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HomeMy WebLinkAboutCDC/1999-39 1 RESOLUTION NO. CDC 1999-39 2 A RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING THE FORM OF A CAPITAL GRANT PARTICIPATION AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO AND GROW AMERICA FUND, INC., FOR THE GROW SAN BERNARDINO FUND PROGRAM 3 4 5 6 7 WHEREAS, the Community Development Commission of the City of 8 San Bernardino (the "Commission") is the governing body of the 9 Redevelopment Agency of the City of San Bernardino (the "Agency"); 10 and 11 WHEREAS, Grow America Fund Inc., (the "GAF") has submitted a 12 proposal to the Agency to originate and service certain Small 13 Business Administration loans to qualified borrowers in the City of 14 San Bernardino which is generally described as the "Grow San 15 Bernardino Fund Program"; and 16 WHEREAS, it is appropriate for the Commission to take the 17 action as set forth in this Resolution with respect to the Grow San 18 Bernardino Fund Program 19 NOW, THEREFORE, THE COMMUNITY DEVELOPMENT COMMISSION ACTING ON 20 BEHALF OF THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO 21 DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: 22 23 Section 1. The Commission hereby acknowledges receipt of 24 the Agency Staff report dated October 18, 1999, which describes the 25 relevant operational features of the Grow San Bernardino Fund Loan 26 Program. 27 28 SBEO/0001/DOC/3575.1 10/05/99 300 ME 1 CDC 1999-39 1 Section 2. The Commission hereby approves the form of the 2 Capital Grant Participation Agreement by and between GAF and the 3 Agency substantially in the form as presented at this meeting and 4 as on file with the Agency Secretary. The Chairperson of the 5 Community Development Commission is hereby authorized and directed 6 to execute the Capital Grant Participation Agreement on behalf of 7 the Agency, together with such technical and conforming changes as 8 may be recommended by the Executive Director in consultation with 9 the Agency Counsel. The effective date of the Capital Grant 10 Participation Agreement shall be as set forth in Section A. 2, 11 thereof; provided however that GAF shall have fully executed such 12 agreement and otherwise satisfied the conditions of Section A.2 by 13 a date not later than December 1, 1999. 14 15 Section 3. The Commission hereby appropriates the sum of 16 Two Hundred Thousand Dollars ($200,000.00) of the available fiscal 17 year 1999-2000 funds of the Agency as allocated for such purpose 18 under the City of San Bernardino Community Development Block Grant 19 Program budget for fiscal year 1999-2000, to provide for 20 disbursements of the Agency Grant to GAF from time- to- time as set 21 forth in the Capital Grant Participation Agreement. Subject to the 22 timely execution of the Capital Grant Participation Agreement by 23 GAF, the Executive Director is hereby authorized and directed to 24 disburse the Agency Grant to GAF from time to time, as Grow San 25 Bernardino Loan applications are submitted to GAF for approval and 26 funding as set forth in the Capital Grant Participation Agreement. 27 / / / 28 SBEO/0001/DOC/3575.1 10/05/99 300 ME 2 CDC 1999-39 1 A RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING THE FORM OF A CAPITAL GRANT 2 PARTICIPATION AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO AND GROW AMERICA FUND, INC. FOR THE GROW 3 SAN BERNARDINO FUND PROGRAM 4 Section 4. This Resolution shall take effect upon 5 immediately upon its adoption. 6 7 I HEREBY CERTIFY that the foregoing Resolution was duly 8 adopted by the Community Development Commission of the City of 9 San Bernardino at a joing regular meeting 10 thereof, held on the 1st day of November , 1999, 11 by the following vote, to wit: 12 13 Commission 14 ESTRADA LIEN 15 MCGINNIS SCHNETZ 16 (VACANT) - 5th Ward ANDERSON 17 MILLER AYES X X X X NAYS ABSTAIN ABSENT X X 18 19 day of The foregoing Resolution is hereby approved this ~ November , 1 999 . UA--- alles, Chairperson nity Development Commission e City of San Bernardino 20 21 22 23 24 egal 25 By: 26 27 28 SBEO/0001/DOC/3575.1 10/05/99 300 ME 3 CDC 1999-39 CAPITAL GRANT P ARTICIP ATION AGREEMENT BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO AND GROW AMERICA FUND, INC. THIS CAPITAL GRANT PARTICIPATION AGREEMENT (the "Agreement") is dated as of ~ November 1. 1999>Y and between the Redevelopment Agency of the City of San Bernardino a body corporate and politic (the "Agency") and Grow America Fund, Inc., a Delaware non-profit corporation ("GAF"). The Agency and GAF are hereinafter referred to individually as a "Party" and are referred to collectively as the "Parties". This Agreement is entered into by the Parties with respect to the facts set forth in the Recitals, below: RECITALS WHEREAS, the Agency desires to expand economic opportunities for residents and businesses of the City of San Bernardino, California in order to prevent and eliminate the spread of blight and to foster economically self-sustaining capital investment and the expansion of business and employment opportunities in the City of San Bernardino; and WHEREAS, the Agency desires to encourage sustainable community development activities so that neighborhoods situated within redevelopment project areas administered by the Agency or elsewhere within the territorial jurisdiction of the City of San Bernardino are revitalized; and WHEREAS, GAF is a wholly-owned subsidiary of the National Development Council ("NDC"), a national 501(c)(3) not-for-profit corporation engaged in economic and community development and GAF is licensed and regulated by the United States Small Business Administration ("SBA") as a Small Business Lending Company (See: 13 Code of Federal Regulations Part 120.470) and GAF is authorized to make section 7(a) SBA-guaranteed loans to eligible small businesses; and WHEREAS, the Agency has found and determined that an allocation of available funds of the Agency to provide the"Agency Grant" to GAF and to provide for the operation and administration of the "GSB Loan Program" as described herein, shall materially assist the Agency to realize its goals for community redevelopment and revitalization; and WHEREAS, GAF is qualified to participate in the special economic development activities which the Agency proposes to undertake the GSB Loan Program and GAF is willing to assist the Agency to achieve its goals to expand economic opportunity and revitalize neighborhoods in the City of San Bernardino as an SBA-licensed lender which shall provide GSB Loan Program loans to qualified Borrowers as set forth herein. SBEOIOOO I/DOCI3 569-3 10/11/991100 ct 1 CDC 1999-39 NOW, THEREFORE, GAF AND THE AGENCY HEREBY AGREE AS FOLLOWS: AGREEMENT SECTION A. GENERAL PROVISIONS AND RESPONSIBILITIES 1. In addition to the usage of the words and phrases which are defined in the Recitals of this Agreement, certain other words and phrases shall have the meaning described below, unless in a particular context or usage a term or phrase may be specifically defined elsewhere in the Agreement. "Agency Grant" means and refers to the capital grant of cash to be provided by the Agency to GAF as set forth in this Agreement. GAF shall use and apply the Agency Grant, plus certain other capital contributed by GAF as provided in Section A.7, together with the other available proceeds and revenues of the GSB Fund to originate one or more GSB Program Loans. Promptly following the issuance of a Notice of Termination by a Party, GAF shall initiate the applicable GSB Fund "close-out" period distribution of assets procedure , and return the GSB Fund capital contributed under the Agency Grant and other applicable sums, if any to the Agency, as set forth in Section G of this Agreement. "Borrower" means and refers to each person or business entity who has submitted a completed GSB Fund Loan Application to the Agency and who is otherwise eligible to participate in the GSB Fund Program. The Agency may modify the eligibility requirements for Borrowers at any time following the effetive date of this Agreement, provided that such modifications are not inconsistent with the regulations of the SBA relating to the SBA-guaranteed loans. In addition to the section 7(a) loan eligibility requirements mandated by the regulations of SBA, each Borrower shall: (i) own a business which has its principal office in a redevelopment project area administered by the Agency; or (ii) own a business which if provided a GSB Fund Loan, shall provide a benefit to a redevelopment project area administered by the Agency in the prevention or elimination of the spread of blight; or (iii) own a business situated within the territorial jurisdiction of the City of San Bernardino in a United States Census Bureau census tract which is deemed an eligible low and moderate income census tract for purposes of the administration of the Community Development Block Grant program of the City of San Bernardino under 24 CFR Part 570.200 et seq."close-out SBEO/OOO 1 /DOC/3569-3 10/11/99 1100 ct 2 CDC 1999-39 period"means and refers to a period of time commencing on the earlier date of either GAF's receipt or issuance of a Notice of Termination, or July 1,2005 during which GAF shall administer the assets of the GSB Fund, and all outstanding GSB Loans until payment or discharge by Borrowers, and disburse or close-out the assets of the GSB Fund to the Parties as set forth in Section G. "GAF Program Loan" means and refers to a section 7(a) loan originated by GAF in favor of a Borrower using the unencumbered paid-in capital and paid in surplus contributed by GAF under Section A.7, of the Agreement. No part of a GAF Program Loan shall be deemed to be an asset or liability of the GSB Fund. No provision of Section G of this Agreement shall be applicable to the distribution of the assets of any GAF Program Loan during the close-out period or otherwise. "GSB Fund" means and refers to the special non-segregated account established by GAF for its acceptance, account and audit of the Agency Grant and the origination and administration of GSB Loans under the GSB Loan Program. GAF shall deposit and account for each installment of the Agency Grant remitted by the Agency to GDF and all proceeds and revenues derived therefrom, net of expenses of GAF, including applicable Administrative Fees and GSB Loan losses and write-offs properly allocated to the Agency Grant capital account of the GSB Fund. GAF shall have no obligation to deposit any sum into the GSB Fund other than installments of the Agency Grant and proceeds and revenues derived therefrom, including all sums realized by GAF from the sale of the section 7(a) loan guaranteed portion of each GSB Loan into the secondary market as authorized by 13 CFR Part 120.600 et seq. "GSB Loan" means and refers to a section 7(a) loan originated by GAF in favor of a Borrower using the Agency Grant and/or the availabile proceeds and revenues of the GSB Fund. "GSB Loan Application" means and refers to each completed section 7(a) loan application and supporting documentation which has been executed by the Borrower and delivered to the Agency. Subject to the Agency's verification of the eligibility of the Borrower to participate in the GSB Loan Program, the Agency shall deliver each completed GSB Loan Application to GAF within ten (10) days following receipt by the Agency. A GSB Loan Application shall also be used in connection with any GAF Program Loan to a Borrower. "GSB Loan Program" means and refers to the special economic development program of the Agency which shall be implemented by GAF under this Agreement. Under the GSB Loan Program GAF shall originate loans to Borrowers (subject to compliance with all applicable SBA loan underwriting requirements) using two (2) SBEOIOOO1 IDOC/3569-3 10111/99 1100 ct 3 CDC 1999-39 separate sources of capital: the first source of capital shall be the installments of the Agency Grant the available proceeds and revenues of the GSB Fund and the second source of capital shall be the GAF capital contribution described in Section A-7. Each Borrower shall use and apply the proceeds of its loan from either source of capital for eligible purposes under 24 CFR Part 570.203. Assuming that market conditions may permit and that not less than $200,000.000 is provided to GAF under the Agency Grant, GAF shall utilize the Agency Grant and the revenue and proceeds of the GSB Fund to originate approximately $800,000.00 in GSB Loans to Borrowers. In addition, GAF shall also use separate funds to originate the GAF Program Loans to Borrowers which in the aggregate may have a principal balance of$800,000.00 subject to the conditions set forth in Section A-7. Accordingly under these assumptions and for purposes of illustration only, the aggregate amount of all loans to Borrowers which may be originated by GAF under this Agreement could be as much as $1,600,000.00. "Notice of Termination" , means and refers to the written notice which may be given by either Party which ends the period of time during which new GSB Loans may be originated by GAF to Borrower under this Agreement and begins the close-out period for the distribution of GSB Fund assets and the return of the Agency Grant as set forth in Section G of this Agreement. "proceeds and revenues ofthe GSB Fund" means and refers to each of the following: (A) each installment of the Agency Grant received by GAF; and (B) interest earned on cash held by GAF in the GSB Fund; (C) the proceeds realized by GAF, net of SBA-authorized costs and expenses, from the sale of the SBA -guaranteed porion of each GSB Loan to the secondary market pursuant to 13 CFR Part 120.600 et seq.; and (D) payments of principal and interest and other loan collection charges to GAF by Borrowers whose loans are funded using the available proceeds of the GSB Fund. "section 7(a) loan" means and refers to a GSB Loan originated by GAF to a Borrower for which the SBA has guaranteed the repayment of a portion of such section 7(a) loan pursuant to the terms and conditions of the SBA Loan Guarantee Agreement by and between GAF and the SBA. 2. This Agreement shall take effect after it has been approved by the governing boards of each of the Parties and fully executed by the authorized officers of each of them and when each SBEO/OOOI fDOC/3569-3 10/11/991100 ct 4 CDC 1999-39 of the following have been received in acceptable form reasonably satisfactory to the Executive Director of the Agency: (i) the fidelity insurance in favor of the Agency as set forth in Section H; (ii) the evidence of comprehensive general liability insurance coverage in favor of the Agency as set forth in Section H; and (iii) the evidence of corporate authority of GAF as set forth in Section H; The effective date of this Agreement is indicated next to the signature of the authorized officer of the Agency on page 20 , below. Thereafter, this Agreement shall remain in effect until the close-out period for the distribution of GSB Fund assets and the return of the Agency Grant has concluded as evidenced by the Agency's receipt of the final written accounting of the assets, liabilities, expenses and distribution of the GSB Fund. Such a final accounting shall be prepared by GAF and delivered to the Agency as set forth in Section G. The close-out period shall begin on the first of the following dates to occur: (i) 60 days following the date of a Notice of Termination issued by a Party; or (ii) July 1,2005. 3. GAF hereby represents and warrants to the Agency as follows: (i) GAF is Small Business Lending Company licensed by the SBA to originate loans, including the proposed GSB Loans and GAF is otherwise qualified and experienced as an entity which is eligible to undertake the responsibility of a "community based development organization" as set forth at 24 CFR Part 570.204 (c ), with respect to this Agreement and each GSB Loan and each GAF Program Loan; (ii) GAF has entered into an agreement with SBA which authorizes GAF to originate section 7(a) loans as a "Lender," as this term is defined at 13 CFR Part 120.100; (iii) subject to its compliance with the terms of its agreement with SBA and other applicable law, GAF is authorized to accept the receipt of each installment of the Agency Grant and to use the Agency Grant, together with the proceeds and revenues of the GSB Fund, to originate GSB Loans and to pay for the expenses of the GSB Fund and participating in the GSB Loan Program; and SBEO/0001/DOC/3569-3 10/111991100 ct 5 CDC 1999-39 (iv) during the close-out period GAF is authorized under the applicable regulations of the SBA to distribute the assets of the GSB Fund and return the Agency Grant to the Agency in accordance with the applicable provisions of Section G. (v) no provision of this Agreement has the effect of making the Agency a "Lender" as this term is defined in 13 CFR Part 120.100, or otherwise making the Agency subject to regulations by the SBA for any purpose including the sale by GAF of any SBA guaranteed portion of any GSB Loan to the secondary market pursuant to 13 CFR Part 120.600 et seq; 4. Subject to the terms and conditions of this Agreement the Agency hereby agrees to provide GAF an amount not to exceed the sum of Two Hundred Thousand Dollars ($200,000.00) as the Agency Grant to capitalize the GSB Fund. The Agency shall remit the principal amount of the Agency Grant to GAF in installments from time to time. Within ten (10) days following GAF eligibility confirmation for a GSB Loan Application, the Agency shall remit to GAF an installment of the Agency Grant equal to 100% of the proposed GSB Loan amount until such time as the aggregate amount of all previous installments of the Agency Grant remitted to GAF is at least $200,000.00. Notwithstanding the preceding sentence, the Agency may in its discretion provide additional sums to GAF under the Agency Grant in excess of $200,000.00; provided, however, that GAF shall have no obligation to accept an installment of the Agency Grant after the third (3rd) anniversary following the effective date of this Agreement unless the aggregate amount of all previous installments of the Agency Grant remitted to GAF as of such anniversary date is at least Five Hundred Thousand Dollars ($500,000.00). 5. GAF hereby establishes a capital account entitled "Grow San Bernardino Fund" (the "GSB Fund"). GAF shall credit all amounts of the Agency Grant which it receives from the Agency to the GSB Fund, together with the proceeds and revenues derived from GSB Loans. The cash, assets, and liabilities of the GSB Fund shall not be segregated from other funds and accounts held by GAF. The cash and other assets and proceeds and revenues of the GSB Fund shall be used and applied by GAF solely to originate GSB Loans and to pay for the authorized expenses of the GSB Fund incurred by GAF. Pending the disbursement of cash on deposit in the GSB Fund for one or more GSB Loans, GAF shall invest the balance of such cash in securities backed by the full faith and credit of the United States, or in other investments as specifically approved in writing by the Agency, with interest thereon to be credited to the GSB Fund. GAF shall provide the Agency with a suitably detailed written accounting of the GSB Fund activity on a quarterly basis, with the first such accounting due within fifteen (15) days following the end of the calendar year quarter in which the initial installment ofthe Agency Grant is remitted to GAF by the Agency. 6. Subject to its receipt of the Agency Grant in one or more installments and the satisfaction of the other conditions ofthis Agreement, GAF hereby agrees to undertake the following obligations: SBEO/OOO IIDOC/3569-3 101 II 199 1100 ct 6 CDC 1999-39 a. ongmate SBA-guaranteed Section 7(a) loans to Borrowers using the Agency Grant and the proceeds and revenue derived therefrom and/or the GAF Program Loan capital provided by GAF; b. provide technical support and GAF staff to assist the Agency staff to administer the GSB Fund Program; c. provide technical training services as necessary to enhance the ability of Agency staff to administer the GSB Fund Program and other similar community economic development programs in a prudent and businesslike manner in accordance with a training schedule and program to be undertaken by the Parties; d. market the GSB Fund Program in consultation with Agency Staff; e. originate and package GSB Loans and/or GAF Program Loans, as applicable to Borrowers promptly upon receipt of each completed GSB Loan Application from the Agency; f. close, service, and collect OSB Loans and/or OAF Program Loans and perform the fiduciary responsibilities of OAF as a Lender with respect to each such loan, in accordance with SBA and other applicable regulations; g. perform annual reviews of each OSB Loan and each OAF Program Loan; h. provide suitably detailed written quarterly reports to the Agency on the status of OSB Loan and GAF Program Loan activity and performance; and i. establish separate accounting records and accounts for the GSB Fund and each GSB Loan, in the name of OSB Fund. 7. GAF hereby establishes a capital account entitled "OAF Program Loan Fund: San Bernardino" (the "OAF Program Loan Fund"). OAF shall credit the OAF Program Loan Fund from transfers of other available unencumbered capital or paid-in surplus funds of GAF to such account in an amount not to exceed Two Hundred Thousand Dollars ($200,000.00) on a dollar-for-dollar basis as funds are received from the Agency under the Agency Grant. The cash and other assets and proceeds and revenues of the GAF Program Fund shall be used and applied to originate GAF Program Fund Loans to Borrowers. No OAF Program Fund Loan shall be originated after a Notice of Terrnination has been issued by a Party, nor shall a GAF Program Fund Loan be originated on or after the third (3rd) anniversary following the effective date of this Afreement. OAF shall have no duty or obligation to originate OAF Program Loans which have in the aggregate an original principal balance which exceeds on a dollar-for-dollar basis the original principal balance of all GSB Loans. OAF shall provide the Agency with a suitably detailed written accounting of OAF Program Loan Fund activity on a quarterly basis, with the first such accounting due within fifteen (15) days SBEO/OOO I/DOC/3569-3 10111/99 1100 ct 7 CDC 1999-39 following the end of the calendar year quarter in which the initial installment of the Agency Grant is remitted to GAF by the Agency. The final quarterly report on the GAF Program Loan Fund shall be due at the end ofthe calendar year quarter in which a Notice of Termination is issued by a Party, or July 15,2005, whichever date may first occur. The GAF Program Loan Fund is not subject to either the asset distribution program set forth in Section E or the asset distribution program set forth in Section G. The cash, assets and all proceeds and revenues derived from each GAF Program Fund Loan shall be and remain the sole and separate property ofGAF. 8. The Agency hereby represents and covenants to GAF as follows: a. the Agency has taken all necessary action to approve this Agreement; b. the Agency has taken appropriate action to allocate, reserve and make available for the GSB Fund Program during the first three (3) years following the effective date of this Agreement certain Agency funds in the amount of Two Hundred Thousand Dollars ($200,000.00) which shall be disbursed to GAF from time to time as installments of the Agency Grant, subject to the terms and conditions of this Agreement; c. the Agency hereby acknowledges and agrees that all credit and underwriting decisions made by GAF in good faith with respect to each GSB Loan Application shall be final and shall not be subject to review or challenge by the Agency; d. the Agency hereby acknowledges and agrees that all GSB Loan administration and collection decisions made by GAF in good faith with respect to each GSB Loan during the term of this Agreement shall be final and shall not be subject to review or challenge by the Agency. 9. The Agency hereby acknowledges and agrees that it has been informed and that it understands that the Agency Grant is exposed to a degree of market risk and loss of capital by GAF during the course of its customary lending activities with respect to the GSB Fund and the operation by the GAF of the GSB Fund Program. The Agency understands and agrees that to the extent the asset value of one or more GSB Loans may be impaired, reduced or lost during the course of the administration and collection of such OSB Loans by OAF, that OAF shall impose a charge against the Agency Grant capital account for the non-SBA guaranteed portion of such a loan in accordance with the applicable regulations ofthe SBA and the terms and conditions of GAF's loan participation agreement with the SBA. The Agency further understands and agrees that depending upon the circumstances at the time of a Notice of Termination and the initiation of the close-out period under Section G, the final amount of the Agency Grant which shall be returned to the Agency upon the conclusion of such close-out period could be less than the aggregate amount of all installments of the Agency Grant remitted to GAF prior to the date of such Notice of Termination. SBEOI0001/DOC/3569-3 10/11/99 1100 ct 8 CDC 1999-39 SECTION B. OPERATING PROCEDURES 1. GAF shall provide the Agency with forms for the dissemination of GSB Loan Applications to interested persons. Interested persons shall be instructed to submit completed GSB Loan Applications to the Agency for transmittal to GAF. GAF and Agency staff will conduct a preliminary review of each GSB Loan Application and its supporting financial information to verify completeness, verifY that the use of the proceeds of the loan as proposed by the Borrower satisfY the requirements of24 CFR Part 570.204 and the requirements of the GSB Fund Program and confirm the eligibility of the Borrower to participate in the GSB Fund Program. Each completed GSB Loan Application submitted by an otherwise eligible Borrower shall be forwarded to GAF within ten (10) days of receipt by the Agency for review and section 7(a) loan underwriting acceptance by GAF. 2. Upon its receipt GAF will evaluate and underwrite each GSB Loan Application for an SBA-guarantee to be issued under GAF's SBLC license agreement subject to acceptance by the SBA. 3. Following GAF's confirmation that a GSB Loan Application meets SBA eligibility and credit requirements, GAF will submit the particular loan package for final SBA approval, including issuance of an SBA "Loan Authorization and Guaranty Agreement" which stipulates the terms and conditions for the particular GSB Loan. 4. Upon receipt of all necessary SBA documentation for a particular GSB Loan or GAF Program Loan, GAF shall notify Agency staff and the Borrower of SBA approval and initiate the final loan closing and servicing procedures, or if applicable, GAF will notify Agency staff and the Borrower that GAF or the SBA has determined the GSB Loan Application to be ineligible for funding as provided in 13 CFR Part 120.192. 5. The Borrower shall execute the final form of the GSB LoanlGAF Program Loan instruments in favor of GAF and the proceeds of such loan shall be disbursed by GAF to the Borrower within the period of time following loan approval to the Borrower as authorized by GAF. GAF shall be solely responsible for establishing and administering each loan disbursement transaction account with each Borrower. At the option of GAF it may establish one or more local distribution transaction accounts with a third-party fiscal agent or escrow holder acceptable to GAF in accordance with applicable regulations of the SBA. Promptly following the satisfaction of all conditions for the disbursement of any GSB LoanlGAF Program Loan to the Borrower, GAF shall provide the Agency with a copy of the Borrower's loan closing statement. 6. In operating GSB Fund GAF agrees to: a. Perform all functions under this Agreement in accordance with applicable SBA regulations, including but not limited to those governing SBLCs' which are incorporated into this Agreement by reference; SBE010001/DOC/3569-3 10/11/99 1100 ct 9 CDC 1999-39 b. Serve in a fiduciary capacity to underwrite, approve, close, and service all loans under the GSB Fund Loan Program; c. Operate the GSB Fund in a prudent and businesslike manner; and d. In the event that either the Borrower or GAF may materially change the proposed use of the proceeds of a loan, after the time when the GSB Loan Application has been confirmed as complete and eligible by the Agency, GAF shall request the Agency to review and confirm that such a material change is authorized under the GSB Loan Program. 7. To the extent reasonably practical, loans to Borrowers shall be funded by GAF on an alternating basis using the available balance of the GSB Fund and the GAF Program Fund; provided however, that the first loan originated under the GSB Loan Program shall be funded by the Agency Grant. SECTION C. CAPITALIZING THE GSB FUND 1. The Parties agree that the GSB Fund shall be capitalized solely with the proceeds of the Agency Grant as delivered to GAF and the proceeds and revenues derived therefrom. No other funds of GAF are available therefor or shall be used for such purpose. GAF shall use the cash and assets and proceeds and revenues of the GSB Fund solely for the origination of eligible SBA- guaranteed loans to Borrowers within the City, and for no other purpose. 2. The Agency shall commence the disbursement of the Agency Grant to GAF for the account of the GSB Fund within sixty (60) days following the effective date of this Agreement. Each remittance of the Agency Grant made under this section shall be made by check payable to GAF as follows "Grow America Fund (San Bernardino)". 3. In the event that on the third (3rd) anniversary following the effective date of this Agreement, the aggregate amount of all disbursements of the Agency Grant to GAF is less than the sum of Five Hundred Thousand Dollars ($500,000) then in such event the Agency shall be entitled to an annual "program income return" on the outstanding balance of the Agency Grant (currently two percent (2%) per annum) upon the earlier date of either a Notice of Termination or July 1,2005. GAF may adjust the rate of the annual program income return from time-to-time. Such program income return shall be calculated annually by GAF and the aggregate amount of all such program income shall be credited by GAF to the Agency Grant capital account beginning on the third (3rd) anniversary following the effective date of this Agreement with the final such credit payable on the date of such Notice of Termination or July 1,2005, whichever date may first occur. The sum of all revenues and proceeds of the GSB Fund in excess of such program income return shall be the property of GAF and shall be used by GAF to pay administrative expenses of GAF for operating the GSB Fund Program. SBEO/000IlDOC/3569-3 10/11/99 1100 ct 10 CDC 1999-39 4. In the event that on the third (3rd) anniversary following the effective date of this Agreement, the aggregate amount of all disbursements of the Agency Grant to GAF is Five Hundred Thousand Dollars ($500,000.00) or more, then in such event upon the earlier date of either a Notice of Termination or July 01, 2005, and after the deduction of certain administrative expenses of GAF authorized in Section D, the remaining balance of the cash and assets and proceeds and revenue of the GSB Fund shall be subject to distribution to the Parties during the close-out period as set forth in Section G. SECTION D. GAF ADMINISTRATIVE FEE: 1. This Section D is applicable in the event that on or before the third (3rd) anniversary following the effective date of this Agreement the aggregate sum of all remittances of the Agency Grant to GAF is at least Five Hundred Thousand Dollars ($500,000). Provided the Agency Grant is at least $500,000 by no later than such date, GAF will be paid an "Administrative Fee" from the GSB Fund according to the following schedule: a. For the first year during which the GSB Fund Program is in operation, a fee of $40,000 will be paid in twelve (12) equal monthly installments of$3,333.33 each; b. For the second year during which the GSB Fund Program is in operation, a fee of$55,000 will be paid in twelve (12) equal monthly installments of$4,583.33 each; c. For the third year during which the GSB Fund Program is in operation, a fee of $70,000 will be paid in twelve (12) equal monthly installments of$5,833.33 each; d. Thereafter, until the earlier date of the Notice of Termination or June 30, 2005 GAF will receive a monthly fee in the amount of 1/12th of2% of the aggregate amount of all GSB Loans outstanding on the last day of each month, including both sold and unsold portions of GSB Loans. 2. The Administrative Fee will be paid from revenues generated by the GSB Fund in excess of the balance of the Agency Grant and shall be initially payable to GAF in arrears, sixty (60) days following the date on which the aggregate amount of all disbursements of the Agency Grant to GAF exceeds the sum of $500,000.00. Thereafter the Administrative Fee shall be payable in monthly installments. The Administrative Fee shall be payable to GAF solely from the available proceeds and revenues of the GSB Fund and from no other source. 3. Prior to withdrawing any sum from the GSB Fund to satisfy payment of the Administrative Fee, GAF will provide the Agency with a written invoice and statement. SBEO/OOO I1DOC/3569-3 10/11/99 1100 ct 11 CDC 1999-39 SECTION E. PRE CLOSE-OUT-PERIOD OF DISTRIBUTIONS CASH.AND ASSETS OF THE GSB FUND WHEN AGENCY GRANT DISBURSEMENTS ARE AT LEAST $500.000.00 1. Provided the Agency has remitted at least $500,000 (over time) as the Agency Grant to GAF, the proceeds and revenues generated by GSB Fund activities from and after such time until the close-out period is initiated under Setion F will be distributed by GAF within 30 days following the end of each calendar year quarter in the following order; a. First, to pay the GAF Administrative Fee as described in Section D; b. Second, at the written election of the Agency, to reinvest into the GSB Fund as additional contributions of Agency Grant capital; c. Third, the balance will be remitted to the Agency. SECTION F. SUSPENSION OF DISBURSEMENTS OF THE AGENCY GRANT AND TERMINATION OF AGREEMENT: 1. Following the effective date, this Agreement shall continue in effect until the close- out period set forth in Section G has been completed. The close-out period shall be initiated by GAF as of the earlier date that either a Notice of Termination is issued by a Party, or July 1,2005. 2. During the first three (3) year period after the effective date of this Agreement, the close-out period may be initiated at any time, upon mutual written agreement of the Parties, and the assets of the GSB Fund (e.g. the balance of the capital account and the proceeds and revenues thereof) shall be distributed in accordance with Section G. 3. On and after the third (3rd) anniversary following the effective date of this Agreement, either Party may initiate the close-out period for any reason by giving a sixty (60) days written Notice of Termination to the other Party. 4. Unless a Party initiates the close-out period by giving a Notice of Termination before July 1,2005, GAF and the Agency shall continue operation of the GSB Fund in the City making loans and providing economic development financing to Borrowers until July 1,2005, at which time the close-out period shall commence and no new GSB Loans shall be originated. 5. The Agency may suspend its obligation to accept and review any GSB Loan Application and disburse any installment of the Agency Grant to GAF in the event that a default has occurred under this Agreement or in the event that the United States Secretary of Housing and Urban Development may direct the Agency to suspend disbursements of the Agency Grant to GAF. The Agency reserves the right to reallocate and reduce the amount of Agency funds appropriated and SBEOIOOO I/DOC/3569.3 10/11/99 II 00 ct 12 CDC 1999-39 made available for the Agency Grant in the event that Borrower interest or eligibility to participate in the GSB Loan Program may fall below expectations; provided however that the Agency shall consult with GAF before any such reallocation or reduction in funding is implemented by the Agency. SECTION G. DISTRIBUTION OF GSB FUND ASSETS FOLLOWING NOTICE OF TERMINATION 1. Upon the issuance ofa Notice of Termination by either Party or July 1,2005, which ever date may first occur, GSB Fund cash and assets and proceeds and revenues will be distributed and the Agreement will be closed out as provided under in this Section G. The "close-out period" is defined as the period beginning sixty (60) days after the date of the Notice of Termination and ending within ninety (90) days following the last payment of principal and interest by the Borrowers to GAF under any GSB Loan and the preparation and delivery by GAF to the Agency of the final accounting statement ofGSB Fund activity. GAF shall not originate any new GSB Loan for which a GSB Loan Application has not been received prior to the date of such Notice of Termination. 2. During the close-out period, GAF will receive a monthly "Close-Out Portfolio Management Fee" equal to 1/12 of 3.0% of the GSB Fund Loans serviced by GAF during the previous twelve (12) months, plus reasonable out-of-pocket costs incurred in servicing and collecting the outstanding loans. Total fees and out-of-pocket costs of GAF shall be not less than $5,000 annually during the close-out period. Loans serviced by GAF for the purpose of calculating the Close-Out Portfolio Management Fee include loans held by the GSB Fund and the portions of GSB Loans previously sold by GAF to secondary market investors. This fee will be paid from the debt service payments made by GSB Fund Borrowers and servicing fees generated by GAF during the close-out period. The Agency shall not be obligated to pay any portion of the annual close-out management fee nor out-of -pocket costs from any source of funds other than debt service payments and service charges to Borrower on GSB Loans. 3. In addition to the Close-Out Portfolios Management Fee GAF shall receive "incentive compensation" under one of the three methods described in subparagraph a, b, or c below. The Agency will be entitled to all principal and interest payments and program assets (cash and loans outstanding to Borrowers) except as described in Paragraphs 2,3 (a), 3(b) and 3(c): a. If GAF initiates the close-out period before July 1, 2005, or if the Agency initiates the close-out period before July 1,2005, and on the date of the Notice of Termination the aggregate amount of the non-SBA guaranteed portion of the GSB Loans is less than 100% of the aggregate amount of the Agency Grant disbursed to GAF, GAF will not receive any incentive compensation. The principal and interest will be returned to the Agency as paid by the Borrowers, net of the Close-Out Portfolio Management Fee described in Paragraph 2 above. SBEO/OOOI/DOC/3569-3 IO/Il/991100ct 13 CDC 1999-39 b. If on July 1, 2005 or earlier when the Agency initiates the close-out period the Agency has disbursed less than $500,000 of the Agency Grant and GSB Loans exceed the amount of the Agency Grant, then GAF will receive incentive compensation equal to 50% of the GSB Loans made prior to the date of such Notice of Termination, but at no time shall the incentive compensation exceed the amount of the balance of the Agency Grant reimbursed through the date of such Notice of Termination. The incentive compensation will be paid from servicing fees and debt service payments made by Borrowers. c. If on July 1, 2005 or earlier when the Agency initiates the close-out period, the Agency has disbursed an aggregate amount of more than $500,000 of the Agency Grant to GAF and GSB total loans exceed the amount of the equity invested, the GAF will receive incentive compensation in accordance with the following formula; . If the GSB Loans are less than 200% of the Agency Grant, GAF's incentive compensation will equal 10% of the Agency Grant and be paid from servicing fees and debt service payments made by Borrowers. . If the GSB loans equal or exceed 200% of the Agency Grant, GAF's incentive compensation will be 25% of the Agency Grant and be paid from servicing fees and debt service payments made by Borrowers. d. The Agency shall not be obligated to make any payments to GAF, during the close-out period, which may in the aggregate exceed the undistributed portion of the Agency Grant. 4. From and after the date of a Notice of Termination, all principal and interest payments and cash and other assets of the GSB Fund not due to GAF under this section shall be paid to the Agency in quarterly payments during the close-out period until such time as amounts as may be payable to the Agency from the available balance of the GSB Fund have been paid by GDF to the Agency and the GSB Fund is closed as evidenced by a final written accounting and statement of GAF. SECTION H. OTHER TERMS AND CONDITIONS 1. GAF shall perform all services under this Agreement as an independent contractor. GAF agrees to comply with all applicable federal, state and local laws in the conduct of the work hereunder. OAF accepts full responsibility for payments of all unemployment compensation, insurance premiums, workers' compensation premiums, all income tax deductions, social security deductions, and any and all other taxes or payroll deductions required for all employees engaged by OAF for the performance of the work authorized by the Agreement. 2. GAF hereby assures and certifies that it has complied with and will continue to comply with the Small Business Loan Act and all applicable Federal, State and Local SBEO/OOO 1100C/3569-3 10/111991100 ct 14 CDC 1999-39 Laws,ordinances, regulations, policies, guidelines, and requirements as they relate to acceptance and use of the Agency Grant. This Agreement is subject to all such laws, ordinances, regulations, policies and guidelines,including, without limitation, the Community Development Act of 1974,24 CFR Part 570 and U.S. Office of Management and Budget Circulars applicable including, without limitation, A-87, A-95, A-IlO,A-I22 and A-128. 3. The Agency shall have the right, during GAF's normal business hours for the duration of this Agreement and for a period of three (3) years after the and the final disbursement of the GSB Fund assets is paid to the Agency under Section GA., to conduct the following audits at the offices ofGAF. a. Audits of GAF' s performance of services under this Agreement; and b. Audits of books and accounts maintained by GAF for the GSB Fund and the GAF Program Loan Fund under this Agreement. Such audits shall be performed either by Agency staff or by a third party firm if accountants whom the Agency may employ for the purpose of making such audits. The Agency and GAF shall establish customary and reasonable procedures for performing such audits and shall preserve the confidential and proprietary status of audited documents and information to the maximum extent permitted by law. GAF will not be required to relocate records from their normal location. GAF will provide copies of GSB records to the Agency upon request. 4. GAF shall make every effort to ensure that each Borrower takes reasonble actions to provide equal employment and career advancement opportunities for persons and households of low and moderate income. 5. No person shall, on the grounds of race, sex, creed, color, religion or national origin, be excluded from participating in, be refused the benefits of, or otherwise be subjected to discrimination in any activities, programs, or employment supported by this Agreement. 6. By its execution ofthis Agreement, GAF certifies that it has previously filed with the Agency, a written statement listing all revenue received, or expected to be received, by GAF from and federal, state or local governmental agencies, and applied or expected to offset, in whole or in part, any of the costs incurred by GAF in conducting current or prospective projects or business activities, including, but not limited to, the project or business activity which is the subject of this Agreement. Such statement shall reflect the name and a description of such project, the dollar amount of funding provided, or to be provided, by each and every governmental agency to each such project or business activity, and the full name and address of each such governmental agency. During the term of this Agreement, GAF shall prepare and file similar written statement each time it receives funding from any governmental agency which is additional to that revenue disclosed in GAF's initial revenue disclosure statement hereunder. Such statement shall be filed with the SBEO/OOO I1DOC/3569-3 10/11/99 I 100 ct 15 CDC 1999-39 Agency, within fifteen (15) calendar days following receipt of such additional funding. GAF shall make available for inspection and audit by Agency representatives, upon request, at any time or times during the duration of this Agreement and during a period of five (5) years thereafter, all of its books and records relating to the operation by it of each project or business activity which is funded in whole or in part with governmental monies, whether or not such monies are received through the Agency. All such books and records shall be maintained by GAF at their designated business location. Failure to comply with the requirements of this section of the Agreement shall constitute a default of of this Agreement upon which Agency may, among its other remedies, and without limitation, cancel, terminate, or suspend this Agreement. 7. All notices herein required shall be in writing. Notices shall be sent by prepaid First Class Mail to the following address: To Agency: Redevelopment Agency of the City of San Bernardino Attn: Executive Director 201 North "E" Street, Suite 301 San Bernardino, California 92401 To GAF: Grow America Fund, Inc. Attn: Robert W. Davenport, President The National Development Council 41 East 42nd Street, Suite No. 300 New York, New York 10017 8. GAF shall secure and maintain throughout the term of the Agreement the following types of insurance with limits as shown: a. GAF shall provide and maintain workers compensation insurance for its employees and require the carriers of this coverage to waive all rights of subrogation against the Agency, its officers, employees, and agents. GAF shall maintain all California statutory requirements of $1 ,000,000.00 limit. b. GAF shall provide and maintain comprehensive general liability insurance issued by an insurance company which holds a Best Insurance Guide, current edition policy holder rating of at least "A (v)" on a per occurrence basis with a combined single limit of One Million Dollars ($1,000,000.00) which names the Agency, its officials, employees and agents as additional insured with respect to the GSB Program, and automobile liability insurance for owner, hired and non-owned vehicles on a per occurrence basis with a combined single limits of one million dollars ($1,000,000.00). Additional insured endorsements are required for general and automobile liability policy coverage. SBEO/0001/DOC/3569-3 10/11/991100 ct 16 CDC 1999-39 9. Prior to the disbursement of any installment of the Agency Grant, GAF shall deliver a valid certificate of fidelity bond coverage in form and substance reasonably satisfactory to the Agency with respect to the GSB Fund Program. For the purposes hereof, fidelity bond coverage shall be deemed acceptable if it satisfies the requirements of 13 CFR Part 120.470 (b) (10) with respect to the balance of the Agency Grant capital account of the GSB Fund. 10. GAF and its agents and employees shall comply with all applicable Federal, State, County and City laws and regulations governing conflict of interest. To this end, GAF will make available or shall provide copies of all applicable Federal, State, County and City laws and regulations governing conflict of interest, to its agents and employees. 11. Agency will monitor GAF in the performance of this Agreement.GAF shall maintain such property, personnel, financial and other records and accounts as are considered necessary by HUD, and Agency, to assure proper accounting for all Agency Grant funds authorized under this Agreement. GAF will permit on-site inspection by Agency and HUD representatives, and ensure that its employees and board members furnish such information, as in the reasonable judgement of Agency and HUD, may be relevant to a question of compliance with contractual conditions and HUD directives, or the effectiveness, legality, and achievements of the program. All GAF records, with the exception of confidential Borrower information, shall be made available to representatives of the Agency and appropriate Federal Agencies. 12. In addition to other audits and accounting reports and information to be provided by GAF to the Agency, GAF shall to arrange for and provide at its cost and expense an independent financial and compliance audit annually during each fiscal year any portion of the Agency Grant funds are held by GAF with the first such independent audit report due on September 1, 2000, and on each September 1, thereafter. Within thirty (30) days of the submittal of the audit report to the Agency OAF shall also provide a written response to all conditions or findings reported in said audit report. The response must examine each condition or finding and explain a proposed resolution, including a schedule for correcting and deficiency, within six (6) months after receipt of such independent audit report. 13. The Agency and GAF, each respectively as indemnitor, will indemnify the other, as indemnitee, and save the other harmless from any and all loss, damage, expense and liability resulting from injuries to or death of persons, including but not limited to employees of the other Party hereto, and damage to or destruction of property, including but not limited to the property of the other Party hereto, arising out of or in any way connected with the performance of this Agreement or any operations hereunder by indemnitor, its agents or employees, excepting only such injury, death, damage or destruction as may be caused by the sole negligence or willful misconduct of the indemnitee, its agents or employees. Indemnitor shall, upon an indemnitee's request, defend at its sole cost any suit asserting a claim covered by this indemnity. It is the intent of the Parties hereto that, where negligence is determined to have been contributory, principles of comparative negligence will be followed and each Party shall bear the proportionate cost of any loss, damage, expense and liability attributable to the Party's negligence. SBEOIOOOI/DOC/3569-3 10/11/99 1100 ct 17 CDC 1999-39 14. In the event of any litigation between the Parties, the Superior Court of San Bernardino County, California or the United States District Court Central District of California shall have jurisdiction to consider any matter arising hereunder. The prevailing Party in any such litigation shall be entitles to a recovery of its reasonable attorney fees and costs either in such proceedings or in separate proceedings initiated for such purpose. The costs, salaries and expenses of the Office of the City Attorney of the City of San Bernardino which may be incurred on behalf of the Agency to to enforce the Agreement shall be deemed attorney fees. 15. Neither this Agreement nor any rights, duties or obligations herein shall be assigned by any Party without the prior written consent of the other Party. 16. Failure or delay by either party to perform any material term or provision of this Agreement shall constitute a default under this Agreement; provided however, that if the Party who is otherwise claimed to be in default by the other Party commences to cure, correct or remedy the alleged default within thirty (30) calendar days after receipt of written notice specifying such default and shall diligently complete such cure, correction or remedy, such Party shall not be deemed to be in default hereunder. The Party which may claim that a default has occurred shall give written notice of default to the Party in default, specifying the alleged default. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default; provided, however, the injured Party shall have no right to exercise any remedy for a default hereunder without delivering the written default notice as specified herein. Any failure to delay by a Party in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any rights or remedies associated with a default. In the event that a default of either Party may remain uncured for more than thirty (30) calendar days following written notice, as provided above, a "breach" shall be deemed to have occurred. In the event of a breach, the Party who is not in default shall be entitled to initiate the close-out period under this Agreement, and in addition to its receipt of the distribution of the assets of the GSB Fund as its interest may then appear, such Party may also seek any appropriate remedy or damages by initiating legal proceedings, if necessary. 17. If any provision of this Agreement is held invalid, the balance of the provisions of this Agreement shall not be affected thereby if the balance of the provisions ofthis Agreement would then continue to conform to the requirements of the applicable Agreement. 18. This Agreement, together with any and all appendices, exhibits, and/or attachments attached hereto and any amendments, modifications, addendum and/or any other documents attached hereto and incorporated herein constitutes the entire agreement among the Parties and no changes, alterations, or modifications shall be effective unless made in writing and signed by duly authorized representatives of the Parties. 19. This Agreement shall be construed, interpreted, and the rights of the Parties determined, in accordance with the laws of the State of California. SBEO/OOO I/DOC/3569-3 10/11/99 1100 ct 18 CDC 1999-39 In Witness Whereof, the Parties have caused this Agreement regarding the GSB Fund Program to be duly executed. The effective date of this Agreement is the date indicated next to the signature of of the Chairperson of the Community Development of the City of San Bernardino, which appears below. AGENCY Redevelopment Agency of the City of San Bernardino By: (cJ Date: /1---c7? -11 I APPROVED AS TO FORM: ~ ~.~ \l-S4~ Agency ~el Date: /o!-:; /19 I f SBEO/0001IDOC/3569-2 10-06-99 11.00 me 20