3.8 Escrow Closing Costs, Taxes and Title Policy Premium . The City and the Developer shall each pay one-half (1/2) of the Escrow fees and such other costs as Escrow Holder may charge for the conduct of the Escrow. Escrow Holder shall notify the Developer and the City of the costs to be borne by each of them at the Close of Escrow by delivering the Escrow Holder’s estimated closing/settlement statement to both the City and the Developer at least four (4) business days prior to the Escrow Closing Date. The City shall pay the premium charged by the Title Company for the standard Title Policy for the Properties, exclusive of any endorsements or other supplements to the coverage of such Title Policy that may be requested by the Developer, as well as documentary transfer taxes and any and all other charges, fees and taxes levied by a Governmental Authority relative to the conveyance of any portion of the Properties through the Escrow transaction contemplated in this Agreement. The Developer shall pay any and all recording fees relative to the conveyance of any portion of the Properties through the Escrow transaction contemplated in this Agreement.
3.9 Escrow Cancellation Charges. If the Escrow fails to close due to either the City’s material default under this Agreement and t he Escrow is cancelled and this Agreement is terminated, the City shall pay all ordinary and reasonable Escrow and title order cancellation charges. If the Escrow fails to close due to the Developer’s material default under this Agreement and the Escrow is cancelled and this Agreement is terminated, the Developer shall pay all ordinary and reasonable Escrow and title order cancellation charges. If the Escrow fails to close for any reason other than the material default of either the Developer or the City and the Escrow is cancelled and this Agreement is terminated, the Developer and the City shall each pay one -half (1/2) of any ordinary and reasonable Escrow and title order cancellation charges.
3.10 Escrow Cancellation. If this Agreement is terminated and the Escrow cancelled pursuant to a contractual right granted to a Party in this Agreement to terminate this Agreement and cancel the Escrow, other than due to the material default of another Party, the Parties shall do each of the following:
3.10.1 Cancellation Inst ructions. The Parties shall,
within three (3) business days of receipt of Escrow Holder ’s written request, execute any reasonable Escrow cancellation instructions requested by Escrow Holder;
3.10.2 Return of Funds and Documents. Within ten (10)
days of receipt by the Parties of a settlement statement of Escrow and title order cancellation charges from Escrow Holder: (i) the Developer or Escrow Holder shall return to the City any documents previously delivered by the City to the Developer or Escrow Holder, (ii) the City or Escrow Holder shall return to the Developer all documents previously delivered by the Developer to the City or Escrow Holder; (iii) Escrow Holder shall return to the Developer any funds deposited by Developer into Escrow, less the Developer ’s share of customary and reasonable Escrow and title order cancellation charges, if any; and (iv) Escrow Holder shall return to the City any funds deposited by City into Escrow if it has already been deposited, less the City ’s share of customary and reasonable Escrow and title order cancellation charges, if any.
3.11 Report to IRS. Following the Close of Escrow and prior to the last date on which such report is required to be filed with the Internal Revenue Service, if such report is required pursuant to Section 6045(e) of the Internal Revenue Code, Escrow Holder shall report the g ross 689
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proceeds of the purchase and sale of the Properties to the Internal Revenue Service on Form 1099- B, W-9 or such other form(s) as may be specified by the Internal Revenue Service pursuant to Section 6045(e). Upon the filing of such reporting form with the Internal Revenue Service, Escrow Holder shall deliver a copy of the filed form to the City and the Developer.
ARTICLE IV
PROJECT DEVELOPMENT
4.1 Developer Covenant to Undertake Project . Upon Close of Escrow t he Developer covenants, for itself, its successors and assigns, to and for the exclusive benefit of the City, that the Developer shall commence and complete the development of the Project on the Properties within the time period for such actions set forth in the Schedule of Performance. The Developer covenants and agrees for itself, its successors, and assigns, that the Project and Properties shall be rehabilitated, improved and developed in compliance with the City Requirements and in substantial conformity with the terms and conditions of this Agreement, the Scope of Development, the Schedule of Performance, any and all plans, specifications and similar development documents required by this Agreement, except for such changes as may be mutually agreed upon in writing by and among the Parties, rehabilitate all Historic Properties to in accordance with the Secretary of the Interior Standards, and comply with all applicable laws, regulations, orders and conditions of each Governmental Agency with jurisdiction over the Properties or the Project. The covenants of this Section 4.1 shall run with the land of the Properties until the earlier of the date of recordation of the Certificate of Completion or the fifteenth (15th) anniversary of the date of the Close of Escrow.
4.2 Development of Properties.
4.2.1 Developer has agreed perform the Project to
construct and rehabilitate the Properties as a commercial and residential development including all required or associated on-site and off-site improvements, all hardscape and all landscaping, all as specifically described in the Scope of Development, in accordance with the Plans and Specifications to be approved by the City and any conditions imposed by the City in its approval of the Plans and Specifications , as well as rehabilitate all Historic Properties to be developed in accordance with the Secretary of the Interior Standards.
4.2.2 Phase 1
4.2.2.1 Phase 1 Project Loan.
4.2.2.1.1 Developer has presented City with a total cost estimate for completion of Phase 1 Project, including all work performed in compliance with Prevailing Wage Laws if required by state law, for Nineteen Million Dollars ($19,000,000.00). (a) Developer acknowledges and agrees that City
will loan Developer amounts in the form of reimbursements only for the actual reasonable development costs, up to the issuance of the Certificate of Completion, Developer pays for the Project and the amount the City shall loan Developer shall not to exceed Nineteen Million Dollars ($19,000,000.00)(the “City Loan”).
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(b) Developer shall submit to City monthly
invoices including supporting documentation showing the actual costs incurred for the Project prior to Completion of Construction for Phase 1.
(c) City shall review the invoices and supporting
documentation. In City's sole and absolute discretion determines additional information is needed City will specify the additional information or documentation that is needed, and Developer shall provide the requested documentation within fourteen (14) days, unless a City grants a longer period of time for compliance. Should Developer fail to timely provide the requested documentation the expense shall be deemed unreasonable.
(d) City can object to any expenses the City
determines is unreasonable contained in the monthly invoices. Within fourteen (14) days, Developer shall have the right to provide additional supporting documentation to justify the reasonableness of the expen se to the City. City shall review any additional supporting documentation provided by Developer to reconsider the reasonableness of the expense for the Project.
(e) City shall pay any reasonable costs for the
construction of the Project within forty-five (45) days of receipt of monthly invoice or the receipt of the additionally requested documentation or additional information, whichever comes later.
Absolutely no costs shall be paid by the City for work completed after Completion of Construction for Phase 1.
(f) Developer acknowledges that Developer is
solely responsible for the construction of the Project and is solely responsible for any costs of the Project that exceed the Total Development Costs for Phase 1. (g) City shall provide in writing to Developer the
Total Development Costs for Phase 1 upon the earlier of (1) the last reimbursement payment made to Developer or (2) total payments to Developer is Nineteen Million Dollars ($ 19,000,000.00).
After Completion of Construction for Phase 1 , the City shall not acc ept any invoices, under any circumstances, from the Developer, even if said invoice would have been reimbursed if delivered at an earlier date.
4.2.2.1.2 In accordance with and subject to all of the terms, conditions, and covenants of this Agreement, the City agrees to make the City Loan in the amount of City’s determined Total Development Costs for Phase 1 (the “City Loan Principal ”). The Principal represents the total amount of reimbursements made by the City to the Developer pursuant to the terms of this Agreement for the construction, rehabilitation, etc., of the Project.
The term of the City Loan will be 10 years from the date that the City Loan Commencement Date. No separate notice is required. All amounts advanced via reimbursement payments by the City to the Developer under the City Loan will bear interest at a variable interest rate of at the then current prime rate of interest with a ceiling of 8% and a floor of 5 % from the date of the first disbursement by City to Developer until the date the City Loan is paid in full. The rate of interest shall be in accordance with the terms of the Note of the City Loan. The City Note shall be senior in priority of payment to any other loans approved by the City. 691
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4.3 Developer Changes to Plans and Specifications During Cours e of Construction. The Developer shall submit all changes, to the City for its review and approval no less than fifteen (15) days prior to the date that the Developer intends to implement such changes.
The City shall have ten (10) days from its receipt of such proposed changes to review the same and advise the Developer in writing whether such changes are acceptable to the City in its reasonable discretion. Any proposed changes which are not disapproved by the City within such ten (10) day period shall be deemed approved.
4.4 Construction Start and Completion of Project . The Developer shall commence construction of each Phase the Project in accordance with the Schedule of Performance and, thereafter, shall diligently proceed to complete the construction of each Phase of the Project in a good and workmanlike manner in substantial conformity with the City Requirements, approved plans, specifications, and conditions for the Project approved by the City. The Developer shall obtain a Certificate of Completion for each of the Properties in each Phase on or before the Project Completion Date. The Developer will, promptly upon completion of construction of each Phase of the Project, cause the Project to be inspected by each Governmental Agency with jurisdiction over the Project, shall correct any defects and deficiencies that may be disclosed by any such inspection and shall cause to be duly issued all occupancy certificates and other licenses, permits and authorizations necessary for the operation and occupancy o f the completed Phase of the Project. The Developer shall do and perform all of the foregoing acts and things and cause to be issued and executed all such occupancy certificates, licenses, and authorizations for each Phase of the Project on or before the date set forth therefor in the Schedule of Performance as the completion date for each Phase of the Project. After the Construction Commencement Date for the Project, the Developer shall not permit the work of improvement of each Phase of the Project to cease or be suspended for a time period in excess of thirty (30) consecutive calendar days, subject to Unavoidable Delays. Developer shall not commence a subsequent Phase of the Project unless and until Completion of Construction for the prior Phase, unless the City has agreed in writing to the commencement of the subsequent Phase of the Project. Should Developer construct more than one Phase of the Project simultaneously upon written consent of the City, the Developer shall not permit work of improvement of each Phase of the Project under construction to cease or be suspended for a time period in excess of thirty (30) consecutive calendar days, subject to Unavoidable Delays.
4.5 Compliance with Laws. All work performed in connection with the development of the Project shall comply with all Governmental Requirements.
4.6 Schedule of Performance. The Schedule of Performance establishes various dates and times for the accomplishment of various tasks assigned to the City and the Developer and the satisfaction of the conditions precedent to the close of the Escrow. The Parties agree that time is of the essence in the performance of such tasks and the satisfaction of conditions precedent, in view of the large investment of resources that all Parties recognize will b e required for assembly of the Properties and the undertaking of the Project. If the date or time for the performance of a task or the satisfaction of a condition, as set forth in either the text of this Agreement or in the Schedule of Performance, may not be achieved, then prior to such date or time set forth in the text of this Agreement or the Schedule of Performance, the Parties shall consider whether a modification to the text of this Agreement or to the Schedule of Performance is indicated. Any decision to approve a modification to a time or date established in either the text of this Agreement 692
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or the Schedule of Performance shall be subject to the sole discretion of each Party. Any modification of a time or date for performance of a particular task or satisfaction of a particular condition that does not result in a change of more than one hundred eighty (180) days may be approved on behalf of the City by the City Manager, in his or her reasonable discretion. A modification of a time or date for performance of a task or satisfaction of a condition (or a series of such modifications) that results in an aggregate change of more than one hundred eighty (180) days shall be subject to the approval of t he City Council, in its sole and absolute discretion. If performance of a task or satisfaction of a condition in the Schedule Performance is prevented or delayed by Unavoidable Delays, the deadline for completion of such task or satisfaction of such condition shall be extended by the period of such Unavoidable Delays.
4.7 Developer Attendance at City Meetings . The Developer agrees to have one or more of its employees or consultants who are knowledgeable regarding this Agreement and the development of the Project, such that such person(s) can meaningfully respond to City questions regarding the progress of the Project, attend City Council meetings, when requested to do so on not less than ten (10) days prior written notice by City staff.
4.8 City’s Right to Inspect Project and Properties. Officers, employees, agents and representatives of the City shall have the right of reasonable access to the Properties, without the payment of charges or fees, during normal construction hours, during the period of construction of the Project. Such officers, employees, agents or representatives of the City shall be those persons who are designated by the City Manager. Any and all officers, employees, agents or representatives of the City who enter the Properties shall identify themselves at the construction management office on the Properties, upon their entrance on to the Properties, and shall at all times be accompanied by a representative of the Developer, while on the Properties. The Developer shall make a representative of the Developer available for this purpose at all times during normal construction hours, upon reasonable notice from the City. The City shall indemnify and hold the Developer harmless from injury, property damage or liability arising out of the exercise by the City of the right of access to the Properties provided in this Section 4.8, other than injury, property damage or liability arising from the n egligence or willful misconduct of the Developer or its officers, agents or employees. The City shall inspect relevant portions of the Properties, prior to issuing any written statements reflecting adversely on the Developer’s compliance with the terms and conditions of this Agreement pertaining to development of the Project. If in the City ’s reasonable judgment it is necessary, the City shall have the further right, from time to time, to retain a consultant or consultants to inspect the Project and verif y compliance by the Developer with the provisions of this Agreement. The Developer acknowledges and agrees that any such inspections are for the sole purpose of protecting the City’s rights under this Agreement, are made solely for the City’s benefit, that the inspections may be superficial and general in nature, and are for the purposes of informing the City of the progress of the Project and the conformity of the Project with the terms and conditions of this Agreement, and that the Developer shall not b e entitled to rely on any such inspection(s) as constituting an approval, satisfaction or acceptance of any materials, workmanship, conformity of the Project with this Agreement or otherwise. The Developer agrees to make its own regular inspections of the work of construction of the Project to determine that the quality of the Project and all other requirements of the work of construction of the Project are being performed in a manner satisfactory to the Developer. The Developer also agrees to immediately notify the City in writing should the Developer ’s inspections show any matters that will prevent the entire Project from being completed by the Project Completion Date 693
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set forth therefore in the Schedule of Performance. Without limiting the foregoing, the Developer shall permit the City upon reasonable notice to examine and copy all books and account records and other papers relating to the Properties and the construction of the Project. The Developer will use commercially reasonable efforts to cause all contractors, subcontractors and materialmen to cooperate with the City to enable such examination.
4.9 Cost of Construction. The cost and expense of und ertaking and completing the Project, including, without limitation, constructing all legally imposed on - and off -site improvements, and providing all utilities therefor, shall be borne by Developer at its sole cost, expense and liability. Developer shall be solely responsible for payment of all City land use, construction, inspection, plan check and development impact fees (collectively, “Development Fees”) imposed by the City with respect to the development of the Project. Developer shall bear all costs and expenses associated with the processing and obtaining of the entitlements and shall bear all costs and expenses (except to the extent expressly set forth otherwise in this Agreement), associated with any and all terms, conditions, requirements, mitiga tion measures and other exactions imposed on, or required in connection with, the entitlements.
4.10 California Environmental Quality Act (CEQA)
4.10.1 The Developer agrees, at its sole cost and expense, to fully indemnify, protect, hold harmless, and defend with counsel acceptable to the Indemnified Parties, from and against any and all claims, demands, damages, losses, liabilities, obligations, penalties, fines, actions, causes of action, judgments, suits, proceedings, costs, disbursements and expenses, includin g, without limitation, attorney fees, disbursements and costs of attorneys, environmental consultants and other experts, and all foreseeable and unforeseeable damages or costs of any kind or of any nature whatsoever that may, at any time, be imposed upon, incurred or suffered by, or claimed, asserted or awarded against, the Indemnified Parties, directly or indirectly relating to or arising from CEQA for the approval of the Project and/or this Agreement.
4.11 Prevailing Wages.
4.11.1 THE DEVELOPER ACKNOWLEDGES THAT
THE CITY HAS MADE NO REPRESENTATION, EXPRESS OR IMPLIED, TO THE
DEVELOPER OR ANY PERSON ASSOCIATED WITH THE DEVELOPER REGARDING
WHETHER OR NOT LABORERS EMPLOYED RELATIVE TO THE CONSTRUCTION,
INSTALLATION OR OPERATION OF THE PROJECT MUST BE PAID THE PREVAILIN G
PER DIEM WAGE RATE FOR THEIR LABOR CLASSIFICATION, AS DETERMINED BY
THE STATE OF CALIFORNIA, PURSUANT TO CALIFORNIA LABOR CODE SECTION 1720, ET SEQ., AND 1770, ET SEQ., AS WELL AS CALIFORNIA CODE OF REGULATIONS, TITLE 8, SECTION 16000, ET SEQ., (“PREVAILING WAGE LAWS”). THE DEVELOPER
AGREES WITH THE CITY THAT THE DEVELOPER SHALL ASSUME THE
RESPONSIBILITY AND BE SOLELY RESPONSIBLE FOR DETERMINING WHETHER OR
NOT LABORERS EMPLOYED RELATIVE TO THE CONSTRUCTION, INSTALLATION
OR OPERATION OF THE PROJECT MUST BE PAID THE PREVAILING PER DIEM WAGE
RATE FOR THEIR LABOR CLASSIFICATION, AS DETERMINED BY THE STATE OF CALIFORNIA, PURSUANT TO PREVAILING WAGE LAWS.
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4.11.2 THE DEVELOPER, ON BEHALF OF ITSELF,
ITS SUCCESSORS, AND ASSIGNS, WAIVES AND RELEASES THE CITY FROM ANY
RIGHT OF ACTION THAT MAY BE AVAILABLE TO ANY OF THEM PURSUANT TO LABOR CODE SECTION 1781. THE DEVELOPER ACKNOWLEDGES THE PROTECTIONS OF CIVIL CODE SECTI ON 1542 RELATIVE TO THE WAIVER AND RELEASE CONTAINED IN THIS SECTION 4.11, WHICH READS AS FOLLOWS:
A GENERAL RELEASE DOES NOT EXTEND TO
CLAIMS THAT THE CREDITOR OR RELEASING
PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN
HIS OR HER FAVOR AT THE TIME OF EXECUTING
THE RELEASE, AND THAT, IF KNOWN BY HIM OR
HER WOULD HAVE MATERIALLY AFFECTED HIS
OR HER SETTLEMENT WITH THE DEBTOR OR
RELEASED PARTY.
4.11.3 BY INITIALING BELOW, THE DEVELOPER
KNOWINGLY AND VOLUNTARILY WAIVES THE PROVISIONS OF SECTION 1542
SOLELY IN CONNECTION WITH THE WAIVERS AND RELEASES OF THIS SECTION
4.11:
____________
Initials of Authorized
Developer Representative
4.11.4 ADDITIONALLY, THE DEVELOPER SHALL
INDEMNIFY, DEFEND WITH COUNCIL ACCEPTABLE TO THE CITY AND HOLD CITY HARMLESS, AGAINST ANY CLAIMS PURSUANT TO LABOR CODE SECTION S 1726 AND 1781 ARISING FROM THIS AGREEMENT OR THE CONSTRUCTION OR INSTALLATION OF ALL OR ANY PORTION OF THE PROJECT.
4.12 Certificate of Completion.
4.12.1 Following the substantial completion of each Phase of the Project, and upon written request from the Developer for issuance of a Certificate of Completion for the Properties within the completed Phase, the City shall inspect the Properties of the Phase to determine whether or not the Phase of the Project has been substantially completed in compliance with this Agreement. If the City determines that the Phase of the Project is complete and in compliance with this Agreement, the City Manager shall furnish the Developer with a Certificate of Completion for the Properties within the Phase. If the City determines that the Phase of the Project is not in compliance with this Agreement, the City Manager shall send written notice of each non-conformity to the Developer. Upon issuance of the final certificate of occupancy for the development of the Phase of the Project, based on the plans submitted by the Developer to the City, the City shall furnish the Developer with a Certificate of Completion for each Phase of the Properties.
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4.12.2 Upon the Developer ’s substantial completion of
each Phase of the Project, the Developer shall request and be entitled to receive a Certificate of Completion, including the right of the City Manager to issue the Certificate of Completion, except that the Certificate of Completion, upon issuance, shall be evidence of the City ’s conclusive determination of satisfactory substantial completion of the construction of the Phase of the Project pursuant to the terms of this Agreeme nt. However, the Certificate of Completion shall not terminate, or affect in any regard, the responsibilities of the Developer to repay the City Loan or the covenants and terms of the City or Developer related to said City Loan , or City Loan Agreement, or any undeveloped Phase of the Project.
4.12.3 The City shall not unreasonably withhold the
issuance of a Certificate of Completion. A Certificate of Completion shall be evidence of the City’s conclusive determination of satisfactory completion of the Phase of the Project to which it pertains pursuant to the terms of this Agreement. After the recordation of a Certificate of Completion for each Phase of the Project, any person then owning or thereafter purchasing, leasing or otherwise acquiring any interest in Properties improved with the Phase of the Project shall not (because of such ownership, purchase, lease or acquisition) incur any obligation or liability under this Agreement regarding construction or installation of the Project except that such person shall be bound by any reservations, covenants, conditions, restrictions and other interests recorded against the Properties pursuant to this Agreement and the Grant Deed.
4.12.4 If the City fails or refuses to issue a Certificate of Completion following written request f rom the Developer, the City shall, within fifteen (15) calendar days of the Developer ’s written request or within three (3) calendar days after the next regular meeting of the City Council, whichever date occurs later, provide the Developer with a written statement setting forth the reasons for the City’s failure or refusal to issue a Certificate of Completion. The statement shall also contain the City ’s opinion of the action(s) the Developer must take to obtain a Certificate of Completion from the City. If the reason for the Developer ’s failure to complete the Phase of the Project is confined to the immediate unavailability of specific items or materials for construction or landscaping at a price reasonably acceptable to the Developer or other minor building “punch-list” items, the City may issue its Certificate of Completion upon the posting of a bond or irrevocable standby letter of credit by the Developer in a form reasonably acceptable to the City in an amount representing the fair value of the work on the Phase of the Project remaining to be completed, as reasonably determined by the City. If the City fails to provide such written statement, within the specified time period, the Developer shall be deemed conclusively and without further action of the City to have satisfied the requirements of this Agreement with respect to the Phase of the Project, as if a Certificate of Completion had been issued by the City pursuant to this Agreement.
4.12.5 A Certificate of Completion shall not constitute evidence of compliance with or satisfaction of any obligation of the Developer to any holder of a mortgage, or any insurer of a mortgage securing money loaned to finance the Phase of the Project, or any parts thereof including any reimbursements made by the City as part of the City Loan. A Certificate of Completion shall not be deemed to constitute a notice of completion under Section 3093 of the California Civil Code, nor shall it act to terminate the continuing covenants, restrictions or conditions contained in the Grant Deed or any other instruments recorded against the Phase of the Properties pursuant to this Agreement. A Certificate of Completion is not evidence of the 696
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compliance of the Project with any City Requirements or any building code, conditions of approval, land use, zoning or other requirements of the City or any Governmental Agency with jurisdiction over the Phase of the Properties, other than the City.
4.12.6 The City and Developer acknowledge that the
nature of the Project, including but not limited to, the adaptive reuse/structural retrofit of existing structures necessarily involves the risk of Unforeseen Site Conditions and Unavoidable Delays.
Should any Unforeseen Site Conditions and/or Unavoidable Delays impede Developers ability to seek a Certificate of Occu pancy and/or Certificate of Completion for any particular phase, Developer may request a Temporary Certificate of Occupancy (“TCO”) for that phase(s) or portions of a phase(s) ready to be occupied. Developer may seek a TCO for all or portions of a phase in order to further the Parties interests contained herein. Should Developer seek and be issued a TCO by the City, such TCO shall extend Developers obligation to obtain a Certificate of Completion for the duration such TCO is valid.
ARTICLE V
DEVELOPER COVENANTS
5.1 Covenant to Maintain Properties on Tax Rolls . The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
5.1.1 The entirety of the Properties shall remain on the County secured real property tax rolls for twenty years from the date of issuance of the final Certificate of Completion for the Project.
5.1.2 The Developer shall pay all property tax bills with respect to the Properties and all improvements thereon on or before the last day for the timely payment of each property tax installment on each December 10 and April 10 during such time period and to timely pay all supplemental tax bills regarding the Properties issued by the County.
The Developer further covenants and agrees to provide to the City, on or before July 31 of each year, commencing in the calendar year following the calendar year in which a Certificate of Completion is recorded and in each calendar year, thereafter, for the full term of this covenant: (i) a true and correct copy of all property tax assessment notices, property tax bills and property tax assessment correspondence by and between the Developer and the County regarding the Properties and all improvements thereon, with respect to the preceding fiscal year of the County, and (ii) cancelled checks issued by the Developer in payment of all property tax payments that are made to the County regarding the Properties and all improvements thereon (or other reasonab ly acceptable evidence of such payment), with respect to the preceding County fiscal year.
5.1.3 The covenants of this Section 5.1 shall run with the land of the Properties, shall be enforceable against the Developer and its successors and assigns, and shall be covenants set forth in the Grant Deed.
5.2 No Conveyance to Tax Exempt Entity . The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
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5.2.1 The Developer shall not use or otherwise sell,
transfer, convey, assign, lease, leaseback or hypothecate the Properties, the Project, or any portion of any of the foregoing to any entity or person, or for any use of the Properties, the Project, or any portion of any of the foregoing, that is partially or wholly exempt from the payment of real or personal property taxes or that would cause the exemption of the payment of all or any portion of real or personal property taxes otherwise assessable regarding the Properties, the Project, or any portion of any of the foregoing, without the prior written consent of the City, which may be withheld in the City’s sole and absolute discretion for a period of 20 years from the date of issuance of the certificate of completion for the Project by the City.
5.2.2 If the Properties, or any portion of the Properties, shall be conveyed, trans ferred or sold to any entity or person that is partially or wholly exempt from the payment of real or personal property taxes otherwise assessable against the Properties, or any portion thereof, without the prior written consent of the City, then, at the C ity’s election and in addition to all other remedies available to the City under this Agreement or at law or in equity, the Developer shall pay to the City a fee in lieu of payment of such taxes each year in an amount determined by the City to be one percent (1%) of the “full cash value” of the Properties, or portion thereof, as may be subject to such exemption from payment of real or personal property taxes. The City’s determination of “full cash value ” for in-lieu payment purposes under this Section 5.2.2 shall be established by the City each year, if necessary, by reference to the real or personal property tax valuation principles and practices generally applicable to a county property tax assessor under Section 1 of Article XIIIA of the California Constitution. The City ’s determination of “full cash value” and that an in -lieu payment is due shall be conclusive on such matters. If the City determines that an amount is payable as an in -lieu payment under this Section 5.2.2 in any tax year, then such amount shall be paid to the City for that tax year within forty -five (45) days following transmittal by the City to the Developer of an invoice for payment of the in-lieu amount.
5.2.3 The covenants of this Section 5.2 shall run with the land of the Properties, shall be enforceable against the Developer and its successors and assigns , and shall be covenants set forth in the Grant Deed.
5.3 Maintenance Condition of the Properties. The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
5.3.1 The areas of the Properties that are subject to public view (including all existing and future improvements, paving, walkways, landscaping, exterior signage and ornamentation) shall be maintained in good repair and a neat, clean and orderly condition, ordinary wear and tear excepted. If there i s an occurrence of an adverse condition on any area of the Properties that is subject to public view in contravention of the general maintenance standard described above (a “Maintenance Deficiency”), then the City shall notify the Developer in writing of the Maintenance Deficiency. If the Developer fails to cure or commence and diligently pursue to cure the Maintenance Deficiency within thirty (30) days of its receipt of notice of the Maintenance Deficiency, the City shall have the right to enter the Properties and perform all acts necessary to cure the Maintenance Deficiency, or to take any other action at law or in equity that may then be available to the City to accomplish the abatement of the Maintenance Deficiency.
Any sum expended by the City for the abatement of a Maintenance Deficiency on the Properties pursuant to this Section 5.3.1 shall become a lien on the Properties, as applicable. If the amount 698
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of the lien is not paid within thirty (30) days after written demand for payment from the City to the Developer, the City shall have the right to enforce the lien in the manner provided in Section
5.3.3. 5.3.2 Graffiti, as this term is defined in Government Code Section 38772, that has been applied to any exterior surface of a structure or improvement on the Properties that is visible from any public right -of-way adjacent or contiguous to the Properties, shall be removed by the Developer by either painting over the evidence of such vandalism with a paint that has been color -matched to the surface on which the paint is applied, or graffiti may be removed with solvents, detergents or water, as appropriate. If any such graffiti is not removed within ninety-six (96) hours following the time of the discovery of the graffiti, the City shall have the right to enter the Properties and remove the graffiti, without notice to the Developer. Any sum reasonably expended by the City for the removal of graffiti from the Properties pursuant to this Section 5.3.2, shall be a lien on the Properties. If the amount of the lien is not paid within thirty (30) days after written demand to the Developer from the City, the City shall have the right to enforce its lien in the manner provided in Section 5.3.3.
5.3.3 The Parties further mutually understand and agree that the rights conferred upon the City under th is Section 5.3 expressly include a grant by the Developer of a security interest in the Properties with the power to establish and enforce a lien or other encumbrance against the Properties or any portion t hereof, in the manner provided under Civil Code Sections 2924, 2924b and 2924c, to secure the obligations of the Developer and it successors under Section 5.3.1 or Section 5.3.2, including the reasonable attorneys’ fees and costs of the City associated with the abatement of a Maintenance Deficiency or removal of graffiti. For the purposes of the preceding sentence the words “reasonable attorneys’ fees and costs of the City” mean and include the salaries, benefits and costs of the City Attorney and the lawyers employed in the Office of the City Attorney.
5.3.4 The provisions of this Section 5.3, shall be a
covenant running with the land of the Properties, shall be enforceable against the Develope r and its successors and assigns, and shall be covenants set forth in the Grant Deed. Nothing in the foregoing provisions of this Section 5.3 shall be deemed to preclude the Developer from making any alteration, addition, or other change to any structure or improvement or landscaping on the Properties, provided that any such changes comply with applicable zoning and building regulations of the City.
5.4 Obligation to Refrain from Discrimination . The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
5.4.1 There shall be no discrimination against or
segregation of any person, or group of persons, on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Properties nor shall the Developer, itself or any person claiming under or through it, 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, sub-tenants, sub-lessees or vendees of the Properties. The covenant of this Section 5.4 shall run with the land 699
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of the Properties and shall be enforceable against the Developer and its successors and assigns in perpetuity and be a covenant in the Grant Deed and the Notice of Agreement.
5.4.2 The covenant of this Section 5.4 shall run with the land of the Properties in perpetuity, shall be enforceable against the Developer and its successors and assigns, and shall be covenants set forth in the Grant Deed.
5.5 Form of Non-Discrimination and Non-Segregation Clauses. The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
5.5.1 The Developer, such successors and such assigns
shall refrain from restricting the s ale, lease, sublease, rental, transfer, use, occupancy, tenure or enjoyment of the Properties (or any portion thereof) on the basis of sex, marital status, race, color, religion, creed, ancestry or national origin of any person. All deeds, leases or contracts pertaining to the Properties shall contain or be subject to substantially the following non -discrimination or non-segregation covenants:
5.5.1.1 In deeds: “The grantee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, locati on, number, use or occupancy of tenants, lessees, sub -tenants, sub -lessee, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land.”
5.5.1.2 In leases: “The Lessee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee itself, or any person claiming under or through it, establ ish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants lessees, sub-lessee, sub-tenants, or vendees in the premises herein leased.”
5.5.1.3 In contracts: “There shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed or leased, nor shall the transferee or any person claiming under or through it, 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, sub-lessees, sub-tenants, or vendees of the premises herein transferred. ” The foregoing provision shall be binding upon and shall obligate the contracting party or parties and any subcontracting party or parties, or other transferees under the instrument. 700
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5.5.2 The covenant of this Section 5.5 shall run with the land of the Properties in perpetuity, shall be enforceable against the Developer and its successors and assigns, and shall be covenants set forth in the Grant Deed.
5.6 Survival of Special Development Covenants . All of the covenants set forth in ARTICLE V, inclusive, shall be a covenant running with the land of the Properties and each such special development covenant shall survive the Close of Escrow, execution and recordation of the Grant Deed, and issuance and recordation of any Certificate of Completion for the time period specifically set forth in each such special development covenant. The Parties acknowledge that although the special development covenants apply to the entirety of the Properties, portions of the Project and Properties may, in accordance with the Permitted Transfer requirements, be sold or otherwise transferred to various successors and assigns of the Developer. Accordingly, the City agrees that with respect to enforcement of any of the spec ial development covenants, it is understood and agreed that, in the event of a breach of any of the special development covenants, the City will seek to enforce those covenants only against the then-current owner(s) of that portion of the Properties which is not in compliance with any one or more the special development covenants. No owner of any portion of the Properties which is in compliance with the special development covenants shall be liable for the breach of any of the special development covenants by any other owner of any other portion of the Properties; provided, however, that the foregoing shall not preclude Ci ty from seeking damages against any prior owner of any portion of the Properties if, during the tenure of such owner’s ownership, such owner’s portion of the Properties was not in compliance with any one or more of the special development covenants.
5.7 Developer Covenant to Defend this Agreement . The Developer acknowledges that the City is a “public entity” and/or “public agency” as defined under applicable California law.
Therefore, the City must satisfy the requirements of certain California statutes rel ating to the actions of public entities and public agencies including, without limitation, CEQA and Prevailing Wage Laws . Also, as a public body, the City’s action in approving this Agreement may be subject to proceedings to invalidate this Agreement or mandamus. The Developer assumes the risk of delays and damages and costs that may result to or be incurred by the Developer from any third- party legal actions related to the City’s approval of this Agreement or the pursuit of the activities contemplated by this Agreement, even in the event that an error, omission or abuse of discretion by the City is determined to have occurred. If a third -party asserts a claim, including, in the case of a government entity, a notice of violation, against the City or Deve loper, regarding the City’s approval of this Agreement or the pursuit of the activities contemplated by this Agreement, either the City may terminate this Agreement on thirty (30) days written notice to the Developer of the City’s intent to terminate this Agreement, referencing this Section 5.7, without any further obligation to perform the terms of this Agreement and without any liability to the Developer resulting from such termination, unless the Developer unconditionally agrees to indemnify and defend the City, with legal counsel acceptable to the City, against such third-party legal action, as provided in the next sentence. Within thirty (30) days of receipt of the City ’s notice of intent to terminate this Agreement, as provided in the preceding sentence, the Developer may offer to defend the City, with legal counsel reasonably acceptable to the City, in the third-party legal action and pay al l of the court costs, attorney fees, monetary awards, sanctions, attorney fee awards, expert witness and consulting fees, and the expenses of any and all financial or performance obligations resulting from the disposition of the legal action. Any such off er from the Developer must be in writing and reasonably acceptable to the City in both form and substance. 701
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Notwithstanding the language in this paragraph, in the case of a CEQA related action Section
4.10.1 shall control and in the case of a Prevailing Wage related Section section 4.11.4 shall control. Notwithstanding anything to the contrary in this Agreement and for the avoidance of doubt, nothing contained in this Section 5.7 shall be deemed or construed to be an express or implied admission that the City is liable to the Developer or any other person or entity for damages alleged from any alleged or established failure of the City to comply with any statute, including, without limitati on, CEQA, and Prevailing Wage . The Developer ’s defense of such third party actions as described in this Section 5.7 shall constitute an Unavoidable Delay.
5.8 Environmental Indemnity of the City by the Developer. The Developer agrees, at its sole cost and expense, to fully indemnify, protect, hold harmless, and defend (with counsel selected by the Developer and approved by the City) the City and its commissions, agents, attorneys, officers, employees, and authorized representatives (collectively, the “Indemnified Parties”), from and against any and all claims, demands, damages, losses, liabilities, obligations, penalties, fines, actions, causes of action, judgments, suits, proceedings, costs, disbursements and expenses, including, without limitation, attorney fees, disbursements and costs of attorneys, environmental consultants and other experts, and all foreseeable and unforeseeable damages or costs of any kind or of any nature whatsoever (collectively, “Environmental Claims”) that may, at any time, be imposed upon, incurred or suffered by, or claimed, asserted or awarded against, the Indemnified Parties, directly or indirectly relating to or arising from any of the following “Environmental Matters” existing or occurring during or arising from the Developer’s ownership of the Properties or construction or operation of the Project:
5.8.1 The presence of Hazardous Materials on, in, under, from or affecting all or any portion of the Properties or the Project.
5.8.2 The storage, holding, handling, release, threatened release, discharge, generation, leak, abatement, removal or transportation of any Hazardous Materials on, in, under, from or affecting the Properties or the Project.
5.8.3 The violation of any law, rule, regulation, judgment, order, permit, license, agreement, covenant, restriction, requirement or the like by the Developer, its agents or contractors, relating to or governing in any way Hazardous Materials on, in, under, from or affecting the Properties or the Project.
5.8.4 The failure of the Developer, its agents or
contractors, to properly complete, obtain, submit and/or file any and all notices, permits, licenses, authorizations, covenants and the like in connection with the Developer ’s activities on the Properties or regarding the Project.
5.8.5 The implementation and enforcement by the
Developer, its agents or contractors of any monitoring, notification or other precautionary measures that may, at any time, become necessary to protect against the release, potential release or discharge of Hazardous Materials on, in, under, from or affecting the Properties or the Project.
5.8.6 The failure of the De veloper, its agents or
contractors, in compliance with all applicable Environmental Laws, to lawfully remove, contain, 702
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transport or dispose of any Hazardous Materials existing, stored or generated on, in, under or from the Properties or the Project.
5.8.7 Any investigation, inquiry, order, hearing, action or other proceeding by or before any governmental agency in connection with any Hazardous Materials on, in, under, from or affecting the Properties or the Project or the violation of any Environmental Law relating to the Properties or the Project.
5.8.8 The Developer shall pay to the Indemnified Parties all costs and expenses including, without limitation, reasonable attorneys' fees and costs, incurred by the Indemnified Parties in connection with enforcement of the af orementioned environmental indemnity.
5.9 Insurance. In order to protect the City and its commissions, agents, attorneys, officers, employees and authorized representatives (collectively, “Additional Insureds”) against any and all claims and liability for dea th, injury, loss and damage resulting from the Developer ’s actions in connection with this Agreement, the Properties, and the Project, the Developer shall secure and maintain the insurance coverage, described in and required by this Section 5.9. The City shall not have any obligation under this Agreement until the Developer provides the required policies and/or certificates evidencing the insurance required by this Section 5.9 to the City and the City approves such evidence of insurance. The Developer shall pay any deductibles and self- insured retentions under all insurance policies issued in satisfaction of the terms of this Agreement.
Developer shall retain all insurance policies as set forth in this Section 5.9 until recordation of the Certificate of Completion.
5.9.1 Workers’ Compensation Insurance
Requirement. The Developer shall submit written proof that the Developer is insured against liability for workers’ compensation in accordance with the provisions of Section 3700 of the Labor Code. By executing this Agreement, the Developer makes the following certification, required by Section 1861 of the Labor Code:
“I am aware of the provisions of section 3700 of the Labor Cod e which require every employer to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the work of the Agreement.”
The Developer shall require each contractor and sub-contractor performing work on the Project to provide workers ’ compensation coverage for all of such contractor ’s or sub -contractor’s employees, unless the contractor ’s or sub -contractor’s employees are covered by workers ’ compensation insurance provided by the Developer. If any class of employees engaged in work or services performed in connection with the Project is not covered by Labor Code Section 3700, the Developer shall provide and/o r require each contractor or sub -contractor to provide adequate workers’ compensation insurance covering such employees. Each workers’ compensation policy procured pursuant to this Section 5.9.1 shall contain a full waiver of subrogation clause in favor of the Additional Insureds.
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5.9.2 Liability and Permanent Insurance
Requirements.
5.9.2.1 The Developer shall maintain or cause to be maintained in full force and effect, until the issuance of the Certificate of Completion, subject to Section 5.9.2.4, the following insurance coverage:
5.9.2.1.1 Commercial General Liability Insurance coverage, including, but not limited to, Premises -Operations, Contractual Liability Insurance (specifically covering all indemnity obligations of the Developer pursuant to this Agreement), Products - Completed Operations Hazards, Personal Injury (including bodily injury and death), and Properties Damage for liability arising out of the construction of the Project and/or the Developer’s operations concerning the Properties or the Project. The commercial general liability insurance coverage in conjunction with any “umbrella policy” shall have minimum limits for Bodily Injury and Properties Damage liability of TWO MILLION DOLLARS ($2,000,000) each occurrence and FOUR MILLION DOLLARS ($4,000,000) aggregate. The use of an “ umbrella policy” is permitted to achieve the aforementioned liability limits.
5.9.2.1.2 Developer shall maintain and Developer will require the general contractor and subcontractors to obtain Automobile Liability Insurance against claims of Personal Injury (including bodily injury and death) and Properties Damage covering all owned, leased, hired and non -owned vehicles used by the Developer with minimum limits for Bodily Injury and Properties Damage of ONE MILLION DOLLARS ($1,000,000) each occurrence and TWO MILLION DOLLARS ($2,000,000) aggregate. Such insurance shall be provided by a business or commercial vehicle policy.
5.9.2.1.3 Workers' Compensation: Workers' Compensation
Insurance, as required by the State of California and Employer's Liability Insurance with a limit of not less than $1,000,000 per accident for bodily injury and disease.
5.9.2.1.4 If the Developer hires a consultant to provide design services, such as architectural or engineering services in connection with the Project, or any portion of the Project, the Develope r shall require each such consultant to provide Professional Liability (Errors and Omissions) Insurance, for liability arising out of, or in connection with, the performance of such design services, with limits of not less than TWO MILLION DOLLARS ($2,000,000).
5.9.2.1.5 If umbrella or excess liability coverage is used to meet any required limit(s) specified herein, the Contractor shall provide a “follow form” endorsement satisfactory to the City indicating that such coverage is subject to the same terms and conditions as the underlying liability policy.
5.9.2.1.6 Upon acceptance of the Project or any portion thereof, from each contractor, the Developer shall maintain Fire and Extended Coverage Insurance on the Project on a blanket basis or with an agreed amount clause in amoun ts not less than 100% of the replacement value of all portions of the Project so accepted. 704
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5.9.2.2 During the construction of the Project, the Developer shall require that each contractor performing work on the Project maintain the following insurance coverage, as specified below, at all times during the performance of said work, or the Developer shall provide for such contractors “wrap” coverage, as specified below, at all times during the performance of said work:
5.9.2.2.1 The Developer shall maintain Builder ’s Risk
Insurance to be written on an All Risk Completed Value form, in an aggregate amount equal to 100% of the completed insurable value of the Project or portion of the Project on which such contractor is performing work.
5.9.2.2.2 Each general contractor and each sub -contractor shall maintain Commercial General Liability Insurance with limits of not less than ONE MILLION DOLLARS ($1,000,000) per occurrence and TWO MILLION DOLLARS ($2,000,000) aggregate to protect the Developer during the construction of the Project from claims involving bodily injury and/or death and damage to the property of others.
5.9.2.2.3 Each general contractor and each sub -contractor shall maintain Automobile Liability Insurance against claims of personal injury (including bodily injury and death) and property damage covering all owned, leased, hired and non-owned vehicles used in the performance of the contractor’s obligations with minimum limits for bodily injury and property damage of ONE MILLION DOLLARS ($1,000,000) each occurrence and TWO MILLION DOLLARS ($2,000,000) aggregate. Such automobile liability insurance shall be provided by a business or commercial vehicle policy.
5.9.2.3 The insurance required in Section 5.9.2.1 and Section 5.9.2.2 above shall include endorsements naming the Additional Insureds as additional insured for liability arising out of this Agreement and any operation related to this Agreement.
5.9.2.4 Any insurance coverage required under this Agreement shall not be written on a “claims made” basis. The applicable certificate of insurance must clearly provide that the coverage is on an “occurrence” basis. The requirements of this Section 5.9.2.4 shall survive any expiration or termination of this Agreement and the recordation of the Grant Deed and any Certificate of Completion.
5.9.2.5 Receipt by the City of evidence of insurance that does not comply with the above requirements shall not constitute a waiver of the insurance requirements of this Agreement.
5.9.2.6 Subject to Section 5.9.2.4, all of the insurance coverage required under this Section 5.9 shall be maintained by the Developer or its contractors, as required by the terms of this Agreement, until the issuance of the Certificate of Completion and shall not be reduced, modified, or canceled without, at least, thirty (30) days prior written notice to the City.
Also, phrases such as “endeavor to” and “but failure to mail such notice shall impose no obligation or liability of any kind upon the company” shall not be included in the cancellation wording of any certificates of insurance or any coverage for the Additional Insureds. The Developer shall immediately obtain replacement coverage for any insurance policy that is terminated, canceled, 705
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non-renewed, or whose policy limits are exha usted or upon insolvency of the insurer that issued the policy. If any notices of change, or cancellation are received Developer shall immediately notify the City, but requirements for “no changes without 30 days advance notice” may not be accepted by insurers, and minor variations in notice of cancellations clauses shall not be a breach of this Agreement. Failure of Developer to have replacement insurance meeting all requirements put in place prior to the cancellation date of any required insurance policy is a breach of this Agreement.
5.9.2.7 All insurance to be obtained and maintained by the Developer under this Section 5.9 shall be issued by a company or companies listed in the then current “Best’s Key Rating Guide” publication with a minimum of an “A:XV” rating and be authorized to conduct business in the State of California , but said carriers may be ‘non admitted’ by the State of California Department of Insurance.
5.9.2.8 The City will not accept self -insurance in satisfaction of the insurance requirements of this Section 5.9.
5.9.2.9 All insurance obtained and maintained by the Developer in satisfaction of the requirements of this Agreement shall be primary to and not contributing to any insurance maintained by the Additional Insureds.
5.9.2.10 Insurance coverage in the minimum amounts set forth in this Section 5.9 shall not be construed to relieve the Developer of any liability, whether within, outside, or in excess of such coverage, and regardless of solvency or insolvency of the insurer that issues the coverage; nor shall it preclude the Additional Insureds from taking such other actions as are available to them under any other provision of this Agreement or otherwise at law.
5.9.3 Failure by the Developer to maintain all insurance coverage required by this Section 5.9 in effect shall be an Event of Default by the Developer. The City, at its sole option, may exercise any remedy available to them in connection with such an Event of Default. Alternatively, the City may, at its sole option, purchase any such required insurance coverage and the City shall be entitled to immediate payment from the Developer for any premiums and associated costs paid by the City for such insurance coverage. Any election by the City to purchase or not to purchase insurance otherwise required to be carried by the Developer shall not relieve the Developer of its obligation to obtain and maintain the insurance coverage required by this Agreement.
ARTICLE VI
PROJECT FINANCING
6.1 Construction Loans. The Developer covenants to the City that no Construction Loan Deed of Trust(s) shall to be recorded against the Properties until Phase 1 has received the final Certificate of Completion for Phase 1. . Developer covenants to the City that Construction Loan(s) Deed of Trust may only be recorded on one Phase of the Project at a time. A subsequent Phase of the Project cannot receive a construction loan until the previous Phase of the Project has Completion of Construction . For illustrative purposes only Develop er complete s Phase 1 , 706
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Developer can obtain a construction loan for Phase 2, but cannot obtain construction loans for Phase 3 or 4 until Developer receives the Completion of Construction for Phase 2.
6.2 Unauthorized Liens. Until recordation of the final Certificate of Completion for each Phase , the Developer shall not record, and shall not allow to be recorded, against the any uncompleted Phase of the Properties, or any portion thereof, any Lien not expressly authorized by this Agreement. The Developer shall remove, or shall have removed, any unauthorized Lien made or recorded against the Properties or any portion of the Properties, or shall assure the satisfaction thereof to the satisfaction of the City. After one hundred twenty (120) calendar days prior written notice to the Developer, the City shall have the right, but not the obligation, to satisfy any unauthorized Lien made or recorded prior to recordation of the Certificate of Completion and receive reimbursement from the Developer for any amounts paid or incurred in satisfying any such Lien including staff time and costs , upon demand. Nothing in this Section 6.2, though, shall require the Developer to pay or make provisions for the payment of any tax, assessment, lien, or charge that the Developer is in the process of contesting the validity or amount thereof, in good faith, and so long as such contest shall not subject the Properties, or any portion thereof, to forfeiture or sale.
6.3 Rights of Lenders and City Regarding Permitted Loans and Liens.
6.3.1 Until repayment of the City Loan and any accrued
interest in it ’s entirety, t he City shall have the right of reasonable review and approval of any Lender from which the Developer proposes to obtain any Loan, whether or not such Loan is secured by a Lien against the Property or any portion thereof. The City shall not unreasonably withhold, condition or delay its approval of any proposed Lender or Loan. Developer acknowledges that City Loan shall be a first priority security and any other Loan shall be subordinate to City Loan . In deciding whether to give, condition or withhold such approval, the City may consider, among other matters, whether or not the proposed Lender is a state or federally chartered bank, savings and loan, or other financial institution which routinely provides construction financing to development projects such as the Project, whether the terms of the Loan are reasonable and customary when compared to the financing terms of similar development projects in the County, the size and financial strength of the proposed Lender, and what effect, if any, any changes requ ested by the Lender to either this Agreement or any of the exhibits to this Agreement may have upon the City’s rights and remedies hereunder. In connection therewith, in any notice requesting approval of a proposed Lender and Loan, the Developer shall inc lude a statement identifying any amendments, modifications, or other changes to this Agreement or its exhibits which the proposed Lender will request in connection with the Developer’s obtaining of the Loan. The City agrees to reasonably consider, but sha ll not be obligated to accept, any amendment, modification, or other change to this Agreement or any of the exhibits to this Agreement which materially restricts, diminishes, or burdens the City’s rights and remedies.
6.3.2 Whenever the City delivers any notice or demand to the Developer regarding any breach or default by the Developer under this Agreement that, if not timely cured by the Developer, would entitle the City to terminate this Agreement, the City shall send a copy of such notice to each affected Lend er of which the City has received notice and a contact address for transmittal of such notices. Whenever the City delivers any notice or demand to the Developer regarding any breach or default by the Developer under this Agreement that, if 707
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not timely cured by the Developer, would entitle the City to exercise its power of termination of the fee estate of all or any portion of the Property pursuant to Section 7.6, the City shall at the same time send a copy of such notice or demand to each affected Lender of which the City has received notice and a contact address for transmittal of such notice. Each affected Lender receiving a copy of any such notice shall have the right, at its option, to commence the cure or remedy of any such default of the Developer and to diligently and continuously proceed with such cure or remedy, within one hundred eighty (180) calendar days following its receipt of notice of the default. If a default of the Developer under this Agreement cannot, with diligence, be remedied or cured, or the remedy or cure of such default cannot be commenced, within such one hundred eighty (180) calendar day period, the Lender shall have such additional time as is reasonably necessary to remedy or cure such default of the Developer, but in no event beyond three hundred sixty five (365) calendar days following its receipt of notice of the default. If such default of the Developer can only be remedied or cured by the Lender upon obtaining possession of the Property, the Lender shall seek to obtain possession of the Property with diligence and continuity through a receiver or otherwise, and shall remedy or cure such default of the Developer within one hundred eighty (180) calendar days after obtaining possession of the Property. Nothing contained in this Agreement shall be deemed to permit or authorize any Lender to undertake or continue the construction of any portion of the Project (beyond the e xtent necessary to conserve or protect improvements or construction already made), without expressly assuming the Developer’s obligations under this Agreement by written agreement approved by the City, in which the Lender agrees to complete, in the manner provided in this Agreement, the improvements to which the Lien or title of the Lender relates, which approval shall not unreasonably be withheld, delayed, or conditioned by the City.
6.3.3 In any case where, one hundred eighty (180)
calendar days after delivery of notice of a default of the Developer under Section 6.3.2, an affected Lender has not exercised the option provided in Section 6.3.2 to construct the applicable portions of the Project, or has exercised the option, but has not proceeded diligently and continuously with construction, the City shall have the option, in the City’s sole and absolute discretion, to purchase the Loan of such Lender and any security interest of such Lender under its Loan Documents by payment to the Lender of the amount of the unpaid Loan, including principal, accrued and unpaid interest, late charges, costs, expenses and other amounts payable to the Lender by the Developer under its Loan Documents and, if the ownership of the Property or any portion of the Property has previously vested in such Lender, the City, at i ts option but not as its obligation, shall be entitled to a conveyance of any title or interest in the Property vested in such Lender from such Lender.
6.3.4 After expiration of the one hundred eighty (180)
calendar day period provided for in Section 6.3.3, any affected Lender may demand, in writing, that the City act to exercise or forego the option granted in Section 6.3.3. If the City fails to exercise the right granted in Section 6.3.3 within sixty (6 0) calendar days from the date of the City’s receipt of such written demand from a Lender, the City shall be conclusively deemed to have waived its right of purchase of that Lender’s interest pursuant to Section 6.3.3.
6.3.5 In the event of a default or breach by the Developer under any Loan Documents, where the Lender has not exercised its option to complete the Project under Section 6.3.2, the City may cure the default of the Developer under the applicable Loan Documents, but is under no obligation to do so, prior to completion of any sale or forecl osure of 708
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the Property or any portion thereof under the applicable Loan Documents. The City shall be entitled to reimbursement from the Developer of all costs and expenses incurred by the City in curing any default of the Developer under any Loan Documents.
6.3.6 In any case where a Lender has acquired title to all or any portion of the Property or Project through foreclosure, deed in lieu of foreclosure, or any other means, and such Lender proposes to enter into an agreement to transfer the Property and/or Project, or any portion thereof, to a third party transferee, the Lender shall provide the City with written notice thereof, which notice shall include a reasonably detailed description of the terms and conditions of the proposed transaction. The City shall have the option, but not the obligation, to purchase the Property and/or Project on substantially the same terms as described in the Lender’s notice, which option, if ever, shall be exercised by written notice from the City to the Lender within twenty (20) d ays following the City’s receipt of the Lender’s notice. If the City elects not to exercise its option, then, subject to Section 8.3.2, the Lender may complete the transaction described in its notice, provided that such transaction is closed on materially identical terms and conditions as those described in the Lender’s notice to the City. If the Lender and third party transferee desire to materially amend the terms of their proposed transaction, the Lender shall give the City written notice of the proposed modifications and the City shall once again have the right to elect to acquire the Property and the Project (or portion thereof) on terms and co nditions substantially similar to those modified terms. If, for any reason, the proposed transaction between the Lender and third party transferee fails to close within two hundred forty (240) days following the date on which the City first receives notic e of the proposed transaction (or notice of the proposed modified transaction, whichever is later), then the City once again have the right to elect to acquire the Property and/or Project pursuant to this Section 6.3.6.
6.3.7 The restrictions set forth in this Section 6.3 shall remain in effect only until the recordation of the final Certificate of Completion for the Project
ARTICLE VII
DEFAULTS, REMEDIES AND TERMINATION
7.1 Defaults - General.
7.1.1 Parties agree that City may terminate this
Agreement without cause at its sole and absolute discretion at any time prior to the Close of Escrow by providing written notice to Developer. Should City exercise it power of termination under this Section 7.1.1 Developer shall not be entitled to any compensation or damages from City.
7.1.2 Subject to any extensions of time provided for in this Agreement, failure or delay by any Party to perform any term or provision of this Agreement shall constitute an “Event of Default ” under this Agreement; provided, however, that if a Party otherwise in default commences to cure, correct or remedy such default, within thirty (30) calendar days after receipt of written notice from the injured Party specifying such default, and shall diligently and continuously prosecute such cure, correction or remedy to completion (and where any time limits for the completion of such cure, correction or remedy are specifically set forth in 709
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this Agreement, then within said time limits), such Party shall not be deemed to be in default under this Agreement and no Event of Default shall be deemed to have occurred.
7.1.3 The injured Party shall give written notice of default to the Party in default, specifying the default complained of by the non-defaulting Party. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default.
7.1.4 Any failure or delays by any Party in asserting any of their rights and/or remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by any Party in asserting any of its rights and/or remedies shall not deprive that Party of its right to institute and maintain any actions or proceedings that it may deem necessary to protect, assert or enforce any such rights or remedies.
7.1.5 In addition to other acts or omissions of the
Developer that may legally or equitably constitute a default or breach of this Agreement, the occurrence of any of the following specific events, prior to the issuance of a Certifica te of Completion for the Project, shall constitute an “Event of Default” under this Agreement and shall not be subject to the notice and cure provisions of Section 7.1.1:
7.1.5.1 Any material default by the Developer under any Loan Documents for any purpose or reason that remains uncured following any applicable notice and expiration of any applicable cure period under such Loan Documents.
7.1.5.2 Any representation, warranty or disclosure made to the City by the Developer regarding this Agreement or the Project is materially false or misleading, whether or not such representation or disclosure appears in this Agreement.
7.1.5.3 The Developer fails to make any payment or deposit of funds required under this Agreement or to pay any other charge set forth in this Agreement, following seven (7) days’ written notice to the Developer from the City of such failure.
7.1.5.4 The construction of the Project is delayed or sus pended for a period in excess of that permitted under Section 4.4 or the Developer has not been issued, or entitled to be issued, a Completion of Construction for each Phase in accordance with the Schedule of Performance.
7.1.5.5 There occurs any event of dissolution, reorganization or termination of the Developer that adversely and materially affects the operation or value of the Properties or the Project, and such event is not corrected within five (5) days following written notice of such event from the City to the Developer.
7.1.5.6 The Developer Transfers its interest in this Agreement, the Properties, or the Project, or any portion thereof, whether voluntarily or involuntarily or by operation of law, in violation of the terms and conditions of this Agreement and such action is not cured within the period prescribed in Section 8.3.2.
7.1.5.7 The Developer becomes insolvent or a receiver is appointed to conduct the affairs of the Developer under state or federal law. 710
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7.1.5.8 The Developer ’s legal status as a California limited liability company authorized by the Secretary of State of the State of California to transact business in California is suspended or terminated.
7.2 LIQUIDATED DAMAGES TO THE CITY. UPON THE OCCURRENCE OF
AN EVENT OF DEFAULT BY THE DEVELOPER UNDER THIS AGREEMENT PRIOR TO
THE CLOSE OF ESCROW, THE CITY MAY CANCEL THE ESCROW PURSUANT TO SECTION 3.10, AND UPON CANCELLATION OF THE ESCROW, THE CITY SHALL BE
RELIEVED OF ANY OBLIGATION UNDER THIS AGREEMENT TO SELL OR CONVEY
THE PROPERTY OR ANY PORTION THEREOF AND ANY SUCH ESCROW
CANCELLATION SHALL BE WITHOUT ANY LIABILITY OF THE CITY T O THE DEVELOPER OR ANY OTHER PERSON ARISING FROM SUCH ACTIONS. THE CITY
AND THE DEVELOPER ACKNOWLEDGE THAT IT IS EXTREMELY DIFFICULT AND
IMPRACTICAL, IF NOT IMPOSSIBLE, TO ASCERTAIN THE AMOUNT OF DAMAGES
THAT WOULD BE SUFFERED BY THE CITY IN THE EVENT OF A CANCELLATION OF
THE ESCROW DUE TO THE OCCURRENCE OF AN EVENT OF DEFAULT BY THE DEVELOPER UNDER THIS AGREEMENT PRIOR TO THE CLOSE OF ESCROW. HAVING
MADE DILIGENT BUT UNSUCCESSFUL ATTEMPTS TO ASCERTAIN THE ACTUAL
DAMAGES THE CITY WOULD SUFFER IN THE EVENT OF A CANCELLATION OF THE
ESCROW DUE TO THE OCCURRENCE OF AN EVENT OF DEFAULT BY THE
DEVELOPER UNDER THIS AGREEMENT PRIOR TO THE CLOSE OF ESCROW, THE
CITY AND THE DEVELOPER AGREE THAT A REASONABLE ESTIMATE OF THE CITY’S DAMAGES IN SUCH EVENT IS THE TOTAL S UM OF TWENTY THOUSAND DOLLARS ($20,000) (THE “LIQUIDATED DAMAGES AMOUNT”). THEREFORE, UPON
THE CANCELLATION OF THE ESCROW BY THE CITY DUE TO THE OCCURRENCE OF
AN EVENT OF DEFAULT BY THE DEVELOPER UNDER THIS AGREEMENT PRIOR TO
THE CLOSE OF THE ESCROW, ESCR OW HOLDER SHALL IMMEDIATELY CANCEL
THE ESCROW AND PAY THE LIQUIDATED DAMAGES AMOUNT TO THE CITY, IN PART, FROM THE EARNEST MONEY DEPOSIT WITHIN FIVE (5) DAYS OF ESCROW CANCELLATION. RECEIPT OF THE LIQUIDATED DAMAGES AMOUNT SHALL BE THE CITY’S SOLE AND EXC LUSIVE REMEDY UPON THE CANCELLATION OF THE
ESCROW DUE TO THE OCCURRENCE OF AN EVENT OF DEFAULT BY THE DEVELOPER UNDER THIS AGREEMENT PRIOR TO THE CLOSE OF ESCROW.
CITY’S INITIALS: _____ DEVELOPER’S INITIALS: _____
7.3 DEVELOPER’S ELECTION RE: SPECIFIC ENFORC EMENT OF
AGREEMENT OR WAIVER OF RIGHT TO SPECIFIC PERFORMANCE AND LIMITATION ON RECOVERY OF DAMAGES PRIOR TO CLOSE OF ESCROW.
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT PERTAINING TO THE
CONVEYANCE OF THE PROPERTY BY THE CITY UNDER THIS AGREEMENT PRIOR
TO CLOSE OF ESCROW, THE DEVELOPER SHALL, AS ITS SOLE AND EXCLUSIVE
REMEDY, HAVE THE RIGHT TO EXERCISE ONE OF THE ALTERNATIVE REMEDIES DESCRIBED IN SECTIONS 7.3.1 AND 7.3.2. THE DEVELOPER ’S ELECTION, ONCE MADE, SHALL BE IRREVOCABLE.
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7.3.1 WAIVER OF RIGHT TO SPECIFIC
PERFORMANCE AND LIMITATION ON RECOVERY OF DAMAGES . THE DEVELOPER MAY WAIVE THE REMEDIES SET FORTH IN SECTION 7.3.2 AND MAY CANCEL THE ESCROW PURSUANT TO SECTION 3.10, AND UPON CANCELLATION OF
THE ESCROW, THE DEVELOPER SHALL BE RELIEVED OF ANY OBLIGATION UNDER
THIS AGREEMENT TO PURCHASE OR ACCEPT TITLE TO THE PROPERTY AND ANY
SUCH ESCROW CANCELLATION SHALL BE WITHOUT ANY LIABILITY OF THE DEVELOPER TO THE CITY OR ANY OTHER PERSON ARISING FROM SUCH ACTIONS.
THE DEVELOPER SHALL BE LIMITED TO RECOVERING ANY AMOUNTS ACTUALLY
EXPENDED BY THE DEVELOPER IN REASONABLE RELIANCE ON THIS AGREEMENT
PRIOR TO THE DATE OF THE OCCURRENCE OF THE EVENT OF DEFAULT BY THE CITY, NOT TO EXCEED TEN THOUSAND DOLLARS ($ 10,000). THE DEVELOPER
WAIVES ANY RIGHT TO RECOVER ANY OTHER SUMS FROM THE CITY ARISING FROM AN EVENT OF DEFAULT BY THE CITY PRIOR TO THE CLOSE OF ESCROW. THE DEVELOPER ACKNOWLEDGES THE PROTECTIONS OF CIVIL CODE SECTION 1542 RELATIVE TO THE WAIVER AND RELEASE C ONTAINED IN THIS SECTION 7.3.1, WHICH CIVIL CODE SECTION READS AS FOLLOWS:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
THAT THE CREDITOR OR RELEASI NG PARTY DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT
THE TIME OF EXECUTING THE RELEASE, AND THAT, IF
KNOWN BY HIM OR HER WOULD HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR
OR RELEASED PARTY.”
BY INITIALING BELOW, THE DEVELOP ER KNOWINGLY AND VOLUNTARILY WAIVES THE PROVISIONS OF SECTION 1542 SOLELY IN CONNECTION WITH THE WAIVERS AND RELEASES OF THIS SECTION 7.3.1.
DEVELOPER’S INITIALS ____________
IN CONNECTION WITH THE WAIVERS OF THIS SECTION 7.3.1, THE
DEVELOPER FURTHER WAIVES THE RIGHT TO RECORD A NOTICE OF PENDENCY
OF ACTION AGAINST ALL OR ANY PORTION OF THE PROPERTY EXCEPT
DEVELOPER MAY RECORD SUCH A NOTICE IN CONNECTION WITH ANY SUIT FOR
SPECIFIC PERFORMANCE PERMITTED HEREUNDER IN THE EVENT DEVELOPER
ELECTS NOT TO WAIVE ITS RIGHT TO SEEK SPECIFIC PERFORMA NCE UNDER SECTION 7.3.2.
7.3.2 SPECIFIC PERFORMANCE . THE
DEVELOPER MAY WAIVE THE REMEDIES SET FORTH IN SECTION 7.3.1 AND, IN ACCORDANCE WITH CIVIL CODE SECTION 3384, ET SEQ., INSTITUTE AN ACTION
AGAINST THE CITY FOR SPECIFIC PERFORMANCE OF THE TERMS OR PROVISIONS
OF THIS AGREEMENT WHICH WERE TO HAVE BEEN CO MPLETED BY THE CITY PRIOR TO THE CLOSE OF ESCROW.
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7.4 Legal Actions.
7.4.1 Except as otherwise provided by Section 7.3, any
Party may institute legal action to cure, correct or remedy any default, to recover damages for any default, or to obtain any other remedy available to that Party under this Agreement or at law or in equity. Such legal actions must be instituted in the Superior Court of the State of California in and for the County of San Bernardino, California, in any other appropriate court within the County of San Bernardino, California.
7.4.2 The procedural and substantive laws of the State of California shall govern the interpretation and enforcement of this Agreement, without regard to conflicts of laws principles. The Parties acknowledge and agree that this Agreement is entered into, is to be fully performed in and relates to real property located in the City of Ontario, County of San Bernardino, California.
7.5 Rights and Remedies are Cumulative . Except as otherwise expressly stated in this Agreement, the rights and remedies of the Parties set forth in this ARTICLE VII are non- exclusive and cumulative, and the exercise by any Party of one or more of such rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other Party(ies).
7.6 City Power of Termination Regarding the Properties.
7.6.1 The City hereby reserves a power of termination
pursuant to Civil Code Sections 885.010, et seq., exercisable by the City, in its sole and absolute discretion, upon thirty (30) calendar days written notice to the Developer referencing this Section
7.6, to terminate the fee interest of the Developer in the Properties and/or any improvements to the Properties and revest such fee title in the City and take possession of all or any portion of such real property and improvements, without compensation to the Developer, upon the occurrence of an Event of Default by the Developer following the Close of Escrow and pr ior to the repayment of the City Loan, or expiration of this Agreement, whichever occurs later.
7.6.2 The thirty (30) calendar day written notice specified Section 7.6.1 shall specify the Event of Default by the Developer triggering the City’s exercise of its power of termination. The City shall proceed with its remedy set forth in Section 7.6.1 only if the Developer continues in default for a period of sixty (60) calendar days following such notice or, upon commencing to cure such default, fails to diligently and continuously prosecute said cure to satisfactory conclusion.
7.6.3 The rights of the City under this Section 7.6 shall be subject and subordinate to, shall be limited by and shall not defeat, render invalid or limit:
7.6.3.1 Each Lien recorded against the Properties and specifically authorized by this Agreement as a Permitted Transfer;
7.6.3.2 Any leases, declarations of covenants, conditions and restrictions, easement agreements or other recorded documents or interests applicable to the Properties and specifically authorized by this Agreement as a Permitted Transfer. 713
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7.6.4 Parties agree that should City exercise it power of termination p rior to all Certificates of Completion being issued for Phase 1, Developer or its successors or assigns shall convey by grant deed to the City title the entirety of Phase 1, Phase 2, Phase 3, and Phase 4.
7.6.5 Parties agree that should Developer timely obtain all Certificates of Completion for Phase 1 but fails to timely comply with the Schedule of Performance for Phase 2, then Developer or its successors or assigns shall convey by grant deed to the City title the entirety of Phase 2, Phase 3 and Phase 4.
7.6.6 Parties agree that should Developer timely obtain all Certificates of Completion for Phase 1 and Phase 2 but fails to timely comply with the Schedule of Performance for Phase 3, then Developer or its successors or assigns shall convey by grant deed to the City title the entirety of Phase 3, and Phase 4.
7.6.7 Parties agree that should Developer timely obtain all Certificates of Completion for Phase 1, Phase 2, and Phase 3 but fails to timely comply with the Schedule of Performance for Phase 4, then Developer or its successors or assigns shall convey by grant deed to the City title the entirety of Phase 4.
7.6.8 Upon the City’s exercise of its power of termination pursuant to this Section 7.6, the Developer or its successors or assigns shall convey by grant deed to the City title to the Properties, as specified in the City’s notice pursuant to Section 7.6.1, and all improvements thereon, in accordance with Civil Code Section 1109, as such code section may hereafter be amended, renumbered, replaced or substituted. Such conveyance shall be duly acknowledged by the Developer and a notary in a manner suitable for recordation. The City may enforce its rights pursuant to this Section 7.6 by means of an injunctive relief or forfeiture of title action filed in any court of competent jurisdiction.
7.6.9 IMMEDIATELY FOLLOWING THE THIRTY
(30) DAY PERIOD SPECIFIED IN SECTION 7.6.1, ABOVE, THE CITY, ITS EMPLOYEES
AND AGENTS SHALL HAVE THE RIGHT TO REENTER AND TAKE POSSESSION OF
THE PROPERTY AND ANY IMPROVEMENTS THEREON, WITHOUT FURTHER NOTICE OR COMPENSATION TO THE DEVELOPER. BY INITIALING BELOW, THE DEVELOPER
HEREBY EXPRESSLY WAIVES, TO THE MAXIMUM EXTENT ALLOWED BY LAW, ANY
AND ALL RIGHTS THAT THE DEVELOPER MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 791 AND CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1162,
AS THOSE STATUTES MAY BE AMENDED, REPLACED , RENUMBERED OR
SUBSTITUTED, OR UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.
DEVELOPER’S INITIALS ____________
7.6.10 THE DEVELOPER ACKNOWLEDGES AND
AGREES THAT THE CITY’S EXERCISE OF ITS POWER OF TERMINATION AND RIGHT OF REENTRY PURSUANT TO THIS SECTION 7.6 MAY WORK A FORFEITURE OF THE
ESTATE IN THE DEFAULTED PORTION OF THE PROPERTY CONVEYED TO THE 714
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DEVELOPER THROUGH THE GRANT DEED. THE DEVELOPER HEREBY EXPRESSLY
WAIVES, TO THE MAXIMUM EXTENT ALLOWED BY LAW, ANY AND ALL
EQUITABLE AND LEGAL DEFENSES THAT THE DEVELOPER MAY HAVE TO SUCH
FORFEITURE, INCLUDING, BUT NOT LIMITED TO, THE DEFENSES OF LACHES, WAIVER, ESTOPPEL, SUBSTANTIAL PERFORMANCE OR COMPENSABLE DAMAGES.
THE DEVELOPER FURTHER EXPRESSLY WAIVES, TO THE MAXIMUM EXTENT
ALLOWED BY LAW, ANY AND ALL RIGHTS AND DEFENSES THAT THE DEVELOPER MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 3275 OR ANY OTHER STATUTE OR COMMON LAW PRI NCIPLE OF SIMILAR EFFECT. THE DEVELOPER
ACKNOWLEDGES THAT THE TERMS AND CONDITIONS OF THIS AGREEMENT
REFLECT THE POSSIBILITY OF FORFEITURE BY VIRTUE OF THE EXERCISE OF THE CITY’S POWER OF TERMINATION PROVIDED IN THIS SECTION 7.6 AND FURTHER
ACKNOWLEDGE THAT IT HAS RECEIVED INDEPENDENT AND ADEQUATE
CONSIDERATION FOR ITS WAIVER AND RELINQUISHMENT OF RIGHTS AND REMEDIES PURSUANT TO SECTION 7.6.9. AND THIS SECTION 7.6.10.
DEVELOPER’S INITIALS ____________
7.7 Developer Indemnification of the City. In addition to any other specific indemnification or defense obligations of the Developer set forth in this Agreement, the Developer agrees to indemnify, defend (upon written request by the City an d with counsel reasonably acceptable to the City and hold harmless the Indemnified Parties , from any and all losses, liabilities, charges, damages, claims, liens, causes of action, awards, judgments, costs and expenses, including, but not limited to reason able attorney ’s fees of counsel retained by the Indemnified Parties, expert fees, costs of staff time, and investigation costs, of whatever kind or nature, that are in any manner directly or indirectly caused, occasioned or contributed to in whole or in part, through any act, omission, fault or negligence, whether active o r passive, of the Developer or the Developer ’s officers, agents, employees, independent contractors or subcontractors of any tier, relating in any manner to this Agreement, any work to be performed by the Developer related to this Agreement, the Properties, or the Project, or any authority or obligation exercised or undertaken by the Developer under this Agreement. Without limiting the generality of the foregoing, the Developer’s obligation to indemnify the Indemnified Parties shall include injury or death to any person or persons, damage to any property, regardless of where located, including the property of the Indemnified Parties, any workers ’ compensation or prevailing wage determination, claim or suit or any other matter arising from or connected with any goods or materials provided or services or labor performed regarding the Project or the Properties on behalf of the Developer by any person or entity.
ARTICLE VIII
GENERAL PROVISIONS.
8.1 Incorporation of Recitals. The Recitals of fact set forth preceding this Agreement are true and correct and are incorporated into this Agreement in their entirety by this reference.
8.2 Project as a Private Undertaking. It is specifically understood and agreed by and between the Parties hereto that the development of the Project is a private development, that neither 715
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party is acting as the agent of the other in any respect hereunder, and that each party is an independent contracting entity with respect to the terms, covenants and conditions contained in this Agreement. No partnership, joint venture or other association of any kind is formed by this Agreement.
8.3 Restrictions on Transfers.
8.3.1 The Developer acknowledges that the qualifications and identity of the Developer are of part icular importance to the City. The Developer further recognizes and acknowledges that the City has relied and is relying on the specific qualifications and identity of the Developer in entering into this Agreement with the Developer and, as a consequence, Transfers are permitted only as expressly provided in this Agreement. The Developer shall promptly notify the City in writing of any and all changes whatsoever in the identity of the business entities or individuals either comprising or in control of the Developer, as well as any and a ll changes in the interest or the degree of control of the Developer by any such person, of which information the Developer or any of its partners, members or officers are notified or may otherwise have knowledge or information.
8.3.2 Except as expressly permi tted in this Agreement, the Developer represents to the City that it has not made and agrees that it will not make or create, or suffer to be made or created, any Transfer other than a Permitted Transfer, either voluntarily, involuntarily or by operation of law, until after the recordation of a Certificate of Completion for the Project subject to the Transfer; provided, however, that the City may approve in its reasonable discretion, Transfers other than Permitted Transfers prior to the recordation of a Cer tificate of Completion. In deciding whether to approve or disapprove any proposed Transfer, the City may consider the proposed transferee’s financial strength and the experience of the proposed transferee and its senior management in undertaking and succe ssfully completing projects of a similar type and size as the Project or that portion of the Project proposed to be transferred. Any Transfer made in contravention of this Section 8.3 shall be voidable at the election of the City and this Agreement may be terminated by the City or the City may exercise any other remedy available to the City under the terms of this Agreement, provided, however, that (i) the City shall first notify the Developer in writing of its intention to terminate this Agreement or to exercise any other remedy, and (ii) the Developer shall have twenty (20) calendar days following its receipt of such written notice to commence and, thereafter, diligently and continuously proceed to cure the default of the Developer and submit evidence of the initiation and satisfactory completion of such cure to the City, in a form and substance reasonably satisfactory to the City.
8.3.3 The Developer sha ll provide the City no less than thirty (30) days prior written notice of any proposed Permitted Transfer which the Developer desires to enter into prior to the recordation of the Certificates of Completion for the Project, other than a Permitted Transfer for which no notice shall be required. The Developer shall have the burden of demonstrating to the City’s reasonable satisfaction that the proposed Permitted Transfer meets the conditions and requirements of this Agreement with respect to Permitted Transfers.
8.3.4 In connection with the City’s review of any request for approval of any proposed Transfer under this Section 8.3, or of any Lender or Loan und er Section 6.3, the Developer agrees to reimburse the City for those third party costs and expenses 716
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incurred by the City in connection with its revi ew of the Developer ’s request for approval, including, without implied limitation, the reasonable fees and costs of those outside consultants and legal counsel retained by the City to assist it in its review of the Developer’s request, including the City Attorney.
8.3.5 Anything in this Agreement to the contrary
notwithstanding, the restrictions and prohibitions on Transfers contained in this Section 8.3 shall terminate upon issuance of a Certificate of Completion for the Project.
8.4 Notices, Demands and Communications Between the Parties.
8.4.1 Any and all notices, demands or communications
submitted by any Party to another Party pursuant to or as required by this Agreement shall be proper, if in writing and dispatched by messenger for immediate personal delivery, by a nationally recognized overn ight courier service or by registered or certified United States Mail, postage prepaid, return receipt requested, to the principal office of the City or the Developer, as applicable, as designated in Section 8.4.2. Such written notices, demands or communications may be sent in the same manner to such other addresses as either Party may from time to time designate. Any such notice, demand or communication shall be deemed to be received by the addressee, regardless of whether or when any return receipt is received by the sender or the date set forth on such return receipt, on the day that it is delivered by personal delivery, on the date of delivery by a nationally recognized overnight courier service or three (3) calendar days after it is placed in the United States Mail, as provided in this Section 8.4.
8.4.2 The following are the authorized addresses for the submission of notices, demands or communications to the Parties:
TO DEVELOPER: A Block LLC
Alex Baroian
109 E Harvard Street, Suite 300
Glendale, CA 91205
TO CITY:
COPY TO:
City of Ontario
303 East B St
Ontario, CA 91764
Attention: City Manager
(T) 909-395-2000
Best Best & Krieger, LLP
18101 Von Karman Ave, Suite 1000
Irvine, CA 92614
Attention: Elizabeth Wagner Hull
(T) 949-263-2600
8.5 Conflict of Interest . No member, official or employee of the City, having any conflict of interest, direct or indirect, related to this Agreement, the Properties, or the development 717
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or operation of the Project shall participate in any decision relating to this Agreement. The Parties represent and warrant that they do not have knowledge of any such conflict of interest.
8.6 Warranty Against Payment of Consideration for Agreement . The Developer warrants that it has not paid or given, and will not pay or give, any third party any money or other consideration for obtaining this Agreement. Third parties, for the purposes of this Section 8.6, shall not include persons to whom fees are paid for professional services, if rendered by attorneys, financial consultants, accountants, engineers, architects and the like when such fees are considered necessary by the Developer.
8.7 Non-liability of City, Officials and Employees. No member, official or employee of the City shall be personally liable to the Developer, or any successor in interest of the Developer, in the event of any default or breach by the City under this Agreement or for any amount that may become due to the Developer or to its successor, or on any obligations under the terms of this Agreement, except as may arise from the gross negligence or willful acts of such member, official or employee.
8.8 Calculation of Time Periods . Unless otherwise specified, all references to time periods in this Agreement measured in days shall be to consecutive calendar days, all references to time periods in this Agreement measured in months shall be to consecutive calendar months and all references to time periods in this Agreement measured in years shall be to consecutive calendar years. Any reference to Business Days in this Agreement shall mean consecutive Business Days.
8.9 Principles of Interpretation. No inference in favor of or against any Party shall be drawn from the fact that such Party has dr afted any part of this Agreement. The Parties have both participated substantially in the negotiation, drafting and revision of this Agreement, with advice from legal and other counsel and advisers of their own selection. A word, term or phrase defined i n the singular in this Agreement may be used in the plural, and vice versa, all in accordance with ordinary principles of English grammar, which shall govern all language in this Agreement. The words “include” and “including” in this Agreement shall be co nstrued to be followed by the words: “without limitation.” Each collective noun in this Agreement shall be interpreted as if followed by the words “(or any part of it),” except where the context clearly requires otherwise. Every reference to any documen t, including this Agreement, refers to such document, as modified from time to time (excepting any modification that violates this Agreement), and includes all exhibits, schedules, addenda and riders to such document. The word “or” in this Agreement inclu des the word “and.” Every reference to a law, statute, regulation, order, form or similar governmental requirement refers to each such requirement as amended, modified, renumbered, superseded or succeeded, from time to time.
8.10 Governing Law. The procedural and substantive laws of the State shall govern the interpretation and enforcement of this Agreement, without application of conflicts of laws principles. The Parties acknowledge and agree that this Agreement is entered into, is to be fully performed in and relates to real property located in the County. All legal actions arising from this Agreement shall be filed in the Superior Court of the State in and for the County or in the United States District Court with jurisdiction in the County.
8.11 Unavoidable Delay; Extension of Time of Performance. 718
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8.11.1 Notice. Subject to specific provisions of this
Agreement, performance by any Party under this Agreement shall not be deemed, or considered to be, in default where any such default is due to an Unavoidable Delay and/or Unforeseen Site Condition resulting in an extension of time pursuant to this Agreement that is not attributable to the fault of the Party claiming an extension of time to perform. An extension of time for any Unavoidable Delay and/or Unforeseen Site Condition resulting in an extension of time pursuant to this Agreement shall be for the period of the Unavoidable Delay and/or Unforeseen Site Condition and shall commence to run from the date of occurrence of the Unavoidable Delay and/or Unforeseen Site Condition resulting in an extension of time pursuant to this Agreement , if the Party asserting the existence of the Unavoidable Delay and/or Unforeseen Site Condition resulting in an extension of time pursuant to this Agreement provides the other Parties with written notice of the occurrence of the Unavoidable Delay and/or Unforeseen Site Condition resulting in an extension of time pursuant to this Agreement, within ten (10) days of the commencement of such asserted Unavoidable Delay and/or Unforeseen Sit e Condition resulting in an extension of time pursuant to this Agreement . Otherwise, the extension of time for an Unavoidable Delay and/or Unforeseen Site Condition resulting in an extension of time pursuant to this Agreement shall commence on the date of receipt of written notice of the occurrence of the Unavoidable Delay and/or Unforeseen Site Condition resulting in an extension of time pursuant to this Agreement by the Parties not requesting an extension of time to perform due to such Unavoidable Delay and/or Unforeseen Site Condition resulting in an extension of time pursuant to this Agreement.
8.11.2 Assumption of Economic Risks . The Parties
expressly acknowledge and agree that changes in either general economic conditions or changes in the economic assumptions of either of them that may have provided a basis for entering into this Agreement and that occur at any time after the execution of this Agreement, do not constitute an Unavoidable Delay and do not provide any Party with grounds for asserting the exist ence of an Unavoidable Delay in the performance of any covenant or undertaking arising under this Agreement. Each Party expressly assumes the risk that changes in general economic conditions or changes in such economic assumptions relating to the terms an d covenants of this Agreement could impose an inconvenience or hardship on the continued performance of such Party under this Agreement.
8.12 Inspection of Books and Records. The City shall have the right at all reasonable times, at the City’s cost and expense, to inspect the books and records of the Developer pertaining to the Properties and/or the Project. The Developer shall also have the right at all reasonable times, at the Developer’s sole cost and expense, to inspect the books and records of the City pe rtaining to the Properties and/or the Project, to the extent relevant to the Developer’s obligations under this Agreement. Nothing in this Section 8.12 or elsewhere in this Agreement shall, however, constitute a waiver or modification of any right or privilege which any Party may have with respect to any document, statement, or other record, including, without implied limitation, the attorney -client privilege, the attorney -work product privilege, any privilege arising under any state or federal evidentiary code or rule, or any privilege or exclusionary right arising under any state or federa l freedom of information or public records disclosure law.
8.13 Real Estate Commissions . The City shall not be liable for any real estate commissions, brokerage fees or finder fees that may arise from or be related to this Agreement. 719
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The Developer shall pay a ny fees or commissions or other expenses related to its retention or employment of real estate brokers, agents or other professionals.
8.14 Binding on Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Parties and thei r respective heirs, executors, administrators, legal representatives, successors, and assigns.
8.15 Entire Agreement.
8.15.1 This Agreement shall be executed in three (3)
duplicate originals, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. This Agreement that constitute the entire understanding and agreement of the Parties regarding the Properties, the Project, and the other subjects addressed in this Agreement.
8.15.2 This Agreement integrates all of t he terms and
conditions mentioned in this Agreement or incidental to this Agreement, and supersedes all negotiations or previous agreements between the Parties with respect to the Properties, the Project, and the other subjects addressed in this Agreement.
8.15.3 None of the terms, covenants, agreements or
conditions set forth in this Agreement shall be deemed to be merged with any deed conveying title to the Properties and this Agreement shall continue in full force and effect before and after such conveyances.
8.15.4 All waivers of the provisions of this Agreement and all amendments to this Agreement must be in writing and signed by the authorized representative(s) of all Parties.
8.16 Execution of this Agreement . Following execution of three (3) originals of this Agreement by the authorized representative(s) of the Developer and prompt delivery of such originals, thereafter, to the City, accompanied by an official action of the governing body of the Developer authorizing the individuals executing this Agreement on behalf of the Developer to execute and perform this Agreement, in form and substance acceptable to the City, this Agreement shall be subject to the review and approval by the City Council, in their sole and absolute discretion, no later than forty-five (45) calendar days after such date of delivery to the City. If the City have not approved, executed, and delivered an original of this Agreement to the Developer within the foregoing time period, then no provision of this Agreement shall be of any force or effect for any purpose.
8.17 City Manager Implementation. City shall implement this Agreement through the City Manager. The City Manager is hereby authorized by City to enter into agreements referenced in this Agreement or reasonably required to implement this Agreemen t on behalf of City, issue approvals, interpretations or waivers and enter into amendments to this Agreement on behalf of City, to the extent that any such action(s) does/do not materially or substantially change the Project or increase the monetary obligations of City by more than Fifty Thousand Dollars ($50,000) in the aggregate. All other actions shall require the consideration and approval of City Council, unless expressly provided otherwise by action of City Council. Nothing in this Section 8.17 shall restrict 720
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the submission to City Council of any matter within the City Manager’s authority under this Section 8.17 in the City Manager’s sole and absolute discretion, to obtain City Council authorization on such matter. The specific intent of this Section 8.17 is to authorize certain actions on behalf of City by the City Manager, but not to require that such actions be taken by the City Manager, without consideration by City Council.
8.18 Survival of Indemnity Obligations . All general and specific indemnity and defense obligations of the Parties set forth in this Agreement shall survive the expiration or termination of this Agreement, the execution or recordation of the Grant Deed, and/or the issuance and recordation of any Certificate of Completion.
8.19 Time Declared to be of the Essence. As to the performance of any obligation hereunder as to which time is a component thereof, the performance of such obligation within the time provided is of the essence.
[Signatures on Following Pages]
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SIGNATURE PAGE
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
CITY:
THE CITY OF ONTARIO
a California municipal corporation
Dated:_________________, 2025 By:
City Manager
ATTEST:
____________________________
City Clerk
APPROVED AS TO LEGAL FORM:
BEST BEST & KRIEGER LLP
By: _______________________
City Attorney
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SIGNATURE PAGE
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
DEVELOPER:
A BLOCK, LLC a California limited liability
company
Dated:_____________________ By:
Alexis Baroian
Manager / Member
723
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EXHIBIT A
EXHIBIT A
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Lerch Property
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOT 9, BLOCK 45, TOWN OF ONTARIO, IN THE CITY OF ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM THE SOUTH 6 INCHES THEREOF.
APN: 1048-553-15
724
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EXHIBIT B
EXHIBIT B
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Yanghtze Property
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOTS 6 AND 7 AND THE SOUTH 3 FEET OF LOT 5, IN BLOCK 45, TOWN OF ONTARIO,
IN THE CITY OF ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9, PAGE 43 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
APN: 1048-553-17
725
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EXHIBIT C
EXHIBIT C
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Old Bridal Shop Property
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOT 3 BLOCK 45, TOWN OF ONTARIO, IN THE CITY OF ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
APN: 1048-553-02
726
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EXHIBIT D
EXHIBIT D
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 1
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOTS 4 AND 5, BLOCK 45, TOWN OF ONTARIO, IN THE CITY OF ONTARIO, COUNTY
OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAPS ON FILE IN BOOK 9, PAGE 43 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM SAID LOT 5, THE SOUTH 3.00 FEET THEREOF.
APN: 1048-553-01
727
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EXHIBIT E
EXHIBIT E
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 3
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOT 2 BLOCK 45, TOWN OF ONTARIO, IN THE CITY OF ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
APN: 1048-553-03
728
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EXHIBIT F
EXHIBIT F
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 4
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOT 1 BLOCK 45, TOWN OF ONTARIO, IN THE CITY OF ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
APN: 1048-553-04
729
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EXHIBIT G
EXHIBIT G
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 5
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
THE NORTH 40.00 FEET OF LOTS 16, 17 AND 18, BLOCK 45, OF THE TOWN OF ONTARIO, IN
THE CITY OF ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43 RECORDS OF SAID COUNTY.
EXCEPT THEREFROM AL OIL, HYDROCARBON SUBSTANCES AND MINERALS OF EVERY KIND AND CHARACTER LYING MORE THAN 400.00 FEET BELOW THE SURFACE OF SAID
LAND, TOGETHER WITH THE RIGHT TO DRILL INTO, THROUGH AND TO USE AND OCCUPY ALL PARTS OF SAID LAND LYING MORE THAN 400.00 FEET BELOW THE
SURFACE THEREOF FOR ANY AND ALL PURPOSES INCIDENTAL TOT EH EXPLORATION
FOR AND PRODUCTION OF OIL, GAS, HYDROCARBON SUBSTANCES, OR MINERALS FROM
SAID OR OTHER LANDS BUT WITHOUT, HOWEVER, ANY RIGHT TO USE EITHER THE SURFACE OF SID LAND OR ANY PORTION OF SAID LAND WITHIN 500.00 FEET OF THE
SURFACE FOR ANY PURPOSE OR PURPOSES WHATSOEVER NOT PREVIOUSLY RESERVED AS RESERVED IN THE DEED EXECUTED BY RAYMOND GIN, ETAL., RECORDED MARCH 30, 1993 AS INSTRUMENT NO. 93-139095, OF OFFICIAL RECORDS.
EXCEPT THEREFROM (TO THE EXTENT VALIDLY EXCEPTED OR RESERVED BY OTHER
PARTIES NAMED IN PRIOR DEEDS, LEASES AND OTHER DOCUMENTS OF RECORD) ALL
OIL, BAS, HYDROCARBON SUBSTANCESAND MINERALS OF EVERY KIND AND CHARACTER LYING MORE THAN 500 FEET BELOW THE SURFACE, TOGETHER WITH THE
RIGHT TO DRILL INTO, THROUGH AND TO USE AND OCCUPY ALL PARTS OF THE PROPERTY LYING MORE THAN 500 FEET BELOW THE SURFACE, THEREOF FOR ANY AND
ALL PURPOSESINCIDENTAL TO THE EXPLORATION FOR AND PRODUCTION OF OIL, GAS,
HYDROCARBON SUBSTANCES OR MINERALS FROM THE PROPERTY OR ANY PORTION
THEREOF BUT WITHOUT, HOWEVER, ANY RIGHT TO USE OR DISTURB EITHER THE SURFACE OF THE PROPERTY OR ANY PORTION THEREOF WITHIN 500 FEET OF THE
SURFACE FOR ANY PURPOSE OR PURPOSES WHATSOEVER, MORE PARTICULARLY
DESCRIBED IN AND RESERVED BY COPY ONTARIO REDEVELOPMENT AGENCY, A PUBLIC
BODY, CORPORATE AND POLITIC, OFTHE STATE OF CALIFORNIA IN THE DOCUMENT RECORDED JUNE 27, 1997 AS INSTRUMENT NO. 19970229022, OF OFFICIAL RECORDS OF SAID COUNTY.
APN: 1048-553-05
730
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EXHIBIT H
EXHIBIT H
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 6
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
ALL THAT PORTION OF LOT 18, BLOCK 45 OF THE TOWN OF ONTARIO, IN THE
CITY OF ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43, RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEAST CORNER OF SAID LOT; THENCE NORTH 127.00 FEET; THENCE WEST 30.00 FEET; THENCE SOUTH 127.00 FEET; THENCE EAST 30.00 FEET TO THE POINT OF BEGINNING.
APN: 1048-553-06
731
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EXHIBIT I
EXHIBIT I
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 7
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
THAT PORTION OF BLOCK 45 OF THE TOWN OF ONTARIO, IN THE CITY OF
ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43, RECORDS OF SAID COUNTY, PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE SOUTH LINE OF SAID BLOC, 81.00 FEET EAST OF THE SOUTHWEST CORNER OF LOT 16; THENCE NORTH AND PARALLEL TO THE WEST LINE OF SAID LOT, 127.00 FEET; THENCE EAST AND PARALLEL TO THE SOUTH LINE OF SAID BLOCK, 33.00 FEET TO A POINT 30.00 FEET WEST OF THE EAST LINE OF LOT 18; THENCE SOUTH AND PARALLEL TO THE EAST LINE OF LOT 18, 127.00 FEET TO THE SOUTH LINE OF LOT 18; THENCE WEST 33.00 FEET TO THE POINT OF BEGINNING.
EXCEPT THEREFROM ALL OIL, HYDROCARBON SUBSTANCES AND MINERALS OF EVERY KIND AND CHARACTER LYING MORE THAN 500 FEET BELOW THE
SURFACE OF SAID LAND, TOGETHER WITH THE RIGHT TO DRILL INTO, THROUGH AND TO USE AND OCCUPY ALL PARTS OF SAID LAND LYING MORE THAN 500
FEET BELOW THE SURFACE THEREOF FOR ANY AND ALL PURPOSES INCIDENTAL
TO THE EXPLORATION FOR AND PRODUCTION OF OIL, GAS, HYDROCARBON
SUBSTANCES OR MINERALS FROM SAID OR OTHER LANDS BUT WITHOUT,
HOWEVER, ANY RIGHT TO USE EITHER THE SURFACE OF SAID LAND OR ANY PORTION OF SAID LAND WITHIN 500 FEET OF THE SURFACE FOR ANY PURPOSE
OR PURPOSES WHATSOEVER NOT PREVIOUSLY RESERVED, MORE
PARTICULARLY DESCRIBED IN AND RESERVED BY LUIS A. ROJAS AND
ALICIAROJAS, HUSBAND AND WIFE, AS JOINT TENANTS, IN THE DOCUMENT RECORDED ON AUGUST 25, 1992 AS INSTRUMENT NO. 92-352921, OF OFFICIAL RECORDS OF SAID COUNTY.
APN: 1048-553-07
732
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EXHIBIT J
EXHIBIT J
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 8
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
PORTION OF LOTS 16 AND 17, IN BLOCK 45, ACCORDING TO MAP OF THE TOWN OF
ONTARIO, IN THE CITY OF ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43, RECORDS OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING 28.00 FEET EAST OF THE SOUTHWEST CORNER OF LOT 16 OF SAID BLOCK 45; THENCE NORTH 127.00 FEET; THENCE EAST 53.00 FEET; THENCE SOUTH 127.00 FEET TO THE SOUTH LINE OF LOT 17 OF SAID BLOCK 45; THENCE WEST TO THE POINT OF BEGINNING.
EXCEPT THEREFROM (TO THE EXTENT VALIDLY EXCEPTED OR RESERVED BY
OTHER PARTIES NAMED IN PRIOR DEEDS, LEASES AND OTHER DOCUMENTS OF
RECORD) ALL OIL, BAS, HYDROCARBON SUBSTANCES AND MINERALS OF EVERY KIND AND CHARACTER LYING MORE THAN 500 FEET BELOW THE SURFACE,
TOGETHER WITH THE RIGHT TO DRILL INTO, THROUGH AND TO USE AND OCCUPY ALL PARTS OF THE PROPERTY LYING MORE THAN 500 FEET BELOW THE
SURFACE, THEREOF FOR ANY AND ALL PURPOSES INCIDENTAL TO THE
EXPLORATION FOR AND PRODUCTION OF OIL, GAS, HYDROCARBON
SUBSTANCES OR MINERALS FROM THE PROPERTY OR ANY PORTION THEREOF
BUT WITHOUT, HOWEVER, ANY RIGHT TO USE OR DISTURB EITHER THE SURFACE OF THE PROPERTY OR ANY PORTION THEREOF WITHIN 500 FEET OF
THE SURFACE FOR ANY PURPOSE OR PURPOSES WHATSOEVER, MORE
PARTICULARLY DESCRIBED IN AND RESERVED BY COPY ONTARIO
REDEVELOPMENT AGENCY, A PUBLIC BODY, CORPORATE AND POLITIC, OFTHE STATE OF CALIFORNIA IN THE DOCUMENT RECORDED JUNE 27, 1997 AS INSTRUMENT NO. 19970229022, OF OFFICIAL RECORDS OF SAID COUNTY.
APN: 1048-553-08
733
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EXHIBIT K
EXHIBIT K
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 9
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
THAT PORTION OF LOT 16 IN BLOCK 45 OF TOWN OF ONTARIO, IN THE CITY OF
ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43, RECORDS OF SAID COUNTY, ESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHWEST CORNER OF SAID LOT 16; THENCE NORTH 127.00 FEET; THENCE EAST AND PARALLEL WITH “A” STREET 28.00 FEET; THENCE SOUTH 127.00 FEET; THENCE WEST 28.00 FEET TO THE POINT OF BEGINNING.
APN: 1048-553-09
734
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EXHIBIT L
EXHIBIT L
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 10
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOT 15, BLOCK 45, TOWN OF ONTARIO, IN THE CITY OF ONTARIO, COUNTY OF
SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43 RECORDS OF SAID COUNTY.
EXCEPT THEREFROM THE SOUTH 10.00 FEET OF LOT 15, AS CONVEYED TO THE
CITY OF ONTARIO, A MUNICIPAL CORPORATION BY A DOCUMENT RECORDED JANUARY 9, 1970 AS INSTRUMENT NO. 173, IN BOOK 7368, PAGE 887 OF OFFICIAL RECORDS.
APN: 1048-553-10
735
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EXHIBIT M
EXHIBIT M
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 11
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOT 14, BLOCK 45, TOWN OF ONTARIO, IN THE CITY OF ONTARIO, COUNTY OF
SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43 RECORDS OF SAID COUNTY.
EXCEPT THEREFROM THE SOUTH 10.00 FEET OF LOT 15, AS CONVEYED TO THE
CITY OF ONTARIO, A MUNICIPAL CORPORATION BY A DOCUMENT RECORDED JANUARY 9, 1970 AS INSTRUMENT NO. 173, IN BOOK 7368, PAGE 887 OF OFFICIAL RECORDS.
APN: 1048-553-11
736
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EXHIBIT N
EXHIBIT N
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 12
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOT 13, BLOCK 45, TOWN OF ONTARIO, IN THE CITY OF ONTARIO, COUNTY OF
SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43 RECORDS OF SAID COUNTY.
APN: 1048-553-12
737
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EXHIBIT P
EXHIBIT O
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 13
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOTS 11 AND 12, BLOCK 45 OF TOWN OF ONTARIO, IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9, PAGE 43 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEAST CORNER OF SAID LOT 11; THENCE SOUTHERLY ALONG THE EAST LINES OF SAID LOTS 11 AND 12 TO THE SOUTH LINE OF SAID LOT 12; THENCE WESTERLY ALONG SAID SOUTH LINE TO THE WEST LINE OF SAID LOTS 11 AND 12; THENCE NORTHERLY ALONG SAID WEST LINES TO THE NORTH LINE OF SAID LOT 11; THENCE EASTERLY ALONG SAID LINE TO THE POINT OF BEGINNING.
SAID LAND IS DESCRIBED PURSUANT TO A CERTIFICATE APPROVING A LOT LINE ADJUSTMENT NO. LLA 02-001, RECORDED NOVEMBER 14, 2002 AS INSTRUMENT NO. 02-615590, OFFICIAL RECORDS.
APN: 1048-553-13
738
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EXHIBIT P
EXHIBIT P
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Legal Description of the Parcel 14
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ONTARIO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOT 10, BLOCK 45, TOWN OF ONTARIO AND THE SOUTH SIX INCHES OF LOT 9, BLOCK 45, TOWN OF ONTARIO, IN THE CITY OF ONTARIO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 9 OF MAPS, PAGE 43, RECORDS OF SAID COUNTY.
APN: 1048-553-14
739
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EXHIBIT Q
EXHIBIT Q
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
The Project will include the rehabilitation of existing historic structures and construction of additional multi-story, mixed-use residential and commercial/retail components on the Property and consist of approximately 156 multi-family residential dwelling units and nearly 35,000 square feet of ground floor commercial/retail/restaurant space fronting on Euclid Avenue, B Street, Lemon Avenue, and Holt Boulevard in addition to the required parking. The Developer will be required to preserve and retain the historic context of the historic buildings by obtaining a Certificate of Appropriateness under the Adaptive Reuse Ordinance.
The Project will be phased over a five-year period with the adaptive reuse of the historic structures being completed in Phases 1 and 2. Phases 1 and 2 will include 22 residential units and approximately 25,000 square feet of retail and commercial uses. Phases 3 and 4 include new construction of up to 134 multi-family market rate units and just roughly 10,000 square feet of commercial and retail space.
740
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EXHIBIT R
EXHIBIT R
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Schedule of Performance
Action Date Action to be
Completed By
1. Effective Date See Section 1.3
2. Developer to open Escrow and, concurrently, deposit
Purchase Price into Escrow
Within 5 days following
the Effective Date
3. City to deliver Preliminary Report to Developer Within 3 days following City’s receipt of the
Preliminary Report
from Title Company
4. Escrow Closing Date No later than seven (7)
days following the
Effective Date of this
Agreement
5 Developer to submit Phase 1 Plans and Specification to City No later than 30 days from City Council
approval of Agreement
6 Developer to submit Tentative Parcel Map to City No later than 30 days from City Council
approval of Agreement
7 Developer to record Final Map No later than 6 months from close of Escrow or
prior to issuance of first
building permit
whichever occurs first
8 Developer to receive Phase 1 Plans and Specification
approval by City
No later than 6 months
from the submittal of
the Phase 1 Plans and
Specifications to City
9 Developer to submit Phase 1 Shell/Construction Drawings to City
No later than 60 days
from approval of Phase
1 Plans and
specification by City
10 Developer to get Phase 1 Shell/Construction Drawings permit issued
No later than 4 months
from submittal of
construction drawings
for Phase 1
11 Developer to request issuance of First Building Permit for the Phase 1 Project
No later than 365 days
from City Council
approval of Agreement
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EXHIBIT R
Action Date Action to be
Completed By
12 Developer shall commence construction of Phase 1 No later than 30 days after issuance of
building permit for
Phase 1
13 Phase 1 construction completed and obtain all Certificates of Completion
No later than 24 months
after commencement of
construction
14 Developer to submit Phase 2 Plans and Specification to City No later than 30 days from submittal of Phase
1 Shell/Construction
Drawings to City
15 Developer to receive Phase 2 Plans and Specification approval by City
No later than 6 months
from the submittal of
the Phase 2 Plans and
Specifications to City
16 Developer to submit Phase 2 Shell/Construction Drawings to City
No later than 60 days
from approval of Phase
2 Plans and
specification by City
17 Developer to get Phase 2 Shell/Construction Drawings permit issued
No later than 4 months
from submittal of
construction drawings
for Phase 2
18 Developer to request issuance of First Building Permit for the Phase 2 Project
No later than 24 moths
from City Council
Approval
19 Developer shall commence construction of Phase 2 No later than 30 days after issuance of
building permit for
Phase 2
20 Phase 2 construction completed and obtain all Certificates of Completion
No later than 12 months
after commencement of
construction for Phase 2
21 Developer to submit Phases 3 and Phase 4 Plans and
Specification to City
No later than 30 days
from Submittal of Plans
and Specifications for
Phase 2
22 Developer to receive Phase 3 and 4 Plans and Specification approval by City
No later than 9 months
from the submittal of
the Phase 3 and Phase 4
Plans and Specifications
to City
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EXHIBIT R
Action Date Action to be
Completed By
23 Developer to submit Phase 3 Shell/Construction Drawings to City
No later than 90 days
from approval of Phase
3 and Phase 4 Plans and
specification by City
24 Developer to get Phase 3 Shell/Construction Drawings permit issued
No later than 4 months
from submittal of
construction drawings
for Phase 3
25 Developer to request issuance of First Building Permit for the Phase 3 Project
No later than 36 moths
from City Council
Approval
26 Developer shall commence construction of Phase No later than 30 days after issuance of
building permit for
Phase 3
27 Phase 3 construction completed and obtain all Certificates of Completion
No later than 24 months
after commencement of
construction for Phase 3
28 Developer to submit Phase 4 Shell/Construction Drawings to City
No later than 90 days
from issuance of Phase 3
building permit
29 Developer to get Phase 4 Shell/Construction Drawings permit issued
No later than 4 months
from submittal of
construction drawings
for Phase 4
30 Developer to request issuance of First Building Permit for the Phase 4 Project
No later than 48 moths
from City Council
Approval
31 Developer shall commence construction of Phase 4 No later than 30 days after issuance of
building permit for
Phase 4
32 Phase 4 construction completed and obtain all Certificates of Completion
No later than 12 months
after commencement of
construction for Phase 4
743
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EXHIBIT S
1 EXHIBIT S
TO DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Form of Grant Deed
[Attached Behind This Page]
744
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EXHIBIT S
2 RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
_____________
THE CITY OF ONTARIO
GRANT DEED
PART ONE
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, THE CITY OF ONTARIO, a California municipal corporation (“Grantor”), hereby grants to
A Block, LLC a California limited liability company (“Grantee”), that certain real properties located in the City of Ontario, County of San Bernardino, State of California, specifically described in Exhibit “A” attached to this Grant Deed (“Properties”) and made a part of this Grant Deed by this reference.
PART TWO
The conveyance of the Properties by the Grantor to the Grantee in Part One is subject to the following community development terms, conditions, covenants and restrictions:
Section 1. Conveyance Subject to Terms of a
Disposition and Development Agreement. The Properties is conveyed subject to that certain Disposition and Development Agreement (City of Ontario and A Block, LLC), dated as of June 6, 2025, between the Grantor and the Grantee (the “Agreement”). The provisions of the Agreement are incorporated into this Grant Deed by this reference and are deemed to be a part of this Grant Deed, as though fully set forth in this Grant Deed.
Section 2. Condition of Properties. The Grantee acknowledges and agrees that the Properties are conveyed by the Grantor to the Grantee in its “AS IS, ” “WHERE IS ” and “SUBJECT TO ALL FAULTS CONDITION, ” as of the date of recordation of this Grant Deed, with no warranties, expressed or implied, as to the environmental or other physical condition of the Properties, the presence or absence of any patent or latent environmental or other physical condition on or in the Properties, or any other matters affecting the Properties.
Section 3. As provided in the Disposition and Development Agreement, Grantee shall promptly commence and comp lete development of the Properties in accordance with plans and specifications approved by Grantor. Rehabilitation of the Properties (the "Improvements") required by the Disposition and Development Agreement shall commence and be prosecut ed diligently to completion at the time specified in, and subject to the terms of, the Agreement. 745
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EXHIBIT S
3 3.1 Grantee shall maintain the Improvements and any other improvements on the Properties in good condition and order, shall keep the Properties free from accumul ation of debris and waste materials and shall permit no action or inaction on the Properties such that the Properties detracts from the surrounding neighborhood in any substantial manner.
3.2 All obligations imposed upon Grantee herein shall bind any and all successors of Grantee; provided, however, that upon sale or conveyance of the Properties, the party selling or conveying shall be relieved of any such obligation to the extent that such obligation arises after the date of sale or conveyance.
Section 4. Covenant to Maintain Properties on Tax Rolls. The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
4.1 The entirety of the Properties shall remain on the County secured real property tax rolls for twenty years from the date of issuance of the final Certificate of Completion for the Project.
4.2 The Developer shall pay all property tax bills with respect to the Properties and all improvements thereon on or before the last day for the timely payment of each property tax installment on each December 10 and April 10 during such time period and to timely pay all supplemental tax bills regarding the Properties issued by the County. The Developer further covenants and agrees to provide to the City, on or before July 31 of each year, commencing in the calendar year following the calendar year in which a Certificate of Completion is recorded and in each calendar year, thereafter, for the full term of this covenant:
(i) a true and correct copy of all property tax assessment notices, property tax bills and property tax assessment correspondence by and between the Developer and the County regarding the Properties and all improvements thereon, with respect to the preceding fiscal year of the County, and (ii) cancelled checks issued by the Developer in payment of all property tax payments that are made to the County regarding the Properties and all improvements thereon (or other reasonably acceptable evidence of such payment), with respect to the preceding County fiscal year.
4.3 The covenants of this Section 4 shall run with the land of the Properties, and shall be enforceable against the Developer and its successors and assigns.
Section 5. No Conveyance to Tax Exempt Entity. The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
5.1 The Developer shall not use or otherwise sell, transfer, convey, assign, lease, leaseback or hypothecate the Properties, the Project, or any portion of any of the foregoing to any entity or person, or for any use of the Properties, the Project, or any portion of any of the foregoing, that is partially or wholly exempt from the payment of real or personal property taxes or that would cause the exemption of the payment of all or any portion of real or personal property taxes otherwise assessable regarding the Properties, the Project, or any portion of any of the foregoing, without the prior written consent of the City, which may be 746
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4 withheld in the City’s sole and absolute discretion for a period of 20 years from the date of issuance of the certificate of completion for the Project by the City.
5.2 If the Properties, or any portion of the Properties, shall be conveyed, transferred or sold to any entity or person that is partially or wholly exempt from the payment of real or personal property taxes otherwise assessable against the Properties, or any portion thereof, without the prior written consent of the City, then, at the City’s election and in addition to all other remedies available to the City under this Agreement or at law or in equity, the Developer shall pay to the City a fee in lieu of payment of such taxes each year in an amount determined by the City to be one percent (1%) of the “full cash value” of the Properties, or portion thereof, as may be subject to such exemption from payment of real or personal property taxes. The City’s determination of “full cash value” for in-lieu payment purposes under this Section 5.2.2 shall be established by the City each year, if necessary, by reference to the real or personal property tax valuation principles and practices generally applicable to a county property tax assessor under Section 1 of Article XIIIA of the California Constitution. The City’s determination of “full cash value” and that an in-lieu payment is due shall be conclusive on such matters. If the City determines that an amount is payable as an in-lieu payment under this Section 5.2.2 in any tax year, then such amount shall be paid to the City for that tax year within forty-five (45) days following transmittal by the City to the Developer of an invoice for payment of the in-lieu amount.
5.3 The covenants of this Section 5 shall run with the land of the Properties, and shall be enforceable against the Developer and its successors and assigns.
Section 6. Maintenance Condition of the Properties. The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
6.1 The areas of the Properties that are subject to public view (including all existing and future improvements, paving, walkways, landscaping, exterior signage and ornamentation) shall be maintained in good repair and a neat, clean and orderly condition, ordinary wear and tear excepted. If there is an occurrence of an adverse condition on any area of the Properties that is subject to public view in contravention of the general maintenance standard described above (a “Maintenance Deficiency”), then the City shall notify the Developer in writing of the Maintenance Deficiency. If the Developer fails to cure or commence and diligently pursue to cure the Maintenance Deficiency within thirty (30) days of its receipt of notice of the Maintenance Deficiency, the City shall have the right to enter the Properties and perform all acts necessary to cure the Maintenance Deficiency, or to take any other action at law or in equity that may then be available to the City to accomplish the abatement of the Maintenance Deficiency. Any sum expended by the City for the abatement of a Maintenance Deficiency on the Properties pursuant to this Section 6.1 shall become a lien on the Properties, as applicable. If the amount of the lien is not paid within thirty (30) days after written demand for payment from the City to the Developer, the City shall have the right to enforce the lien in the manner provided in Section 6.3.
6.2 Graffiti, as this term is defined in Government Code Section 38772, that has been applied to any exterior surface of a structure or improvement on the Properties that is 747
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5 visible from any public right-of-way adjacent or contiguous to the Properties, shall be removed by the Developer by either painting over the evidence of such vandalism with a paint that has been color-matched to the surface on which the paint is applied, or graffiti may be removed with solvents, detergents or water, as appropriate. If any such graffiti is not removed within ninety-six (96) hours following the time of the discovery of the graffiti, the City shall have the right to enter the Properties and remove the graffiti, without notice to the Developer. Any sum reasonably expended by the City for the removal of graffiti from the Properties pursuant to this Section 6.2, shall be a lien on the Properties. If the amount of the lien is not paid within thirty (30) days after written demand to the Developer from the City, the City shall have the right to enforce its lien in the manner provided in Section 6.3.
6.3 The Parties further mutually understand and agree that the rights conferred upon the City under this Section 6.3 expressly include a grant by the Developer of a security interest in the Properties with the power to establish and enforce a lien or other encumbrance against the Properties or any portion thereof, in the manner provided under Civil Code Sections 2924, 2924b and 2924c, to secure the obligations of the Developer and it successors under Section 6.1 or Section 6.2, including the reasonable attorneys’ fees and costs of the City associated with the abatement of a Maintenance Deficiency or removal of graffiti.
For the purposes of the preceding sentence the words “reasonable attorneys’ fees and costs of the City” mean and include the salaries, benefits and costs of the City Attorney and the lawyers employed in the Office of the City Attorney.
6.4 The provisions of this Section 6, shall be a covenant running with the land of the Properties, shall be enforceable against the Developer and its successors and assigns, and shall be covenants set forth in the Grant Deed. Nothing in the foregoing provisions of this Section 6, shall be deemed to preclude the Developer from making any alteration, addition, or other change to any structure or improvement or landscaping on the Properties, provided that any such changes comply with applicable zoning and building regulations of the City.
Section 7. Obligation to Refrain from Discrimination. The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
7.1 There shall be no discrimination against or segregation of any person, or group of persons, on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Properties nor shall the Developer, itself or any person claiming under or through it, 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, sub-tenants, sub-lessees or vendees of the Properties. The covenant of this Section 7 shall run with the land of the Properties and shall be enforceable against the Developer and its successors and assigns in perpetuity and be a covenant in the Grant Deed and the Notice of Agreement.
7.2 The covenant of this Section 7 shall run with the land of the Properties in perpetuity, and shall be enforceable against the Developer and its successors and assigns. 748
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6 Section 8. Form of Non-Discrimination and Non-Segregation Clauses. The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
8.1 The Developer, such successors and such assigns shall refrain from restricting the sale, lease, sublease, rental, transfer, use, occupancy, tenure or enjoyment of the Properties (or any portion thereof) on the basis of sex, marital status, race, color, religion, creed, ancestry or national origin of any person. All deeds, leases or contracts pertaining to the Properties shall contain or be subject to substantially the following non-discrimination or non- segregation covenants:
8.1.1 In deeds: “The grantee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through it, 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, sub-tenants, sub-lessee, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land.”
8.1.2 In leases: “The Lessee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee itself, or any person claiming under or through it, 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, sub-lessee, sub-tenants, or vendees in the premises herein leased.”
8.1.3 In contracts: “There shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed or leased, nor shall the transferee or any person claiming under or through it, 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, sub-lessees, sub-tenants, or vendees of the premises herein transferred.” The foregoing provision shall be binding upon and shall obligate the contracting party or parties and any subcontracting party or parties, or other transferees under the instrument.
8.2 The covenant of this Section 8 shall run with the land of the Properties in perpetuity, and shall be enforceable against the Developer and its successors and assigns.
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7 Section 9. Grantee covenants and agrees that prior to recordation of the last Certificate of Completion for the Properties:
9.1 The Grantor hereby reserves a power of termination pursuant to Civil Code Sections 885.010, et se q., exercisable by the Grantor, in its sole and absolute discretion, upon thirty (30) calendar days written notice to the Grantee referencing this Section 9.1, to terminate the fee interest of the Grantee in the Properties and/or any improvements to the Properties and revest such fee title in the Grantor and take possession of all or any portion of such real property and improvements, without compensa tion to the Grantee, upon the occurrence of an Event of Default by the Grantee following the Close of Escrow and prior to the issuance of the Certificate of Completion for Properties.
9.2 The thirty (30) calendar day written notice specified in Section 9.1 shall specify the Event of Default by the Grantee triggering the Grantor’s exercise of its power of termination. The Grantor shall proceed with its remedy set forth in Section 9.1 only if the Grantee continues in default for a period of sixty (60) calendar days following such notice or, upon commencing to cure such default, fails to di ligently and continuously prosecute said cure to satisfactory conclusion. The right to re enter, repossess, terminate and revest shall be subject to and be limited by and shall not defeat, render invalid, or limit:
9.3 The rights of the Grantor under this Section 9 shall be subject and subordinate to, shall be limited by and shall not defeat, render invalid or limit:
9.3.1 Each Lien recorded against the Pr operties and specifically authorized by this Agreement as a Permitted Transfer;
9.3.2 Any leases, declarations of covenants, conditions and restrictions, easement agreements or other recorded documents or interests applicable to the Properties and specifically authorized by this Agreement as a Permitted Transfer.
9.4 Upon the Grantor’s exercise of its power of termination pursuant to this Section 9, the Grantee or its successors or assigns shall convey by grant deed to the Grantor title to the Properties, as specified in the Grantor’s notice pursuant to Section 9.1, and all improvements thereon, in accordance with Civil Code Section 1109, as such code section may hereafter be amended, renumbered, replaced or substituted. Such conveyance shall be duly acknowledged by the Grantee and a notary in a manner suitable for recordation. The Grantor may enforce its rights pursuant to this Section 9 by means of an injunctive relief or forfeiture of title action filed in any court of competent jurisdiction.
9.5 The right to re enter, repossess, terminate and revest with respect to the Properties shall terminate when the last Certificate of Completion for the Prop erties has been recorded by the Grantor.
Section 10. In the event title to all or any part of the Properties is revested in the Grantor as provided in this Section 10, the Grantor shall, pursuant to its responsibilities under California Law, use its best efforts to resell the Property or part as soon and in such manner as the Grantor shall find feasible to a qualified and responsible party or parties (as determin ed by the Grantor) who will assume the obligation of completing the rehabilitation in accordance with the Disposition 750
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8 and Development Agreement. Upon such resale of the Property the proceeds thereof shall be applied as follows:
10.1 First, the Grantor shall be reimbursed, on its own behalf or on behalf of the City of Ontario, California for all costs and expenses incurred by the Grantor, including but not limited to salaries of personnel incurred in connection with the recapture, management and resale of the Pr operty or part (but less any income derived by the Grantor from the Property in connection with such management); all taxes, assessments, and water and sewer charges with respect to the Property or part (or, in the event the Property is exempt from taxatio n, assessment or such charges during the period of Grantor's ownership thereof, an amount equal to such taxes, assessments or charges as determined by the assessing official as would have been payable if the Property were not exempt); any payments made or necessary to be made to discharge any encumbrances or liens existing on the Property or part at the time of revesting of title in the Grantor or to discharge or prevent such encumbrances or liens from attaching or being made by any subsequent successors or transferees; any expenditures made or obligations incurred with respect to the completion of the Improvements; and any amounts otherwise owed to the Grantor by the Grantee and its successors or transferee; and
10.2 Second, to the Grantor shall be reimbursed, on its own behalf or on behalf of the City of Ontario, California to the extent possible, the Total Development Costs for Phase
1. “Total Development Costs for Phase 1 ” means the total amount the City reimburses to Developer for the actual reasonable costs for the construction of the Project, including all work performed in compliance with Prevailing Wage Laws if required by state law , which shall not exceed Nineteen Million Dollars ($19,000,000.00).
10.3 Third, Grantee shall be reimbursed in an amount not to exceed the sum of (1) the Purchase Price paid to the Grantor by the Grantee for the Property (or allocable to the part thereof); (2) the costs incurred for the development of the Property solely paid by Grantee at the time of the reentry and repossession, (3) less any gains or income withdrawn or made by the Grantee from the Properties; and
10.4 Fourth, any balance remaining after such reimbursements shall be retained by the Grantor.
Section 11. To the extent that this right of reverter involves a forfeiture, it must be strictly interpreted against the Grantor, the party for whose benefit it is created. This right of reverter shall, however, be interpreted in light of the fact that the Grantor is by this deed conveying the Property to the Grantee for rehabilitation of historic properties speculation in undeveloped land and that such rehabilitation of the historic properties is a material element of the consideration received by Grantor for the Property.
Section 12. IMMEDIATELY FOLLOWING THE THIRTY (30) DAY PERIOD SPECIFIED IN SECTION 9.1, ABOVE, THE GRANTOR, ITS EMPLOYEES AND AGENTS
SHALL HAVE THE RIGHT TO REENTER AND TAKE POSSESSION OF THE PROPERTY
AND ANY IMPROVEMENTS THEREON, W ITHOUT FURTHER NOTICE OR COMPENSATION TO THE GRANTEE. BY INITIALING BELOW, THE GRANTEE
HEREBY EXPRESSLY WAIVES, TO THE MAXIMUM EXTENT ALLOWED BY LAW, ANY 751
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9 AND ALL RIGHTS THAT THE GRANTEE MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 791 AND CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1162,
AS THOSE STATUTES MAY BE AMENDED, REPLACED, RENUMBERED OR
SUBSTITUTED, OR UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.
GRANTEE’S INITIALS ____________
Section 13. THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE GRANTOR’S EXERCISE OF ITS POWER OF TERMINATION AND RIGHT OF REENTRY PURSUANT TO THIS Section 13 MAY WORK A FORFEITURE OF THE ESTATE IN THE PROPERTY C ONVEYED TO THE GRANTEE THROUGH THE GRANT DEED. THE
GRANTEE HEREBY EXPRESSLY WAIVES, TO THE MAXIMUM EXTENT ALLOWED BY
LAW, ANY AND ALL EQUITABLE AND LEGAL DEFENSES THAT THE GRANTEE MAY
HAVE TO SUCH FORFEITURE, INCLUDING, BUT NOT LIMITED TO, THE DEFENSES
OF LACHES, WAIVER, ESTOPPEL, SUBSTANTIAL PERFORMANCE OR COMPENSABLE DAMAGES. THE GRANTEE FURTHER EXPRESSLY WAIVES, TO THE
MAXIMUM EXTENT ALLOWED BY LAW, ANY AND ALL RIGHTS AND DEFENSES THAT THE GRANTEE MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 3275 OR ANY OTHER STATUTE OR COMMON LAW PRINCIPLE OF SIMILAR EFFECT. THE
GRANTEE ACKNOWLEDGES THAT THE TERMS AND CONDITIONS OF THE
AGREEMENT REFLECT THE POSSIBILITY OF FORFEITURE BY VIRTUE OF THE EXERCISE OF THE GRANTOR’S POWER OF TERMINATION PROVIDED IN THIS Section 13AND FURTHER ACKNOWLEDGE THAT IT HAS RECEIVED INDEPENDENT AND
ADEQUATE CONSIDERATION FOR ITS WAIVER AND RELINQUISHMENT OF RIGHTS AND REMEDIES PURSUANT TO Section 12 AND THIS Section 13.
GRANTEE’S INITIALS ____________
Section 14. Developer Covenant to Undertake Project . Upon Close of Escrow the Developer covenants, for itself, its successors and assigns, to and for the exclusive benefit of the City, that the Developer shall commence and complete the development of the Project on the Properties within the time period for such actions set forth in the Schedule of Performance. The Developer covenants and agrees for itself, its successors, and assigns, that the Project and Properties shall be rehabilitated, improved and developed in compliance with the City Requirements and in substantial conformity with the terms and conditions of this Agreement, the Scope of Development, the Schedule of Performance, any and all plans, specifications and similar development documents required by this Agreement, except for such changes as may be mutually agreed upon in writing by and among the Parties, rehabilitate all Historic Properties to in accordance with the Secretary of the Interior Standards, and comply with all applicable laws, regulations, orders and conditions of each Governmental Agency with jurisdiction over the Properties or the Project. The covenants of this Section 14 shall run with the land of the Properties until the earlier of the date of recordation of the Certificate of Completion or the fifteenth (15th) anniversary of the date of the Close of Escrow.
Section 15. Covenants Run with the Land of the Properties. Each of the covenants and agreements contained in this Grant Deed tou ch and concern the Properties and each of them is 752
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10 expressly declared to be a community development covenant that runs with the land for the benefit of the Grantor, and such covenants run with the land in favor of the Grantor for the entire period that such covenants are in full force and effect, regardless of whether the Grantor is or remains an owner of any land or interest in land to which such covenants relate. The Grantor, in the event of any breach of any such covenants, has the right to exercise all of the rights and remedies, and to maintain any actions at law or suits in equity or other proper proceedings, to enforce the curing of such breach, as provided in the Agreement or by law. The covenants contained in this Grant Deed are for the benefit of and are enforceable only by the Grantor, and shall survive the execution and recordation of this Grantor Deed and the issuance and recordation of each and every Certificate of Completion, for the time period set forth above for each covenant.
Section 16. Costs and Att orneys’ Fees for Enforcement Proceeding . If legal proceedings are initiated to enforce the rights, duties or obligations of any of the covenants set forth in this Grant Deed, then the prevailing party in such proceeding shall be entitled to collect its reasonable attorney fees and costs from the other party in addition to any other damages or relief obtained in such proceedings.
Section 17. Effect of Unlawful Provision; Severability. In the event that any provision of this Grant Deed is held to be invalid or unlawful by a final judgment of a court of competent jurisdiction, such invalidity shall not affect the validity of any other provision of this Grant Deed.
Section 18. All covenants contained in this Deed shall be covenants running with the land and equitable servitudes there on. The covenants contained in Section 9 of this Deed shall terminate upon issuance of the last Certificate of Completion for the Properties. The covenants contained in this City Deed shall remain in effect in perpetuity unless specified otherwise; provided, however, that if the state law requiring such covenants changes such that such covenants are not required to remain in effect in perpetuity, s uch covenants shall terminate at such earlier date as may be permitted by state law.
IN WITNESS WHEREOF, the Grantor has caused this Grant Deed to be executed by its authorized representative(s) on this ____ day of _____________, 2025.
GRANTOR:
THE CITY OF ONTARIO
a California municipal corporation
By: ___________________________
City Manager
[ALL SIGNATURES MUST BE NOTARY ACKNOWLEDGED]
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11 EXHIBIT A
TO
GRANT DEED
Properties Legal Description
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12 CERTIFICATE OF ACCEPTANCE OF
GRANT DEED
The undersigned hereby acknowledges acceptance by A Block, LLC a California limited liability company, the Grantee in the within Grant Deed, of the delivery of the subject Properties described in the within Grant Deed from the City of Ontario.
GRANTEE:
A BLOCK, LLC a California limited liability
company
Dated: _____________________ By: _________________________ [TITLE]
[ALL SIGNATURES MUST BE NOTARY ACKNOWLEDGED]
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TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Form of Notice of Agreement
[Attached Behind This Page]
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1 RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
The City of Ontario
303 E. B Street
Ontario, CA 91764
Attn: City Manager
Exempt from Recording fee
pursuant to Gov’t Code § 27383
NOTICE OF AGREEMENT
Disposition and Development Agreement
(City of Ontario and A Block, LLC)
TO ALL INTERESTED PERSONS PLEASE TAKE NOTICE that A Block, LLC a California limited liability company (the “Developer”) and the City of Ontario, a California municipal corporation (the “City”) entered into an agreement entitled Disposition and Development Agreement ( City of Ontario and A Block, LLC ), dated as of June 6, 2025 (the “Agreement”). A copy of the Agreement is on file with the City and is available for inspection and copying by interested persons as a public record of the City at the City’s offices located at 303 E. B Street, Ontario, CA 91764, during the City’s regular business hours.
The Agreement affects the real property described in Exhibit A attached to this Notice of Agreement (the “Properties”). The meaning of defined terms, indicated by initial capitalization, used in this Notice of Agreement shall be the same as the meaning ascribed to such terms in the Agreement.
PLEASE TAKE FURTHER NOTICE that the Agreement contains certain development covenants running with the land of th e Properties and other agreements between the Developer and the City affecting the Properties, as set forth below (all section references are to the Agreement):
Section 4.1 of the Agreement provides:
4.1 Developer Covenant to Undertake Project. Upon Close of Escrow the Developer covenants, for itself, its successors and assigns, to and for the exclusive benefit of the City, that the Developer shall commence and complete the development of the Project on the Properties within the time period for such actions set forth in the Schedule of Performance. The Developer covenants and agrees for itself, its successors, and assigns, that the Project and Properties shall be rehabilitated, improved and developed in compliance with the City Requirements and in substantial conformity with the terms and conditions of this Agreement, the Scope of Development, the Schedule of Performance, any and all plans, specifications and similar development documents required by this Agreement, except for such changes as may be mutually agreed upon in writing by and among the Parties, rehabilitate all Historic Properties to in 757
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2 accordance with the Secretary of the Interior Standards, and comply with all applicable laws, regulations, orders and conditions of each Governmental Agency with jurisdiction over the Properties or the Project. The covenants of this Section 4.1 shall run with the land of the Properties until the earlier of the date of recordation of the Certificate of Completion or the fifteenth (15th) anniversary of the date of the Close of Escrow
Section 5.1 of the Agreement provides:
5.1 Covenant to Maintain Properties on Tax Rolls . The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
5.1.1 The entirety of the Properties shall remain on the County secured real property tax rolls for twenty years from the date of issuance of the final Certificate of Completion for the Project.
5.1.2 The Developer shall pay all property tax bills with respect to the Properties and all improvements thereon on or before the last day for the timely payment of each property tax installment on each December 10 and April 10 during such time period and to timely pay all supplemental tax bills regarding the Properties issued by the County. The Developer further covenants and agrees to provide to the City, on or before July 31 of each year, commencing in the calendar year following the calendar year in which a Certificate of Completion is recorded and in each calendar year, thereafter, for the full term of this covenant: (i) a true and correct copy of all property tax assessment notices, property tax bills and property tax assessment correspondence by and between the Developer and the County regarding the Properties and all improvements thereon, with respect to the preceding fiscal year of the County, and (ii) cancelled checks issued by the Developer in payment of all property tax payments that are made to the County regarding the Properties and all improvements thereon (or other reasonably acceptable evidence of such payment), with respect to the preceding County fiscal year
5.1.3 The covenants of this Section 5.1 shall run with the land of the Properties, shall be enforceable against the Developer and its successors and assigns, and shall be covenants set forth in the Grant Deed.
Section 5.2 of the Agreement provides:
5.2 No Conveyance to Tax Exempt E ntity. The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
5.2.1 The Developer shall not use or otherwise sell, transfer, convey, assign, lease, leaseback or hypot hecate the Properties, the Project, or any portion of any of the foregoing to any entity or person, or for any use of the Properties, the Project, or any portion of any of the foregoing, that is partially or wholly exempt from the payment of real or personal property taxes or that would cause the exemption of the payment of all or any portion of real or personal property taxes otherwise assessable regarding the Properties, the Project, or any portion of any of the foregoing, without the prior written consen t of the 758
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3 City, which may be withheld in the City’s sole and absolute discretion for a period of 20 years from the date of issuance of the certificate of completion for the Project by the City.
5.2.2 If the Properties, or any portion of the Properties, shal l be conveyed, transferred or sold to any entity or person that is partially or wholly exempt from the payment of real or personal property taxes otherwise assessable against the Properties, or any portion thereof, without the prior written consent of the City, then, at the City’s election and in addition to all other remedies available to the City under this Agreement or at law or in equity, the Developer shall pay to the City a fee in lieu of payment of such taxes each year in an amount determined by the City to be one percent (1%) of the “full cash value” of the Properties, or portion thereof, as may be subject to such exemption from payment of real or personal property taxes. The City’s determination of “full cash value” for in-lieu payment purposes und er this Section 5.2.2 shall be established by the City each year, if necessary, by reference to the real or personal property tax valuation principles and practices generally applicable to a county property tax assessor under Section 1 of Article XIIIA of the California Consti tution. The City’s determination of “full cash value” and that an in-lieu payment is due shall be conclusive on such matters. If the City determines that an amount is payable as an in -lieu payment under this Section 5.2.2 in any tax year, then such amount shall be paid to the City for that tax year within forty -five (45) days following transmittal by the City to the Developer of an invoice for payment of the in-lieu amount.
5.2.3 The covenants of this Section 5.2 shall run with the land of the Properties, shall be enforceable against the Dev eloper and its successors and assigns , and shall be covenants set forth in the Grant Deed.
Section 5.4 of the Agreement provides:
5.4 Maintenance Condition of the Properties . The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
5.4.1 The areas of the Properties that are subject to public view (including all existing and future improvements, paving, walkways, landscaping, exterior signage and ornamentation) shall be maintained in good repair and a neat, clean and orderly condition, ordinary wear and tear excepted. If there is an occurrence of an adverse condition on any area of the Properties that is subject to public view in contravention of the general maintenance standard described above (a “Maintenance Deficiency”), then the City shall notify the Developer in writing of the Maintenance Deficiency. If the Developer fails to cure or commence and diligently pursue to cure the Maintenance Deficiency within thirty (3 0) days of its receipt of notice of the Maintenance Deficiency, the City shall have the right to enter the Properties and perform all acts necessary to cure the Maintenance Deficiency, or to take any other action at law or in equity that may then be available to the City to accomplish the abatement of the Maintenance Deficiency. Any sum expended by the City for the abatement of a Maintenance Deficiency on the Properties pursuant to this Section 5.4.1 shall become a lien on the Properties, as applicable. If the amount of the lien is not paid within thirty (30) days after written demand for payment from the City to the Developer, the City shall have the right to enforce the lien in the manner provided in Section 5.4.3. 759
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4 5.4.2 Graffiti, as this term is defined in Government Code Section 38772, that has been applied to any exterior surface of a structure or improvement on the Properties that is visible from any public right -of-way adjacent or contiguous to the Properties, shall be removed by the Developer by either painting over the evidence of such vandalism with a paint that has been color- matched to the surface on which the paint is applied, or graffiti may be removed with solvents, detergents or water, as appropriate. If any such graffiti is not removed within ninety-six (96) hours following the time of the discovery of the graffiti, the City shall have the right to enter the Properties and remove the graffiti, without notice to the Developer. Any sum reasonably expended by the City for the removal of graffiti from the Properties pursuant to this Section 5.4.2, shall be a lien on the Properties. If the amount of the lien is not paid within thirty (30) days after written demand to the Developer from the City, the City shall have the right to enforce its lien in the manner provided in Section 5.4.3.
5.4.3 The Parties further mutually understand and agree that the rights conferred upon the City under this Section 5.3 expressly include a grant by the Developer of a security interest in the Properties with the pow er to establish and enforce a lien or other encumbrance against the Properties or any portion thereof, in the manner provided under Civil Code Sections 2924, 2924b and 2924c, to secure the obligations of the Developer and it successors under Section 5.4.1 or Section 5.4.2, including the reasonable attorneys’ fees and costs of the City associated with the abatement of a Maintenance Deficiency or removal of graffiti. For the purposes of the preceding sentence the words “reasonable attorneys’ fees and costs of the City” mean and include the salaries, benefits and costs of the City Attorney and the lawyers employed in the Office of the City Attorney.
5.4.4 The provisions of this Section 5.3, shall be a covenant running with the land of the Properties, shall be enforceable against the Developer and its successors and assigns, and shall be covenants set forth in the Grant Deed. Nothing in the foregoing provisions of this Section 5.3 shall be deemed to preclude the Developer from making any alteration, addition, or other change to any structure or improvement or landscaping on the Properties, provided that any such changes comply with applicable zoning and building regulations of the City.
Section 5.5 of the Agreement provides:
5.5 Obligation to Refrain from Discrimination. The Developer for itself, its successors and assigns to all or any part or portion of the Properties and/or Project, covenants and agrees that:
5.5.1 There shall be no discrimination against or segregation of any person, or group of persons, on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Properties nor shall the Developer, itself or any person claiming under or th rough it, 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, sub-tenants, sub-lessees or vendees of the Properties.
The covenant of this Section 5.5 shall run with the land of the Properties and shall be enforceable against the Developer and its successors and assigns in perpetuity and be a covenant in the Grant Deed and the Notice of Agreement.
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EXHIBIT T
5 5.5.1.1 In deeds: “The grantee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through it, 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, sub-tenants, sub-lessee, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land.”
5.5.1.2 In leases: “The Lessee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee itself, or any person claiming under or through it, 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, sub-lessee, sub-tenants, or vendees in the premises herein leased.”
5.5.1.3 In contracts: “There shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed or leased, nor shall the transferee or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, locat ion, number, use, or occupancy, of tenants, lessees, sub-lessees, sub-tenants, or vendees of the premises herein transferred.” The foregoing provision shall be binding upon and shall obligate the contracting party or parties and any subcontracting party o r parties, or other transferees under the instrument.
5.5.2 The covenant of this Section 5 .5 shall run with the land of the Properties in perpetuity, shall be enforceable against the Developer and its successors and assigns, and shall be covenants set forth in the Grant Deed.
This NOTICE OF AGREEMENT is dated as of _________________, 2025, and has been executed on behalf of the Developer and the City by and through the signatures of their authorized representative(s) set forth below. This Notice of Agreement may be executed in counterparts and when fully executed each counterpart shall be deemed to be one original instrument.
CITY:
THE CITY OF ONTARIO
a California municipal corporation
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EXHIBIT T
6 Dated: _________________, 2025 By: _______________________________ City Manager
ATTEST:
____________________________
City Clerk
APPROVED AS TO LEGAL FORM:
BEST BEST & KRIEGER LLP
By: _______________________
City Attorney
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EXHIBIT T
7 DEVELOPER:
A BLOCK, LLC, a California limited liability
company
Dated: _____________________ By: _________________________ [TITLE]
[ALL SIGNATURES MUST BE NOTARY ACKNOWLEDGED]
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8 EXHIBIT A
TO
NOTICE OF AGREEMENT
Legal Description of Properties
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EXHIBIT U
EXHIBIT U
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Form of Official Action of Developer
CERTIFICATION OF LLC AUTHORITY
The undersigned members of A BLOCK, LLC a California limited liability company (the “LLC”), do certify that we are all of the members of the LLC and that there are no other members.
We further certify that any one (1) of the following named persons, individually:
[INSERT NAMES]
be, and they are, authorized and empowered for and on behalf of and in the name of the LLC to execute and deliver that certain Disposition and Development Agreement (City of Ontario and A Block, LLC), dated June 6, 2025, between the City of Ontario, a Calif ornia municipal corporation, (“City”) and the LLC (the “Agreement”), to purchase certain real property located in the City of Ontario, California, as specifically described in the Agreement, and all other documents to be executed by the LLC in connection w ith the transactions contemplated in the Agreement, and to take all actions that may be considered necessary to conclude the transactions contemplated in the Agreement and perform the other obligations of the LLC pursuant to the Agreement.
The authority conferred shall be considered retroactive, and any and all acts authorized in this document that were performed before the execution of this Certificate are approved and ratified. The authority conferred shall continue in full force and effect until the City of Ontario, a California municipal corporation shall have received notice in writing from the LLC of the revocation of this Certificate.
We further certify that the activities covered by the foregoing certifications constitute duly authorized activities of the LLC; that these certifications are now in full force and effect; and that there is no provision in any document under which the LLC is organized and/or that governs the LLC’s continued existence, limiting the power of the undersigned to make the cert ifications set forth in this certificate, and that such certifications are in conformity with the provisions of all such documents.
LLC Members:
____________________________
____________________________
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EXHIBIT V
EXHIBIT V
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Form of Certificate of Completion
[Attached Behind This Page]
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1 RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
________________________________
________________________________
________________________________
________________________________
Attention:
Exempt from Recording fee
pursuant to Gov’t Code § 27383
CITY OF ONTARIO
CERTIFICATE OF COMPLETION
(City of Ontario and A Block, LLC)
I, Scott Ochoa, City Manager of the City of Ontario (the “City”) certify that:
The Project described as [______________________] required to be constructed in accordance with that certain Disposition and Development Agreement (City of Ontario and A Block, LLC) dated June 6 2025 (“DDA”), between the City and A Block, LLC a California limited liability company (the “Developer”), on that certain real property specifically described in the legal description(s) attached to this Certificate of Completion as Exhibit A (the “Properties”), is complete in accordance with the provisions of the Agreement.
This Certificate of Completion constitutes conclusive evidence of the City’s determination of the Developer’s satisfaction of its obliga tion under the Agreement for the rehabilitation of the Property(ies) as a commercial development, including any and all buildings, parking areas, landscaping areas and related improvements necessary to support or meet any requirements applicable to the Pro ject and its use and occupancy on the Project, whether or not such improvements are located on or off the Properties or on other property subject to the Agreement.
Notwithstanding any provision of this Certificate of Completion, the City may enforce any covenant surviving this Certificate of Completion in accordance with the terms and conditions of the Agreement and the Grant Deed by which the Properties was conveyed to the Developer by the City under the Agreement. The Agreement is an official record of the City and a copy of the Agreement may be inspected at the City ’s office located at 303 E. B Street, Ontario , California 91764, during the City’s regular business hours.
DATED AND ISSUED this _____ day of ______________, _____.
THE CITY OF ONTARIO
a California municipal corporation
By: ___________________________
City Manager
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2 EXHIBIT A
TO
CERTIFICATE OF COMPLETION
Legal Description of the Properties
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EXHIBIT W
EXHIBIT W
TO
DISPOSITION AND DEVELOPMENT AGREEMENT
(City of Ontario and A Block, LLC)
Development Phases
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ECONOMIC OPPORTUNITY
SUMMARY REPORT PURSUANT TO
CALIFORNIA GOVERNMENT CODE
SECTIONS 52200 – 52201 REGARDING
A DISPOSITION AND DEVELOPMENT
AGREEMENT BY AND BETWEEN THE
CITY OF ONTARIO
AND
A BLOCK, LLC.
The following Economic Opportunity Summary Report has been prepared pursuant to Sections 52200 - 52201 of the California Government Code. The report sets forth certain details of the proposed Disposition and Development Agreement (“Agreement”) between the City of Ontario (“City”) and A Block, LLC. (“Developer”). The site is approximately
3.123 acres located at the 100 Block North Euclid Avenue in the City of Ontario, California (“Property”).
BACKGROUND STATEMENT
The following Summary Report is based upon information contained within the Agreement, and is organized into the following six sections:
I. Terms of Agreement: This section includes a description of the Project; and the obligations imposed on the City and the Developer by the Agreement.
II. Cost of the Agreement to the City: This section details the total cost to the City associated with implementing the Agreement.
Ill. Estimated Value of the Interests to be Conveyed Determined at the Highest Use Permitted Under the General Plan: This section estimates the value of the interests to be conveyed determined at the highest use permitted under the existing zoning and the requirements imposed by the General Plan.
IV. Estimated Fair Market Value of the Interest to be Conveyed: This section summarized the valuation estimate for the City Property based on the required use.
V. Consideration Received: This section describes the compensation to be received by the City.
VI. Creation of Economic Opportunity: This section describes the how the Project will asset in the creation of economic opportunity.
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This Summary Report and the Agreement are to be made available for public inspection prior to the approval of the Agreement.
I. TERMS OF THE AGREEMENT
A. Project Description
The Property is located on the northeast corner of Euclid Avenue and Holt Boulevard and encompasses slightly over 3 acres. The current land use is mixed-use commercial and falls within the Downtown Mixed Use zoning district – MU-1. The Property is presently improved with an approximately 5,000 square foot commercial building (Boney’s Market), 23,000 square foot historic commercial building (Yangtze), a 7,725 square foot historic commercial building (Lerch), a 15,570 square foot historic commercial building (Citizen National Bank), and 7 vacant parcels utilized as public parking lots.
The Project incorporates the structural retrofitting and adaptive reuse of three existing historic structures and one non -historic building on the Property, and construction of additional multi -story, mixed -use residential and retail commercial uses totaling approximately 1 56 residential dwelling units, and approximately 35,000 square feet of ground floor commercial/retail/service space fronting on Euclid Avenue, B Street, Lemon Avenue, and Holt Boulevard (“Project”). The Project will be phased over a five-year period with the adaptive reuse of the historic structures being completed in Phases 1 and 2 and the construction of the new commercial and residential development in Phases 3 and 4.
The Developer will also be required to build all associated on and off -site improvements, including but not limited to all hardscape, landscaping, and public street improvements.
B. City Responsibilities
The Agreement requires the City to accept the following responsibilities:
1. The City will sell the Property to the Developer for $1.00.
2. The City will Loan the Developer $19,000,000 to finance Phase 1 construction of the Project at the prime annual interest rate, with a ceiling of 8% and floor of 5%.
3. The City must work in good faith with the Developer to issue a Certificate of Appropriateness and other necessary entitlements from the Community Development Agency and other City Departments for the proposed uses.
C. Developer Responsibilities
The Agreement imposes the following responsibilities on the Developer:
1. The Developer must accept conveyance of the Property from the City under the terms of the Agreement, including paying $1.00 for the Property. 771
2. The Developer must preserve and retain the historic context of three historic buildings and obtain a Certificate of Appropriateness, Adaptive Reuse Plan, and other necessary entitlements from the Community Development Agency and other City Departments for the proposed uses.
3. The Developer must develop the Project with 156 high-quality, for sale multi-family residential units and approximately 35,000 square feet of retail and commercial space.
4. The Developer must accept the Construction Covenant, which requires Developer to complete the Project by the dates set forth in the Schedule of Performance
5. The Developer must pay back the $19,000,000 loan intended to finance Phase 1 construction of the Project at the prime annual interest rate, with a ceiling of 8% and floor of 5%, no later than 5 years from the initial draw down of funds.
II. COST OF THE AGREEMENT TO THE CITY
The Property was purchased for $ 4,565,000. The City paid for the preparation of an Environment Impact Report for an estimated cost of $100,000. The City paid $65,000 for the preparation of a Historic Structures Report (“HSR”) prepared by a state certified architect. The City incurred relocation costs, site clearance costs, in addition to costs to maintain the property over the last several years. The City also incurred the cost of preparing the necessary studies, a land valuation report and the necessary agreements to facilitate the disposition and development of the Property.
Ill. ESTIMATED VALUE OF THE INTERESTS TO BE CONVEYED
DETERMINED AT THE HIGHEST USE PERMITTED UNDER THE
REDEVELOPMENT PLAN
Section 52201 of the California Government Code requires the City to identify the value of the interests being conveyed at the highest use allowed by the Property's zoning and the requirements imposed by the General Plan.
Pursuant to an appraisal prepared by R.P. Laurain & Associates ., for the subject Property, the appraiser arrived at a negative Opinion of Value. The negative value was derived from recent comparable land and building values coupled with the Developer’s overall Project costs supported by HSR. The HSR included an analysis of the historic nature of the buildings as well as the structural integrity of the buildings and an engineer’s cost estimate to retrofit the building s to allow for the Developer’s proposed use. The proposed rehabilitation/historic preservation and new improvement costs exceed the current market value of the Property by $10,760,000.
IV. ESTIMATED REUSE VALUE OF THE INTERESTS TO BE CONVEYED
As discussed above, the property is being conveyed to the Developer as a negative value due to the substantial improvement costs to restore the building to current building codes.
With improvement costs estimated at $19,000,000 for the adaptive re-use of three existing structures and approximately $70,000,000 for the balance of the Project, the estimated 772
reuse value of the interests to be conveyed are significantly higher than present fair market value.
V. CONSIDERATION RECEIVED AND COMPARISON WITH THE
ESTABLISHED VALUE OF THE PROPERTY
Under the Agreement, the City is conveying the Property for $1.00. T he Developer is making a significant investment in the Historic Downtown Ontario which will not only generate new jobs but also raise property taxes for which the City will receive its share of property tax revenues generated by the Project.
Based on the sale price and estimated value of the Property, the City is not selling the Property below the fair market value estimated by an independent appraiser.
VI. CREATION OF ECONOMIC OPPORTUNITY
The City has determined that the proposed development would fulfill goals and objectives defined in the City's adopted General Plan and create economic opportunities and benefits to the City including but not limited to the following:
1. The City will benefit from the interest accrued on the $19,000,00 loan.
2. The City anticipates that the mixed-use Project will generate significant increases in property tax. The estimated assessed value of property at the conclusion of construction is estimated to be approximately $89,500,000. The increase in property valuation will generate approximately $895,580 in additional property tax revenues to the City.
3. During construction, the Project will create approximately over 150 full-time jobs for skilled workers across various trades. In addition, over 75 full -time permanent jobs will be added after completion and st abilization of the Project’s various residential and commercial components. This not only enhances the existing uses in the area, but also injects additional economic vitality into our community by providing diverse employment opportunities.
4. Generating substantial revenue for the City through additional local sales tax revenue which may be used by the City for the funding of necessary public services and facilities, including but not limited to, public safety services and facilities, public improvements and recreational opportunities that otherwise may not be available to the community for many years.
5. Implementation of the Agreement helps to remove blighting influences within the area by improving the physical appearance of the area. The Property currently includes multiple vacant and underutilized buildings that are designated as a local historic landmark. The Property also has several underutilized vacant lots. In its current condition and use, the Property is attractive to vandalism and illegal dumping. This will be removed and replaced by a new modern Project.
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1 SECURED PROMISSORY NOTE
$19,000,000.00 Ontario, California
May ___, 2025
1. DEFINITIONS.
The following terms will be used as defined terms in this Secured Promissory Note (as it may be amended, modified, extended and renewed from time to time, this “Note”):
Lender/Payee: CITY OF ONTARIO, a California municipal corporation , or the holder of this Note.
Borrower/Maker: A BLOCK, LLC, a California limited liability company Principal Amount: NINETEEN MILLION and No/100 Dollars ($19,000,000.00).
Interest Rate: Seven and one -half percent ( 7.50%) per annum , subject to adjustments as provided herein. The Interest Rate shall equal the Index Rate and shall adjust on each Adjustment Date in accordance with changes to the Index Rate. If the Index Rate pu blished on the last business day pr eceding the Adjustment Date differs from the Index Rate then in effect, the Interest Rate shall adjust on the Adjustment Date to equal the rate set forth above . Notwithstanding the foregoing, the Interest Rate shall at al l times be subject to a floor of five percent (5.00%) per annum (the “Interest Rate Floor”) and a ceiling of eight percent (8.00%) per annum (the “Interest Rate Cap”).
Default Interest Rate: Five percent (5.00%) per annum above the Interest Rate. The Def ault Interest Rate shall change from time to time as and when the Interest Rate changes as a result of changes in the Index Rate.
Adjustment Date: The first day following the change in the Index Rate.
Index Rate: The rate of interest identified as the “pri me rate” being the base rate on corporate loans posted by at least seventy -five percent (75%) of the thirty (30) largest banks in the United States as published from time to t ime by the Wall Street Journal. Should the Wall Street Journal cease publication of said prime rate, the Index Rate shall be that rate of interest as determined by the Lender to be most comparable to the prime rate.
Maturity Date: July 1, 2030 unless the Maturity Date is modified as otherwise provided in this Note and the Loan Documents.
Business Day: Any day of the year other than Saturdays, Sundays and legal holidays.
Deed of Trust: That certain Construction Deed of Trust and Fixture Filing (With Assignment of Rents and Security Agreement ) of even date herewith executed by Borrower, as “Trustor”, for the benefit of Lender, as “Beneficiary.” Loan Documents: The Loan Agreement, the Note, the Deed of Trust, and all other documents securing the repayment of the Note, guaranties, indemnity agreements and instruments executed by the Borrower and/or guarantor and/or indemnitor. 774
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2 Loan: The loan from Lend er to B orrower in the Principal Amount and evidenced by this Note and/or the Loan Documents.
Loan Agreement: That certain Construction Loan Agreement of even date herewith between Borrower and Lender.
Advance: Any disbursement of Loan proceeds by Lender made pursuant to any of the Loan Documents.
2. PROMISE TO PAY.
For value received, Borrower promises to pay to the order of Lender, at 303 E B St, Ontario, CA 91764 or at such other place as the Lend er hereof may from time to time designate in writing, the Principal Amount or the aggregate unpaid principal amount of all Advances made by Lender to the undersigned from time to time and remaining outstanding on the Maturity Date, whichever is less, together with interest thereon, and all other sums due under and secured by the Deed of Trust or by any other Loan Documents.
3. INTEREST; PAYMENTS.
(a) Absent a continuing Event of Default hereunder or under any of the Loan Documents, each Advance made hereunder shal l bear interest on the unpaid principal amount at the Interest Rate , from the date on which the Advance is funded until repaid. Throughout the term of this Note, interest shall be calculated on a 360 -day year with respect to the unpaid balance of the Princ ipal Amount and, in all cases, shall be computed for the actual number of days in the period for which interest is charged, which period shall consist of 365 -days on an annual basis.
(b) All payments of principal and interest due hereunder shall be made (i) wi thout deduction of any present and future taxes, levies, imposts, deductions, charges or withholdings, which amounts shall be paid by Borrower, and (ii) without any ot her set off, claim or defense of any kind or nature. Borrower will pay the amounts necessary such that the gross amount of the principal and interest received by the holder hereof is not less than that required by this Note and/or the Loan Documents. Notwithstanding the foregoing, Borrower shall not be required to pay franchise taxes and tax es imposed on or measured by Lender ’s net income or gross receipts or other taxes imposed in lieu of such taxes.
(c) Commencing on July 1, 2025 , and continuing on the same day of each succeeding month thereafter (each, an “Interest Payment Date”), Borrower shall make consecutive monthly installments of all accrued unpaid interest. The Borrower shall have a grace period of ten (10) calendar days from the due date of each monthly payment to make such payment without incurring a late payment penalty or be found in default. (d) Commencing on the first day of the month immediately following the issuance of the Certification of Completion and upon stabilization with respect to Phase 1 (as such term is defined in the DDA), and continuing on the same day of each succeeding month thereafter, Borrower shall make equal monthly installments of principal and interest amortized over a period of thirty (30) years . Notwithstanding the foregoing, with respect to the payments due after each Adjustment Date, the monthly installmen t payment amount shall be re -calculated to fully amortize the then remaining principal amount over the remaining portion of the original amortization period, with such calculation using the adjusted interest rate as determined herein. (e) One (1) final “balloon” payment of all unpaid principal, interest, and all other amounts payable by Borrower pursuant to this Note or pursuant to the terms of any other Loan Documents shall be due and payable on the Maturity Date. If any payment of principal and interest to be made by Borrower hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day. (f) The Interest Rate on this Note is subject to change as provided herein based on changes in the Index Rate. Lender will tell Borrower the current Index Rate upon Borrower’s request. 775
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3 4. PREPAYMENT.
(a) Borrower may prepay the Loan, in whole or in part, at any time and from time to time without any prepayment penalties.
(b) In no event shall Borrower be entitled to re-borrow any amounts prepaid.
5. LAWFUL MONEY.
Principal and interest are payable in lawful money of the United States of America.
6. APPLICATION OF PAYMENTS/LATE CHARGE.
(a) Unless otherwise agreed to, in writing, or otherwise required by applicable law, payments will be applied first to accrued, unpaid interest, then to any unpaid collection costs, late charges and other charges, and any remaining amount to principal, provided, however, during the continuance of an Event of Default, as defined herein or in any other Loan Document, Lender reserves the right to apply payments among principal, interest, late charges, collection costs and other charges in such order of priority as Lender shall from time to time determine in its sole discretion. All prepayments shall be ap plied to the indebtedness owing hereunder in such order and manner as Lender may from time to time determine in its sole discretion. (b) If any payment of interest and/or principal is not received by the holder hereof within ten (10) days of when such payment is due, then in addition to the remedies conferred upon the holder hereof pursuant to the provisions of this Note and/or the Loan Documents, a late charge of five percent (5%) of the amount of the payment due will be due and owing by the Borrower and will be added to the delinquent amount to compensate the holder hereof for the costs, expenses, and damages of the holder related to the delinquency of the Borrower in making such payment, regardless of any notice and/or cure periods (if any). Acceptance of an y late charge will not constitute a waiver of default with respect to the overdue payment, and will not prevent or delay Lender from exercising any of its rights or remedies available under this Note and/or the Loan Documents. (c) Upon the occurrence, and duri ng the continuance, of an Event of Default, including the failure to pay upon final maturity, Lender, may at its option and in its sole discretion: (i) increase the applicable Interest Rate on this Note to the Default Interest Rate, and/or (ii) add any unp aid accrued interest to principal and such sum will bear interest therefrom until paid at the Default Interest Rate. The undersigned acknowledges that, during the time that any amount is in default, Lender will incur losses that are impracticable, costly, and inconvenient to ascertain.
Those losses include, without limitation, the ability to invest amounts then due at the current rate of return and the unavailability of liquid funds. The undersigned agrees that the interest payable hereunder represents a reasonable sum considering all of the circumstances existing on the date of the execution of this Note and represents a reasonable estimate of the losses Lender will incur by reason of late payment. The undersigned further agrees that proof of actual losses would be costly, inconvenient, impracticable, and extremely difficult to fix. Acceptance of the interest will not constitute a waiver of the default with respect to the overdue installment and will not prevent Lender from exercising any of the other r ights and remedies available under this Note and/or the Loan Documents.
Notwithstanding anything contained herein, the interest rate will not exceed the maximum rate permitted by applicable law.
7. SECURITY.
This Note is secured, among other security, by sec urity instruments covering real property and personal property of the undersigned located in the State of California, including, without limitation, the Deed of Trust, which Deed of Trust creates a lien on that certain real and personal property described therein.
8. ACCELERATION BY REASON OF TRANSFER.
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4 The Deed of Trust contains the following limitation on the right of Borrower to transfer the Trust Estate (as defined in the Deed of Trust):
“2.12 Transfer of Trust Estate by Trustor. In order to induce Beneficiary to make the loan, Trustor agrees that, in the event of any Transfer (as hereinafter defined), without the prior written consent of Beneficiary, Beneficiary shall have the absolute right, at its option, without prior demand or notice, to declare all s ums secured hereby immediately due and payable. Consent to one such transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions. Beneficiary may grant or deny such consent in its sole discretion and, if consent should be given, any such Transfer shall be subject to this Deed of Trust, and such transferee shall assume all obligations hereunder and agree to be bound by all provisions contained herein. Such assumption shall not, however, release Trustor or any maker or guarantor (if any) of the Note from any liability thereunder without the prior written consent of Beneficiary. As used herein, “Transfer” shall mean:
a) Except as permitted in the Loan Agreement, any sale, transfer, conveyance, assignment, hypothecation, mortgage, encumbrance, lease (except as expressly permitted by the Loan Documents) or vesting of the Trust Estate or any part thereof or interest therein to or in any person, firm or entity, whether voluntary, involuntary, by operation of la w, or otherwise, provided, however, that the foregoing shall not include the granting of utility easements in the normal course of Trustor’s business;
b) any merger, consolidation or dissolution of Trustor; c) any sale or transfer of substantially all of the assets of Trustor; d) any sale, transfer, conveyance or assignment (at one time or over any period of time) of twenty five percent (25%) or more of the ownership interests (direct or indirect) of Trustor; and
e) the execution of any agreements to do any of the foregoing.”
9. EVENT OF DEFAULT.
The occurrence of any of the following shall be deemed to be an event of default ( “Event of Default”) hereunder:
(a) default in the payment of principal and/or interest, and/or any other sum a dvanced by Lender pursuant to the terms and provisions of this Note and/or the Loan Documents; and/or (b) subject to Force Majeure (as defined in the Loan Agreement), the failure to perform any of the other terms, provisions, and obligations of the Borrower and/or any guarantor and/or any indemnitor p ursuant to the Loan Documents within thirty (30) days from the receipt of written notice from the Lender (the “30 Day Notice ”) that such performance was due; provided, however that if such failure is not reasonably susceptible to cure within said thirty (3 0) days from receipt of the 30 Day Notice and provided that (i) Borrower shall have in good faith undertaken such cure within said thirty (30) day period and (ii) Borrower shall have diligently prosecuted such cure thereafter, Borrower shall have additiona l time to prosecute such cure, such additional time not to exceed the one hundred twenty (120) days, from receipt by Borrower of the 30 Day Notice; and/or (c) if any event occurs that is an Event of Default under any of the Loan Documents.
10. REMEDIES.
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5 Upon the occurrence, and during the continuance, of an Event of Default, then at the sole election and option of the holder hereof, the entire balance of principal together with all accrued interest thereon, and all other amounts payable by Borrower under the Loan D ocuments shall, without demand or notice, immediately become due and payable. Upon the occurrence of an Event of Default (and so long as such Event of Default shall continue), the entire balance of principal hereof, together with all accrued interest ther eon, all other amounts due under the Loan Documents, and any judgment for such principal, interest, and other amoun ts due under the Loan Documents shall bear interest at the Default Interest Rate, subject to the limitations contained in Section 15 hereof. No delay or omission on the part of the holder hereof in exercising any right or remedy under this Note and/or under any of the other Loan Documents hereof shall operate as a waiver of such right.
11. WAIVER.
Borrower hereby waives diligence, demand for payme nt, presentment for payment, protest, notice of nonpayment, notice of protest, notice of intent to accel erate, notice of acceleration, notice of dishonor, and all other notices or demands of any kind (except notices specifically provided for in the Loan Do cuments, if any). Borrower waives to the full extent permitted by law, the right to plead any and all statutes of limitations and/or any defenses relating to marshaling of assets as a defense.
12. CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
No provision of this Note may be changed, discharged, terminated, or waived except in a writing signed by the party against whom enforcement of the change, discharge, termination, or waiver is sought. No failure on the part of the holder hereof to exercise and no delay by t he holder hereof in exercising any right or remedy under this Note and/or the Loan Documents and/or under the law shall operate as a waiver thereof.
13. ATTORNEY’S FEES.
The undersigned agrees to pay all reasonable costs including, without limitation, reasonab le attorney fees, incurred by the holder of this Note in enforcing payment, whether or not suit is filed, including, without limitation, all costs, attorney fees, and expenses incurred by the holder of this Note in connection with any bankruptcy, reorganiz ation, arrangement, or other similar proceedings involving the undersigned that in any way affects the exercise by the holder of this Note of its rights and remedies under this Note. All costs incurred by the holder of this Note in any action undertaken t o obtain relief from the stay of bankruptcy statutes are specifically included in those costs and expenses to be paid by the undersigned. Borrower will pay to Lender all attorney fees and other costs referred to in this Section 13 on demand, together with interest from the date of the demand at the Default Rate until paid.
14. SEVERABILITY.
If any provision of this Note is unenforceable, the enforceability of the other provisions shall not be affected and they shall remain in full force and effect.
15. INTEREST RATE LIMITATION.
Borrower hereby agrees to pay an effective rate of interest that is the sum of the interest rate provided for herein, together with any additional rate of interest resulting from any other charges of interest or in the nature of interest paid or to be paid in connection with the Loan, including, without limitation, the Loan Fee and any other fees to be paid by Borrower pursuant to the provisions of the Loan Documents. Lender and Borrower agree that none of the terms and provisions contained herein or in any of the Loan Documents shall be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by the laws of State of Cal ifornia. In such event, if any holder of this Note shall collect monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of the maximum rate permitted to be charged by the laws of the State of California, all such sums deemed to constitute interest in excess of such maximum rate shall, at the option of the holder, be credited to the payment of other amounts payable under this Note and/or the Loan Documents or returned to Bor rower. 778
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6 16. NUMBER AND GENDER.
In this Note the singular shall include the plural and the masculine shall include the feminine and neuter gender, and vice versa.
17. HEADINGS.
Headings at the beginning of each numbered section of this Note are intended solely for c onvenience and are not part of this Note.
18. CHOICE OF LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES.
19. INTEGRATION.
The Loan Documents contain the c omplete understanding and agreement of the holder hereof and Borrower and supersede all prior representations, warranties, agreements, arrangements, understandings, and negotiations.
20. BINDING EFFECT.
The Loan Documents will be binding upon, and inure to the benefit of, the holder hereof, Borrower, and their respective successors and assigns. Borrower may not assign its obligations under the Loan Documents.
21. TIME OF THE ESSENCE.
Time is of the essence with regard to each provision of the Loan Documents as to which time is a factor.
22. SURVIVAL.
The representations, warranties, and covenants of the Borrower in the Loan Documents shall survive the execution and delivery of the Loan Documents and the making of the Loan.
23. JURY WAIVER.
TO THE EXTENT PERMITTED BY LAW, BORROWER AND LENDER (BY ITS ACCEPTANCE HEREOF)
HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG BORROWER AND LENDER ARISING OUT
OF OR IN ANY WAY RELATED TO THIS NOTE OR ANY OTHER RELATED DOCUMENT OR LOAN DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.
24. JOINT AND SEVERAL OBLIGATIONS.
If this Note is signed by more than one party as Borrower, all obligations of Borrower herein shall be the joint and several obligations of each party executing this Note as Borrower. [Signatures on Following Page]
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7 IN WITNESS WHEREOF, Maker has caused this Note to be properly executed as of the date first above written and has authorized this Note to be dated as of the day and year first above written. “BORROWER”
By:________________________________
Its: Manager / Member
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1 CONSTRUCTION LOAN AGREEMENT
This Construction Loan Agreement (the “Agreement”) is entered into as of June 3, 2025, by and between A BLOCK LLC , a California limited liability company , whose address is 109 Harvard Street, Suite 300, Glendale, CA 91205 (“Borrower”), and CITY OF ONTARIO, a California municipal corporation (“Lender”), whose address is 303 East B Street, Ontario, CA 91764.
RECITALS
A. Borrower and Lender have entered into that certain Disposition and Development Agreement dated as of June 3, 2025 (the “DDA”), whereby Borrower has agreed, among other things, to purchase from Lender (i) that certain real property commonly called the Lerch Building generally located at 120 North Euclid Ave nue, Ontario, California 91762 (the “Lerch Property”); (ii) th at certain real property commonly called the Yangtze Building generally located at 122 and 126 North Euclid Avenue, Ontario, California 91762 (the “ Yangtze Property”); and (iii) that certain real property commonly called the Old Bridal Shop generally located at 116 E. B Street, Ontario, California 91762 (the “Old Bridal Shop Property ”)(the Lerch Property, the Yangtze Property and the Old Bridal Shop Property are collectively referred to herein as the “Premises”).
B. In connection with the purchase of the Pr emises, Borrower has requested Lender to make a loan to finance the rehabilitation of and construction of certain improvements on the Premises, as more particularly described in the DDA , upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and conditions herein contained, the parties agree as follows:
ARTICLE I. DEFINITIONS
1.1 Definitions. As used herein, the following terms shall have the meanings set forth below:
“Advance” shall mean a disbursement of Loan proceeds and/or advances by the Lender as contemplated by the Loan Documents.
“Agreement” shall mean this Construction Loan Agreement, as the same may be amended and supplemented as hereinafter provided.
“Appraisal” shall mean an appraisal prepared by an appraiser selected by Lender, which appraisal complies with all federal and state standards for appraisals and is otherwise in form and substance satisfactory to Lender.
“Authorized Representative of Borrower” shall mean the person or persons designated b y Borrower to submit Requests for Disbursement on behalf of Borrower, and to take any and all actions on the part of Borrower under any of the Loan Documents. 781
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2 “Borrower” shall mean A Block LLC, a California limited liability company. “Borrower’s Architect ” shall mean the architect selected by Borrower and reasonably acceptable to Lender.
“Borrower’s Organizational Documents” shall mean (i) those certain Articles of Organization of Borrower filed on July 12, 2022 with the California Secretary of State, and a ll modifications and amendments thereto as of the date hereof , and (ii) that certain Operating Agreement of Borrower dated August 12, 2022 and all modifications and amendments thereto as of the date hereof.
“Budget” shall mean a maximum budget for the Proj ect, as modified from time to time pursuant to the terms of this Agreement. The budget and each modification thereof is to be approved in writing by Lender. As of the date hereof the Budget is in the form of Exhibit B attached hereto and is approved by Lender.
“Business Day” shall have the same meaning as set forth in the Note. “CC&Rs” shall mean any covenants, conditions, restrictions, maintenance agreements or reciprocal easement agreements affecting the Premises.
“Certification of Non -Foreign Status ” shall mean an affidavit, signed under penalty of perjury by an authorized representative of Borrower, stating (a) that Borrower is not a “foreign corporation”, “foreign partnership ”, “foreign trust ”, or “foreign estate ”, as those terms are defined in the In ternal Revenue Code and the regulations promulgated thereunder, (b) Borrower’s U.S. employer identification number, and (c) the address of Borrower’s principal place of business. Such affidavit shall be consistent with the requirements of the regulations promulgated under Section 1445 of the Internal Revenue Code, and shall otherwise be in form and substance acceptable to Lender.
“Change Orders” shall mean any change in the Plans and Specifications or the General Contract, which change has been approved by (a) the Borrower, (b) the Lender (subject to Section 6.7), and (c) the General Contractor, as applicable. “Closing Date ” shall mean the date upon which the Deed of Trust is recorded in the Official Records of the County.
“Collateral” shall mean all collateral described in the Loan Documents. “Completion Date” shall mean _________ (___) months from the recordation date of the Deed of Trust.
“Construction Contract ” shall mean any contract (other than the General Contract) relating to work performed or to be performed for the Improvements executed or to be executed by Borrower.
“Construction Contractor ” shall mean any contractor who is a party to a Construction Contract.
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3 “County” shall mean the County of San Bernardino, State of California. “DDA” shall have the meaning set forth in Recital A.
“Deed of Trust ” shall mean that certain Construction Deed of Trust and Fixture Filing (with Assignment of R ents and Security A greement) of even date herewith executed by Borrower, as trustor, for the benefit of Lender, as beneficiary, creating a first lien on the Premises, the Improvements, and all other buildings, fixtures and improvements now or hereafter owned or acquired by Borrower and situated thereon.
“Environmental Indemnity” shall mean that certain Environmental I ndemnity Agreement of even date herewith executed by Borrower.
“Event of Default ” shall mean the occurrence of any of the events listed in Section 7.1 and the expiration of any applicable notice and cure period provided in said subsection. “Funding Date” shall mean the date of funding of each respective Advance. “Force Majeure” shall have the meaning set forth in Section 7.3 herein below. “General Contract” shall mean any form of agreement by and between Borrower and the General Contractor relating to the construction of the Improvements. “General Contractor ” shall mean the general contractor for the Project selected by Borrower and reasonably acceptable to Lender.
“Governmental Authority ” shall mean any arbitrator, other private adjudicator, court, government or governmental authority (federal, state, local or foreign). “Hard Costs” or “Direct Costs” shall mean all costs incurred for labor performed in the construction of the Improvements and the materials incorporated into the Improvements. “Improvements” shall mean the buildings and other improvements located on the Premises as described in the Plans and Specifications.
“Inspector” shall mean Lender’s inspector (which may be an employee of the Lender or a third-party) or such other third -party consultants e mployed by Lender for the purposes of inspecting the work to be performed on the Premises.
“Interest Rate” shall have the same meaning as set forth in the Note. “Lender” shall mean CITY OF ONTARIO, a California municipal corporation , and its successors and assigns.
“Loan” shall mean the loan from Lender to Borrower described in this Agreement in the principal amount of the Loan Amount.
“Loan Amount” shall mean the amount of NINETEEN MILLION and No/100 Dollars ($19,000,000.00).
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4 “Loan Documents” shall mean the documents described in Section 3.1 hereof. “Maturity Date” shall have the same meaning as set forth in the Note. “Note” shall mean the Secured Promissory Note, dated the date hereof, executed by the Borrower in favor of Lender evidencing the Loan.
“Person” shall mean any natural person, any unincorporated association, any corporation, any partnership, any joint venture, any limited liability company, any trust, any other legal entity, or any Governmental Authority.
“Plans and Specifications ” shall mean th e final plans and specifications for the improvements for the Project, as previously detailed in writing to the Lender , as may be amended in accordance herewith.
“Preliminary Title Report” shall mean that certain preliminary title report dated as of May 13 , 202 5, Order No. FBDO-2504451, and issued by the Title Company covering the Premises and showing all exceptions to title and accompanied by legible copies of all such recorded exceptions.
“Premises” shall mean the Lerch Property, the Yangtze Property and the Old Bridal Shop Property, collectively, as more particularly described on Exhibit A attached to the Deed of Trust. “Project” shall mean the rehabilitation, structurally retrofit ting for adaptive re -use, and construction of an additional multi -story, mi xed-use residential and retail commercial development project on the Premises, as more particularly described in the DDA. “Project Costs” shall mean the total, as estimated on the Budget, of all costs, expenses and fees relating to the Project.
“Request f or Disbursement ” shall have the same meaning as set forth in Section 4.2 herein below.
“Retainage” shall mean a holdback in an amount equal to ten percent (10%) of all amounts due the General Contractor and each Construction Contractor. “Security Agreement” shall mean that portion of the Deed of Trust, as described therein. “Soft Costs” or “Indirect Costs” shall mean all costs designated as “Soft Costs ” on the Budget, or which are not Hard Costs.
“Stored Materials” shall mean materials purchased or to be pu rchased by Borrower, the General Contractor or a Construction Contractor, including, without limitation, materials to be fabricated (including initial deposits therefore) as contemplated by the Plans and Specifications, at the date of a request for disbursement, but not yet installed or incorporated into the Project. 784
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5 “Subcontract” shall mean a contract relating to any work performed or to be performed for the Project executed or to be executed by General Contractor or a Construction Contractor with a Subcontractor.
“Subcontractor” shall mean any contractor who is a party to a Subcontract other than General Contractor or a Construction Contractor.
“Substantially Complete ” or “Substantial Completion ” shall mean that in Lender’s reasonable judgment, all of the following conditions shall have been satisfied: (i) the Improvements shall have been constructed, completed, equipped and furnished in a good and workmanlike manner substantially in accordance with the Plans and Specifications, (ii) all notices of completion shall have been filed, all statutory lien periods shall have expired, and no outstanding mechanic ’s liens are of record (or if of record, bonded against in a manner reasonably approved by Lender), and (iii) a final inspection report from Lender’s inspec tion service has been issued in a form approved by Lender.
“Title Company” shall mean Fidelity National Title Company. “Title Insurance Policy ” shall mean a title insurance policy in the form of an American Land Title Association Loan Policy -2021 extended coverage (without revision, modification or amendment) issued by Fidelity National Title Company, with such endorsements, with a liability equal to the Loan Amount, reflecting that the Deed of Trust is a first mortgage lien on the Property, and in form and substance satisfactory to Lender, subject only to those exceptions as Lender may require.
“Transfer” shall mean any transaction in violation of the restrictions contained in the Deed of Trust.
“Unconditional Lien Waiver and Release” shall mean a written unconditional waiver and release of mechanic’s lien or bond rights in form and substance reasonably acceptable to Lender.
1.2 Accounting Terms. For purposes of this Agreement, all accounting terms not otherwise defined herein or in the Recitals shall have the meanings assigned to them in conformity with generally accepted accounting principles (“GAAP”).
ARTICLE II. THE LOAN
2.1 Agreement to Lend and Borrow . Subject to the terms and conditions of this Agreement, Lender agrees to lend to Borrower and Borrower agrees to borrow from Lender up to the Loan Amount. The Loan proceeds shall be used solely for (a) the purposes of paying Project Costs as approved by Lender and as set forth in the Budget; (b) the payment of expenses, charges, costs and fees pursuant to Section 8.8 herein in accordance with the terms and conditions of this Agreement; and (c) the payment of costs incurred in connection with the Loan.
2.2 Evidence of Indebtedness. The Loan shall be evidenced by the Note. Disbursements of the Loan shall be charged and funded under the Note.
2.3 Interest Rate.
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6 (a) Payment. Payment of interest on the Loan shall be payable in accordance with the terms of the Note.
(b) Rate after Default . Upon and during the continuance of an Event of Default hereunder or under any of the Loan Documents, in cluding failure to pay upon final maturity, Lender, at its option, may do one or both of the following: (i) increase the Interest Rate on the Note to the Default Rate (as defined in the Note) , and (ii) add any unpaid accrued interest to principal and such sum will bear interest therefrom until paid at the Default Rate. The interest rate will not exceed the maximum rate permitted by applicable law. The application of the Default Rate of interest shall not be interpreted or deemed to extend any cure period set forth in this Agreement or any Loan Document, if any, or otherwise limit any of Lender’s remedies under this Agreement or the other Loan Documents.
(c) Computation of Interest. Interest shall be computed in the manner provided in the Note. If any payment of interest under the Note would otherwise be due on a day which is not a Business Day, the payment instead shall be due on the next succeeding Business Day. (d) No Deductions . All payments of principal or interest under the Note shall be made (i) without de duction of any present and future taxes, levies, imposts, deductions, charges or withholdings, which amounts shall be paid by Borrower, and (ii) without any other set-off.
Borrower will pay the amounts necessary such that the gross amount of the principal and interest received by Lender is not less than that required by the Note.
2.4 Payment of Principal . The outstanding principal balance of the Loan, together with all unpaid accrued interest thereon, and all other amounts payable by Borrower pursuant to the Note or pursuant to the terms of any other Loan Documents, shall be due and payable on the Maturity Date in lawful money of the United States of America at 303 East B Street, Ontario, CA 91764 , or at such other place as the Lender shall designate in writin g, in same day funds, not later than 1:00 p.m. (California time) in accordance with the Note.
2.5 Prepayment of Principal . Prepayment of the Note shall be subject to the terms and conditions of the Note.
2.6 Security. Payment of the Note shall be secured by the following:
(a) the Deed of Trust; and
(b) such other assignments, documents, agreements and/or instruments as the Lender shall reasonably require, as provided in this Agreement.
ARTICLE III. LOAN CLOSING
3.1 Conditions Precedent . Lender’s obligation to perform the remainder of its obligations under this Agreement are expressly conditioned upon (in form and content approved by the Lender):
(i) Borrower’s satisfaction of all of the conditions set forth in Exhibit C; 786
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7 (ii) Borrower’s satisfaction of the conditions for disbursement set forth in Article IV (as applicable);
(iii) Borrower’s payment of the costs and expenses incurred by Lender, including the cost of the Title Insurance Policy;
(iv) the Title Company’s unconditional commitment to issue the Title Insurance Policy; (v) the representations and warranties as specified in Article V of this Agreement shall be true and correct as of the Closing Date;
(vi) no Event of Default exists under this Agreement or any of the other Loan Documents; and
(vii) Borrower’s delivery to Lender of the following documents, in form and content satisfactory to Lender, duly executed (and acknowledged where necessary) by the appropriate parties thereto:
(a) This Agreement;
(b) The Note;
(c) The Deed of Trust, which shall be duly recorded in the Official Records of the County;
(d) The Environmental Indemnity Agreement; and
(e) Such other assignments, documents, subordinations and/or consents entered into by the Borrower and/or such other parties for the benefit of the Lender that Lender may require.
All of the forego ing are sometimes referred to as the “Loan Documents. ” Lender’s approval of the recording of the Deed of Trust on the Closing Date shall establish the satisfaction of all conditions precedent set forth in this Section 3.1.
ARTICLE IV. DISBURSEMENTS OF THE LOAN1
4.1 Use of Disbursements; Revision of the Budget.
(a) Except as otherwise expressly permitted pursuant to Section 2.1, Borrower shall use disbursements of the Loan only for the payment of or reimbursement for Project Costs as shown on the Budget pursuant to subsections 4.1(b) and 4.1(c), as such Project Costs are incurred by Borrower. Project Costs shall be deemed to have been “incurred” by Borrower at the following times: (i) Hard Costs: when the labor has been performed or the materials have been supplied, delivered to, and/or incorporated into the Project, payment therefore has been requested by the contractor or supplier thereof, and such contractor or supplier is entitled thereto; and (ii)
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8 Soft Costs: when such costs have been paid or are due and payable and the services relating thereto have been rendered or the value thereof has been received by Borrower. Lender shall have no obligation to make disbursements for Stored Materials except as provided in Section 4.7 hereof.
(b) The Budget shall be subject to revisio n from time to time as Lender may require or approve in accordance with this subsection 4.1(b) . Lender shall have the right, in its discretion, to increase or decrease the allocation to the contingency, interest reserve and tax reserve categories and to determine whether any item of cost, expense or fee for which Borrower requests a disbursement constitutes a Project Cost and to which category such cost, expense or fee will be applied. The maximum amount that Lender shall be obligated to disburse for any item of Project Costs shall not exceed the amount designated for such category on the Budget as it may be amended from time to time by mutual agreement of Borrower and Lender, which agreement shall not be unreasonably withheld, pursuant to the last preceding sentence. (c) All modifications to the Budget will be evidenced by a new Budget approved by Lender, subject to the provisions of Section 6.7 hereof. (d) The Borrower acknowledges that this Agreement contains additional terms relating to the disbursement of the Loan which are supplemental to the terms of the DDA .
Notwithstanding anything in this Agreement to the contrary, in the event of any direct conflict between any of the terms of disbursement as set forth in this Agreement and the terms of the DDA, the terms of the DDA shall prevail.
4.2 Requests for Disbursements.
(a) Borrower shall request disbursements of the Loan no more frequently than once each month. Advances shall be made upon requisitions in a form as may be reasonably prescribed by Lender from time to time, signed by an Authorized Representative of Borrower, and approved by such persons as Lender may direct (hereafter referred to as a “Request for Disbursement”), which approvals shall not be unreasonably withheld, conditioned or delayed and shall be promptly given if the Request for Disbursement complies with the terms and conditions of this Agreement. Except with respect to the final disbursement of Retainage, each disbursement must be for an amount which is not less than One Hundred Thousand Dollars ($100,000) (with any requests for disbursement of a lesser amount being held until a subsequent disbursement is approved, at which time such amounts will be combined and disbursed to the Borrower provided the combined amounts exceed the required disbursem ent amount minimum).
Lender shall fund each approved requisition within ten (10) Business Days following receipt of all supporting invoices, instruments and documents that Lender may reasonably require. In connection with Advances, Lender may require, at Borrower’s expense, on-site inspections and a review of construction (i) to verify completion of the work for which reimbursement is requested, and the estimated cost to complete the Improvements, and (ii) to certify disbursement requests. Any such inspec tions shall be for the sole use and benefit of Lender, and neither Borrower nor any third party shall be entitled to rely thereon for any purpose. (b) Each such Request for Disbursement shall thereby constitute, without the necessity of specifically containing a written statement, a representation and warranty by 788
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9 Borrower with respect to the item for which payment is requested that (i) subject to the provisions of Section 4.7 herein below, if the item is work or materials, it has been physically incorporated in to or stored on the Premises, or has been custom ordered for the Project and deposit has been paid (i.e. elevators, electrical panels/gear s, etc.) (provided that the amount requested for disbursement does not exceed the amount of the deposit until such time as the custom ordered item has been delivered to the Premises) , free of all liens and encumbrances (except for those to be discharged in full with the proceeds of the requested advance ), (ii) the item is included in the Budget or is subject to a Change Or der, (iii) the cost of the item is as specified in the requisition and Budget (or if not, that Borrower has paid any excess), (iv) the work, materials or other item substantially conforms to the Plans and Specifications and/or Budget and all applicable sta tutes, laws, ordinances, administrative rules, regulations and other legal requirements, (v) the item has been approved by all zoning, building and other governmental officers, offices or departments having jurisdiction and whose approval is required, and (vi) except as set forth in the Request for Disbursement or any previous Request for Disbursement, the representations and warranties of Borrower contained in this Agreement are true and correct in all material respects as if made on the date of the request for disbursement. (c) At the election of Lender, Lender, with input and approval from Borrow er, which approval shall not be unreasonably withheld, may select a third -party construction fund control company (the “Fund Control Company ”) through which to fund d isbursements of proceeds of the Loan. If Requests for Disbursement will be funded through a Fund Control Company, (i) Borrower shall subm it each Request for Disbursement and all supporting documentation concurrently to Lender and to the Fund Control Company, (ii) the Fund Control Company and/or Lender’s construction inspector may conduct construction inspections and monitor the work of construction and percentage of completion of construction and review all Requests for Disbursement and supporting items of information and documentation, and Lender shall have no duty to disburse any requested funds unless approved by the Fund Control Company and Lender’s construction inspector, as applicable, after completion of such review.
4.3 Amount of and Conditions to Disbursements.
(a) Borrower shall not be entitled to any Advance unless:
(i) the representations and warranties as specified in subsection 4.2(b) shall be true and correct at the date of the Advance;
(ii) Lender has received copies of building permits issued by the City o f Ontario for the construction of the Project;
(iii) the costs set forth in all prior requisitions have been duly paid by Borrower;
(iv) if required by Lender, the Title Company issues to Lender, at Borrower’s expense, the endorsements to the Title Policy as may be reasonably required by Lender; (v) the Borrower shall have furnished to Lender copies of receipts for the payment of bills and copies of Unconditional Lien Waivers and Releases covering work completed and/or materials furnished in connection with the work which was to have been paid 789
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10 from the prior disbursement, and conditional lien waiver and releases with respect to the work to be paid from the current disbursement, each as requested by Lender; (vi) no Event of Default exists under this Agreement or any of the other Loan Documents;
(vii) if required by Lender, Lender has received and approved, true, correct and complete copies of all Construction Contracts and Subcontracts executed since the last disbursement and not previously delivered to Lender, all construction bonds on those Construction Contracts and Subcontracts which have been obtained by such Construction Contractor or the General Contractor, and all Change Orders as required under Section 6.8 of this Agreement not previously delivered to Lender;
(viii) Borrower has sati sfied the conditions of Section 4.8 with respect to the disbursement of Retainage (if applicable);
(ix) the Inspector has delivered to Lender written certification to Lender’s reasonable satisfaction that work for which payment is being requested has been comp leted in substantial accordance with the Plans and Specifications; and (ix) Borrower has furnished evidence to Lender that all required eq uity contribution funds have been expended toward Project Costs prior to disbursement of Loan proceeds.
Provided that the foregoing conditions are satisfied, Lender shall disburse (within the period set forth in subsection 4.2(a)), the amount of the Advance requested by Borrower in the Request for Disbursement, which amount shall not exceed the difference between (A) the cost of construction work in place, and any other costs, expenses and fees actually paid or payable by Borrower for approved Project Costs as of the date of the request for a disbursement, and (B) any required Retainage and any amounts previously disbursed hereunder.. (b) Each disbursement for Hard Costs shall be subject to the Retainage, which shall be disbursed upon satisfaction of the conditions in Section 4.8. (c) At Lender’s election, disbursements of the Loan may be made to a fund control account of a fund co ntrol agent selected by the Lender, for disbursement to the Borrower ; provided, however, that during the continuance of an Event of Defaul t or if Lender shall determine that Borrower is not paying the General Contractor or Construction Contractor or that the General Contractor of Construction Contractor is not paying any Subcontractors or other persons, as and when payments are due, Lender may, at its option, disburse such proceeds (i) directly to Borrower or to any Construction Contractor, (ii) jointly to Borrower, the General Contractor, and any Construction Contractor, (iii) directly to Persons supplying labor, materials and services in connection with the Improvements, or (iv) jointly to Borrower and said Persons.
4.4 Loan Balancing.
(a) As a material condition of the Loan and as a condition precedent to Lender’s duty to disburse proceeds of the Loan, Borrower shall pay all Project Costs in excess of the Loan 790
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11 Amount. Except for the payment of expenses, charges, costs and fees pursuant to Section 8.8, Lender shall be obligated to disburse proceeds of the Loan only when the Loan is “in balance”.
The Loan shall be “in balance” only at such times as Borrower has invested sufficient funds into the payment of Project Costs so that, in Lender’s reasonable judgment , the undisbursed portion of the Loan shall be sufficient to complete fully the Pr oject and pay all Project Costs until repayment in full of the Loan.
(b) The determination as to whether or not the Loan is “in balance” may be made by Lender at any time, in cluding with each request for a disbursement of the Loan. Project Cost categories listed as “contingencies” on the Budget shall be deemed to be Project Costs for purposes of loan balancing.
(c) Borrower shall within ten (10) days after notice from Lender that the Loan is not “in balance,” deposit with Lender, in cash, the amount necessary to put the Loan “in balance”.
No interest shall be paid by Lender on such deposited funds. (d) All amounts deposited with the Lender pursuant to this Section 4.4 shall b e disbursed toward Project Costs prior to any further Advances of the Loan.
4.5 [Intentionally Omitted].
4.6 Foundation Endorsement.
Upon completi on of the construction of any foundation on the Premises, and as a condition precedent to any further disbursements un der this Agreement, Borrower shall (if required by Lender), at Borrower’s own cost and expense, deliver or cause to be delivered to Lender a foundation endorsement with respect to each such foundation, in form and substance reasonably satisfactory to Lende r, to be attached to the Title Insurance Policy, which endorsement shall insure that such foundation is within the boundary lines of the P remises, does not violate any applicable covenants, conditions, restrictions or agreements affecting the Premises which are referred to in the Title Insurance Policy, and does not encroach upon any easements, rights or rights of way affecting or covering the Premises.
4.7 Stored Materials . Borrower shall have the right to obtain an Advance for Stored Materials subject to the provisions of Section 4.3 and the following:
As a condition precedent to the disbursement for Stored Materials, Borrower shall supply to Lender: (i) evidence satisfactory to Lender that the Stored Materials are included in the coverage of the insurance p olicies required by Section 6.18 or are otherwise adequately insured; (ii) evidence satisfactory to Lender from the seller or fabricator of the Stored Materials that, upon payment, ownership thereof will vest in Borrower free of any liens or claims of thir d parties; (iii)(A) evidence satisfactory to Lender that the Stored Materials are satisfactorily stored on the Premises to protect against theft or damage, or (B) if the Stored Materials are not stored on the Premises, (1) evidence satisfactory to Lender t hat the Stored Materials are stored in a bonded warehouse, storage yard or fabricator’s premises approved by Lender, which approval shall not be unreasonably withheld, conditioned or delayed, and the warehouse or yard has been notified that Lender has a se curity interest in the subject Stored Materials, and (2) if available, Lender shall have received from Borrower the original warehouse rec eipt. With Lender’s prior written 791
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12 approval, Stored Materials may be stored in the yard or warehouse of the seller or fabricator, subject to satisfaction of conditions (i) and (ii) in this Section 4.7 , and provided further that Lender receives satisfactory evidence that the Stored Materials are protected against theft or damage, have been suitably identified as belonging to Borrower for use in the Project to the extent commercially reasonable and that such seller or fabricator has been notified of the security interest of Lender therein.
4.8 Retainage Under any Construction Contracts and the General Contract . Retainage under a Construction Contract or the General Contract, as applicable, shall be released upon Borrower’s delivery of the requisition documents described in Section 4.2 and Borrower’s satisfaction of the conditions set forth in Section 4.3 and the following applicable conditions:
(a) The Project shall be Substantially Complete. Substantial Completion for purposes of this Section 4.8 , shall be deemed to have occurred despite the existence of minor and immaterial punch-list items that require correction or completion, a s determined by the Inspector and as approved by Lender; provided, however, that if such minor and immaterial punch -list items exist upon Substantial Completion, Lender shall have the right to withhold an amount equal to one hundred twenty five percent (12 5%) of the cost to complete all such punch -list items. The punch -list holdback will be disbursed upon lien -free completion of the punch -list items and reasonable approval thereof by the Lender and the Inspector; (b) Lender shall have received (1) a Lien Waive r and Release (upon progress payment) from the General Contractor, each Construction Contractor and each Subcontractor covering the full amount of the disbursement for Direct Costs through the date of the previous disbursement request, subject only to (and conditioned only upon) the receipt of final payment; and (2) a Lien Waiver and Release (upon final payment) from each Construction Contra ctor and each Subcontractor who had completed the work covered by its Construction Contract or Subcontract, respectively, as of the previous disbursement request, covering the full amount due such Construction Contractor or Subcontractor, as the case may be, subject only to (and conditioned only upon) the receipt of final payment;
(c) With respect to the final release of Reta inage under the General Contract, Lender shall have received appropriate approvals from (1) all Governmental Authorities regarding completion of the Improvements; (2) the local board of fire underwriters or its equivalent, if necessary; and (3) all other G overnmental Authorities having jurisdiction over the contemplated uses, operation and occupancy of the Project;
(d) Borrower shall have submitted to Lender copies of all licenses, permits and agreements necessary for the use of the Project not previously delivered to Lender; (e) Lender shall have received a satisfactory report as to the completion of the Improvements from the Inspector;
(f) A notice of completion on Lender’s approved form has been executed by Borrower and duly recorded in the Official Records of the County; and (g) Such other documentation, including, but not limited to, endorsements to the Title Insurance Policy, as Lender may reasonably require.
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13 Notwithstanding the foregoing, at Lender’s election, Lender may disburse the Retainage on a trade -by-trade basi s, subject to Lender’s reasonable verification that such work has been completed to Lender’s reasonable satisfaction and in substantial co mpliance with the Plans and Specifications.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.1 Consideration. As an inducement to Lender to execute this Agreement and to disburse the proceeds of the Loan, Borrower represents and warrants to Lender that the following statements set forth in this Article V are true, correct and complete in all material respects as of the date hereof and wil l be true, correct and complete in all material respects as of the Closing Date and until the Loan is repaid.
5.2 Organization, Powers and Good Standing.
(a) Organization and Powers . Borrower is a limited liability company , duly organized and validly existing und er the laws of the State of California, and is qualified to transact business in the State of California and in each jurisdiction where it is required to conduct its operations. Borrower has all requisite power and authority, rights and franchises to own and operate its properties, to carry on its businesses as now conducted and as proposed to be conducted, and to enter into and perform this Agreement and the other Loan Documents. (b) Good Standing. Borrower has made all filings and is in good standing in the State of California and/or each other jurisdiction in which the character of the property it owns or the nature of the business it transacts makes such filings necessary or where the failure to make such filings could have a materially adverse effect on the business, operations, assets or condition (financial or otherwise) of Borrower.
(c) Non-Foreign Status . Borrower is not a “foreign corpo ration”, “foreign partnership”, “foreign trust ”, or “foreign estate ”, as those terms are defined in the Internal Revenue Code and the regulations promulgated thereunder. Borrower’s U.S. employer identification number previously provided to Lender is correct.
5.3 Authorization of Loan Documents.
(a) Authorization. The execution, delivery and performance of the Loan Documents by Borrower are within the Borrower’s powers and have been duly authorized by all necessary action by Borrower.
(b) No Conflict. The execution, delivery and performance of the Loan Documents by Borrower will not violate (i) Borrower’s Organizational Documents ; (ii) any legal requirement affecting Borrower or any of its properties; or (iii) any agreement to which Borrower is bound or to which it is a party and will not result in or require the creation (except as provided in or contemplated by this Agreement) of any lien upon any of such properties. (c) Governmental and Private Approvals . All governmental or regulatory orders, consents, permits, author izations and approvals required for the commencement of construction of the Improvements have been obtained and are in full force and effect. No additional 793
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14 governmental or regulatory actions, filings or registrations with respect to the Improvements, and no approvals, authorizations or consents of any trustee or holder of any indebtedness or obligation of Borrower are re quired for the due execution, delivery and performance by Borrower of the Loan Documents.
(d) Binding Obligations. This Agreement and the oth er Loan Documents have been duly executed by Borrower, and are legally valid and binding obligations of Borrower, enforceable against Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.
5.4 No Material De faults. There exists no material violation of or material default by Borrower and, to the best knowledge of Borrower, no event has occurred which, upon the giving of notice or the passage of time, or both, would constitute a material default by Borrower with respect to (a) the terms of any instrument evidencing or securing any indebtedness secured by the Premises, (b) any material lease or other agreement affecting the Premises to which Borrower is a party, (c) any material license, permit, statute, ordina nce, law, judgment, order, writ, injunction, decree, rule or regulation of any Governmental Authority, or any determination or award of an y arbitrator to which Borrower or the Premises may be bound, or (d) any mortgage, instrument, agreement or document by which Borrower, or any of its properties is bound: (i) which is a Loan Document, (ii) which involves the Premises and is not adequately covered by insurance, (iii) which could be reasonably expected to materially and adversely affect the ability of Borrower to perform its obligations under any of the Loan Documents, or (iv) which could be reasonably expected to adversely affect the first priority of the liens created by this Agreement or any of the Loan Documents.
5.5 Litigation; Adverse Facts . There is no ac tion, suit, investigation, proceeding or arbitration (whether or not purportedly on behalf of the Borrower) at law or in equity or before or by any foreign or domestic court or other governmental entity (a “Legal Action”), pending or, to the knowledge of Borrower, threatened against or affecting Borrower or any of its assets which could reasonably be expected to result in any material adverse change in the business, operations, assets (including the Premises) or condition (financial or otherwise) of Borrower or would materially and adversely affect Borrower’s ability to perform its obligations under the Loan Documents, except as may already have been disclosed in writing to the Lender as of the date of this Agreement. Borrower is not (a) in violation of any applicable law which violation materially and adversely affects or could reasonably be expected to materially and adversely affect the business, operations, assets (including the Premises) or condition (financial or otherwise) of Borrower, (b) subject to, or in default with respect to any other legal requirement that would have a materially adverse effect on the business, operations, assets (including the Premises) or condition (financial or otherwise) of Borrower, or (c) in default with respect to any agr eement to which Borrower is a party or to which it is bound which could reasonably be expected to materially and adversely affect the busi ness, operations, assets (including the Premises) or condition (financial or otherwise) of Borrower. There is no Lega l Action pending or, to the knowledge of Borrower, threatened against or affecting Borrower questioning the validity or the enforceability of this Agreement or any of the other Loan Documents. Legal action will be deemed “material” if it involves the sum of more than fifty thousand dollars ($50,000.00). 794
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15 5.6 Title to Properties; Liens . Borrower has good, sufficient and legal title to all proper ties and assets reflected in its most recent balance sheet delivered to Lender, except for assets disposed of in the o rdinary course of business since the date of such balance sheet. Borrower is the sole owner of, and has good and marketable title to the fee interest in the Premises, the Improvements and all other real property described in the Deed of Trust, free from a ny adverse lien, security interest or encumbrance of any kind whatsoever, excepting only (a) liens and encumbrances shown on the Title Ins urance Policy, (b) liens and security interests in favor of Lender, and (c) other matters which have been approved in writing by Lender.
5.7 Assets & Liens. Borrower has good, sufficient and legal title to the assets reflected in its most recent balance sheet delivered to Lender, except for assets disposed of in the ordinary course of business since the date of such balance sheet.
5.8 Disclosure. There is no fact known to Borrower that materially and adversely affects the business, operations, assets or condition (financial or otherwise) of Borrower which has not been disclosed in this Agreement or in other documents, certificat es and written statements furnished to Lender in connection herewith.
5.9 Payment of Taxes. All tax returns and reports of Borrower required to be filed by it have been timely filed, and all taxes, assessments, fees and other governmental charges upon Borrower and upon its properties, assets, income and franchises which are due and payable have been paid when due and payable. Borrower knows of no proposed tax assessment against it that would be material to the condition (financial or otherwise) of Borrower, and Borrower has not contracted with any government entity in connection with such taxes.
5.10 Securities Activities . Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing o r carrying any margin stock (as defined within Regulations G, T and U of the Board of Governors of the Federal Reserve System), and not mo re than twenty -five percent (25%) of the value of Borrower’s assets consists of such margin stock. No part of the Loa n will be used to purchase or carry any margin stock or to extend credit to others for that purpose or for any other purpose that violates the provisions of Regulations U or X of said Board of Governors.
5.11 Government Regulations . Borrower is not subject to regulation under the Investment Company Act of 1940, the Federal Power Act, the Public Utility Holding Company Act of 1935, the Interstate Commerce Act or to any federal or state statute or regulation limiting its ability to incur indebtedness.
5.12 Rights to P roject Agreements, Permits and Licenses . Borrower is the true owner of all rights in and to all existing agreements, permits and licenses relating to the Premises entered into by Borrower or issued in the name of Borrower, and will be the true owner of al l rights in and to all future agreements, permits and licenses relating to the Premises. Borrower’s interest in all such agreements, perm its and licenses is not subject to any present claim (other than under the Loan Documents or as otherwise approved by Lender in its discretion), set-off or deduction other than in the ordinary course of business.
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16 5.13 Utilities and Access . Telephone services, electric power, storm sewers, sanitary sewer, potable water facilities and all other utilities and services necessary for the construction, use, operation and maintenance of the Improvements are available to the Premises, are adequate to serve such improvements, and are not subject to any conditions limiting the use of such utilities, other than normal charges to the util ity supplier. All streets and easements necessary for the operation and maintenance of the Improvements are available to the boundaries of the Premises.
5.14 Compliance with Laws. The Improvements and the Premises, and the uses to which the Improvements and t he Premises are and will be put, comply in all material respects with such applicable laws and restrictive covenants.
5.15 Financial Condition. The financial statements and all financial data previously delivered to Lender by Borrower in connection with the Lo an and/or relating to Borrower are true, correct and complete in all material respects. Such financial statements fairly present the financial position of the parties who are the subject thereof as of the date thereof. No material adverse change has occurred in such financial position and, except for this Loan and any other loans from Lender, no borrowings have been made by Borrower since the date thereof which are secured by, or might give rise to, a lien or claim against the Premises or the proceeds of this Loan.
5.16 Personal Property . After the Closing Date, Borrower will be the sole owner of the Collateral free from any adverse lien, security interest or adverse claim of any kind whatsoever, except for liens or security interests in favor of Lender.
5.17 No Co ndemnation. No condemnation proceedings or moratorium is pending or, to Borrower’s knowledge, threatened against the Project or the Premises (or any portion thereof).
5.18 Other Loan Documents . Each of the representations and warranties of Borrower contained in any of the other Loan Documents is true and correct in all material respects. All of such representations and warranties are incorporated herein for the benefit of Lender.
ARTICLE VI. COVENANTS OF BORROWER
6.1 Consideration. As an inducement to Lender to execute this Agreement and to make each disbursement of the Loan, Borrower hereby covenants as set forth in this Article VI, which covenants shall remain in effect so long as the Note shall remain unpaid.
6.2 Compliance with Laws . Borrower will comply and, to the exten t it is able, will use commercially reasonable efforts to require others to comply with all material laws and requirements of all Governmental Authorities having jurisdiction over the Premises or construction of the Improvements and will furnish Lender with reports of any official searches obtained by Borrower for violation of any requirements established by such Governmental Authorities. Borrower will comply and, to the extent it is able, will use commercially reasonable efforts to require others to compl y in all material respects with applicable CC&Rs and all restrictive covenants and all obligations created by private contracts and leases which affect ownership, construction, equipping, fixturing, use or operation of the Premises. The Improvements, when completed, shall comply in all material respects with all applicable building, zoning and use laws, requirements, regulations and ordinan ces and will not violate any 796
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17 restrictions of record against the Premises or the terms of any lease of all or any porti on of the Premises.
6.3 Lender Inspections. Throughout the term of the Loan and during normal business hours, Borrower will permit Lender and Lender’s representatives, inspectors and consultants to enter upon the Premises, to inspect the Improvements and mate rials to be used therein, to audit, examine and copy all contracts, records (including, but not limited to, financial and accounting records pertaining to the Loan or the Premises), plans and shop drawings which are kept at the construction site or at Borrower’s offices, and to discuss the affairs, finances and accounts of Borrower with representatives of Borrower. Borrower will cooperate with and shall cause the General Contractor to cooperate with any such representatives, inspectors or consultants retai ned by Lender pursuant to the Loan Documents to enable them to perform their functions under this Agreement.
6.4 Commence and Continue Construction.
(a) Borrower acknowledges that construction of the Improvements has not begun and that construction of the Improvements shall commence promptly following the Closing Date and shall continue with diligence and continuity, in order that Substantial Completion of the Improvements shall occur on or before the Completion Date, subject to Force Majeure. (b) Subject to the provis ions of Section 6.9, on the Completion Date all construction shall be free and clear of material defects in and liens or claims for liens for materials supplied or labor or services performed in connection with the Improvements. The Improvements shall be in substantial conformity with the Plans and Specifications and, except for off -site improvements designated thereon, shall be contained wholly within the lot lines of the Premises and will not encroach on any other real estate, easements, building lines or set-back requirements.
6.5 Ownership of Personal Property . Borrower will be the sole owner of all Collateral acquired after the date hereof , free from any adverse lien, security interest or adverse claim of any kind whatsoever, except for security interests and liens in favor of the interest of a lessor pursuant to a lease of personal property reasonably approved by Lender and the liens and security interests approved by Lender pursuant to the Loan Documents.
6.6 Correction of Defects . Within five (5) days afte r notice thereof from Lender or any governmental agency, Borrower will proceed with diligence to correct all material defects in the Improvements and any departure from the Plans and Specifications except as approved by Lender or permitted under Section 6.7 below. The disbursement of any Loan proceeds shall not constitute a waiver of Lender’s right to require compliance with this covenant with respect to any such defect or departure from the Plans and Specifications. 797
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18 6.7 Changes and Change Orders.
(a) Borrower will not change or in any manner cause or seek a change in any laws, requirements of Governmental Authorities and obligations created by pri vate contracts and leases which now or hereafter could be reasonably expected to materially, adversely and significantly affect the ownership, construction, equipping, fixturing, use or operation of the Premises without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed.
(b) Any Change Order must be submitted to Lender for review and approval.
Borrower will not, without the prior written approval of Lender, which approval shall not be unreasonably withheld, conditioned or delayed, permit the performance of any work pursuant to, or request a disbursement for, any Chang e Orders which result in a material change in the Plans and Specifications, General Contract or any Construction Contract or will increase Project Costs.
Proposed Change Orders requiring Lender’s approval shall be submitted to Lender on a form reasonably acceptable to Lender containing such information as to the nature, scope and cost for such change as Lender may require together with a ma rked copy of the portion of the Plans and Specifications affected by the proposed change.
(c) Notwithstanding the provisions of this Section 6.7, Borrower shall not be required to obtain Lender’s consent to any individual Change Order of $10,000.00 or less, provided the aggregate of all other Change Orders does not exceed $50,000.00.
6.8 Changes in Cost of Contracts . Subject to Section 6.7(c) above, Borrower shall not agree to any increases in the cost or amount of the General Contract or any Construction Contract without Lender’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.
6.9 Contesting Liens.
(a) Borrower shall promptly discharge or cause to be discharged any mechanics ’ or materialmen’s liens or claims of lien filed or otherwise asserted against the Premises, the Improvements, the Project or any funds due the General Contractor or an y Construction Contractor and any proceedings for the enforcement thereof; provided, however, that Borrower shall have the right to contest in good faith and with reasonable diligence the validity of any such liens or claims upon furnishing to the Title Company such security or indemnity as the latter may require to induce it to issue its Title Insurance Policy or an interim endorsement thereto insuring against all such claims or liens and, provided further, that Lender will not be required to make any further disbursements of the Loan until all such mechanics ’ or materialmens’ liens or claims of lien shown on the title insurance commitment o r any interim endorsement have been so insured against by the Title Company to Lender’s reasonable satisfaction. (b) If (i) Borrower fails either to promptly discharge or contest liens or claims of lien and provide the security or indemnity in the manner provided in subsection 6.9(a) or (ii) after having complied with the provisions of subsection 6.9(a) there is an adverse co nclusion to any such contest and Borrower does not cause any final judgment or decree to be immediately satisfied and the lien to be disch arged, then Lender may, but shall not be required to, procure the 798
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19 release and discharge of any such lien and any judgm ent or decree thereon, and in furtherance thereof may, in its sole discretion, effect any settlement or compromise or furnish any security or indemnity as may be required by the Title Company. All amounts expended by Lender in connection with the provisio ns of this subsection 6.9(b) shall be deemed to constitute a disbursement of the Loan. In settling, compromising or arranging for the dis charge of any liens under this subsection 6.9(b), Lender shall not be required to establish or confirm the validity or amount of the lien.
6.10 Compliance with Loan Documents . Borrower will comply with all conditions of this Agreement, whether or not a disbursement of the Loan is requested. It will comply and, to the extent it is able, will use its commercially reasonable ef forts to cause compliance by parties thereto (other than Lender), with all other Loan Documents and with the General Contract and the Construction Contracts.
6.11 Trade Names. Borrower shall immediately notify Lender in writing of any change in the legal, trad e or fictitious business names used by Borrower and shall, upon Lender’s request, execute any additional financing statements and other certificates necessary to reflect the change in such legal, trade or fictitious business names.
6.12 Further Assurances . Borrower shall execute and deliver from time to time, promptly after any reasonable request therefor by Lender, any and all instruments, agre ements and documents and shall take such other action as may be necessary or desirable in the reasonable opinion of Lender to maintain, perfect or insure Lender’s security provided for herein and in the other Loan Documents, including, without limitation, the execution of UCC -1 renewal statements, the execution of such amendments to the Deed of Trust and the other Loan Documents and the delivery of such endorsements to the Title Insurance Policy, all as Lender shall reasonably require, and Borrower shall pa y all fees and expenses (including reasonable attorneys’ fees) related thereto. Promptly upon the request of Lender, Borrower shall execute and deliver a Certification of Non-Foreign Status.
6.13 Notice of Litigation. Borrower shall give, or cause to be given, prompt written notice to Lender of (a) any action or proceeding to the extent Borrower has knowledge thereof which i s instituted by or against it in any Federal or state court or before any commission or other regulatory body, Federal, state or local, fo reign or domestic, or any such proceedings which are threatened against it which, if adversely determined, could have a material and adverse effect upon its business, operations, properties, assets, management, ownership or condition (financial or otherwise), (b) any other action, event or condition of any nature which could reasonably be expected to have a material and adverse effect upon its business, operations, management, assets, properties, ownership or condition (financial or otherwise), or which, with notice or lapse of time or both, would constitute an Event of Default or a default under any other contract, instru ment or agreement to which it is a party or to which it or any of its properties or assets may be bound or subject, and (c) any actions, proceedings or notices adversely affecting the Premises or Lender’s interest therein by any zoning, building or other m unicipal officers, offices or departments having jurisdiction with respect to the Premises.
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20 6.14 Financial Statements and Reports . Promptly, a nd from time to time, upon request of Lender, Borrower shall furnish to Lender such information concerni ng the Premise s and Borrower’s financial condition, business and affairs, as shall be reasonably requested by Lender.
6.15 Punctual Payments. Borrower shall punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times an d place and in the manner specified therein, and immediately upon demand by Lender, the amount by which the outstanding principal balance of the Loan at any time exceeds any limitation on borrowings applicable thereto.
6.16 Accounting Records. Borrower shall maintain adequate books and records in accordance with sound accounting principles consistently applied, and permit any representative of Lender, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower.
6.17 Amendments to Borrower’s Organizational Documents . Borrower shall not allow any amendments to be made in the terms of Borrower’s Organizational Documents without Lender’s prior written consent, which consent shall not be unreasonably withheld.
6.18 Insurance Requirements . Prior to closing, and at all times during the term of this transaction, maintain in full force and effect such insurance covering the Premises as is required by this Agreement, by any of the other Loan Docu ments or by any law, and all such insurance shall be in such amounts and shall insure against such hazards and liabilities, as is customar ily maintained by individuals or entities situated similarly to Borrower including, but not limited to, fire and extended coverage, comprehensive general liability, automobile liability and workmen’s compensation insurance, and a course of construction/builders risk insurance protection during the construction phase of the Project . All such insurance shall be written by reputable, financially sound insurance companies acceptable to Lender. The limits of coverage, deductibles, and carriers shall be subject to Lender’s reasonable approval. Any or all policies of insurance required hereby or by any of the Loan Documents sh all be issued naming Lender as an additional insured and as loss payee or mortgagee. In addition such policies shall specify that the insurer must give at least thirty (30) days’ notice to the Lender before canceling or modifying its policy for any reason. Borrower shall promptly notify Lender in the event any insurance shall be cancelled. Borrower shall furnish to the Lender, upon request of the Lender, reports on each existing insurance policy showing such information as the Lender may reasonably request.
6.19 Maintenance of Existence . Borrower shall maintain and preserve its existence and all rights and franchises material to its business.
6.20 Notice To Lender. Borrower shall promptly (but in no event more than five (5) days after the occurrence of each such event or matter) give written notice to Lender in reasonable detail of:
(a) the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default; or (b) any termination or cancellation of any insurance policy which Borrower is required to maintain, or any uninsured or partially insured loss through liability or property damage, or through fire, theft or any other cause affecting Borrower's property in excess of an aggregate of $100,000.00. 800
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21 6.21 Construction Materials . Borrower will not use, and will not permit the use of, any Hazardous Substance ( as defined in the Environmental Indemnity) in the construction of the Improvements, other than Hazardous Substances us ed in compliance with applicable environmental laws and customarily employed, in accordance with industry practice, in construction of projects similar to the Project; provided that no use permitted hereunder shall have any effect of any kind on the Environmental Indemnity Agreement.
6.22 Appraisals. If deemed reasonably necessary by Lender or if required by law, Lender shall have the right to o rder Appraisals of the Premises from time to time from an appraiser selected by Lender, which Appraisals shall comply with all federal and state standards for Appraisals and otherwise shall be satisfactory to Lender in all respects. Borrower agrees to pay the cost and expense for any Appraisals and reviews as are required pursuant to a change in applicable law, or as dee med necessary by Lender in Lender’s sole and absolute discretion during the continuance of an Event of Default.
6.23 Verification of Costs . At Lender’s request, Borrower agrees to provide Lender with copies of all contracts, subcontracts and other agreements r elating to the Project so that Lender can verify all costs set forth in the Budget, which contracts, subcontracts and other agreements shall be subject to Lender’s review and approval. Based on its review, reasonable determination and verification of costs set forth in the Budget, Lender, with input and approval from Borrower, which approval shall not be unreasonably withheld, shall have th e right to reduce the dollar amount of any line items in the Budget or reallocate between line items in the Budget.
6.24 Changes in Management. Borrower shall notify Lender in writing within thirty (30) days of any changes in the executive management, managing directors or officers of Borrower.
6.25 Compliance with DDA . Borrower and Lender shall comply with all of the t erms and conditions of the DDA.
ARTICLE VII. EVENTS OF DEFAULT AND REMEDIES
7.1 Events of Default . The occurrence of any one or more of the following sh all constitute an Event of Default under this Agreement:
(a) Failure by Borrower to pay any monetary amount when due under any Loan Document.
(b) Failure by Borrower to perform any of the other terms, provisions, and obligations of the Borrower pursuant to the Loan Documents within thirty (30) days from the receipt of written notice from the Lender (the “30 Day Notice”) that such performance was due; provided, however that if such failure is not reasonably susceptible to cure within thirty (30) days from receipt of the 30 Day Notice and provided that (i) Borrower shall have in good faith undertaken such cure within said thirty (30 ) day period and (ii) Borrower shall have diligently prosecuted such cure thereafter, Borrower shall have additional time to prosecute such cure, such additional time not to exceed one hundred twenty (120) days, from receipt by Borrower of the 30 Day Notice.
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22 (c) Any representation or warranty by Borrower in any Loan Document is materially false, incorrect, or misleading as of the date made.
(d) The occurrence of any event (including, without limitation, a change in the financial condition, business, or operations o f Borrower for any reason whatsoever) that materially and adversely affects the ability of Borrower to perform any of its obligations under the Loan Documents.
(e) Borrower (i) admits in writing Borrower’s inability to pay Borrower’s monetary obligations as they become due, (ii) fails to pay when due any monetary obligation, whether such obligation be direct or contingent, to any person in exces s of Fifty Thousand Dollars ($50,000), (iii) makes a general assignment for the benefit of creditors, or (iv) applies for, consents to, or acquiesces in, the appointment of a trustee, receiver, or other custodian for Borrower or the property of Borrower, or in the absence of such application, consent, or acquiescence, a trustee, receiver, or other custodian is appointed f or Borrower or the property of Borrower or any part thereof, and such appointment is not discharged within sixty (60) days. (f) Commencement of any case under the Bankruptcy Code, Title 11 of the United State Code, or commencement of any other bankruptcy arran gement, reorganization, receivership, custodianship, or similar proceeding under any federal, state, or foreign law by or against Borrower and with respect to any such case or proceeding that is involuntary, such case or proceeding is not dismissed within sixty (60) days of the filing thereof. (g) Any litigation or proceeding which could reasonably be expected to materially and adversely affect the ability of Borrower to perform their respective obligations under the Loan Documents is commenced before any Gover nmental Authority against Borrower or the property of Borrower or any part thereof and such litigation or proceeding is not defended diligently and in good faith by Borrower.
(h) A final judgment or decree for monetary damages or a monetary fine or penalty (not subject to appeal or as to which the time for appeal has expired) is entered against Borrower by any Government Authority, which togethe r with the aggregate amount of all other such judgments and decrees against Borrower that remain unpaid or that have n ot been discharged or stayed, exceeds Fifty Thousand Dollars ($50,000), is not paid and discharged or stayed within thirty (30) days after the entry thereof.
(i) Commencement of any action or proceeding which seeks as one of its remedies the dissolution of Borrower which is not being defended diligently and in good faith by Borrower, but in any event such action or proceeding must be terminated within ninety (90) days following its commencement.
(j) Except for taking a material portion of the property of Borrower is attached, levied upon, or otherwise seized by legal process, and such attachment, levy, or seizure is not quashed, stayed, or released within thirty (30) days of the date thereof. (k) The occurrence of any Transfer, unless prior to such Transfer the holder o f the Note has delivered to Borrower the written consent of such holder to such Transfer. 802
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23 (l) The occurrence of any Event of Default, as such term is defined in any other Loan Document.
(m) The occurrence of any default in the payment or performance of a term or condition of any credit agreement, note, security agreement, mortgage, deed of trust, deed to secure debt, or other agreement or instrument evidencing or securing any other indebtedness, liabilities or obligations of Borrower to Lender, including, without limitation, any other loan now or in the future entered into between Borrower and Lender. (n) Commencement of any case under the Bankruptcy Cod e, Title 11 of the United States Code, or commencement of any other bankruptcy arrangement, reorganization, receivership, custodianship, or similar proceeding under any federal, state, or foreign law by or against the General Contractor and/or termination of the General Contract and/or the permanent withdrawal of the General Contractor from proceeding with construction of the Project and the failure of Borrower to procure a contract at the same price, or, if at a higher price, to supply the additional funds thereby required with a new general contractor reasonably satisfactory to Lender within thirty (30) days from the occ urrence of such bankruptcy, insolvency, termination or permanent withdrawal. Notwithstanding the foregoing, in the event that Borrower is unable to enter into an agreement with a new general contractor, and provided that construction activities with respe ct to the Project are continuing, Borrower shall have an additional thirty (30) days within which to enter into such an agreement with an additional general contractor. (o) Failure to deposit with Lender in cash or cash equivalents the amount necessary to put the Loan “in balance” within ten (10) days of Lender’s notice that the Loan is not “in balance”.
(p) The occurrence of any event of default under the DDA beyond any applicable notice and cure period.
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24 7.2 Remedies.
(a) Notwithstanding any provision to the cont rary herein or any of the other Loan Documents, during a continuance of any Event of Default under this Agreement or any of the other Loan Documents: (i) Lender’s obligation to make further disbursements of the Loan shall abate, and (ii) if the Event of De fault shall not be cured within the applicable periods, then Lender shall, at its option, have the remedies provided in the Loan Document breached by Borrower, including, without limitation, the option to declare all outstanding indebtedness to be immediately due and payable without presentment, demand, protest or notice of any kind, and the following remedies: Lender’s obligation to make fu rther disbursements to Borrower shall terminate; Lender may, at its option, apply any of Borrower’s funds in its posse ssion to the outstanding indebtedness under the Note whether or not such indebtedness is then due; Lender may exercise all rights and remedies available to it under any or all of the Loan Documents; and Lender shall have the right to cause an independent c ontractor selected by Lender to enter into possession of the Premises and to perform any and all work and labor necessary for the completion of the Project substantially in accordance with the Plans and Specifications and to perform Borrower’s obligations under this Agreement. All sums expended by Lender for such purposes shall be deemed to have been disbursed to and borrowed by Borrower and shall be secured by the Deed of Trust on the Premises.
(b) Effective upon the occurrence of an Event of Default, Borrower hereby constitutes and appoints Lender, or an independent contractor selected by Lender, as its true and lawful attorney -in-fact with fu ll power of substitution for the purposes of completion of the Project and performance of Borrower’s obligations under this Agreement in the name of the Borrower, and hereby empower said attorney-in-fact to do any or all of the following:
(i) to use any of the funds of Borrower, including any balance of the Loan, as applicable, and any funds which may be held by Lender for Borrower, for the purpose of effecting completion of the Improvements in the manner called for by the Plans and Specifications;
(ii) to make such additions, changes and corrections in the Plans and Specifications as shall be necessary or desirable to complete the Improvements in substantially the manner contemplated by the Plans and Specifications; (iii) to employ any contractors, subcontractors, agents, architects and inspectors required for said purposes;
(iv) to employ attorneys to defend against attempts to interfere wit h the exercise of power granted hereby;
(v) to pay, settle or compromise all existing bills and claims which are or may be liens against the P remises, the Improvements or the Project or may be necessary or desirable for the completion of the Improvements or clearance of objections to or encumbrances on title; (vi) to execute all applications and certificates in the name of Borrower, which may be required by the General Contract, any Construction Contract, any Subcontract or any other construction contract;
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25 (vii) to prosecute and defend all actions or proceedings in connection with the Project and to take such action, require such performance and do any and every other act as is deemed necessary with respect to the completion of the Improvements which Borrower might do on its own behalf;
(viii) to let new or additional contracts with the same contractor(s) or others to the extent not prohibited by their existing contracts;
(ix) to employ watchmen and erect security fences to protect the Project from injury; and
(x) to take such action and r equire such performance as it deems necessary under any of the bonds or insurance policies to be furnished hereunder, to make settlements and compromises with the sureties or insurers thereunder, and in connection therewith to execute instruments of release and satisfaction.
It is understood and agreed that the foregoing power of attorney shall be deemed to be a power coupled with an interest which cannot be revoked until repayment of the Loan.
7.3 Force Majeure. Whenever the performance of an act (or the fore bearance therefrom) is required of Borrower, other than the payment of any monetary item (including, but not limited to payments of intere st and/or principal on the Note, insurance premiums and/or impounds, real estate impositions and/or impounds, and/or a ny other monies that are to be paid by Borrower pursuant to the Loan Documents) and Borrower is unable to perform or forebear therefrom due to conditions beyond the reasonable control of Borrower, including but not limited to acts of God or the elements, f ire, strikes, labor disputes, delays in delivery of materials (not caused by Borrower’s or General Contractor ’s failure to make timely pay ments therefore), then in such event an Event of Default shall not exist, provided that: (i) Borrower gives Lender written notice of any claimed reason for Borrower’s inability to perform or forebear within five (5) Business Days of the occurrence or the commencement of the event that forms the basis of that reason; (ii) the Borrower proceeds in good faith and with all re asonable due diligence in a commercially reasonable manner to perform (or forebear) as required; and (iii) the completion of the act or forbearance required of Borrower to the reasonable satisfaction of Lender is not delayed by more than one hundred twenty (120) days.
ARTICLE VIII. MISCELLANEOUS
8.1 Assignment. Borrower shall not assign any of its rights under this Agreement. Lender shall not assign any of its rights under this Agreement , except that Lender may assign its rights and delegate its duties under this Agreement to another public entity.
8.2 Notices. All notices (except notices relating to disbursement of funds, changes to the Budget or changes to the Plans and Specifications, each of which shall be delivered to Lender as directed in written instructions from Lende r), requests, demands and consents to be made hereunder to the parties hereto shall be in writing and shall be delivered by hand or sent by registered mail or certified mail, postage prepaid, return receipt requested, through the United States Postal Service, or by overnight delivery by a nationally recognized delivery service (e.g., Federal Express) requiring a receipt, to the addresses sho wn below or such other address which 805
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26 the parties may provide to one another in accordance herewith. Such notices, req uests, demands and consents, if sent by mail shall be deemed given three (3) Business Days after deposit in the United States mail, one (1) Business Day after the date of sending via overnight delivery, and if delivered by hand, shall be deemed given when delivered:
To LENDER: CITY OF ONTARIO
Attn: City Manager
303 East B Street
Ontario, CA 91764
With a Copy to:
Best, Best & Krieger LLP
Attn: Ruben Duran
Ontario City Attorney
2855 E. Guasti Rd., Suite 400
Ontario, CA 91761
To BORROWER: A BLOCK LLC
109 Harvard Street, Suite 300
Glendale, CA 91205
8.3 Authority to File Notices . Effective upon the occurrence of an Event of Default, Borrower irrevocably appoints Lender as its attorney -in-fact, with full power of substituti on, to file for record, at the Borrower’s cost and expense and in Borrower’s name, any notices of completion, notices of cessation of labo r, or any other notices that Lender reasonably considers necessary or desirable to protect its security, and which are consistent with the terms of this Agreement.
8.4 Inconsistencies with the Loan Documents . In the event of any inconsistencies between the terms of th e DDA and any terms of this Agreement and any of the Loan Documents, the terms of the DDA shall govern and prevail.
8.5 No Waiver. No disbursement of proceeds of the Loan shall constitute a waiver of any conditions to Lender’s obligation to make furt her disbursements nor, in the event Borrower is unable to satisfy any such conditions, shall any such waiver have the effect of precluding Lender from thereafter declaring such inability to constitute a default or Event of Default under this Agreement.
8.6 Incorporation of Preamble, Recitals and Exhibits . The preamble, recitals and exhibits hereto are hereby incorporated into this Agreement.
8.7 Third-Party Consultants. Following Lender’s prior notice to Borrower, Lender may hire such third-party consultants as i t reasonably deems necessary, the costs of which shall be paid by Borrower, to provide the following services: (a) review final Plans and Specifications and 806
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27 final construction cost breakdown; (b) conduct compliance inspections with respect to the progress of construction of the Project and approve each element of a request for disbursement relating to construction costs ; and (c) perform such other services as may, from time to time, be required by Lender. This obligation on the part of Borrower shall survive the closing of the Loan and the repayment thereof. Borrower hereby authorizes Lender, in its discretion, to pay such expenses, charges, costs and fees at any time by a disbursement of the Loan.
8.8 Payment of Expenses . Borrower shall pay all taxes and assessments and all reasonable expenses, charges, costs and fees provided for in this Agreement or relating to the Loan or construction of the Improvements, including, without limitation, any fees incurred for recording or filing any of the Loan Documents, title insurance premiums and charges, tax service contract fees, fees of any consultants, fees and expenses of Lender’s counsel incurred in connection with any enforcement of the Loan Documents , documentation and processing fees, printing, photostating and duplicating expenses, air freight charges, escrow fees, costs of surveys, premiums of hazard insurance policies and s urety bonds and fees for any appraisal and appraisal review, market or feasibility study required by Lender. Borrower hereby authorizes Lender to disburse the proceeds of the Loan to pay such expenses, charges, costs and fees notwithstanding that Borrower may not have requested a disbursement of such amount. Lender shall make such disbursements notwithstanding the fact that the Loan is not “in balance” or that Borrower is in default under the terms of this Agreement or any other Loan Document. Such disbursement shall be added to the outstanding principal balance of the Note. The authorization hereby granted shall be irrevocable, and no fu rther direction or authorization from Borrower shall be necessary for Lender to make such disbursements. However, the provision of this Section 8.8 shall not prevent Borrower from paying such expense, charges, costs and fees from its own funds. All such expenses, charges, costs and fees shall be Borrower’s obligation regardless of whether or not Borrower has requested a nd met the conditions for a disbursement of the Loan. The obligations on the part of Borrower under this Section 8.8 shall survive the cl osing of the Loan and the repayment thereof. Borrower hereby authorizes Lender, in its discretion, to pay such expenses, charges, costs and fees at any time by a disbursement of the Loan. Borrower shall not be required to pay as an expense the general overhead of Lender.
8.9 Disclaimer by Lender. Lender shall not be liable to any contractor, subcontractor, supplier, labore r, architect, engineer or any other party for services performed or materials supplied in connection with the Project. Lender shall not b e liable for any debts or claims accruing in favor of any such parties against Borrower or others or against the Premi ses or the Project. Borrower is not and shall not be an agent of Lender for any purpose. Lender is not a joint venture partner with Borrower or with any person having an ownership interest in Borrower in any manner whatsoever. Prior to default by Borrower under this Agreement and the exercise of remedies granted herein, Lender shall not be deemed to be in privity of contract with any contractor or provider of services to the Project, nor shall any payment of funds directly to a contractor, subcontractor, or provider of services be deemed to create any third party beneficiary status or recognition of same by Lender. Approvals granted by Lender for any matters covered under this Agreement shall be narrowly construed to cover only the parties and facts identified in any written approval or, if not in writing, such approvals shall be solely for the benefit of Borrower.
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28 8.10 Indemnification. To the fullest extent permitted by law, Borrower agrees to protect, indemnify, defend and save harmless Lender, its director s, officers, agents and employees for, from and against any and all liability, expense or damage of any kind or nature and for, from and against any suits, claims or demands, including reasonable legal fees and expenses on account of any matter or thing or action or failure to act by Lender, whether in suit or not, arising out of this Agreement or in connection herewith, including, without l imitation, any suit, claim or demand arising out of any default which may occur under the CC&Rs, provided, however, th at the foregoing shall not apply to (i) Lender’s gross negligence or willful misconduct, or (ii) a material breach of Lender’s obligations contained within the Loan Documents. A breach by Lender shall be deemed to have occurred only after the following: ( a) should Borrower claim a material breach by Lender, it shall give Lender written notice of such claimed breach, which notice shall set f orth with reasonable specificity the nature of said breach; and (b) Lender shall not be deemed in breach of any Loan D ocuments unless said breach is not cured within sixty (60) days from receipt of said notice, or if said breach cannot be cured within said sixty (60) day period, the time for Lender to cure said breach shall be extended, so long as Lender is pursuing the cure thereof with all reasonable due diligence. Upon receiving knowledge of any suit, claim or demand asserted by a third party that Lender believes is covered by this indemnity, Lender shall give Borrower notice of the matter and an opportunity to defend it, at Borrower’s sole cost and expense, with legal counsel reasonably satisfactory to Lender. Lender may also require Borrower to so defend the matter. The obligations on the part of Borrower under this Section
8.10 shall survive the closing of the Loan and the repayment thereof.
8.11 Titles and Headings. The headings at the beginning of each section of this Agreement are solely for convenien ce and are not part of this Agreement. Unless otherwise indicated, each reference in this Agreement to a section or a n exhibit is a reference to the respective section herein or exhibit hereto.
8.12 Brokers. Borrower and Lender represent to each other that neither of them knows of any brokerage commissions or finders ’ fee due or claimed with respect to the transaction contemplated hereby. Borrower and Lender shall indemnify and hold harmless the other party for, from and against any and all loss, damage, liab ility, or expense, including costs and reasonable attorney fees, which such other party may incur or sustain by reason of or in connection with any misrepresentation by the indemnifying party with respect to the foregoing.
8.13 Change, Discharge, Termination, or Waiver . No provision of this Agreement may be changed, discharged, terminated, or waived except in writing signed b y the party against whom enforcement of the change, discharge, termination, or waiver is sought. No failure on the part of Lender to exer cise and no delay by Lender in exercising any right or remedy under the Loan Documents or under the law shall operate as a waiver thereof.
8.14 Choice of Law . EXCEPT AS EXPRESSLY PROVIDED IN THE DEED OF TRUST
AND ANY OF THE OTHER LOAN DOCUMENTS, THIS AGREEMENT AND THE
TRANSACTION CONTEMPLATED HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STAT E OF CALIFORNIA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES.
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29 8.15 Disbursements in Excess of Loan Amount . In the event the total dis bursements by Lender exceed the amount of the Loan, to the extent permitted by the laws of the State of California, the total of all disbursements shall be secured by the Deed of Trust. All other sums expended by Lender pursuant to this Agreement or any other Loan Documents shall be deemed to have been paid to Borrower and shall be secured by, among other things, the Deed of Trust.
8.16 Counterparts. This Agreement may be executed in any number of counterparts each of which shall be deemed an original, but all such counterparts together shall constitute but one agreement.
8.17 Time is of the Essence. Time is of the essence for all purposes under this Agreement.
8.18 Attorneys’ Fees. Borrower agrees to pay all costs of enforcement and collection and preparation for any Event of Default or any action taken by Lender (including, without limitation, reasonable attorneys ’ fees) whether or not any action or proceeding is brought (including, without limitation, all such costs incurred in connection with any bankruptcy, receivership, or other court proceedings (whether at the trial or appellate level)), together with interest thereon from the date of demand at the default interest rate ; provided, however, i f legal proceedings are initiated to enforce the rights, duties or obligations of the parties under the Loan Documents, then the prevailing party in such proceeding shall be entitled to collect its reasonable attorney fees and costs from the other party in addition to any other damages or reli ef obtained in such proceedings.
8.19 Jury Waiver . TO THE EXTENT PERMITTED BY LAW, BORROWER AND
LENDER HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) BETWEEN OR AMONG BORROWER AND LENDER ARISING OUT OF
OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT OR LOAN DOCUMENT. THIS PROVISION IS A MATERIAL
INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.
8.20 Integration. The Loan Documents contain the complete understanding and agreement of Borrower and Lender and supersede al l prior representations, warranties, agreements, arrangements, understandings, and negotiations.
8.21 Binding Effect. The Loan Documents will be binding upon, and inure to the benefit of, Borrower and Lender and their respective successors and assigns. Subject to Section 8.1, neither Borrower nor Lender may delegate its obligations under the Loan Documents.
8.22 Survival. The representations, warra nties, and covenants of the Borrower and the Loan Documents shall survive the execution and delivery of the Loan Docum ents and the making of the Loan.
8.23 Joint and Several Obligations . If this Agreement is executed by more than one party as Borrower, all obligations of Borrower herein shall be the joint and several obligations of each party executing this Agreement as Borrower.
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30 8.24 Non-Discrimination. Borrower, for itself and its successors and assigns, agrees that, in performing the construction of the Project, it shall not discriminate against any employee or applicant for employment because of race, color, sexual orientation and/or gender identity, creed, religion, ancestry, political affiliation or opinion, national origin, sex, physical condition, medical condition, pregnancy or pregnancy -related condition, or condition of physical or mental disability or other handicap, ag e, marital status, or status with regard to public assistance.
Borrower will take affirmative action to insure that all employment practic es are free from such discrimination. Such employment practices include but are not limited to the following: hiring, upgrading, demotion, transfer, recruitment or recruitment advertising, layoff, termination, rates of pay or other forms of compensation and selection for training, including apprenticeship.
Borrower agrees to post in conspicuous places, available to employ ees and applicants for employment, notices to be provided by the contracting agency setting forth the provisions of this nondiscrimination clause.
8.25 Conflict of Interest.
8.25.1 Borrower has disclosed to the Lender whether it has made any campaign contributions of more than $250 to any member of the City Council for the City of Ontario (“City”) or other City elected officer, within the earlier of: (1) the date of the submission of Borrower’s application for the Project, or (2) twelve (12) months befor e the date this Agreement was approved by the City Council. Borrower acknowledges that under Government Code section 84308, Borrower is prohibited from making campaign contributions of more than $250 to any member of the City Council or City elected officer for twelve (12) months after the Lender’s consideration of the Agreement. In the event of a proposed amendment to this Agreement, Borrower will provide the Lender a written statement disclosing any campaign contribution(s) of more than $250 to any membe r of the City Council or other City elected officer within the preceding twelve (12) months of the date of the proposed amendment. Campai gn contributions include those made by any agent/person/entity on behalf of the Borrower or by a parent, subsidiary or otherwise related business entity of Borrower.
8.25.2 Except for approved eligible administrative or personnel costs, no person described in Section 8.25.3 below who exercises or has exercised any functions or responsibilities with respect to the activiti es funded pursuant to this Agreement or who is in a position to participate in a decision -making process or gain inside information with r egard to such activities, may obtain a personal or financial interest or benefit from the activity, or have an interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, during, or at any time after, such person's tenure. Borrower shall exercise due dilig ence to ensure that the prohibition in this Section is followed
8.25.3 The conflict of interest provisions of this Section apply to any pe rson who is an employee, agent, consultant, officer, or any immediate family member of such person, or any elected or appointed official of the City, or any person related within the third (3rd) degree of such person.
8.25.4 In accordance with California Government Code Section 1090 and the Political Reform Act, California Government Code section 87100 et seq., no person who is a director, 810
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31 officer, partner, trustee or employee or consultant of Borrower, or immediate family member of any of the preceding, ma y make or participate in a decision, made by the City or a City board, commission or committee, if it is reasonably fo reseeable that the decision will have a material effect on any source of income, investment or interest in real property of that person or Borrower. Interpretation of this Section is governed by the definitions and provisions used in the Political Reform Act, California Government Code Section 87100 et seq., its implementing regulations manual and codes, and California Government Code Section 1090.
ARTICLE IX.
EXHIBITS
The following exhibits to this Agreement are fully incorporated herein as if set forth at length:
Exhibit A - Property Description
Exhibit B - Budget
Exhibit C - Closing Requirements
[Signatures on Following Page]
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32 IN WITNESS WHEREOF, Lender and Borrower have caused this Agreement to be duly executed and delivered as of the date first above written.
BORROWER: A BLOCK LLC,
a California limited liability company
By:________________________________
Name: ____________________________
Its: ______________________________
LENDER: CITY OF ONTARIO
By:
Scott Ochoa
City Manager
ATTEST:
City Clerk
APPROVED AS TO LEGAL FORM:
BEST BEST & KRIEGER LLP
Ruben Duran, City Attorney
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33 EXHIBIT A
PROPERTY DESCRIPTION
That certain real property commonly called the Lerch Building generally located at 120 -122 North, APN 1048-553-15, (the “Lerch Property”), that certain real property commonly called the Yangtze Building generally located at 12 4-132 North Euclid Avenue, APN’s 1048-553-16 and 1048-553-17, (the “Yangtze Property”) , that certain real property commonly called the Old Bridal Shop generally located at 116 -118 E. B Street, APN 1048 -553-02, (the “Old Bridal Shop Property”), and all current and future improvements thereon.
813
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34 EXHIBIT B
BUDGET
814
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35 EXHIBIT C
CLOSING REQUIREMENTS
The obligations of Lender to make the Loan to Borrower and to perform the remainder of its obligations under the Agreement are expressly conditioned upon the receipt and appro val, in form and content acceptable to the Lender of each of the following items:
1. Budget. The Budget.
2. Construction Co ntracts. A copy of all Construction Contracts relating to the Project which Borrower has executed or intends to execute.
3. Title Report. The Preliminary Title Report and evidence satisfactory to Lender that the Title Company is prepared to issue the Title Insurance Policy.
4. Insurance. The policies of insurance required under Section 6.1 8 of the Loan Agreement.
5. Formation Documents . Complete copies of Borrower’s Organizational Documents, together with good standing certificates from the State of California, and resolutions authorizing the transactions described herein.
6. Other Items. Such other items or documents as Lender may require.
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