HomeMy WebLinkAboutR10- MDA San Bernardino Associates SABO & GREEN
ATTORNEYS AT LAW
A PROFESSIONAL CORPORATION
LOS ANGELES OFFICE 201 NORTH"E"STREET COACHELLA VALLEY OFFICE
Sum 206
23801 CALABASAS ROAD SAN BERNARDwo,CALi oRmA 92401 35-325 DATE PAL`t DRIVE
Surm 1015 (909)383-9373 SuTE 232
CALABASAS,CALffORNIA 91302 FAX(909)383-9378 CATHEDRAL CrrY,CALIFORNIA 92234
(818)704-0195 (760)770-0873
FAX(818)704-4729 FAX(760)770-1724
August 20, 1998
(BY: FEDERAL EXPRESS)
United States Department of
Housing and Urban Development
Attention: Mr . William McGill
Financial Services Division
451 Seventh Street, SW
Room 7180
Washington, D.C. 20410
Re : City of San Bernardino, California
Section 108 Loan Guarantee Program
Grant No . B-96-MC-06-0539
(MDA-San Bernardino Associates - Cinema Star Multi-flex
Theater Project)
Dear Mr . Mc Gill :
On behalf of the Redevelopment Agency of the city of San
Bernardino (the "Agency") this letter and the accompanying loan
documentation is transmitted to your attention. The United States
Department of Housing and Urban Development ("HUD") has previously
delivered a set of loan guarantee commitment documents for the MDA-
San Bernardino Associates - Cinema Star Multi-P1ex Theater Project
(the "Theater Project") to the City of San Bernardino (the "City")
under cover of correspondence dated March 13, 1998 for Section 108
Loan Guarantee Program Grant No . B-96-MC-06-0539 (the "Section 108
Contract") .
SBEO/0001/DCC/581
08/20/98 2:05 zvp
Mr. William McGill
August 20, 1998
Page 2
The City is the "Unit of General Local Government" and
the Agency is the "designated public agency borrower" as these
terms are defined in the Section 108 Contract. The proceeds of the
funds disbursed to the Agency under the Section 108 Loan Contract
will in turn be loaned by the Agency to MDA-San Bernardino
Associates, a Delaware limited liability company (the
"Borrower") for the improvement of the Theater Project .
On behalf of the Agency, I request that HUD begin the
legal review of the enclosed documents for the Theater Project in
order to confirm that in their present draft form, each appears to
be satisfactory to HUD. Under cover of a separate letter the City
and Agency will submit to your attention the fully executed form of
the HUD Section 108 Contract and related documents, together with
a completed Section 108 funds advance request. At this time, it is
our expectation that the escrow transaction described in Section
7 . 0 of Document No. 1, below will be in a condition to close during
the week of September 7, 1998, subject to the completion by HUD of
its review of the RROF for the Theater Project and the receipt by
the Agency from HUD of an initial- disbursement of funds under the
Section 108 Contract .
The Theater Project loan documents identified below
include the key elements of the "other security" which will be
obtained by the Agency as part of the Theater Project in accordance
with the "Special Conditions and Modifications" of Paragraph 15 of
the Section 108 Contract . Other related Theater Project loan
documents are in the process of being reviewed and finalized by
GMAC-Mortgage, the Borrower, the Theater Tenant and the Agency.
Accordingly, the Theater Project documents, identified below as
numbers 1-9 are submitted to you in draft form at this time, and
are subject to minor changes as the final text of the GMAC-Mortgage
loan documents and the Agency loan documents are integrated with
the comments of the Theater Tenant and the Borrower .
The Agency will use the proceeds of the $7 . OM in Section
108 funds drawn from HUD under the Section 108 Contract, together
with certain other local funds of the Agency, to loan to the
Borrower for the construction of the Theater Project . The terms of
SBEO/0001/00C/581
08/20/98 2:05 zvo
Mr. William McGill
August 20, 1998
Page 3
the Agency loan of the Section 108 funds to the Borrower are set
forth in Document No. 1, below. The Borrower will also obtain a
$3 . 6M loan from GMAC Commercial Mortgage Corporation ("GMAC-
Mortgage) for the construction of the Theater Project . The terms
of the GMAC-Mortgage loan to the Borrower are set forth in Document
No. 7, below.
The Agency loan to the Borrower_ of the Section 108 funds
(plus the other local funds to be contributed by the Agency as set
forth in Document No . 11, below) shall be subordinate to the loan
of GMAC-Mortgage . The terms of the subordination of the Agency
loans for the Theater Project are set forth in Document No . 8,
below.
The disbursement of funds to the Borrower for the
construction of the Theater Project will be administered by First
American Title Insurance Company, as fiscal agent of the parties,
in accordance with the terms set forth in Document No . 6, below.
However, no funds shall be disbursed to the Borrower for the
construction of the Theater Project until all of the conditions for
the close of the escrow described in Section 7 . 0 of Document No . 1,
below have been satisfied. At this time, fee title interest in the
lands on which the Theater Project will be constructed by the
Developer remain with the Agency.
The key Theater Project loan documents submitted for your
review are described as follows :
1 . $7 . OM 1998 Community Development Block Grant Program
Section 108 Development Loan Agreement, draft dated
August 14, 1998 [Borrower and Agency]
2 . $7 . OM Section 108 Development Loan Promissory Note, draft
dated August 19, 1998 [Borrower delivers to Agency]
SSEO/0001/0OC/581
08/20/98 2:05 zvp
Mr. William McGill
August 20, 1998
Page 4
3 . $7 . OM Section 108 Development Loan Deed of Trust,
Security Agreement, Assignment of Rents and Fixtures
Filing, draft dated August 20, 1998 [Borrower
delivers to Agency]
4 . Assignment of Leases and Rents, draft dated August 14,
1998 [Borrower, Theater Tenant, Theater Tenant Lease
Guarantor and Agency] ; _
5 . Agreement of Subordination, Nondisturbance and
Attornment, draft dated August 11, 1998 [Theater
Tenant, Borrower and Agency]
6 . Fiscal Agent Agreement, draft dated August 5, 1998
[GMAC-Mortgage, Borrower, First American Title
Insurance company and Agency]
7 . $3 . 6M Construction Loan Agreement, draft dated August 19,
1998 [GMAC-Mortgage and Borrower] ;
8 . Subordination and Intercreditor Agreement, draft dated
August 13, 1998 [GMAC-Mortgage, Borrower and Agency]
9 . Draft Pro Forma Policy of Title Insurance, dated
August 13, 1998 [to be issued in final form by First
American Title Insurance Company with an endorsement
to HUD as assignee of the interests of the Agency
under Document Nos . 2-5, above]
10 . Section 108 Contract, dated March 13, 1998 [HUD, City and
Agency]
The next two documents relate to the development and
operation of the Theater Project. These documents were included as
SBEC/0001/CCC/581
08/20/98 2:05 zvv
Mr. William McGill
August 20, 1998
Page 5
part of the original submittal application by the Agency to HUD for
the Section 108 Contract .
11 . Disposition and Development Agreement, dated October 29,
1996 (Borrower and Agency]
12 . Multi-21ex Theater Lease, dated December 26, 1996
If I may be of any assistance to you, please do not
hesitate to contact me at (909) 383-9373 .
Very truly yours
SABO & GREEN
a professional corporation
C-L �
David F. Gondek
DFG: zvp
(Enclosures)
cc: Ronald Winkler
Jason Kamm
Debby Zurzolo, Esq.
Scott Rodde
Houston Carlyle, Esq.
SBE0/0001/0CC/581
08/20/98 2:05 zvp
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48
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL T0-
ALLEN,MATKINS, LECK, GAMBLE
& MALLORY LLP
18400 Von Karmaa, Fourth Floor
Irvine, California 92612-1597
Attention: Anne E Klokow, Esq.
(Space Above For Recorder's Use)
SUBORDINATION AND TNTERrRCWTnR AGRF.F.MFNT
NOTICE. THIS SUBORDINATION AND INTERCREDITOR AGREEMENT,
RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY
BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE
LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT
This SUBORDINATION AND INTERCREDITOR AGREEMENT
("Agreement") is dated as of ' 1998, by and among MDA-SAN
BERNARDINO ASSOCIATES, L.L.C., a Delaware limited liability company ("Borrower"),
GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation (" enior
Lender") and the REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, a
body corporate and politic ("Junior Lender").
RECITALS .
A Concurrently herewith, Borrower is the owner of approximately 137,000
square feet of unimproved real property located at the northwest comer of the intersection of 4th
Sueet and E Street ra the City of San Bernardino, San Bernardino County, California
("Property"), which is referred to in the DDA (defined below) as the Theater Parcel and the
Common Area Parcel as more particularly described in Exhibit "A" attached hereto and
incorporated herein by this reference.
B Senior Lender is making a loan("Senior Loan") to Borrower pursuant to a
Construcuoa Loan Agreement of even date herewith("Senior Loan Agreement") to pay for part
of the cost of constructing an 80,000 square foot, twenty(20) screen theater and related
improvements and facilities as more particularly described in the Senior Loan Agreement (the
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" carer P�oiect")whose sole tenant shall be CinemaStar Luxury Theater, Inc ("Tenant"). The
Senior Loan is further evidenced by a Promissory Note of even date therewith in the original.
principal amount of Three Million Six Hundred Thousand and No/100 Dollars ($3,600,000)
("Senior Note"), which is secured by, among other things, (i) a Deed of Trust, Security
Agreement, Assignment of Leases and Rents and Fixture Filing("Senior Deed of'l=") dated of
even date therewith, (ii) an Assignment of Leases and Rents, assigning to Senior Lender all leases
affecting the property, including the Multi-Flex Theater Lease dated December 20, 1996 between
Borrower, as landlord, and Tenant ("CiemaStar Lease"), and all rents derived from all such
leases ("Senior Lease Assignment"); (iii) an Assignment of Developer's Rights under Agency
Development Agreements assigning, among other things, to Senior Lender all of Borrower's
rights under that certain Disposition and Development Agreement dated October 29, 1996
("DDA") ("SA^�or Agency A sin meat"), and consent thereto executed by Junior Lender and the
Agency, and(v) an Assignment of Letter of Credit("the Senior Letter of Credit Assignment")
executed by Borrower and Tenant in favor of Senior Lender, assigning to Lender that certain
letter of credit in the atnount of$2,000,000 ("Tenant Letter of Credit")issued by Tenant under
the CinemaStar Lease The Senior Loan is also secured by a completion guaranty
Completion Guaranty") from HFG Associates LLC, a Delaware limited liability company
("Guarantor) of even date herewith. The Senior Loan Agreement, the Senior Note, the Senior
Deed of Trust, the Senior Lease Assignment, the Senior Agency Assignment, the Senior Letter of
Credit Assignment, the Senior Completion Guaranty and all other documents governing,
evidencing or securing the Senior Loan are hereinafter collectively referred to as the "Senior Loaa
ocu s".
C. Concurrently herewith, Junior Lender is making a loan ("Second Loan")to
Borrower pursuant to that certain 1998 Community Development Block Grant Program
Section 108 Project Development Loan Agreement ("Second Loan Agreement") dated
1998 for payment of certain costs associated with the development, construction,
improvement and financing of the Theater Project. The Second Loan is evidenced by a
Promissory Note of even date herewith in the original principal amount of Seven Million Dollars
($7,000,000) ("Second Note") which is secured by a Deed of Trust and Assignment of Rents
("Second Deed of Trust") of even date herewith and recorded in the Official Records on
1998 as Instrument No , creating a second lien against the Property
in favor of Junior Lender (subject and subordinate to the rights of Senior Lender under the Senior
Loan Documents). The Second Loan Agreement, the Second Note and the Second Deed of
Trust, together with all other documents governing, evidencing or securing the Second Loan are
hereinafter collectively referred to as the "Second Loan Documents".
D. Junior Lender has also covenanted under the DDA to provide a Theater
Project development cost contribution in the amount of One Million Three Hundred Twenty-Four
Thousand Five Hundred Seventy-Five Dollars ($1,324,575) (the "Agency Contribution Loan")
which is evidenced by a promissory note of even date herewith of Borrower delivered to Junior
Lender(the "Third Loan") which is secured by a third priority deed of trust encumbering the
Property (the Thud Deed of Trust"). The Third Note and the Third Deed of Trust, together with
all other documents governing, evidencing or securing the Agency Contribution Loan are
hereinafter collectively referred to as the "Third Loan Documents". The Second Deed of Trust
and the Third Deed of Trust are collectively hereinafter referred to as the "Junior Deeds of Trust"
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E It is a condition precedent to Borrower's obtaining the Senior Loan Thar
(a)the Senior Deed of Trust constitutes a first position lien against the Property and is prior and
superior to the Second Deed of Trust and the Third Deed of Trust(and all indebtedness secured
thereby) and to any nght or interest Junior Lender has in, to or against the Property or the
Borrower, under any contracts or agreernents affecting the Property or any part thereof except as
may be provided in that certain Declaration of Covenants. Conditions and Restrictions dated
and recorded against the Property as Instrument No. is the
Official Records("CCA$C) and that certain Parking Agreement dated between
Borrower and Junior Lender recorded against the Property and certain other property upon which
the Parking Spaces(as defined in the Parking Agreement) are located as Lumument No
in the Official Records ( Parking Agreement ), and (b) Junior Lender and Borrower
agree that all indebtedness and obligations now or hereafter secured by the Senior Deed of Trust
shall be fully paid and performed prior to payment of any indebtedness evidenced by the Junior
Note and the Third Note or otherwise secured by the Junior Deed of Trust or the Third Deed of
Trust, respectively, except as expressly provided in Paragraph 1(f)hereinbelow
F Concurrently herewith, Senior Lender, Junior Lender, Borrower and
("Fiscal Agent") are entering into a fiscal Agent Construction Loan Disbursement
Control Agreement ("Fiscal Agent A egr ement") to coordinate disbursement of the proceeds of
the Senior Loan, the Second Loan, the Agency Contribution Loan and the Developer
Contribution to pay for the cost of constructing the Theater Project.
A-Q9-BF—MF—N I '
NOW, T1iBREF0R.E, in order to induce Senior Lender to make the Senior Loan
and advances as provided in the Senior Loan Documents, the parties hereto hereby agree as
follows:
1 St bordination of Debt Junior Lender agrees as follows
(a) All indebtedness evidenced by the Second Note, or otherwise now
or hereafter secured by the Second Deed of Trust, and any amendments or extensions
Thereof(collectively, the "Second Indebtedness") and all indebtedness evidenced by the
Third Note, or otherwise now or hereafter secured by the Third Deed of Trust, and any
amendments or extensions thereof(collectively, the "Third indebtedness") shall be and
hereby is subordinated and the payment therefor is deferred to any and all rights, claims,
demands, indebtedness, action or causes of action of any nature whatsoever that Senior
Lender may now or hereafter have against Borrower or the Property or any present or
future claim or indebtedness,judgment or decree against Borrower or the Property arising
out of or relating to the Senior Note, the Senior Loan or otherwise secured by the Senior
Deed of Trust arising under the Senior Loan Agreement (collectively, the "Senior
Indebtedness"), except as expressly provided in subparagraph(f) below. The Second
Indebtedness and the Third Indebtedness are hereinafter referred to as the"Junior
Indebtedness".
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(b) If Junior Lender shall commence, prosecute or participate in any
suit, action or proceeding against Borrower, Senior Lender may interpose as a defense the
making of this Subordination Agreement and Senior Lender may intervene and interpose
such defense or plea in Senior Lenders name or in the carne of the Borrower. if Junior
Lender shall attempt to enforce any chattel or real estate mortgages or any lien
instruments or encumbrances, including, without limitation, the Junior Deed of Trust,
Senior Lender may by virtue of this Subordination Agreement restrain the enforcement
Thereof in Senior Lender's name or in the name of Borrower If Junior Lender obtains any
payments, monies, or other assets in excess of the amounts to which Junior Leader is
entitled pursuant to this Agreement as a result of any administrative, legal or equitable
action, or otherwise, Junior Lender shall immediately pay, deliver, and assign to Senior
Lender any such excess payments, monies, or other assets for application to the Senior
Indebtedness (and while held by Junior Lender, all such payments, monies or other assets
so received shall be held in oust by Junior Lender for the benefit of Senior Leader)
(c) Borrower agrees that it will not, so long as any of the Senior
indebtedness remains unpaid, without Senior Lender's prior written consent, pay to Junior
Lender any sum on account of the Junior Indebtedness(whether it be principal, interest or
otherwise), except as expressly provided in subparagraph (f)below
(d) Senior Lender may grant extensions of the time of payment or
performance to and make compromises and settlements with Borrower is connection with
the Senior Loan without the consent of and without affecting the agreements of Junior
Lender or Borrower hereunder, provided, however, that the maximum principal amount of
the Senior Indebtedness shall not exceed the sum of Three Million Six Hundred Thousand
Dollars ($3,600,000) plus any and all accrued and unpaid interest owing on the Senior
Loan plus any charges, fees, expenses, prepayment premiums and other amounts due and
owing under the Senior Loan Documents and any and all tr additional advances, whether
obligatory or optional, made by Senior Lender in connection with the Theater Project.
(e) This Subordination Agreement shall continue is fun force and effect
until Senior Lender shall have been paid in full on all indebtedness owing under, arising
out of or relating to the Senior Loan.
(f) Notwithstanding anything to the contrary contained herein, so long
as no Event of Default exists under the Senior Loan Documents, Junior Lender shall be
entitled to receive scheduled payments of principal and interest as and when due under the
Second Note and Third Note, but only after payment of all normal and necessary
operating expenses for the Property and all installment and other payments and deposits
due under the Senior Loan Documents.
(g) Junior Lender shall promptly also provide Senior Lender with
copies of any notices of default with respect to either the Second Loan or the Agency
Contribution Loan (collectively, the "Junior Loans") sent to Borrower. Junior Lender
acknowledges that so long as either of the Junior Loans is secured by a deed of trust or
other lien or mortgage encumbering any property which is collateral for the Senior Loan,
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then a default by Borrower under the Second Loan Documents or the Third Loan
Documents, as applicable (which is not cured within any applicable grace periods) shall
constitute a default under the Senior Lout Documents In addition, any attempt by Junior
Leader to exercise any remedies under either the Second Loan Documents or the Third
Loan Documents, except as contemplated by this Agreement, shall constitute a default
under the Senior Loan Documents
(h) Senior Lender shall promptly provide Junior Lender with copies of
any notice of default with respect to the Senior Loan sent to Borrower Junior Lender
shall have the right, but not the obligation, to cure any default by Borrower to Senior
Lender under the Senior Loan within the time and manner afforded Borrower under the
Senior Loan Documents.
(i) if at any time prior to the hill repayment of the Senior Loan, a
Purchasing Event occurs (as defined hereinbelow), Junior Lender shall have the right to
purchase the Senior Loan from Senior Lender for a purchase price payable in cash or
iram diately available fLaids equal to the total amount of the Senior Indebtedness and
otherwise on terms and conditions acceptable to Senior Lender by (i) delivering written
notice of Junior Lender's exercise of such right to purchase the Senior Loan("Exercise
Notice")within(A) thirty (30) days after the recordation date of the Notice of Default,
where the Purchasing Event is a Senior Default or(B) five (5) business days following
delivery of a copy of the Senior Loan Modification to Junior Lender where the Purchasing
Event is a Senior Loan Modification and (ii)by executing and delivering to Lender within
thirry(30) days following the date of the Exercise Notice a purchase agreement with
Senior Lender ("Loan Purchase Agreement")in a form acceptable to Senior Lender and
which shall include without limitation (A) an assignment of all of Senior Lender's right,
title and interest in the Senior Loan, and each of the Senior Loan Documents to Junior
Lender, which shall include but not be limited to delivering to Junior Lender(1) the
original Senior Note, endorsed to Junior Lender without recourse and without warranty or
representation of any kind and (2) the original Tenant Letter of Credit (to the extent not
previously drawn upon)to be held and drawn upon by the Junior Lender in accordance
with the terms of the Senior Letter of Credit Assignment and (B) a full release of Senior
Lender executed by Borrower and Junior Lender, in a form acceptable to Senior Lender
The closing of the Loan Purchase Agreement shall occur no later than seventy (70) days
following the date of the Election Notice and in no event shall any of the rights granted to
Junior Lender hereunder delay, impair or affect in any way Senior Leader's rights and
remedies under the Senior Loan Documents or in any way delay any foreclosure sale
pending as a result of a Senior Default. Senior Lender and Junior Lender mutually agree
to execute, acknowledge, exchange and deliver such agreements or other instruments in
recordable form as may be necessary or appropriate to carry out the purpose and imear of
this subparagraph (1)_ Nothing contained herein shall limit, delay or impair Senior
Lender's right to pursue aA of its rights and remedies under the Senior Loan Documents,
including without limitation, seeking the appointment of a receiver for the Property and
completing as foreclosure sale against the Property nor shall any provision contained
herein affect or impair the enforceability or validity of any Senior Loan Modification
(defined below) whether or not Junior Lender exercises its right to purchase the Senior
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Loan Documents as herein provided. The failure to deliver a copy of any Senior Loan
Modification to Junior Lender shall not invalidate, or affect the enforceability or validity
of, any such Senior Loan Modification As used herein the term"chasing Event" shall
mean either(A) an Event of Default CSenior Default") occurs under the Senior Loan
Documents and Senior Lender commences foreclosure Proceedings against the Property
by recording a notice of default ("Notice of Default") against the Property and Borrower
has not yet fully reinstated the Senior Loan, or(B)if Senior Leader and Borrower enter
into a material modification of the Senior Loan Documents ("Senior Loan Modification")
which is not consented to by the Junior Lender and which constitute an Event of Default
under the HUD Section 108 Loan Agreement (as defined in the Second Loan Agreement)
as evidenced by a written notice of default from HUD (as defined in the Second Loan
Agreement) to Junior Lender which has not been waived by HUD and there is no Senior
Default then outstanding.
6) Junior Leader acknowledges and agrees that, until Senior Loan has
been paid in full and all of the obligations of Borrower to Senior Lender under the Senior
Loan Documents have been paid and performed in full, Junior Lender shall not without the
prior written consent of Senior Lender, which consent may be given or withheld in Senior
Lender's sole and absolute discretion(i) commence any action or proceeding to
foreclose(either judicial or nonjudicial) against the Property, Cli) exercise any power of sale
under the Junior Deed of Trust, (iii) accept a deed in lieu of foreclosure for the Property,
or any portion thereof, (iv) commence, or join with any other creditor in commencing, any
banlauptcy, reorganization or insolvency proceeding with respect to Borrower or the
Property, (v) seek or obtain a receiver for the Borrower or the Property, substitute or
replace any property manager for the Property or conduct any invasive testing at the
Property, (vi) take any action that would terminate any leases or other rights held or
granted by third patties with respect to the Property, or(vii) take any other enforcement
action or pursue any rights or remedies Junior Lender might have available against the
Property, or any pan or portion thereof, or against any guarantor of the Junior Loans, or
against the Borrower
2. Subordination of Security Interest.
(a) Junior Lender hereby intentionally, unconditionally and absolutely
subordinates the lien or charge of the Junior Deeds of Trust (and all present and future
indebtedness and obligations secured thereby, including, without limitation, the
indebtedness evidenced by the Junior Notes) and the Junior Indebtedness, and all other
present and future rights, privileges, and interests of Junior Lender in and to the Property
pursuant to the Junior Loan Documents or under the DDA, to the lien or charge of the
Senior Deed of Trust and all rights, privileges and interests of Senior Lender in and to the
Property pursuant to the Senior Loan Documents (and subject to Paragraph 1(d) above,
any renewals, extensions, modifications, or amendments thereof), and all present and
future Senior Indebtedness secured thereby, shall unconditionally be and remain at all
times a lien or charge on the Property prior and superior to the lien or charge of the Junior
Deeds of Trust (and all present and future indebtedness and obligations secured thereby,
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includin& without limitation, the indebtedness evidenced by the Junior Notes) and all
other rights, privileges, and interests of Junior Leader is and to the Property.
(b) Notwithstanding anything to the contrary contained is the Junior
Notes, Junior Deeds of Trust or any other document or agreement between Junior Lender
and Borrower, Junior Lender hereby consents and agrees that Senior Lender may, at any
time and from time to time, extend, renew, waive, accelerate, or otherwise change any of
the terms or provisions of the Senior Loan Documents, including without limitation,
increase the principal amount of the Senior Loan(subject to Paragraph 1(d) above),
change the rate of interest or the time and manner for principal and interest payments, and
release or reconvey any security for the Senior Loan subject to Junior Lender's right to
purchase the Senior Loan Documents in the event of a Senior Loaa Modification as
provided in Paragraph 1(i) above. Any such supplement, modification, amendment,
extension, renewal, waiver, acceleration, or change to any of the terms or provisions of
the Senior Loan Documents shall not affect this Subordination Agreement. Nothing
contained herein shall obligate Senior Lender to confirm or insure that any advances made
under the Senior Loan have in fact been used to improve, maintain, preserve or otherwise
benefit the Property.
3. Disbursement of Senior Loan Proceeds Junior Lender acknowledges and
agrees that any application or use by Borrower of any disbursements of the proceeds from the
Senior Loan for any improper or unpermitted purposes shall not defeat the subordination and
other agreements herein made, in whole or is part
4 Bankruptcy: No Payments to Junior Lender
(a) During(i) the continuance of a default under the Senior Loan
Documents, or (ii) in the event of any liquidation or dissolution of Borrower, or of any
execution sale, receivership, insolvency, bankruptcy, liquidation, readjustment,
reorganization or other similar proceeding relative to Borrower or the Property
(collectively, a "Bankruptcy Event"), the Junior Lender shall not be entitled to receive or
retain aay further payment or prepayment made after such Bankruptcy Event under the
Junior Loans (including, without limitation, the Permitted Payments) and all amounts due
under the Senior Loan,or secured by the Senior Deed of Trust shall be first paid in full
before any payment is made under either of the Junior Loans. In the event such a payment
is nevertheless received by Junior Lender, such amounts immediately shall be paid over to
Senior Lender for application in payment of the Senior Loan. For the purposes of this
Agreement, the Senior Loan shall not be deemed paid or satisfied in full until such time
that any preference period applicable to any payment received by Senior Lender has run
and such payment is therefore not subject to disgorgement In connection with any
Bankruptcy Event or any proceedings relating thereto ("Bankru-ptey Proceeding"), Junior
Lender agrees that, unless and until it has obtained Senior Lender's prior written consent
(which consent may be given or withheld is Senior Lender's sole a4d absolute discretion),
Junior Leader shall take no action that may impair, affect or otherwise alter in any way
Senior Lender's interests or claims in such Bankruptcy Proceeding including, without
limitation, in connection with any vote to accept a plan of reorganizatioa which is not
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acceptable to Senior Lender, in its sole discretion, any cash collateral or adequate
Protection issues, any trustee appointment issues, any plan exclusivity issues, any claim
subordination i.,•.wea (as between Senior Lender and any of Borrower's creditors, including
Junior Lender), nay motion to dismiss, any claim voting entitlements(excluding Junior
Lender's ) or any other matters pertaining to the extent, validity or priority of Senior
Lender's liens, rights and entitlements. Notwithstanding the foregoing. Junior Lender may
file a claim in the Bankruptcy Proceeding subject to the foregoing restri tr
ctions and
limitations
(b) From and after the occurrence of a Bankruptcy Event, any and all
disuibutions, claims, awards or other amounts paid or payable to Junior Lender under the
Junior Loan Documents or otherwise shall be paid first to Senior Lender, and Senior
Lender shall apply such amounts to the full and prior payment of the Senior Loan as
originally written, provided, however, that the balance of such amounts, after paying the
Senior Loan as originally written in full, shall be paid to Junior Lender for application
against the Junior Loans. Junior Lender fiuther agrees to execute and deliver to Senior
Lender such assignments or other instruments as may be required by Senior Lender in
order to enable Senior Lender to collect any and all such payments or disbursements
otherwise payable to Junior Lender.
Notwithstanding the occurrence of a Bankruptcy Event, Junior Lender shall be
entitled to receive the Permitted Payments at such time, if ever, all pending Bankruptcy
Proceedings have been dismissed, there are no Bankruptcy Events then continuing and the Senior
Loan has been fully reinstated within the time and is the manner permitted under applicable
California law, including, without limitation, payment of all amounts due and owing under the
Senior Loan Documents, and cure of all defaults under the Senior Loan to The satisfaction of
Senior Lender.
5 ForTher Assurances So long as the Senior Deed of Trust shall remain a
lien upon the Property or aay part thereof, Junior Lender shall execute, acknowledge and deliver,
upon Senior Lender's demand, at any time or from time to tithe, any and sU&rther
subordination, agreements or other instruments in recordable form as Senior Lender may
reasonably require for carrying out the purpose and intent of the covenants contained herein
6. Ent_ij a Agreement This Agreement shall be the entire agreement with
regard to the subordination of the Junior Loan Documents to the lien or charge of The Senior
Loan Documents, and shall supersede and cancel any prior agreements as to such subordination,
including, without limitation, those provisions (if any) contained in the Senior Loan Documents or
in The Junior Loan Documents which provide for the subordination of any fiuther encumbrances
to the lien of the Senior Loan Documents. As between Senior Lender and Junior Lender, to the
extent of any conflict between the terms hereof and the terms of the Senior Loan Documents or
the Junior Loan Documents, the terms hereof shall control.
OC981730 040/AMG3464-028108-13-98/l4h
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7. Junior Lender's Covenants and ftresenration& Cure of Default. Junior
Lender hereby further confirms to and covenants with Senior Leader as follows:
(a) Junior Lender has delivered to Senior Lender true and complete
copies of the Junior Loan Documents and the DDA, and such documents have not been
amended, modified or supplemented in any way.
(b) Junior Leader has received and reviewed the Senior Loan
Documents.
(c) Junior Lender shall not enter into any agreement to amend or
modify any of the Junior Loan Documents or the DDA without notice to, and the prior
written consent of', Senior Lender(which consent shall not be unreasonably withheld).
(d) Notwithstanding any provision of the Junior Loan Documents to
the contrary, Senior Lender shall be entitled to rely upon Borrower's execution of any
amendment, modification, consent or wrinag concerning or relating to the Senior Loan as
conclusive evidence of Borrower's duly authorized execution and delivery thereof.
S. Notices All notices expressly provided hereunder to be given shall be in
writing and shall be (i) hand-delivered, effective upon receipt, (ii) sent by United States Express
Mail or by private overnight coi ner, effective upon receipt, or (iii) served by certified mail. Any
such notice or demand served by certified mail, return receipt requested, shall be deposited in the
United States mail, with postage thereon fully prepaid and addressed to the party so to be served
at its address above stated or at such other address of which said parry shall have theretofore
notified in writing, as provided above, the party giving such notice. Service of any such notice or
demand so made shall be deemed effective on the day of actual delivery as shown by the
addressee's return receipt or the expiration of three (3)business days after the date of mailing,
whichever is the earlier in time. Notices to be served hereunder shall be addressed to the
appropriate address set forth hereinbelow, or at such other place as Senior Lender or Junior
Lender may from time to time designate in writing by ten (10) days prior written notice thereof
Notices to Borrower shall be addressed as follows.
MDA-San Bernardino Associates
300 Continental Boulevard, Suite 360
El Segundo, California 90245
Attention: Mr. Jasoa Kamm
Notices to Senior Lender shall be addressed as follows.
GMAC Commercial Mortgage Corporation
100 South Wacker Drive, Suite 400
Chicago, Illinois 60606
Attention: Philip J. Keel
OC991730.0 /AEK/G3464-a2ki08-13-9&/ldh
Aug-14-91 03:55w Fro -GREENBERG.GLUSKER 310-553-0687 T-047 P.29/35 F-333
Notices to Junior Leader shall be addressed as follows
Redeveloptneut Agency of the City of San Bernardino
201 North E Street, Third Floor
San Bernardino, California 92401-1507
Attention: Development Director
9 Governi=_L4w. This Agreement will be governed by, and construed and
enforced in accordance with,the laws of the State of California
10. Counterparts. This Agreement may be signed in multiple counterparts with
the same effect as if all signatories had executed the same instrument. The parties hereto agree
That a signature to this Agreement produced by facsimile transmission is valid and is as effective as
an original signature
11 Atorney Fees and Costs. if any parry hereto brings an action or
prouccdiup to euforce the terms hereof or declare rights hcrcundcr, the Prevailing Party, as
hereinafter defined, in any such proceeding, action.or appeal thereon, shall be ent Tled to
reasonable attorneys' fees and costs. Such fees and costs shall be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is pursued to decision.or
Judgment The term"Prevailing Party" shall include,without limitation, a party who substantially
obtains or defeats the relief sought, as the case may be, whether by compromise, settlement,
judgment or the abandonment by the other parry of its claim or defense. The attorneys' fee and
cost award shall be such as to fully reimburse all attorneys' fees and costs reasonably incurred
12 No Third party Beneficiaries. This Agreement sW be for the beaefit of
Senior Lender and Junior Leader, this Agreement shall not benefit Borrower, Borrower shall have
no rights hereunder, and there shall be no third party beneficiaries,intended or otherwise, of this
Agreement, and no party hereunder shall be liable to any persoa not a parry hereto for any
obligations provided herein.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of Senior Leader and Junior Lender and their respective successors and assigns.
14. No Marshaling of Assets. Junior Lender hereby waives any right to require
Senior Lender to marshall the assets and/or liabilities of Borrower.
-lo-
OC 981730.040/AEKIC 3464{12&iU 8-1 3-98IWh
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15. F urure SubQrgnarion of Junior Loans to Permanent Senior Fitt;.*+��Q
Junior Leader acknowledges that Borrower intends to obtain,a permanent loan from Senior
Leader("Permanent Senior Loan") pursuant to that certain commitment letter dated August
1998, the proceeds of which will be used to repay the Senior Loan Prior to the funding of the
Permanent Senior Loan, Junior Leader and Borrower agree to execute and deliver a
subordination agreement, in recordable form subordinating the Junior Loans to the Permanent
Senior Loan which shall be in substantially the same form as ibis Agreement but excluding all
rights afforded to Junior Lender to purchase the Senior Loan as provided in Paragraph 1(i)hereof
and iucWding such other terms as may be reasonably required by Senior Lender.
IN WITNESS WHEMOF, the parties hereto have executed this agreement as of
the date first set forth above.
NOTICE. THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH
MAY ALLOW THE PERSON OBLIGATED ON YOUR REAL PROPERTY
SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE
EXPENDED FOR OTHER PURPOSES THAN VVIPROVEMENT OF THE
PROPERTY.
"Borrower" MDA-SAN BERNARDINO ASSOCIATES,
L.L.C., a Delaware limited liability company
By. MDA Investors No 1, L L C ,
a Delaware limited liability Company
Its: Managing Member
By. MJL Associates,
a Californ a limited partnership
Its. Managing Member
By: MIL Investments, Inc.,
a California corporation
Its: General Partner
By:
Name•
Title-
- -11-
OC99173u 040/AMG3464028/08-13-9&1dh
Aue-14-98 03:56Pm FrorGREEMBERG,GIUSKER 310-553-0687 T-047 P•31/33 F-333
"Seaior Lender" GMAC COMMERCIAL MORTGAGE
CORPORATION, a Cailiforaia corporanou
By:
Name.
Title.
[SIGNATURES CONTINUED]
"Junior Lender" REDEVELOPMENT AGENCY OF
THE CITY OF SAN BERNARDINO,
a body corporate and politic
By-
Chair of the Governing Hoard of the Agency
By.
Secretary
By.
Ex=dve Director
-13-
MX1730 040/AMr-73464.028/U8-13-991Wh
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STATE OF —�
ss
COUNTY OF
On , before me, . a
Notary Public in and for said state, personally appeared , personally
known to me(or proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument, the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public in and for said State
STATE OF
ss.
COUNTY of �?
On , before me, a
Notary Public in and for said state, personally appeared personally
known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument, the person, or the
entity upon behalf of which the person acted, executed the instrument.
wITNESS my hand and official seal.
Notary Public m and for said State
-13-
OC981730.04U/AM03464-018 08-13.98/'41
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STATE Of
ss.
COUNTY OF
On
before me, • a
Notary Public in and for said state, personally appeared_ personally
known to me(or proved to me on the basis of satisfactory evidence)to be the person whose name
i3 subscnbed to the within instrument and acknowledged to me that he/she executed the sane in
his/her auth=ed capacity, and that by his/her signature on the instrument, the person, or the
entity upon behalf of which the person acted, executed the instrument.
WiTNF-SS my hand and official seal-
Notary Public in and for said State
STATE OF
ss
COUNTY OF
On before me, ) a
Notary Public in and for said state, personally appeared personally
known to the(or proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that halshe executed the same in
his/her authorized capacity, and that by his/her signature on the instrument, the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public in and for said State
-14-
OC94730 U4cvAFK/G3464-028 08-13-y9/ldh
Aus-14-98 03:57ps FrwGREEHBERG,GLUSKER 310-553-0687 t-047 P.34/35 F-333
STATE OF
ss.
COUNTY OF -
On . before me. , a
Notary Public in and for said state, personally appeared , personally
known to me(or proved to Hate on the basis of satisfactory evidence)to be the person whose name
us subscribed to the within insuurn nt and acknowledged to me that he/she executed the same in
his/her authorized capacity. and that by hivl=signature on the instrument, the person, or the
entity upon behalf of which the person acted, executed the Wit.
WITNESS my hand and official seal
Notary Public in and for said State
- -15-
OC 981730.040/A!'.KJG 3464-02 WO S-13.98/Wh
Aui-14-98 03:5TP@ FrorGREEMSERG,GLUSKER 310-553-0687 T-047 P.35/35 F-333
LEGAL DESCRIp1TON
EXHIBIT"A"
Ot;y81�30 040/AEICJG3464-028/08-13-9&IU
CITY OF SAN BERNAAW esacd�t %�,y/�G1
INTEROFFICE MEMORA iCMV0evCms.Mtg: -
re Ayen-ii) Item
TO: Mayor Judith Valles and Common Council
FROM: James F. Penman, City Attorney City ClerkICDC Secy
DATE: September 14, 1998 City of San Bernardino
RE: Status of Subordination Agreement - Downtown Theater Project
On Wednesday, September 9, 1998,the day after the last regular Council meeting, our office
received a telephone call from Attorney Deby Zurzolo advising us that GMAC was going to remove
the "stand still" language in the Subordination Agreement for the Downtown Cinema Theater
project.
On Thursday, September 10, 1998, I spoke by telephone with Attorney Deby Zurzolo on the
GMAC loan. Ms. Zurzolo advised me that GMAC is willing to delete the "stand still" language
provision. Because the "stand still" language is not present in only one provision, but throughout
several pages of the document, Mr. Sabo and I had agreed that we need to see a changed document
and discuss the matter directly with GMAC. Ms. Zurzolo informed me that she would fax me a draft
document and arrange a conference call later that day. On Friday, September 11, 1998 we waited
throughout the day for the fax of the revised Subordination Agreement, but it was not forthcoming.
At 3:46 p.m., Tim Sabo called me and informed me he had been on the phone with Rex Swanson
and Debbie Zurzolo discussing the Cinema Star/GMAC Subordination Agreement. Mr. Sabo said
he was informed that they do not have a revision from GMAC on the Subordination loan. There has
been a great deal of fluctuation in the last few days in the market on the rate for such loans. GMAC
cannot do what they had intended at the current rate. GMAC may now want out of the loan, Mr.
Sabo informed me.
I was further advised that the GMAC attorney on this matter had two children ill on Friday
and has not been able to work on the loan.
This morning we found a faxed revised Subordination and Intercredit Agreement from
GMAC that came in after closing Friday night. Mr. Sabo spoke with Mr. Carlyle this morning and
told him that the changes do not appear to be sufficient to resolve our objections. I have reviewed
the document and agree with Mr. Sabo's conclusion.
At 8:48 a.m. today, 12 minutes prior to the start of today's City Council/CDC meeting, we
received a second fax from Attorney Deby Zurzolo discussing the changes and warning that our
failure to approve the Agreement as modified constitutes a material breach, in their opinion, of the
Disposition and Development Agreement in this matter.
JFP:ea[TheatProj.Meml 1
One possible explanation for this situation is that GMAC does in fact wish to withdraw from
this project and is purposely giving us an unacceptable agreement knowing that we will reject it,thus
giving GMAC the excuse they are looking for to decline to make the loan.
In any event, the situation with HUD described in Mr. Empeno's memo to me of September
11, 1998(copy attached)overshadows the Subordination Agreement problem. Until the HUD matter
can be resolved, assuming it is possible to resolve it, the Subordination Agreement issue is
secondary.
MES F. PENMAN
ity Attorney
Attachment 1
JFP:ea[TheatProj.Meml 2
CITY OF SAN BERNARDINO
INTEROFFICE MEMORANDUM
TO: James F. Penman, City Attorney
FROM: Henry Empeno, Jr., Deputy City Attorney
DATE: September 11, 1998
RE: HUD Communication Regarding Downtown Theater Project
Late Thursday afternoon on September 10, 1998, we received a copy of an E-Mail message
from Karen Choi, HUD Environmental Protection Officer, to John Hoeger, EDA Project Manager,
dated September 10, 1998, which states as follows:
This afternoon at 2:00 p.m., I spoke with John Hoeger, Project Manager for the San
Bernardino Economic Development Agency, Development Department, and Dave
Dondek [sic], attorney for their redevelopment agency. The subject matter involved
issues and concerns raised in an objection/comment letter by Archaeological
Consulting Services, in response to a public notice of FONSI/RROF.
In an e-mail to Mr. Hoeger, I requested a copy of their response to ACS as well as a
copy of their compliance documentation with Section 106 of the National Historic
Preservation Act (NHPA) (as amended). On September 3, I received a Fed X
package of materials which included a formal response to my e-mail, including
CEQA documentation (Initial Study and CUP) and their Environmental Assessment
(NEPA document). They also indicated that a response to ACS was mailed on
August 21, 1998...the same day they faxed their Certification and RROF to HUD.
During the course of the conference call this afternoon, I raised the point that Sec.
106 compliance has yet to be completed. Although the City submitted their CEQA
documentation and all historical-related materials to the SHPO, via the State
Clearinghouse, it„still does not preclude them from formally consulting with the
SHPO under the provisions of the NHPA. I indicated that the CEQA process is
separate and does not legally take the place of the requirements under Sec. 106 of the
NHPA. However, I provided them with a contact name and phone number at the
SHPO's office, in the event they wanted to try to argue compliance with Sec. 106 thru
the process they have already completed under CEQA. I also faked them a copy of
the implementing regulations of Sec. 106...36 CFR Part 800.
It was also discovered that the City demolished three structures on the subject site.
These actions occurred between March and May of 1998...before HUD clearance but
after award of the 108 Loan(12-9-97). Technically, the grantee are prohibited from
taking any choice-limiting actions or conducting physically impacting activities that
could have an adverse impact on the environment. Clearly, demolition smacks of
this violation...which was pointed out in my e-mail to Mr. Hoeger previously. I'm not
sure that I clearly expressed the precariousness of their actions, as it relates to our
HE:ea(TheatCom.meml 1
obligation to uphold NEPA and the requirements of Part 58....basically, whether we
can legally approve their RROF. (I was thinking they demolished in 1997, not 1998,
but my notes lead me to believe 1998) For that reason, I'm copying Mr. Hoeger.
On the other hand, if they can get SHPO clearance, even though anticipatory
demolition has occurred, perhaps HUD Headquarters will rule in their favor and
allow us to release environmental grant conditions. My initial recommendation is
that we cannot legally release funds at this point. Remember too, the objection
letter from ACS points out that demolition occurred before compliance with Sec.
106. One of the permissible bases for objection at Sec. 58.75(e) states that: 'the
recipient has committed funds or incurred costs not authorized by this part before
release of funds and approval of the environmental certification by HUD...'. It might
be stretching it, but the citation does not specify HUD or non-HUD funds. I believe
the underlying concept is that it doesn't necessarily matter what funds are involved
(see Sec. 58.22). Sec. 104(g) of the HCD Act talks about commitment of funds
relative to execution of the Certification form. The program regulations also speak
to this.
I will get a reading from HUD HQ on their take as well. Please, lets talk about this
project on Friday or early next week. Perhaps Mary should be notified as well.
Karen Choi X3008" [emphasis added]
On Thursday afternoon, September 10, 1998, you, Huston Carlyle, and I met with Tim Sabo
and Dave Gondek of Sabo& Green, to discuss the EDA's options in response to this communication
from HUD. On Friday morning, September 11, 1998, I met with the FDA's environmental
consultant, Tom Dodson, along with Dave Gondek and John Hoeger to discuss the EDA's options
in response to this HUD communication. During these discussions, Mr. Hoeger, Mr. Dodson, Mr.
Gondek and I concluded that because of HUD's position, the EDA must complete more extensive
consultation with the State Office of Historic Preservation (SHPO) in accordance with 36 CFR
800.4. HUD's position, in summary, is that HUD will not release funds until after the EDA gets
SHPO's clearance that the structures already demolished were not eligible for listing in the National
Register of Historic Places maintained by the Secretary of the Interior. We also concluded that Mr.
Dodson will draft the consultation letter to SHPO and compile the documentation required by SHPO.
We also agreed that Mr. Gondek will call Ms. Choi to reschedule Mr. Hoeger's discussion with her
until after Mr. Dodson completes his research. Later this same morning, you, Mr. Gondek, and I all
together spoke by telephone with Mr. Sabo, during which we all concurred, after considering other
options, that because of HUD's position, the EDA must get clearance from SHPO.
HE:ea[TheatCom.mem] 2