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HomeMy WebLinkAbout06-330 - Resolutions RESOLUTION NO. 06-330 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA,APPROVING THE FORM OF AN ACQUISITION/FINANCING AGREEMENT IN COMMUNITY FACILITIES DISTRICT NO. 2006-02 (AMADOR ON ROUTE 66) WHEREAS, the CITY COUNCIL of the CITY OF RANCHO CUCAMONGA, CALIFORNIA (the "City Council"), has initiated proceedings relating to formation of a community facilities district and the authorization to levy special taxes and to issue of bonds of such community facilities district to finance the acquisition or construction of certain public improvements, as authorized pursuant to the terms and provisions of the "Mello-Roos Community Facilities Act of 1982", being Chapter 2.5. Part 1, Division 2, Title 5 of the Government Code of the State of California (the"Act"). Such community facilities district is designated as COMMUNITY FACILITIES DISTRICT NO. 2006-02 (AMADOR ON ROUTE 66) (the "District"); and, WHEREAS, Lewis Investment Company, LLC (the "Developer") is the master developer of the property within the District and sold the property within the District to William Lyon Homes (the"Owner") pursuant to a purchase and sale agreement(the"Purchase Agreement");and WHEREAS, under the terms and conditions of the Purchase Agreement the Developer is to construct certain public improvements; and WHEREAS, the District is proposed to be formed for, among other purposes, the purpose of financing the acquisition of certain public improvements from the Developer; and, WHEREAS, the City, the Developer, and the Owner have negotiated the terms and conditions pursuant to which such public improvements are to be constructed or acquired and bonds are to be issued to finance the acquisition or construction of such public improvements and such terms and conditions have been memorialized in an Acquisition/Financing Agreement by and among the City, the Developer, and the Owner(the"Acquisition/Financing Agreement"), the form of which has been presented to this City Council for its consideration and approval. NOW,THEREFORE, BE IT RESOLVED AND DETERMINED by the City Council of the City of Rancho Cucamonga as follows: SECTION 1: RECITALS. The above recitals are all true and correct. SECTION 2: APPROVAL OF FORM OF ACQUISTION/FINANCING AGREEMENT. The form of Acquisition/Financing Agreement as presented to this City Council and on file with the City Clerk is hereby approved. The City Manager or such other official of the City as may be designated by the City Manager (an "Authorized Officer"), acting for and on behalf of the District, is hereby authorized and directed to execute and deliver Acquisition/Financing Agreement subjectto such additions or changes therein as such Authorized Officer shall deem to be in the best interests of the District following consultation with and review by the City Attorney and Best Best & Krieger LLP, the District's bond counsel. Resolution No. 06-330 Page 2 of 24 PASSED, APPROVED, AND ADOPTED this 181h day of October 2006. AYES: Alexander, Gutierrez, Michael, Spagnolo, Williams NOES: None ABSENT: None ABSTAINED: None William J. Alex er, Mayor ATTEST: AKathn L. S ott, CMC, Secretary I, KATHRYN L.SCOTT, DEPUTY SECRETARY,of the City of Rancho Cucamonga, California, do hereby certify that the foregoing Resolution was duly passed, approved and adopted by the City Council of the City of Rancho Cucamonga, California, at a Regular Meeting of said City Council held on the 181h day of October 2006. Executed this 1 g`h day of October 2006, at Rancho Cucamonga, California. Kath n L"co , CMC, Secretary Resolution No. 06-330 Page 3 of 24 ACQUISITIONNINANCING AGREEMENT THIS AGREEMENT is made and entered into this _ day of 2006, by and between the CITY OF RANCHO CUCAMONGA,a charter city duly organized and validly existing under the Constitution and laws of the State of California, (the "City") acting for and on behalf of itself and COMMUNITY FACILITIES DISTRICT NO. 2006-02 (AMADOR ON ROUTE 66), Lewis Investment Company,LLC, a California Limited Liability Company(the"Developer"), and William Lyon Homes, Inc., a California corporation(the"Owner"). A. Pursuant to the petition of the Owner, the City has formed a community facilities district under the terms and conditions of the"Mello-Roos Community Facilities Act of 1982,"as amended(Government Code Section 53311 and following)(the"Act"),for the purpose of financing the acquisition or construction of certain public improvements, together with appurtenances and appurtenant work within the jurisdictional limits of such the City,such community facilities district known and designated as COMMUNITY FACILITIES DISTRICT NO. 2006-02 (AMADOR ON ROUTE 66) (the "Community Facilities District"). B. The Developer is the master developer of the project located in the City known as "Amador on Route 66"(the"Development"). The Developer sold the Development to the Owner pursuant to a purchase and sale agreement (the "Purchase Agreement"). Under the terms of the Purchase Agreement,the Developer is to construct certain improvements which are to be financed by the proceeds of bonds issued by the Community Facilities District, and the Owner shall have no responsibility for the construction of such improvements. C. The Owner, in order to proceed in a timely way with development of the Development and in accordance with the conditions of approval of the entitlements authorizing such development, is responsible for mitigating the impact that the Development will have on the community and certain public improvements by(a) financing its proportionate share of the cost of construction of certain public improvements (collectively, the "Fee Related Improvements") to be owned by the City, the Cucamonga Valley Water District ("Water District") or the Inland Empire Utility Agency ("Utility Agency") by the payment of certain development impact fees to the applicable public agency and (b) constructing certain other public improvements that are to be owned, operated and maintained by the City(the"Developer Constructed City Improvements")or Water District (the "Developer Constructed Water District Improvements" and together with the "Developer Constructed City Improvements, the"Developer Constructed Improvements"),which, together with the Fee Related Improvements, are set forth and described in Exhibit "A" (each, an "Improvement") attached hereto and incorporated herein by this reference. The Developer has requested that the cost of the Developer Constructed Improvements and payment of its proportionate share of the cost of construction of the Fee Related Improvements for the City, the Water District and the Utility Agency(collectively,the"Fee Obligation")be financed,in whole or in part,through the Community Facilities District. D. An estimate of the cost of the Improvements is also set forth in Exhibit"A"hereto. E. It is the intent of this Agreement that the Developer shall,upon the formation of the Community Facilities District,the sale of bonds by or for the Community Facilities District and the 1 Resolution No. 06-330 Page 4 of 24 completion of the construction of the Developer Constructed Improvements pursuant to this Agreement,be entitled pursuant to the provisions of this Agreement to be paid for such Developer Constructed Improvements at the prices as determined by the City pursuant to this Agreement. F. The Developer acknowledges that the Community Facilities District may only finance the Improvements to be owned by the Water District and the Utility Agency only if the City and each respective agency enter into joint community facilities agreements as required pursuant to the Act (each, a"JCFA"). G. The City is willing to finance the acquisition of the Developer Constructed Improvements from the Developer and the payment of the Fee Obligation subject to the requirements of the Act, the City of Rancho Cucamonga Statement of Goals and Policies Regarding the Establishment of Community Facilities Districts adopted by the City Council (the "Goals and Policies")and this Agreement and,where applicable,the JCFA's,and the Developer desires that the City acquire such Improvements. NOW, THEREFORE, IT IS MUTUALLY AGREED between the respective parties as follows: . SECTION 1. Recitals. The above recitals are all true and correct. SECTION 2. Plans and Specifications for the Developer Constructed City Improvements. All plans, specifications and bid documents for the Developer Constructed City Improvements (the "Plans and Specifications") shall be prepared by the Developer at the Developer's initial expense, subject to City approval. The costs of acquisition of such Improvements shall include costs of the preparation of the Plans and Specifications and all related documentation as set forth in Section 8 below. Except as provided below,the Developer shall not award bids for construction, commence construction or cause commencement of construction of a Developer Constructed City Improvement until the Plans and Specifications for such Improvement have been approved by the City. SECTION 3. Construction of Developer Constructed City Improvements. The Developer covenants and agrees that each Developer Constructed City Improvement to be acquired from the Developer pursuant to this Agreement shall be constructed: A. in substantial compliance with the approved Plans and Specifications for such Improvement; B. in a good and workmanlike manner by well-trained adequately supervised workers; C. in strict compliance with all governmental and quasi-governmental rules,regulations, laws, building codes and all requirements of the Developer's insurers and lenders; D. free of any material design flaws and defects; and E. in compliance with the requirements of this Section 3. 2 Resolution No. 06-330 Page 5 of 24 The Developer shall solicit or has solicited at least three (3) bids for the construction of such Improvements and shall award or has awarded the bid for the construction of such Improvements to the lowest responsible bidder.Nothing in the preceding sentence shall prohibit the Developer from including more than one such improvement in a single solicitation for bids. In the case where the Developer does include more than one such Improvement in a single solicitation for bids, the Developer shall award the bid for the construction of such improvements to the bidder submitting the lowest aggregate bid for the construction of all such Improvements. The description of the Developer Constructed City Improvements in Exhibit A is preliminary and general in nature. The final nature and location of such improvements will be determined upon the preparation of final Plans and Specifications. The description of such Improvements and their budgeted cost may be modified or Developer Constructed City Improvements substituted as long as the modified or substituted Developer Constructed City Improvements provide a service substantially similar to the Developer Constructed City Improvements currently described in Exhibit A. Any such modification or substitution shall be set forth in a supplement to Exhibit A approved by the City Manager of the City, or his or her designee (the "City Manager") . SECTION 4. Inspection and Acceptance of the Developer Constructed City Improvements. The construction activities relating to the Developer Constructed City Improvements shall be subject at all reasonable times to inspection by authorized representatives of the City. Once the construction of an entire Developer Constructed City improvement to be acquired by the City is substantially completed in accordance with the approved Plans and Specifications (including any change orders reasonably approved by the City),then such improvement shall be eligible for acceptance by the City for purposes of paying the Base Increment of the Purchase Price(each term as defined in Section 8 below) for such Improvement. Prior to acceptance of any Developer Constructed City Improvement by the City for purposes of paying the Retained Increment (as defined in Section 8 below) of the Purchase Price, the Developer shall provide to the City Engineer of the City,or his or her designee(the"City Engineer"), the documentation set forth in Section 8(c)(2) below and obtain approval of as-built drawings in accordance with the process described below in this Section 4. The Developer's engineer of record for the Developer Constructed City improvement("Engineer of Record")shall file a request with the City Engineer for a punchlist of any items which must be completed prior to payment of the Retained Increment. Within 20 working days of such filing,the field inspector of the City("Field Inspector") shall issue and transmit to the Engineer of Record a letter requesting as-built drawings for such improvement and a punchlist of any items which must be completed prior to payment of the Retained Increment.Within 20 working days of receipt of the Field Inspector's letter,the Engineer of Record shall prepare redline as-built drawings and submit them to the Field Inspector. Within 10 working days of the Engineer of Record's submittal,the Field Inspector shall review the redline as- built drawings and provide comments. The Engineer of Record shall revise the redline as-built drawings per the Field Inspector's comments and resubmit within 10 working days. The Field Inspector shall make his final review within 5 working days of the Engineer of Record's resubmittal and notify the Engineer of Record to prepare mylar as-built drawings and a microfiche copy and submit both to the City Engineer or his designee. The City and the Developer shall make best efforts to perform within the time periods described above. The inability of the City or the Developer to 3 Resolution No. 06-330 Page 6 of 24 perform within each time period,notwithstanding its best efforts,shall not constitute a breach ofthis Agreement. SECTION 5. Warranty of Developer Constructed City Improvements. Prior to payment of the Retained Increment of the Purchase Price for a Developer Constructed City Improvement, the Developer shall be responsible for maintaining such Improvement at the Developer's expense. The Developer shall be obligated for a period of twelve (12) months after the date the City pays the Retained Increment to repair or replace any defects or failures resulting from the work of the Developer, its contractors or agents. Upon the expiration of such twelve (12) month period, the Developer shall assign to the City and the Community Facilities District its rights in and to any warranties, guarantees, or other evidence of contingent obligations of third persons with respect to such Improvement. As a condition precedent to the payment of the Retained Increment(as defined in Section 8 below) of the Purchase Price, the Developer shall post a maintenance bond in a form reasonably approved by the City,cause a maintenance bond to be posted,or assign the Developer's rights under such a bond naming the City and/or the Community Facilities District as beneficiary in an amount equal to fifteen percent(15%)of the Purchase Price of the Developer Constructed City Improvement in order to secure the Developer's obligations pursuant to this Section. Such maintenance bond will be released upon the date which is 12 months past the date on which the City pays the Developer the Retained Increment for such Improvement. Upon posting of such maintenance bond,the City shall release any performance, labor and material bonds for such Improvement. SECTION 6. Notice of Completion and Lien Releases. The Developer shall notify the City Engineer in writing upon completion of each of the Developer Constructed City Improvements to be acquired hereunder and shall prepare and execute a Notice of Completion for such Improvement in the form prescribed by Section 3093 of the California Civil Code and shall record such notice in the Official Records of the County of San Bernardino. The Developer shall cause its contractors to provide unconditional lien releases for such Improvement or all Developer Constructed City Improvements thereof in accordance with Section 3262 of the Civil Code. Notwithstanding the foregoing, the City may waive the requirement for a Notice of Completion and lien releases if the City determines that as of the date of payment of the Retained Increment of the Purchase Price for a Developer Constructed City Improvement,title to such Improvement or portion thereof satisfies the requirements for Acceptable Title(as hereinafter defined). SECTION 7. Construction of the Developer Constructed Water District Improvements. The design, construction,bonding, inspection, acceptance and warranty of the Developer Constructed Water District Improvements shall be subject to the rules,regulations,policies and practices of the Water District(the"Water District Requirements"). In the event of a conflict between the terms and conditions of this Agreement and the Water District Requirements regarding the design, construction,bonding, inspection,acceptance and/or warranty of the Developer Constructed Water District Improvements, the provisions of the Water District Requirements shall prevail. 4 Resolution No. 06-330 Page 7 of 24 SECTION 8. Payment of Purchase Price. A. Amount of Purchase Price. The amount to be paid by the City for the Developer Constructed Improvements to be acquired from the Developer(the"Purchase Price")shall,as to each such Improvement,(i)be determined by the City in accordance with the provisions of this Section 8, (ii) equal the lesser of the cost or the value thereof, (iii) include the reasonable cost or value of eligible appurtenant public facilities; (iv)include the costs of the title insurance policy described in Section 10(a)as to any Developer Constructed City Improvement; and(v)include all other costs of construction and incidental costs eligible under the Act and the Goals and Policies as a part of the cost of the Developer Constructed Improvements, including the following: 1. the actual hard costs for the construction of such Developer Constructed Improvement as established by the approved construction contracts and change orders,including costs of payment,performance and maintenance bonds and insurance costs; 2. the design and engineering costs of such Developer Constructed Improvement including, without limitation, the costs incurred in preparing plans; 3. the costs of environmental evaluations and public agency permits and approvals attributable to the Developer Constructed Improvements; 4. professional costs associated with the Developer Constructed Improvement, such as engineering, inspection, construction staking, materials testing and similar professional services; and 5. costs of acquiring from an unrelated third party any real property or interests therein required for the Developer Constructed Improvement including, without limitation, temporary construction casements, haul road and maintenance easements. In no event shall the cost or value of the construction of the Developer Constructed Improvements be deemed to exceed the sum of the construction contract prices set forth in the contracts and change orders approved by the City or Water District,as applicable,and the incidental expenses identified in paragraphs 1 through 5 above. B. Incremental Payment of Purchase Price. The Purchase Price for a Developer Constructed Improvement shall be payable in not to exceed two increments: the`Base Increment' which shall be an amount not to exceed 85% of the Purchase Price for such Improvement and the "Retained Increment"which shall be an amount not to exceed the remaining,unpaid portion of the Purchase Price for such Improvement determined pursuant to the provisions of subsection A.above. C. Requisition for Incremental Payment of Purchase Price. 1. Base Increment. The Developer may submit a written request to the City Manager for the payment of the Base Increment for a Developer Constructed Improvement upon the substantial completion of the construction of such Improvement in accordance with the approved Plans and Specifications.The criteria for determining"substantial completion"of each Developer Constructed City Improvement shall mean generally that construction, or work with 5 Resolution No. 06-330 Page 8 of 24 respect to the Developer Constructed City Improvement has progressed to the point where it is sufficiently complete so that the Developer Constructed City Improvement can be utilized for the purpose for which it was intended. "Substantial Completion"of a Developer Constructed Water District Improvement shall be deemed to have occurred when the City Manager shall have received notification from the Water District that such Improvement has been completed in accordance with the Water District Requirements and is ready for acceptance by the Water District. Each Base Increment payment request must be in the form attached hereto as Exhibit B and conform to the requirements of subsection D. below. 2. Retained Increment. The Developer may submit a written request to the City Manager for the payment of the Retained Increment for a Developer Constructed Improvement upon the completion of such Improvement in accordance with the approved Plans and Specifications as to any Developer Constructed City Improvement and in accordance with the Water District Requirements as to any Developer Constructed Water District Improvement.Such Retained Increment payment request must be in the form attached hereto as Exhibit C and conform to the requirements of subsection D.below and,unless previously provided to the City, must be accompanied by(1)evidence that the Developer has posted a maintenance bond for any such Developer Constructed City Improvement as required by Section 5 hereinabove, and (2) evidence of the satisfaction of the requirements of Section 9,hereinbelow directly related to such Developer Constructed City Improvement. D. Documentation. Any payment request submitted by the Developer shall be properly executed and shall include all supporting documents referred to in the payment request. E. Review of Payment Request. The City Manager shall review each payment request.If the City Manager finds that any such payment request is incomplete, improper or otherwise not suitable for approval, the City Manager shall inform the Developer in writing within twenty(20) working days after receipt thereof,the reasons for his finding. The Developer shall have the right to respond to this finding by submitting further documentation and/or to resubmit the payment request within thirty (30) days after receipt of the denial. A resubmittal shall be deemed a new payment request for purposes of this Section. The City Manager shall review any resubmitted payment request and inform the Developer of his approval or denial of it in accordance with this Section within ten(10)working days after receipt of the resubmission. Costs incurred under a construction contract entered into pursuant to the requirements of this Agreement and pursuant to change orders approved by the City shall be deemed to be reasonable. The City Manager shall, after the sale of Bonds (defined in Section 19 below)pursuant to Section 19 and the receipt of the proceeds of such Bonds which are intended to be used to acquire the Developer Constructed Improvements and after his or her approval of a payment request, immediately forward a request to the Director of Administrative Services of the City, or his or her designee (the "Director of Administrative Services") notifying the Director of Administrative Services of his or her approval of the payment request and requesting that such payment be made to the appropriate payee. The Director of Administrative Services shall process any such request of the City Manager pursuant to the applicable procedures of the Finance Department and shall make or authorize such payment pursuant to such procedures and subsection F. below. 6 Resolution No. 06-330 Page 9 of 24 F. Payment. The increment of the Purchase Price for each Developer Constructed Improvement shall be paid to the Developer within fifteen (15) days after the date of the City Manager's approval of the payment request for any such Improvement; provided, however, no Retained Increment may be paid for (a) any Developer Constructed City Improvement prior to (i) completion of all punch list items as specified in the letter from the Field Inspector to the Engineer of Record pursuant to Section 4 above; (ii) receipt of the maintenance bond as required pursuant to Section 5 above; (iii) the date which is thirty-five (35) days after the recording of a Notice of Completion for such Improvement as required pursuant to Section 6 above unless the requirement for such Notice of Completion has been waived by the City pursuant to such section;(iv)receipt of unconditional lien releases for such Improvement as required pursuant to Section 6 above unless the requirement for such unconditional lien releases has been waived by the City pursuant to such section; and (v) receipt of Acceptable Title as required pursuant to Section 9 below or (b) any Developer Constructed Water District Improvement prior to receipt by the City Manager of written notice from Water District that Water District has accepted such Developer Constructed Water District Improvement. Notwithstanding the foregoing,the Purchase Price or any increment thereof shall not be due and payable to the Developer except to the extent of available funds solely from the proceeds of the sale of Bonds as provided in Section 19 hereof, after all costs of formation of the Community Facilities District and all costs of issuance of such Bonds have been paid and deposits of accrued and capitalized interest to the redemption fund and the initial deposit to the reserve fund have been made and funds for the payment of the Fee Obligation have been set aside for such purpose. Beyond the amount of such available proceeds,neither the City,the Community Facilities District nor Water District shall have any obligation whatsoever to pay for the Developer Constructed Improvements contemplated hereby. In addition to the foregoing,the City shall have the right to withhold payment of the Purchase Price or any increment thereof of any Developer Constructed Improvement if(a)the Developer is delinquent in the payment of any assessment installments or special taxes levied by the City or a community facilities district established by the City on properties then owned by the Developer within the Community Facilities District or (b) the City Manager reasonably determines that the Developer is not then in substantial compliance with all applicable conditions and obligations imposed upon the Development pursuant to the land use entitlements approved by the City of the Development, including but not limited to, payment of all applicable fees, dedication of all applicable rights-of-way or other property and construction of all applicable public improvements. The City Manager shall provide written notice to the Developer of the decision to withhold any such payment and shall specify the reason for such decision within five(5)business days of the later of(i) receipt of the applicable payment request or(ii)the date upon which the City Manager is made aware of such delinquency or substantial non-compliance. If the payment is withheld as a result of the delinquency in the payment of assessment installments or special taxes,the notice shall identify the delinquent parcels and the amount of such delinquency. If the payment is withheld as a result of substantial non-compliance with a condition or obligation,the notice shall specify such condition or obligation and what action will be necessary by the Developer to substantially comply with such condition or obligation. Upon receipt by the City Manager of evidence reasonably satisfactory to the City Manager of the payment of the delinquent special taxes or assessments or upon the determination by the City Manager that the Developer has substantially complied with the subject condition or obligation,the City shall forthwith make any payment which has been withheld pursuant 7 Resolution No. 06-330 Page 10 of 24 to the provisions of this paragraph. SECTION 9. Audit. The authorized representatives of the City shall have the right,upon two(2) days prior written notice to the Developer and during normal business hours,to review all books and records of the Developer pertaining to costs and expenses incurred by the Developer in construction of the Developer Constructed Improvements. SECTION 10. Developership and Transfer of Developer Constructed City Improvements. The conveyance of the Developer Constructed City Improvements by the Developer to the City shall be in accordance with the following procedures: A. Improvements Constructed on Land not Owned by the City. As a condition to the payment of the Retained Increment of the Purchase Price, the Developer shall cause an irrevocable offer of dedication to be made to the City or an outright grant of a fee interest or easement interest as appropriate, in the sole discretion of the City of the appropriate right,title and interest in and to the portion of the applicable property related to the applicable Developer Constructed City Improvement, including any temporary construction or access easements. The Developer,whether or not it is the entity constructing the Developer Constructed City Improvements,agrees to execute and deliver to the City the documents required to complete the transfer of Acceptable Title. For purposes of this Agreement, the term "Acceptable Title" shall mean title to the portion of the property to be conveyed free and clear of all taxes, liens, encumbrances, assessments, easements, leases, whether any such item is recorded or unrecorded, except those non-monetary encumbrances and easements which are reasonably determined by the City not to interfere with the intended use of the portion of the property. As a further condition to the payment of the Retained Increment of the Purchase Price for any Developer Constructed City Improvement,the Developer at its sole cost and expense,subject to reimbursement pursuant to Section 8, shall cause to be issued a policy of title insurance for such portion of the property in an amount not to exceed the Purchase Price and in the form reasonably required by the City in connection with the dedication of land for subdivision improvements and containing such title endorsements as may be reasonably requested by the City. The City's final acceptance of the portion of the property and the Developer Constructed City Improvements constructed thereon shall not be unreasonably withheld or delayed. B. Developer Constructed City Improvements Constructed on Land Owned by the City. If the Developer is authorized to construct a Developer Constructed City Improvement on land owned in fee by the City or on land over which the City owns an easement, the Developer shall obtain the necessary encroachment permits to enter such land for purposes of constructing such Improvement. The City shall cooperate with the Developer in issuing such encroachment permits. The Developer Constructed City Improvements shall be inspected by the City on an ongoing basis. SECTION 11. Grading and Subdivision Improvement Bonds.Except as provided below, the Developer shall be required to post bonds or other security acceptable to the City to guarantee completion of the Developer Constructed City Improvements in accordance with the City's standard subdivision requirements and conditions of approval of the Development (the "Conditions of Approval"). 8 Resolution No. 06-330 Page 11 of 24 Performance and labor and material bonds for specific Developer Constructed City Improvements shall not be required or maybe released if.(1)such Improvements constitute a portion of the required subdivision improvements;(2)Bond proceeds to construct or acquire such Developer Constructed City Improvements are available;and(3)the Developer Constructed City Improvements are to be constructed or acquired entirely with the proceeds of the Bonds. Provided that conditions (1) and (2) are satisfied, if a Developer Constructed City Improvement is to be constructed or acquired only in part with the proceeds of the Bonds,performance and labor and material bonds shall not be required for that portion of such Improvements to be so constructed or acquired except with respect to the portion that will not be acquired or constructed with Bond proceeds. The City will cooperate with the Developer in the termination or exoneration of any performance and labor and material bonds assuring completion of Developer Constructed City Improvements for which bonds have been sold or in accordance with Section 5 above. SECTION 12. Indemnification by the Developer. The Developer shall defend,indemnify and hold harmless the City, its officers, directors, employees and agents, the Community Facilities District, its officers, directors, employees and agents(collectively,the"Indemnified Parties") from and against any and all claims, losses, liabilities, damages, including court costs and reasonable attorneys fees by reason of, or resulting from, or arising out of the design, engineering and construction of the Developer Constructed Improvements;provided that any claims which relate to the Improvements shall be limited to those arising out of personal injury or property damage caused by actions or omissions by the Developer or the Developer's employees, agents, independent contractors or representatives which occurred during the period prior to the transfer of title to the Developer Constructed City Improvements to the City, whether or not a claim is filed prior to the date of acceptance of such Improvements. Nothing in this Section 12 shall limit in any manner the rights of the City and/or the Community Facilities District against any of the architects, engineers, contractors or other consultants employed by the Developer which have performed work in connection with construction or financing of the Developer Constructed Improvements. Notwithstanding the foregoing, the District shall not be obligated to defend, indemnify or hold harmless the City, its officers, directors, employees and agents for the sole negligence or willful misconduct of the City, its officers, directors, employees and agents. Except as set forth in this Section 12,no provision of this Agreement shall in any way limit the extent of the responsibility of the Developer for payment of damages resulting from the operations of the Developer, its agents, employees, or contractors. SECTION 13. Financing of Fee Related Improvements. The Community Facilities District shall finance, solely from the proceeds of the Bonds, the construction of the Fee Related Improvements for the Water District and the Utility Agency contingent upon each such public agency entering into a JCFA with the City pursuant to the Act. The terms and conditions of each JCFA will govern the financing of the applicable Fee Related Improvements for each such public agency. The Community Facilities District shall finance, solely from the proceeds of the Bonds,the construction of the Fee Related Improvements for the City in an amount equal to the City's share of the Fee Obligation set forth in Exhibit A hereto. The financing of the Fee Related Improvements of the City from the proceeds of the Bonds shall be in lieu of the payment of the corresponding development impact fee of the City. In the event that the Bond proceeds allocated to finance the Fee 9 Resolution No. 06-330 Page 12 of 24 Related Improvements of the City are less than the corresponding development impact fee, the Developer shall be obligated to pay the balance of the development impact fee obligation applicable to the Development in accordance with the Conditions of Approval. If it is necessary or desirable to pay any Fee Obligations in advance of the issuance of the Bonds (herein, the "Advances"), the Community Facilities District and the City agree that such Advances shall be reimbursed from the proceeds of the Bonds to the party that paid such Advances. The parties hereto agree that any such Advances shall be paid with an expectation of reimbursement solely from the proceeds of the Bonds, and shall not be construed as a gift or a waiver of reimbursement. SECTION 14. Obligations of the City,the Community Facilities District or the Water District. Except as provided in this Agreement,neither the City, the Community Facilities District nor the Water District has a legal or financial obligation to construct or finance the actual construction of the Developer Constructed Improvements. All costs incurred for actual construction of the Developer Constructed Improvements, including all incidentals thereto, shall be home by the Developer..The obligations of the City are limited to(a)the acquisition of the Developer Constructed Improvements pursuant to the provisions of this Agreement and (b) the transfer to the City, the Water District and the Utility Agency of an amount equal to the applicable portion of the Fee Obligation. SECTION 15. Failure by the Developer to Construct Developer Constructed City Improvements. At any time that the construction of the Developer Constructed City Improvements is not progressing within a reasonable time in accordance with the Conditions of Approval or the Developer fails to demonstrate a continuing ability to complete the construction of the Developer Constructed City Improvements in accordance with the Conditions of Approval,the City may give written notice of such failure of performance to the Developer. The Developer shall have sixty(60) days from the date of receipt of such notice to cure such failure of performance by demonstrating to the satisfaction of the City during such cure period reasonable progress in the construction of the Developer Constructed City Improvements and a continuing ability to complete the construction of such Improvements in accordance with the Conditions of Approval. Should the Developer fail to satisfactorily demonstrate such reasonable progress or such continuing ability,the obligations of the City under this Agreement related to the Developer Constructed City Improvements may be terminated by the City by providing ten(10)days written notice to the Developer. Upon termination, the City may in its sole discretion then proceed to advertise and bid the balance of the Developer Constructed City Improvements, and there will be no further obligation on the part of the City for payment due to the Developer pursuant to this Agreement with regard to the Developer Constructed City Improvements. In the event that the City chooses not to advertise and bid the balance of the Developer Constructed City Improvements following such a termination, any monies remaining in the improvement fund for the Community Facilities District and eligible to be utilized to pay the Purchase Price for the Developer Constructed City Improvements and not appropriated or subject to appropriation for eligible expenses of the Community Facilities District previously incurred shall be utilized in accordance with the provisions of the fiscal agent agreement applicable to the Bonds(as such term is defined in Section 19). 10 Resolution No. 06-330 Page 13 of 24 SECTION 16. Agreement Contingent. This Agreement shall be null and void if the first series of Bonds are not sold within a three(3)year period following the date of this Agreement,or any mutually agreed upon extension. The City may,at its option,suspend the performance of its obligations under this Agreement if any legal challenge is filed relating to the validity or enforceability of this Agreement, the Community Facilities District proceedings or the issuance of the Bonds. The obligations of the City hereunder shall be reinstated upon the entry of a final judgment in any such proceedings upholding the validity and enforceability of the Agreement, the Community Facilities District proceedings and the issuance of the Bonds. In the event that a final judgment is entered invalidating or declaring unenforceable this Agreement,the Community Facilities District proceedings or the issuance of the Bonds, the City may, at its option, terminate this Agreement. SECTION 17. Notice of Special Tax. The Owner,or the successor or assigns of the Owner, shall provide written notice to all potential purchasers of lots in a form satisfactory to the City so advising the potential owner of the existence of the Community Facilities District and the levy of the special taxes,with such document being executed by the potential purchaser. Such notice shall be provided to the potential purchaser a reasonable time before the potential purchaser becomes contractually committed to purchase the lot so that the potential purchaser may knowingly consider the impact of the special tax in the decision to purchase the lot. A copy of all such notices executed by actual purchasers shall be sent to the City Manager. SECTION 18. Relationship to Public Works. This Agreement is for the construction and acquisition of certain Developer Constructed Improvements by the City and the sale of the Bonds for the payment of construction and acquisition costs for such Developer Constructed Improvements and such other amounts as are herein provided, and is not intended to be a public works contract. hi performing its obligations under this Agreement,the Developer is an independent contractor and not the agent of the City. The City shall have no responsibility for payment to any contractor or supplier of the Developer. SECTION 19. Sale of Bonds. The City shall initiate proceedings to issue and sell bonds secured by the levy of special taxes within the Community Facilities District (the "Bonds") to be issued pursuant to the Act only upon the receipt of a written request from the Owner that the Community Facilities District initiate proceedings to issue and sell such Bonds. The proceeds of the Bonds shall be used in the following priority to (i) fund a reserve fund for the payment of principal and interest with respect to the Bonds;(ii)fund capitalized interest,if necessary,on the Bonds in an amount not to exceed the amount required to pay interest on the Bonds until sufficient special taxes of the Community Facilities District are collected; (iii) pay for costs of issuance of the Bonds including, without limitation, underwriter's discount, bond counsel fees, disclosure counsel fees, printing,and fiscal agent fees;(iv)reimbursement for the costs of forming the Community Facilities District, the rate and method of apportionment of the special taxes and the bond authorization;(vi) pay the Fee Obligation pursuant to the provisions of this Agreement, and(v)pay for the costs of the construction or acquisition of the Developer Constructed Improvements pursuant to the provisions of this Agreement. 11 Resolution No. 06-330 Page 14 of 24 Proceeds of the Bonds in an amount equal to the Fee Obligation shall be deposited and set aside in a separate account (the "Fee Related Improvement Account") to be established by the instrument establishing the terms and conditions related to the issuance of the Bonds (the "Fiscal Agent Agreement"). Upon the deposit of the Fee Obligation in the Fee Related Improvement Account, such amount shall be credited the City, the Water District and the Utility Agency, as applicable. The timing of the issuance and sale of the Bonds, the terms and conditions upon which the Bonds shall be issued and sold,the method of sale of the Bonds and the pricing of the Bonds shall be determined solely by the City and shall conform to the Goals and Policies and this Agreement. The sale of the Bonds shall be subject to receipt by the City of a competitively bid or negotiated bond purchase agreement which is acceptable to the City. The sale of the Bonds shall also be conditional upon the preparation of an official statement related to the Bonds that is,in the sole judgment of the City, "deemed final' as such term is used in Rule 15c2-12 of the Securities and Exchange Commission(the "Rule"). The aggregate principal amount of the Bonds shall not exceed one-third(1/3)of the value of the property within the Community Facilities District subject to the levy of special taxes as determined by an independent appraisal undertaken for the City utilizing appraisal assumptions approved by the City. Notwithstanding the foregoing, a value-to-lien ratio of less than 3:1 may be approved, in the sole discretion of the City Council, upon determination by the City Manager, after consultation with the Director of Administrative Services,the bond counsel,the underwriter and the financial advisor, that a value-to-lien ratio of less than 3:1 is financially prudent under the circumstances of the Community Facilities District. The City may, in its sole discretion, accept a form or forms of credit enhancement such as a letter of credit, cash deposit, bond insurance or the escrow of bond proceeds to offset a deficiency in the required value-to-debt ratio. The amount of the Bonds to be issued shall be determined in accordance with the Goals and Policies such that the maximum projected annual special tax revenues equal (i) 110%of the projected annual gross debt service on the Bonds for the calendar year commencing in such fiscal year, plus (ii) projected administrative expenses of the Community Facilities District for the calendar year commencing in such fiscal year. The Developer and the Owner,on behalf of itself,any affiliates of the Developer and Owner and any successor or assign of the Developer and Owner including,but not limited to,all persons or entities acquiring all or a part of the Development for the purpose of constructing and selling owner- occupied residential dwelling units,agrees to(a)provide all information regarding the development of the property within the Community Facilities District, including the financing plan for such development,which is necessary to ensure that the official statement for such Bonds complies with the requirements of the Rule and all other applicable federal and state securities laws,(b)enter into a continuing disclosure agreement to provide such continuing disclosure pertaining to the Community Facilities District, the development thereof and the Developer and Owner as necessary to ensure ongoing compliance with the continuing disclosure requirements of the Rule and (c) cause its counsel to provide an opinion of such counsel in a form satisfactory to disclosure counsel of the City and the underwriter of the Bonds. 12 Resolution No. 06-330 Page 15 of 24 SECTION 20. Conflict with Other Agreements. Except as specifically provided herein, nothing contained herein shall be construed as releasing the Developer from any condition of development or requirement imposed by any other agreement with the City. In the event of a conflicting provision, such other agreement shall prevail unless such conflicting provision is specifically waived or modified in writing by the City. SECTION 21. General Standard of Reasonableness. Any provision of this Agreement which requires the consent, approval, discretion or acceptance of any party hereto or any of their respective employees, officers or agents shall be deemed to require that such consent, approval or acceptance not be unreasonably withheld or delayed,unless such provision expressly incorporates a different standard. SECTION 22. Entire Agreement; Amendment. This Agreement and the agreements expressly referred to herein contains all of the agreements of the parties hereto with respect to the matters contained herein and no prior or contemporaneous agreement or understandings, oral or written, pertaining to any such matters shall be effective for any purpose. No provision of this Agreement may be modified,waived, amended or added to except by a writing signed by the party against which the enforcement of such modification, waiver, amendment or addition is or may be sought. SECTION 23. Notices. Any notice, payment or instrument required or permitted by this Agreement to be given or delivered to either party shall be deemed to have been received when personally delivered or seventy-two (72) hours following deposit of the same in any United States Post Office in California, registered or certified,postage prepaid, addressed as follows: Owner: William Lyon Homes 11870 Pierce Street, Suite 200 Riverside, California, 92505 Attn: Rick Brown Developer: Lewis Investment Company, LLC c/o Lewis Operating Corp. 1156 North Mountain Avenue Upland, California, 91786 Attn: Bryan T. Goodman City: City of Rancho Cucamonga 10500 Civic Center Drive Rancho Cucamonga, California Attn: City Manager Each party may change its address for delivery of notice by delivering written notice of such change of address to the other party. 13 Resolution No. 06-330 Page 16 of 24 SECTION 24. Severability. If any provision of this Agreement is held to be illegal or unenforceable by a court of competent jurisdiction,the remainder of this Agreement shall be given effect to the fullest extent reasonably possible. SECTION 25. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. The Developer may not assign its rights or obligations hereunder except upon written notice to the City within ten(10)days of the date of such assignment indicating the name and address of the assignee. Upon such notice and the assumption by the assignee of the rights, duties and obligations of the Developer arising under or from this Agreement,the Developer shall be released by the City from all future duties or obligations arising under or from this Agreement. Notwithstanding the preceding sentence,the Developer may assign its rights and obligations hereunder as security to lenders for the purpose of obtaining loans to finance development within the Community Facilities District,but no such assignment shall release the Developer from its obligations hereunder to the City. SECTION 26. Governing Law. This Agreement and any dispute arising hereunder shall be governed by and interpreted in accordance with the laws of the State of California,Additionally,this Agreement and the construction of the Improvements shall be subject to all City ordinances and regulations relating to the requirement of improvement agreements, land division, improvement security or other applicable development requirements. SECTION 27. Waiver. Failure by a party to insist upon the strict performance of any of the provisions of this Agreement by any other party,or the failure by a party to exercise its rights under the default of any other party, shall not constitute a waiver of such party's right to insist and demand strict compliance by any other party with the terms of this Agreement thereafter. SECTION 28. Singular and Plural; Gender. As used herein, the singular of any word includes the plural, and terms in the masculine gender shall include the feminine. SECTION 29. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original. SECTION 30. Construction of Agreement. This Agreement has been reviewed by legal counsel for the City,the Owner,and the Developer and shall be deemed for all purposes to have been jointly drafted by the City, the Owner and the Developer. No presumption or rule that ambiguities shall be construed against the drafting party shall apply to the interpretation or enforcement of this Agreement. The language in all parts of this Agreement, in all cases, shall be construed as a whole and in accordance with its fair meaning and not strictly for or against any party and consistent with the provisions hereof,in order to achieve the objectives of the parties hereunder.The captions of the sections and subsections of this Agreement are for convenience only and shall not be considered or referred to in resolving questions of construction. 14 Resolution No. 06-330 Page 17 of 24 Signature Page to Acquisition/Financing Agreement by and between the City of Rancho Cucamonga, Lewis Investment Company, LLC, and William Lyon Homes, Inc. EXECUTED by and between the parties hereto on the day and year first hereinabove written. "CITY" CITY OF RANCHO CUCAMONGA CITY MANAGER CITY OF RANCHO CUCAMONGA STATE OF CALIFORNIA "OWNER" WILLIAM LYON HOMES, INC., A California corporation By: Name: Title: By: Name: Title: "DEVELOPER" LEWIS INVESTMENT COMPANY, LLC, A California Limited Liability Company By: Lewis Operating Corp. A California Corporation, Its Sole Manager By: Authorized Agent S - 1 Resolution No. 06-330 Page 18 of 24 EXHIBIT "A" DESCRIPTION OF IMPROVEMENTS AND COST ESTIMATE , 2006 1. Fee Related Improvements to be owned by the City which Total are authorized to be financed from the proceeds of City fees: Transportation Fee $217,305 Beautification Fee 41,045 Parks and Recreation Fee 267,291 Drainage Fee 165,627 Sub Total $691,268 2. Fee Related Improvements to be owned by the Water District authorized to be financed from proceeds of Water District fees: Water Capacity Fee $283,536 Water Meter&Box Charge 32,670 Sewer Connection Fee 122,661 Sub Total $438,867 3. Fee Related Improvements to be owned by the Utility Agency which are authorized to be financed from proceeds of Utility Agency fees: Sewer Capacity Fee $415,800 Sub Total of Fee Obligation(sum of 1, 2 and 3 above) $1,545,935 4. Developer Constructed City Improvements Street Improvements' $423,803 Landscaping Improvements located in public right-of-way 367,584 Drainage Improvements 65,000 Sub Total of Developer Constructed City Improvements $856,387 5. Developer Constructed Water District Improvements Water Improvements $120,000 Sewer Improvements 36,000 Sub Total of Developer Constructed Water District $156,000 Improvements Sub Total of Developer Constructed Improvements (sum of 4 $1,012,387 and 5 above) Total Improvement Cost Estimate $2,558,322 Cost estimate includes$114,808 for dry utilities. B - 1 Resolution No. 06-330 Page 19 of 24 EXHIBIT "B" BASE INCREMENT PAYMENT REQUEST NO. The undersigned(the"Developer")hereby requests payment in the total amount of$ for the Base Increment of the Purchase Price of the Developer Constructed Improvements(as defined in the Acquisition/Financing Agreement by and among the City of Rancho Cucamonga(the"City")and the Developer(the"Agreement") and described in Exhibit A to that Agreement), all as more fully described in Attachment 1 hereto. Capitalized terms used in this Payment Request and not defined herein shall have the meanings given such terms in the Agreement. In connection with this Payment Request, the undersigned hereby certifies, represents and warrants to the City as follows: 1. He(she) is a duly authorized officer of the Developer, qualified to execute this Payment Request for payment on behalf of the Developer and is knowledgeable as to the matters set forth herein. 2. The Developer Constructed Improvements that are the subject of this Payment Request have been substantially completed in accordance with the provisions of the Agreement. 3. The Purchase Price for the Developer Constructed Improvements has been calculated in conformance with the terms of the Agreement. All costs for which payment is requested hereby are eligible costs (as permitted in the Agreement) and have not been inflated in any respect. The Base Increment for which payment is requested has not been the subj ect of anyprior payment request paid by the City. 4. Supporting documentation(such as third party invoices,change orders and copies of checks or other evidence of payment) is attached with respect to each cost for which payment is requested. 5. The Developer Constructed Improvements for which payment is requested were constructed in accordance with the requirements of the Agreement[and the JCFA with the Water District and the Water District Requirements as to any Developer Constructed Water District Improvements]. 6. The Developer is in compliance with the terms and provisions of the Agreement [and the JCFA with the Water District and the Water District Requirements as to any Developer Constructed Water District Improvements]. 7. Except as otherwise permitted pursuant to the Agreement, no mechanics liens or other encumbrances have attached,or to the best knowledge of the Developer,after due inquiry,will attach to the Developer Constructed Improvements. B - 2 Resolution No. 06-330 Page 20 of 24 I hereby declare under penalty of perjury that the above representations and warranties are true and correct. DEVELOPER: Dated: CrrY Payment Request Approved for Submission to Director of Administrative Services City Manager Dated: B - 3 Resolution No. 06-330 Page 21 of 24 ATTACHMENT SUMMARY OF DEVELOPER CONSTRUCTED IMPROVEMENTS TO BE ACQUIRED AS PART OF PAYMENT REQUEST NO. Base Increment Description of Purchase Price Disbursement Developer for Developer Base Increment Requested Constructed Constructed Improvement Im rovement [List here all Improvements for which payment is requested; and attach supporting documentation] B -4 Resolution No. 06-330 Page 22 of 24 EXHIBIT "C" RETAINED INCREMENT PAYMENT REQUEST NO. The undersigned(the"Developer")hereby requests payment in the total amount of$ for the Retained Increment of the Purchase Price of the Developer Constructed Improvements (as defined in the Acquisition/Financing Agreement by and among the City of Rancho Cucamonga(the "City")and the Developer(the"Agreement")and described in Exhibit A to that Agreement), all as more fully described in Attachment 1 hereto. Capitalized terms used in this Payment Request and not defined herein shall have the meanings given such terms in the Agreement. In connection with this Payment Request, the undersigned hereby certifies, represents and warrants to the City as follows: 1. He(she) is a duly authorized officer of the Developer, qualified to execute this Payment Request for payment on behalf of the Developer and is knowledgeable as to the matters set forth herein. 2. The Developer has submitted or submits herein to the City,if applicable,as-built drawings or similar plans and specifications for any Developer Constructed City Improvements included in this Payment Request and such drawings or plans and specifications,as applicable,are true,correct and complete. 3. The Purchase Price for the Developer Constructed Improvements has been calculated in conformance with the terms of the Agreement. All costs for which payment is requested hereby are eligible costs (as permitted in the Agreement) and have not been inflated in any respect. The Retained Increment for which payment is requested has not been the subject of any prior payment request paid by the City. 4. Supporting documentation (such as third party invoices, change orders, lien releases and copes of checks or other evidence of payment) is attached with respect to each cost for which payment is requested. 5. The Developer Constructed Improvements for which payment is requested were constructed in accordance with the requirements of the Agreement[and the JCFA with the Water District and the Water District Requirements as to any Developer Constructed Water District Improvements]. 6. The Developer is in compliance with the terms and provisions of the Agreement [and the JCFA with the Water District and the Water District Requirements as to any Developer Constructed Water District Improvements]. 7. No mechanics liens or other encumbrances have attached, or to the best knowledge of the Developer, after one inquiry, will attach to the Developer Constructed Improvements. C - 1 Resolution No. 06-330 Page 23 of 24 I hereby declare under penalty of perjury that the above representations and warranties are true and correct. DEVELOPER: By: Dated: CITY Payment Request Approved for Submission to Director of Administrative Services City Manager Dated: C- 3 Resolution No. 06-330 Page 24 of 24 ATTACHMENT 1 SUMMARY OF DEVELOPER CONSTRUCTED IMPROVEMENTS TO BE ACQUIRED AS PART OF PAYMENT REQUEST NO. Retained Increment Description of Base Increment Disbursement Developer Purchase Price Previously Paid Requested Constructed Improvement [List here all Developer Constructed Improvements for which payment is requested, and attach supporting documentation] C - 4