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HomeMy WebLinkAbout1982-3602,OD8-9 8/10/82 RESOLUTION NO. 82-360 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO DECLARING ITS ELECTION TO HAVE THE $10,000,000 LIMITATION OF SECTION 103(b)(6)(D) OF THE INTERNAL REVENUE CODE OF 1954, AS AMENDED, APPLIED TO THE ISSUANCE OF AN INDUSTRIAL DEVELOPMENT REVENUE NOTE ISSUED BY SAID CITY PURSUANT TO AN APPLICATION THEREFOR FILED BY DOANE PRODUCTS COMPANY, A MISSOURI CORPORATION, AND DIRECTING THAT A STATEMENT OF SUCH ELECTION BE FILED WITH THE DISTRICT DIRECTOR OF INTERNAL REVENUE FORTH- WITH (DOANE PRODUCTS COMPANY) WHEREAS, there has been filed with the City an Application pursuant to the provisions of Ordinance No. 3815, as amended, of said City, by Doane Products Company, a Missouri corporation, requesting the issuance of an Industrial Development Revenue Note in the principal amount of $4,500,000 (the "Note") for the construction and permanent financing for the construction of a 50,000 square foot manufacturing facility and warehouse for the production of dry pet food as more particularly described in said Application; and WHEREAS, the provisions of Section 103(b)(6)(D) of the Internal Revenue Code of 1954, as amended, and the regulations promulgated and proposed thereunder (the "Regulations") apply to the issuance of such a Note; and WHEREAS, in order that said Note be exempt under the provisions of Section 103(b) of said Internal Revenue Code and said Regulations thereunder as a tax-exempt municipal obligation, it is necessary that the Mayor and Common Council, as the issuing body of said Note on behalf of the City, make an election pursuant to said Section 103(b)(6)(D) in the manner hereinafter set forth. NOW, THEREFORE, THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO DO HEREBY FIND, RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. That recitals set forth hereinabove are true and correct in all respects. - 1 - Section 2. That the Mayor and Common Council, acting for and on behalf of the City of San Bernardino, hereby make this election pursuant to the provisions of said Section 103(b)(6)(D) of said Internal Revenue Code and the Regulations promulgated thereunder, that the limitation as set forth therein be declared to be a limitation of $10,000,000 rather than $1,000,000 as otherwise set forth therein. Section 3. That in the documents pertaining to the issuance of such Note in the manner and for the project described in the recitals hereof, there shall be requirements that the Applicant set forth the "capital expenditures" which said Applicant has made for facilities and projects of said Applicant or any related persons within the City within a period of three (3) years prior to the issuance date of the Note referred to hereinabove; and further that said Applicant be required to report such capital expenditures on all such income tax returns to be filed by such Applicant henceforth; and such requirements shall be set forth as covenants and agreements of said Applicant made to and with the City of San Bernardino. Section 4. That the City Clerk is hereby authorized and directed to file a certified copy of this Resolution with the District Director of the Internal Revenue Service in Fresno, California. 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 16th day of August , 1982, by the following vote, to -wit: AYES: Councilmen Castaneda, Reilly, Hernandez, Ouiel. Strickler _ NOES: None ABSENT: Council Member Hobbs ABSTAIN: None Cit. Clerk IPM The foregoing resolution is hereby approved 1 o^ day of August , 1982. Approved as to form: City Att rney ivrayer ofe San Berns rdii -3- - - �-: , 11 - - r -�e ice. 11DETELOPISIT IGENCT OF iNf C119 OF SRO BEROHRUInO, CNIIFOR�Ifl MEMBERS W. R. "BOB" HOLCOMB. CHAIRMAN CITY HALL ROBERT A. CASTANEDA 300 NORTH "D" STREET. RM 320 ANN BOTTS SAN BERNARDINO. CALIFORNIA JACK REILLY 92418 JOHN D. HOBBS O PHONE: (714) 383-5081 JACK STRICKLER August 18, 1982 RALPH HERNANDEZ GARY VAN OSDEL EXECUTIVE DIRECTOR GLENDA SAUL DEPUTY DIRECTOR District Director Internal Revenue Service Center Fresno, California 93888 Gentlemen: On behalf of the City Clerk of the City of San Bernardino, enclosed please find City of San Bernardino Resolution No. 82-360, adopted on August 16, 1982, declaring its election to have the $10,000,000 limitation of Section 103(b)(6)(D) of the Internal Revenue Code of 1954, as amended, applied to the issuance of the following Industrial Development Bond Issue: (1) The name and addres of governmental unit -- City of San Bernardino City Hall 300 North "D" Street San Bernardino, California 92418 (2) The name, address and employer identification number of principal user or users of such proceeds for the facilities -- Doane Products Company, a Missouri corporation Employer identification number - 44-0536767. (3) The date and face amount of the issue -- $4,500,000 City of San Bernardino Industrial Development Revenue Note of 1982, Doane Products Company Project, to be issued on or about August 30, 1982. (4) The date and amount of any outstanding issues the proceeds of which have been or will be used primarily with respect to facilities the principal user or users of which are or will be the same or related persons as those listed in (2) above, and which are located in the same incorporated municipality or in the same county (outside of the incorporated municipalities in such county) -- No outstanding issues. (5) The date and amount of any Section 103(bX6)(D) capital expenditures paid or incurred within the three (3) years preceding the date of the issue for which the election is made with respect to facilities described in (4) above are: The only expenditures incurred by the corporation herein designated are those directly related to the acquisition and construction of the Project for which the Industrial Development Bonds shall be issued, i.e. $4,500,000, plus approximately $300,000 for land acquisition and for costs and expenses not otherwise financed from the proceeds of the Industrial Development Bonds. Vep truly yours, i f / Gary/an Osdel Executive Director encls. cc: City Clerk, City of San Bernardino Timothy J. Sabo, Esq. Doane Products Company 2,008-5/SB4 8/10/82 $4,500,000 PROJECT AGREEMENT BETWEEN THE CITY OF SAN BERNARDINO CALIFORNIA AND DOANE PRODUCTS COMPANY, A MISSOURI CORPORATION WITH ALLIED BANK OF TEXAS AND FIRST NATIONAL BANK AND TRUST COMPANY OF JOPLIN AS PURCHASER IN CONNECTION WITH $4,500,000 CITY OF SAN BERNARDINO INDUSTRIAL DEVELOPMENT REVENUE NOTE OF 1982, DOANE PRODUCTS COMPANY PROJECT (SMALL ISSUE EXEMPTION - $10,000,000 MAXIMUM) Dated as of August 1, 1982 The interest of the City of San Bernardino, California, in this Project Agreement and the Company Note attached hereto, is hereby assigned by the City to_____ _________, a Corporation, as Trustee, for the holders of the City Notes pursuant to the Resolution of Issuance of said City, and is subject to the security interest of , a Corporation, as Trustee. Project Agreement Parties Recitals Section 1.01 PROJECT AGREEMENT TABLE OF CONTENTS ARTICLE I DEFINITIONS Definitions 2,008-6/SB3 8/10/82 Page 1 1 3 ARTICLE IV FUNDING OF THE LOAN Section 4.01 ARTICLE II 17 ACQUISITION AND CONSTRUCTION OF THE PROJECT Disbursement of Loan Proceeds Section 2.01 Construction of the Project 12 19 ARTICLE III The Trustee 19 THE LOAN Disbursement Procedure Section 3.01 The Loan 12 Section 3.02 Company Note and City Notes 13 Section 3.03 Acceleration of Loan 14 Section 3.04 Security 14 Section 3.05 Incorporation of Terms 14 Section 3.06 Prepayment of the Note 14 Section 3.07 Place of Payments 16 Section 3.08 Conditions Precedent 16 ARTICLE IV FUNDING OF THE LOAN Section 4.01 Application of Note Proceeds 17 Section 4.02 Disbursement of Loan Proceeds 17 Section 4.03 Expenditure of Funds 19 Section 4.04 The Trustee 19 Section 4.05 Disbursement Procedure 20 Section 4.06 Trust Funds 21 (i) ARTICLE V DAMAGE, DESTRUCTION AND CONDEMNATION Section 5.01 No Abatement of Payments 22 Section 5.02 Proceeds of Insurance or Condemnation 22 ARTICLE VI REPRESENTATIONS AND WARRANTIES Section 6.01 Organization, Powers, etc. 23 Section 6.02 Execution of Project Agreement and Other 28 Section 8.03 Documents 23 Section 6.03 Title to Properties 23 Section 6.04 Litigation 23 Section 6.05 Design of Project 23 Section 6.06 Payment of Taxes 24 Section 6.07 Description of the Project 24 Section 6.08 No Defaults 24 Section 6.09 No Material Adverse Change 24 Section 6.10 Important Inducement 24 Section 6.11 Obligations of the Company 24 Section 6.12 No Untrue Statements 24 Section 6.13 No Outstanding Industrial Revenue Bonds 25 Section 6.14 Limitation on Expenditures 25 Section 6.15 Limitations on Use of Proceeds 26 Section 6.16 Tax Treatment of Project 26 Section 6.17 Not to Make the City Notes Taxable 26 Section 6.18 Operation of Project 26 Section 6.19 No Conflict of Interest 27 ARTICLE VII CONDITIONS OF LENDING Section 7.01 Opinion of Counsel for the Company 27 Section 7.02 Opinion of Bond Counsel 27 Section 7.03 Other Documents, etc. 27 ARTICLE VIII COVENANTS Section 8.01 Payment of Secured Obligations 28 Section 8.02 Preservation and Defense of Property 28 Section 8.03 General Provisions Concerning Insurance 28 Section 8.04 Insurance Required 29 Section 8.05 Payment of Taxes, etc. 30 Section 8.06 Payment of Utilities 31 Section 8.07 Concerning the Project 31 Section 8.08 Compliance with Code 32 00 Section 8.09 Compliance with Applicable Laws 32 Section 8.10 Financial Statements 33 Section 8.11 Special Covenants 33 Section 8.12 Indemnification 36 Section 8.13 Certificate of No Default 36 Section 8.14 Inspection of the Project 37 Section 8.15 Indebtedness of Company 37 Section 8.16 Duties in Case of Breach of Convenant 37 Section 8.17 Pursuit of Remedies 37 Section 8.18 Assumption of Loan 37 Section 8.19 Assignment of Documents and Materials 37 ARTICLE IX DEFAULTS AND REMEDIES Section 9.01 Event of Default 38 Section 9.02 Remedies 39 Section 9.03 No Remedy Exclusive 40 Section 9.04 Agreement to Pay Attorneys' Fees and Expenses 40 Section 9.05 No Additional Waiver Implied by One Waiver 41 Section 9.06 Repayment After Acceleration 41 F.'"t 1191RAK/ MISCELLANEOUS Section 10.01 Notices 41 Section 10.02 Effect of Agreement 42 Section 10.03 Amendment 42 Section 10.04 Counterparts 42 Section 10.05 Severability of Provisions 42 Section 10.06 Construction 42 Section 10.07 Assignment to Trustee 42 EXHIBITS Exhibit. A Form of Company Note Exhibit B Form of Deed of Trust Exhibit. C Legal Description of Land Exhibit D Form of Title Insurance Policy Exhibit E (Reserved) Exhibit F Schedule of Performance Exhibit G Detailed Budget Exhibit H Final Plans and Specifications 2,008-4/SB4 8/10/82 PROJECT AGREEMENT PARTIES: THE CITY OF SAN BERNARDINO, CALIFORNIA, a municipal corporation organized and existing under the laws of the State of California and the City Charter of said City (the "City"); DOANE PRODUCTS COMPANY, duly formed and existing under the laws of the State of Missouri (the "Company"); ALLIED BANK OF TEXAS, a Texas banking corporation and FIRST NATIONAL BANK AND TRUST COMPANY OF JOPLIN, a national banking association (collectively referred to herein as the "Purchasers"); and , a corporation, as Trustee (the "Trustee"). Dated as of August 1, 1982. RECITALS: WHEREAS, the City is a public body, corporate and politic, duly organized and existing under the laws of the State of California and the City Charter of said City; and WHEREAS, the City has adopted its 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 amend- ments thereto (collectively referred to as the "Ordinance"); and WHEREAS, the Ordinance is intended to provide a means for financing the development of industry and commerce and to thereby 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 financ- ing of certain capital improvements and improvements to land as authorized by the Ordinance, and on July 15, 1982, the Mayor and Common Council of the City have adopted a Resolution approving the same and making the necessary determinations, in a certain Resolution No. 82-299 as said Application was amended on August 16, 1982, by Resolution No. ; and WHEREAS, pursuant to and in accordance with the provisions of the Ordinance, the Company proposes to finance the construction of a manufacturing facility and warehouse for the production of dry pet food with the proceeds of a loan to be evidenced by this Project Agreement (the "Project Agreement"); and the City intends to finance the cost of the Project by the issuance of special revenue notes of the City under a Resolution dated of even date herewith (the "Resolution of Issuance"); and WHEREAS, two City Notes will Resolution of Issuance and will be secured by the City under this Project Agreement; and - 1 - be issued to the purchasers under the a pledge of the Revenues derived by WHEREAS, this Project Agreement and the Resolution of Issuance to which it pertains have in all respects been duly and validly authorized by 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 neces- sary to finance the cost of the Project, including necessary expenses incidental thereto, will require the issuance, sale and delivery of the City Notes pursuant to the Ordinance in the principal amount set forth in the Resolution of Issuance; and WHEREAS, all things necessary to make the City Notes, 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 from this Project Agreement to the payment of the principal of and interest on the City Notes and a valid assignment and pledge of the rights of the City under this Project Agreement have been done and performed, and the creation, adoption, execution and delivery of the Resolution of Issuance, and the creation, execution, delivery and issuance of the City Notes, subject to the terms hereof, have in all respects been duly authorized. WITNESSETH: For and in consideration of the mutual promises and agreements herein contained the parties hereto agree as follows: - 2 - ARTICLE I Definitions Section 1.01 Definitions The following terms shall, for all purposes of this Agreement, have the following meanings unless the context shall clearly require some other meaning: Accountant's Certificate means an opinion signed by a firm of certified public accountants approved by the City. Administrative Expenses means the reasonable and necessary expenses incurred by the City in the administration of the Project Agreement, the Resolution of Issuance and the Financing of the Project. A enc means the Redevelopment Agency of the City of San Bernardino, a public body, corporate and politic. Annual Debt Service on the Note means the total amount of principal and interest payable on the Company Note for any Bond Year after the computa- tion is made. Authorized Newspapers means a financial paper, or a newspaper of general circulation in the City of Los Angeles, California, or Houston, Texas, and the Daily Bond Buyer or other financial paper or newspaper circulated in the City and State of New York, each of which is published at least once a day for at least five (5) days (other than legal holidays) in each calendar week, and is printed in the English language. Authorized Officer means the Mayor, Secretary -Treasurer of the Agency or any other person authorized by resolution of the City to perform the act or sign the document in question. Bank means Alllied Bank of Texas, a state bank chartered under the laws of the State of Texas. Bond Counsel means the Law Offices of Timothy J. Sabo or other attorney or firm of attorneys of favorable reputation in the field of municipal finance. Bondholder or Holder or Holders of Bonds or any similar term, means any person who shall be the registered owner of any Outstanding City Note or Notes or his duly authorized attorney, trustee, representative or assigns on the City Notes. Bond Year means the twelve (12) month period commencing on August 1, 1982 and on each August 1 thereafter. Business Day means a day on which banking business is transacted in the city in which the Bank has its principal corporate trust office. Cash Flow means net income after taxes, plus depreciation and amortization for each fiscal year throughout the term hereof, calculated in - 3 - accordance with generally accepted accounting principles consistently applied. Certificate of Net Revenues means an Accountant's Certificate show- ing as of any particular date: (1) in each and every year the City Notes are Outstanding the actual amount of Net Revenues received in such Bond Year and the Maximum Annual Debt Service on the Company Note in the amount of $4,500,000 as a part of this Project Agreement; (2) in such Bond Year, the difference between (i) Maximum Annual Debt Service on the Company Note referred to in (1) above, and (ii) the actual Net Revenues received; (3) the ratio of Net Revenues to Maximum Annual Debt Service on the Company Note referred to in (1) above. City means the City of San Bernardino, or any body, authority, agency, or other entity which shall hereafter succeed to the powers, duties and functions of the City. City Note or Notes means any or all City Notes authorized and issued under the Resolution of Issuance. City Note Proceeds means all amount received by the City upon the sale or other disposition of the City Notes issued under the Resolution of Issuance. Company means Doane Products Company, a Missouri corporation, duly formed and existing under the laws of the State of Missouri, and authorized and permitted to transact business in the State of California, or any entity which is the surviving, resulting or transferee entity in any merger, consolidation or transfer of assets or its successors and assigns. Company Note or Note means the note executed by the Company evidencing the obligation of the Company for the amount of the loan from the City, secured by the Deed of Trust, and substantially in the form attached hereto as Exhibit "A". Company Representative means the person or persons at the time designated to act on behalf of the Company by written certificate furnished to the Agency and to the Bank and containing the specimen signature of such person or persons. Conflict of Interest means an interest which constitutes a conflict of interest as applied to public officials, public officers and employees in the City and the State. Costs of Issuance means items of expense payable or reimbursable directly or indirectly by the City and related to the authorization, sale and issuance of City Notes, which items of expense shall include but not be limited to, printing costs, costs of reproducing and binding documents, filing and recording fees, initial fees and charges of the Bank, insurance premiums, City Note discounts, legal fees and charges, professional consultants' fees, fees and charges -4- for execution, transportation and safekeeping of City Notes, and other costs, charges and fees in connection with the foregoing. Counsel means an attorney or firm of attorneys (who may be of counsel to the City or the Company, or retained by the City or the Company in other connections as the context may require), licensed to practice in the State in which said attorney or firm maintains an office, selected by the City and satisfactory to the Bank. Counsel's Opinion means an opinion signed by Counsel. Any Opinion of such 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, upon a certificate or opinion of, or representation by, an officer or officers of the City or Company, unless such Counsel knows, or in the exercise of reasonable care should have known, that the certificate or opinion or representation with respect to the matters upon which his opinion may be based, as aforesaid, is erroneous, incomplete or misleading. County Recorder means the County Recorder of the County of San Bernardino, California. Current Assets means as of the date of determination thereof, the following assets Company: (i) cash and cash items in any bank or trust company, on hand and in transit, (ii) inventories, stated at the lower of cost of fair market value, (iii) investments maturing in one (1) year or less from the date of any determination stated at the lower of cost or current fair market value, (iv) cus- tomer accounts, bills and notes receivable, (v) fixed assets held for sale with respect to which bona fide commitments to the Company for purchase within twelve (12) months exist, NO prepaid interest, taxes and other prepaid expenses which, in accordance with generally accepted accounting principles, would be included in current assets, all after deduction of appropriate reserves in accord- ance with generally accepted accounting principles, and (vii) such other tangible assets (but excluding investments other than those described in clause (iii) above and excluding real property in process of development for sale other than property described in clause (v) above) as, in accordance with generally accepted accounting principles, would be included in current assets (but excluding in any case fran- chises, licenses, permits, patent applications, copyrights, trademarks, trade names, goodwill, experimental and organizational expense and other intangibles). Current Liabilities means as of the date of determination thereof, of the Company i all Indebtedness payable on demand or maturing within one (1) year from the date of determination and which is not renewable or extendable at the option of the debtor, under a revolving credit agreement or otherwise, to a date more than one (1) year from the date of creation thereof, (ii) final maturities, prepayments and sinking fund payments required to be made within one (1) year after said date in respect of any Indebtedness (including the Company Note), (iii) accounts, bills and notes payable and (iv) all other items (including taxes accrued as estimated) which in accordance with generally accepted accounting principles would be included as current liabilities. Debt Service means all amounts of the current principal portion of long-term indebtedness of any person due or to become due during each fiscal year throughout the term hereof, calculated in accordance with generally accepted accounting principles consistently applied. -5- Deed of Trust means the Deed of Trust executed by the Company as trustor in favor of the City as beneficiary given to secure the payment of the Loan and creating a first and prior lien on the property on the form attached hereto as Exhibit "B". Determination of Taxability means any determination, decision or decree made with regard to Section 103 of the Internal Revenue Code of 1954, as amended and then in effect, by the Commissioner or any District Director of the Internal Revenue Service or by any court of competent jurisdiction that interest on the City Notes is includable in the gross income of the holder of the City Notes (other than a holder who is a substantial user or related person as defined in the Internal Revenue Code of 1954, as amended). A Determination of Taxability shall be deemed to have occurred on the first to occur of the following: (i) on the date when the Company files (in compliance with its obligations under this Project Agreement) any statement, supplemental statement or other tax schedule, return or document (whether pursuant to Income Tax Regulations Section 1.103-10(b)(2)(vi)(c), as the same may be amended or supplemented, or otherwise) which discloses that an Event of Taxability shall have in fact occurred; or (ii) on that date when the Company shall be advised in writing by the Commissioner or any District Director of the Internal Revenue Service that, based upon any filings of the Company under this Project Agreement, or upon any review or audit of the Company, or upon any other ground whatsoever, an Event of Taxability shall have occurred; or (iii) on that date when the Company shall receive notice from the Trustee or the Bank in writing that the Trustee or the Bank has been advised by (A) any holder of the City Notes that the Internal Revenue Service has assessed as includable in the gross income of such holder the interest on the City Notes due to the occurrence of an Event of Taxability, or (B) the Commissioner or any District Director of Internal Revenue that the interest on the City Notes is includable in the gross income of any taxpaying holder of the City Notes due to the occurrence of an Event of Taxability; or (iv) on that date when the Company shall receive notice from the Trustee or any holder of the City Notes that such holder of the City Notes has filed a federal income tax return including, in good faith, in the gross income of such holder of the City Notes any interest in the City Notes held by such holder of the City Notes; provided, however, that no Determination of Taxability shall occur unless the Company (who shall agree to pay all expenses in connection therewith and to indemnify the holders of the City Notes in connection therewith) has been afforded the opportunity, at its expense, to contest any such assessment and, further, no Determination of Taxability shall occur until such contest, if made, has been finally determined; provided that if such contest has not been abandoned or finally determined within two (2) years of the event described in clauses (ii), (iii) or (iv) which forms the basis for the Determination of Taxability in question, then such Determination of Taxability shall be deemed to have occurred two (2) years after the date of such event. - 6 - Event of Taxability means the occurrence of any event, whether within or without the control of the Company, including the imposition of a minimum tax on income of the holder of the City Notes, which has the effect of causing all or any portion of the interest payable on the City Notes to become includable in the gross income for federal income tax purposes of the holder or former holder of the City Notes (other than a holder or former holder who is a "substantial user" of the Project or a "related person" as such terms are used in Section 103(b)(10) of the Code). Facilities means the approximately 50,000 square foot manufacturing facility and warehouse for the production of dry pet food to be located in the State College Industrial Park at the western end of Lexington Way, on the south side facing Lexington Way, San Bernardino, California, to be constructed by the Company and all machinery, equipment and other personal property located therein. Financing means the lending of moneys or any other thing of value for the purpose of facilitating construction pursuant to the Ordinance and includes the making of Loans in connection with newly constructed structures. Fiscal Year means any twelve (12) consecutive calendar months com- mencing with the first day of July and ending on the last day of the following June. Fund or Account means a Fund or Account that may have been or as may be hereafter created by or pursuant to the Resolution. Guaranty means the Guaranty Agreement dated as of August 1, 1982, from the Company to the Trustee. Hazard and Liability Insurance means insurance, issued by a person qualified to issue such insurance in the State which provides coverage at least equal to that provided in connection with commercial developments similar to the Project to be acquired and operated by the Company. Such insurance shall include, but not be limited to (i) comprehensive public liability insurance with respect to the Project in minimum amounts of $1,000,000 for death or bodily injury in connection with each occurrence and $100,000 for property damage in connection with each occurrence or such greater amounts as may from time to time be required by the Federal National Mortgage Association in connection with loans for projects similar to the Project; (ii) insurance against loss or damage by fire and any of the risks covered by insurance of the type known as "fire and extended coverage" for an amount not less than the greater of the replacement cost of the Project or the aggregate principal amount of the City Notes Outstanding; and (iii) insurance against loss or damage due to floods for an amount not less than the replacement cost of the Project if the Project shall at any time hereafter be located in an area designated by the Department of Housing and Urban Develop- ment as a flood hazard zone. The premiums on Hazard and Liability Insurance shall be paid by the Company. Indebtedness means all items (other than capital stock, capital surplus and retained earnings) which, in accordance with generally accepted accounting principles, would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date on which Indebtedness is to be determined. "Indebtedness" shall also include, whether or not so reflected, (i) indebtedness, obligations and liabilities secured by any mortgage, pledge or lien -7- existing on property owned subject to such mortgage, pledge or lien, whether or not the indebtedness secured thereby shall have been assumed, (ii) obligations under capital leases and (iii) all guaranties. "Indebtedness" shall not include (a) any indebtedness evidences of which are held in treasury (but the subsequent resale of such indebtedness shall be deemed to constitute the creation thereof) or (b) any particular indebtedness if, upon or prior to the maturity thereof, there shall have been deposited with the proper depository, in trust, moneys (or evidences of such indebtedness as permitted by the instrument creating such indebtedness) in the necessary amount to pay, redeem or satisfy such indebtedness. Independent when used with terms defining any professional, means any person or firm, respectively, appointed by the City or the Company, as the case may be, in such capacity, and who, 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 domination of the City or Company, as the case may be; and (2) is not connected with the City or the Company, as the case may be, as an officer or employee of the City or the Company, as the case may be, but who may be regularly retained to make reports to the City or the Company, as the case may be. Interest Payment Date means each date on which interest on the City Notes is required to be paid by the terms of the Resolution. Interest Requirement means, as of any particular date of calculation, the amount equal to any unpaid interest then due plus an amount equal to the interest to become due on the City Notes on the next succeeding Interest Payment Date. Issue Date means the date of the City Notes specified and determined in accordance with the Resolution. Land means the Land (sometimes referred to as "Site" or "Property"), upon which the Project is to be constructed by the Company, described on Exhibit "C" and on the Title Insurance Policy attached hereto as Exhibit "D" and which will be subject to the lien of the Deed of Trust and the Resolution of Issuance. Loan means an interest-bearing obligation made for the purpose of Financing oT the Project and secured by a Deed of Trust on the Project and such other security arrangements described herein and in the Company Note. Maintenance and Operating Expenses means all costs and expenses of operating the Project as a manufacturing facility and warehouse for the production of dry pet foods, including (1) the cost of all utilities, taxes and assessments, if any, of any type or character levied at any time during the term of this Agreement upon the Project or upon the operation of the Project; (2) the premiums on all insurance required or permitted under this Agreement; (3) the cost of keeping the Project free and clear of all liens, charges and encumbrances; (4) all costs of maintaining the Project in proper order and repair; and (5) the amount of any replacement or repair reserves required hereunder. -8- Maximum Annual Debt Service on the Note means the largest amount of Debt Service on the $4,500,000 Company Note pursuant to this Project Agreement payable in any Bond Year. Net Proceeds, when used with respect to any insurance proceeds from policies required to be maintained by the Company and by this Project Agreement, means the amount remaining after deducting from gross proceeds all expenses (including attorney's fees) incurred in the collection thereof. Net Revenues means all revenues excluding all insurance revenues or sale proceeds received by the Company including all payments by tenants with respect to the Project less Maintenance and Operating Expenses. Officer's Certificate means a certificate of the City signed by an Authorized Officer and filed with the Trustee. Ordinance means Ordinance No. 3815 of the City of San Bernardino entitled "Ordinance of the City of San Bernardino Relating to the Financing of Projects for the Encouraging of Increased Employment Within the City" and all amendments thereto. Outstanding, when used with reference to the City Notes, means, as of any particular date, the aggregate amount of the City Notes authenticated and delivered under the Resolution of Issuance except: (1) the amount of such City Notes for the payment of which cash shall have been therefore deposited in trust; and (2) the amount of such City Notes otherwise deemed to be paid in accordance with the Resolution of Issuance. Permitted Encumbrances means and includes: (a) Mechanics', materialmen's, workmen's, vendor's or other undeter- mined liens and charges incident to construction or maintenance provided that the same shall be discharged in the ordinary course of business or the amount or validity of the same shall be contested in good faith as provided herein with any pending execution thereof appropriately stayed; (b) The lien of taxes and assessments which are not delinquent; (e) The lien of taxes and assessments which are delinquent but the validity of which is being contested in good faith and with respect to which the Company shall have set aside adequate reserves unless thereby any of the Project or the interest of the Company therein may be in danger of being lost or forfeited; (d) The lien of the Deed of Trust; (e) With regard to the Site, those certain exceptions, restrictions, easements, licenses, rights-of-way and other encumbrances recited in Exhibit "D" hereto; (f) Such minor defects, irregularities, encumbrances, exceptions, restrictions, easements, licenses, rights-of-way and clouds on title as normally -9- exist with respect to properties similar in character to the Project and as do not impair the use or the operation of the Facilities or otherwise diminish or impair the security intended to be afforded by the Deed of Trust. Permitted Investments means any of the following which at the time are legal investments for the City under the laws of the State, and to the extent provided by law, for the moneys held hereunder and proposed to be invested therein: (i) time or demand deposits in, or other banking arrangements with any bank including the Bank or trust company having aggregate capital and surplus of at least $50,000,000 and authorized to accept deposits of public funds , which are secured at all times by bonds or other obligations which are authorized by law as security for public deposits, of a market value at least equal to the amount required by law; (ii) evidences of indebtedness, obligations for which the full faith and credit of the United States are pledged for the payment of principal and interest; (iii) obligations, participations, or other instruments of, or issued by, or fully guaranteed as to principal and interest by, FNMA, or issued by a federal agency or a United States Government sponsored enterprise; (iv) evidence of indebtedness of corporations authorized by the provisions of Section 1364 of the California Financial Code provided such indebtedness is rated, or is on a parity with obligations that are rated "AA" or better by a nationally recognized rating agency; (v) repurchase agreements secured by any of the obligations referred to in (ii), (iii) or (iv) above or bonds or obligations which are authorized by law as security for public deposits. Person includes any individual, corporation, governmental entity, part- nership, joint venture, business association, estate or other organization or entity. Plan means any plan subject to Title IV of ERISA and maintained by the Company or any subsidiary of any such plan to which the Company is required to contribute on behalf of its employees. Prepayment means any amount received or recovered which reduces or eliminates the principal amount of the Loan other than scheduled amortization payments of the principal amount of the Loan, including any prepayment penalty, fee, premium or other such additional charge. Prime Rate means the prime commercial lending rate per annum as announced by the Bank at its principal office in Houston, Texas, as in effect from time to time. In the event that the Bank shall fail to establish or publish a "Prime Rate," then, for purposes hereof, the "Prime Rate" shall be deemed to be the average Prime Rate for the three (3) largest (total assets) banking institutions in the continental United States then publishing a prime rate. Principal Installment means with respect to any particular Principal Installment Date, an amount equal to the aggregate principal amount payable on the City Notes. Principal Installment Date means the date on which Principal Install- ments are required to be made pursuant to the Resolution. Principal Office, when used with respect to the Bank, means the principal or corporate trust or head or principal trust office of the Bank situated in the city in which the Bank is described as being located. - 10 - Principal User means any principal user of the Project within the meaning of Section 103 of the Internal Revenue Code. The Company represents that as of the effective date of this Agreement, the Company is the only Principal User of the Project within the meaning of Section t03 of the Internal Revenue Code. Proceedings means the actions taken by the City in undertaking, carrying out and completing the Project, including, without limitation, this Project Agreement, the Resolution of Issuance, the Company Note, the City Notes, the Deed of Trust and any and all other agreements and documents involved in the issuance, sale, delivery of the City Notes, the security therefor and the expendi- ture of the City Note Proceeds. Project means the Facilities and the Land. Project Agreement means this Agreement among the City, the Pur- chasers, the Company and the Trustee whereby the City, through the Trustee, agrees to make a loan to the Company for the construction and permanent financing of the improvement of land and depreciable property constituting the Project. Property means the parcels as more particularly described in Exhi- bit "C" hereto. Resolution or Resolution of Issuance means the Resolution of Issuance, being Resolution No. , approved by the City providing for the issuance and sale of the City Notes as approved by the City on August 16, 1982. Resolution of Preliminary Approval means that certain Resolution No. 82-299, adopted by the Mayor and Common Council on July 15, 1982. Revenues mean all payments and other income derived by the City from the Company or its legal successor in interest, if any, under this Project Agreement, to wit, payments made directly to the Bank under the Company Note, but does not include receipts designated to cover Administrative Expenses. Site has the same meaning as the Land. State means the State of California. Subordinated Indebtedness means Indebtedness of a Person which, by the express terms of the instrument evidencing or creating such Indebtedness or by the terms of a subordination agreement in form and substance satisfactory to the holders of 66-2/3% in aggregate principal amount of the City Notes Outstanding, it validly and effectively made subordinate and subject right to payment, to whatever extent the holders of 66-2/3% in aggregate principal amount of the City Notes Outstanding may require, to the prior payment of the Company Note and the City Notes. Supplemental Resolution means a resolution supplemental to or amen- datory of the Resolution duly adopted by the City in accordance with the terms of the Resolution. - 11 - Tangible Net Worth means at any time, the total assets of a Person less the total liabilities of such Person set forth on its balance sheet at such date, prepared in accordance with generally accepted accounting principles consistently applied, plus Subordinated Indebtedness of such Person, except that the sum of the following shall be excluded therefrom (i) goodwill, (ii) any amounts by which investments in Persons appearing on the asset side of such balance sheet exceed the proportionate share of the Person and its subsidiaries in the book value of the assets of such Persons and, (iii) patents, trademarks, copyrights, deferred charges (including, but not limited to, unamortized discount and expenses, organizational expenses, experimental and developmental expenses, but excluding prepaid ex- penses), intangibles and other similar assets. Treasurer means the officer who is then performing the functions of Treasurer of the City. Trustee means the bank appointed as Trustee pursuant to this Project Agreement, for and on behalf of the holders of the City Notes. Working Capital at any date, means the excess of the Current Assets of a Person at such date over the Current Liabilities of a Person at such date. Written Requisition means a requisition prepared in such form or forms and signed by the Treasurer and containing the information required by this Project Agreement. ARTICLE H ACQUISITION AND CONSTRUCTION OF THE PROJECT Section 2.01. Construction of the Project. The parties hereto agree that the Company has acquired the Land, which is (is not) to be financed hereunder, and will cause the Facilities to be constructed on the Land so that the same constitutes the Project, all in compliance with the Ordinance. The Facilities will be constructed in accordance with the Schedule of Performance attached hereto as Exhibit "F". The Facilities shall also be constructed in accordance with the plans and specifications therefor (the "Plans and Specifications") which shall have been approved by the Bank. Any changes in the Plans and Specifications affecting the value of the Project by more than $10,000 shall be approved by the Bank. ARTICLE III LOAN Section 3.01. The Loan. The City agrees, upon the terms and subject to the conditions herein- after set forth, to make a loan to the Company through the Purchasers in the principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000 ) (the - 12 - "Loan") for the purpose of providing construction and permanent financing of the Project. Upon the sale and delivery of the City Notes to the Purchasers, the full amount of the proceeds of the Loan shall be deposited with the Trustee and disbursed in accordance with Article IV hereof. Section 3.02. Company Note and City Notes. The Loan shall be evidenced by the Company Note. The Company Note shall mature at such times and in such amounts to provide for the payment in full, when due, of all principal of, premium, if any, and interest in the City Notes. The City Notes and, therefore, the Company Note shall bear interest at a variable rate equal to sixty-five percent (65%) of the Prime Rate, calculated daily, provided, however, that such rate shall never be less than eight and three quarters percent (8-3/4%). Interest on the City Notes and, therefore, the Company Note shall be payable monthly on the first day of each month, with the first interest payment to be made on October 1, 1982. The City Notes and, therefore, the Company Note shall mature, subject to the prepayment provisions of Section 3.06 hereof in one hundred eighty (180) equal monthly installments of $25,000 each commencing, 1, 1983 and ending 1, 1998. With respect to any payment of principal and interest not made on or prior to the day the date such payment is due, the Company shall pay a late charge equal to the Prime Rate plus two percent (2%) of such amount. The amount of interest on the City Notes and, therefore, the Company Note deemed payable on each Interest Payment Date shall be computed in accordance with this paragraph. Seven (7) days before each Interest Payment Date prior to the last Interest Payment Date, the Bank shall compute the amount of interest to be due and payable on such Interest Payment Date based on the Prime Rate in effect on each day included in the related interest payment period. However, the amount of interest to be due and payable in respect of the remaining days of such interest payment period shall be estimated by using the Prime Rate in effect on the date of such calculation period. Any difference between the amount of interest due and payable in respect of such remaining days as subsequently computed based on the Prime Rate in effect on each day, shall be credited or debited, as the case may be, against the amount of interest due and payable on the Interest Payment Date. Seven (7) days before each such Interest Payment Date, the Bank shall send to the Company by mail notice of the amount of interest so computed by the Bank when due based on the Prime Rate in effect on each day included in the related period, plus any credit or minus any debit due to the computation of interest due on the next preceding date when interest was paid. Interest shall be computed under this paragraph on the basis on a 360 -day year and/or 30 -day months (regardless of the actual number of days in each month), and the interest rate shall be calculated to four (4) decimal places. The Company shall be absolutely and unconditionally obligated to pay all installments of principal and interest on the Company Note without any defense or set-off by reason of any default by any suppliers or tenants or under any other agreement between the Company and the City or for any other reason, including without limitation, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Project, commercial frustration of purpose, or failure of the City to perform and observe any agreement, whether express or implied or any duty, liability or obligation arising out of or connected with this Project Agreement. -13- Section 3.03. Acceleration of Loan. Upon the occurrence of an Event of Default, as provided in Article IX hereof, the holders of at least 66-2/3% of the aggregate principal amount of the City Notes and the Company Note Outstanding may declare the principal of and all accrued interest on the Loan to be immediately due and payable without notice and such principal and interest shall become immediately due and payable. Section 3.04. Security. Upon funding of the Loan pursuant to Section 4.02 hereof, the Company Note shall be secured by (i) the Deed of Trust, which Deed of Trust, when recorded in the office of the County Recorder, shall constitute a first lien on the Project; (ii) the Guaranty; and (iii) such other security instruments as herein provided. Section 3.05. Incorporation of Terms. The Company Note, the Deed of Trust and the Guaranty, to be executed, acknowledged and delivered pursuant to this Project Agreement shall be made subject to all the terms and conditions contained in this Project Agreement, to the same extent and effect as if this Project Agreement were fully set forth in and made a part of the Company Note, the Deed of Trust, the Resolution of Issuance and the Guaranty. This Project Agreement is made subject to all the conditions, stipulations, agreements and covenants contained in the Company Note, the Deed of Trust, the Resolution of Issuance and the Guaranty to the same extent and effect as if the Company Note, the Deed of Trust, the Resolution of Issuance and the Guaranty were fully set forth herein and made a part hereof. Notwith- standing any of the foregoing, if any provisions in the Company Note, the Deed of Trust, the Resolution and the Guaranty are inconsistent with the Project Agree- ment, the Project Agreement shall control. Section 3.06. Prepayment of the Note. (a) The Company may prepay the Company Note, in whole or in part, at any time, at its option, at a price equal to the aggregate principal amount of the Company Note Outstanding, plus interest thereon to the redemption date, without premium, upon giving the Bank written notice of Company's intention to prepay the Company Note at least sixty (60) days and not more than one hundred eighty (180) days prior to the date of prepayment unless otherwise agreed to by the Bank. (b) The Company shall prepay the Company Note in whole, at the option of the holders of at least 66-2/3% of the aggregate principal amount of the City Notes Outstanding on September 1, 1987 or September 1, 1992, at a price equal to the aggregate principal amount of the Company Note Outstanding plus interest thereon to the redemption date, without premium, upon receipt by the Company of written notice from the holders of at least 66-2/3% of the aggregate principal amount of the City Notes Outstanding of the exercise of such option, which notice shall be given by such holders at least sixty (60) days and not more than one hundred eighty (180) days prior to either of such dates unless otherwise agreed to by the Company and the holders of 100% of the aggregate principal amount of the City Notes Outstanding. (c) The Company shall prepay the Company Note, in whole, within one hundred eighty (180) days of any damage, destruction or condemnation of the ME= Project which is not repaired by the Company pursuant to Section 5.02 hereof, at a price equal to the aggregate principal amount of the Company Note Outstanding, plus interest thereon to the redemption date, without premium. The date of such prepayment shall be selected by the Company, but shall be no more than one hundred eight (180) days following any such event. (d) Upon a Determination of Taxability, the Company Note shall be redeemed prior to maturity in whole on a date selected by the Bank (the "Redemption Date"), which date shall, except as provided below, be not more than one hundred twenty (120) days from the date on which the Bank receives written notice that such Determination of Taxability shall have occurred, at a redemption price equal to the principal amount of the Company Note to be redeemed on the Redemption Date, plus accrued interest thereon to the Redemption Date. In addition, the Company shall pay to each holder or former holder of City Notes as to which a Determination of Taxability has occurred, as a redemption premium and as full, liquidated damages, an amount equal to the sum of (i) the Tax Adjustment Amount, as defined and calculated below, plus, (ii) the amount of any interest, penalties, or additions to federal income tax which are payable by the holder or former holder of such City Notes, as a result of the failure to include interest on such City Notes in the federal gross income of such holder or former holder, plus (iii) the reasonable costs and expenses incurred by each holder or former holder of such City Notes in connection with such Determination of Taxability. For purposes hereof, the "Tax Adjustment Amount" shall mean, an amount equal to the difference, if any, between (i) the amount of interest actually paid since the date of the Event of Taxability of the principal amount of the Company Note to be redeemed on the Redemption Date and on any principal amount of the Company Note which was paid or redeemed after the date of the Event of Taxability but prior to the Redemption Date and (ii) the amount of interest which would have been payable on such principal amounts since the date of the Event of Taxability at a rate equal to the Prime Rate plus two percent (2%). (e) The Company shall prepay the Company Note within thirty (30) days of the date of completion of the Project with any moneys then held by the in the Disbursement Account at a price equal to the principal amount of such moneys, plus accrued interest thereon, without premium. The date of such prepayment shall be selected by the Company, but shall be no more than thirty (30) days following the date of completion of the Project. (f) Any prepayment of the Company Note shall be applied to the principal installments due on the Company Note in inverse order of their maturities. (g) Any prepayment of the Company Note shall also constitute a prepayment of the City Notes. 01610 Section 3.07. Place of Payments. Any payment to be made under the Project Agreement and the Company Note shall be made when due at the Principal Office of Section 3.08. Conditions Precedent. As a condition of the Company's right to receive any of the proceeds of the Loan contemplated by this Agreement, the following conditions precedent and other requirements shall have been satisfied prior to each (except as hereinafter otherwise stated) disbursement hereunder: (a) Prior to the first advance, the Company shall furnish to the Bank an ALTA Lender's Policy of Title Insurance (LP10 with provision for rewrite) which shall insure that the aforesaid Deed of Trust is a first lien on the Property, free and clear of all liens, encumbrances and restrictions or other matters except those, if any, to which the Bank may agree to take subject to in writing. Said Policy of Title Insurance shall be in the principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000). (b) The Company shall furnish to the Bank the documents required by Sections 4.02 and 4.05 hereof. (c) At the Bank's sole and absolute discretion, in addition to the requirements of this Section, the Bank may require the Company to obtain, in connection with any or all requested disbursements, at the Company's sole cost and expense, Foundation Indorsements 102.5, and/or Form 122 Indorsements, which Indorsements are to be attached to and be a part of the Bank's Policy of Title Insurance. (d) Such evidence as the Bank may require that the Project, and all of the improvements therein and construction thereof, comply with the zoning laws affecting the Property. (e) Proof satisfactory to the Bank of the incorporation into the Project of all labor and materials, and submission of labor and material releases on forms approved by the Bank as well as such other supporting affidavits and statements as the Bank may specify. In the case of disbursements to pay for materials or supplies, the amount requested must be supported by invoices therefor. (f) At the Bank's sole and absolute discretion, fifteen (15) days after notice given by the Bank to the Company, the Company shall supply the Bank with correct lists of all contractors, subcontractors and all other persons who have or will perform or furnish any work, labor or material in connection with the construction of the Project. Each such list shall show the name, address and telephone number of each such contractor or subcontractor, a general statement of the nature of the work to be done, the labor and materials to be supplied, the names of materialmen, if known, the approximate dollar value of such labor, work and materials with respect to each, and the status of such work or whether such materials have been delivered. The Bank and its agents shall have the right - 16 - (without either the obligation or the duty) to directly contact each contractor, subcontractor and materialman to verify the facts disclosed by said list. (g) At the Bank's sole and absolute discretion, the Bank may require, as to a particular disbursement, signed mechanics' and materialmen's lien releases in form and content acceptable to the Bank from all persons who furnished labor, services and/or materials for which said disbursement is requested and proof that no preliminary notice describing such labor, services and/or materials has been served upon the Bank or the Company except by the person(s) named on the disbursement request. (h) By way of deposit into the Disbursement Account hereinafter referred to in Section 4.05, within five (5) days after notice from the Bank, such sums as the Bank may determine are required in order to assure completion of the Project within the purview of the Final Plans and Specifications, whether such additional sums are required due to error of estimating costs, or increases in costs of labor and/or materials, or increased costs resulting from any changes in or to the Plans and Specifications which may or may not have been approved by the Bank or unbudgeted costs, or otherwise. The Company agrees that any such sums required over and above the proceeds of the Loan which are so deposited in the Account shall be disbursed by the Bank prior to the disbursement of any remaining proceeds of the Loan. The judgment of the Bank shall be final and conclusive. (i) Proof satisfactory to the Bank that no Notice to Withhold or Stop Notice has been filed and no mechanic's lien has been recorded. (j) Proof satisfactory to the Bank that all contractors and subcon- tractors are bonded. (k) Notwithstanding anything to the contrary contained in this Sec- tion 3.08 or in Section 4.02, with respect to services performed or materials and supplies furnished, no disbursement may exceed ninety percent (90%) of the value, based on contract prices of such labor, materials or supplies. ARTICLE IV FUNDING OF THE LOAN Section 4.01. Application of Note Proceeds. In order to provide funds for the Loan, the City, concurrently with the execution and delivery of this Project Agreement, will sell and shall thereafter deliver the City Notes to the Purchasers and apply the proceeds therefrom to the funding of the Loan as herein provided. Section 4.02. Disbursement of Loan Proceeds. (a) The Bank shall make the initial disbursement of proceeds of the Loan upon receipt of the following: (1) The original Company Note setting forth the amount of the initial disbursement of the Loan and secured by the Deed of Trust, duly executed by the Company; - 17 - (2) The original or certified copy of the fully executed Deed of Trust, such Deed of Trust to be duly recorded in the office of the County Recorder, as evidenced by a document stamped of record or by certification of the Trustee. (3) A current American Land Title Association mortgage title insurance policy, containing appropriate indorsements in favor of the Trustee by the terms of such policy or any indorsement of the title insurance company, insuring title to the Project and the additional secured property as being vested in the Company showing that the Deed of Trust is a first lien on the Project and any additional secured property, subject only to Permitted Encumbrances, and issued in the face amount of the Loan by a reputable title insurance company. (4) A copy of the Hazard and Liability Insurance policy or policies or an appropriate endorsement or binder or such policies, on the Project, insuring the Bank, the City, the Company and any other parties in interest as their interests may appear. (5) Evidence reasonably satisfactory to the Bank that all secur- ity interests in the rents, profits or other income derived from the Project and assigned to the Trustee have been properly perfected, including any filings required by the California Uniform Commercial Code. (6) Evidence reasonably satisfactory to the Bank, including such opinions as the Bank shall deem necessary, that the Deed of Trust has been duly recorded and constitutes a valid first lien upon and first priority security interest in the Project and the additional secured property. (7) The original Guaranty of the parties so required by the Bank. (8) A requisition stating with respect to such disbursement: (i) the requisition number; (ii) the name and address of the person, firm or corporation including, without limitation, the Company or the Bank, to whom payment is due; (iii) the amount to be paid; (vi) the purpose for which each obligation to be paid was incurred; (v) that each obligation, item of cost, or expense mentioned therein has been properly incurred, is a proper charge as a cost of acquisition or construction, is within the amount estimated as the cost of the item or items for which the obligation was incurred, and has not been the basis of any previous withdrawal; and (vi) that there has not been filed with or served upon the City or the Company, notice of any lien, right to lien, or attachment upon, or claim affecting the right to receive payment of any of the moneys payable to any of the persons named in such requisition, which has not been released or will not be MV:M released simultaneously with such payment, other than materialmen's or mechanics' liens accruing by mere operation of law which will not be released until final payment is made. (9) An inspection certificate issued by a Person acceptable to the Bank stating that such Person has inspected the Project, the percentage completion of the Project and that the Project is being constructed in accordance with the Plans and Specifications. (b) Subsequent disbursements other than the final disbursement shall be made upon receipt of a requisition and such proof of the items set forth in Section 3.08 as the Bank may require, provided no Event of Default has occurred. The amount of each disbursement shall be annotated on the Company Note upon disbursement. (c) The final disbursement of Loan proceeds shall be made upon receipt of the following: (1) A Notice of Completion of Improvement, validly recorded as required by law and evidenced satisfactory to the Bank that construction of the Project is complete. (2) Title insurance endorsements to the policy referred to in Section 4.02(a)(3) which insures the lien -free completion of the Project including CLTA Series 101 endorsements. (3) Copies of all occupancy permits issued by the City for the Project. (4) Certifications of architects or engineers, as applicable, certifying that the Project has been completed in accordance with the plans and specifications approved by the City. (5) the items listed in Section 4.05(8). Section 4.03. Expenditure of Funds. The Company shall not expend any Loan proceeds so as to cause the interest on the City Notes to become taxable pursuant to Section 103(b) of the Internal Revenue Code of 1954, as amended, and the United States Treasury Regulations then in effect thereunder and applicable to obligations issued on the date of issuance of the City Note. Section 4.04. The Trustee. shall act as Trustee for and on behalf of the holders of the City Notes in administering the Loan made by the City to the Company as evidenced by and pursuant to the terms of the Company Note and the Deed of Trust securing said Company Note. The Trustee shall have and hereby accepts all rights and responsibilities as specifically provided herein or in the Resolution of Issuance and may exercise such additional powers as are reasonably incidental thereto. The Trustee shall act as the agent of and on behalf of the City and any act required to be performed by the City as herein provided shall be deemed taken if such act is performed by the Trustee. Neither the Trustee nor the Bank nor any officers, directors or employees thereof shall be liable for any action taken or - 19 - omitted to be taken by it hereunder or in connection herewith except for its or their own gross negligence or willful misconduct. The Bank and the Trustee may consult with legal counsel selected by it and any action taken or suffered by it in accordance with the opinion of such counsel shall be full justification and protection to it. The Company shall pay the Trustee a fee of $ per annum and the Bank a fee of $ per annum for the performance of their duties hereunder. Section 4.05. Disbursement Procedure. Upon recording of the Deed of Trust, the Trustee will establish a special account ("Disbursement Account") into which the Loan funds and any funds of the Company shall be deposited pending disbursement in the manner and for the purpose set forth herein. (a) Funds from the Disbursement Account shall be disbursed pursuant to Sections 3.08 and 4.02 to the Company or to the Company's designated bank account, provided, however, that the Trustee reserves the right, at the Trustee's option, to make any disbursements for construction of the Project directly to the general contractor and/or subcontractors, laborers and materialmen. (b) So long as the Trustee is acting in good faith and without gross negligence, the Trustee shall not be liable for any error, omission, irregularity or action taken with respect to the Disbursement Account. (c) Except as agreed in writing by the Trustee, in no event shall any part of such funds be used to pay any costs, profit or overhead allocated to the Company. Subject to the provisions of this Agreement, the Company hereby irrevocably assigns to the Trustee, as security for the obligations secured by the Security Documents, all of the right, title and interest of the Company in and to said Disbursement Account, including moneys that may be deposited or credited to said Disbursement Account either by the Company or the Trustee. The Company acknowledges that it has no right to the moneys in said Disbursement Account other than to have the same disbursed by the Trustee in accordance with this Agreement, which disbursements the Trustee, upon its acceptance of this Agree- ment herein, agrees to make, for the purposes, and upon the conditions set out herein. (d) The respective rights of the Trustee and the Company with respect to any Disbursement Account shall be governed by the terms of this Agreement, notwithstanding anything to the contrary contained in any forms used to open such account with the Trustee. (e) Attached hereto as Exhibit "G" is a detailed Budget. On or before the first working day of each month after the date of this Agreement, the Company shall submit to the Trustee for its approval, an updated Budget reflecting any changes in the estimated dates or amounts of disbursements or in the cost breakdown or cash flow projection reflecting all work through the 25th day of the preceding month. An updated Budget shall also be submitted by the Company to the Trustee for its approval within five (5) working days after the Company becomes aware of any material changes to the most recently approved Budget. (f) The Trustee shall disburse moneys from the Disbursement Ac- count to pay the costs of the acquisition, construction and equipping of the Project -20- pursuant to Sections 3.08 and 4.02. In addition, the Trustee shall disburse moneys from the Disbursement Account to pay the costs of issuance, including all legal fees incurred in connection with the issuance of the City Notes. The Trustee may also, at the request of the Company, disburse moneys from the Disbursement Account to pay interest on the Company Note for a period of one (1) year from the date hereof. (g) 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 Bank, shall have the sole right to revoke such designation, and substitute any other person as the person authorized to sign such orders: For the Company or and or (h) Upon receipt of properly signed Requests for Funds, the Bank is authorized to act thereon without further inquiry and except for its gross negligence or willful misconduct, the Company shall hold the Bank harmless against any and all losses, claims or liability incurred in connection with making disburse- ments from the Disbursement Account. (i) Prior to the Final Disbursement, all of the conditions set forth herein shall have been satisfied and the Trustee shall have received the following: (1) Proof that a notice of completion has been filed. (2) A permanent certificate of occupancy issued by the requi- site governmental agency. (3) Proof that the time for the filing of mechanic's and/or materialmen's liens has run without there being filed any liens against the Property or obtaining satisfactory releases from all liens which may have been filed. (4) Certificate of Company and Architect to the effect that the Project has been completed in substantial accordance with the plans and that there is no outstanding indebtedness for labor or materials relating to the Project known to the Company and the Architect which will not be fully paid by the final requested disbursement, and verification of such completion by the Bank by such inspection as it may require. (5) A final ALTA survey prepared by a surveyor satisfactory to the Trustee showing the location of the Project. (6) Evidence that a title company approved by the Bank is in a position to issue to the Trustee its ALTA rewrite policy of title insurance with a CLTA Form 100 indorsement undeleted and at the Trustee's discretion a CLTA Form 101.6 or 101.13 attached. (7) Any other proof the Trustee in its discretion deems appro- priate. Section 4.06. Trust Funds. The Company covenants that any disbursements received by it here- under shall be held as trust funds to be applied for the purpose of paying for the - 21 - costs of the Project, but nothing herein shall impose upon the Bank any obligation to see to the proper application of such payments by the Company. ARTICLE V DAMAGE, DESTRUCTION AND CONDEMNATION Section 5.01. No Abatement of Payments. If the Project shall be damaged or either partially or totally destroyed, or if title to or the temporary use of the whole or any part of the Project shall be taken or condemned by a competent authority other than the City for any public use or purpose, there shall be no abatement or reduction in the amounts payable by the Company hereunder, or under the Company Note, and the Company shall continue to be obligated to make such payments. The Company shall supply prompt notice of any such damage, destruction or condemnation or any proposal to condemn to the City. Section 5.02. Proceeds of Insurance or Condemnation. In the event of any damage, destruction or condemnation, all proceeds shall be payable to the Bank. The Company shall have the right to settle, adjust or compromise any claims for loss, damage or destruction under any policy or policies of insurance or condemnation action without the consent of the City; provided, that payments on the Loan continue to be made in the amounts and at the time as provided in the Company Note. All such awards, compensation, rights of action and proceeds awarded to the Company shall be paid to the Bank to be applied as to the payment of the Company Note, and the Company agrees to execute such further assignments or documents necessary to authorize direct payment of such proceeds to the Bank. Proceeds from condemnation, damage or destruction received by the Bank are to be applied to the payment of the Company Note in accordance with the provisions of the Deed of Trust and the Resolution of Issuance. In the event that any such awards or proceeds are inadequate to pay the total principal amount of and accrued interest on the Company Note, the Company shall pay to the Bank an amount equal to the difference between such award or proceeds and the amount of such principal and interest so that the Company Note can be prepaid in full pursuant to Section 3.06(c) hereof. Except to the extent that proceeds received by the City or the Bank hereunder are applied to the indebtedness secured hereby if the Company elects not to repair, replace or reconstruct the Project, nothing herein contained shall be deemed to excuse the Company from continuing to make payments on the Loan in the amounts and at the times provided in the Company Note or from repairing the Project promptly upon the occurrence of any such event or maintaining the Project as provided in Section 8.02 or restoring the damage or destruction to the Project promptly upon the occurrence of any such event, regardless of whether or not there are proceeds available or whether any such proceeds are sufficient in amount. - 22 - ARTICLE VI REPRESENTATIONS AND WARRANTIES The Company represents and warrants that: Section 6.01. Organization, Powers, etc. The Company (a) is a corporation duly organized, validly existing and in good standing in the State of Missouri and is authorized to transact business in the State of California, (b) has the power and authority to own its properties and assets and to carry on its business as now being conducted (and as now contemplated) and (c) has the power to execute and perform all the undertakings of the Project Agreement, to borrow hereunder and to execute and deliver the Company Note, the Deed of Trust and this Project Agreement. Section 6.02. Execution of Project Agreement and Other Docu- ments. The execution and performance of this Project Agreement, the Com- pany Note, the Deed of Trust and other instruments required pursuant to this Project Agreement (a) have been duly authorized by all requisite action, executed and delivered (b) will not violate with respect to the Company any provision of law, rule or regulations, any order of any court or other agency of government, or any provision of any charter document or by-law of the Company and (c) will not violate any provision of any indenture, agreement or other instrument by which the Company may be bound, or result in the creation or imposition of any lien, charge or encumbrance of any nature on the Project, other than the liens created pursuant hereto. Section 6.03. Title to ProDerties. The Company shall on or prior to the funding of the Project have good and marketable title to the Site as shown in Exhibit "D" free and clear of any lien or encumbrance except for (i) liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, and (ii) Permitted Encum- brances. Section 6.04. Litigation. There is no action, suit, or proceeding at law or in equity by or before any court, governmental instrumentality or other agency now pending, or to the knowledge of the Company, threatened against or affecting it, or any of its properties or rights, which, if adversely determined, would materially adversely affect the Company's ability to perform under this Project Agreement. Section 6.05. Design of Project. To the best of the Company's knowledge the operation of the Project in the manner presently contemplated and as described herein will not and does not conflict with any zoning, water or air pollution or other ordinance, order, law or regulation applicable thereto; and the Company has caused the Project to be designed in accordance with all federal, state and local laws or ordinances (including rules and regulations) relating to zoning, building, safety, and environ- -23- mental quality and has not failed to obtain and maintain in effect any licenses, permits, franchises or other governmental authorizations necessary for the opera- tion and conduct of the Project. Section 6.06. Payment of Taxes. The Company has filed or caused to be filed all federal, state and local tax returns which are required to be filed and of which the Company has knowledge, and has paid or caused to be paid all taxes as shown on said returns or on any assessment received by it, to the extent that such taxes have become due and payable other than those payable without penalty or interest. Section 6.07. Description of the Project. The Project described in the Resolution of Issuance, Company Note and Deed of Trust is the same Project as that described in this Project Agreement and is the Project to be constructed by the Company in accordance with this Project Agreement. Section 6.08. No Defaults. The Company is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any material agreement or instrument to which it is a party. No event has occurred and no condition exists which, upon entering into the obligations contemplated by this Agreement, would constitute an Event of Default. Section 6.09. No Material Adverse Change. There has been no material adverse change in the financial condition of the Company since July 31, 1982. Section 6.10. Important Inducement. The possible availability of the financial assistance by the Agency as provided herein has been an important inducement to the Company to locate the Project within the City. Section 6.11. Obligations of the Company. The Project Agreement is, and the Company Note, and the Deed of Trust when executed and delivered, will be legal, valid and binding obligations of the Company enforceable against it in accordance with their respective terms. Section 6.12. No Untrue Statements. Neither the Project Agreement, nor any other document, certificate or statement furnished to the Purchasers or the City by or on behalf of the Company contains to the best of its knowledge any untrue statement of a material fact or omits to state a material fact necessary in order to make the statement contained herein and therein not misleading or incomplete. It is specifically understood by the Company that all such statements, representations and warranties shall be deemed to have been relied upon by the City as an inducement to make the Loan and that if any such statements, representations and warranties were materially - 24 - incorrect at the time they were made, the City may consider any such mis- representation or breach, an Event of Default. Section 6.13. No Outstanding Industrial Revenue Bonds. There is outstanding no issue of industrial revenue bonds, other than the City Note, as defined in Section 103 of the Internal Revenue Code of 1954, as amended, and the regulations promulgated thereunder (the "Code") the proceeds of which have been or will be used with respect to facilities, the Principal User or Users of which are or will be the Company or any Principal User of the Project as of the date hereof or any related person or persons (as defined in Section 103 of the Code) and which are or will be wholly or partially located within the City. Section 6.14. Limitation on Expenditures. The sum of the following does not now and is not reasonably expected, during the period ending three (3) years from the date of issue of the City Notes to exceed $10,000,000.00: (1) the aggregate face amount of any outstanding issues of obliga- tions (other than the City Notes) exempt from taxation under Section 103(b)(6) of the Code; the proceeds from which were or will be used primarily with respect to facilities (a) located within the City and (b) the Principal User of which is or will be the Principal User of the Project or related person or persons within the meaning of Section 103 of the Code; (2) the aggregate amount of any capital expenditures paid or incurred (other than those financed out of the proceeds of the City Notes or a bond referred to in subparagraph (1) above) within the meaning of Treas. Reg. Sec. 1.103-10(b)(2)(ii) and (iii) under the Code, during the six-year period beginning three (3) years prior to the date of issuance of the City Notes and ending three (3) years after such date of issuance with respect to facilities utilized by any Principal User of the Project located within the City; and (3) the aggregate principal amount of the City Notes. If at any time before the end of the third year after the date of issuance of the City Notes, the Company or any Principal User or any related person proposes to pay or incur any capital expenditure other than expenditures payable out of the proceeds of the City Notes in an amount exceeding $100,000 with respect to the Project or any other property located in the City, or if the total of all such capital expenditures plus the amount of the City Notes exceeds $9,000,000 in an amount exceeding $10,000, the Company will, prior to the payment or incurrence of such capital expenditure, file with the Bank an Opinion of Counsel satisfactory to the Bank to the effect that such capital expenditure will not have the effect of causing the interest on the City Notes (other than those held by a substantial user of the Project or any related person) to be included in the gross income of the recipient thereof for Federal income tax purposes. If at any time during which any of the City Notes are Outstanding, the Company or Principal User or any related person proposes to gain control of any person, firm or corporation with facilities located in the City, or assume liabilities incurred in connection with facilities located in said City of another person, firm or corpora- tion or acquire greater than fifty percent (50%) of the outstanding stock of such corporation, the Company shall first file with the Bank an Opinion of Counsel - 25 - satisfactory to the Bank to the effect that such action would not cause the interest on the City Note (other than those held by a substantial user of the Project or any related person) to be included in the gross income of the recipient thereof for Federal income tax purposes. The Company will, until the end of the third full fiscal year after the date of issuance of the City Notes, keep separate books and records and require each Principal User to keep separate books and records with respect to the Project and any other property or facilities located in the City of which the Company or Principal User or any related person is the principal user, which books and records shall be sufficient to indicate the nature of all expenditures with respect to the Project or such property or facilities. The Company will at its sole expense cause an audit for each of the fiscal years ending December 31, 1982-83 to be made of such books and records by an independent public account satisfactory to the Bank. Such independent public accountant shall within one hundred twenty (120) days after the end of such fiscal year file with the Bank and the City a certificate, which shall state that during the preceding fiscal year neither the Company, any Principal User nor any related person has paid or incurred any capital expenditures in the City of the nature specified in Section 103(b)(6)(D) of the Internal Revenue Code, or in the event the Company, any Principal User or any related person has paid or incurred any such expenditure, such certificate shall specify the details, including the date and amount thereof. Section 6.15. Limitations on Use of Proceeds. Substantially all of the proceeds from the sale of the City Note, exclusive of Costs of Issuance and other expenses, and other amounts which the Company does not receive, will be expended to pay the cost of acquisition and construction of the Project. Section 6.16. Tax Treatment of Project. The Project constitutes and will constitute either (i) land or (ii) property of a character subject to the allowance for depreciation under Section 167 of the Code. 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. The proceeds of the Loan will be used only for payment of such costs, and will not be used to provide working capital for the Company. Section 6.17. Not to Make the City Notes Taxable. The Company will not take, or permit to be taken, any action, or omit to take 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 Notes to Federal income taxation. Section 6.18. Operation of Project. The Company shall operate the Project in a sound and businesslike manner, and in accordance with the provisions of this Agreement. -26- Section 6.19. No Conflict of Interest. Neither the Company, any entity or person constituting the Company, nor any officer or employee of the foregoing has a Conflict of Interest. ARTICLE VII CONDITIONS OF LENDING The City's obligation to lend hereunder is subject to the following conditions precedent: Section 7.01. Opinion of Counsel for the Company. (a) As of the date of delivery of the City Notes, the City and the Purchasers and the Trustee shall have received the Opinion of Counsel for the Company, dated the date of such execution, addressed to the City and the Purchasers and the Trustee satisfactory in form and substance to Bond Counsel, (a) confirming the representations and warranties set forth in Sections 6.01, 6.02, 6.04, 6.07 and 6.08 hereof (which in the case of Section 6.02(b) (except with respect to the Articles of Incorporation and the Bylaws of the Company), 6.02(c), 6.04 and 6.08 may be to the best knowledge of such counsel), and (b) to the effect that (i) the Project Agreement has been duly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable in accordance with its terms; (ii) the Company Note and the Deed of Trust have been duly authorized, executed and delivered and constitute valid and binding obligations in accordance with their respective terms; and (iii) to the best knowledge of such counsel substantially all of the proceeds of the Loan will be used for the construction financing of the costs incurred in connection with the acquisition, construction or improvement of land or property subject to the allowance for depreciation under Section 167 of the Internal Revenue Code. Section 7.02. Opinion of Bond Counsel. The City, the Purchaser and the Trustee shall have received an Opinion from Bond Counsel, that interest on the City Notes is exempt from federal income taxes and from personal income taxes imposed by the State of California and that the City Notes have been duly authorized and issued under the provisions of the Ordinance and constitute legal, valid and binding special obligations of the City, enforceable in accordance with their terms. Section 7.03. Other Documents, etc. Prior to the funding of the Loan pursuant to Section 4.02, the Trustee shall have received the executed Company Note and such supporting certificates and documents as may be requested by the Trustee and the Deed of Trust together with evidence that such documents have been recorded in the office of the County Recorder and legal matters in connection with making the Loan shall be satis- factory to the Purchasers, the Trustee, the City and Bond Counsel. - 27 - ARTICLE VIII COVENANTS The Company covenants and agrees, so long as the Company Note is outstanding, as follows: Section 8.01. Payment of Secured Obligations. The Company agrees to pay when due the principal of, and the interest on, the indebtedness evidenced by the Company Note, charges, fees and all other sums as provided in the Project Agreement and the Deed of Trust; and the principal of, and interest on, future advances, if any, secured by the Deed of Trust. Section 8.02. Preservation and Defense of Property. The Company agrees to keep the Project in good order and good operating condition: to make or cause to be made, as and when necessary, all repairs, renewals and replacements, structural and non-structural, exterior and interior, ordinary and extraordinary, foreseen and unforeseen; not to remove, demolish or substantially alter or permit the removal, demolition or substantial alteration (except such alterations as may be required by laws, ordinances or regulations) any of the improvements on the Project and the Site; to complete promptly and in good and workmanlike manner any improvement which may be damaged, removed, substantially altered or destroyed thereon, and to pay when due all claims for labor performed and materials furnished therefor; to comply with all laws, ordinances, regulations, covenants, conditions and restrictions now or here- after affecting the Project or the Site or any part thereof or requiring any alterations or improvements; not to commit or permit any waste or deterioration of the Project or the Site; to keep and maintain abutting grounds, sidewalks, roads, parking and landscaped areas over which the Company has control in good and neat order and repair; to comply with the provisions of any lease of all or any part of the Project or the Site; not to knowingly commit, suffer or permit any act to be done in or upon the Project or the Site in violation of any law, ordinance or regulation; not to permit the Project or the Site to become vacant or deserted. The Company will appear in and contest any action or proceeding purporting to affect the City's interest in the Project or the Site as set forth in this Project Agreement or the rights or powers of the City or its assigns and to pay all costs and expenses, including reasonable attorney's fees, in any such action or proceeding in which the City may appear. Section 8.03. General Provisions Concerning Insurance. All policies of insurance issued pursuant to Section 8.04 hereof shall be so written or endorsed as to make losses, if any, payable to the City, the Company and the Trustee as their respective interests may appear and duplicate copies of any such policy and evidence of renewal or replacement thereof shall be promptly furnished to the City and the Trustee, upon their request, for their records. Such policies of insurance shall cover and be applicable to this Project Agreement. All such policies of insurance shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy - 28 - notwithstanding any act or negligence of the Company which might otherwise result in forfeiture of such insurance and the further agreement of the insurer waiving all rights of setoff, counterclaim or deductions against the Company. All such policies shall not be subject to contribution by the City or the Trustee. All such policies, including policies for any amounts carried in excess of the required minimum and policies not specifically required by the Bank shall be in form satisfactory to the City, shall be maintained in full force and effect and shall be assigned and delivered to the Trustee, with premiums prepaid, as collateral security for payment of the Loan. If the insurance, or any part thereof, shall expire, or be withdrawn, or become void or unsafe by reason of the Company's breach of any condition thereof, or become void or unsafe by reason of the failure or impairment of the capital of any company in which the insurance may then be carried, or if for any reason whatever the insurance shall be unsatisfactory to the Bank, the Company shall place new insurance on the Project, satisfactory to the Bank. In the event the Company fails to provide, maintain, keep in force or deliver and furnish to the City and the Trustee the policies of insurance required by this Project Agreement, the Trustee may procure such insurance or single -interest insurance for such risks covering its interest, and the Company will pay all premiums thereon promptly upon demand by the Trustee and until such payment is made by the Company the amount of all such premiums, together with interest thereon at a rate which shall be equal to the rate specified in the Company Note, shall be secured by the Deed of Trust. In the event of foreclosure of the Deed of Trust or delivery of a deed in lieu of foreclosure or assignment of the Project in extinguishment, in whole or in part of the Loan, all right, title and interest of the Company in and to all policies of insurance required by this Project Agreement shall inure to the benefit of or pass to the successor in interest to the Company or the purchaser or grantee of the Project. ages: Section 8.04. Insurance Required. (a) The Company agrees to provide the following insurance cover- (i) Hazard and Liability Insurance; (ii) The Company shall supply boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, air conditioning and elevator equipment and escalator equipment, provided the Project contains equipment of such nature, and insurance against loss of occupancy or use arising from any such breakdown, in such amounts as are reasonably satisfactory to the City. (iii) The Company further agrees to procure and deliver to the City policies of title insurance required under Sections 4.02(a)(3) and 4.02(c)(2) issued by a company licensed by the State. (iv) At all times during the term of this Project Agreement the Company shall comply with the laws of the State relating to workmen's compensation insurance with respect to the Project. - 29 - (b) The Company will have delivered on or prior to the date of funding of the Loan or upon the appropriate date pursuant to the development of the Project, pursuant to Section 4.02(a), insurance certificates evidencing proof of coverage as indicated above. (c) Such insurance coverage may be effected under overall blanket or excess coverage policies of the Company but all policies required hereunder shall name the City and the Trustee as additional insureds and shall contain a standard mortgage clause in favor of the Trustee on behalf of the City, not subject to contribution, and lender's loss payable endorsement for the benefit of the Trustee on behalf of the City. The Company shall furnish to the Trustee a signed duplicate original policy with respect to all required insurance. If a blanket or excess coverage policy is utilized, then the Company shall furnish to the Trustee a signed certificate of insurance for each policy setting forth the coverage, the limits of liability, the name of the carrier, the policy number, and the expiration date. In the event of loss of or damage to the Project, the net proceeds of any insurance provided hereunder shall be applied as set forth in Article V of this Project Agreement and the Resolution of Issuance; in the event of a public liability occurrence, the net proceeds of any insurance provided hereunder shall be applied toward extinguishment or satisfaction of such liability. Each insurance policy maintained pursuant to this Section shall contain a provision that such policy shall not be cancelled or amended in any material manner unless the Trustee and the City are notified at least thirty (30) days prior to such cancellation or amendment and at least ten (10) days prior to the expiration of any such policy the Company shall furnish evidence satisfactory to the Trustee and the City that such policy has been renewed or replaced or is no longer required by this Project Agreement. Section 8.05. Payment of Taxes, etc. The Company will pay and discharge promptly all State and federal taxes, assessments and governmental charges or levies imposed upon it in connec- tion with the Project or in respect of any of its property and assets used in connection with the Project before the same shall become a default, including, but not limited to, all taxes to which the Company and any company, corporation, joint stock association or limited partnership, in which the Project shall hereafter vest, may be liable under the laws of the United States of America, the State both present and future, which under the provisions of such laws may be or become a lien upon the Project, and the Site, as well as all other charges or claims of every kind and nature which may be or become a prior lien upon the Project, or which may be or become first distributable or allowable or payable, before the indebted- ness secured hereby, out of the proceeds of any judicial sale of the Project, except such that are contested by the Company in accordance with this Section. The Company shall keep in effect its existence and rights as a corporation qualified to do business under the laws of the State and its rights to own property and transact business in the State during the entire time that it has any ownership interest in the Project. The Company shall have the right if proceedings are stayed or sus- pended and no increased chance of loss occurs therefrom to contest or object to the amount or validity of any such imposition set forth above in good faith and by - 30 - appropriate legal proceedings, but this shall not be deemed or construed in any way as relieving, modifying or extending the Company's obligation to pay any such imposition at the time such contest, objection and legal proceedings have been terminated or discontinued adversely to the Company, and further provided that, during the pendency of such contest, objection and legal proceedings, (i) the Company is not in default under the Company Note, the Deed of Trust or no Event of Default exists under Section 9.01; (ii) the Company has given prior written notice to the City of its intent to so contest or object to any imposition; and (iii) the Company shall furnish a good and sufficient bond or surety or maintain adequate reserves on the books of the Company for the payment of such imposition and any interest and penalties accruing thereon satisfactory to the City. The Company will pay and promptly discharge, at its cost and expense, all other liens, encumbrances and charges upon the Project, or any part thereof or interest therein; provided that the Company shall have the right to contest in good faith the validity of any such lien, encumbrance or charge; provided, however, that if any such lien, encumbrance or charge has or may have priority over the lien of the Deed of Trust, then the Company shall first deposit with the City a bond or other security satisfactory to the City in such amounts as the City shall reasonably require; and further provided that if the Company shall thereafter diligently proceed to cause such lien, encumbrance or charge to be removed and discharged. If the Company shall fail to pay and promptly discharge any such lien, encumbrance or charge, then, in addition to any other right or remedy of the City, the City may, but shall not be obligated to, discharge the same, either by paying the amount claimed to be due, or by procuring the discharge of such lien by depositing in court a bond or the amount claimed or otherwise giving security for such claim, or in such manner as is or may be prescribed by law, and all expenditures and expenses incurred by the City in so doing shall be recoverable from the Company upon the terms set forth in Article IX and shall be deemed advances secured by the lien of the Deed of Trust. Section 8.06. Payment of Utilities. The Company will pay when due all utility charges which are incurred for the benefit of the Project or which may become a charge or lien against the Project for gas, electricity, water or sewer services furnished to the Project and all other assessments or charges of a similar nature, whether public or private, affecting the Project or any portion thereof, whether or not such taxes, assess- ments or charges are liens thereon. Section 8.07. Concerning the Project. (a) The Company shall devote the Project to the uses as set forth in its request for Financing pursuant to the Ordinance. (b) There shall be no discrimination against or segregation of any person, or group of persons, on account of sex, race, marital status, color, age, creed, handicap, national origin or ancestry on the enjoyment of the Site, nor shall the Company or any person claiming under or through them establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Project or any portion thereof. - 31 - Section 8.08. Compliance with Code. The Company shall at all times use its best efforts to do and perform all acts and things reasonably necessary or desirable in order to assure that interest paid on the City Notes shall, for the purposes of federal income taxation, be excludable from the gross income of the recipients thereof and exempt from such taxation, except in the event that such recipient is a "substantial user" or "related person" within the meaning of Section 103 of the Internal Revenue Code. For so long as the $10,000,000 limitation on bond issuance and capital expenditures as presently contained in Section 103 of the Internal Revenue Code is effective with respect to the City Notes, the Company hereby further covenants for the benefit of the holders of the City Notes that at no time during the period beginning on the date of issuance of the City Notes and ending three (3) years after such date of issuance will the aggregate total amount of the items listed in Section 6.14 of this Agreement exceed a total of $10,000,000. Should the $10,000,000 limitation on bond issuance and capital expen- ditures be increased during the applicable six-year period, the Company covenants not to exceed such limitation contained in Section 103 of the Internal Revenue Code, as amended; provided, that the $10,000,000 limitation as herein above provided shall not be exceeded without obtaining the Opinion of Bond Counsel that interest on the City Notes will continue to be exempt from Federal income taxes. The Company shall file and shall cause all Principal Users of the Project to file a copy of the statement filed by the City pursuant to Treasury Regulation Section 1.103-10(b)(2)(vi)(a) with regard to the issuance of the City Notes with the district director or the director of the regional service center with whom each of the Company and the respective Principal Users is required to file its income tax returns (as provided in Section 6091 of the Code) for the taxable year during which the City filed the above statement. The Company shall also file and cause each Principal User to file a supplemental statement which lists by date and amount any subsequent section 103(b)(6)(D) capital expenditures. Such supplemental statement must be filed with the district director or director of the regional service center with whom the Company and each Principal User's income tax return is required to be filed (as prescribed in Section 6091 of the Internal Revenue Code) on the due date prescribed for filing such returns (without regard to any extensions of time). A copy of such supplemental statement shall be filed with the Bank on the same date on which it is filed with the Internal Revenue Service. The Company shall not permit at any time or times any of the proceeds of the City Notes or other of their funds to be used, directly or indirectly, to acquire any asset or obligation the acquisition of which would cause the City Notes to be "arbitrage bonds" for the purposes of Section 103(c)(2) of the Internal Revenue Code. Section 8.09. Compliance with Applicable Laws. All work performed in connection with the Project shall be performed in strict compliance with all applicable federal, state, county and municipal laws, ordinances, rules and regulations now in force or that may be enacted hereafter. The existing improvements at the Project and the operation of the Project shall - 32 - also comply with all applicable federal, state, county or municipal laws, ordi- nances, rules and regulations. Section 8.10. Financial Statements. The Company will furnish and will cause to be furnished to the Purchasers and any other holders of the then Outstanding City Notes: (a) as soon as available, but in any even within one hundred twenty (120) days after the end of each fiscal year throughout the term hereof, a copy of the audited financial statements for such period (consisting of at least a balance sheet and related statements of income, retained earnings and changes in financial condition) of the Company prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding fiscal year, and certified (with no material qualifications or exceptions) by independent certified public accountants selected by the Company and satisfactory to the Bank; (b) as soon as available, but in any event within thirty (30) days of the end of each month of each fiscal year during the term hereof, unaudited interim financial statements of the Company prepared and certified by a proper accounting officer of the Company; and (c) such other financial information concerning the Company as either Purchaser or any holder of any City Notes shall reasonably request from time to time. Section 8.11. Special Covenants. (A) The Company agrees that during the term hereof and as long as any of the City Notes shall be Outstanding, unless the Bank otherwise shall give its prior written consent, the Company: (a) will not create, incur, assume or suffer to exist any Indebt- edness except (i) the Indebtedness incurred under this Project Agree- ment, (ii) Indebtedness (other than for borrowed money) on open account or under trade acceptance in the ordinary course of business in connection with normal trade obligations, and (iii) Indebtedness for taxes and other charges to the extent permitted hereunder; (b) will not create, assume or suffer to exist any mortgage, lien, pledge, charge, security interest or encumbrance of any kind upon any of its properties or assets, whether now owned or hereafter acquired, except (i) liens created by the Deed of Trust, or this Project Agreement, (ii) liens for taxes, assessments and other governmental charges not yet payable, or the validity of which are being contested in good faith by appropriate proceedings as provided herein and as to which adequate reserves have been set aside on the books of the Company, (iii) deposits or pledges to secure the payment of workmen's compensation, unemployment insurance or other social security benefits or obligations, public or statutory obligations, surety or appeal bonds or other obligations of a like general nature incurred in the ordinary - 33 - course of business, and (iv) liens securing Indebtedness permitted by subsection (a) hereof; (c) will not create, assume or suffer to exist any liability, direct or indirect, for or in connection with the obligations, stock or dividends of any other person, whether by guaranty, endorsement, agreement to purchase or repurchase, agreement to lease, agreement to supply or advance funds (including, without limitation, agreements to maintain working capital, solvency or other balance sheet conditions or agreements to purchase stock or make capital contributions), or other- wise, except endorsements of instruments for collection in the ordinary course of business; (d) will not (i) form any new subsidiary, (ii) enter into any transaction of merger or consolidation, (iii) issue any additional shares of capital stock, (iv) liquidate or dissolve itself (or suffer any liquida- tion or dissolution), (v) convey, sell, lease, charter or otherwise dispose of all or any substantial part of its property, assets or business, NO except in the ordinary course of business, enter into any arrange- ment directly or indirectly whereby the Company would sell or transfer any properties either now owned or hereafter acquired, and then or thereafter lease as lessee such properties or any part thereof or any property to be used for substantially the same purpose; (e) will not declare or pay any dividend on any share of its capital stock or make any other distribution to its stockholders other than salary or bonuses; or purchase, redeem, or otherwise acquire for value any of its capital stock; (f) except with respect to the Project, will not expend or enter into a commitment to expend an amount in the aggregate for the acquisition or lease of tangible, fixed or capital assets, including repairs, replacements and improvements, which are capitalized under proper accounting practice, which exceeds $ for any such expenditure or $ for all such expenditures during any fiscal year; (g) will not subordinate or permit to be subordinated any claim against, or obligation of, another person held or owned by it to any other claim against or obligation of such other person; (h) will not make or permit to remain outstanding any advances, loans or extensions of credit to, or purchase or own any stock, bonds, notes, debentures or other securities of or interest in, any Person except accounts, instruments, chattel paper and general intangibles (as defined in the UCC), arising or acquired in the ordinary course of business as presently conducted; (i) will not at any time permit any Plan maintained by it to: (i) engage in any "prohibited transaction" as such term is defined in Section 4975 of the Internal Revenue Code of 1954, as amended; -34- (ii) incur any "accumulated funded deficiency" as such term is defined in Section 302 of ERISA; or (iii) terminate any such Plan in a manner which will result in the imposition of a lien on the property of the User or any Subsidiary pursuant to Section 4068 of ERISA; and (j) will not voluntarily take any action which would adversely affect its existence. (B) The Company further agrees that during the term hereof and as long as any of the City Notes shall be Outstanding, unless the Bank otherwise shall have given its prior written consent, the Company: (a) will (i) continue to engage in the businesses presently being operated, (ii) keep and maintain all franchises, licenses and properties useful and necessary in the conduct of its business in good order and condition, and (iii) duly observe and conform to all material require- ments of any governmental authorities relative to the conduct of its business or the operation of its properties or assets (iv) remain qualified to do business in the State. (b) will pay its accounts payable and will maintain its accounts receivable in a manner consistent with normal business practices, including normal terms and conditions for payment, for companies engaged in similar operations in similar jurisdictions. (c) will maintain a ratio of consolidated Current Assets to consolidated Current Liabilities of not less than to 1.0 throughout the term hereof; (d) will maintain consolidated Tangible Net Worth of not less than $ from the date hereof through the end for the first fiscal year ending during the term hereof, such minimum amount to escalate thereafter by not less than $ during each fiscal year through- out the term hereof; (e) will maintain a ratio of total consolidated Indebtedness minus Subordinated Indebtedness to total consolidated Tangible Net Worth of not greater than to 1.0 throughout the term hereof; (f) will maintain Working Capital of at least $ during the term hereof; (g) will maintain a ratio of Cash Flow to Debt Service of not less than to 1.0 during the term hereof; (h) will pay when due all taxes, assessments and other liabili- ties, except those being contested in good faith and against which the Company has set up adequate reserves in accordance with generally accepted accounting principles; and - 35 - (i) will notify the Bank of the occurrence of any event of default hereunder or the occurrence of any event which could result in an Event of Taxability. Section 8.12. Indemnification. The Company agrees to indemnify and hold harmless the City, the Purchasers, any member, officer, official, employee, and attorney of the City or the Purchasers, against any and all losses, claims, damages or liabilities (i) caused by any untrue statement of a material fact contained in its application or other information submitted to the City or to the Purchasers by the Company with respect to the issuance and sale of the City Notes and the funding of the Loan, (ii) caused by any omission of any material fact necessary to be stated therein in order to make such statements to the City or the Purchasers not misleading or incomplete, or (iii) caused by the acquisition, construction or operation of the Project. If the City or any Purchaser is made a party defendant to any litigation the subject matter of which is the Loan, the Project or any part thereof or any interest therein, or the occupancy of the Project by the Company, then the Company shall indemnify, defend and hold the City or the Purchasers harmless from all liability by reason of such litigation, including reasonable attorneys' fees and expenses incurred by the City or the Purchasers in any such litigation, whether or not any such litigation is prosecuted to judgment. If any party to this Project Agreement commences an action against any other party to enforce any of the terms hereof or because of the breach of any of the terms hereof, or for the recovery of any sum secured hereby, the prevailing party shall pay the other party's reasonable attorneys' fees and expenses, and the right to such attorneys' fees and expenses shall be deemed to have accrued on the commencement of such action, and shall be enforceable whether or not such action is prosecuted to judgment. If any party shall breach any term of this Project Agreement or the Deed of Trust, the other parties may employ an attorney or attorneys to protect their rights, and in the event of such employment following any breach, the breaching party shall reimburse the other parties for any reasonable attorneys' fees and expenses incurred by the non -breaching party, whether or not an action is actually commenced by reason of such breach. Section 8.13. Certificate of No Default. The Company agrees to deliver to the Bank, together with the financial statements required by Section 8.10(a) and (b), a certificate of a representative of the Company to the effect that it is not aware of any condition, event or act which constitutes an Event of Default (as hereinafter defined), or which, with notice or lapse of time, or both, would constitute such Event of Default, or if any such condition, event or act exists, specifying the same. The Company further agrees to notify the Bank as soon as possible after it becomes aware of an occurrence of an Event of Default or any conditon, event or act which, with notice or lapse of time, or both, would constitute such Event of Default and the action which the Company proposes to take with respect thereto. - 36 - Section 8.14. Inspection of the Project. The Company agrees that the City and Bank and their duly authorized agents shall have the right at all reasonable times to enter upon and to examine and inspect the Project. Section 8.15. Indebtedness of Company. The Company shall not permit any lien on the Project other than the Loan or Permitted Encumbrances as defined herein. The Company shall not directly or indirectly incur, assume, guarantee, or otherwise become or be liable with respect to any indebtedness for borrowed money other than the Loan incurred in connection with the Project. No additional secondary financing shall be permitted in connection with the Project without the express written approval of the Bank. Section 8.16. Duties in Case of Breach of Covenant. In the event that the Company becomes aware of the breach of any covenant of the Company pursuant to this Article, the Company shall promptly provide written notice of such breach to the City and the Bank. Section 8.17. Pursuit of Remedies. The Company shall diligently pursue all rights and remedies it may have against any contractor or sub -contractor in its employ with respect to the construction of the Project or the security as set forth in Section 3.04 of this Project Agreement. Section 8.18. Assumption of Loan. The obligations of the Company pursuant to this Project Agreement, the Loan and the Company Note may not be assumed. Section 8.19. Assignment of Documents and Materials. (a) As additional security for the Loan, the Company hereby transfers and assigns to the Trustee all of the Company's right, title and interest in and to all documents, instruments and materials of whatever nature, including, without limitation, the final Plans and Specifications described on Exhibit "H" and any modifications thereof or additions thereto, other drawings, architects' contracts, and construction contracts and subcontracts, relating to the Project. Such transfer and assignment shall be void and of no further force or effect upon payment in full of the indebtedness secured by the Company Note and faithful performance by the Company of all obligations, the performance of which is secured thereby. The Company covenants to faithfully perform any and all obligations it may have under the documents assigned hereby until such indebtedness has been paid in full. The Trustee shall not be obligated to perform or discharge any such obligation, but may, at its option, do so at the Company's expense in the event the Company should fail to do so as herein provided. (b) The Company hereby agrees to submit copies of all contracts executed in connection with the construction of the Project as well as all estimates - 37 - and cost breakdowns to the Bank and the Company agrees that the Bank or its agents shall have the right at all reasonable times to examine the Company's books and records with respect to the Property. ARTICLE IX DEFAULTS AND REMEDIES Section 9.01. Event of Default. Any one or more of the following events, shall constitute an Event of Default hereunder: (a) if any representation or warranty made herein or in any closing certificate, financial statement, material report, material certificate furnished by the Company in connection with this Project Agreement shall prove to be false or misleading in any material respect; (b) default in the payment of any installment of the principal or interest on the City Notes, the Company Note or any other sum when due under the Loan; (c) breach or default in the due observance or performance of any covenant, condition or agreement on the part of the Company to be observed or performed pursuant to the terms of this Project Agreement, Company Note or Deed of Trust, other than the payment of principal and interest which shall be governed by (b) above, and such default shall continue unremedied for thirty (30) days after notice thereof given by the Bank pursuant to Section 10.01 specifying such default and requesting that it be remedied, provided that if such default is of such nature that it can be remedied, but not within said thirty (30) days, upon the consent of the Bank, such default shall not constitute an Event of Default so long as the Company institutes prompt corrective action; such default, however, must be cured within six (6) months. (d) The Company shall have applied for or consented to the appoint- ment of a custodian, receiver, trustee or liquidator of all or a substantial part of their assets; a custodian shall have been appointed with or without consent of the Company; shall have made a general assignment for the benefit of creditors or have filed a voluntary petition in bankruptcy, or shall have filed a petition or an answer seeking reorganization or an arrangement with creditors, or taken advan- tage of any insolvency law, or shall have submitted an answer admitting the material allegations of a petition in bankruptcy, reorganization or insolvency proceeding or a petition in bankruptcy shall have been filed against the Company, or an order for relief shall have been entered under the Bankruptcy code, or an order, judgment or decree shall have been entered, without the application, approval or consent of the Company by any court of competent jurisdiction approving a petition seeking reorganization of the Company, or appointing a receiver, trustee, custodian or liquidator of the Company, or for a substantial part of any of its assets; or if the Company shall have suspended the transaction of its usual business related to the management and operation of the Project; - 38 - (e) a writ of execution or attachment or any similar process shall be issued or levied against all or any part of or interest in the Project, or any judgment involving monetary damages shall be entered against the Company which shall become a lien on the Project or any portion thereof or interest therein and an appeal is not taken and actively prosecuted on such judgment within fifteen (15) days of its entry, or such execution, attachment or similar process is not released, bonded, satisfied, vacated or stayed within fifteen (15) days after its entry or levy. (f) the Company (i) shall have failed to make payment when due of any final maturity on any obligation representing Indebtedness, (ii) shall have failed to make any other payment when due on any obligation representing Indebtedness, or (iii) shall have failed to perform or observe any other provision contained in any such obligation or in any instrument or agreement securing or relating to such obligation and, in the case of an event described in (ii) or (iii), the effect of either such failure is to cause, or permit the holder of such obligation or a trustee to cause, such obligation to become due prior to its stated maturity. (g) the Guarantor shall have failed to perform any covenant, condi- tion or agreement required to be performed by it under the Guaranty Agreement. Section 9.02. Remedies. (a) Upon the occurrence of an Event of Default, and at any time thereafter during the continuance of such Event of Default the City or the Trustee on behalf of the City may take one or more of the following rights and remedies which shall be in addition to and not in limitation of any other right or remedy which may be available to the City or the Trustee (whether pursuant to agreement or by operation of law) including but not limited to, the rights and remedies of a secured party under the Uniform Commercial Code of the State: (1) The City or the Trustee may declare all amounts payable hereunder and pursuant to the Company Note to be immediately due and payable with applicable premiums, whereupon the same shall become immediately due and payable to the Bank. (2) The City or the Trustee may cause any or all of the Project to be sold under the power of sale granted by the Deed of Trust in any manner permitted by applicable law. (3) The City or the Trustee may exercise any other right or remedy available under this Project Agreement. (b) In the event that the Company fails to make any payment required hereby, the payment so in default shall continue as an obligation of the Company, subject to the provisions of Section 3.02 hereof, until the amount in default shall have been fully paid. (c) Notwithstanding the foregoing, unless and until the City or the Rank shall have commenced proceedings to foreclose its interest in the Project; (1) The Company may, at any time, pay all accrued unpaid amounts plus applicable premiums (exclusive of any such amounts accrued solely by virtue of acceleration of the due date of the Company Note) and fully cure all def aults; and - 39 - (2) In such event, this Project Agreement shall be fully rein- stated, as if it had never been terminated, and the Company shall be accordingly restored to the use and possession of the Project. (d) Nothing contained in this Section shall be deemed to prevent the Company from seeking legal or equitable relief if it disputes the existence of an Event of Default. Section 9.03. No Remedy Exclusive. No remedy herein or in the Deed of Trust conferred or reserved to the City is intended to be exclusive of any other remedy or remedies herein or by law provided or permitted, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Project Agreement and the Company Note or Deed of Trust or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the instruments set forth in Section 3.04 to the City or to which it may be otherwise entitled, may be exercised separately, successively, concurrently or independently, from time to time and as often as it may be deemed expedient by the City or the Trustee on behalf of the City and the City or the Trustee on behalf of the City may pursue inconsistent remedies. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. Any failure by the City to insist upon strict performance by the Company of any of the terms and provisions of this Project Agreement or of the Company Note or the Deed of Trust shall not be deemed to be a waiver of any of the terms or provisions thereof, and the City or the Trustee on behalf of the City shall have the right thereafter to insist upon strict performance by the Company of any and all of them. In order to entitle the City or the Trustee on behalf of the City to exercise any remedy reserved to it in this Article, it shall not be necessary to give notice, other than such notice as may be required in this Article or by law. Such rights and remedies as are given the City or the Trustee on behalf of the City hereunder shall also extend to the Trustee, and the Trustee shall be entitled to the benefit of all covenants and agreements herein contained and may without any prior comment of the City or the Trustee on behalf of the City, proceed to seek any remedy provided for herein. Section 9.04. Agreement to Pay Attorneys' Fees and Expenses. In the event the Company should default under any of the provisions of this Project Agreement and either the City, the Trustee or the holders of the City Notes shall require and employ attorneys or incur other expenses of the nature set forth in Section 9.02 or for the collection of payments due or to become due or for the enforcement or performance or observance of any obligation or agreement on the part of the Company herein contained or to preserve the Project or to preserve the priority of the Company Note and the Deed of Trust or to defend any suit involving the Project including bankruptcy proceedings or in preparation for the commencement or defense of any proceeding or threatened suit or proceeding, all of said fees and expenses shall be added to the indebtedness of the Loan and shall be secured by the Deed of Trust and other security for the Loan provided for herein, the Company agrees that it will pay to the City, the Trustee or the holder of the City Notes the reasonable fees of such attorneys or such expenses as set forth in this Project Agreement, the Company Note and the Deed of Trust and other expenses so incurred by the City, the Trustee or the holder of the City Notes. -40- Section 9.05. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Project Agreement should be breached by any party and thereafter waived by any party, such waiver shall be limited to the particular breach so waived and shall not be deemed to be a waiver as to any other breach hereunder. Section 9.06. Repayment After Acceleration. Upon the acceleration of the Company Note, a tender of payment of the amount necessary to satisfy the entire indebtedness secured hereby made at any time prior to foreclosure sale by the City, its successors, or assigns or by anyone on behalf of the City, its successors or assigns, shall, to the extent permitted by law, constitute an evasion of the prepayment terms contained in Section 3.06 of this Project Agreement and be deemed to be a voluntary prepayment hereunder, and the City shall not be obligated to accept any such tender of payment unless such tender of payment includes the additional applicable prepayment fee required by Section 3.03 of the then outstanding principal balance of the indebtedness evidenced by the Company Note together with any and all other sums then owing to the City and the Trustee hereunder or under the Company Note and the Deed of Trust. ARTICLE X MISCELLANEOUS Section 10.01. Notices. All notices, certificates, requests or other communications between the City, the Company, the Purchasers and the Trustee required to be given hereunder or under the Resolution of Issuance shall be sufficiently given and shall be deemed given when mailed by certified mail, return receipt requested, postage prepaid, on the fifteenth Business Day after the day on which mailed, addressed as follows: City: Company: Trustee: Purchasers: A copy of each notice, certificate, request or other communication given hereunder to either the City, the Company, the Purchasers or the Trustee shall also be given to the others, and copies of all such notices shall be given to Bond Counsel. The City, the Company, the Purchasers and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent. -41- Section 10.02. Effect of Agreement. This Project Agreement shall inure to the benefit of and shall be binding upon the City, the Company, the Purchasers and their respective successors and assigns, subject to the limitation that any obligation of the City created by or arising out of this Project Agreement shall be a limited obligation of the City, payable solely out of the Revenues of the City derived from this Project 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 or taxing powers of the City or the State or any political subdivision thereof within the meaning of any constitu- tional or statutory debt limitation provision of the State whatsoever. Section 10.03. Amendment. This Project Agreement may be amended in any respect but only by written agreement of the parties hereto, and, if the City Notes remain outstanding at the time of such amendment, subject to the limitations on such amendments set forth in the Resolution of Issuance. Section 10.04. Counterparts. This Project Agreement may be executed in any number of counter- parts, each of which, when so executed and delivered, shall be an original; but such counterparts shall together constitute but one and the same Project Agreement. Section 10.05. Severability of Provisions. If any clause, provision or section of this Project Agreement 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 Project Agreement shall be construed and enforced to the end that the transactions contemplated hereby be effected and the obligations contemplated hereby be enforced, as if such illegal or invalid clause, provision or section had not been contained herein. In case any agreement or obligation contained in this Project 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 Bank, as the case may be, to the full extent permitted by law. Section 10.06. Construction. The laws of the State of California shall govern the construction and interpretation of this Project Agreement. Section 10.07. Assignment to Trustee. The interest of the City in this Project Agreement and in the Company Note is hereby assigned by the City to the Trustee for the holders of the City Notes. -42- (SEAL) ATTEST: City Clerk (SEAL) Executed as of the day of , 1982. CITY OF SAN BERNARDINO, CALIFORNIA (the "City") By Mayor -43 - DOANE PRODUCTS COMPANY, a Missouri corporation (the "Company") am Title: By: Title: ALLIED BANK OF TEXAS, a Texas banking corporation (the 'Bank" or the "Purchaser") By: Title: By: Title: FIRST NATIONAL BANK AND TRUST COMPANY OF JOPLIN, a national banking association By: Title: By: Title: a (the "Trustee") By: Title: By: Title: -44- ACKNOWLEDGEMENT STATE OF CALIFORNIA ) COUNTY OF ) On this day of , 1982, before me, a Notary Public duly commissioned, qualified and acting within and for the State and County aforesaid, appeared in person the within -named in the capacity of of Doane Products Company, a corporation, to me personally known, who stated that he was duly authorized in his capacity as aforementioned to execute the foregoing instrument for and in the name and behalf of the Company, and further stated and acknowledged that he had so signed, executed and delivered the foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this day of , 1982. (SEAL) My Commission expires: Notary Public -45- ACKNOWLEDGEMENT STATE OF CALIFORNIA COUNTY OF On this day of , 1982,.before me, a Notary Public duly commissioned, qualified and acting within and for the State and County aforesaid, appeared in person the within -named in the capacity of of Doane Products Company, a corporation, to me personally known, who stated that he was duly authorized in his capacity as aforementioned to execute the foregoing instrument for and in the name and behalf of the Company, and further stated and acknowledged that he had so signed, executed and delivered the foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this day of , 1982. (SEAL) My Commission expires: Notary Public -46- ACKNOWLEDGEMENT STATE OF CALIFORNIA ) COUNTY OF ) On this day of , 1982, before me, a Notary Public duly commissioned, qualified and acting within and for the State and County aforesaid, appeared in person the within -named of in the capacity of of , to me personally known, who stated that he was duly authorized in his capacity as aforementioned to execute the foregoing instrument for and in the name and behalf of the Bank, and further stated and acknowledged that he had so signed, executed and delivered the foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this day of , 1982. (SEAL) My Commission expires: Notary Public -47 - ACKNOWLEDGEMENT STATE OF CALIFORNIA COUNTY OF On this day of , 1982, before me, a Notary Public duly commissioned, qualified and acting within and for the County and State aforesaid, appeared in person the within -named and , Mayor and City Clerk, 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 instrument for and in the name and behalf of said City, and further stated and acknowledged that they had so signed, executed and delivered the foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this day of , 1982. (SEAL) My Commission expires: Notary Public -48- Exhibit "A" $4,500,000 COMPANY NOTE PROMISSORY NOTE SECURED BY DEED OF TRUST From Doane Products Company, a Missouri corporation to the City of San Bernardino, California, a municipal corporation $4,500,000 2,008-7 8/10/82 San Bernardino, California August, 1982 FOR VALUE RECEIVED, Doane Products Company, a Missouri corporation (the "Company"), promises to pay to _ , a Corporation (the "Trustee"), on behalf of the City of San Bernardino, California, a municipal corporation (the "City") at the address indi- cated below or at such other location as the Trustee shall designate in writing, or at such other place as the holder or holders of this Note may from time to time designate, the principal sum of Four Million Five Hundred Thousand Dollars ($4,500,000), plus interest as computed below. The Company Note shall bear interest at a variable rate equal to sixty- five percent (65%) of the Prime Rate, as defined in the Project Agreement, calculated daily, provided, however, that such rate shall never be less than eight and three quarters percent (8-3/4%). Interest on this Company Note shall be payable monthly on the first day of each month, with the first interest payment to be made on October 1, 1982. This Company Note shall mature, subject to the prepayment provisions of Section 3.06 of the Project Agreement in one hundred eighty (180) equal monthly installments of $25,000 each commencing _ 1, 19_, and ending _ __ 1, 19 . In the event that Allied Bank of Texas shall fail to establish or publish a Prime Rate, then, for purposes hereof, the Prime Rate shall be deemed to be the average Prime Rate for the three (3) largest (total assets) banking institutions in the continental United States then publishing a prime rate. All payments shall be in lawful money of the United States of America and shall be applied first to interest and the remainder, if any, on principal. It is the intent of the City, the Purchasers of the City Notes and the Company that payments on this Company Note shall be in an amount sufficient to fully pay all payments of principal and interest on the City Notes together with any fees of the City or any servicer of the Loan. Payment on this Company Note shall be deemed to constitute payment on the City Notes without further delivery by the City. MW This Company Note is subject to all of the terms and conditions contained in the Project Agreement, the Deed of Trust and the Resolution of Issuance, executed, acknowledged and delivered on or prior to the date of this Company Note by the undersigned or the City to the same extent as if such documents were set forth in full in this Company Note and the same are hereby incorporated herein by reference. This Company Note is secured by the Deed of Trust on the Project, which Deed of Trust constitutes a first lien on the Project; and such other security instruments as may be provided for in the Project Agreement. This Company Note shall become immediately due and payable prior to maturity under the circumstances as provided in the Project Agreement, including upon the occurrence of an Event of Taxability or an Event of Default. This Company Note may be prepaid at the option of the undersigned in whole or in part as provided in the Project Agreement. The Company shall prepay the Company Note in whole, at the option of the holders of at least 66-2/3% of the aggregate principal amount of the City Notes Outstanding on September 1, 1987 or September 1, 1992, at a price equal to the aggregate principal amount of the Company Note Outstanding plus interest thereon to the redemption date, without premium, as provided in the Project Agreement. The undersigned agrees to pay all costs of collection when incurred, including but not limited to reasonable attorneys' fees. If any suit or action is instituted to enforce this Company Note, the undersigned promises to pay, in addition to the costs and disbursements otherwise allowed by law, such sum as the court may adjudge reasonable attorneys' fees in such suit or action. If any payment due hereunder is not made on or prior to the day the date such payment is due, the undersigned agrees to pay a late charge in the amount of two percent (2%) of the payment so due and unpaid, in addition to said payment; but nothing in this paragraph is to be construed as any obligation on the part of the holder of this Company Note to accept payment of any installment of less than the total unpaid principal balance after its due date. In the event of a Determination of Taxability as defined in the Project Agreement, this Company Note shall be redeemed prior to maturity in whole on the date and in the amount as provided in the Project Agreement. If this Company Note is not paid when due, the Company promises to pay all costs and expenses of collection and reasonable attorneys' fees incurred by the holder hereof on account of such collection, plus interest at the rate applicable to principal, whether or not suit is filed hereon. The Company hereby consents to renewals, replacements, and extensions of time for payment hereof, before, at, or after maturity; consents to the acceptance, release or substitution of security for this Company Note; and waives demand and protest and the right to assert any statute of limitations. The indebtedness evidenced hereby shall be payable in lawful money of the United States. In any action brought under or arising out of this Company Note, the Company, including successor(s) or assign(s) hereby consents to the jurisdiction of any competent court within the State of California, and to service of process by any means authorized by California law. Any payment to be made under this Company Note shall be made when due at the Principal Office of the Trustee at: - 2 - This Company Note will be governed by California 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 Ordinance, the applicable Project Agreement 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 Company 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. DOANE PRODUCTS COMPANY, a Missouri corporation By:_ Title: By: Title: - 3 - Exhibit "B" 2,008-11/SB4* 7/27/82 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: LAW OFFICES OF TIMOTHY J. SABO ) Suite 230 ) 20335 Ventura Boulevard ) Woodland Hills, California 91364 ) Space Above For Recorder's Use DEED OF TRUST THIS DEED OF TRUST is being executed by Doane Products Company, a Missouri corporation, the owner of the real property described in the attached Exhibit "A" (the "Trustor"), to (the "Trustee"), in favor of the CITY OF SAN BERNARDINO (the "Beneficiary"). The Beneficiary is making a loan to the Trustor in the amount of $ (the "Loan") evidenced by a promissory note, dated as of the date hereof, payable to Beneficiary or its order in the principal amount of the Loan together with interest thereon (the "Note"). The Loan will be funded at the time and in accordance with the Project Agreement by and among the Trustor, the Trustee and the Beneficiary, dated as of 1, 1982 (the "Project Agreement"). All terms used herein shall be defined in the same manner as such items are defined in the Project Agreement. In consideration of the Loan, the Trustor hereby irrevocably grants, conveys, transfers and assigns to the Trustee, its successors and assigns, in trust with power of sale and right of entry and possession as provided below, all of its present and future estate, right, title and interest in and to the following described property: (A) The real property (the "Property") described in the attached Exhibit "A" which is incorporated into this Deed of Trust by reference; (B) All structures, buildings, improvements, appurtenances and fixtures of any kind on the Property owned by Trustor, including but not limited to all apparatus, equipment and appliances used in connection with the operation or occupancy of the Property, such as heating and air-conditioning systems and facilities used to provide any utility services, refrigeration, ventilation, and all window coverings, drapes and rods, carpeting and floor coverings, it being intended and agreed that all such items will be conclusively considered to be a part of the real property conveyed by this Deed of Trust, whether or not attached or affixed to the Property (the "Improvements"); (C) all existing and future appurtenances of the Property and all rights of the Trustor in and to any existing and future streets, roads or public places, easements or rights of way relating to the Property; (D) All of the existing and future leases affecting the Property or any part thereof, including but not limited to any security deposits; (E) All existing and future proceeds and claims arising on account of any damage to or taking of the Property or any part thereof and all existing and future causes of action and recoveries for any loss or diminution in value of the Property or any part thereof. -1- The Trustor also hereby grants to the Trustee in favor of the Benefici- ary a security interest in all of the following described property, whether now or hereafter existing, and in which the Trustor now has or hereafter acquires any right, title, estate or interest: (F) All goods located on the Property or any part thereof and used in the operation or occupancy of the Property or any part thereof or in any construction on the Property or any part thereof but which are not effectively made real property under Clause (B) above, including but not limtied to all appliances, furniture and furnishings, building service equipment, and building materials, supplies and equipment; and (G) All general intangibles relating to the development or use of the Property or any part thereof, including but not limited to all governmental permits relating to construction on the Property or any part thereof, all names under or by which the Property or any part thereof or any of the Improvements may at any time be operated or known and all rights to carry on business under any such names or any variant thereof, and all trademarks and goodwill in any way relating to the Property or any part thereof. All of the foregoing real; and personal property and interests therein described in the above clauses (A) throught (G) inclusive are herein collectively called the "Mortgaged Property." This instrument secures: (1) Payment and performance of the Trustor's indebtedness and obligations under the Note evidencing the Loan, and all exten- sions, renewals and modifications thereof; (2) The payment and performance of the Trustor's obligations under this Deed of Trust; (3) The payment of all sums advanced or paid out by the Beneficiary or the Trustee under any provision of this Deed of Trust to protect the security of this Deed of Trust; and (4) The payment and performance of the Trustor's obligations and agreements under the Project Agreement and under all other and future agreements executed by the Trustor in favor of the Beneficiary and relating to the Note. follows: To protect the security of this Deed of Trust, the parties agree as A. General 1. Title to Properties. Except as disclosed to Beneficiary in writing, Trustor has good and marketable title to the Property as shown on Exhibit "A" free and clear of any lien or encumbrance. 2. Preservation and Defense of Property. Subject to Sec- tion 5.02 of the Project Agreement: Trustor agrees to keep the Project, as that term is defined in the Project Agreement (herein the "Project"), in good order and good operating condition; to make or cause to be made, as and when necessary, all repairs, renewals and replacements, structural and non-structural, exterior and interior, ordinary and extraordinary, foreseen and unforeseen; not to remove, demolish or substantially alter or permit the removal, demolition or substantial alteration (except such alterations as may be required by laws, ordinances or regulations) of any of the improvements on the Property; to complete promptly and in good and workmanlike manner any improvement which may be damaged, removed, substantially altered or destroyed thereon, and to pay when due all claims for labor performed and materials furnished therefor; to comply with all laws, ordinances, regulations, covenants, conditions and restrictions now or hereafter enacted affecting the Project or the Property or any part thereof or requiring any -2- alterations or improvements; not to commit or permit any waste or deterioration of the Project or the Property; to keep and maintain abutting grounds, sidewalks, roads, parking and landscaped areas over which Trustor has control in good and neat order and repair; to comply with the provisions of any easement of all or any part of the Project, or the Property; not to knowingly commit, suffer or permit any act to be done in or upon the Project or the Property in violation of any law, ordinance or regulation; not to permit the Project or the Property to become vacant or deserted. Should said Project or Property, or any part thereof, require inspection, repair or protection other than that given it by Trustor, then, and in that event, Beneficiary may enter or cause entry to be made upon said Property and into building or buildings thereon for inspection, repair or protection thereof, and such repair may be made by Beneficiary and be made or done in such manner as fully to protect the interest of Beneficiary in the opinion of Beneficiary, and any and all sums expended by Beneficiary in doing or causing to be done any of the things above authorized are secured by this Deed of Trust and shall be paid by Trustor on demand. Trustor will appear in and contest any action or proceeding purporting to affect the interest of the Beneficiary in the Project or the Property as set forth in the Project Agreement or the rights or powers of the Beneficiary or its assigns and to pay all costs and expenses, including reasonable attorneys' fees, in any such action or proceeding in which the Beneficiary or the Trustee on behalf of the Beneficiary may appear. coverages: 3. Insurance Required. (a) The Trustor agrees to provide the following insurance (i) Hazard and Liability Insurance; (ii) During the course of any repair to or improve- ment to the Project, Trustor shall provide builder's completed value risk insurance against "all risks of physical loss", including collapse and transit coverage, during construction of such im- provements, with deductibles not to exceed $1,000, in non - reporting form, covering the total value of work performed and equipment, supplies and materials furnished. Such policy of insur- ance shall contain the "permission to occupy upon completion of work or occupancy" endorsement. (iii) The Trustor shall supply boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, air conditioning, refrigeration and eleva- tor equipment and escalator equipment, provided the Project contains equipment of such nature, and insurance against loss of occupancy or use arising from any such breakdown, in such amounts as are reasonably satisfactory to the City. (iv) The Trustor further agrees to procure and deliv- er to the City, policies of title insurance required under Sec- -3- tion 4.02 of the Project Agreement issued by a company author- ized by the State of California to issue such insurance. (v) At all times during the term of this Deed of Trust, Trustor shall comply with the laws of the State of California relating to worker's compensation with respect to the Project. Such insurance coverage may be effected under overall blanket or excess coverage policies of Trustor or may be provided by tenants of the Project but all policies required hereunder shall name the Beneficiary and the Trustee as additional insureds and shall contain a standard mortgage clause in favor of the Trustee on behalf of the Beneficiary, not subject to contribution, and lender's loss payable endorsement for the benefit of the Trustee on behalf of the Beneficiary. Trustor shall furnish or cause to be furnished to the Trustee a certificate of insurance evidencing proof of coverage with respect to all required insurance. If a blanket or excess coverage policy is utilized, then Trustor shall furnish to the Trustee a signed certificate of insurance for each policy setting forth the coverage, the limits of liability, the name of the carrier, the policy number, and the expiration date. In the event of loss or damage to the Project, the net proceeds of any insurance provided hereunder shall be applied as set forth in Article V of the Project Agreement; in the event of a public liability occurrence, the net proceeds of any insurance provided hereunder shall be applied toward extinguishment or satisfaction of such liability. Each insurance policy maintained pursuant to this Section shall contain a provision that such policy shall not be cancelled or amended in any material manner unless the Trustee and the Beneficiary are notified at least thirty (30) days prior to such cancellation or amendment and at least ten (10) days prior to the expiration of any such policy Trustor shall furnish evidence satisfactory to the Trustee and the Beneficiary that such policy has been renewed or replaced or is no longer required by the Project Agreement. All policies of insurance shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy notwithstanding any act or negligence of Trustor which might otherwise result in forfeiture of such insurance and the further agreement of the insurer waiving all rights of set off, counterclaim or deductions against Trustor. All such policies shall not be subject to contribution by the Beneficiary or the Trustee. All such policies, including policies for any amounts carried in excess of the required minimum and policies not specifically required by the Trustee shall be in a form satisfactory to the Beneficiary, shall be maintained in full force and effect, as collateral security for payment of the Loan. If the insurance, or any part thereof, shall expire, or be withdrawn, or become void or unsafe by reason of Trustor's breach of any condition thereof, or become void or unsafe by reason of the failure or impairment of the capital of any company in which the insurance may then be carried, or if for any reason whatever the insurance shall be unsatisfactory to the Trustee, Trustor shall place new insurance on the Project, satisfactory to the Trustee. -4- In the event Trustor fails to provide, maintain, keep in force or deliver and furnish to the Beneficiary and the Trustee the policies of insurance required hereunder and by the Project Agreement, the Trustee may procure such insurance or single -interest insurance for such risks covering its interest, and Trustor shall pay all premiums thereon promptly upon demand by the Trustee and until such payment is made by Trustor, the amount of all such premiums, together with interest thereon at a rate which shall be equal to the rate specified in the Note, shall be secured by the Deed of Trust. In the event of foreclosure of this Deed of Trust or assignment of the Project in extinguishment, in whole or in part of the Loan, all right, title and interest of Trustor in and to all policies of insurance required by the Project Agreement shall inure to the benefit of and pass to the successor in interest to Trustor or the purchaser or grantee of the Project. 4. Payment of Taxes. Trustor will pay and discharge promptly all State and federal taxes, assessments and governmental charges or levies imposed upon it in connection with the Project or in respect of any of its property and assets used in connection with the Project before the same shall become in default, including, but not limited to, all taxes to which Trustor and any company, corporation, joint stock association or limited partnership in which the Project shall hereafter vest may be liable under the laws of the United States of America, the State both present and future, which under the provisions of such laws may be or become a prior lien upon the Project and the Property, as well as all other charges or claims of every kind and nature which may be or become a prior lien upon the Project, or which may be or become first distributable or allowable or payable, before the indebtedness secured hereby, out of the proceeds of any judicial sale of the Project, except such that are contested by Trustor in accordance with the Project Agreement. 5. Liens and Encumbrances. Trustor will pay and promptly discharge, at its cost and expense, all other liens, encumbrances and charges upon the Project, or any part thereof or interest therein; provided that Trustor shall have the right to contest in good faith the validity of any such lien, encumbrance or charge; provided, however, that if any such lien, encumbrance or charge has or may have priority over the lien of this Deed of Trust, then Trustor shall first deposit with the Beneficiary a bond or other security satisfactory to the Benefici- ary in such amounts as the Beneficiary shall reasonably require; and further provided that Trustor shall thereafter diligently proceed to cause such lien, encumbrance or charge to be removed and discharged. If Trustor shall fail to pay and promptly discharge any such lien, encumbrance or charge, then, in addition to any other right or remedy of the Beneficiary, the Beneficiary may, but shall not be obligated to, discharge the same, either by paying the amount claimed to be due, or by procuring the discharge of such lien by depositing in court a bond or the amount claimed or otherwise giving security for such claim, or in such manner as is or may be prescribed by law, and all expenditures and expenses incurred by the Beneficiary in so doing shall be recoverable from Trustor upon the terms set forth in Article IX of the Project Agreement and shall be deemed advances secured by the lien of the Deed of Trust. Trustor shall not permit any lien on the Property or the Project other than the Loan or Permitted Encumbrances, except Junior Liens placed on the Property or the Project with the prior written consent of the Beneficiary, such consent not to be unreasonably withheld, all as provided in the Project Agreement. -5- 6. Insurance and Condemnation Proceeds. Should a loss occur under any policy of insurance required by Section 3 hereof, or should all or any portion of the Property be taken or damaged by reason of any public improvement or condemnation proceeding, the Beneficiary shall be entitled to all insurance proceeds, compensation, awards and other payments or relief therefor (all herein- after referred to as "proceeds"), and, whether or not the security for the Loan secured by this Deed of Trust has been impaired, the Beneficiary shall be entitled to apply the proceeds collected, after first deducting therefrom all its expenses, including attorneys' fees, in collecting said proceeds, to any and all indebtedness secured hereby and thereafter shall pay the balance remaining, if any, to the Trustor. At its option, in its own name, the Beneficiary shall be entitled to commence, appear in and prosecute any action or proceeding or to make any compromise or settlement, in connection with such loss, taking or damage. All such proceeds and rights of action hereby are assigned to the Beneficiary. In the event of such insurance loss or in the event that only a portion of the Property is taken or damaged by reason of any public improvement or condemnation proceeding, and restoration is necessary, the Beneficiary, after deducting from said proceeds received all its expenses, including attorneys' fees, and at its sole and absolute discretion and without limiting the provisions of the preceding sentences hereof, may release to the Trustor, as restoration progresses, so much of said amount as equals the costs of restoration effected by the Trustor, subject to reasonable conditions, including the right of the Beneficiary to withhold up to ten percent (10%) of said amount until completion and the expiration of the period within which mechanics' or materialmen's liens may be filed and until receipt of satisfactory evidence that no liens exist. Any amount required to complete such restoration in excess of such proceeds shall be paid by the Trustor before such proceeds are used. The Trustor agrees to execute such further assignments of any such proceeds and rights of action as the Beneficiary or the Trustee may require. 7. Payment of Utilities. Trustor shall pay when due all utility charges which are incurred for the bene it of the Project or which may become a charge or lien against the Project for gas, electricity, water or sewer services furnished to the Project and all other assessments or charges of a similar nature, whether public or private, affecting the Project or any portion thereof, whether or not such taxes, assessments or charges are liens thereon. 8. Concerning the Project. Trustor shall devote the Project to industrial uses as set forth in the Project Agreement. There shall be no discrimination against or segregation of any person, or group of persons, on account of sex, race, marital status, color, age, creed, handicap, national origin or ancestry in the enjoyment of the Property, nor shall Trustor or any person claiming under or through them establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Project or any portion thereof. 9. Compliance with Applicable Laws. All work performed in connection with the Project shall be performed in strict compliance with all applicable federal, state, county and municipal laws, ordinances, rules and regula- tions now in force or that may be enacted hereafter. The existing improvements at the Project and the operation of the Project shall also comply with all applicable federal, state, county or municipal laws, ordinances, rules and regulations. -6- 1.0. Financial Statements. Trustor shall furnish the Trustee, or cause to be furnished to the Trustee, annual financial and operating statements of Trustor with respect to the Project (within one hundred twenty (120) days of the close of the Trustor's fiscal year) prepared by a certified public accountant reasonably satisfactory to the Beneficiary and the Trustee but which need not be audited. Trustor agrees to make its books and records relating to the Project available for inspection by the Beneficiary the Trustee, upon request at any reasonable time. 11. Sale or Transfer of Project. If Trustor intends to sell or transfer the Project in accordance with the terms of the Project Agreement, in whole or in part, it shall give Beneficiary and Trustee thirty (30) day prior written notice of the name and address of the purchaser or transferee, together with (a) written evidence that the purchaser or transferee will be bound by all terms of the Project Agreement, the Note, this Deed of Trust, the Assignment of Leases, and (b) written evidence that the declaration of establishment of protective covenants, conditions and restrictions and grant of easement will remain in full force and effect. 12. Indemnification, Authorization of Certain Actions, Attorneys' Fees. If the Beneficiary or the Trustee is made a party defendant to any litigation the subject matter of which is the Loan, the Project or any part therof or any interest therein, or the occupancy of the Project by Trustor, then Trustor shall indemnify, defend and hold the Beneficiary and/or the Trustee harmless from all liability by reason of such litigation, including reasonable attorneys' fees, expenses and costs incurred by the Beneficiary or the Trustee in any such litigation, whether or not any such litigation is prosecuted to judgment. If any party hereto commences an action against any other party to enforce any of the terms hereof or because of the breach of any of the terms hereof, or for the recovery of any sum secured hereby, the prevailing party shall be entitled to reasonable attorneys' fees and expenses, and the right to such attorneys' fees and expenses shall be deemed to have accrued on the commence- ment of such action, and shall be enforceable whether or not such action is prosecuted to judgment. If any party hereto shall breach any term of the Project Agreement, the Note or this Deed of Trust, the other parties may employ an attorney or attorneys to protect their rights, and in the event of such employment following any breach, the breaching party shall reimburse the other parties for any reasonable attorneys' fees and expenses incurred by the non -breaching party, whether or not an action is actually commenced by reason of such breach. Trustee at any time, at Trustee's option, may commence and maintain suit in any court of competent jurisdiction and obtain the aid and direction of said court in the execution by it of the trusts or any of them, herein expressed or contained, and, in such suit, may obtain the orders or decrees, interlocutory or final of said court directing the execution of said trusts, and confirming and approving Trustee's act, or any of them; or any sales or convey- ances made by Trustee, and adjudging the validity thereof, and directing that the purchasers of the Property sold and conveyed be let into immediate possession thereof, and providing for orders of court or other process requiring the Sheriff of the county in which said Property is situated to place and maintain said purchasers -7- in quiet and peaceable possession of the Property so purchased by them, and the whole thereof. 13. Inspection of the Project. Trustor agrees that the Benefici- ary and Trustee and their duly authorized agents shall have the right at all reasonable times to enter upon and to examine and inspect the Project. 14. Collection of Rents, Issues and Profits. Beneficiary confers upon Trustor the authority to collect and retain the rents, issues and profits of the Project as they become due and payable, subject, however, to the right of the Beneficiary to revoke said authority upon the occurrence of an Event of Default under the Project Agreement or at any time thereafter while the Event of Default remains uncured. Beneficiary may revoke said authority and collect and retain the rents, issues and profits of the Project assigned herein to Beneficiary as set forth above without taking possession of all or any part of the Project. The right to collect rents and profits as herein provided shall not grant to Beneficiary or Trustee the right to possession, except as expressly herein provided; nor shall said right impose upon Beneficiary or Trustee the duty to produce rents or profits or maintain the Project in whole or in part. Beneficiary may apply, in its sole discretion, any rents, issues and profits collected by it against any indebtedness or obligation secured hereby or any obligations of Trustor arising hereunder. Collection of any rents, issues and profits by Beneficiary shall not cure or waive any default or notice of default hereunder or invalidate any acts done pursuant to such notice. 15. Acceptance of Trust, Notice of Indemnification. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, becomes a public record as provided by law. 16. Substitution of Trustees. From time to time, by a writing signed and acknowledged by Beneficiary and recorded in the Office of the Recorder of the County in which the Property is situated, Beneficiary may appoint another trustee to act in the place and stead of Trustee or any successor. Such writing shall refer to this Deed of Trust and set forth the date, book and page of its recordation. The recordation of such instrument of substitution shall discharge Trustee herein named and shall appoint the new trustee as the trustee hereunder with the same effect as if originally named Trustee herein. A writing recorded pursuant to the provisions of this section shall be conclusive proof of the proper substitution of such new trustee. 17. Reconveyance; Release of Property. Upon Beneficiary's written request and upon surrender to Trustee for cancellation of this Deed of Trust and any note, instrument, or instruments, setting forth all obligations secured hereby, Trustee shall reconvey, without warranty, the Property or that portion thereof then held hereunder. Upon Beneficiary's written request and satisfaction of the terms and provisions of the Project Agreement, Trustee shall reconvey, without warranty, the portion of the Property to be released. The recitals of any matters or facts in any reconveyance executed hereunder shall be conclusive proof of the truthfullness thereof. To the extent permitted by law, the reconveyance may describe the grantee as "the person or persons legally entitled thereto". Neither Beneficiary nor Trustee shall have any duty to determine the rights of persons claiming to be rightful grantees of any reconveyance. When the Property has been -8- fully reconveyed, the last such reconveyance shall operate as a reassignment of all future rents, issues and profits of the Property to the person or persons legally entitled thereto, unless such reconveyance expressly provides to the contrary. Trustee at any time, upon request of Beneficiary, may reconvey to Trustor or Trustor's successors or assigns, any portion of said Property without affecting the personal liability of any person for the payment of any of said indebtedness, or the lien on this Deed of Trust upon the remainder of the Property not reconveyed. 18. Acceleration. The Loan secured hereby shall become imme- diately due and payable without notice in the amount and under the circumstances as provided in the Project Agreement. In addition, in the event of the passage after the date of this Deed of Trust of any law of the State of California, deducting from the value of land, for the purpose of taxation, any lien thereon, or changing in any way the laws now in force for the taxation of deeds of trust or debts secured by Deed of Trust for State or local purposes or the manner of the collection of such taxes so as to affect this Deed of Trust, the entire principal balance under said Note, together with all accrued interest thereon, at the option of said Beneficiary, without demand or notice, forthwith shall become due and payable; provided, however, that such option shall be ineffective if Trustor is permitted by law to pay the whole of such tax, in addition to all other payments required hereunder, and, if prior to such specified date, Trustor does pay such tax and agrees to pay any such tax when hereafter levied or assessed against the Property, and such agreement shall constitute a modification of this Deed of Trust. 19. Prepayment. The Loan secured hereby may at the option of Trustor be prepaid at the times, in the manner and in the amounts set forth in the Project Agreement. 20. Incorporation of Terms. This Deed of Trust is hereby made subject to all of these terms and conditions contained in the Note, Project Agreement, Resolution of Issuance and Assignment of Leases, copies of which are on file in the office of the Beneficiary and which are incorporated herein by this reference. 21. Security Agreement. This Deed of Trust is deemed a Secur- ity Agreement as defined in the California Commercial Code, the Trustor being the debtor and the Beneficiary being the Secured party, and the remedies for any violation of the covenants, terms and conditions of the agreements herein contained shall be (i) as prescribed herein, or (ii) by general law, or (iii) as to such part of the security which is also reflected in the financing statement which will be filed to perfect the security interest created herein and filed in the real estate records of the county where the land described herein is located, by the specific statutory consequences now, or hereafter enacted and specified in the California Commercial Code, all at Beneficiary's sole election. Trustor and Beneficiary agree that the filing of a Financing Statement in the records normally having to do with personal property shall never be construed as in anywise derogating from or impairing this declaration and the hereby stated intention of the parties hereto that everything used in connection with the operation of occupancy of said Property is and, at all times and for all purposes and in all proceedings, both legal -9- and equitable, shall be regarded as real property, irrespective of whether (i) any such item is physically attached to the buildings and improvements, (ii) serial numbers are used for the better identification of certain equipment items capable of being filed by the Beneficiary, or (iii) any such item is referred to or reflected in any such financing statement so filed at any time. Such mention in the financing statement is declared to be for the protection of the Beneficiary in the event any court or judge shall at any time hold that notice of Beneficiary's priority of interest must be filed in the California Commercial Code records to be effective against a particular class of persons, including, but not limited to, the federal government and any subdivisions or entity of the federal government. Trustor covenants and agrees to reimburse Beneficiary for any costs incurred in filing such financing statement and any continuation statements. 22. Release of Trustee and Beneficiary. Neither the Trustee nor the Beneficiary shall be liable or responsible with respect to acts or omissions hereunder, except for the Trustee's or the Beneficiary's own gross negligence or willful default, nor shall either be liable or responsible for any acts or omissions of any agent, if selected with reasonable care. 23. Special Covenant of Trustor. Trustor promises and agrees to perform all of the obligations in and under that certain Project Agreement, and any other documents given now or hereafter as security for said Note secured by this Deed of Trust. B. Defaults and Remedies 1. At any time after an Event of Default as set forth in the Project Agreement, Beneficiary and Trustee shall have the following rights and remedies which shall be in addition to and not in limitation of any other right or remedy which may be available to the Beneficiary or the Trustee (whether pursuant to agreement or by operation of law) including but not limtied to, the rights and remedies of a secured party under the Uniform Commercial Code of the State: (a) The Beneficiary or the Trustee may declare all amounts payable under the Project Agreement and the Note to be immediately due and payable with applicable premiums, whereupon the same shall become immedi- ately due and payable to the Trustee for deposit and to be used and applied for the payment of Loan amounts. (b) Cause any or all of the Property to be sold under the power of sale granted by this Deed of Trust in any manner permitted by applicable law. (c) The Beneficiary or the Trustee may take whatever action or proceeding that may appear necessary or desirable to enforce or implement the provisions of the Assignment of Leases. (d) The Beneficiary may exercise any other right or remedy available under the Project Agreement. (e) In the event that the Trustor fails to make any payment required by the Project Agreement, the payment so in default shall -10- continue as an obligation of the Trustor, subject to the provisions of Section 3.02 of the Project Agreement, until the amount in default shall have been fully paid. (f) Notwithstanding the foregoing, unless and until the Beneficiary or the Trustee shall have commenced proceedings to foreclose its interest in the Project: (i) The Trustor may, at any time, pay all accrued unpaid amounts plus applicable premiums (exclusive of any such amounts accrued solely by virtue of acceleration of the due date of the Note) and fully cure all defaults; and (ii) In such event, the Project Agreement shall be fully reinstated, as if it had never been terminated, and the Trustor shall be accordingly restored to the use and possession of the Project. .2. No Remedy Exclusive. No remedy herein conferred or re- served to the Beneficiary is intended to be exclusive of any other remedy or remedies herein or by law provided or permitted, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Project Agreement, or now or hereafter existing at law or in equity or by statute. 3. No Additional Waiver Implied by One Waiver. In the event any agreement contained in the Project Agreement or this Deed of Trust should be breached by any party and thereafter waived by any other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any subsequent breach or default nor any other breach hereunder. 4. Conclusive Proof of Default. In the event of a sale of this Property, or any part thereof, the execution of a deed or deeds therefor under these trusts, the recitals therein of default, and of the recordation of notice thereof, and of publication and posting of notice of sale and of a demand by Beneficiary that such sale should be made, shall be conclusive proof of such default and recordation, and of the due publication and posting of such notice of sale, and that the sale was made on due and proper demand by Beneficiary; and any such deed or deeds with such recitals therein, shall be effectual and conclusive against Trustor and all other persons, as to such default, recordation, publication, posting and demand; and the receipt for the purchase money recited or contained in any deed executed to the purchaser as aforesaid, shall be sufficient discharge to such purchaser from all obligations to see to the proper application of the purchase money, according to the trusts aforesaid. IN WITNESS WHEREOF, Trustor has executed this Deed of Trust on the day and year as hereinfter set forth. (Any Trustor whose address is set forth below hereby requests that a copy of notice of default and notice of sale be mailed to him at that address. Failure to insert an address shall constitute a waiver of the right to receive a copy of a notice of default.) TRUSTOR PLEASE NOTE: IN THE EVENT OF YOUR. DEFAULT, CALIFORNIA PROCEDURE PERMITS THE TRUSTEE TO SELL THE PROPERTY AT A SALE HELD WITHOUT SUPERVISION BY ANY COURT AFTER EXPIRA- TION OF A PERIOD PRESCRIBED BY LAW. UNLESS YOU PROVIDE AN AD- -11- DRESS FOR THE GIVING OF NOTICE, YOU MAY NOT BE ENTITLED TO OTHER. NOTICE OF THE COMMENCEMENT OF SALE PROCEEDINGS. BY EXECUTION OF THIS DEED OF TRUST, YOU CONSENT TO SUCH PROCEDURE. IF YOU HAVE ANY QUESTIONS CONCERNING IT, YOU SHOULD CONSULT YOUR LEGAL ADVISOR. BENEFICIARY URGES YOU TO GIVE IT PROMPT NOTICE OF ANY CHANGE IN YOUR ADDRESS SO THAT YOU MAY RECEIVE PROMPTLY ANY NOTICE GIVEN PURSUANT TO THIS DEED OF TRUST. DATED: .1982 Trustor(s) DOANE PRODUCTS COMPANY, a Missouri corporation By: -12- STATE OF CALIFORNIA ) SS. COUNTY OF ) On , 1982, before me, the undersigned, a Notary Public in and for said State, personally appeared , known to me to be the of of , the corporation that executed the within instrument and known to me or proved to me on the oath of ) to be the person who executed the within instrument on behalf of said , and acknowledged to me that such corporation executed the same. WITNESS my hand and official seal. Signature: (Notarial Seal) -13- STATE OF ) SS. COUNTY OF ) On , 1982, before me, the undersigned, a Notary Public in and for said State, personally appeared , known to me to be the of of , the corporation that executed the within instrument and known to me or proved to me on the oath of ) to be the person who executed the within instrument on behalf of said , and acknowledged to me that such corporation executed the same. WITNESS my hand and official seal. Signature: (Notarial Seal) -14- Exhibit "C" Legal Description of Land Exhibit "D" Form of Title Insurance Policy Exhibit "E" (Reserved) Exhibit 'T" Schedule of Performance Exhibit "G" Detailed Budget 4 Exhibit "H" Final Plans and Specifications