HomeMy WebLinkAbout1981-478
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San Bernardino
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RESOLUTION NO. f/-~7,f'
RESOLUTION OF THE MAYOR AND COMMON COUN-
CIL OF THE CITY OF SAN BERNARDINO APPROV-
ING A CERTAIN PROJECT AGREEMENT WITH TRI-
CITY INDUSTRIAL PARK, LTD., A CALIFORNIA
LIMITED PARTNERSHIP, AND AUTHORIZING THE
EXECUTION OF VARIOUS DOCUMENTS
(TRI-CITY INDUSTRIAL PARK, LTD.)
WHEREAS, there has been filed with the City an
Application pursuant to the provisions of Ordinance No. 3815,
as amended, of said City, by Tri-City Industrial Park, Ltd.,
a California Limited Partnership, requesting the issuance of
Industrial Development Bonds which shall be issued in the
principal amount of $1,750,000 in the form of a tax-exempt
construction loan for the purpose of financing the cost and
expense of the construction of multi-tenant industrial
buildings as more particularly described in said Applica-
tion; and
WHEREAS, the Mayor and Common Council must now
approve and authorize the execution of various documents and
a certain Project Agreement with Tri-City Industrial Park,
Ltd., a California Limited Partnership.
NOW, THEREFORE, THE MAYOR AND COMMON COUNCIL OF
THE CITY OF SAN BERNARDINO DO HEREBY FIND, RESOLVE, DETER-
MINE AND ORDER AS FOLLOWS:
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section 1. The recitals set forth hereinabove are
true and correct in all respects.
Section 2. The Mayor and Common Council, acting
for and on behalf of the city of San Bernardino, hereby
approve the Project Agreement with Tri-City Industrial Park,
Ltd., a California Limited Partnership, substantially in the
form attached hereto as "Exhibit A" and incorporated herein
by reference, with such corrections, changes, modifications,
additions or deletions as may be approved and recommended by
Bond Counsel to the Mayor and approved by him, his execution
thereof to be conclusive evidence of his approval; and the
Mayor and City Clerk are hereby authorized and directed to
execute such final Project Agreement when the same shall
have been prepared for execution, with the seal of the city
to be affixed thereto.
Section 3. The Resolution of Issuance is hereby
authorized to be executed and delivered with such correc-
tions, changes, modifications, additions or deletions as may
be approved and recommended by Bond Counsel to the Mayor and
approved by him, his execution thereof to be conclusive
evidence of his approval.
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Section 4. The Mayor, City Clerk, Project Coordi-
nator and any other City official, officer or employee to
the extent necessary under the circumstances, are hereby
authorized to execute any and all documents as may be required
~o consummate the transaction contemplated by the Project
Agreement as attached hereto as "Exhibit A" and the Resolu-
tion of Issuance.
I HEREBY CERTIFY that the foregoing resolution was
duly adopted by the Mayor and Common Council of the City of
San Bernardino at a
regular
meeting thereof, held on
the 5th day of
October
, 1981, by the follow-
ing vote, to wit:
AYES:
Councilmen
Castaneda, Reilly, Hernandez,
Botts, Hudson and Strickler
.NOES:
None
ABSENT:
Hobbs
ABSTAIN:
None
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~e foregoing resolution i. hereby approved this
f?Aay of $~4
, 1981.
Approved as to form:
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City At rney
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STATE OF CALIFORNIA )
COUNTY OF SAN BERNARDINO) as
CITY OF SAN BERNARDINO )
I, SHAUNA CLARK, City Clerk in and for the City of
San Bernardino, DO HEREBY CERTIFY that the foregoing and
attached copy of San Bernardino City Resolution No. 81-478 is
a full, true and correct copy of that now on file in this
office.
IN WITNESS WHEREOF,
and affixed the official Beal
this ~ day of ~b/d1
I have hereunto Bet my hand
of the City of San Bernardino
, 1981.
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PROJECT AGREEMENT
BETWEEN
THE CITY OF SAN BERNARDINO
CALIFORNIA
AND
TRI-CITY INDUSTRIAL PARK, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
WITH
LLOYDS BANK CALIFORNIA,
a California Corporation
AS AGENT
IN CONNECTION WITH
$8,500,000
(TOTAL AUTHORIZATION)
PHASE I: $1,750,000
INDUSTRIAL DEVELOPMENT LOAN BUILDING
SMALL ISSUE EXEMPTION
($10,000,000 MAXIMUM)
Dated as of October 1, 1981
The interest of the City of San Bernardino,
California in this Agreement has been assigned by the City
of San Bernardino, California to Lloyds Bank California,
a California Corporation, as Trustee, for the holder of the
City Note pursuant to the Resolution of Issuance of the City
of San Bernardino, California dated as of the date hereof,
and is subject to the security interest of Lloyds Bank
California, a California Corporation, as Trustee.
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PROJECT AGREEMENT
TABLE OF CONTENTS
Paqe
"Parties ................................................
Recitals
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions ............................ 4
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
section 2.01. Representations and Warranties by
the city ............................... 16
Section 2.02. Representations and Warranties by
tile Company ............................ 18
ARTICLE 3
CONSTRUCTION OF THE PROJECT
section 3.01. Agreement to Construct the Project ..... 21
Section 3.02. Establishment of Completion Date ....... 24
ARTICLE 4
PAYMENTS AND DISBURSEMENTS
Section 4.01. Issuance of the city Note; Creation
of Project Fund ......................... 26
Section 4.02. Project Fund Disbursements; Lien
Upon Moneys in Project Fund ............ 26
Section 4.03. Issuance of Company Note; Purpose;
Amount; Disbursements from Project
Fu.nd ................................... 27
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section 4.04.
Section 4.05.
section 4.06.
Section 4.07.
Section 4.08.
Section 4.09.
Section 4.10.
Section 4.11.
Section 4.12.
Section 4.13.
section 5.01.
Section 5.02.
Section 5.03.
section 5.04.
Section 5.05.
Section 5.06.
section 5.07.
Section 5.08.
section 5.09.
Section 5.10.
section 5.11.
section 5.12.
section 5.13.
Section 5.14.
section 5.15.
Section 5.16.
section 5.17.
section 5.18.
section 5.19.
Section 5.20.
section 5.21.
Section 5.22.
Section 5.23.
Section 5.24.
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Additional Disbursements ...............
Periodic progress Payment Plan .........
Periodic Progress Payment Plan -
Tenant Improvements ....................
Conditions Precedent ...................
Impound of Operating Income ............
Order of Disbursements .................
Payments by Company ....................
Timely Payment by Company..............
Contest; surety Bond ...................
Amendment for Issuance of Bonds ........
ARTICLE 5
SPECIAL COVENANTS
Financial Information ..................
Evidence of Compliance with
Governmental Regulation ................
Company's Responsibilities .............
Indemnification ........................
Commissions and Brokerage Fees .........
Taxes ..................................
No Secondary Financing .................
No Additional Debt .....................
Title Insurance ........................
Hazard Insurance .......................
Public Liability Insurance .............
Additional Insurance ...................
Protection Against Lien Charges ........
Maintain and Preserve the Project ......
Non-Discrimination - Compliance
With Laws and Regulations ..............
Other Assurances .......................
Bankruptcy .............................
Compliance .............................
Limitation on Capital Expenditures
Pursuant to section 103(b)(6)(D)
of the Code ............................
Supplemental Statements ................
Survival of Representations,
Warranties, Covenants, Etc. ............
Security Agreement .....................
Surveys ................................
Permits of Occupancy and certificate
of Completion ...........................
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33
34
35
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39
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42
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Section 5.25. Identification and Assignment of
Plans and specifications ............... 50
Section 5.26. Performance and Labor and Material
Bond ................................... 50
Section 6.01.
ARTICLE 6
FINANCIAL REQUIREMENT ANALYSIS
Financial Requirement Analysis
51
ARTICLE 7
ASSIGNMENTS, SECURITY
Section 7.01. Pledge and Assignment by City to
Trustee ................................ S2
Section 7.02. No Abatement; Payment to Agent ......... 52
Section 8.01.
Section 8.02.
Section 8.03.
Section 8.04.
Section 8.05.
Section 8.06.
Section 8.07.
Section 8.08.
Section 8.09.
Section 8.10.
ARTICLE 8
DEFAULT AND REMEDIES
Events of Default ...................... 54
Acceleration ........................... 56
Application of Funds in Project
Fund Against Company Note .............. 56
Right to Complete Construction ......... 56
Stoppage of Construction by Agent ...... 57
Curing of Defaults by Disbursement
from Project Fund ...................... 57
Remedies of Agent Are Cumulative ....... 58
Right of Contest ....................... 58
Return to Status Quo ................... 58
Attorneys' Fees ........................ S9
ARTICLE 9
AGENT TO ADMINISTER LOAN
Section 9.01. Administration of Loan ................. 60
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ARTICLE 10
MISCELLANEOUS
Section 10.01. Refund of Excess Amounts in the City
Note Fund ......................................................... 62
Section 10.. 02.. Notices ................................................................ 62
Section 10.03. Effect of Agreement .................... 63
section 10.. 04.. Amendment ............................................................ 63
Section 10.05. Counterparts ........................... 63
Section 10.06. Severability of Provisions ............. 63
Section 10.07. Construction ........................... 64
section 10.08. Form of Documents ...................... 64
section 10.09. Approval of Amendments ................. 64
section 10.10. No Waiver .............................. 65
Section 10.11. No Third Parties Benefited ............. 65
Section 10.12. Authority to File Notices .............. 65
section 10.13. Actions ................................ 65
section 10.14. Non1iabi1ity of Agent .................. 66
Section 10.15.. Interest .... '" .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 66
section 10.16.. S1gns .................................................................... 66
section 10.17. Time ................................... 67
EXHIBITS
Exhibit A - Company Note
Exhibit B - Deed of Trust
Exhibit C - city Note
Exhibit D - Plans and Specifications
Exhibit E - Agent's Cost Breakdown Analysis
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PROJECT AGREEMENT
PARTIES:
THE CITY OF SAN BERNARDINO, CALIFORNIA,
a municipal corporation organized and
existing under the Constitution of the
State of California and the city Char-
ter of said City (the "City");
TRI-CITY INDUSTRIAL PARK, LTD., a
California Limited Partnership (the
"Company"); and
LLOYDS BANK CALIFORNIA, a California
corporation (the "Trustee," "Agent,"
and "Purchaser")
RECITALS:
WHEREAS, the city of San Bernardino is a municipal
cOL~oration duly organized and existing under the Constitu-
tion of the State of California and the City Charter of said
City; and
WHEREAS, the city has adopted the Ordinance entitled
"Ordinance of the 'city of San Bernardino Relating to the
Financing of Projects for the Encouraging of Increased
Employment wi thin the City and certain Amendments Thereto";
and
WHEREAS, said Ordinance is intended to provide a
means for financing the development of industry and commerce
and thereby to broaden the employment opportunities for
residents of the City and its tax and revenue base; and
WHEREAS, the Company has submitted its Application
for the financing of certain capital improvements and improve-
ments to land as authorized by the Ordinance, and the Mayor
and Common council of the City have adopted an Initial
Resolution approving the same and making the necessary
determinations, in a certain Resolution entitled: "Resolu-
tion of the Mayor and Common Council of the city of
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San Bernardino Finding That an Application for Industrial
Development Bond Financing Has Been Submitted Pursuant to
the Provisions of the Ordinance of the City for a Certain
Project, Finding That Said Application Complies With the
Provisions and Requirements of Said Ordinance; Approving
Said Application and the Project to Which it Refers; Direct-
ing the Preparation of a Project Agreement, a Resolution of
Issuance and Such Other Legal Documents as May Be Necessary
to Carry Out Said Project and Provide for the Issuance of
Industrial Development Revenue Bonds Therefor; and Making
Certain Other Findings and Determinations in Connection
Therewith"; and
WHEREAS, pursuant to, and in accordance with, the
provisions of the Ordinance, Company proposes to undertake
the construction in phases of multi-tenant industrial build-
ings to be located west of Tippecanoe Avenue and South of
Cooley Avenue in the Southeast Industrial Park Project Area
of the Redevelopment Agency of the City of San Bernardino,
the same to be financed by the Company with the proceeds of
a loan from the City to be evidenced in part by this Project
Agreement (the "Agreement"); and the City intends to finance
the cost of the Facilities, as hereinafter defined, by the
issuance of a special revenue construction loan note (the
"City Note") of the city under a Resolution dated of even
date herewith (the "Resolution of Issuance"); and
WHEREAS, the City Note will be secured by a pledge
of the Revenues derived by the City under this Agreement and
of the proceeds of the city Note, and by said Facilities and
Land, as hereinafter defined and said Facilities being
sometimes referred to as the "Project"; and
WHEREAS, this Agreement and the Resolution of
Issuance to which it pertains have, in all respects, been
duly and validly authorized by the Mayor and Common Council
of the City; and all things required by the Ordinance to be
done have been done; and
WHEREAS, it has been determined that the estimated
amount necessary to finance that portion of the cost of said
Facilities which is eligible to be financed under the Ordi-
nance, and the Internal Revenue Code of 1954, as amended,
and the regulations thereunder, including necessary expenses
incidental thereto, will require the issuance, sale and
delivery of the City Note pursuant to the Ordinance in the
principal amount set forth in the Resolution of Issuance;
and
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WHEREAS, all things necessary to make the City
Note, when issued as provided in the Resolution of Issuance,
the valid, binding and legal special revenue obligation of
the City according to the import thereof, and to constitute
the Resolution of Issuance a valid assignment and pledge of
the Revenues derived by the City under this Agreement to the
payment of the principal of, and interest on, the City Note
and a valid assignment and pledge of the rights of the City
under this Agreement, have been done and performed, and the
creation, adoption and execution of the Resolution of Issuance,
and the creation, execution and issuance of the city Note,
subject to the terms hereof, have, in all respects, been
duly authorized.
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For and in consideration of the mutual promises
and agreements herein contained, the parties hereto agree as
follows:
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ARTICLE 1
DEFINITIONS
section 1.01. Definitions.
The terms defined in this Article 1 shall, for all
purposes of this Agreement, have the meanings herein specified,
unless the context in which they are used clearly requires
otherwise:
Acquire
"Acquire," and its variants, shall mean acquire,
construct, improve, furnish, equip, remodel, repair, recon-
struct or rehabilitate. It is not intended that the word
"acquire" be used exclusively when one of the other words
(for example, "construct" or "improve") would be more
descriptive.
Administration Expense Fund
"Administration Expense Fund" shall mean the fund
created in that name by the Resolution of Issuance.
Administration Expenses
"Administration Expenses" shall mean the reason-
able and necessary expenses incurred by the city in the
administration of the Agreement, the Resolution of Issuance
and the financing of the Facilities, as hereinafter defined,
including, without limitation, the compensation and expenses
paid to the Trustee under the Resolution of Issuance and to
be paid to the Trustee for the account of the city as Addi-
tional Payments by the Company pursuant to Section 4.09
hereof.
Agent
"Agent" shall mean Lloyds Bank California, a
California Corporation, and its successors in interest,
if any, as agent for the city in administering the Loan.
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Agreement
"Agreement" shall mean this Project Agreement
dated as of October 1, 1981, by and between the city, the
Company, and the Agent and any and all modifications, alter-
ations, amendments and supplements hereto.
Authorized Company Representative
"Authorized Company Representative" shall mean a
person authorized to act on behalf of and bind the Company.
Such authorization shall be evidenced by written certifi-
cate, power of attorney, or other instrument acceptable to
the City and the Trustee, furnished to the city, the Agent
and the Trustee, as the case may be, containing the specimen
signature of the Authorized Company Representative and
executed and signed on behalf of the Company by one of the
general partners thereof, [and shall be accompanied by an
unqualified Opinion of Counsel to the Company as to the
foregoing]. Such certificate, power of attorney or instru-
ment may designate one or more alternate representatives and
may designate a different Authorized Company Representative
to act for the Company with respect to different sections of
the Agreement and this Resolution, and any other documents
which are a part of the financing transaction which is the
subject of the Agreement and the Resolution of Issuance.
Basic Rate
"Basic Rate" is the per annum rate of interest
calculated as one-half (1/2) of the Prime Interest Rate plus
three percent (3%). Said Basic Rate is to be adjusted on
the day the Prime Interest Rate changes and is to be com-
puted on the basis of a 360-day year, but accrued on the
actual number of days elapsed.
Bond or Bonds
"Bond" or "Bonds" means the bonds, including
principal (Premium, if any) and interest, authorized to be
issued by the City under the Ordinance, as amended, includ-
ing a single bond, a promissory note or notes, or other
instruments evidencing an indebtedness or obligation.
Bond Counsel
"Bond Counsel" shall mean any firm of nationally
recognized bond counsel of favorable reputation selected by
the city.
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Business Day
"Business Day" shall mean a day on which banking
business is transacted in the city in which the Trustee
has its principal corporate trust office.
certificate of the City, Statement
of the city, Etc.
"Certificate of the city," "Statement of the city,"
"written Request of the City" and "Written Consent of the
City" shall mean, respectively, a written certificate, state-
ment, request or consent signed in the name of the City,
by such person as may be designated and authorized to sign
for the City for such purpose, with the seal of the City
affixed. Any such instrument and supporting opinions or
representations, if any, may, but need not, be combined
in a single instrument with any other ,instrument, opinion
or representation, and the two or more so combined shall be
read and construed as a single instrument.
City
"City" shall mean the City of San Bernardino,
California.
City Note
"city Note" shall mean the Note issued by the City
to the Purchaser under section 3.01 of the Resolution of
Issuance, in the form of Exhibit C hereto.
City Note Fund
"city Note Fund" means that fund created by Sec-
tion 6.02 of the Resolution of Issuance.
City Note Proceeds
"City Note Proceeds" shall mean all amounts re-
ceived by the city upon the sale or other disposition of the
City Note issued hereunder.
Code
"Code" shall mean the Internal Revenue Code of
1954, as amended.
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Company
"Company" shall mean Tri-City Industrial Park,
Ltd., a Limited Partnership, duly formed and validly in
existence pursuant to the laws of the State of California,
or any entity which is the surviving, resulting or trans-
feree entity in any sale of or transfer of assets.
Company Note
"Company Note" shall mean that certain promissory
note secured by the Deed of Trust issued by the Company to
the City under this Agreement evidencing the loan referred
to herein, in the form of which is attached hereto as
Exhibit A.
Company Representative
"Company Representative" shall mean the person or
persons at the time designated to act on behalf of the
Company by written certificate furnished to City, Trustee
and Agent, and containing the specimen signature of such
person or persons.
Completion Date
"Completion Date" shall mean the date of comple-
tion of construction of the Facilities, certified as pro-
vided in Section 3.02 hereof.
Conflict of Interest
"Conflict of Interest" shall mean an interest
which constitutes a conflict of interest as applied to
public officials, public officers and employees in the State
and shall also mean an interest sufficient to make it rea-
sonably foreseeable that such interest will operate to
prevent the Trustee from the faithful and unbiased perfor-
mance of its duties hereunder or which is otherwise adverse
to the interest of the Purchaser as herein defined under the
laws of this State. Such term shall not include any inter-
est which is expressly permitted herein, and the fact that
Trustee, Agent and Purchaser are one and the same entity
shall not be deemed a conflict of interest.
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Cost of Construction
UCost of Construction" shall mean the cost of con-
structing the Facilities, except any of such costs that were
paid or were payable on or prior to September 14, 1981, and
may include all costs permitted by the Ordinance, including,
without limiting the generality of the foregoing:
(1) The cost of construction of the Facilities,
including rights in both real and personal properties
constituting the Facilities and franchises and disposal
rights, including without limitation, taxes and insur-
ance, land acquisition costs, land development costs,
direct and indirect construction costs, leasing and
sales commissions, marketing expenses and general and
administrative expenses incurred on the project;
(2) The cost of machinery, equipment and furnish-
ings and of engineering and architectural surveys,
plans and specifications;
(3) The cost of consultant services, including,
without limitation, legal, financial, engineering,
accounting, and auditing, necessary or incident to the
Project, and of the determination as to the feasibility
or particability of undertaking the Project;
(4) The cost of financing, including, without
limitation, reserves for securing principal and inter-
est payments on the City Note and the Company Note and
for extensions, enlargements, additions, repairs,
replacements~ renovations and improvements;
(5) The cost of acquiring approved refinancing of
existing obligations, incident to the development and
construction (including the financing) of said Facili-
ties; and the reimbursement to any governmental entity
or agency or to the Company, of expenditures made by or
on behalf of such entity, agency, or Company that are
costs of the Facilities hereunder, without regard to
whether or not such expenditure may have been made
before or after the undertaking of the financing of the
Facilities by the city or the delivery of the City
Note, or the Company Note under and pursuant to the
Ordinance, all to the extent that such costs may be
legally paid from the City Note proceeds;
(6) Interest on the city Note and the Company
Note prior to the Completion Date;
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Provided, however, that working capital shall not be included
as a component of the Cost of Construction.
Counsel
uCounse1" shall mean an attorney at law or firm of
attorneys at law (who may be of counsel to the City or the
company, as the context may require), satisfactory to the
Trustee, and which shall not be full-time employees of the
Company.
Deed of Trust
"Deed of Trust" shall mean the deed of trust in
the form attached hereto as Exhibit B, dated as of the date
hereof, executed by the Company as Trustor in favor of the
Trustee as Beneficiary, given to secure the payment of the
city Note and the Company Note, and creating a first and
prior lien on the Project.
Event of Default
"Event of Default," when used in reference to this
Agreement, shall mean any event of default specified in
Section 8.01 of this Agreement, and, when used in reference
to the Resolution of Issuance, shall mean any event of
default specified in Section 9.01 of said Resolution of
Issuance.
Facilities
"Facilities" shall mean all real and personal
property acquired or financed with the proceeds of the City
Note, or which is to be located on the Land, including
incidental facilities and appurtenances and appurtenant
work, and also including all substitutions, modifications,
and additions thereto as from time to time may be made by
the Company.
Financial Newspaper or Journal
"Financial Newspaper or Journal" shall mean a
daily or weekly financial newspaper or journal of general
circulation in the Borough of Manhattan, City of New York,
State of New York, together with a daily or weekly periodi-
cal of general circulation in the city of Los Angeles, State
of California, printed in the English language and custom-
arily published at least five (5) days a week, whether or
not published on Saturday, Sunday or any holiday. Whenever
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successive weekly publications are required hereunder, they
may be made (unless otherwise expressly provided herein) on
the same or different days of the week and in the same or in
different Financial Newspapers or Journals.
Fiscal Year
"Fiscal Year" shall mean the period beginning on
January 1 and ending on the next following December 31.
Governmental Department
"Governmental Department" shall mean any commis-
sion, department, or agency of the State or the United
States of America with or by which, under any other provi-
sion of law (other than the Ordinance) the offer, issuance,
or sale of the City Note is Subject to authorization,
qualification or registration.
Guarantors
"Guarantors" shall mean the Company.
Independent
"Independent," when used with such terms as "Finan-
cial Consultant" or "Certified Public Accountant," shall
mean any person or firm, respectively, appointed by the City
or the Company, as context may require, in such capacity,
who, or each of whom, has a favorable reputation in the
field in which his opinion or certificate will be given and:
(1) Is in fact independent and not under the
control of the City or the Company;
(2) Does not have any substantial interest,
proprietary or otherwise, direct or indirect, in or
with the City or the Company; and
(3) I s not connected wi th the City or the Company
as an officer or employee, but who may be regularly
retained to make reports to the City or the Company.
Land
"Land" shall mean the Land, described in Exhibit C
attached hereto, on which the Facilities are to be located.
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Loan
"Loan" shall mean the loan by the City to the
Company of such portion of the proceeds of the sale of the
City Note as is to be used to finance the Facilities, exclu-
sive of reserves, or funds required to pay costs incurred in
connection with the issuance of the city Note.
Net Proceeds
"Net Proceeds," when used with respect to any
insurance proceeds from policies required to be maintained
by the Company and by this Agreement, means the amount re-
maining after deducting from gross proceeds all expenses
(including attorneys' fees) incurred in the collection
thereof.
Opinion of Counsel
"Opinion of Counsel" means a written opl.nl.on of
Counsel (who may be Counsel for the City, Company or Bond
Counsel, as the context may require). Any Opinion of Counsel
may be based upon, insofar as it relates to factual matters,
information which is in the possession of the City or Company,
as the case may be, but only if the same is contained in a
written certificate of an officer of the City or Company, as
relevant, delivered to the Counsel, unless such Counsel
knows, or in the exercise of reasonable care should know,
that the certificate is erroneous, incomplete, or misleading.
Opinion of Counsel; Bond Counsel
"Opinion of Counsel" means a written opl.nl.on of
Counsel (who may be Counsel for the City, Company or Bond
Counsel, as the case may be). Any Opinion of Counsel may be
based upon, insofar as it relates to factual matters, infor-
mation which is in the possession of the city or the Company,
as the case may be, a written certificate of an officer of
the City, or the Company, as relevant, delivered to Counsel,
unless Counsel knows, or in the exercise of reasonable care
should know or have known, that the certificate is erroneous,
incomplete or misleading.
Ordinance
"Ordinance" means Ordinance No. 3815 of the City
entitled "Ordinance of the City of San Bernardino Relating
to the Financing of Projects for the Encouraging of Increased
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Employment Within the City" and all amendments thereto,
under the authority of which said Resolution of Issuance is
adopted and the City Note is to be issued.
Permitted Encumbrances
"Permitted Encumbrances" means, as of any parti-
cular time, (i) liens for taxes and assessments not then
delinquent or which Company may, pursuant to the provisions
of Section 8.08 hereof, permit to remain unpaid, (ii) this
Agreement, the Resolution of Issuance, the Deed of Trust and
any financing statements naming City or Company as debtor
and naming Trustee or City as secured party filed to perfect
the security interests granted by the Deed of Trust, the
Resolution of Issuance and this Agreement, (iii) utility
access and other easements and rights-of-way, restrictions
and exceptions that in the opinion of Agent will not inter-
fere with or impair the Project or its merchantability, and
(iv) such minor defects, irregularities, encumbrances and
clouds on title as normally exist with respect to property
similar in character to the Project and do not substantially
impair the property affected thereby for the purpose for
which City has loaned its funds.
Phase I
"Phase I" means the first portion of the Facili-
ties which will be constructed under the Project.
Plans and Specifications
"Plans and Specifications" means the plans and
specifications for the Facilities more particularly identi-
fied in Exhibit D hereto, as the same may be amended from
time to time pursuant to Section 3.01(c) hereof.
Prime Interest Rate
"Prime Interest Rate" is that rate of interest
being charged by Lloyds Bank California on ninety (90) day
unsecured loans to said Bank's most substantial and most
responsible borrower as of the date of delivery of the City
Note and the Company Note, and, thereafter, as of each day
that Lloyds Bank California may adjust such Prime Interest
Rate. In the event that Lloyds Bank California shall fail
to establish or publish a "Prime Interest Rate," then, for
purposes hereof, the "Prime Interest Rate" shall be deemed
to be the average Prime Interest Rate for each calendar
month of the three (3) largest (total assets) banking insti-
tutions in the continental United States then publishing a
Prime Interest Rate.
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Proceedings
"Proceedings" means the actions taken by the city
in undertaking, carrying out and completing the Project,
including, without limitation, authorizing and executing
this Agreement, the Resolution of Issuance, the Company
Note, the City Note, Deeds of Trust, and any and all other
agreements and documents involved in the issuance, sale, and
delivery of the City Note, the security therefor, and the
expenditure of the City Note proceeds.
Project
"Project" shall mean the Facilities.
Project Fund
"Project Fund" shall mean the fund created by
section 6.06 of the Resolution of Issuance.
Purchaser
"Purchaser" shall mean Lloyds Bank California, a
California Corporation, as purchaser of the City Note from
the City, sometimes referred to as "Lender".
Resolution of Issuance
"Resolution of Issuance" means the Resolution of
Issuance adopted as of even date herewith under and pursuant
to the Ordinance, providing for financing of the Facilities.
Responsible Officer
"Responsible Officer" shall mean the president,
every vice-president, every assistant vice-president, and
secretary, every assistant secretary, every trust officer
and every other officer and assistant officer of the Trustee
or any separate trustee or co-trustee hereunder to whom any
matter relating to this Agreement is referred.
Revenues
URevenues" shall mean all payments and other in-
come derived by the City from the Company or its legal suc-
cessor in interest, if any, under this Agreement, (including
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without limitation, insurance proceeds and proceeds of
condemnation) and any receipts derived from the investment
of any such income or the City Note proceeds in any fund or
account of the City created in the Resolution of Issuance,
but does not include receipts designated to cover administra-
tive expenses.
State
"State" means the State of California.
Supplemental Resolution
"Supplemental Resolution" means any resolution at
any tilDe in full force and effect which has been duly adopted
by the City under the Ordinance or under any act supplementary
thereto or amendatory thereof, at a meeting of the Mayor and
Common Council duly convened and held, at which a quorum was
present and acted thereon, amendatory of or supplemental to
the Resolution of Issuance, but only if and to the extent
that such Supplemental Resolution is specifically authorized
thereunder.
Treasurer
"Treasurer" means the officer who is then perform-
ing the functions of Treasurer of the City.
Trust Estate
"Trust Estate" shall mean at any particular time
all money and rights, titles and interests described in
paragraphs FIRST through FOURTH of the granting clauses of
the Resolution of Issuance.
Trustee
"Trustee" shall mean Lloyds Bank California, a
California Corporation, a bank duly organized and existing
under the laws of the State of California, and its successors
in interest, if any, as Trustee.
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Written Requisition
"written Requisition" means a requisition signe~
by the Agent prepared in the form, and containing the infor-
mation, required by section 4.02 of this Agreement.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.01. Representations and Warranties
by the City.
The City hereby represents and warrants as fol-
lows, which representations and warranties shall survive the
execution and delivery of this Agreement, the City Note, the
Company Note, the Deed of Trust and any other document or
instrument delivered pursuant hereto:
(a) It is a municipal corporation, duly organized
and existing under the Constitution of the State of
California and the city Charter of the City;
(b) It has the power to enter into this Agree-
ment, to carry out its obligations hereunder, and, by
proper action of the Mayor and Common Council, has duly
authorized the execution and delivery hereof;
(c) It is not in default under any provision of
law of or in the State of California, including, with-
out limitation, the Ordinance, which would affect its
existence or its powers referred to in the preceding
subdivision (b); .
(d) Under existing statutes and decisions, no
taxes on income or profits are imposed on the City;
(e) No officer or employee of the City has a
Conflict of Interest;
(f) Heretofore, the City and the Company did
agree that the City would finance the cost of con-
structing each phase of the Facilities. The Company
has estimated that: (1) the Cost of Construction of
the Facilities will be not less than $8,500,000.00 and
(2) the Cost of Construction of Phase I will be not
less than $1,750,000.00. On that basis, the City
agrees to provide such financing of the Facilities by
the issuance of the city Note for Phase I in the prin-
cipal amount of $1,750,000.00 as set forth in the
Resolution of Issuance;
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(9) The City covenants that it will not pledge
the amounts derived from this Agreement other than to
secure the City Note;
(h) There is no action, proceeding or investi-
gation pending or (to the knowledge of the City)
threatened which questions the validity of this Agree-
ment, the City Note, the Company Note, the Resolution
of Issuance or any other instrument provided for herein
or therein or any action taken or to be taken pursuant
hereto or thereto;
(i) The Trustee's secured interest in the Project
and the Revenues is a first and prior interest and the
Deed of Trust create a first and prior lien on the real
property or leasehold interest therein described sub-
ject only to the lien for real property taxes and
assessments not yet due and payable and to liens and
encumbrances of record expressly approved by the
Purchaser;
(j) Interest payable on the city Note will be
exempt from all Federal income taxation (except while
the City Note is held by a "substantial user" of faci-
lities financed with City Note proceeds) and State
personal income taxes;
(k) The City has made the election required by
Section 103(b)(6)(D) of the Code in the time and manner
required by said Code and the regulations thereunder;
and
(1) The Project qualifies as a project for which
the city may issue its city Note pursuant to the Ordinance.
As a condition to the execution and delivery of
the City Note under the Resolution of Issuance, the city
shall execute and deliver to Purchaser a Certificate of the
City restating the foregoing items (a), (b), (c), (d), (e),
(f), (9), (h), (i), (j), (k) and (1) as of the date thereof.
The City makes no warranty, either express or
implied, as to the actual or designed capacity of the Project,
as to the suitability of the Project for the purposes speci-
fied in this Agreement, as to the condition of the Project,
or as to the suitability of the Project for the Company's
purposes or needs.
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section 2.02. Representations and Warranties
by the Company.
In order to induce Purchaser to purchase the City
Note and the City to make the Loan, Company represents and
warrants as follows, which representations and warranties
shall survive the execution and delivery of this Agreement,
the City Note, the company Note, the Deed of Trust and any
other document or instrument delivered pursuant hereto:
(a) The Company is a limited partnership, duly
formed and validly in existence pursuant to the laws of
the State of California. Company has the right and
power to own and develop the Project, has complied with
all applicable environmental statutes and regulations,
has obtained all necessary permits and licenses to
proceed with the construction of the Facilities and has
followed proper procedure in procuring those permits
and licenses and in submitting any required environ-
mental impact report;
(b) The Company has full authority (i) to execute
and deliver this Agreement, the Company Note, and the
Deed of Trust, (ii) to enter into the Loan and (iii) to
execute and deliver all documents, notes, or other
instruments executed and delivered, or to be executed
and delivered, pursuant to or in connection with the
transactions herein contemplated. This Agreement, the
Company Note, the Deed of Trust, and all other docu-
ments, notes and instruments which have been executed
and delivered pursuant to this Agreement constitute or,
if not yet executed or delivered, will constitute when
so executed and delivered, valid and binding obliga-
tions of the Company, enforceable in accordance with
their respective terms;
(c) The Company presently intends to cause the
Project to be operated as multi-tenant industrial
buildings, housing such tenants to which Company may
let any part of the rentable space in such buildings
(provided that Company may, at its election, occupy
certain portions of such buildings from time to time)
until the Loan has been paid in full as provided herein;
(d) The Project qualifies as a project for which
the city may issue its City Note pursuant to the Ordi-
nance, and its total estimated Cost of Construction is
not less than $8,500,000.00, and the Project's esti-
mated Cost of Construction for Phase I is not less than
$1,750,000.00;
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(e) None of (i) the execution and delivery of
this Agreement or of any document, note or other instru-
ment delivered or to be delivered pursuant hereto; (ii)
the consummation of the transactions contemplated
hereby, (iii) the fulfillment of or compliance with the
terms and conditions of this Agreement, and (iv) the
failure to give notice to or obtain the consent, author-
ization or approval of any person or entity, public or
private, conflicts with or results in a breach of any
of the terms, conditions or provisions of any agreement
or instrument to which the Company is now a party or by
which it is bound, or constitutes a default under any
of the foregoing, or results in the creation or im-
position of any prohibited lien, charge or encumbrance
whatsoever upon any of the property or assets of the
Company under the terms of any instrument or agreement,
or will result in the breach of any applicable law,
regulation or statute;
(f) The Facilities constitute and will constitute
either (i) land or (ii) property of a character subject
to the allowance for depreciation under section 167 of
the Code;
(g) All amounts to be paid by or for the account
of the Company from proceeds of the Loan will be, for
Federal income tax purposes, chargeable to the Project's
capital account or would be so chargeable either with a
proper election by the Company (for example under
Section 266 of the Code) or but for a proper election
by the Company to deduct such amounts;
(h) The proceeds of the Loan will be used only
for payment of Costs of Construction, and will not be
used to provide working capital for the Company;
(i) The Company will not take, or permit to be
taken, any action, or make or permit to be made any
Change in the Project, which would have the effect,
directly or indirectly, of subjecting interest on the
city Note to Federal income taxation;
(j) The Company intends to operate the Project,
or cause the Project to be operated, as a "project,"
within the meaning of the Ordinance, until the date on
which the City Note and the Company Note have been
retired and are no longer outstanding;
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(k) Construction of the Facilities commenced on
or about June 1, 1981;
(1) Company has good and merchantable title to
all of its property and assets as disclosed in the
financial information provided City and Purchaser and
at the time of recordation of the Deed of Trust shall
have good and merchantable title to the Project, and
there shall be no mortgages, liens, pledges or other
encumbrances of any character on the Property or such
other property, other than liens for current taxes and
governmental assessments not yet due and payable and
liens in favor of Purchaser or approved in writing by
Purchaser;
(m) Financial statements of the Company and/or
all Guarantors and all other financial date and infor-
mation furnished by Company to City and Purchaser
fairly and accurately represent the financial condition
of said Company and/or its Guarantors, respectively,
and have been prepared in accordance with cash basis
accounting principles. As of the date of this Agree-
ment, there has not been any material change in the
financial position of the Company and/or its Guarantors
of an adverse nature sufficient to impair Company's
and/or its principal's ability to repay the Loan;
(n) The Project, as designed, complies with all
presently applicable building and zoning ordinances;
(0) The Company does not have a Conflict of
Interest;
(p) Interest payable on the City Note will be
exempt from all Federal income taxation (except while
the City Note is held by a "substantial user" of facil-
ities financed with City Note proceeds) and State
personal income taxes;
(q) The City has made the election required by
Section 103(b)(6)(d) of the Code in the time and manner
required by said Code and the regulations thereunder;
and
(r) As a condition to the execution and delivery
of the city Note under the Resolution of Issuance, the
Company shall deliver to Purchaser a certificate in
form and substance satiSfactory to Purchaser restating
the foregoing items as of the date thereof.
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ARTICLE 3
CONSTRUCTION OF PHASE I OF THE PROJECT
Section 3.01. Agreement to Construct the Project.
In connection with the construction of Phase I of
the Project, the parties agree as follows:
(a) Company shall cause the construction of the
Facilities to be prosecuted with diligence and con-
tinuity and in conformity with the Plans and Specifi-
cations. The Facilities is scheduled to be completed
on or before September 30, 1982; provided, however,
that the time within which the Facilities must be
completed shall be extended for a period equal to any
delay caused by fire, earthquake, or others acts of
God, acts of public enemy, riot, insurrection, govern-
mental regulation of the sale of materials and supplies
or the transportation thereof, strikes directly affect-
ing the work of construction, or shortages of material
or labor resulting directly from governmental control
or diversion. In no event, however, shall the time for
completion of the Facilities be extended beyond Septem-
ber 30, 1982.
(b) The Company hereby agrees that, in order to
effectuate the purposes of this Agreement, it shall
make, execute, acknowledge and deliver any contracts,
orders, receipts, requisitions, writings and instruc-
tions, with any other persons, firms or corporations
and, in general, do all things which may be requisite
or proper for constructing the Facilities.
(c) There shall be no change in the Plans and
Specifications without the prior written consent of
Agent to each such change; provided, however, no con-
sent of Agent shall be required as to those changes
which do not reduce the cost of construction or the
value of the Facilities and which do not individually
exceed $1,750,000.00 or, in the aggregate, result in
increases in construction costs in excess of $1,750,000.00
from those set forth in the Trade Payment Breakdown
referred to in Subsection (h) of this Section 3.01.
Nothing herein, however, shall release Company from the
requirement of submitting each change in writing to
Agent.
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Company shall rely entirely upon its own
judgment in determining the quality and suitability of
the Plans and Specifications and any amendments or
alterations thereto. Agent is under no duty or obli-
gation to review, or inform Company of, the quality or
suitability of the Plans and Specifications or any
amendments or alterations thereto. Any such review or
approval by Agent is entirely for the protection of
Purchaser and neither Company, the prime contractor,
City nor any third party shall be entitled to rely upon
such review or approval.
(d) Upon demand by Agent, Company shall furnish
to Agent from time to time current lists of all con-
tractors, subcontractors and material suppliers employed
in connection with the construction of the Facilities.
Each said list shall state the name, address and tele-
phone number of each such contractor, subcontractor or
supplier; the nature of the work performed or material
supplied; the total dollar amount of each such con-
tract, or subcontract, or the amount of the material
supplied; that each such contractor, subcontractor, or
supplier has been paid in full, or stating the amount
due and owing; that there are no other contracts,
subcontracts, or material suppliers, or indicating what
parts of the Facilities remain to be contracted; and
that such information and the balance stated to be due
and owing, if any, are accurate to the best of the
declarant's knowledge and belief.
Agent shall have the right to make direct
contact with each contractor, subcontractor and mate-
rial supplier to verify the facts disclosed by said
lists or for any other purpose. Company or the prime
contractor shall provide Agent with information suffi-
cient to make said verification.
Company agrees that Agent has the right, but
neither the obligation nor the duty, to disapprove any
contractor, subcontractor or material supplier who, in
Agent's good faith determination, is deemed to be
financially or otherwise unqualified. The failure of
Agent to disapprove a contractor, subcontractor or
material supplier shall not constitute a warranty that
any contractor, subcontractor or material supplier not
so disapproved is in fact qualified.
(e) No materials, equipment, fixtures or any
other part of the Facilities shall be purchased or
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installed under any security agreement or other arrange-
ment whereby the seller thereof reserves or purports to
reserve the right to remove or to repossess any such
items or to consider such items personal property after
their incorporation into the work of construction,
unless first authorized by Agent in writing.
(f) All work done in connection with construction
of the Facilities shall be performed in compliance with
all applicable laws, ordinances, rules and regulations
of all federal, state, county and municipal governments
or agencies now in force or that may be enacted here-
after; and with all directives, rules and regulations
of the firemarshal, health officer, building inspector
or other proper officers of any governmental agency now
having or hereafter acquiring jurisdiction.
(g) Agent, through its officers, agents or employ-
ees, shall have the right at all reasonable times:
(1) To enter upon the Land and inspect the
Facilities and the work of construction to deter-
mine that the same are in conformity with the
Plans and Specifications and all of the require-
ments hereof; and
(2) To examine the books, records, account-
ing date and other documents of Company pertaining
to construction of the Facilities and to make
extracts therefrom or copies thereof. Said books,
records and documents shall be made available to
Agent, its officers, agents or employees promptly
upon written demand therefor.
Agent is under no obligation to supervise, inspect or
inform Company or city of the progress of construction
or to review or inspect the books and records of Com-
pany, the contractors, subcontractors and materialmen,
and neither Company nor City shall rely upon Agent
therefor. Any review or inspection by Agent is entirely
for its own purposes in determining whether and to what
extent to advance money pursuant to this Agreement or
to determine whether Company is in default hereunder
and is not for the purpose of determining for Company,
the prime contractor, or any third party, or of inform-
ing the foregoing of the quality or sui tabili ty of
construction. Company and city shall rely entirely
upon their own supervision and inspection in deter-
mining the quality and suitability of plans and speci-
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fications, materials, workmanship, conformity of the
construction with the Plans and Specifications and the
performance of architects, contractors, subcontractors
and materialmen.
(h) The Company or the prime contractor shall
furnish to Agent a construction loan payment request
("Request") which shall be used as a basis for dis-
bursement requests. Each request for disbursement
shall show the percentage of materials provided and/or
contract completed at the date of request. The Request
shall be certified by the general partner of the
Company, who shall have first been approved by Agent,
or a duly approved appointee.
Section 3.02. Establishment of Completion
Date.
The Completion Date shall be established by de-
livery to Agent and City of a certificate signed by an
Authorized Company Representative stating that, except for
amounts retained by Agent for any Cost of Construction not
then due and payable pursuant to Sections 4.05 and 4.06
hereof, (i) construction of the Facilities has been com-
pleted and payment has been made for all labor, services,
materials and supplies used in such construction, (ii) all
equipment for the Facilities has been installed to the
Company's satisfaction, such equipment so installed is
suitable and sufficient for the intended operation of the
Facilities, and all costs and expenses incurred in the
acquisition and installation of such equipment have been
paid, and (iii) all other facilities necessary in connection
with the Facilities have been constructed, acquired and
equipped and all costs and expenses incurred in connection
therewith have been paid. Notwithstanding the foregoing,
such certificate shall state that it is given without pre-
judice to any rights against third parties which exist at
the date of such certificate or which may subsequently come
into being. Forthwith upon completion of the construction,
acquisition and equipping of the Facilities, Company agrees
to cause such certificate to be furnished to City and Agent.
Upon receipt of such certificate, Agent shall retain in the
Project Fund a sum equal to the amounts necessary for pay-
ment of the Costs of Construction not then due and payable
and for payment of all amounts withheld pursuant to Sec-
tions 4.05 and 4.06 hereof. Any amount not to be retained
in the Project Fund and all amounts so retained but not
subsequently used (notice of such failure of use of which
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shall be given by Company to Agent), shall be transferred by
Agent into the City Note Fund; provided, however, no amount
shall be transferred into the City Note Fund unless at least
90% of (a) the actual amount of the proceeds received by
City from the sale of the city Note less amounts expended
for issuance expenses and (b) any investment earnings on
moneys in the Project Fund have been used (i) for the acqui-
sition, construction, reconstruction or improvement of land
or property of a character subject to the allowance for
depreciation under Section 167 of the Code, or (ii) for
payment of amounts which are, for federal income tax pur-
poses, chargeable either with a proper election by Company
(for example, under Section 266 of the Code) or but for a
proper election by Company to deduct such amounts. In the
case where no amount shall be transferred into the city Note
Fund as provided above, any amount (exclusive of any amount
retained by Trustee in the Project Fund for payment of Costs
of Construction not then due and payable) remaining in the
Project Fund shall be segregated by Trustee and used by
Trustee (a) first to pay principal and interest on the City
Note, and (b) to the extent not used as provided in clause (a),
for any other purpose, provided that the Trustee is furnished
with an opinion of Bond Counsel to the effect that such use
is lawful under the Ordinance and will not adversely affect
the exclusion from Federal income taxes of interest on the
city Note. until used for one or more of the foregoing
purposes, such segregated amount may be invested as per-
mitted by this Agreement and the Resolution of Issuance but
may not be invested, without an opinion of Bond Counsel to
the effect that such investment will not adversely affect
-the exclusion from Federal income taxes of interest on the
City Note, to produce a yield on such amount (computed from
the Completion Date and taking into account any investment
of such amount from the Completion Date) greater than the
yield on the City Note, all in accordance with Section 103(c)
of the Code and the regulations promulgated thereunder.
company and city agree to cooperate with Trustee and take
all required action necessary to pay principal and interest
on the City Note when due or to accomplish any other purpose
contemplated by this Section.
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ARTICLE 4
PAYMENTS AND DISBURSEMENTS
Section 4.01. Issuance of the city Note;
Creation of Project Fund.
In order to provide funds for payment of the Cost
of Construction for Phase I of the Project, the City, as
soon as practicable after the execution of this Agreement,
will issue, sell and deliver the City Note to the Purchaser
thereof and will deposit City Note proceeds as requisitioned
by Agent in the Project Fund established pursuant to the
Resolution of Issuance. The Project Fund shall also include
such additional sums as may be from time to time demanded by
Agent pursuant to Section 4.07(b) hereof, which sums shall
be deposited by Company within five (5) days of written
demand therefor. The city hereby agrees to loan to the
Company from the Project Fund an amount not to exceed
$1,750,000.00 in order to finance the construction by the
Company of Phase I of the Facilities.
Section 4.02. Project Fund Disbursements: Lien
Upon Moneys in Project Fund.
The following provisions apply to the Project
Fund:
.
(a) By the Resolution of Issuance, the Trustee
has been granted a lien upon, and a security interest
in, the moneys on deposit in the Project Fund, enforce-
able upon the occurrence of an Event of Default described
in Article 8 of this Agreement.
(b) From time to time, the Agent shall requisi-
tion from Purchaser and deposit in the Project Fund
sufficient city Note proceeds to fund disbursements
from the Project Fund to pay Costs of Construction.
Agent shall requisition sufficient City Note proceeds
to fund the initial disbursement from the Project Fund
required by and pursuant to Section 4.03(a) hereof upon
deli very of the city Note.
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section 4.03. Issuance of Company Note;
Purpose; Amount; Disburse-
ments from Project Fund.
(a) A Promissory Note secured by the Deed of
Trust is hereby authorized to be issued by the Company to
the City (the "Company Note") under and subject to the terms
of this Agreement for the Object and purpose of evidencing
the Loan to the Company of the necessary funds to pay the
Cost of Construction for Phase I of the Project, such Com-
pany Note to be held by the Trustee on behalf of the city.
The Company Note issued under the provisions of this Agree-
ment shall not exceed in principal amount the sum of
$1,750,000.00, or such lesser amount as may be advanced
thereunder. The Company Note shall be sold and delivered at
such time and in such manner as shall be established and
authorized by the city, Subject to the conditions and limi-
tations herein contained. it being the intent hereof that
the Company Note and the city Note shall be sold and deliv-
ered simultaneously and that they be in the same amounts.
(b) The Company Note shall be substantially in
the form attached hereto as Exhibit A.
(c) Interest on the outstanding balance of the
Company Note shall be payable on the first day of each
calendar month at the Basic Rate.
(d) Notwithstanding the foregoing, if the inter-
est on the city Note becomes subject to federal income
taxation pursuant to an "Official Determination" as that
term is defined below, then the interest rate described
above shall be immediately increased to three percent (3%)
per annum above the Prime Interest Rate, and the undersigned
forthwith shall pay to the Trustee the aggregate difference
between (1) the monthly payments actually made to the Trustee
on the Company Note from the "Taxable Date," as that term is
defined below, to the effective date of the rate increase,
and (2) the monthly payments which would have been made
during such period had the interest on the company Note been
at the rate of three percent (3%) per annum above the Prime
Interest Rate. Trustee, the Purchaser of the City Note, or,
with the consent of the purchaser, which consent shall not
be unreasonably withheld, the company may protest or contest
any "Official Determination." If an "Official Determina-
tion" is protested or contested, interest and principal
shall continue to be payable at an interest rate of three
percent (3%) per annum above the Prime Interest Rate whiJ~
such protest or contest is pending. If such protests or
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contest is successful (whether py binding agreement or
adjudication) the Trustee shall refund all interest col-
lected in excess of the Basic Rate to the Company. Said
excess collected shall be refunded with any interest received
from the Internal Revenue Service or at the highest rate
available under Trustee's normal banking rules. Wi thout in
any way limiting the survival of other provisions of the
Company Note, the undersigned hereby expressly agrees that
-the obligations imposed on the undersigned by this paragraph
shall survive payment and discharge of the Company Note.
The term "Official Determination" shall mean
(and for all purposes of the Company Note shall be deemed to
have occurred as of) a change in the Internal Revenue Code
of 1954, as amended, the issuance of a statutory notice of
deficiency or a ruling by the Internal Revenue Service or a
ruling by any court of competent jurisdiction or any other
occurrence the effect of which is to make the interest
payable on the City Note includable in the gross income of a
holder hereof (except to the extent that such interest is so
includable because the holder is a "substantial user" of the
Project or a "related person" as such terms are defined in
Section 103 of the Internal Revenue Code of 1954, as amended).
The term "Taxable Date" shall mean the date
as of which interest payable on the City Note is includable
in the gross income of a holder thereof by reason of an
Official Determination.
(e) All principal, interest, and other amounts
payable on the Company Note shall be payable in lawful money
of the United States of America which at the time of payment
is legal tender for the payment of public and private debts.
(f) Any interest on the Company Note not paid
when due shall thereafter bear interest at a rate equal to
five percent (5%) per annum in excess of one-half of the
Prime Interest Rate unless interest becomes taxable under
subsection 403(d), in which case interest shall be calcu-
lated at 5% in excess of the Prime Interest Rate. In addi-
tion to such interest, the undersigned promises to pay upon
demand all reasonable late or collection charges incurred by
the Trustee in connection with such late payment.
(g) Without the Agent waiving any rights, it may
have to require the Company to deposit additional funds as
described herein, the Company and the Agent hereby agree
that the Company shall deposit with the Agent Two Million
Fifty-Six Thousand Two Hundred Fifty Dollars ($2,056,250.00)
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in the form of cash (or equivalents), paid bills incurred on
the Project, irrevocable letter of credit or other evidence
the Company has good title to land equity in said amount.
Of the above amount, the Company must deposit with Agent
evidence satisfactory to Agent that Company has contributed
additional cash to the Project of at least Four Hundred
Twenty-Six Thousand Two Hundred Fifty Dollars ($426,250.00).
(h) The Project Fund shall be disbursed and
disbursements of Project Fund of up to One Million Seven
Hundred Fifty Thousand Dollars ($1,750,000.00) shall be
requested and made as follows:
(aa) For the amount of One Hundred Thirty-
Seven Thousand Two Hundred Fifty Dollars ($137,250.00)
for the nonconstruction costs listed below: Disburse-
ments shall take place on or after the date hereof.
The Agent is hereby authorized and directed to make the
disbursements for the purposes, in the amounts and to
the persons indicated below or to the Company upon
satisfactory evidence that such persons or costs have
been paid:
(i) As a non-refundable Loan Fee to
Trustee, the sum of Twenty-Six Thousand Two Hun-
dred Fifty Dollars ($26,250.00).
(ii) To Title Insurance and Trust Com-
pany for payment of title policy premiums and
recording fees, the approximate sum of Eighteen
Thousand One Hundred Fifty Dollars ($18,150.00).
(iii) For architectural and engineering
costs, the approximate sum of Ninety-One Thousand
Dollars ($91,000.00).
(iv) To Memel, Jacobs, pierno & Gersh
for legal fees, the approximate sum of One Thou-
sand Seven Hundred Fifty Dollars ($1,750.00), plus
one Hundred Dollars ($100.00) for expenses, plus
expenses for acting as special counsel for the
Lender in connection with this construction loan.
(v) To James Warren Beebe, A Law Cor-
poration, for bond counsel services, the approx-
imate sum of Eleven Thousand Eight Hundred Sev-
enty-Five Dollars ($11,875.00) less Five Thousand
Dollars ($5,000.00) (representing a portion of the
Ten Thousand Dollars ($10,000.00) paid to the
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city) for a total approximate sum of six Thousand
Eight Hundred Seventy-Five Dollars ($6,875.00),
plus the approximate sum of Twenty-Five Hundred
Dollars ($2500.00) for expenses, plus expenses for
extraordinary items which may be incurred.
(bb) For disbursement of the remainder of the
Loan funds of One Million Six Hundred Three Thousand
Three Hundred Seventy-Five Dollars ($1,603,375.00) the
following procedures shall apply;
(i) For the amount of One Million Three
Hundred Six Thousand Seven Hundred Fifty Dollars
($1,306,750.00) for construction costs: On or
about the first day of each calendar month follow-
ing commencement of the Project, the developer or
general contractor shall submit to Company or
Architect a Request for Funds (Lender's Form
"Request for Funds" or its equivalent acceptable
to the Trustee containing a statement of the
Company setting forth the amount of a disbursement
sought, in such form and manner as Trustee may
approve), showing the estimated cost of labor
performed on and materials incorporated into the
improvement of.the Property, a pro rata portion of
the general contractor's and the developer's
profit and that pro rata portion of overhead of
the general contractor attributable to the Proj-
ect. The original of such Request for Funds,
certified true and correct by the general con-
tractor or the developer, and approved by the
Company, shall be submitted to the Trustee for
payment. Upon verification of the accuracy of the
Request for Funds by the Trustee's inspection of
the Property and Project, the Trustee shall dis-
burse to the developer, the general contractor,
the Company and/or the subcontractors, the labor-
ers and the materialmen (at the Trustee's option
as to whom and the amounts payments are made), the
aggregate amount which Company is obligated on
account of the cost of construction, but in no
event shall the aggregate of such payments exceed
the sum of One Million One Hundred Seventy-Six
Thousand Seventy-Five Dollars ($1,176,075.00)
except as provided for by the Company and accom-
panied by funds for the payment thereof. The
Final Disbursement in the sum of One Hundred
Thirty Thousand six Hundred Seventy-Five Dollars
($130,675.00) shall be made upon compliance with
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the provisions of Section 4.07(c) of this Con-
struction Loan Agreement.
(ii) For the amount of Two Hundred
Ninety-Six Thousand Six Hundred Twenty-Five Dol-
lars ($296,625.00) for interest and miscellaneous
other costs: The sum of Two Hundred Ninety-Six
Thousand Six Hundred Twenty-Five Dollars
($296,625.00), together with any amounts not
otherwise disbursed, shall be disbursed for inter-
est payments on the Note and/or for any other
miscellaneous costs related to the improvement of
the Property or the Loan which in the Trustee's
absolute discretion the Trustee decides to pay.
Should interest on the loan contemplated herein
exceed the amount of interest reserve, reserve
hereinabove, the Trustee shall bill the Company
monthly for said interest, and the Company shall
promptly pay said bill. Any overages and/or
savings resulting from expenditures in the cate-
gories described in Section 4.07 shall at the
Lender's sole discretion be allocated to interest
reserve and other miscellaneous cost category
herein.
(iii) The following persons are hereby
designated by the Company as persons authorized to
sign Requests for Funds in accordance with the
terms of this Agreement, and the Company, with the
consent of the Trustee, shall have the sole right
to revoke such designation, and substitute any
other person as the person authorized to sign such
orders:
For Company:
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Section 4.04. Additional Disbursements.
Agent may, from time to time, upon reguest of the
Company, disburse funds prior to the time the work has
reached the next regularly scheduled stage of construction
or prior to the next regularly scheduled disbursement date,
at Agent's sole discretion and for the benefit of the con-
struction. Agent may, but is not obligated to, charge
Company a special fee in connection with any such disburse-
ment. The amount of said fee shall be determined by Agent
upon receipt of the reguest by Company or as soon thereafter
as practicable. Upon inspection, Agent may disburse a
portion of the next regularly scheduled disbursement, said
portion to be in direct proportion to the work done and the
work reguired by this Agreement.
Section 4.05. Periodic Proqress Payment Plan.
with respect to basic work, on or about the first
day of each month as the work progresses, or at such other
times as Agent may deem appropriate, the Company will present
to Agent an itemized Reguest, in a form acceptable to Agent,
which shall be used as a basis for disbursement, (a) showing
the total amount expended and/or due for work performed or
material or eguipment furnished during the preceding monthly
period, and showing that the expenditure of such disburse-
ments, when added to all disbursements under previous regui-
sitions, will result in at least 90% of the total of such
disbursements, other than disbursements for reasonable
issuance expenses, having been used (i) for the acguisition,
construction, reconstruction or improvement of land or
property of a character subject to the allowance for depre-
ciation under Section 167 of the Code, or (ii) for payment
of amounts which are, for Federal income tax purposes,
chargeable to the Project's capital account or would be so
chargeable either with a proper election by Company (for
example under Section 266 of the Code) or but for a proper
election by Company to deduct such amounts; (b) specifying
in reasonable detail the nature of the obligation; and (c)
accompanied by a bill or statement of account for such
obligation. Such statement shall set forth a description of
the items for which disbursement is reguested, and shall
state the percentage of work under each such item which has
been completed from the commencement of work to the date of
the statement. Such statement shall be approved in writing
by the project architect employed by Company (or reguired by
Agent) and if required by Agent shall be accompanied by
invoices, vouchers, statements, affidavits, payroll records
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and/or other documents approved by Agent, which together
with the other documents previously submitted to and approved
by Agent, substantiate the total amount expended and/or due.
Thereafter, upon approval of the itemized Request and other
documents by Agent, Agent will requisition from the City
Note proceeds and will disburse from the Project Fund 90% of
the total expended and/or due less prior disbursements.
Prior to or at the time of each disbursement hereunder for
construction costs, Company shall deliver to Agent lien
waivers in form and substance satisfactory to Agent from
Company's prime contractor and Company's major subcontractors
and suppliers entitled to payment for the following work
performed or material or equipment furnished for which funds
were disbursed from the Project Fund under the previous
disbursement: plumbing, concrete, electrical, roof struc-
ture, on-site grading, on-site asphalt, AC screens and H/A/C
and drywall work. The final 10% will be requisitioned and
disbursed after the Facilities are fully completed, after
recordation of a Notice of Completion applicable to all of
the Facilities, which is regular in form and which appears,
after Agent's inspection of the Land and Facilities (if
required by Agent), to be valid, after expiration of the
applicable lien period, and after issuance of appropriate
title insurance endorsements as required by Agent, provided
there are no unpaid claims on file with Agent against any of
said building funds held by Agent in the Project Fund.
Notwithstanding the foregoing, however, Agent may, in the
exercise of its sole discretion, disburse from the Project
Fund the full amount, without retention, of each request
relating to the payment of fees of architects or engineers
or similar fees or those charged by public agencies or
utili ties.
Section 4.06. Periodic Progress Payment
Plan - Tenant Improvements.
With respect to the work or materials required to
construct the areas of the Facilities in accordance with the
requirements of the tenant proposing to occupy that portion
of the Facilities (the "Tenant Improvements"), Agent is not
Obligated to make any disbursements for Tenant Improvements
until the following conditions, should Agent so request, are
satisfied:
(a) The proposed tenant shall be in all respects
acceptable to Agent, and Company shall deliver to Agent
such information, including, but not limited to, finan-
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cial statements and credit reports, to enable Agent to
make such determination;
(b) Agent shall have received and approved a copy
of all executed agreements to lease all or any part of
such portion of the Facilities entered into by Company
and each proposed tenant and all other agreements
or documents pertaining thereto; and
(c) Agent shall have received and approved the
plans and specifications for the Tenant Improvements, a
Request itemizing the cost of the Tenant Improvements
in such detail as Agent may request, and any other
information requested by Agent pertaining to the construc-
tion of the Tenant Improvements, including, but not
limited to contract, subcontract, bid proposals, and
evidence of the proposed tenant's approval of documents
pertaining to the Tenant Improvements as Agent may
require.
The Tenant Improvement funds shall be disbursed in
the same manner provided in Section 4.05 above, except that
Company's written request shall be, if requested by Agent,
accompanied by invoices, vouchers, statements, etc., substan-
tiating the amount of the request, and the amounts funded by
Agent shall be 100% of the Tenant Improvement costs expended
and/or due less prior disbursements and less retentions, if
any.
section 4.07. Conditions Precedent.
Agent is not obligated to make the initial or any
subsequent disbursement of the proceeds of the Loan to or
for the benefit of Company, unless at the time of such
requested execution and at the time of each request for
disbursement, all of the following conditions prevail:
(a) There exists no condition, event or act which
would constitute an Event of Default hereunder or under
the City Note, the Company Note, or the Deed of Trust,
or condition, event or act which would constitute such
an Event of Default but for any requirement of notice
to be given or period of grace or time to elapse;
(b) Agent has made no determination that the
amount remaining in the Project Fund, together with
undisbursed Loan proceeds, is less than the amount
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required to pay all amounts required for completion of
the Facilities; provided, however, that within five (5)
days after the making of any such determination, Agency
shall send written notice thereof to Company specifying
the amount required to be deposited by Company into the
Project Fund to provide sufficient funds to complete
said work;
(c) Company has furnished to Agent receipted
bills and releases of lien rights covering work done
and/or materials furnished in connection with the
construction of the Facilities showing the expenditure
of an amount equal to the total of all funds previously
disbursed from the Project Fund, plus the amount of the
requested advance. Agent is further authorized to
require that all contractors and/or subcontractors
and/or materialment and/or laborers employed in connec-
tion with the construction of the Facilities shall be
paid directly by disbursement from the Project Fund
upon a form or order approved by Agent and countersigned
by Company;
(d) All representations and warranties of Company
herein set forth are true; and
(e) The Deed'of Trust constitutes a first lien on
the Land and the Facilities, and the Company shall have
delivered to Agent an ALTA (1970) lender's policy
of title insurance, in form and substance satisfactory
to Agent, evidencing such first priority, together with
such endorsements as Agent shall request.
Section 4.08. Impound of Operating Income.
The Company agrees that all income derived by the
Company in any manner from the Project shall be deposited
into the Project Fund, if necessary in the sole discretion
of the Agent, for the purpose of paying the costs and expenses
associated with the development of the Project.
Section 4.09. Order of Disbursements.
Any disbursement from the Project Fund made after
the deposit of funds pursuant to Subsections 4.07(b) or 4.08
shall be deemed to have been made first from such deposits
to the end that all funds so deposited shall be first disbursed
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by Agent prior to any disbursement of funds remaining in the
p~oject Fund derived from the Loan.
Section 4.10. Payments by Company.
All payments on the Company Note shall be made at
the times and places and in the amounts specified therein.
-In addition to payments on the Company Note, the Company
shall pay the following amounts (hereinafter called "Addi-
tional Payments") as the same become due:
(a) to the appropriate governmental authority all
taxes and assessments of any nature whatsoever, that
may be levied on the Project, including, but not limited
to, excise taxes, ad valorem taxes, ad valoren and
-specific lien special assessments and gross receipts
taxes, if any, levied upon the Project or any income
derived therefrom;
(b) to the City all expenses (not otherwise paid
or provided for out of the proceeds of the sale of the
City Note) incidental to the issuance of the City Note
and all Administrative Expenses, including, without
limiting the generality of the foregoing, salaries,
wages, expenses, compensation and indemnification of the
Trustee under the Resolution of Issuance, fees and
charges of auditors, accountants, architects, attorneys
and engineers, and all other necessary administrative
charges of the City or charges required to be paid by
it in order to comply with the terms of the City Note or
of the Resolution of Issuance and to defend the City
and its officers and officials in any litigation to
which the city may become a party arising out of or in
any way connected with the transaction of which this
Agreement is a part;
(c) to the appropriate insurance company or com-
panies, all insurance premiums, if any, on all insur-
ance required or permitted under the provisions of
ArtiCle 5 hereof;
(d) to the city all costs and expenses which the
City may incur in consequence of or because of any de-
fault by the Company under this Agreement, including
reasonable attorneys' fees and costs of suit in equity
or action at law to enforce the terms and conditions of
this Agreement; and
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(e) all reasonable and necessary expenses inciden-
tal to the making of the Loan including, without limiting
the generality of the foregoing, preclosing and closing
expenses including fees of Bond Counsel, fees of city
Consultants, commitment fees, expenses incurred for
architectural and engineering review, construction
inspection and fees of attorneys for City, Purchaser,
Agent and Financial Consultant.
company agrees that Agent's good faith determination
that an expense is a reasonable and nece&sary expense inci-
dental to the making of the Loan shall constitute a conclu-
sive determination of Company's obligation to pay such
expense.
In the event Company shall fail to pay any of the
amounts set forth in this Section 4.10, or shall fail to
maintain the full insurance coverage required by this Agree-
ment or shall fail to keep the Project in good repair and
operating condition, Agent may (but shall be under no obliga-
tion to) pay the same or take out the required policies of
insurance and pay the premiums on the same or may make such
repairs or replacements as are necessary and provide for
payment thereof, as provided in Section 8.06 hereof.
Section 4.11. Timely Payment by Company.
All payments payable required under this Agreement
shall be made when such payments are due. (Nothing herein
contained shall prevent the Company from making, from time
to time, payments to the city (or the Agent on behalf of the
City) for any purpose now or hereafter authorized by law).
Each payment shall be paid in lawful money of the United
States of America, by warrant or check drawn against funds
of the Company, and each required payment by the Company
which is not paid when due shall thereafter bear interest
as described in Section 4.03(f).
Section 4.12. contest; Surety Bond.
The Company shall have the right to contest the
amount or validity of any taxes, assessments or charges
payable by the Company as Additional Payments by appropriate
legal proceedings, but this right shall not be deemed or
construed in any way as relieving or modifying or extending
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the Company's covenant to pay any such taxes, assessments or
charges at the time and in the manner as is in this Article
4 provided. The City shall, upon request, join in any such
proceedings if the Company determines that it shall be
necessary or convenient for the city to do so in order for
the Company to prosecute properly such proceedings, but the
City shall not be subject to any liability for the payment
of any costs or expenses in connection with any such proceeding
brought by the Company. The Company hereby covenants to
indemnify the City against and save the City harmless from
any such costs and expenses. The Company, upon commencing
such contest, shall deliver to the Agent a good and sufficient
surety bond, letter of credit or other similar instrument
guaranteeing payment of any contested taxes, penalties, and
interest thereon, that might be found due as a result of
such contest.
Section 4.13. Amendment for Issuance of Bonds.
The Company agrees that, in the event the City
shall, at the request of the Company, issue bonds and/or re-
funding bonds pursuant to an appropriate resolution of
issuance, it will enter into an amendment to this Agreement
with the City, which will contain such provisions as shall
be required by such resolution of issuance in respect of the
issuance of such bonds and/or such refunding bonds. It is
the intention of Company to request the City to issue such
bonds or refunding bonds to provide funds for the repayment
of the City Note on or prior to its maturity date; provided,
however, that while any portion of principal or interest on
the City Note remains unpaid, no notes or bonds secured by
or payable from the revenues of the Project shall be issued
without the written consent of Purchaser.
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ARTICLE 5
SPECIAL COVENANTS
Section 5.01. Financial Information.
During the term of the Loan, Company and Guaran-
tors shall each deliver to Agent within ninety (90) days
after the end of each of their respective fiscal years, and
if requested by Agent within forty-five (45) days of the end
of each of their respective fiscal quarters, an income
statement, balance sheet and a statement of changes in
financial condition and in addition any other financial
information reasonably requested by Agent, all to be pre-
pared in accordance with cash basis accounting principles
consistently applied. In the event Company and Guarantors
obtain audited financial information, Company and Guarantors
shall submit copies thereof to Agent. The Company shall
from time to time furnish to the Agent and to the city such
data regarding the Project as each shall reasonably request,
in order to enable each to determine whether the covenants,
terms and provisions of this Agreement have been complied
with by the Company.
Section 5.02. Evidence of Compliance with
Governmental Regulation.
From time to time during the term of the Loan,
Company shall, upon the request of Agent, deliver to Agent
such evidence as Agent may reasonably request of Company's
compliance with all governmental regulations, restrictions
or orders limiting the use and/or operation of the Land
and/or the Facilities. Such evidence shall include, but not
be limited to, evidence of compliance with zoning restric-
tions, building codes, use and geological hazard permits and
environmental regulations.
Section 5.03. Company's Responsibilities.
To prevent and avoid construction defects, Company
shall inspect, review, supervise and assure the high quality,
adequacy and suitability of: (a) the Plans and Specifications
and any amendments, alterations and changes thereto; (b)
architects, contractors, subcontractors and materialmen,
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employed or utilized in the construction; and (c) the progress
and course of construction and its conformance with the
Plans and Specifications and any changes thereto made pur-
suant to Section 3.01(c) hereof.
Section 5.04. Indemnification.
Company shall (at Company's expense) defend,
indemnify, save and hold Agent and City harmless against any
and all claims, demands, losses, expenses, damages (general,
punitive or otherwise), causes of action (whether legal or
equitable in nature) asserted by any person, firm, corpora-
tion, governmental body or agency, or other entity, alleged
or claimed to arise out of the construction of the Facilities
or caused by the use of the proceeds of the Loan. Company
shall pay upon demand all damages, claims, judgments, demands,
losses or expenses (including legal expenses) incurred by
Agent, City, Purchaser, or Trustee as a result of any legal
action arising out of the construction of the Facilities or
caused by the use of the proceeds of the Loan.
Section 5.05. Commissions and Brokerage Fees.
Company agrees to hold Agent and City free and
harmless from any responsibility and/or liability for the
payment of any commission, charge or brokerage fee payable
in connection with the purchase of the City Note or refinancing
of the Loan, or the issuance of Bonds pursuant to Section 4.10,
it being understood that any such commission, charge or
brokerage fee will be paid directly by Company to the party
or parties entitled thereto.
Section 5.06. Taxes.
The Company will:
(a) pay, or make provision for payment when the
same become due of all lawful taxes and assessments,
including income, profits, property or excise taxes, if
any, or other municipal or governmental charges, levied
or assessed by the federal, state or any municipal
government upon any payments by the Company pursuant to
this Agreement; and
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(b) payor cause to be discharged, within sixty
(60) days after the same shall become effective, any
lien or charge upon any payments under this Agreement.
Section 5.07. No Secondary Financing.
Company covenants and agrees that no indebtedness
will be secured by, and no other deed of trust or encumbrance
will be placed upon any portion of the Land or Facilities
without the prior written approval of Agent, except for the
Loan and the Deed of Trust and the City Note.
Section 5.08. No Additional Debt.
Company covenants and agrees that until the Loan
and the city Note have been repaid in full, Company shall
not, without the prior consent of Agent, sell, transfer,
assign, pledge, hypothecate, mortgage or encumber or in-
crease the indebtedness secured by existing pledges, hypo-
thecations, mortgages or encumbrances of, any property,
whether real, personal, tangible or intangible, owned now or
hereafter by Company and relating to the Project. The
consent of Agent hereunder shall not be unreasonably with-
held and shall be based upon the prudent banking judgment of
Agent as to whether or not any such undertaking could materially
diminish the capacity of Company to meet its obligations
under the Company Note and this Agreement.
Section 5.09. Title Insurance.
Company shall procure and deliver to Agent a
policy of title insurance satisfactory to Agent showing the
Deed of Trust to be a valid first lien or charge upon the
Land and Facilities, excepting only such items as shall have
been approved by Agent. No surveys, test borings or other
work of any character shall be commenced nor shall any
materials be delivered upon or near the Property prior to
the recordation of the Deed of Trust without written assurances
from a title insurance company that the title policy required
by Agent shall be issued without any deletion or exception
necessitated by said commencement of construction. Upon
completion of the Facilities and after the filing of a valid
Notice of Completion, Company shall procure at its own
expense and deliver to Agent such title insurance endorse-
ments as Agent may require.
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Company shall obtain for Agent a CLTA Endorsement
No. 102.5, or equivalent endorsement to the title policy,
that the foundations have been located and construction
within the boundary lines of the Land, and do not encroach
upon any easement or public right of way, or breach or
violate the covenants, conditions or restrictions shown in
said title policy. In this regard, Company shall furnish
such surveys, certificates or other documents as may be
required by the title company in connection with the issuance
of such endorsement.
Section 5.10. Hazard Insurance.
Company shall procure and maintain in force during
the term of the Loan, as it may be extended from time to
time by Agent, a policy or policies of fire, vandalism,
malicious mischief and extended coverage insurance or, in
lieu thereof, Builders All Risk Completed Value Insurance,
as Agent may require, covering the Facilities (course of
construction included) in a form and substance and issued by
a company or companies acceptable to Agent. In the event
Company maintains a blanket policy providing coverage accept-
able to Agent, such policy shall satisfy Company's obliga-
tion to procure insurance hereunder.
Company shall also procure such policies of flood,
earthquake or other hazard insurance as may be required by
governmental regulation or authority, or Agent.
All policies of hazard insurance shall contain a
mortgagee loss payable clause in favor of Agent during the
term of the Loan and shall be terminable only upon thirty
(30) days prior to written notice to Agent.
Section 5.11. Public Liability Insurance.
Company shall at all times during the term of the
Loan, at its sole cost and expense, maintain in full force
and effect a policy or policies of comprehensive public
liability insurance issued by an insurance carrier or carriers
satisfactory to Agent, assuring against loss, damage, or
liability for injury to, or death of, persons and loss or
damage to property occurring from any cause whatsoever in,
upon or about the Land and Facilities. Such liability in-
surance shall be in such amounts as are reasonably required
by Agent, but not less than One Million Dollars ($1,000,000),
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insuring Company, City, Trustee, Agent and Purchaser. In
the event at any time such limits are clearly inadequate and
below the limits customarily obtained to cover property and
improvements of a similar type and size, Company shall
procure additional insurance in such amounts as may be
reasonably requested by Agent.
Section 5.12. Additional Insurance.
Company shall provide or cause to be provided all
other insurance as may be required by governmental authority,
applicable law, the general conditions contained in the
Plans and Specifications, or by Agent.
Section 5.13. Protection Against Lien Charges.
The Company agrees fully to pay and discharge all
claims for labor done and materials and services furnished
in connection with the construction of the Facilities, dili-
gently to file or procure the filing of a valid Notice of
Completion upon completion of construction, diligently to
file or procure the filing of a Notice of Cessation upon a
cessation of labor on the work of improvement for a con-
tinuous period of thirty (30) days or more, and to take all
other reasonable steps to forestall the assertion of claims
of lien against either the Land, any part thereof or right
or interest appurtenant thereto, or the Facilities and/or of
claims or bonded stop notices filed against the Project
Fund. Company acknowledges that no portion of the Loan
proceeds shall be disbursed to or for the benefit of Company
until Agent has received satisfactory evidence of the re-
lease or removal of all mechanic's liens and bonded stop
notices and payment or satisfaction of which was covered by
any prior disbursement of the Loan proceeds.
Upon demand by Agent, Company shall make such de-
mands or claims upon laborers, materialmen, subcontractors
or other persons who have furnished or claimed to have
furnished labor, services or materials in connection with
construction of the Facilities, which said demands or claims
shall, under the laws of the State of California, require
diligent assertion of lien claims and stop notice rights
upon penalty of loss or waiver thereof. Nothing herein
contained shall require Company to pay any claims for labor,
materials, or services which Company in good faith disputes
and which Company, at its own expense, is currently and
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diligently contesting; provided, however, that Company
shall, within ten (10) days after the filing of any claim of
lien that is disputed or contested by Company: (a) record,
in the Office of the Recorder of the San Bernardino County,
a surety bond pursuant to the California civil Code suffi-
cient to release said claim of lien, or (b) provide Agent
with proof of special title insurance coverage, in a form
and substance satisfactory to Agent and its legal counsel,
fully equivalent to the protection of Agent's security
interest in the Land and Facilities provided under clause (a)
of this proviso. Company agrees, upon demand by Agent, to
defend, indemnify and hold Agent harmless against any action
filed or claim asserted against Agent for any reason in
connection with any such lien claim.
Section 5.14. Maintain and Preserve the Project.
The Company shall operate, maintain and preserve
the Project in good repair and working order and operate the
Project in an efficient and economical manner; provided,
however, that on the occurrence of an Event of Default,
Agent or its agents, lessees, or sublesses may lease or rent
the Project or any part thereof, or otherwise provide for
the operation of the Project or any part thereof.
Section 5.15. Non-Discrimination - Compliance
With Laws and Regulations.
The Company agrees for itself, and its successors
and assigns, and every successor in interest to the Project
or any part thereof, as follows:
(a) The Company shall not knowingly discriminate
upon the basis of race, sex, marital status, color,
creed, religion, national origin or ancestry in the
sale, lease, sublease, rental or transfer, or in the
use, occupancy, tenure, or enjoyment of the Project or
any improvements erected or to be erected thereon, or
any part thereof, nor shall the Company itself or any
person claiming under or through it, knowingly estab-
lish or permit any such practice or practices of dis-
crimination or segregation with reference to the selec-
tion, location, number, use or occupancy of tenants,
lessees, subtenants, sublessees, or vendees of the
Project, or any part thereof;
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(b) All advertisements, including signs, for
sale and/or rental of the whole or any part of the
Facilities shall include the legend, "An Open
Occupancy Building" in type or lettering of easily
legible size and design; and the words "Project"
or "Development" may be substituted for the word
"Building" where circumstances require such substi-
tution;
(c) It is intended and agreed, and all deeds
shall expressly so provide, that the agreements and
covenants provided in (a) and (b) above, shall be
covenants running with the Land; except as otherwise
specifically provided in this Agreement, such covenants
and agreements shall be binding to the fullest extent
permitted by law and equity, for the benefit and in
favor of, and shall be enforceable by, the City, its
successors and assigns, and any successor in interest
to the Project, or any part thereof, against the Company,
its successors and assigns, and every successor in
interest to the Project, or any part thereof or any
interest therein, and any party in possession or occu-
pancy of the Project or any party thereof; it is further
intended and agreed that the agreement and covenant
provided in (a) above shall remain in effect without
limitations as to time; provided that such agreement
and covenant, including that specified in subdivision (a)
above, shall be binding on the Company itself, each
successor in interest to the Project, and every part
thereof, and each party in possession or occupancy
thereof, respectively, only for such period as such
successor or party shall have title to, or an interest
in or possession or occupancy of, the Project or part
thereof; and
(d) In amplification, and not in restriction of
the provisions of the preceding paragraphs of this
Section 5.15, it is intended and agreed that the City
and its successors and assigns shall be deemed bene-
ficiaries of the agreement and covenant provided in
subsection (a) hereof, for and in their or its own
right, and also for the purposes of protecting the
interests of the community and other parties, public or
private, in whose favor or for whose benefit such
agreements and covenants have been provided; such
agreements and covenants shall (and all deeds shall so
state) run in favor of the city, for the entire period
during which such agreements and covenants shall be in
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force and effect, without regard to whether the City
has at any time been, remains, or becomes an owner of
any land or interest therein to, or in favor of, which
such agreements and covenants relate. The City shall
have the right, in the event of any breach of any such
agreement or covenant, to exercise all of the rights
and remedies, and to maintain any actions or suits at
law or in equity or other proper proceedings to enforce
the curing of such breach of agreement or covenant, to
which it or any other beneficiaries of such agreement
or covenant may be entitled; any leases made by the
Company covering the subject Project shall include all
applicable restrictions, covenants and conditions set
forth in (a), (b) and (c) above; and the Company and
the City agree to cooperate in enforcing such restrictions,
covenants and conditions.
Section 5.16. Other Assurances.
The Company shall do and perform all matters or
things necessary or expendient to be done or performed by
reason of any law of the United States of America, or of the
State of California, or of any legally constituted govern-
mental authority, for the purpose of creating, performing
and maintaining the security interests created hereby and by
the Resolution of Issuance for the security of the payment
of the City Note and Company Note and the interest thereon,
and to perform all of the obligations hereby imposed upon
the Company.
Section 5.17. Bankruptcy.
The Company shall not enter into voluntary bank-
ruptcy or insolvency, or apply for or consent to the appoint-
ment of a receiver or trustee of itself or of its property,
or make any general assignment for the benefit of its creditors,
or suffer any order adjudicating it to be bankrupt or insol-
vent or appointing a receiver or trustee of it or of its
property, or fail to pay its debts as such debts become due.
Section 5.18. Compliance.
The Company shall not suffer or permit any Event
of Default to occur under this Agreement or the Resolution
of Issuance, but shall faithfully observe and perform all of
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the conditions, covenants and agreements hereof. The Company
shall not take any action which would create a Conflict of
Interest, and shall take any reasonable action necessary to
prevent or terminate a Conflict of Interest.
Section 5.19. Limitation on Capital Expenditures
Pursuant to Section 103(b)(6)(D)
of the Code.
The Company represents and covenants that the pro-
ceeds of the Loan are to be used only with respect to faci-
lities to be located within the corporate boundaries of the
city; and that the Company or person related to the Company
will be the principal user of the Project within the meaning
of section 103(b)(6) of the Code, and that there are no
outstanding obligations issued subsequent to October 1, 1978,
of any state, territory or possession of the United States,
or any political subdivision of the foregoing or of the
District of Columbia the interest on which is exempt under
Section 103(b)(6) of the Code, and the proceeds of which
have been or are to be used primarily with respect to facili-
ties located within the corporate boundaries of the city
(including facilities continguous or integrated with such
facilities even though such facilities may be located in
whole or in part outside the corporate boundary of the City)
the principal user of which is the Company (including any
person related to the Company within the meaning of
Section 103(b)(6)(C) of the Code).
The Company represents and covenants that except
as provided in this paragraph, the aggregate amount of (a)
the Loan and (b) capital expenditures with respect to any
land and interest therein, buildings, structures, machinery,
equipment and other facilities of which the Company, or a
"related person" of the Company as that term is used in
Section 103(b)(6)(C) of the Code, is the principal user and
which is located within the boundaries of the City, (inclUd-
ing facilities continguous or integrated with such facilities
even though such facilities may be located in whole or in
part outside the corporate boundaries of the City) as such
boundaries existed at the date of issuance of the City Note,
paid or incurred during the six-year period beginning three
years before the date of issue of the city Note and ending
three years after such date of issue (and financed otherwise
than out of the proceeds of the city Note), shall not exceed
the dollar limitation set forth in Section 103(b)(6)(D) of
the Code. However, capital expenditures are excepted from
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the above if such capital expenditures (1) replace property
destroyed or damaged by fire, storm or other casualty, to
the extent of the fair market value of the property replaced,
(2) are required by change made after the date of issue of
the City Note in a Federal or state law or local ordinance
of general application or by a change made after such date
of issue in rules and regulations of general application
issued under such a law or (3) are required by circumstanes
which could not be reasonably foreseen on the date of issue
of the City Note or arising out of a mistake of law or fact
(but the aggregate amount of expenditures not taken into
account under this clause (3) with respect to the City Note
shall not exceed $1 million). Capital expenditures described
in clauses (2) and (3) of the preceding sentence are excepted
from the dollar limitation set forth in Section 103(b)(6)(D)
of the Code only if the Company has secured an opinion from
a firm of attorneys nationally recognized in the area of
municipal law whose opinions are generally accepted by
purchasers of municipal bonds to the effect that such cap-
ital expenditures are capital expenditures described in
Section 103(b)(6)(F)(ii) or (iii) which are not to be taken
into account for purposes of Section 103(b)(6)(D)(ii) of the
Code. The term "Capital Expenditures," as used herein shall
have the meaning ascribed to it in Section 103(b)(6)(F) of
the Code and the Treasury Regulations thereunder.
The Company agrees that between the first and
tenth days of October, for the years 1981 and 1982, the
Company will deliver to Trustee a certificate of Authorized
Company Representative stating the amount of capital expen-
ditures made to that date which qualifies within clause (b)
of the preceding paragraph.
Section 5.20. Supplemental Statements.
The City and the Company agree to prepare and
cause to be filed all statements (including any statements
to be filed with the Internal Revenue Service) required to
be filed by them, mailing copies of all such statements to
Trustee, promptly after filing, and to take any and all
other action necessary in order to maintain tax-exempt
status of the interest on the City Note.
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Section 5.21. Survival of Representations,
Warranties, Covenants, etc.
Except as provided herein, the representations,
warranties, agreements and covenants of the Company contained
in this Agreement shall survive until the date upon which
all principal and interest of the city Note and the Company
Note shall have been paid or shall be deemed to have been
paid in accordance with the Resolution of Issuance (or any
similar provision in any Supplemental Resolution providing
for the issuance of a note and/or any refunding note). In
addition, notwithstanding anything to the contrary contained
herein or in the Resolution of Issuance, the Company's
obligation to retroactively pay interest on the Company Note
at a rate of 3% in excess of the Prime Rate upon an "Official
Determination" of taxability, as set forth in the Company
Note, shall survive the payment in full of principal and
interest of the city Note and the Company Note.
section 5.22. Security Agreement.
Company shall execute and deliver to Agent a
security agreement in form and substance satisfactory to
Agent, naming Trustee as Secured Party and securing the city
Note and the Company Note, and covering all personal property
of every kind whatsoever used or to be used in the construc-
tion or use and enjoyment of the Facilities.
Section 5.23. Surveys.
Company shall furnish to Agent, immediately upon
completion of the foundation and immediately upon completion
of the Facilities, respectively, a surveyor other evidence
satisfactory to Agent showing that said foundation and said
Facilities, respectively are located entirely with in the
boundary lines of the Land, and do not encroach upon any
easement or public or private right of way, or breach or
violate any covenant, condition or restriction of record, or
any building or zoning ordinance.
Section 5.24. Permits of Occupancy and Certi-
ficate of Completion.
Upon completion of the Facilities, Company shall
furnish to Agent such permits of occupancy as may be required
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by any public authority having jurisdiction, and a certifi-
cate of completion signed by the project architect employed
by Company, who shall have first been approved by Agent,
attesting the completion of the Facilities in accordance
with the Plans and Specifications, as they may be changed
from time to time pursuant to Section 3.01(c) hereof, and in
a good and workmanlike manner.
section 5.25. Identification and Assignment of
Plans and Specifications.
The parties hereto and an authorized officer of
the prime contractor retained by Company to construct the
Facilities, shall identify the copy of the Plans and Spec-
ifications delivered to Agent as a true and correct copy of
the Plans and Specifications and shall initial said copy of
the Plans and Specifications.
As further consideration for the making of the
Loan, and as a security for the Loan, the city Note and the
Company Note, Company does hereby assign to City, and City
hereby assigns to Trustee, all of the Company's right, title
and interest in end to the Plans and Specifications.
Section 5.26. Performance and Labor and Material
Bond.
Company shall, unless expressly waived by Agent,
procure and deliVer to Agent a performance and labor and
material payment bond or bonds for the prime contractor and
any subcontractors, in a form, substance and amount satis-
factory to Agent.
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ARTICLE 6
COST BREAKDOWN ANALYSIS
Section 6.01. Cost Breakdown Analysis.
Company acknowledges that it has reviewed Agent's
Cost Breakdown Analysis for the Loan, a copy of which is
attached hereto as Exhibit E and incorporated herein by this
reference, and that the terms thereof are acceptable to the
Company. The following points in connection with said
analysis are understood and agreed to by the Company:
(a) The proceeds of the Loan and sums from other
sources listed therein are budgeted and shall be dis-
bursed to pay remaining Project costs in accordance
with the breakdown set forth therein. The amount set
forth for each item of Project costs represents the
maximum amount of said funds which shall be applied in
payment of that item. Said funds shall be disbursed
only for the purpose and only to the extent specified
therefore.
(b) Those items, if any, which are listed as
credits represent either project costs previously paid
or incurred by Company or project costs acknowledged by
Company not to be payable from the Project Fund. The
Project budget, as set forth therein is based upon an
estimate of cost which has been reduced by the amount
of these credits and, accordingly, moneys in the Proj-
ect Fund shall not be available for the payment of any
costs enumerated in the preceding sentence except as
provided in the Financial Requirement Analysis or as
otherwise agreed to by the parties in writing.
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ARTICLE 7
ASSIGNMENTS, SECURITY
Section 7.01. Pledge and Assignment by
City to Trustee.
As security for the payment of the principal of
and interest on the City Note, the city has, by the provisions
of the Resolution of Issuance, and does hereby, assign to
the Trustee its rights under and interest in this Agreement
(other than certain rights of the City to indemnification
and Administration Expense) and pledge and assign any payments,
receipts and Revenues receivable by the City under or pursuant
to this Agreement, including, without limitation, payments
on the Company Note, and income earned by the investments of
the funds held under the Resolution of Issuance. Except as
provided in this Section 7.01, the City shall not sell,
assign, transfer, conveyor otherwise dispose of its interest
in this Agreement or in the Revenues, including, without
limitation, any income earned by investment of the funds
held under the Resolution of Issuance or any income earned
by investments under this Agreement. The Company hereby
agrees that any amounts held by the Trustee and all income
earned on the investment of such amounts so held as provided
in the Resolution of Issuance, may be retained by the Trustee
as security for the payment of the principal of and interest
on the City Note and any other sums hereafter advanced by
Purchaser for account of City in accordance with terms of
the Resolution of Issuance. The Company covenants that it
will not enter into any agreement which impairs the operation
of the Project or any part of it necessary to secure adequate
Revenues to pay the principal of and interest on the City
Note or repayment of funds advanced by Purchase for City or
Company, or which otherwise would impair the rights of the
Purchaser with respect to the Revenues or the operation of
the Project.
Section 7.02. No Abatement; Payment to Agent.
The parties hereto hereby consent to the assign-
ment and pledge under the Resolution of Issuance by the City
to the Trustee, as security, of all of the City's right in
and to all money held in the Project Fund and the city Note
Fund, together with all rights of the City in and to this
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Agreement, the Loan, and the Company Note. The Company
agrees that its obligation to make payments on the Loan, the
Company Note and under this Agreement shall be absolute,
irrevocable and unconditional and shall not be subject to
any defense (other than payment) or any right of set-off,
counterclaim, or recoupment arising out of any breach by the
City, the Agent or the Trustee of any obligation to the
Company, whether hereunder or otherwise, or out of any
indebtedness or liability at any time owing to the Company
by the City, the Agent or the Trustee. The City directs the
Company, and the Company agrees, to payor cause to be paid
to the Agent at such office as Agent shall direct all payments
pursuant to this Agreement and the Company Note.
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ARTICLE 8
DEFAULT AND REMEDIES
Section 8.01. Events of Default.
Each of the following events shall constitute an
Event of Default hereunder:
(a) The condemnation, seizure, or appropriation
of all, or such portion as in the opinion of Agent
constitutes substantially all, of the Land or
Facilities.
(b) Failure of Company to make any deposit re-
quired pursuant to Subsections 4.01, 4.07(b), 4.08 or
8.08 hereof or any other provisions hereof requiring
deposits by the Company within five (5) days after
written demand therefor.
(c) Substantial deviations in the work of
construction from the Plans and Specifications without
the prior approval of Agent, or the appearance of defec-
tive workmanship or materials, which said deviations or
defects are not corrected within thirty (30) days after
written notice thereof.
(d) Cessation of the work of construction prior
to completion of the Facilities for a continuous period
of fifteen (15) days or more for causes other than those
enumerated in Section 3.0l(a) hereof.
(e) The filing of any claim of lien against the
Land, the Facilities or any part thereof, or the ser-
vice of any bonded notice to withhold funds applicable
to the Project Fund and the continued maintenance of
said claim of lien or notice to withhold for a period
of ten (10) days without discharge or satisfaction thereof
or provision therefor in accordance with the terms
hereof.
(f) The breach of any covenant, warranty, promise
or representation herein contained and the continuance
of such breach for a period of thirty (30) days after
written notice thereof to Company; provided, however,
that if a different period or notice requirement is
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specified for any particular breach under any subsection of
this Section 8.01, the specific provision shall control.
(g) The entry by a court having jurisdiction of a
decree or order adjudging Company, any general partner
of the Company or the prime contractor to be bankrupt
or insolvent or approving as properly filed a petition
seeking the reorganization of Company or any general
partner of the Company under the Federal Bankruptcy Law
or any other applicable law or statute of the United
States, or any state, or appointing a receiver or
trustee or assignee in bankruptcy or insolvency for
Company or any general partner of the Company and its
property, or directing the winding up or liquidation of
Company, such decree or order having remained continuing,
undischarged or unstayed for a period of thirty (30)
days.
(h) A general assignment by the Company or the
prime contractor of their respective assets for the
benefit of creditors, or a sequestration or attachment
of or execution upon any substantial part of such
property, unless the property so assigned, sequestered,
attached or executed upon shall have been returned or
released within thirty (30) days after such event or
prior to sooner sale pursuant to such sequestration,
attachment or execution.
(i) The failure of the Company to payor to
discharge any judgment or judgments against it for the
payment of money which singly or in the aggregate is in
excess of Five Thousand Dollars ($5,000.00) and such
jUdgment or judgments be not satisfied, an appeal taken
therefrom or enforcement of such jUdgment or judgments
be not stayed, or any process levied thereon be not
removed, within ten (10) days after entry of judgment
or issue of process.
(j) The dissolution or termination of Company or
the suspension or termination of Company's business or
alteration of the nature thereof in any manner which
Agent in good faith determines is likely to materially
decrease Company's capacity to perform hereunder or
repay the Loan.
(k) The commencement of any work or the delivery
of any materials upon or near the Land prior to
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the recordation of the Deed of Trust, without written
assurances from a title insurance company that the
title policy required by Agent shall be issued without
any deletion or exception due to said commencement
of construction.
(1) The occurrence of a default under the
Company Note and/or Deed of Trust.
Section 8.02. Acceleration.
Upon the happening of an Event of Default, the
unpaid balance of the Company Note shall, at the option
of Agent, become immediately due and payable.
section 8.03. Application of Funds in Project
Fund Against Company Note.
Upon acceleration of the unpaid balance of the
Company Note hereunder, Agent's obligation to requisition
funds from the Project Fund will forthwith terminate, and
Agent may, at its option, direct the Trustee to apply all
or any part of the Project Fund to the payment of princi-
pal and accrued interest on the Company Note and the City
Note.
Section 8.04. Right to Complete Construction.
In the event that Company shall abandon or fail
diligently to proceed with construction of the Facilities
or otherwise be in default hereunder, Agent shall have the
right to enter upon the Land and take over and complete
the work of construction, to make requisitions from the
Project Fund, to discharge and replace the contractors
or subcontractors and to employ watchmen to protect the
Land and Facilities. Any contracts entered into or
indebtedness incurred upon the exercise of such right may be
in the name of Company, and Agent is hereby irrevocably
appointed the attorney in fact of Company (said appointment
being coupled with an interest) to enter into said contracts,
incur such obligations, enforce any contracts or agreements
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theretofore made by or on behalf of Company and do any and
all things necessary or proper to complete the work of con-
struction, including the signing of Company's name to such
contracts and documents as may be deemed necessary by legal
counsel for Agent. In no event shall Agent be required to
expend its own funds to complete the Facilities if the funds
in the Project Fund are insufficient, but Agent may, at its
option, advance such funds. Any funds so advanced shall be
added to the outstanding balance of the city Note and the
Company Note and shall be payable on demand, together with
interest at the rate specified in the city Note or the
Company Note, as applicable.
Section 8.05. Stoppage of Construction by Agent.
Where substantial deviations from the Plans and
Specifications appear which have not been approved in accord-
ance with Section 3.0l(c) hereof, or defective or unworkman-
like labor or materials are being used in the construction
of the Facilities, or upon receipt of knowledge of encroach-
ments to which there has been no consent, Agent shall have
the right to immediately order stoppage of construction and
demand that such condition be corrected. After issuance of
such an order in writing, no further work shall be done on
said Facilities without the prior written consent of Agent
unless and until said condition has been fully corrected.
Section 8.06. Curing of Defaults by Disburse-
ment From the Project Fund.
Upon the happening of any Event of Default which
may be cured by the payment of money, Agent shall have the
right, but not the obligation, to make such payment from the
Project Fund or from its own funds, thereby curing the
default. If the payment of any such sums results, or may
result, in Agent's good faith determination, in the reduc-
tion in the amount of funds in the Project Fund, together
with undisbursed Loan proceeds, below the amount required to
complete construction of the Facilities, the amount which
Agent determines in good faith to be necessary to provide
for such completion shall be deposited by Company pursuant
to the terms of Subsections 4.01 and 4.07(b) hereof within
five (5) days after written demand by Agent therefor. If
Agent advances its own funds for such purposes, all such
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funds advanced shall be added to the outstanding balance of
the City Note and the Company Note and shall be payable on
demand, together with interest at the rate specified in the
City Note or the Company Note, as applicable.
Section 8.07. Remedies of Agent are CUmulative.
All remedies of Agent provided for herein and in
any other document relating to the Loan are cumulative and
shall be in addition to all other rights and remedies pro-
vided by law, including banker's lien and the right of
offset. The exercise of any right or remedy by Agent hereunder
shall not in any way constitute a cure or waiver of default
hereunder or under any other document relating to the Loan,
or invalidate any act done pursuant to any notice of default,
or prejudice Agent in the exercise of any of its rights
hereunder or under any other document relating to the Loan,
unless, in the exercise of said rights, Agent realizes all
amounts which are or may be owed under the Company Note, the
City Note, the Deed of Trust and this Agreement.
Section 8.08. Right of Contest.
Notwithstanding anything to the contrary herein
contained, Company shall have the right to contest in good
faith any claim, demand, levy or assessment the assertion of
which would constitute an Event of Default hereunder. Any
such contest shall be prosecuted diligently and in a manner
unprejudicial to Agent or the rights of Agent. Upon demand
by Agent, Company Shall make suitable provision by deposit
of funds into the Project Fund or by bond or other assurance
satisfactory to Agent for the possibility that any such
contest will be unsuccessful. Such provision shall be made
within five (5) days after demand by Agent therefor and, if
made by deposit of funds into the Project Fund, the amount
so deposited shall be disbursed in accordance with the
resolution of the contest either to Company or the adverse
claimant.
Section 8.09. Return to Status Quo.
In case any proceeding taken by the City or the
Agent on account of any Event of Default shall have been
discontinued or abandoned for any reason, then and in every
such case the City and the Agent shall be restored to their
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former positions and rights hereunder, respectively, and all
rights, remedies and powers of the City and the Agent shall
continue as though no such proceeding had been taken.
Section 8.10. Attorneys' Fees.
If an Event of Default shall occur under this
Agreement, and the City or the Agent shall employ attorneys
or incur other expenses for the collection of payments due
hereunder or for the enforcement of performance or observance
of any obligation or agreement on the part of the Company
contained herein, the Company will on demand therefor reim-
burse the City or the Agent, as the case may be, for the
reasonable fees of such attorneys and such other reasonable
expenses so incurred.
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ARTICLE 9
AGENT TO ADMINISTER LOAN
Section 9.01. Administration of Loan.
Agent, as agent for the City and Trustee, shall
administer the Loan, in accordance with the requirements of
this Agreement and all other documents delivered pursuant
hereto ("Loan Documents"). Agent shall have full power
and authority to do any and all things in connection wi th
such servicing and administration of the Loan that it may
deem necesary or desirable, including, without limitation,
the following:
(a) Make advances from the Project Fund on the
Loan directly to or for the account of the Company,
pursuant to this Agreement and other Loan Documents,
in accordance with Agent's usual practices and pro-
cedures in administering project and construction
loans.
(b) Record and file documents and statements to
create, maintain and preserve the priority of the lien
of the Deed of Trust on the Project and the Land, make
site inspections, obtain title updates and endorsements,
process change orders, and maintain required insurance
and escrow funds.
(c) Collect all payments of principal and interest
due under the Loan and the Company Note, and any other
payments or sums due under or with respect to the Loan,
the Deed of Trust or other Loan Documents, including,
without limitation, all payments for real estate taxes,
assessments, hazard insurance premiums, ground rent
(if any), service charges and late payment fees, and
all proceeds of title and hazard insurance policies.
(d) Deposit all Revenues in the city Note Fund.
(e) Preserve collateral, administer and enforce
the Loan and the Loan Documents, and in this connection
do (or refrain from doing) all acts which are permitted
under the terms of the Loan or the Loan Documents and
which in its sole judgment may be appropriate.
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(f) Release in whole or in part the Loan and
any Loan Document, at such time and subject to such
conditions as Agent may in its discretion determine.
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ARTICLE 10
MISCELLANEOUS
Section 10.01. Refund of Excess Amounts in
the City Note Fund.
Any amounts remaining in the City Note Fund after
payment in full of the city Note (including interest thereon),
or provision for payment thereof having been made in accor-
dance with the provisions of the Resolution of Issuance, and
payment of all other reasonable and necesary obligations in-
curred by the city under this Agreement, including, without
limitation, the payment of Administration Expenses, shall
belong to and be paid to the Company by the Trustee in
accordance with the provisions of the Resolution of Issuance.
Section 10.02. Notices.
All notices, certificates, requests or other
communications between the City, the Company and the Agent
required to be given hereunder or under the Resolution of
Issuance shall be deemed given when mailed by certified
mail-return receipt requested, postage prepaid, addressed as
follows: if to the city, at 300 North liD" Street, San
Bernardino, California 92401, Attention: City Clerk; if to
the Company, Tri-city Industrial Park, Ltd., 14531 Hamlin
Street, Suite 205, Van Nuys, California, 91411; if to the
Agents, Lloyds Bank California, a California Corporation at
1666 North Main Street, suite 500, Santa Ana, California;
Attention: Real Estate Loan Administration. A copy of each
notice, certificate, request or other communication given
hereunder to either the City, the Company, or the Agent
shall also be given to the others. Copies of all such
notices shall be given to Bond Counsel and Messrs. Memel,
Jacobs, pierno & Gersh, counsel for Agent. The City, the
Company and the Agent may, by notice given hereunder, desig-
nate Company and the Agent may, by notice given hereunder,
designate any further or different addresses to which subse-
quent notices, certificates, requests or other communications
shall be sent.
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'........,./
section 10.03. Effect of Agreement.
This Agreement shall inure to the benefit of and
shall be binding upon the City, the Company, the Agent and
their respective successors and assigns, subject to the
limitation that any obligation of the City created by or
arising out of this Agreement shall be a limited obligation
of the City, payable solely out of the Revenues of the City
derived from this Agreement and the other funds held or set
aside in trust under the Resolution of Issuance, and shall
not constitute a pledge of the faith and credit of the City
or an indebtedness or a charge against the general credit of
the City or the general credit or taxing powers of the city
or the State of California or any political subdivision
thereof, within the meaning of constitutional or statutory
provision of the State of California whatosever; and provided
further, that Company shall not assign its rights hereunder
in whole or in part without the prior written consent of
Agent and any such assignment without said consent shall be
void.
Section 10.04. Amendment.
This Agreement may be amended in any respect, but
only by written agreement of the parties hereto and, if the
City Note remains outstanding at the time of such amendment,
subject to the limitations on such amendments set forth in
the Resolution of Issuance.
Section 10.05. Counterparts.
This Agreement may be executed in any number of
counterparts, each of which, when duly executed and delivered,
shall be an original; but such counterparts shall together
constitute but one and the same Agreement.
Section 10.06. Severability of Provisions.
If any clause, provision or section of this Agree-
ment shall be held illegal or invalid by any court, the
invalidity of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections
hereof, and this Agreement shall be construed and enforced
to the end that the transactions contemplated hereby be
enforced, as if such illegal or invalid clause, provision or
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section had not been contained herein. In case any agreement
or obligation contained in this Agreement shall be held to
be in violation of law, then such agreement or obligation
shall be deemed to be the agreement or obligation of the
City, the Company or the Agent, as the case may be, to the
full extent permitted by law. To the extent that the provi-
sions relating to the Agent are held to be in violation of
law, all such duties required by such provision shall be
performed by the City.
section 10.07. Construction.
The laws of the State of California shall govern
the construction of this Agreement.
Section 10.08. Form of Documents.
The form and substance of all documents instru-
ments, papers or forms of evidence to be delivered to Agent
by Company under the terms of any of the Loan Documents,
including, without limiting the generality of the foregoing,
the Company Note, the Deed of Trust, and this Agreement
shall in all respects be subject to the approval of Agent
and its legal counsel.
Company shall deliver to Agent such additional
documents, instruments, papers or forms of evidence inci-
dental to the Loan as Agent or its legal counsel may rea-
sonably request, including, without limiting the generality
of the foregoing, financial statements, articles of incorpora-
tion, partnership or joint venture agreements, borrowing
resolutions, opinions of counsel and certifications by, and
evidence of compliance with orders of, governmental authorities.
Section 10.09. Approval of Amendments.
No document or instrument delivered to Agent or to
be delivered to Agent by the Company under the terms of any
of the Loan Documents including, without limiting the generality
of the foregoing, the Company Note, the Deed of Trust, or
this Agreement, shall be amended, modified, superseded or
terminated in any re~pect whatsoever without Agent's prior
written approval.
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Section 10.10. No Waiver.
No waiver of any default or breach by the Company
hereunder shall be implied from any failure by Agent or the
City to take action on account of such default, and no
express waiver shall affect any default other than the
default referenced therein, and such waiver shall be operative
only for the time and to the extent therein stated. Waivers
of any covenant, term or condition contained herein shall
not be construed as a waiver of any subsequent breach of the
same covenant, term or condition. The consent or approval
by Agent or City to or of any act by the Company shall not
be deemed to waive or render unnecessary the consent or
approval to or of any subsequent similar act. No waiver or
consent given by City shall be effective unless agreed to in
writing by the Agent.
section 10.11. No Third Parties Benefited.
This Agreement is made and entered into for the
sole protection and benefit of the City, Agent, Trustee,
Purchaser and Company, their successors and assigns, and no
other person or persons shall have any rights of action
hereon, or right to funds at any time on deposit in the
Project Fund.
section 10.12. Authority to File Notices.
Company irrevocably appoints, designates and
authorizes Agent as its agent (said agency being coupled
with an interest) to file for record any notices of comple-
tion, cessation of labor, or any other notice that Agent
deems necessary or desirable to protect its interest hereunder,
or under any other document relating to the Loan.
Section 10.13. Actions.
Agent shall have the right to commence, appear in
or defend any action or proceeding purporting to affect the
rights, duties or liabilities of parties hereunder, or the
disbursement of any funds in the Project Fund. In connection
therewith, Agent may incur and pay costs and expenses, in-
cluding reasonable attorneys' fees. Company agrees to pay
to Agent on demand all such expenses incurred or paid and
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Agent is hereby authorized to disburse funds from the Project
Fund for said purpose.
section 10.14. Nonliabi1ity of Agent.
The relationship between Company and Agent with
respect to construction of the Facilities is, and shall at
all times remain, solely that of borrower and agent for
lender, and Agent neither undertakes nor assumes any respon-
sibility or duty to Company to select, review, inspect,
supervise, pass judgment upon, or inform Company of the
quality, adequacy or suitability of: (i) the Plans and
Specifications and any amendments, alterations and changes
thereto, (ii) architects, contractors, subcontractors and
materialmen employed or utilized in the construction or
(iii) the progress or course of construction and its conform-
ance or nonconformance with the Plans and Specifications and
any amendments, alterations and changes thereto.
Agent owes no duty of care to protect the Company
against negligent, faulty, inadequate or defective building
or construction and shall not be responsbible or liable to
Company for negligent, faulty, inadequate or defective
building or construction or for any loss or damage of any
kind to person or property caused by its negligence, whether
as to Company or as to any other person or group of persons.
Company shall keep Agent free and harmless from any such
liability, loss or damage.
SectionlO.l5. Interest.
Notwithstanding any provision of the Company Note
to the contrary, interest shall be payable at the rate pro-
vided therein, computed daily on the basis of a 360 day
year/30 day month, only on such portions of the Loan pro-
ceeds as have been disbursed from time to time from the
Project Fund pursuant to this Agreement.
Section 10.16. Signs.
Company agrees that Agent may place on the Land
signs appropriate to the construction project evidencing
that construction financing is being provided by city through
the sale of the City Note to Purchaser.
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Section 10.17. Time.
Time is of the essence hereof.
Executed as of the
#3 day of ~
,
1981.
city:
,
ATTEST:
~/Jf4/~,1.b
,
city Clerk
[SEAL]
Company: TRI-CITY INDUSTRIAL PARK, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
GENERAL PARTNERS
EASTERN PACIFIC FINANCIAL GROUP,
a California Corporation
By
David Doremus, President
VTN CONSOLIDATED, INC., a
California Corporation
By
C. Richard Nelson, President
LILCO FINANCIAL CORPORATION,
a California Corporation
By
L. M. Lilly, III, President
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Agent:
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CHARLES GLENN, an Individual
By
Ti tIe
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ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN BERNARDINO )
on this
1981, before me,
Public in and for the
duly commissioned and
day of , in the year
, a Notary
State of California, residing therein,
sworn, personally appeared
known to me to be the
persons who executed the within
to me that such be executed the
,
, the
instrument and acknowledged
same.
IN WITNESS WHEREOF, I have hereunto subscribed my
name and affixed my official seal in the County of
on the day and year in this certificate
first above written.
Notary Public in and for the
State of California
[NOTARIAL SEAL]
My Commission expires:
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ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN BERNARDINO)
On this '9 T:I- day of 6c-l-06 f' r ,1981, before
me, a Notary Public duly commissioned, qualified and acting
within and for the County and State aforesaid, appeared in
person the within-named W. R. Holcomb and Shauna Clark,
respectively, of the city of San Bernardino, California,
to me personally known, who stated that they were duly
authorized in their respective capacities to execute the
foregoing insturment for an din the name and behalf of the
City, and further stated and acknowledged that they had so
signed, executed and delivered the foregoing instrument for
consideration, uses and purposes therein mentioned and set
forth.
IN TESTIMONY WHEREOF, I have hereunto set my hands
and official seal this 9 ~ day of ~~6pr- , 1981.
-
~,
~ - -
(OFFICIAL SEAL)
SANDRA A. BAXTER
NOTARY PUBLIC . CALIFORNIA
SAN BERNAROINO COUNTY
My Commission >Expires Dec. 7, 1981
zj~C.~ZZ-c
Notary Public
[SEAL)
My Commission expires:
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ACKNOWLEDGMENT
STATE OF CALIFORNIA
)
) ss.
)
COUN'IT OF ORANGE
On this day of , 1981, before
me, a Notary Public duly commissioned, qualified and acting
within and for the State and County aforesaid, appeared
in person the within-named and
, respectively of Lloyds Bank
California, a California Corporation, to me personally
known, who stated that they were duly authorized in their
respective capacities to execute the foregoing instrument
for and in the name and behalf of the Bank, and further
stated and acknowledged that they had so signed, executed
and delivered the foregoing instrument for the consider-
ation, uses and purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and official seal this day of , 1981.
Notary Public
[SEAL]
My Commission expires:
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EXHIBIT A
"COMPANY NOTE"
PROMISSORY NOTE SECURED BY DEED OF TRUST
From Tri-City Industrial Park, Ltd.,
A California Limited Partnership
to Lloyds Bank California, a California Corporation, as
Agent for the City of San Bernardino and Trustee for
the Holders of the Industrial Development Revenue Note
$1,750,000.00
, California
, 1981
On 1982, for value received, the
undersigned promises to pay to the order of LLOYDS BANK
CALIFORNIA, a California Corporation, as Agent for the City
of San Bernardino ("City") for the administration of the
loan by the City to the Company of such portion of the
proceeds of the sale of the Industrial Development Revenue
Note ("City Note") and as Trustee for the holders of the
Note of the city ("Trustee," when acting in that capacity),
pursuant to a Resolution of Issuance dated as of October 1,
1981 ("Resolution"), at Trustee's Office, 1666 North Main
Street, suite 500; Santa Ana, California 92701, or at such
other place as may be designated in writing by holder of
this Note, the principal sum of One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000.00) or such lesser amount
as may be outstanding hereunder. Interest accrued on amounts
outstanding for the preceding month shall be payable on the
first day of each calendar month commencing , 1981
at the Basic Rate. As used herein the "Basic Rate" is the
per annum rate of interest calculated as one-half (1/2) of
the Prime Interest Rate plus three percent (3%). Said Basic
Rate is to be adjusted on the day the Prime Interest Rate
changes and is to be computed on the basis of a 360-day
year, but accrued on the actual number of days elapsed; and
the "Prime Interest Rate" is that rate of interest being
charged by Lloyds Bank California on ninety (90) day unse-
cured loans to said Bank's most substantial and most respon-
sible borrower as of the date of delivery of the City Note
and the Company Note, and, thereafter, as of each day that
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Lloyds Bank California may adjust such Prime Interest Rate.
In the event that Lloyds Bank California shall fail to
establish or publish a Prime Interest Rate, then, for pur-
poses hereof, the Prime Interest Rate shall be deemed to be
the average Prime Interest Rate for each calendar month of
the three (3) largest (total assets) banking institutions in
the continental United States then publishing a prime inter-
est rate.
This Note is issued pursuant to and in accordance
with the terms and conditions of that Project Agreement
among the undersigned, the City, and Lloyds Bank California,
a California Corporation dated as of October 1, 1981, and
may be extended upon the terms and conditions of such Proj-
ect Agreement.
Notwithstanding the foregoing, if the interest on
the City Note becomes subject to federal income taxation
pursuant to an "Official Determination" as that term is
defined below, then the interest rate described above shall
be immediately increased to three percent (3%) per annum
above the Prime Interest Rate, computed as above provided,
and the undersigned forthwith shall pay to the Trustee the
aggregate difference between (1) the monthly payments actu-
ally made to Trustee on this Note from the "Taxable Date,"
as that term is defined below, to the effective date of the
rate increase, and (2) the monthly payments which would have
been made during such period had the interest on this Note
been at the rate of three percent (3%) per annum above the
Prime Interest Rate. Trustee or the Purchaser of the City
Note may protest or contest any "Official Determination."
If an "Official Determination" is protested or contested,
interest and principal shall continue to be payable at an
interest rate of three percent (3%) per annum above the
Prime Interest Rate while such protest or contest is pend-
ing. If such protest or contest is successful (whether by
binding agreement or adjudication) the Trustee shall apply
all interest collected in excess of the Basic Rate in reduc-
tion of the principal hereof, or, if the Purchaser has been
paid principal hereof, or, if the Purchaser has been paid
principal in full, the excess shall be refunded to the
Company. Without in any way limiting the survival of other
provisions of this Note, the undersigned hereby expressly
agrees that the obligations imposed on the undersigned by
this paragraph shall survive payment and discharge of this
Note.
The term "Official Determination" shall mean (and
for all purposes of this Note shall be deemed to have occurred
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as of) a change in the Internal Revenue Code of 1954, as
amended, the issuance of a statutory notice of deficiency or
a ruling by the Internal Revenue Service or a ruling by any
court of competent jurisdiction or any other occurrence the
effect of which is to make the interest payable on the City
Note includable in the gross income of a holder hereof
(except to the extent that such interest is so includable
because the holder is a "substantial user" of the Project or
a "related person" as such terms are defined in Section 103
of the Internal Revenue Code of 1954, as amended).
The term "Taxable Date" shall mean the date as of
which interest payable on the City Note is includable in the
gross income of a holder thereof by reason of an Official
Determination.
All principal, interest, and other amounts payable
hereunder shall be payable in lawful money of the United
States of America which at the time of payment is legal
tender for the payment of public and private debts.
Any interest on this Note not paid when due shall
thereafter bear interest at a rate equal to five percent
(5%) per annum in excess of one-half of the Prime Interest
Rate unless interest becomes taxable to payee, in which case
it shall be calculated 'at five percent (5%) per annum in
excess of payee's Prime Interest Rate. In addition to such
interest, the undersigned promises to pay upon demand all
reasonable late or collection charges incurred by Trustee in
connection with such late payment.
If principal of or interest on this Note is not
paid when due or if default is made under the Deeds of Trust
securing this Note or under the City Note, the Resolution,
or the Project Agreement then or at any time thereafter the
holder of this Note, may, without notice, declare immedi-
ately due and payable all unpaid principal, interest and
charges owing on this Note, and also all unpaid principal,
interest and charges owing on every other note secured by
the Deeds of Trust.
Upon sale, transfer, hypothecation, assignment or
encumbrance, whether voluntary, involuntary or by operation
of law, of all or any part of the properties described in
the Deeds of Trust securing this Note or any interest in
said property, then at its sole option the holder of this
Note may, by written notice to the undersigned, declare all
unpaid principal, interest and charges owing on this Note
in~ediately due and payable, except to the extent that such
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acceleration is prohibited by law. The undersigned shall
notify the holder hereof promptly in writing of any trans-
action or event which may give rise to such right of accel-
eration.
If any attorney is engaged because of any default
hereunder or under the Deeds of Trust securing this Note, or
to enforce any provision of either instrument, then in such
event, the undersigned promises to pay all costs and attor-
neys' fees incurred in connection therewith.
The Maker and endorsers severally waive present-
ment, protests and demand, notice of protest, demand and of
dishonor and nonpayment of this Note, and expressly agree
that this Note, or any payment thereunder, may be extended
from time to time without in any way affecting the liability
of the Maker and endorsers hereof.
The Maker hereof acknowledges and agrees that the
credit worthiness and expertise of Maker in owning, develop-
ing and operating the real property covered by certain Deeds
of Trust of even date herewith which secured this Note is
the basis upon which Payee has determined that it is pro-
tected against impairment of the security and risk of default
and thereby has agreed to lend Maker the principal sum set
forth above. In order to insure the continued credit wor-
thiness and expertise of the owner of said real properties
and in order to allow the holder of this Note an opportunity
to review and evaluate the same, Maker agrees, for itself
and subsequent owners of said real properties, that said
real properties shall not be sold, agreed to be sold, con-
veyed, transferred, assigned, disposed of, or further encum-
bered, whether voluntarily, involuntarily, by operation of
law or otherwise, without the written consent of the holder
hereof being first obtained, which consent shall not be
unreasonably withheld. Any transaction in violation of the
above restrictions shall cause the then outstanding prin-
cipal balance and interest thereon and other sums secured by
said Deeds of Trust, at the option of said holder, to imme-
diately become due and payable.
Notwithstanding any provision hereof to the con-
trary, interest on this Note shall not exceed the maximum
note permitted by law.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that
all acts, conditions and things required by the Constitution
and statutes of the State of California, the Charter of the
city, Ordinance No. 3815, as amended, the Project Agreement
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and the Resolution of Issuance referred to therein to exist,
to have happened and to have been performed precedent to and
in the issuance of this Note, exist, have happened and have
been performed in due time, form and manner as required by
law.
All capitalized terms used herein shall have the
meanings attributed to them in the Project Agreement.
When the identity of the undersigned makes it
appropriate, the singular shall include the plural and the
plural shall include the singular.
The payment of this Note and all interest thereon
is secured by Deeds of Trust, of even date herewith, on real
estate situated in the County of San Bernardino, California,
and this Note is to be construed according to the laws of
California.
TRI-CITY INDUSTRIAL PARK, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
GENERAL PARTNERS
EASTERN PACIFIC FINANCIAL GROUP,
a California Corporation
By
David Doremus, President
VTN CONSOLIDATED, INC., a
California Corporation
By
C. Richard Nelson, President
LILCO FINANCIAL CORPORATION,
a California Corporation
By
L. M. Lilly, III, President
CHARLES GLENN, an Individual
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EXHIBIT "A"
To Deed of Trust
DESCRIPTION
All that certain Real Property situated in the city of
San Bernardino, State of California, described as follows:
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EXHIBIT C
"CITY NOTE"
City of San Bernardino
Industrial Development Revenue Note,
Tri-City Industrial Park, Ltd.
Project, 1981 Series
(Construction Loan)
to Lloyds Bank California,
a California Corporation, Purchaser
, 1981
The City of San Bernardino (hereinafter sometimes
called the "City") a public body, corporate and politic,
organized and existing under, and by virtue of, its Charter
and the laws of the State of California, for value received,
hereby promises to.pay, from the sources of funds herein-
after described, to Lloyds Bank California, a California
Corporation, or order, the principal sum of One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000.00), or
such lesser amount as may be advanced hereunder on
, 1982, upon the presentation and surrender hereof at
the office of Lloyds Bank California, a California Corpora-
tion, 1666 North Main Street, Suite 500, Santa Ana, California
92701, or its successors as trustee (herein called the
"Trustee") under a Resolution of Issuance entitled: "A
Resolution of the Mayor and Common Council of the City of
San Bernardino, California, Constituting its Trust Agreement
and lndenture; Creating a Trust Estate and Making Certain
Provisions Therefor; Authorizing the Issuance of its
Industrial Development Revenue Note, Tri-City Industrial
Park, Ltd. -Project, 1981 Series (Construction Loan), for the
Purpose of Providing Funds for the Construction of Multi-
Tenant lndustrial Buildings; and Making Certain Findings and
Determinations in Connection Therewith," dated as of October 1,
1981 (herein called the "Resolution"), adopted by the Mayor
and Common Council of the City on , 1981, and
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hereby promises to pay on the first' day of each calendar
month on the amounts outstanding for the preceding months
commencing , 1981, interest thereon at the
rate ("Basic Rate") per annum calculated as one-half (1/2)
of the Prime Interest Rate plus three percent (3%). Said
Basic Rate is to be adjusted on the day the Prime Interest
Rate changes and is to be computed on the basis of a 360-day
year, but accrued on the actual number of days elapsed; and
the "Prime Interest Rate" is that rate of interest being
charged by Lloyds Bank California on ninety (90) day unsecured
loans to said Bank's most substantial and most responsible
borrowers as of the date of delivery of the City Note and
the Company Note, and, thereafter, as of each day that
Lloyds Bank California may adjust such Prime Interest Rate.
In the event that Lloyds Bank California shall fail to
establish or publish a Prime Interest Rate, then, for purposes
hereof, the Prime Interest Rate shall be deemed to be the
average prime interest rate for each calendar month of the
three (3) largest (total assets) banking institutions in the
continental United States then publishing a prime interest
rate.
Notwithstanding the foregoing, if the interest on
this Note becomes subject to federal income taxation pursu-
ant to an "Official Determination," as that term is defined
below, the then Basic Rate shall be immediately increased to
three percent (3%) above the Prime Interest Rate, computed
as above provided, and the City forthwith shall pay to the
Trustee the aggregate difference between (1) the monthly
payments actually made on this Note from the "Taxable Date,"
as that term is defined below, to the effective date of the
rate increase, and (2) the monthly payments which would have
been made during such period had the interest on this Note
been at the rate of three percent (3%) above the Prime
Interest Rate as so defined. The Trustee or the holder of
this Note may protest or contest any "Official Determination."
If an "Offical Determination" is protested or contested,
interest and principal shall continue to be payable as if
calculated at an interest rate of three percent (3%) above
the Prime Interest Rate while such protest or contest is
pending. But if such protest or contest is successful the
Trustee shall apply all interest in excess of the Basic Rate
in reduction of the principal hereof, or, if the holder
hereof has been paid principal in full, the excess shall be
refunded and the monthly payments shall be adjusted as if
they had been based on the Basic Rate. without in any way
limiting the survival of other provisions of this Note, the
City hereby expressly agrees that the Obligations imposed
upon it by this paragraph shall survive payment and discharge
of this Note.
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The term "Official Determination" shall mean (and
for all purposes of this Note shall be deemed to have occurred
as of) a change in the Internal Revenue Code of 1954, as
amended, tile issuance of a statutory notice of deficiency or
ruling by the Internal Revenue Service or a ruling by any
court of competent jurisdiction or any other occurrence the
effect of which is to make the interest payable on this Note
includable in the gross income of a holder hereof (except to
the extent that such interest is so includable because the
holder is a "substantial user" of the Project or a "related
person" as such terms are defined in Section 103 of the
Internal Revenue Code of 1954, as amended).
The term "Taxable Date" shall mean the date as of
which interest payable on this Note is includable in the
gross income of a holder of this Note by reason of Official
Determination.
All principal, interest, and other amounts payable
under the terms of this Note are payable in lawful money of
the United States of America which at the time of payment is
legal tender for the payment of public and private debts.
This Note is a special obligation of the City
whose issuance is duly authorized by the City in the prin-
cipal amount of $1,750,000.00 under and pursuant to the
Charter of the City of San Bernardino and the city's Ordinance
No. 3815, entitled "Ordinance of the City of San Bernardino
Relating to the Financing of Projects for the Encouraging of
Increased Employment Within the City and Certain Amendments
Thereto," as now or hereafter amended (herein called the
"Ordinance"), and 'under and pursuant to the Resolution.
A copy of the Resolution is on file at the office
of the City Clerk of the City and at the aforesaid office of
the Trustee, and reference to the Resolution and any and all
supplements thereto and modifications and amendments thereof
and to the Ordinance is made for a description of the
pledges and covenants securing this Note; the nature, extent
and manner of enforcement of such pledges; the rights and
remedies of the holder of this Note with respect thereto and
the terms and conditions upon which the Note is issued and
may be issued thereunder. To the extent and in the manner
permitted by the terms of the Resolution, the provisions of
the Resolution or any document amendatory thereof or supple-
mental thereto, may be modified or amended by the City with
the written consent of the holder of this Note.
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.
This Note is issued by the City pursuant to the
Resolution to fund a construction loan by the Trustee on
behalf of the City to Tri-City Industrial Park, Ltd., a
California Limited Partnership (the "Company"), for the
purpose of financing the cost of constructing and equipping
multi-tenant industrial buildings and improvements thereon
(collectively, the "Project"), under the provisions of a
certain Project Agreement dated as of October 1, 1981, by
and among the City, the Company and the Agent (the "Project
Agreement") and for the purpose of paying necessary expenses
incidental to the Project and to this Note. By the Resolu-
tion, the City has pledged and assigned to the Trustee, as
security for this Note, collateral described in the Resolu-
tion and the Project Agreement.
By the Project Agreement the Company (1) has
agreed to construct and equip the Project; (2) has agreed to
repay the construction loan for the Project made by the City
and evidenced by a Promissory Note secured by Deed of Trust
(herein called the "Company Note"); and (3) has executed and
delivered to the City a Deed of Trust and Assignment of
Rents on the Project securing repayment of the Company Note
and this Note.
Any interest on this Note not paid when due shall
thereafter bear interest at a rate equal to five percent
(5%) per annum in excess of the Prime Interest Rate, unless
interest becomes taxable to payee, in which case it shall be
calculated at five percent (5%) per annum in excess of
payee's Prime Interest Rate. In addition to such interest,
the undersigned promises to pay upon demand all reasonable
late or collection charges incurred by the holder hereof in
connection with such late payment.
If principal of or interest on this Note is not
paid when due or if default is made under this Note or under
the Company Note secured by the Deeds of Trust, the Resolu-
tion or the Project Agreement, the city and Lloyds Bank
California, a California Corporation, of even date herewith,
then or at any time thereafter the holder of this Note may,
without notice, declare immediately due and payable all
unpaid principal, interest and charges owing on this Note,
and also all unpaid principal, interest and charges owing on
the Company Note secured by the Deeds of Trust.
Upon sale, transfer, hypothecation, assignment or
encumbrance, whether voluntary, involuntary or by operation
of law, of all or any part of the property described in the
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Deeds of Trust securing the Company Note or any interest in
said property, then at its sole option, the holder of this
Note may, by written notice to the undersigned, declare all
unpaid principal, interest and charges owing on this Note
immediately due and payable, except to the extent that such
acceleration is prohibited by law. The undersigned shall
notify the holder hereof promptly in writing of any trans-
action or event which may give rise to such right of accelera-
tion.
All capitalized terms used herein shall have the
meanings attributed to them in the Resolution or the Project
Agreement.
This Note shall not constitute a debt or liability
of the City, nor a pledge of the faith and credit of the
City, but shall be payable solely from the Revenues and
other funds, if any, provided therefor in the proceedings
for the issuance of this Note. The issuance of this Note
shall not directly or indirectly or contingently obligate
the City to levy or to pledge any form of taxation whatsoever
therefor or to make any appropriation for its payment.
Nei ther the faith and credit nor the taxing power of the
City of San Bernardino is pledged to the payment of the
principal of or interest on this Note, nor is the City of
San Bernardino in any manner obligated to make any appro-
priation for payment. Neither the Mayor and Common Council
nor any persons executing this Note shall, in any event, be
subject to any personal liability or accountability by
reason of the issuance of such Note. This Note shall be a
special obligation of the city, and the City shall, under no
circumstances, be obligated to pay this Note or Project
costs (other than Administrative Expenses), except from
Revenues and other funds received under the Project Agreement
for such purposes, nor to pay Administrative Expenses except
from funds received under the Project Agreement for such
purposes, or from funds which are made available as otherwise
authorized by law.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that
all acts, conditions and things required by the Constitution
and statutes of the state of California, the Charter of the
City, the Ordinance, and the Resolution to exist, to have
happened and to have been performed precedent to and in the
issuance of this Note, exist, have happened and have been
performed in due time, form and manner as required by law
and that the issuance of this Note, together with all other
indebtedness of the City, is within every debt and other
limit prescribed by law.
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This Note shall not be entitled to any benefits
under the Resolution or become valid or obligatory for any
purpose until it shall have been authenticated by the certi-
ficate of the Trustee endorsed hereon.
IN WITNESS WHEREOF, the City has caused this Note
to be executed in its name by the manual or facsimile signa-
ture of the Mayor and the seal of the City to be affixed
hereon, and attested by the manual or facsimile signature of
its City Clerk all as of the date set forth below.
...
THE CITY OF SAN BERNARDINO
SAN BERNARDINO, CALIFORNIA
,
,
By:
Mayor
(SEAL)
ATTEST:
City Clerk
(Form of Certificate of Authentication)
This Note is one of an issue described in the
Resolution within mentioned.
LLOYDS BANK CALIFORNIA,
a California Corporation,
as Trustee
.- ~
DATED:
By
Authorized Officer
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