Free Recording Requested Pursuant to Government Code Section 27283 RECORDING REQUESTED BY AND WHEN RECORDED, MAIL TO: Department of Developmental Services MS 2-13 P.O. Box 944202 Sacramento, CA 94244-2020 Attn: Director of the Department	(Space Above For Recorder’s Use)

APN _____________________

Department of Developmental Services

Community Placement Plan Program

PROFIT PARTICIPATION AGREEMENT

This Profit Participation Agreement (this “Agreement”), dated for reference purposes as of _____________________, 20___, is executed by _____________________ a [type of entity, e.g., California nonprofit corporation] (“Owner”), which address is ______________________, for the benefit of the Department of Developmental Services, a public agency of the State of California (“DDS”), which address is MS 2-13, P.O. Box 944202, Sacramento, CA 94244-2020, Attn: Director of the Department.

The Property; the Effective Date. On the date this Agreement is filed for record, Owner is the fee owner of certain real property in the County of ________________, California and legally described on Exhibit “A” attached hereto (the “Property”). The common address of the Property is: _________________________. The “Effective Date” is the date Owner acquired fee title to the Property, which is on or about the date this Agreement is filed for record.

The Regional Center. ______________ Regional Center, a California nonprofit corporation (“Regional Center”) is a nonprofit corporation which provides services to individuals with developmental disabilities (“Consumers”). The Property is located within the Regional Center’s catchment area, and it is intended that Consumers served by the Regional Center and other regional centers will occupy the Property.

The DDS Funds. Through funds made available by DDS, Regional Center has provided to Owner the sum of $_________ to assist Owner in the purchase of the Property (the “DDS Funds”).

Certain Definitions.

Conveyance. The term “Conveyance” means the transfer of the Property, or any of Owner’s interest therein, for consideration. If Owner is an entity, the transfer individually or in the aggregate, directly or indirectly, of a 50% or greater voting or financial interest of any of the partners, members, shareholders or principals of Owner shall also constitute a Conveyance. (A Regional Center-approved lease between Owner and a service provider for the purpose of providing services to Consumers is not a Conveyance.)

Gross Proceeds. The term “Gross Proceeds” means the greater of (i) all funds and other consideration received by Owner or its Affiliate (defined below), or received by others for the benefit of Owner or its Affiliate, upon a Conveyance or relating to a Conveyance or (ii) the fair market value of the Property on the 60th day before the date of the Conveyance, as determined by DDS in its reasonable discretion.

Affiliate. The term “Affiliate” means any person or entity in which Owner or any of its principals or, if Owner is a partnership or limited liability company, any of its partners or members or principals of its partners or members, has, individually or in the aggregate, directly or indirectly, a 25% or greater voting or financial interest. The term “Affiliate” shall include any principal, partner or member of Owner and any family member of Owner or any of Owner’s principals or, if Owner is a partnership or limited liability company, any family member of any of its partners or members or the principals of its partners or members. As used in this Section 4.3, a “principal” shall be any person or entity who owns or controls, directly or indirectly, a 10% or greater voting or financial interest in Owner or the entity at issue, and “financial interest” shall mean any interest in the profits and/or losses of, and/or equity in, such entity.

Allowed Costs. The term “Allowed Costs” means the total of the following: (i) the funds required to repay the loan secured by the Senior Lender’s Deed of Trust described in Section 15 below (except for any late charges, penalties or default interest owed due to Owner’s failure to make payments thereunder); (ii) the funds required to repay any other secured real property loans encumbering the Property that have been expressly approved by DDS (except for any late charges, penalties or default interest owed due to Owner’s failure to make payments thereunder); and (iii) Owner’s documented and reasonable out-of-pocket costs related to the Conveyance (including escrow fees, title fees, attorneys’ fees, brokerage fees, closing costs and other reasonable costs paid to third parties).

Net Proceeds. The term “Net Proceeds” means Gross Proceeds less the Allowed Costs.

Profit Participation; Remittance to DDS or Designee. Upon Owner’s Conveyance of the Property, Owner shall remit to DDS the lesser of (i) an amount equal to the DDS Funds or (ii) 100% of the Net Proceeds. Such payment is hereinafter referred to as the “Profit Participation”.

Payment of Profit Participation. Owner shall pay the Profit Participation to DDS directly from the close of escrow or on the date such Conveyance is otherwise effectuated, unless DDS directs otherwise.

Owner’s Report. At least 30 days prior to the anticipated close of escrow or other effectuation of the Conveyance of the Property, Owner shall complete and submit to DDS for its approval or correction, a report showing the projected Profit Participation owing to DDS, along with back up documentation and calculations in support of such amount. The report shall be signed by an officer of Owner who shall certify that the information on the report is accurate. Once approved by DDS, the projected Profit Participation (as it may be corrected by DDS) shall be the amount of the Profit Participation.

Books and Records. Owner shall keep and maintain accurate financial books and records with respect to the acquisition and development of the Property in accordance with generally accepted accounting principles. Prior to the conveyance and as a condition precedent, Owner shall have prepared audited financial statements for the three prior fiscal years, which shall be made available to DDS upon request prior to the close of escrow. These financial books and records, along with all supporting documentation, shall be maintained by Owner for at least seven years after a Conveyance.

Right to Audit. At any reasonable time during escrow in connection with a Conveyance, or after the occurrence of the Conveyance, Regional Center and/or DDS shall have the right to audit Owner’s and its Affiliates’ books and records for the purpose of verifying the calculation of Gross Proceeds, Allowed Costs, Net Proceeds and the Profit Participation due to DDS (the “Audit”). The results of the Audit shall be binding upon the parties. Owner shall make available to Regional Center’s and DDS’s auditor all of the books and records of Owner and its Affiliates which such auditor deems necessary or desirable for the purpose of completing the Audit. Any deficiency in amounts due to DDS, as determined by the Audit, shall be immediately due and payable by Owner, together with interest thereon at 10% per annum commencing on the date or dates such amount should have been paid. If such deficiency is in excess of five percent of the previously remitted Profit Participation, Owner shall also pay to DDS the cost of the Audit. If the Audit establishes that Owner has overpaid DDS, DDS shall refund the amount of the overpayment within 90 days. Regional Center is a third party beneficiary to this paragraph.

Reasonable and Appropriate Provisions. Owner acknowledges that: (i) but for the DDS Funds, it could not have acquired the Property; (ii) the DDS Funds are derived from State of California funds, the purpose of which is to provide long term affordable housing to individuals with developmental disabilities; and (iii) the Profit Participation is in lieu of a promissory note equal to the DDS Funds and is also in lieu of interest that would have accrued on such note. It is therefore reasonable and appropriate that Profit Participation be returned to DDS.

Term of Agreement. This Agreement, and DDS’s profit participation rights, shall automatically terminate and expire on the 99th anniversary of the Effective Date.

Purpose of Agreement. This Agreement is being recorded to provide notice to any and all potential purchasers and subsequent interests in the Property of the Profit Participation requirements in this instrument.

Agreement Runs With the Land. The provisions herein burden the Property and run with the land. All successive owners of the Property shall be bound hereby for the benefit of DDS and its successors and assigns.

Obligations Secured; Violation of Agreement by Owner; DDS’s Remedies. Owner’s obligations to DDS under this Agreement are secured by a deed of trust entered into as of even date by Owner for the benefit of DDS (the “DDS Deed of Trust”). In the event of a breach or violation of the provisions of this Agreement, DDS shall give written notice to Owner at the address stated in the DDS Deed of Trust. If the breach or violation is not cured to the satisfaction of DDS within the time period specified in the notice, which shall not be less than twenty (20) days, DDS may declare a default and may seek any legal and equitable remedies including those as provided in the DDS Deed of Trust. They include, without limitation, the following:

Collect the entire Net Proceeds.

Elect to void the Conveyance.

Collect all income in connection with the operation of the Property and use the same and the reserve funds for the operation and maintenance of the Property.

Take possession of the Property and bring any action necessary to enforce any rights of Owner growing out of the operation of the Property, and operate the Property in accordance with the terms of this Agreement until such time as DDS, in its sole discretion, shall determine that Owner is again in a position to operate the Property in accordance with the terms of this Agreement or that the Property should be transferred to a different entity for the benefit of Consumers.

Apply to the court for specific performance of this Agreement or for the appointment of a receiver to take over and operate the Property in accordance with the terms of this Agreement; or for such other relief as may be appropriate. It is agreed by Owner that the injury to DDS arising from a default under any of the terms of this Agreement would be irreparable and that the amount of compensation which would be provide adequate relief to DDS, in light of the purposes of the Property, would be impossible to ascertain.

Accelerate all amounts, including all outstanding interest, due under the DDS Deed of Trust and judicially or nonjudicially foreclose on the Property.

Seek such other remedies as may be available under law or equity.

Subordination. This Agreement and the DDS Deed of Trust, and all rights arising under such instruments are, by their terms, subject and subordinate to the lien of that certain deed of trust given by Owner (as trustor) in favor of [Name of Senior Lender] to secure a loan in the principal amount of $______________ (the "Senior Lender’s Deed of Trust"). The Senior Lender’s Deed of Trust has been recorded against the Property concurrently with recordation of this Agreement and the DDS Deed of Trust. This Agreement and the DDS Deed of Trust are subject and subordinate to the Senior Lender’s Deed of Trust.

Violation of Agreement by Owner; Specific Performance. The parties agree that damages are an inadequate remedy for Owner’s breach of this Agreement, and that DDS or its designee may specifically enforce the provisions herein by temporary restraining order, preliminary injunction and permanent injunctive relief.

Cumulative Rights and Remedies. To the maximum extent permitted by law, all rights, options and remedies of DDS contained in this Agreement shall be construed and held to be cumulative, and no one of them shall be exclusive of the other, and DDS shall have the right to pursue any one or all of such remedies or any other remedy or relief which may be provided by law or equity, whether or not stated in this Agreement.

Amendment or Termination of Agreement. Subject to Section 11 above, this Agreement shall only be amended or terminated by an instrument executed and notarized by DDS and Owner and filed for record with the County Recorder’s Office where the Property is situated.

Partial Invalidity. If any provisions of this Agreement shall be determined to be void by any court of competent jurisdiction, then such determination shall not affect any other provisions of this Agreement and all such other provisions shall remain in full force and effect unless, in the sole discretion of DDS, the invalidity, illegality or unenforceability of the affected provision negates or impairs the purpose of DDS’s Community Placement Plan. If any provision of this instrument is capable of two constructions, one of which would render the provision void and the other of which would render the provision valid, then the provision shall be determined to have the meaning which renders it valid.

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Counterparts; Delivery. This instrument may be executed in counterparts, each of which shall be deemed an original and both of which shall constitute a single instrument. Signed copies of this instrument delivered by facsimile or a PDF attachments to emails shall be deemed the same as originals.

Executed in ______________ County, California as of the date first above written.

[Name of Owner], a [e.g., California nonprofit corporation] By: Name: Title:	Department of Developmental Services, a public agency of the State of California By: Name: Title:

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF CALIFORNIA	)
)
COUNTY OF _____________________	)

On ____________________, before me, ____________________________, a Notary Public, personally appeared _______________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Notary Public
STATE OF CALIFORNIA	)
)
COUNTY OF _____________________	)

On ____________________, before me, ____________________________, a Notary Public, personally appeared _______________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Notary Public

EXHIBIT “1” TO AGREEMENT

LEGAL DESCRIPTION OF PROPERTY

[Insert Legal Description Here]