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HomeMy WebLinkAboutRES NO 095-03RESOLUTION NO. 095-03 A RESOLUTION OF THE COUNCIL OF THE CITY OF BAKERSFIELD AUTHORIZING THE REQUISITE CITY PERSONNEL TO EXECUTE ALL DOCUMENTS REQUIRED TO ACCESS SECTION 108 LOAN GUARANTEE FUNDS OF $4.'1 MILLION FOR CONSTRUCTION AND REHABILITATION OF VARIOUS PUBLIC FACILITIES. WHEREAS, the City of Bakersfield has determined that a high priority exists for a series of public facilities improvement projects in various Iow and moderate income neighborhoods, including the rehabilitation of Martin Luther King (MLK) Jr. and Jefferson swimming pools, construction of a new aquatic facility and construction of a Career Counseling/Training Center facility; and WHEREAS, the City applied to the Secretary of the Department of Housing and Urban Development ("HUD") under the Section 108 Loan Guarantee program for a loan to enable such construction and rehabilitation; and WHEREAS, under the Section 108 Loan Guarantee program, the City can borrow up to five years' worth of its annual Community Development Block Grant allocation, and can take up to twenty years to repay the principal and interest; and WHEREAS, the City requested and has been authorized to receive $4.1 million dollars to construct and rehabilitate the public facilities enumerated herein; and WHEREAS, to access the funds, the City must execute several documents with HUD, including, but not limited to, a loan agreement, a promissory note and a pledge loan inventory agreement; and WHEREAS, the loan shall be repaid with future Community Development Block Grant entitlements; and WHEREAS, additional security ~s provided by way of a first deed of trust on the City-owned real property located at 1601 Truxtun Avenue. as well as a portfolio of loans due to be repaid to the City in the next twenty years. NOW, THEREFORE, BE IT RESOLVED, incorporating the above recitals herein, by the Council of the City of Bakersfield as follows: That the participation of the City of Bakersfield in the Section 108 Loan Guarantee Program is hereby authorized; and Page 1 of 2 Pages S:~Agreement\CouncitActionsection 108contractS4 Mdoc Last printed 5/30/2003 8:36 AM Created on 5~30/2003 8:36 AM That the mayor or designee, the city attorney or designee, the economic development director or designee and the finance director or designee of the City of Bakersfield are authorized to execute the documents attached hereto as Exhibit "A" and any other documents required by HUD to enable the City to access the Section 108 Loan Guarantee Program funds mentioned herein. the I HEREBY CERTIFY that the foregoing Resolution was passed and adopted by Council of the City of Bakersfield at a regular meeting thereof held on JUN 1 ,!. ~03 ., by the following vote: AYES: COUNCILMEMBER COUCH, CARSON, ~, MACGARD, HANSON, SULLIVAN, SALVAGGIO NOES: COUNClLMEMBER ABSTAIN: COUNCILMEMBER /~J Oh..~ ~ ABSENT: COUNCILMEMBER APPROVED JUN 1 1 ?003 Mayor CITY CLERK and Ex Officic~lerk of the Council of the City of Baker~ield APPROVED AS TO FORM: BART J. THILTGEN City Attorney BY~~ Deputy City Attorney Page 2 of 2 Pages S:~Agreement\CouncilActionsection 108cont ract $4 M.doc Last printed 5/30/2003 8:36 AM Created on 5~30~2003 8:36 AM ORIGINA~ EXHIBIT NO. ~/~ U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT SECTION 108 LOAN GUARANTEE PROGRAM VARIABLE~IXEDRATE NOTE NOTE NUMBER: B-02-MC-06-0510 BORROWER: The City of Bakersfield, California MAXIMUM COMMITMENT AMOUNT: $4,100,000 COMMITMENT AMOUNTS: See Commitment Schedule attached hereto DATE OF NOTE: PRINCIPAL DUE DATES AND PRINCIPAL AMOUNT: Before the Conversion Date, the aggregate of Advances made for each applicable Principal Due Date specified in the Commitment Schedule to this Note; on or after the Conversion Date, the Principal Amount (if any) listed for each Principal Due Date in Schedule P & I hereto. VARIABLE INTEREST RATE: REGISTERED HOLDER: As set forth below. AFTERWATCH & CO As Nominee for Money Market Obligations Trust on behalf of its Government Obligations Fund I. Terms Applicable Before the Conversion Date A. Advances For value received, the undersigned, the City of Bakersfield (the "Borrower", which term includes any successors and assigns), a public entity organized and existing under the laws of the State (or Commonwealth as applicable) of California promises to pay to the Registered Holder (the "Holder," which term includes any successors or assigns), at the time, in the manner, rlr-I~!NA~ interest at the rate or rates hereinafter provided, such amounts as may be advanced under this Note from time to time by the Holder for disbursement to, or on behalf of, the Borrower (individually, an "Advance", and collectively, "Advances"). The Holder shall make Advances upon the written request of the Borrower and the approval of the Secretary of Housing and Urban Development or his designee (the "Secretary"), pursuant to the Contract for Loan Guarantee Assistance (as further defined in Section IV.A. of this Note, the "Contract"), and the Amended and Restated Master Fiscal Agency Agreement (the "Fiscal Agency Agreement") dated as of May 17, 2000, between The Chase Manhattan Bank (now known as JPMorgan Chase Bank), as Fiscal Agent (the "Fiscal Agent"), and the Secretary. The total amount of Advances made for each Principal Due Date under this Note shall not exceed the applicable Commitment Amount for such Principal Due Date set forth on the Commitment Schedule attached hereto. The aggregate of all Advances under this Note for all Principal Due Dates shall not exceed the Maximum Commitment Amount specified on the attached Commitment Schedule. The Fiscal Agent shall record the date and amount of all payments and Advances on this Note and maintain the books and records of all such Advances and Commitment Amounts for each corresponding Principal Due Date, and all payments. No Advances shall be made on this Note after its Conversion Date. As used herein, "Conversion Date" means the date (if any) upon which this Note is (i) delivered by the Holder to the Fiscal Agent against payment therefor by the purchasers selected by the Secretary to make such payment; and (ii) assigned to JPMorgan Chase Bank (or any successor thereto) acting in its capacity as Trustee (the "Trustee") pursuant to a Trust Agreement between the Secretary and the Trustee, dated as of January 1, 1995, as such agreement may be amended or supplemented (the "Trust Agreement"). Upon the occurrence of both (i) and (ii) in the previous sentence, Section III of this Note applies, thereby converting this Note to a fixed rate obligation. B. Variable Rate of Interest From and including the date of each Advance to but excluding the earlier of (i) the Conversion Date, and (ii) the date of redemption or prepayment of such Advance pursuant to Section I.D. below (each such date of redemption or prepayment, a "Prepayment Date") interest shall be paid quarterly at a variable interest rate (as set forth below) on the unpaid principal balance of each Advance on the tn:st day of each February, May, August and November (each, an "Interim Payment Date"), commencing on the first Interim Payment Date after the initial Advance is made under this Note. Interest also shall be paid on each applicable Conversion Date, Prepayment Date or Principal Due Date. The amount of interest payable on each Interim Payment Date will represent interest accrued during the three-month period ending immediately prior to such Interim Payment Date, or in the case of the first Interim Payment Date following each Advance that is not made on an Interim Payment Date, the period from and including the date of such Advance to but excluding the first Interim Payment Date following such Advance. The amount of interest payable on this Note's Conversion Date, Prepayment Date, or on any Principal Due Date that precedes such Conversion Date will represent interest accrued during the 2 OR~INA~ period from the last Interim Payment Date to such Conversion Date, Prepayment Date, or Principal Due Date, respectively. The initial variable interest rate for each Advance will be set on the date of such Advance and will be equal to 20 basis points (0.2%) above the Applicable LIBO Rate (as hereinafter defined) and thereafter will be adjusted monthly on the tn-st day of each month (each, a "Reset Date") to a variable interest rate equal to 20 basis points (0.2%) above the Applicable LIBO Rate (such interest rate, as reset from time to time, the "Standard Note Rate"). If the Conversion Date for this Note has not occurred by the March 1 following the initial Advance under this Note, then the terms of Appendix A shall be used to set the variable interest rate. If the Fiscal Agent does not receive notice of either a Negotiated Special Interest Rate or Holder Determined Special Interest Rate (as defined in Appendix A attached hereto) from the Secretary or Holder, respectively, by the times specified in Appendix A to this Note, then the Standard Note Rate shall apply for the period to which such Negotiated Special Interest Rate or Holder Determined Special Interest Rate would otherwise apply. The Fiscal Agent may conclusively rely on any such notice as to the correctness of any matters set forth therein. Appendix A shall be inapplicable to this Note on or after the Conversion Date. "LIBO Rate" for any given Business Day means, except in the case of manifest error, the interest rate per annum published on that day in the Eastern Edition of The Wall Street Journal or any successor publication ("WSJ"), published by Dow Jones & Company, Inc., in the section titled "Money Rates" (or any successor section) and opposite the caption "London Interbank Offered Rates (LIBOR) -- three months" (or any successor caption). If such rate does not appear in WSJ on a given Business Day, for each interest period, the LIBO Rate shall be the interest rate, converted to a bond-equivalent yield basis, for deposits in U.S. dollars for three months which appears on Telerate Page 3750 or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying such rate (together, "Telerate Page 3750") as of 11:00 a.m., London time, on the day (the "Determination Date") that is two London Banking Days preceding the relevant Reset Date or Advance. If such rate does not appear on Telerate Page 3750 on such Determination Date, such rate shall be obtained from the Reuters Screen ISDA Page as of 11:00 a.m., London time, on such Determination Date. If, in turn, such rate does not appear on the Reuters Screen ISDA Page on such Determination Date, the offered quotation from each of four reference banks (expressed as a percentage per annum) as of approximately 11:00 a.m., London time, on such Determination Date for deposits in U.S. dollars to prime banks on the London interbank market for a 3-month period, commencing on the Reset Date or date of such Advance, shall be obtained. If at least two such quotations are provided, the LIBO Rate for such Reset Date or date of such Advance will be the arithmetic mean of the quotations, rounded to five decimal places. If fewer than two such quotations are provided as requested, the LIBO Rate for that Determination Date shall be the rate for the most recent day preceding such Determination Date for which the LIBO Rate shall have been displayed on Telerate Page 3750. The LIBO Rate for any interest period shall be converted to a bond-equivalent yield basis by multiplying such rate by the actual number of days in such interest period and dividing that number by 180. 3 "Applicable LIBO Rate" means: (1) with respect to the initial interest rate for the first Advance hereunder, the LIBO Rate two London Banking Days before the date of such first Advance; (2) with respect to the initial interest rate for any subsequent Advance made before the first Reset Date, the interest rate borne by the first Advance; (3) with respect to the initial interest rate for any subsequent Advance made after the first Reset Date, the LIBO Rate two London Banking Days before the immediately preceding Reset Date; and (4) with respect to the subsequent interest rate at any Reset Date for any Advance, the LIBO Rate two London Banking Days before such Reset Date. "London Banking Day" means any day in which dealings in deposits in United States dollars are transacted in the London interbank market. Interest payable on or before the Conversion Date shall be calculated on the basis of a 360-day year and the actual number of days lapsed. C. Principal Amount Prior to the Conversion Date, the aggregate amount of Advances under this Note for each specified Principal Due Date shall be the Principal Amount paid by the Borrower on such Principal Due Date (as assigned to such Advances by the Secretary's instructions to the Fiscal Agent in accordance with the Contract and the Fiscal Agency Agreement), except to the extent such Principal Amount shall have been reduced by redemption before such Principal Due Date as provided below. D. Redemption before Conversion Date At any time on or before the Conversion Date, the Borrower, with the consent of the Secretary, may redeem this Note, in whole or in part, upon fourteen calendar days notice to the Fiscal Agent and the Secretary, at the purchase price of one hundred percent (100%) of the unpaid Principal Amount to be redeemed, plus accrued interest thereon to the date of redemption. Partial redemptions shall be credited against the applicable Principal Amount(s). The related Comm/tment Amounts and the Maximum Commitment Amount shall be adjusted concurrently with any such redemptions in accordance with the Secretary's instructions to the Fiscal Agent pursuant to the Contract and the Fiscal Agency Agreement. II. Conversion The following events shall occur on the Conversion Date: 4 A. .Schedule P&I On the Conversion Date all Advances owed by the Borrower under this Note with the same Principal Due Date shall be aggregated into a single Principal Amount which will accrue interest at the fixed rate applicable to such Principal Due Date. Such Principal Amount may be adjusted by the Fiscal Agent in accordance with the following paragraph or paragraph IV.H, as applicable. Whether or not adjusted, each Principal Amount, the fixed rate applicable to each Principal Amount, and the applicable Principal Due Date, shall be listed by the Secretary in Schedule P&I. Schedule P&I will be provided by the Secretary to the Fiscal Agent and attached to this Note by the Fiscal Agent upon the Fiscal Agent's receipt of this Note on the Conversion Date. B. Conversion Date Advances If, on or prior to the Conversion Date, the Borrower has not utilized the entire Commitment Amount indicated on the Commitment Schedule attached hereto for a given Principal Due Date, the Borrower may, in accordance with the Fiscal Agency Agreement and the Contract, and with the approval of the Secretary, util/ze such Commitment Amount on the Conversion Date to obtain a Conversion Date Advance. A "Conversion Date Advance" shall mean any amount by which the Secretary instructs the Fiscal Agent to increase a Principal Amount on Schedule P&I for a given Principal Due Date, effective as of the Conversion Date of this Note. Conversion Date Advances shall be funded by the sale of this Note to the purchaser selected by the Secretary. The proceeds of a Conversion Date Advance (net of any applicable fees) shall be distributed to or on behalf of the Borrower on the Conversion Date. The total amount of Conversion Date Advances hereunder shall not exceed the sum of any unused Commitment Amounts for all Principal Due Dates. III. Terms Applicable Upon Conversion The following terms shall apply to this Note from the Conversion Date (if any) until this Note is canceled, or matured and paid in full: Commencing on the Conversion Date, the Borrower promises to pay to the Holder on the applicable Principal Due Date each Principal Amount set forth on the attached Schedule P&I, together with interest on each such Principal Amount at the rate applicable thereto specified on the Schedule P&I. Interest shall be calculated and payments shall be made in the manner set forth below. Interest on each scheduled Principal Amount of this Note due as of a given date specified on Schedule P&I hereto shall accrue at the related per annum rate specified on Schedule P&I from (and including) the Conversion Date to (but excluding) such Principal Due Date or, if applicable, to the applicable Interest Due Date on which an Optional Redemption (as defined below) occurs. Each interest amount accrued on each unpaid Principal Amount of this Note shall be due semiannually as of February 1 and August 1 of each year (each such February 1 an~ August 1, an "Interest Due Date") commencing on the first such date after the Conversion Date, until each Principal Amount listed on Schedule P&I to this Note is paid in full. Interest shall be calculated on the basis of a 360-day year consisting of twelve 30~day months. Certain Principal Amounts that are indicated as being eligible for Optional Redemption on Schedule P&I may be paid, in whole or in part, at the option of the Borrower as of any Interest Due Date on or after the date specified in such schedule (an "Optional Redemption"). In order to elect an Optional Redemption of such a Principal Amount, the Borrower shall give notice of its intention to prepay a Principal Amount to the Trustee and the Secretary not less than 60 days and not more than 90 days prior to the Interest Due Date as of which the Borrower intends to prepay the Principal Amount. The Trustee shall apply any payments received in respect of Optional Redemptions in accordance with written instructions of the Borrower, as approved by the Secretary. Principal Amounts that are not indicated as being eligible for Optional Redemption on Schedule P&I may not be prepaid. IV. General Terms A. Additional Definitions For purposes of this Note, the following terms shall be defined as follows: "Business Day" shall mean a day on which banking institutions in New York City are not required or authorized to remain closed and on which the Federal Reser~,e Bank and the New York Stock Exchange are not closed. If any payment (including a payment by the Secretary) is required to be made on a day that is not a Business Day, then payment shall be made on the next Business Day. "Contract" shall mean the Contract for Loan Guarantee Assistance, and any amendments thereto, among the Secretary and the Borrower, the designated public entity named therein (if applicable), and the State named therein (if applicable), that refers to and incorporates this Note by the number hereof. "Principal Amount" shall mean: (i) before the Conversion Date for this Note, the aggregate amount of Advances made for each Principal Due Date specified in the Commitment Schedule attached to this Note, less the amount of any redemptions pursuant to Section I.D. hereof, and any principal repayment; and (ii) on or after the Conversion Date, the principal amount (if any) stated for each Principal Due Date in Schedule P&I attached hereto, less the amount of any principal repayment and any Optional Redemptions made pursuant to Section III hereof and the Trust Agreement. B. Timely Payment to Fiscal Agent or Trustee Notwithstanding anything contained in Section I, Section II, or Section III, the Borrower, in accordance with the Contract, shall be required to make all payments of interest and principal, including any Optional Redemption payment, directly to the Fiscal Agent or the Trustee (as applicable) on the seventh Business Day prior to the appropriate Interim Payment Date, Interest Due Date, Principal Due Date, Prepayment Date, or date of Optional Redemption, as applicable. C. Interest on Late Payments If a payment of principal or interest herein provided for shall not be made by either (i) 2:30 p.m. on an Interest Due Date or Principal Due Date; or (ii) 2:30 p.m. on the second Business Day (as herein defined) next succeeding an Interim Payment Date, then interest shall accrue on the amount of such payment at the then applicable interest rate or rates payable on this Note, from the relevant due date, as the case may be, until the date such payment is made. Nothing in the immediately preceding sentence shall be construed as permitting or implying that the Borrower may, without the written consent of the Holder and the Secretary, modify, extend, alter or affect in any manner whatsoever the right of the Holder timely to receive any and all payments of principal and interest specified in this Note. D. Applicability of Fiscal Agency Agreement or Trust Agreement Prior to the Conversion Date, this Note and Advances and payments made hereunder shall be administered pursuant to the terms of the Fiscal Agency Agreement and are subject to such agreement. On or after the Conversion Date, this Note and Advances and payments made hereunder shall be administered pursuant to the Trust Agreement and are subject to such agreement. The terms and provisions of the Fiscal Agency Agreement or the Trust Agreement, insofar as they affect the rights, duties and obligations of the Holder and/or the Borrower, are hereby incorporated herein and form a part of this Note. The Borrower hereby agrees to be bound by all obligations of the Borrower to the Fiscal Agent set forth in the Fiscal Agency Agreement. Capitalized terms not defined in this Note shall have the meanings ascribed to them in the Fiscal Agency Agreement or Trust Agreement, as applicable. The Fiscal Agency Agreement provides for the Fiscal Agent to perform certain duties, including the duties of (i) paying agent and calculation agent for this Note until its Conversion Date, and (ii) registrar for this Note until this Note is canceled or a new registrar appointed, each in accordance with the Fiscal Agency Agreement. The Trust Agreement provides for the Trustee to perform certain duties, including the duties of collection agent for this Note after its Conversion Date until a new Trustee is appointed in accordance with the Trust Agreement. This Note may be surrendered to the Fiscal Agent for registration of transfer or exchange, as provided in the Fiscal Agency Agreement. The Fiscal Agent and Trustee each shall permit reasonable inspection to be made of a copy of the Fiscal Agency Agreement or Trust Agreement kept on file at its respective corporate trust office. Neither the Fiscal Agency Agreement nor the Trust Agreement shall change the Borrower's payment obligations under this Note. E. Applicability of Contract and Secretary's Guarantee This Note evidences indebtedness incurred pursuant to and in accordance with the Contract and pursuant to Section 108 of Title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. § 5308) (the "HCD Act"). This Note is subject to the terms and provisions of the Contract, to which Contract reference is hereby made for a statement of said terms and provisions and for a description of the collateral security for this Note. The payment of principal on the applicable Principal Due Dates and interest on the applicable Interim Payment Dates or Interest Due Dates under this Note is unconditionally guaranteed by the Secretary to the Holder through a guarantee (the "Guarantee"). Execution of the Secretary's Guarantee is required before this Note is effective, and such Guarantee shall be issued pursuant to and in accordance with the terms of the Contract and Section 108 of the HCD Act. F. Default A default under this Note shall occur upon failure by the Borrower to pay principal or interest on this Note when due hereunder. If a Borrower defaults on the payment of any interest or Principal Amounts when due, or if the Secretary gives notice of a final decision to declare the Borrower in default pursuant to the following paragraph of this Section IV.F, the Secretary may, but is not obligated to, make on any date on or prior to the Conversion Date with fourteen calendar days prior notice to the Fiscal Agent, or on the seventh Business Day preceding any Interest Due Date on or after the first permissible Optional Redemption date with seven Business Days prior notice to the Trustee, an acceleration payment to the Fiscal Agent or the Trustee, as applicable, equal to the Aggregate Principal Amount of the Note, together with accrued and unpaid interest thereon to such acceleration payment date or Interest Due Date, as applicable. In the event that any such acceleration payment is made from sources other than funds pledged by the Borrower as security under the Contract (or other Borrower funds), the amounts paid on behalf of the Borrower shall be deemed to be immediately due and payable to the Secretary. Nothing in this paragraph shall be construed as permitting or implying that the Borrower may, without the written consent of the Holder and the Secretary, modify, extend, alter or affect in any manner whatsoever the right of the Holder timely to receive any and all payments of principal and interest specified in this Note. In addition, the Secretary may declare the Borrower in default under this Note if the Secretary makes a final decision in accordance with the provisions of 24 C.F.R. § 570.913 (or any successor regulation thereof), including requirements for reasonable notice and opportunity for heating, that the Borrower has failed to comply substantially with Title I of the HCD Act. Following the giving of such reasonable notice, the Secretary may take the remedial actions specified as available in the relevant provisions of the Contract pending the Secretary's final decision. G. Holder's Reliance on Guarantee Following a default by the Borrower under the terms of this Note, the Holder agrees to rely wholly and exclusively for repayment of this Note upon the Guarantee. The enforcement of any instruments or agreements securing or otherwise related to this Note shall be the sole responsibility of the Secretary, and the Holder shall not be responsible for the preparation, contents or administration of such instruments and agreements, or for any actions taken in connection with such instruments and agreement. The Holder, to the extent it is legally able to do so, shall bind or cause to be bound its successors and assigns to all limitations imposed upon the Holder by this Note. H. Amendment This Note may only be amended with the prior written consent of the Secretary and the Borrower. No such amendment shall reduce, without the prior written consent of the Holder of this Note, in any manner the amount of, or delay the timing of, payments required to be received on this Note by the Holder, Fiscal Agent or Trustee, including Guarantee Payments; provided that prior to the Conversion Date, the Commitment Amounts on the Commitment Schedule attached hereto, and the Principal Amounts due on the corresponding Principal Due Dates may be rescheduled pursuant to written instructions given to the Fiscal Agent by the Secretary with the written agreement of the Borrower and the Secretary absent the consent of the Holder. I. Waivers The Borrower hereby waives any requirement for presentment, protest or other demand or notice with respect to this Note. The Borrower hereby waives notice of default and opportunity for hearing for any failure to make a payment when due. J. Deliver,/and Effective Date This Note is deemed issued, executed, and delivered on behalf of the Borrower by its authorized official as an obligation guaranteed by the Secretary pursuant to Section 108 of the HCD Act, effective as of the date of the Secretary's Guarantee. V. Borrower-Specific Provisions [This space intentionally left blank] 9 IN WITNESS WHEREOF, the undersigned, as an authorized official of the Borrower, has executed and delivered this Note. The City of Bakersfield, California BORROWER By: (Signature) (Name) ATTEST: (Signature) (Name) (Title) (Title) 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first-above written. "CITY" CITY OF BAKERSFIELD By: HARVEY L. HALL Mayor APPROVED AS TO FORM: BART J. THILTGEN City Attorney By: JANICE SCANLAN Deputy City Attorney APPROVED AS TO CONTENT: ECONOMIC AND COMMUNITY DEVELOPMENT DEPARTMENT By: DONNA L. KUNZ Economic Development Director COUNTERSIGNED: By: GREGORY J. KLIMKO Finance Director 11 ASSIGNMENT AND TRANSFER For value received, the undersigned assigns and transfers this Note to (Name and Address of Assignee) (Social Security or Other Identifying Number of Assignee) and irrevocably appoints attorney-in-fact to transfer it on the books kept for registration of the Note, with full power of substitution. Dated: Note: The signature to this assignment must correspond with the name as written on the face of the Note without alteration or enlargement or other change. Signature Guaranteed: Qualified Financial Institution By: Authorized Signature 12 APPENDIX A (a) (b) Special Pre-Conversion Interest Rates. The Holder and the Secretary contemplate that the majority of the outstanding Variable/Fixed Rate Notes will be purchased by underwriters selected by the Secretary for sale in public offerings to occur each year. If a public offering including this Note has not occurred by each March 1 following the initial Advance under this Note, the Secretary shall, upon request, advise the Holder as to when a public offering including this Note is expected to occur, and the Holder and the Secretary agree to consult with each other as to what the interest rate on this Note will be after May 1 of that year if a public offering has not occurred by such May 1. The Holder shall notify the Secretary if such consultation has not occurred by April 1 of that year. If no public offering including this Note has occurred on or before such May 1, the applicable interest rate on this Note from such May 1 shall be the rate (if any) negotiated and agreed upon by the Secretary and the Holder. Such rate may be the Standard Note Rate or some other rate agreed upon by the Holder and the Secretary at least two Business Days before such May 1 (such other rate, the "Negotiated Special Interest Rate"). The Secretary shall notify the Fiscal Agent and the Holder in writing of any Negotiated Special Interest Rate within two Business Days of the determination thereof. If the Secretary and the Holder do not, by the April 15th preceding such May 1, negotiate and agree under Section (a) of this Appendix on an interest rate applicable to this Note, then tlie Holder may, on or before the April 20th preceding such May 1, give written notice to the Secretary of its intent to change the interest rate on this Note and, if such notice was given during such period, the Holder may, on such May 1, unilaterally determine (subject to the terms of this paragraph) the interest rate that this Note will bear (such rate, the "Holder Determined Interest Rate") from and including such May 1 to but excluding the earliest off (i) the Conversion Date; (ii) the date that this Note is purchased by a new Holder (as described in Section (c) below) or (iii) a Monthly Special Reset Date (as defined below). Interest from and including such May 1 to but excluding the Public Offering Date shall be paid on the unpaid principal balance of all outstanding Advances under this Note at the rate(s) to be determined by the Holder which, based upon then prevailing market conditions and taking into account all the circumstances, will enable the Holder to sell this Note at one hundred percent (100%) of the aggregate amount of all Advances hereunder prior to the date of such sale. Such interest rate shall be determined as of such May 1 and shall be determined again on the foregoing basis on the f'n:st of each month thereafter (the fzrst of each month after such May 1, a "Monthly Special Reset Date"). The Holder shall notify the Fiscal Agent and the Secretary in writing within two Business Days following such dates of the determination of the Holder Determined (c) (~) Interest Rate and each applicable interest rate determined on a Monthly Special Reset Date. If the Secretary and the Holder have failed to agree upon an interest rate pursuant to Section (a) of this Appendix A, the Secretary, upon seven calendar days notice to the Holder, may arrange for the purchase of this Note in full by another entity on the following May 1 or any Business Day thereafter. If such a purchase occurs, the Holder shall sell and assign this Note to the purchaser thereof without recourse to the Holder and deliver this Note and its Guarantee to the Fiscal Agent for registration in the name of the pumhaser thereof in accordance with the Secretary's written instructions. The purchase price for this Note shall be 100% of the aggregate amount of all Advances owing hereunder plus accrued interest to the date of purchase. Payment to the Holder of the purchase price for this Note shall be made by the purchaser thereof in Federal funds at the offices of the Holder, or at such other place as shall be agreed upon by the Holder and the Secretary, at 10:00 a.m., New York time, on the date of purchase. After such purchase date this Note shall bear a rate of interest negotiated between the Secretary and the new interim Holder (the "New Purchaser Special Interest Rate"). The Secretary shall notify the Fiscal Agent and the new purchaser in writing of any New Purchaser Special Interest Rate within two Business Days following the date of determination thereof. Notwithstanding Sections (a) through (c) (inclusive) of this Appendix, no Borrower is obligated to pay interest at a variable rate exceeding the maximum rate permitted by generally applicable law of the Borrower's state (such rate, the "Maximum Rate"). If the Borrower receives notice of a variable interest payment that exceeds the Maximum Rate, then the Borrower shall timely pay such amount as does not exceed the Maximum Rate, and concurrently shall notify the Secretary and the Fiscal Agent of the reason for any interest non-payment. COMMITIVIENT SCHEDULE Note No. B-02-MC-06-0510 Principal Due Date Commitment Amount August 1, 2003 August 1, 2004 August 1, 2005 August 1, 2006 August 1, 2007 August 1, 2008 August 1, 2009 August 1, 2010 August 1, 2011 August 1, 2012 August 1, 2013 August 1, 2014 August 1, 2015 August 1, 2016 August 1, 2017 August 1, 2018 August 1, 2019 August 1, 2020 August 1, 2021 August 1, 2022 $0 137,000 143,000 150,000 158,000 164,000 172,000 181,000 189,000 199,000 208,000 218,000 229,000 241,000 252,000 265,000 278,000 291,000 305,000 320,000 Maximum Commitment Amount $4,100,000 ORIGiNA' SCHEDULE P&I Note No.. B-02-MC-06-0510 Principal Amount Principal Interest Rate Due Date Optional Redemption Available YES NO August 1, 2003 X August 1, 2004 X August 1, 2005 X August 1, 2006 X August 1, 2007 X August 1, 2008 X August 1, 2009 X August 1, 2010 X August 1, 2011 X August 1, 2012 X August 1, 2013 X August 1, 2014 X August 1, 2015 X August 1, 2016 X August 1, 2017 X August 1, 2018 X August 1, 2019 X August 1, 2020 X August 1, 2021 X August 1, 2022 X Principal Amounts for which Optional Redemption is available may be redeemed, subject to the terms contained herein and in the Trust Agreement, on any Interest Due Date on or after August 1, 2012. O~iGiNAi~ U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT CONTRACT FOR LOAN GUARANTEE ASSISTANCE UNDER SECTION 108 OF THE HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1974, AS AMENDED, 42 U.S.C. §5308 Date of Contract This Contract for Loan Guarantee Assistance ("Contract") is entered into between the City of Bakersfield, California, as Borrower (the "Borrower"), and the Secretary of Housing and Urban Development ("Secretary"), as guarantor for the Guarantee made pursuant to section 108 ("Section 108") of title I of the Housing and Community Development Act of 1974, as amended (the "Act") and 24 CFR Part 570, Subpart M, of the promissory note executed contemporaneously herewith and numbered B-02-MC-06-0510, in the Maximum Commitment Amount of $4,100,000, and any amended note or note issued in substitution for such note and having the same note number (the "Note"). This is the first Contract under the Funding Approval ("Commitment") of the same number, which was approved by the Secretary on September 30, 2002. The funds paid or credited to the account of the Borrower pursuant to the Note are referred to herein as the "Guaranteed Loan Funds." The Note (including the Fiscal Agency Agreement and the Trust Agreement as defined in Section I.A. of the Note and incorporated therein) is hereby incorporated into the Contract. Terms used in the Contract with initial capital letters and not otherwise defined in the text hereof shall have the respective meanings given thereto in the Note. The Fiscal Agency Agreement and the Trust Agreement are sometimes collectively referred to herein as the "Fiscal Agency/Trust Agreements," and the Fiscal Agent and the Trustee respectively are sometimes collectively referred to as the "Fiscal Agent/Trustee." PART I The Note: Advances and Records. The Note provides that Advances and Conversion Date Advances shall be made thereunder upon the written request of the Borrower and the approval of the Secretary, pursuant to this Contract and the Fiscal Agency Agreement. The Commitment Schedule attached to the Note represents the principal repayment schedule for the Maximum Commitment Amount of the Note. At all times, the total amount of all Advances and Conversion Date Advances under the Note for all Principal Due Dates shall not exceed the Maximum Commitment Amount of the Note. Prior to the Conversion Date (as defined in the Note, Section I.Ao), the total amount of Advances made by the Holder for each Principal Due Date under the Note shall not exceed the applicable Commitment Amount for such Principal Due Date set forth in the Commitment Schedule of the Note. Prior to 2 Conversion Date, the Borrower agrees that the Fiscal Agent pursuant to the Fiscal Agency Agreement shall record the date and amount of each payment and Advance under the Note and shall maintain the books and records of all Advances and Conversion Date Advances for each Principal Due Date, interest rates on Advances, payments, and Principal Amounts outstanding for each Principal Due Date. On and after the Conversion Date, the Borrower agrees that the Trustee pursuant to the Trust Agreement will maintain the books and records of all payments on the Note and all Principal Amounts and interest rates on such Principal Amounts (each as to be set forth on Schedule P&I to the Note). No advances of any kind may be made on the Note after its Conversion Date. Borrower's Requests for Advances. Ail requests for Advances or Conversion Date Advances by the Borrower under the Note shall: be in writing; specify the amount of the Advance requested; identify the Note by Borrower, number and Maximum Commitment Amount; be addressed to the Secretary at the address for notices specified in paragraph 12(f) of this Contract; be signed by an authorized official of the Borrower; and otherwise be in the form prescribed by the Secretary. Advances and Conversion Date Advances shall be requested and will only be approved and made in increments of not less than $1,000 for any Principal Due Date. A request for an initial Advance under a Note, or a request for a Conversion Date Advance, shall be received by the Secretary at least ten Business Days prior to the Borrower's proposed Funding Date or Conversion Date, as applicable. All other requests for Advances shall be received by the Secretary not less than five Business Days prior to the proposed Funding Date. The Borrower may not deliver a Note or a request for an Advance or Conversion Date Advance to the Secretary more than two calendar months prior to the Borrower's proposed Funding Date. At least two Business Days prior to the proposed Funding Date or Conversion Date if the Borrower's request was timely received, or the next available Funding Date for which the request was timely received, the Secretary shall, except as otherwise provided in paragraph il(c) or 12 hereof, deliver a corresponding Authorization Order or Advance Order (as applicable) to the Fiscal Agent in accordance with Section 2.03 or 2.04 of the Fiscal Agency Agreement for the applicable Funding Date or Conversion Date. If the Borrower requests an Advance or Conversion Date Advance of less than the outstanding Maximum Commitment Amount under the Note, the Borrower may also specify in its written request the amount of the Advance or Conversion Date Advance to be allocated to each Commitment Amount or Principal Amount per Principal Due Date under the Note. If the Borrower does not specify how the Advance or Conversion Date Advance should be allocated among Commitment Amounts/Principal Due Dates, the Borrower hereby authorizes the Secretary to direct the Fiscal Agent to allocate the 3 Advance to the respective Commitment Amounts or Principal Amounts in order of the earliest Principal Due Date(s). Conversion; Public Offering. On the Conversion Date (if any), trust certificates backed by the Note (and similar notes issued by other Section 108 borrowers) will be purchased for a purchase price of the full principal amount thereof by underwriters selected by the Secretary {the "Underwriters") pursuant to an Underwriting Agreement between the Underwriters and the Secretary, at a closing on such Conversion Date as determined by the Secretary and the Underwriters. The Borrower agrees that the interest rate at which the trust certificate of a specified maturity is sold to the Underwriters shall govern the interest rate inserted on the Conversion Date in Schedule P&I of the Note for the Principal Amount of corresponding maturity. Consents. By execution of this Contract, the Borrower ratifies and consents to the Secretary's selection of the Underwriters and authorizes the Secretary to negotiate with the Underwriters the terms of the Underwriting Agreement and of the public offering of interests in the trust certificates to investors (including the applicable interest rates). In addition, by execution hereof the Borrower ratifies and consents to the Secretary's selection of the Fiscal Agent/Trustee and agrees to the respective terms of the Fiscal Agency/Trust Agreements. If Advances have been made in the Maximum Commitment Amount of the Note not less than ten Business Days prior to the proposed Conversion Date, or if the Borrower requests a Conversion Date Advance, the Borrower authorizes the Secretary to deliver Schedule P&I to the Note completed in accordance herewith to the Fiscal Agent/Trustee on the Conversion Date in accordance with the Fiscal Agency/Trust Agreements, concurrent with delivery of the Secretary's Guarantee of the trust certificates at the closing on the Conversion Date, and thereafter the Note shall be enforceable in accordance with its terms including Schedule P&I. In addition, the Secretary reserves the right to notify the Borrower not less than one calendar month in advance of a specified Conversion Date that the Note will be sold to the Underwriters on such date, if the Secretary in his sole discretion determines that market conditions or program needs require the participation in the proposed public offering of all or substantially all Borrowers with outstanding Advances. 4 PART II Receipt, Deposit and Use of Guaranteed Loan Funds. (a) Except for funds deducted on the Conversion Date pursuant to paragraph 4(b) and fees and charges deducted by the Fiscal Agent/Trustee pursuant to paragraph 4(a), the Guaranteed Loan Funds shall be electronically transferred in accordance with the Borrower's instructions for deposit in a separate, identifiable custodial account (the "Guaranteed Loan Funds Account") with a financial institution whose deposits or accounts are Federally insured. The Guaranteed Loan Funds Account shall be established and designated as prescribed in the attached form document entitled "Letter Agreement for Section 108 Loan Guarantee Program Custodial Account" (Attachment 1) and shall be continuously maintained for the Guaranteed Loan Funds. Such Letter Agreement must be executed when the Guaranteed Loan Funds Account is established. (A fully executed copy of such Letter Agreement shall be submitted to the Secretary within thirty days of its execution.) The Borrower shall make withdrawals from said account only for payment of the costs of approved Section 108 activities, for transfer to the Loan Repayment Account or for the temporary investment of funds pursuant to this paragraph l(a). Such temporary investment of funds into the Guaranteed Loan Funds Investment Account shall be required within three Business Days after the balance of deposited funds exceeds the amount of the Federal deposit insurance on the Guaranteed Loan Funds Account. At that time, any balance of funds in the Guaranteed Loan Funds Account exceeding such insurance coverage shall be fully (100%) and continuously invested in Government Obligations, as defined in paragraph 10 hereof, held in the Guaranteed Loan Funds Investment Account. Ail temporary investments, whether or not required as above, shall be limited to Government Obligations having maturities that are consistent with the cash requirements of the approved activities. In no event shall the investments mature on or after January 31, 2005, or have maturities which exceed one year. All such investments shall be held in trust for the benefit of the Secretary by the above financial institution in an account (the "Guaranteed Loan Funds Investment Account") established and designated as prescribed in the attached form document entitled "Letter Agreement for Section 108 Loan Guarantee Program Custodial Investment Account" (Attachment 2), which account shall be maintained for all Government Obligations purchased with funds from the Guaranteed Loan Funds Account. The Guaranteed Loan Funds Investment Account need only be established if and when the Borrower is required to invest, or otherwise invests, the Guaranteed Loan Funds in Government Obligations. Such Lett~e~ ORIGi~A~ 5 Agreement must be executed when the Guaranteed Loan Funds Investment Account is established. (A fully executed copy of such Letter Agreement shall be submitted to the Secretary within thirty days of its execution.) All proceeds and income derived from such investments shall be returned to the Guaranteed Loan Funds Account. Ail funds in the Guaranteed Loan Funds Account or the Guaranteed'Loan Funds Investment Account must be withdrawn and disbursed by the Borrower for approved activities by January 31, 2005. Any funds remaining in either Account after this date shall be immediately transferred to the Loan Repayment Account established pursuant to paragraph 6 of this Contract. (b) The Borrower shall by the fifteenth day of each month provide the Secretary with a written statement showing the balance of funds in the Guaranteed Loan Funds Account and the withdrawals from such account during the preceding calendar month, and a statement identifying the obligations and their assignments in the Guaranteed Loan Funds Investment Account. (c) Upon the Secretary giving notice that the Borrower is in Default under this Contract or the Note, all right, title, and interest of the Borrower in and to the Guaranteed Loan Funds and Guaranteed Loan Funds Investment Accounts shall immediately vest in the Secretary for use in making payment on the Note, purchase of Government Obligations in accordance with paragraph 10, or payment of any other obligations of the Borrower under this Contract or the Fiscal Agency/Trust Agreements. Payments Due on Note; Final Payment and Discharge. The Borrower shall pay to the Fiscal Agent/Trustee, as collection agent for the Note, all amounts due pursuant to the terms of the Note. In accordance with the Note and the Fiscal Agency/Trust Agreements, payment shall be made by 3:00 P.M. (New York City time) on the seventh Business Day (the "Note Payment Date") preceding the relevant Interest Due Date or Principal Due Date (each as defined in the Note). If any Note Payment Date falls on a day that is not a Business Day, then the required payment shall be made on the next Business Day. Payment may be made by check or wire transfer. Upon final payment of all amounts due to Holders under the Note, including any payment made by the Secretary pursuant to the Guarantee, the Fiscal Agent/Trustee is required by the Fiscal Agency/Trust Agreements to return the Note to the Secretary. Upon final payment to the Secretary of any amounts due as a result of Guarantee Payments or otherwise due under this Contract, the Secretary will cancel and return the Note to the Borrower in discharge of the Borrower's obligations under the Note. ~ 6 Selection of New Fiscal Agent or Trustee. The Secretary shall select a new Fiscal Agent or Trustee if the Fiscal Agent or Trustee resigns or is removed by the Secretary. The Borrower hereby consents in advance to any such selection and to any changes in the Fiscal Agency/Trust Agreements agreed to by any Fiscal Agent or Trustee and the Secretary, subject to paragraph 4(e) of this Contract. Payments Due Fiscal Agent or Trustee; Documents to the Secretary. (a) The Borrower agrees to pay the fees of the Fiscal Agent as required by Exhibit G to the Fiscal Agency Agreement, and any additional amounts that may be due pursuant to Section 6.01 of the Fiscal Agency Agreement. If not paid by the Borrower by any other means prior thereto, the Borrower agrees that any such fees or additional amounts that have been incurred prior to an Advance or a Conversion Date Advance may be deducted by the Fiscal Agent/Trustee from the proceeds of the Advance or Conversion Date Advance, as applicable. (b) The Borrower agrees to pay the Borrower's share, as determined by the Secretary, of the customary and usual issuance, underwriting, and other costs related to the public offering and future administration of the Note and the trust certificates, as approved by the Secretary, including the cost of reimbursement and/or compensation of the Trustee pursuant to the Trust Agreement, including Sections 3.11 and 7.01 thereof. In connection with the public offering on the Conversion Date, such payment shall either be made by wire transfer to the Trustee on the day prior to the Conversion Date or shall be deducted from the Guaranteed Loan Funds on the Conversion Date. (c) The Borrower shall submit to the Secretary not later than ten Business Days prior to the Funding Date for the initial Advance hereunder, or if not submitted earlier, prior to any Conversion Date or Public Offering Date applicable to the Note, this executed Contract, the executed Note, a request for an Advance or a Conversion Date Advance (as applicable) in proper form, and an opinion acceptable to the Secretary from the Borrower's counsel to the effect that: (i) the governing body of the Borrower has authorized by resolution or ordinance, in accordance with applicable State and local law, the issuance of the Note and the execution of this Contract; (ii) the Note and this Contract are valid, binding, and enforceable obligations of the Borrower; (iii) the pledge of funds pursuant to 24 CFR 570.705(b) (2) and paragraph 5(a) of this Contract is valid and binding; and (iv) there is no the outstanding litigation that will affect the validity of Note or this Contract. In addition, the Borrower shall submit any other additional documents or opinions 7 specifically required by this Contract (e.g., paragraph 5(c), or paragraph 15, et seq.), at the time required thereby. (d) The Borrower agrees to reimburse the Underwriters upon demand by the Secretary for the Borrower's share, as determined by the Secretary, of all reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel) incurred in connection with a proposed public offering, if the Underwriters incur such additional costs for the public offering because of any refusal, inability, or failure on the part of the Borrower timely to submit in acceptable form any document required by this Contract (including paragraph 4(c)), or because of any withdrawal by the Borrower from the public offering, after the Borrower has submitted a request for a Conversion Date Advance hereunder. By execution and delivery of this Contract to the Secretary, the Borrower hereby expressly authorizes the Secretary to pay amounts due under this paragraph from funds pledged under paragraph 5(a) of this Contract. (e) The undertakings in paragraphs 3 and 4 of this Contract are expressly subject to the requirement that the Fiscal Agency/Trust Agreements shall in no event require payment of fees or charges, reimbursement of expenses, or any indemnification by the Borrower from any source other than funds pledged pursuant to paragraphs 5 or 15 et seq. of this Contract. Security. The Borrower hereby pledges as security for repayment of the Note, and such other charges as may be authorized in this Contract, the following: (a) Ail allocations or grants which have been made or for which the Borrower may become eligible under Section 106 of the Act, as well as any grants which are or may become available to the Borrower pursuant to Section 108(q). (b) Program income, as defined at 24 CFR 570.500(a) (or any successor regulation), directly generated from the use of the Guaranteed Loan Funds. (c) Other security as described in paragraph 15, et seq. (d) Ail proceeds (including insurance and condemnation proceeds) from any of the foregoing. (e) Ail funds or investments in the accounts established pursuant to paragraphs 1 and 6 of this Contract. Loan Repayment Account. (a) Ail amounts pledged pursuant to paragraphs 5(b), 5(c), and 5(d) of this Contract shall be deposited immediately 8 receipt in a separate identifiable custodial account (the "Loan Repayment Account") with a financial institution whose deposits or accounts are Federally insured. The Loan Repayment Account shall be established and designated as prescribed in the attached form document entitled "Letter Agreement for Section 108 Loan Guarantee Program Custodial Account" (Attacb-~ent 1) and shall be maintained for such pledged funds. The Loan Repayment Account need only be established if and when the Borrower receives amounts pledged pursuant to paragraph 5(b), 5(c) or 5(d). Such Letter Agreement must be executed when the Loan Repayment Account is established. (A fully executed copy of such Letter Agreement shall be submitted to the Secretary within thirty days of its execution.) Borrower shall make withdrawals from said account only for the purpose of paying interest and principal due on the Note (including the purchase of Government Obligations in accordance with paragraph 10 hereof), for payment of any other obligation of the Borrower under this Contract or the Fiscal Agency/Trust Agreements, or for the temporary investment of funds pursuant to this paragraph, until final payment and discharge of the indebtedness evidenced by the Note, unless otherwise expressly authorized by the Secretary in writing. Such temporary investment of funds shall be required within three Business Days after the balance of deposited funds exceeds the amount of the Federal deposit insurance on the Loan Repayment Account. At that time, the balance of funds in the Loan Repayment Account exceeding such insurance coverage shall be fully (100%) and continuously invested in Government Obligations, as defined in paragraph 10 hereof. Ail temporary investments, whether or not required as above, shall be limited to Government Obligations having maturities that are consistent with cash requirements for payment of principal and interest as required under the Note. In no event shall the maturities of such investments exceed one year. All such investments shall be held in trust for the benefit of the Secretary by the above financial institutiQn in an account (the "Loan Repayment Investment Account") established and designated as prescribed in the attached form document entitled "Letter Agreement for Section 108 Loan Guarantee Program Custodial Investment Account" (Attach. merit 2), which account shall be maintained for all Government Obligations purchased with funds from the Loan Repayment Account. Such Letter Agreement must be executed when the Loan Repayment Investment Account is established. (A fully executed copy of such Letter Agreement shall be submitted to the Secretary within thirty days of its execution.) All proceeds and income derived from such investments shall be returned to the Loan Repayment Account. 9 (b) Borrower shall by the fifteenth day of each month, provide the Secretary with a written statement showing the balance of funds in the Loan Repayment Account and the deposits and withdrawals of all funds in such account during the preceding calendar month and a statement identifying the obligations and their assignments in the Loan Repayment Investment Account. (c) Upon the Secretary giving notice that the Borrower is in Default under this Contract or the Note, all right, title, and interest of the Borrower in and to the Loan Repayment and Loan Repayment Investment Accounts shall immediately vest in the Secretary for use in making payment on the Note, purchase of Government Obligations in accordance with paragraph 10, or payment of any other obligation of the Borrower under this Contract or the Fiscal Agency/Trust Agreements. Use of CDBG or EDI Funds for Repayment. Any funds available to the Borrower under Section 106 of the Act (including program income derived therefrom) are authorized to be used by the Borrower for payments due on the Note, Optional Redemption (as defined in the Note), payment of any other obligation of the Borrower under this Contract or the Fiscal Agency/Trust Agreements, or the purchase of Government Obligations in accordance with paragraph 10. Any funds specifically available to the Borrower for such payments or as a debt service reserve under an EDI Grant Agreement pursuant to Section 108(q) of the Act which supports the eligible project(s) and activities financed by the Note may also be used therefor; any other use of Section 108(q) funds for such purposes shall require the prior written approval of the Secretary. Unless otherwise specifically provided herein or unless otherwise expressly authorized by the Secretary in writing, the Borrower shall substantially disburse funds available in the Loan Repayment or the Loan Repayment Investment Accounts before funds from grants under Section 106 of the Act are withdrawn from the U.S. Treasury for such purposes. Secretary's Right to Restrict Use of CDBG Funds to Repayment. Upon a determination by the Secretary that payments required by paragraph 2 and/or paragraph 4 of this Contract are unlikely to be made as specified, the Secretary may give the Borrower notice that the availability to the Borrower of funds pledged under paragraph 5(a) of this Contract for purposes other than satisfaction of the pledge is being restricted. This restriction shall be in an amount estimated by the Secretary to be sufficient to ensure that the payments referred to in paragraph 2 and/or paragraph 4 hereof are made when due. This restriction may be given effect by conditioning the restricted amounts to prohibit disbursement for purposes other than satisfaction of the pledge at the time such restricted funds are approved as grants, by limiting the Borrower's ability to draw down or expend the restricted funds for other purposes, and by 10 disapproving payment requests submitted with respect to such grants for purposes other than satisfaction of the pledge. Secretary's Right to Use Pledged Funds for Repayment. The Secretary may use funds pledged under paragraph 5(a) of this Contract or funds restricted under grants pursuant to paragraph 8 of this Contract to make any payment required of the Borrower under paragraph 2 and/or paragraph 4, if such payment has not been timely made by the Borrower. 10. Defeasance. For purposes of this Contract, after the Conversion Date the Note shall be deemed to have been paid (defeased) if there shall have been deposited with the Trustee either moneys or Government Obligations (as defined below), which in the sole determination of the Secretary, mature and bear interest at times and in amounts sufficient, together with any other moneys on deposit with the Trustee for such purpose, to pay when due the principal and interest to become due on the Note. The Aggregate Principal Amount of the Note or any unpaid Principal Amount may be so defeased, in whole or in part, as of any Principal Due Date. In accordance with the Note and the Trust Agreement, the Borrower shall give timely notice and written instructions to the Secretary and the Trustee concerning any principal amounts proposed to be defeased, including any Optional Redemptions proposed, which instructions shall be approved by the Secretary. If the unpaid Aggregate Principal Amount of the Note guaranteed pursuant to this Contract shall be defeased and deemed to have been paid in full, then the Borrower shall be released from all agreements, covenants, and further obligations under the Note. "Government Obligation" means a direct obligation of, or any obligation for which the full and timely payment of principal and interest is guaranteed by, the United States of America, including but not limited to, United States Treasury Certificates of Indebtedness, Notes and Bonds State and Local Government Series or certificates of ownership of the principal of or interest on direct obligations of, or obligations unconditionally guaranteed by, the United States of America, which obligations are held in trust by a commercial bank which is a member of the Federal Reserve System and has capital and surplus (exclusive of undivided profits) in excess of $100,000,000. 11. Default. (a) A Default under the Note and this Contract shall occur upon failure by the Borrower to: (i) pay when due an installment of principal or interest on the Note; or (ii) punctually and properly perform, observe, and comply with any covenant, agreement, or condition contained in: (A) this Contract, (B) any security agreement, deed of trust, mortgage, assignment, guarantee, or other contract securing payment of 11 indebtedness evidenced by the Note, or (C) any future amendments, modifications, restatements, renewals, or extensions of any such documents. (b) The Borrower waives notice of Default and opportunity for hearing with respect to a Default under paragraph ll(a). (c) In addition to Defaults under paragraph ll(a), the Secretary may declare the Note in Default if the Secretary makes a final decision in accordance with the provisions of section 111 of the Act and 24 CFR 570.913 (or any successor provisions), including requirements for reasonable notice and opportunity for hearing, that the Borrower has failed to comply substantially with title I of the Act. Notwithstanding any other provision, following the giving of such reasonable notice, the Secretary may, in the Secretary's sole discretion pending the Secretary's final decision, withhold the guarantee of any or all obligations not yet guaranteed on behalf of the Borrower under outstanding commitments, suspend approval of any further Advances or Conversion Date Advances under the Note, and/or direct the Borrower's financial institution to: refuse to honor any instruments drawn upon, or withdrawals from, the Guaranteed Loan Funds Account or the Loan Repayment Account initiated by the Borrower, and/or refuse to release obligations and assignments by the Borrower from the Guaranteed Loan Funds Investment Account or the Loan Repayment Investment Account. 12. Remedial Actions. Upon a Default or declaration of Default under this Contract, the Secretary may, in the Secretary's sole discretion, take any or all of the following remedial actions: (a) With any funds or security pledged under this Contract, the Secretary may: (i) continue to make payments due on the Note, (ii) make a prepayment under Section I.D. of the Note or make an acceleration payment with respect to the principal amount of the Note subject to Optional Redemption as provided in Section III of the Note, (iii) purchase Government Obligations in accordance with paragraph 10 of this Contract, (iv) pay any interest due for late payment as provided in the Note, this Contract, or the Fiscal Agency/Trust Agreements, (v) pay any other obligation of the Borrower under this Contract or the Fiscal Agency/Trust Agreements, and/or (vi) pay any reasonable expenses incurred by the Secretary or the Fiscal Agent/Trustee as result of the Borrower's Default. (b) The Secretary may withhold the guarantee of any or all obligations not yet guaranteed or the disbursement of any or all grants not yet disbursed in full under outstanding guarantee commitments or grant approvals for the Borrower under Sections 108 and/or 106 of the Act. 12 (c) The Secretary may withhold approval of any or all further Advances or Conversion Date Advances under the Note (if applicable); direct the Borrower's financial institution to refuse to: honor any instruments drawn upon, or withdrawals from, the Guaranteed Loan Funds Account or the Loan Repayment Account by the Borrower, and/or to release obligations and assignments by the Borrower from the Guaranteed Loan Funds Investment Account or the Loan Repayment Investment Account; and/or direct the Borrower and/or the Borrower's financial institution to transfer remaining balances from the Guaranteed Loan Funds Account to the Loan Repayment Account. (d) Until the Conversion Date, subject to Optional Redemption, Note. or with respect to amounts the Secretary may accelerate the (e) The Secretary may exercise any other appropriate remedies or sanctions available by law or regulation applicable to the assistance provided under this Contract, or may institute any other action available under law to recover Guaranteed Loan Funds or to reimburse the Secretary for any payment under the Secretary's Guarantee or any reasonable expenses incurred by the Secretary as a result of the Default. (f) Ail notices and submissions provided for hereunder shall be in writing (including by telex, telecopier or any other form of facsimile communication) and mailed or sent or delivered, as to each party hereto, at its address set forth below or at such other address as shall be designated by such party in a written notice to the other party hereto. All such notices and other communications shall be effective when received as follows: (i) if sent by hand delivery, upon delivery; (ii) if sent by mail, upon the earlier of the date of receipt or five Business Days after deposit in the mail, postage prepaid; (iii) if sent by telex, upon receipt by the sender of an answer back; and (iv) if sent by telecopier, upon receipt. The Secretary: U.S. Dept. of Housinq and Urban Development Attention: Paul Webster, Director Financial Manaqement Division 451 7th Street, SW, Room 7180 Washinqton, DC 20410 Borrower: The City of Bakersfield Economic and Community Development Department ATTN: Ms. Donna Kunz, Economic Development Dir. 1501 Truxtun Avenue Bakersfield, CA 93301 13 13. Limited Liability. Notwithstanding any other provision of this Contract, the Fiscal Agency/Trust Agreements or the Note, any recovery against the Borrower for any liability for amounts due pursuant to the Note, the Fiscal Agency/Trust Agreements or this Contract shall be limited to the sources of security pledged in paragraph 5 or any Special Conditions of this Contract. Neither the general credit nor the taxing power of the Borrower, or of the State in which the Borrower is located, is pledged for any payment due under the Note, the Contract, or the Fiscal Agency/Trust Agreements. 14. Incorporated Grant Agreement. The Contract and the Note are hereby incorporated in and made a part of the Grant Agreement authorized by the Secretary on July 24, 2002, under the Funding Approval for grant number B-02-MC-06-0510 to the Borrower. In carrying out activities with the Guaranteed Loan Funds hereunder, the Borrower agrees to comply with the Act and 24 CFR Part 570, as provided in Subpart M thereof. 15. Special Conditions and Modifications: (a) Paragraph 5(c) of the Contract is amended by deleting the paragraph as written in its entirety and substituting therefor the following: "(c) Other security, consisting of any and all rights, titles, and interests of the Borrower (but none of the obligations of the Borrower), in and to a portfolio of notes (the "Pledged Loan Notes") and supporting security documents (the "Pledged Loan Security Documents") which together constitute the loans (the "Pledged Loans"), further described in a Pledged Loan Inventory and Agreement (the "Pledged Loan Inventory and Agreement") in the form attached as Attachment 3. Other security shall also include, but not be limited to, a sole first priority lien in the name of the Secretary on the real property described in Attachment 4 hereof {1601 Truxtun Avenue) (the "Real Property"), established through an appropriate and properly recorded mortgage (the 'Mortgage'). The Mortgage shall contain such provisions as the Secretary deems necessary." (b) Guaranteed Loan Funds shall be used by the Borrower to carry out the acquisition, construction, reconstruction, rehabilitation, or installation of a public facility, pursuant to 24 CFR 570.703(1). Specific activities to be assisted include the rehabilitation of the Martin Luther King Jr. Pool, the rehabilitation of the Jefferson Pool, development of 14 the 14~n Street Aquatic Center, and construction of a Career Counseling/Training Center facility. (c) For the Pledged Loans: (i) (ii) (iii) (iv) The Borrower shall deliver to the Secretary contemporaneously with the delivery of this Contract and the Note the following, in form and substance satisfactory to the Secretary: (A) the Pledged Loan Inventory and Agreement, including Exhibit 1, the Schedule of Pledged Loans, and a copy of Exhibit 2, the Pledged Loan Escrow Agreement (in the forms attached hereto as Attachment 3), duly executed by an authorized representative of the Borrower. (B) an opinion of Borrower's counsel on its letterhead, addressed to the Secretary, that: {1) the Pledged Loan Inventory and Agreement, the Pledged Loan Escrow Agreement, and the Blanket Endorsement and Assignment referred to therein, have been duly executed by an authorized representative of the Borrower and are valid and binding obligations of the Borrower, enforceable in accordance with their terms; (2) the Pledged Loan Notes and the related deeds of trust are valid and legally binding obligations of the respective borrowers, enforceable in accordance with their respective terms; and (3) the Borrower has provided to the Secretary a perfected security interest in the security specified in the Pledged Loan Inventory and Agreement. As to the preceding subparagraph, such opinion may be based, in counsel's discretion, on counsel's review of a sample of Pledged Loan documents and a certification by a responsible official of the Borrower that the remainder of the Pledged Loans were made using materially similar documents and procedures. Reserved. Reserved. The Borrower covenants that it shall ensure the 15 (d) (v) (vi) diligent performance of the usual and customary functions related to the servicing of the Pledged Loan Notes. Paragraph 12 is amended by adding at the end thereof the following language: "(g) The Secretary may complete the endorsement of the Pledged Loans (as defined in the Pledged Loan Inventory and Agreement), and thereby effectuate the transfer of such documents and the underlying indebtedness and the security therefore from the Borrower to the Secretary or the Secretary's assignee." Notwithstanding anything else to the contrary in paragraph 6(a), so long as no Default has occurred, amounts pledged pursuant to paragraph 5(b), 5(c), and 5(d) shall not be required to be deposited in the Loan Repayment Account; provided, however, such amounts shall be used in accordance with the regulations governing their use (including, without limitation, 24 CFR Part 570 and 24 CFR Part 92). Upon any Default or the issuance by the Secretary of a Notice of Impaired Security pursuant to paragraph 15(g), the Borrower shall immediately deposit all cash derived from such pledged amounts (then on hand or thereafter received) in the Loan Repayment Account. For the lien on real property described in paragraph 15(a) above and Attachment 4 of this Contracts (i) The Borrower shall select a financial institution acceptable to the Secretary (the "Custodian") to act as custodian for the documents specified in (d) (ii) below (hereinafter referred to as the "Security Documents"). The Borrower and the Custodian shall enter into a written agreement containing such provisions as the Secretary deems necessary. A fully executed copy of such agreement, with original signatures, shall be forwarded to the Secretary contemporaneously with the delivery of documents pursuant to 15(d) (ii) below. (ii) Not later than five business days after receipt by the Borrower of the Guaranteed Loan Funds, the Borrower shall deliver to the Custodian the following: (A) The original recorded Mortgage signed by the mortgagor securing repayment of the indebtedne~.~ 16 evidenced by the Note. Alternatively, Borrower shall deliver a copy of the Mortgage submitted for recordation, to be followed by the original recorded Mortgage as soon as it becomes available. (B) A mortgagee title policy, issued by a company and in a form acceptable to the Secretary, naming the Secretary as the insured party. (C) A certified survey with a legal description conforming to the title policy and the Mortgage. (D) An appraisal of the fee simple ownership interest in the Real Property specifying a combined estimate of fair market value of not less than $3,625,000. The appraisal shall be completed by an appraiser who is certified by the state and has a professional designation (such as "SRA" or "MAI"), and shall conform to the standards of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). (E) An opinion of Borrower's counsel on its letterhead, addressed and satisfactory to the Secretary, that the Mortgage is a valid and legally binding obligation, enforceable in accordance with its terms. (iii) Consistent with the use of the Guaranteed Loan Funds as described in paragraph 15(b) to rehabilitate the Martin Luther King Jr. Pool and the Jefferson Pool, the development of the 14th Street Aquatic Center, and construction of a Career Counseling/Training Center facility, the Borrower contemplates requesting release of real property from the Mortgage, as defined in paragraph 15(a) above, and substitution of other real property. The Secretary agrees timely to consider such request and to execute such release prepared in proper form by the Borrower for the signature of the Secretary, provided that the Borrower certifies that the appraised value of Property to be substituted equals or exceeds that amount which is not less than the amount required by paragraph 15(d) (ii) (D) of this Contract. (e) Paragraph 12 is amended by adding at the end thereof the following language: "(h) The Secretary may exercise any appropriate remedies to enforce the lien on the Real Property referred to in paragraph 15 (a) above, amending paragraph 5(c) ." 17 (f) (g) If any one or more of the covenants, agreements, provisions, or terms of this Contract shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Contract and shall in no way affect the validity or enforceability of the other provisions of this Contract or of the Note or the rights of the Holder thereof. (i) The Borrower acknowledges and agrees that the Secretary's guarantee of the Note is made in reliance upon the availability of grants pledged pursuant to paragraph 5(a) (individually, a "Pledged Grant" and, collectively, the "Pledged Grants") in any Federal fiscal year subsequent to the Federal fiscal year ending September 30, 2003 to: (A) pay when due the payments to become due on the Note, or (B) defease (or, if permitted, prepay) the full amount outstanding on the Note. The Borrower further acknowledges and agrees that if the Secretary (in the Secretary's sole discretion) determines that Pledged Grants'are unlikely to be available for either of such purposes, such determination shall be a permissible basis for any of the actions specified in paragraphs 15(g) (ii) and (iii) below (without notice or hearing, which the Borrower expressly waives. (ii) Upon written notice from the Secretary to the Borrower at the address specified in paragraph 12(f) above that the Secretary (in the Secretary's sole discretion) has determined that Pledged Grants are unlikely to be available for either of the purposes specified in (A) and (B) of paragraph 15(g) (i) above (such notice being hereinafter referred to as the "Notice of Impaired Security"), the Secretary may limit the availability of Pledged Grants by withholding amounts at the time a Pledged Grant is approved or by disapproving payment requests (drawdowns) submitted with respect to Pledged Grants. (iii) If after 60 days from the Notice of Impaired Security the Secretary (in the Secretary's sole discretion) determines that Pledged Grants are still unlikely to be available for either of the purposes specified in (A) and (B) of paragraph 15(g)(i) above, the Secretary may declare the Note in Default and exercise any and all remedies available under paragraph 12. This paragraph 15(g)(iii) shall not affect the right of the Secretary to declare the Note and/or this Contract in Default pursuant to paragraph 11 and to exercise in connection therewith any and all remedies available under paragraph 12. 18 (iv) Ail notices and submissions provided for hereunder shall be submitted as directed in paragraph 12(f) above. [Rest of Page Intentionally Left Blank] 19 IN WITNESS WHEREOF, the undersigned, as authorized officials on behalf of the Borrower or the Secretary, have executed this Contract for Loan Guarantee Assistance, which shall be effective as of the date of execution hereof on behalf of the Secretary. The City of Bakersfield, BORROWER ATTEST: BY= (Signature) (Signature) (Name) (Name) (Title) (Title) (Date) CA SECRETARY OF HOUSING AND URBAN DEVELOPMENT BY: (Signature) (Name) (Title) (Date) ORK,~iNAi 2O IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first-above written. "CITY" CITY OF BAKERSFIELD By: HARlrEY L. HALL Mayor APPROVED AS TO FORM: BART J. THILTGEN City Attorney By: JANICE SCANLAN Deputy City Attorney APPROVED AS TO CONTENT: ECONOMIC AND COMMUNITY DEVELOPMENT DEPARTMENT By: DONNA L. KUNZ Economic Development Director COUNTERSIGNED: By: GREGORY J. KLIMKO Finance Director ATTACHMENT 3 PLEDGED LOAN INVENTORY AND AGREEMENT This pledge and security agreement (the "Pledged Loan Inventory and Agreement") is entered into as of the day of by and between the City of Bakersfield, a public entity organized and existing under the laws of the State of California, as grantor (the "Borrower") and the Secretary of Housing and Urban Development, as secured party (the "Secretary"). WITNESSETH THAT ~nereas, the Borrower wishes to secure financing to enable the Borrower to carry out the acquisition, construction, reconstruction, rehabilitation, or installation of public facilities; and Whereas, to facilitate such financing, the Borrower has requested that the Secretary issue its guarantee under Section 108 of Title I of the Housing and Community Development Act of 1974, as amended ("Title I); and Whereas, the Secretary has agreed, pursuant to Section 108 of Title I, to guarantee the Borrower's loan (the "Loan Guarantee") upon certain conditions, including the requirement that the Borrower furnish certain collateral as security for the Loan Guarantee; and Whereas, a part of the required collateral is a portfolio of notes (the "Pledged Loan Notes") and supporting security documents described below (the "Pledged Loan Security Documents") which together constitute the loans (the "Pledged Loans") specified on 2 the attached schedule (the "Schedule of Pledged Loans"), attached hereto as ~Dd~ibit l, which the Borrower has agreed to offer as collateral for the Loan Guarantee. Now therefore, in consideration of the premises the Borrower represents and agrees as follows: 1. That the Borrower is the holder in due course of each of the Pledged Loan Notes shown on the Schedule of Pledged Loans as attached hereto as E~/~ibit 1. 2. That there are no known defenses to the payment of any of the Pledged Loan Notes in accordance with their terms. 3. That no Pledged Loan Note is in default, or is delinquent for more than thirty days on any payment due thereunder. 4. That, not later than Borrower will provide a blanket endorsement, without recourse, with a schedule of the Pledged Loan Notes, and deliver them and the Pledged Loans to a financial institution approved by the Secretary (the "Custodian") which Custodian will hold the Pledged Loans pursuant to a written agreement acceptable to the Secretary, substantially in the form attached hereto as ~,hibit 2. 5. Upon receipt of notice of a Declaration of Default from the Secretary or his designee, the Custodian will deliver to the Secretary as many of the Pledged Loans as may, in the reasonable determination of the Secretary, be necessary to cure the underlying Default, up to the limit of the total portfolio of such Pledged Loans, together with all of the Borrower's right, title and interest in and to the proceeds of any related insurance policies. 6. The Borrower will, so long as the Note, as defined in the Contract for Loan Guarantee Assistance under Section 108 between the Borrower and the Secretary of Housing and Urban Development (the "Contract"), remains unpaid, maintain the Schedule of Pledged Loans at no less than a decreasing (offsetting) aggregate value as principal payments are made to the outstanding Note. The Borrower will have the right, from time to time, to substitute other loans of equal dignity for any Pledged Loan shown on the Schedule of Pledged Loans so long as such aggregate value is maintained. 7. This Pledged Loan Inventory and Agreement constitutes a legally valid and binding obligation of the Borrower and provides the Secretary with a perfected security interest in the Pledged Loan Notes and any revenues accruing to the Borrower from the Pledged Loans. [Remainder of page intentionally left blank] 4 IN WITNESS WHEREOF, the undersigned, as authorized officials of the Borrower and the Secretary, have executed this Pledged Loan Inventory and Agreement as of the date first appearing above. The City of Bakersfield, CA BORROWER ATTESTs BY= (Signature) (Signature) (Name) (Name) (Title) (Title) (Date) SECRETARY OF HOUSING ANDURBAN DEVELOPMENT BY: (Signature) (Name) (Title) (Date) IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first-above written. "CITY" CITY OF BAKERSFIELD By: HARVEY L. HALL Mayor APPROVED AS TO FORM: BART J. THILTGEN City Attorney By: JANICE SCANLAN Deputy City Attorney APPROVED AS TO CONTENT: ECONOMIC AND COMMUNITY DEVELOPMENT DEPARTMENT By: DONNA L. KUNZ Economic Development Director COUNTERSIGNED: By: GREGORY J. KLIMKO Finance Director EXHIBIT i OF ATTACHI~IENT 3 Schedule of Ple~.qed Loans BORROWER PRINC I PAL INTEREST BALANCE RATE MATURITY ANNUAL P&I EXHIBIT 2 OF ATTACH~NT 3 PLEDGED LOAN ESCROW AGREEMENT Date: [Name and Address of Institution] Dear Sirs: Re: Section 108 Loan Guarantee Program - Pledged Loan Escrow Agreement The undersigned, the City of Bakersfield, California (the "Borrower"), hereby delivers to you, as Escrow Agent, those notes (the "Pledged Loan Notes") and supporting security documents (the "Pledged Loan Security Documents") which together constitute the loans (the "Pledged Loans") shown on the Schedule of Pledged Loans attached as Exhibit i to a certain Pledged Loan Inventory and Agreement entered into by the Borrower and the Secretary, dated as of the day of , For each Pledged Loan you will find a copy of the promissory note (the "Pledged Loan Note") and the instrument number and date of the duly recorded deed of trust related to such note. The Borrower also hereby delivers to you a blanket endorsement of the Pledged Loan Notes, and a blanket assignment of the related deeds of trust, without recourse (the "Blanket Endorsement and Assignment"). This letter agreement will be designated as Exhibit 2 to 2 said Pledged Loan Inventory and Agreement. You are to hold the Pledged Loans until the Note guaranteed by the Secretary is paid in full, or until you are authorized by the Secretary, in writing, to redeliver all or a part of such Pledged Loans to the Borrower. Notwithstanding the foregoing, you are authorized and directed to deliver up to the Borrower from time to time and upon its request, certain Pledged Loans specified by the Borrower in exchange for other Pledged Loans of equal value and dignity. In effectuating such exchanges you may rely on representations made by the Borrower as to the value of the Pledged Loans tendered in exchange for the Pledged Loans which you are asked to deliver to Borrower. In the event you receive a Declaration of Default from the Secretary, or his designee, pertaining to the Note guaranteed by the Secretary, and you receive a request to do so from the Secretary, you shall, as to as many Pledged Loans as may be needed to cure the default in the reasonable determination of the Secretary, deliver such Pledged Loans and the Blanket Endorsement and Assignment to the Secretary or his designee. Upon being notified by the Secretary that the Note guaranteed by the Secretary has been paid, you may return to Borrower as many of the Pledged Loans as may be specified by the Secretary. If you are notified by the Secretary that the Note has been paid in full, you shall deliver all of such Pledged Loans to the Borrower and terminate this escrow agreement. 3 The undersigned will indemnify and hold you, your directors, officers, employees and agents harmless from and against any and all liability, demands, claims, actions, losses, interest, costs of defense, and expenses (including reasonable attorney's fees) which arise out of your acts or omissions in connection with this agreement, except for your own gross negligence or willful misconduct. These indemnification and hold harmless provisions set forth herein shall continue after termination of this agreement. In the event of any disagreement between the undersigned and/or any other person, resulting in adverse claim or demand being made in connection with this escrow, you shall not become liable to the parties for damages or interest for your failure or refusal to comply with such conflicting or adverse demands, and you shall be entitled to continue to refuse to act until the disagreement is resolved in accordance with this paragraph. Disagreements may be resolved by: a. Ail adverse parties providing you with consistent written instructions; or b. You initiate an interpleader in a court of proper jurisdiction; provided, however, that any other controversy or claim arising out of or relating to your acts or omissions in connection with this agreement, or any related agreement or instrument, including any claim based on or arising from an alleged tort or any counterclaim related to an interpleader action, shall be determined by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon an award rendered by an arbitrator(s) may be entered in any court having jurisdiction. Should you at any time and for any reason desire to be relieved of your obligations as escrow holder hereunder, you shall give written notice to the Borrower and the Secretary. The Borrower shall within days of the receipt of such notice, appoint a successor escrow holder and instruct you to deliver the subject matter hereunder to said successor. If you are not notified of the successor escrow holder within __ days, you may return the subject matter hereunder to the Borrower and upon doing so you may be absolved from all further obligations in connection with this escrow. Except as provided as above, this agreement shall be governed by the laws of the State of California, except to the extent the federal laws of the United States of America are applicable. All notices and submissions provided for hereunder shall be in writing (including by telex, telecopier or any other form of facsimile communication) and mailed or sent or delivered, as to each party hereto, at its address set forth below or at such other address as shall be designated by such party in a written notice to the other party hereto. All such notices and other communications shall be effective when received as follows: (i) if sent by hand delivery, upon delivery; (ii) if sent by mail, upon the earlier of the date of receipt or five Business Days after deposit in the mail, postage prepaid; (iii) if sent by telex, upon receipt by the sender of sent by telecopier, upon receipt. The Secretary: U.S. Dept. Attention: Paul Webster, Director Financial Manaqement Division an answer back; and (iv) if of Housinq and Urban Development 451 7th Street, SW, Room 7180 Washington, DC 20410 Borrower: This agreement may not be amended except in writing executed by all parties hereto. Such amendment shall not be effective without the prior written consent of the Secretary. This agreement may be executed in counterparts, each of which so executed shall be deemed an original, irrespective of the date of execution and delivery, and said counterparts shall constitute one and the same document. [Rest of page intentionally left blank] This letter is submitted to you in duplicate. Please execute the duplicate copy of the certificate below, acknowledging your willingness to act as Escrow Agent in this matter, so that we may present a signed copy of this letter to the Secretary of HUD. City of Bakersfield, CA By: Name: Title: Date: (Signature) The undersigned institution certifies, for the benefit of the Secretary of Housing and Urban Development, that it is willing to act as Escrow Agent for the purposes and under the terms set forth above. [Name of Institution] By: Signature) Name: Title: Date: IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first-above written. "CITY" CITY OF BAKERSFIELD By: HARVEY L. HALL Mayor APPROVED AS TO FORM: BART J. THILTGEN City Attorney By: JANICE SCANLAN Deputy City Attorney APPROVED AS TO CONTENT: ECONOMIC AND COMMUNITY DEVELOPMENT DEPARTMENT By: DONNA L. KUNZ Economic Development Director COUNTERSIGNED: By: GREGORY J. KLIMKO Finance Director ATTACHMENT 4 Legal Description of Real Property [1601 Truxtun Avenue, Bakersfield, CA] Parcel 1: Lots 1, 2, 3 and 4 in Block 315 in the City of Bakersfield, County of Kern, State of California, as per map recorded in Book 1, Page 13 of Maps, in the office of the County Recorder of said county. Together with that portion of the alley, being 33 feet in width, lying between Lots 1 and 2 and Lots 7 and 8 of said Block 315 as vacated by Resolution No. 59-74, by the Council of the City of Bakersfield, dated June 24, 1974 and recorded July 25, 1974 in Book 4852, Page 726 of Official Records. Also that portion of the alley being 33 feet in width lying between Lots 3 and 4 and Lots 5 and 6 of said Block 315, as vacated by Resolution No. 33-75 by the Council of the City of Bakersfield, dated April 21, 1975 and recorded May 20, 1975 in Book 4896, Page 907 of Official Records. Parcel 2: All of Lots 5, 6, 7 and 8 in Block 315, in the City of Bakersfield, County of Kern, State of California, as per map recorded in Book 1, Page 13 of Maps, in the office of the County Recorder of said county. Together with that portion of the northerly 16.5 feet of 16th Street being 82.5 feet wide, that is adjacent to and bounded on the north by the south line of said Block 315 as vacated by Resolution No. 59-74, by the Council of the City of Bakersfield, dated June 24, 1974 and recorded July 25, 1974 in Book 4852, Page 726 of Official Records. Also that portion of the northerly ½ of said 16th Street, being 82.5 feet wide, lying adjacent to said Block 315 and bounded on the west by the easterly line of H Street and on the east by and westerly tine of Eye Street as vacated by Resolution No. 119-83 by the Council of the City of Bakersfield, dated August 3, 1983 and recorded September 30, 1983 in Book 5593, Page 1909 of Official Records. Excepting therefrom the northerly 16.5 feet of said 16th Street as previously vacated. Excepting therefrom that portion of the northerly ½ of 16th Street as vacated by the Council of the City of Bakersfield in Resolution No. 50-74, recorded July 25, 1974 in Book 4852, Page 726, of Official Records, and in Resolution No. 119-82, recorded September 30, 1983 in Book 5593, Page 1909 of Official Records, lying within the following described parcel of land: Beginning at the northwest corner of Lot 4, Block 324, as per Map recorded November 26, 1898, in Book 1, Pages 13 and 14, of Maps in the office of the County Recorder of said county; Thence (1) north 90°00'00" east 31.47 feet along the north line of said Lot 4, which is also the south line of a portion of 16~h Street vacated per Resolution 119-83 on September 30, 1983, said portion of vacated 16th Street being 82.5 feet in width lying adjacent to Blocks 315 and 324 as said Blocks are shown on said map of the City of Bakersfield, bounded on the west by the east line of "H" Street and on the east by the west line of Eye Street (formerly 'T' Street); Thence (2) north 20052'46" west 88.30 feet to the southwest corner of Lot 5 of said Block 315, said corner also being the intersection of the north line of said vacated 16th Street with the east line of "H" Street; Thence (3) south 0~00'00'' west along the east line of "H" Street, 82.50 feet to the point of beginning. Parcel 3: Lots 1, 2, 3 and 4 in Block 324, in the City of Bakersfield, County of Kern, State of California, as per map recorded November 25, 1898 in Book 1, Pages 13 and 14 in the office of the County Recorder of said county. Excepting therefrom the southerly 25 feet of Lot 1 and the southerly 25 feet of the easterly 26 feet of Lot 2. Together with the southerly ½ of 16th Street, lying adjacent to said Block 324, and bounded on the west by the easterly line of H Street and on the east by the westerly line of Eye Street as vacated by Resolution No 119-83 by the City Council of the City of Bakersfield, dated August 3, 1983 and recorded September 30, 1983 in Book 5593, Page 1909 of Official Records. Together with that portion of the 33 foot wide alley in said Block 324, vacated by Resolution No. 215-91 of the City Council of the City of Bakersfield, dated November 6, 1991, recorded November 20, 1991 in Book 6596, Page 1723, of Official Records, more particularly described as follows: Beginning at a point on the north line of said alley also being the southeast corner of Lot 3 of said Block 24; Thence south 00°00'00'' west, 33.00 feet to a point on the south line of said alley also being the northeast corner of Lot 6 of said block; Thence south 90°00'00'' west, along said south line, 76.94 feet; Thence north 09°01'33" west, 33.41 feet to a point on the north line of said alley; Thence north 90°00'00'' east, along said north line, 82.18 feet to the point of beginning. Excepting therefrom that portion of the southerly ½ of 16~h Street as vacated by the Council of the City of Bakersfield in Resolution No. 119-82, recorded September 30, 1983 in Book 5593, Page 1909 of Official Records, lying within the following described parcel of land: Beginning at the northwest corner of Lot 4, Block 324, as per Map recorded November 25, 1898, in Book 1, Pages 1 3 and 14, of Maps in the office of the County Recorder of said county; Thence (1) north 90'00'00" east 31.47 feet along the north line of said Lot 4, which is also the south line of a portion of 16~h Street vacated per Resolution 119-83 on September 30, 1983, said portion of vacated 16th Street being 82.5 feet in width lying adjacent to Blocks 315 and 324 as said Blocks are shown on said map of the City of Bakersfield, bounded on the west by the east line of "H" Street and on the east by the west line of Eye Street (formerly "1" Street); Thence (2) north 20°52'46'' west 88.30 feet to the southwest corner of Lot 5 of said Block 315, said corner also being the intersection of the north line of said vacated 16th Street with the east line of "H" Street; Thence (3) south 0000'00'' west along the east line of "H" Street, 82.50 feet to the point of beginning. Also excepting therefrom that portion of Lot 4 lying within the following described parcel of land: Beginning at the southwesterly corner of Lot 4, Block 324, in that portion of the City of Bakersfield, in the County of Kern, State of California, as per map recorded November 25, 1898, in Book 1, Pages 13 and 14, of Maps in the office of the County Recorder of said county; Thence running easterly along the southerly line of said Lot 4, which is also the northerly line of the alley, north 90°00'00'' east, a distance of 49.82 feet; Thence running northwesterly along a line through said Lot 4, north 9~01'33" west, a distance of 116.95 feet; Thence running westerly along the northerly line of said Lot 4, which is also the southerly line of 16~h Street, north 90°00'00'' west, a distance of 31.47 feet; Thence running southerly along the westerly line of said Lot 4, which is also the easterly line of "H" Street, south 0°00'00'' east, a distance of 115.50 feet to the point of beginning. Parcel 4: Lots 5 and 6 in Block 324, in the City of Bakersfield, County of Kern, State of California, as per map recorded November 25, 1898, in Book 1, Pages 13 and 14 of Maps, in the Office of the County Recorder of said County. Excepting therefrom that portion of said land lying within the following described parcel of land: Beginning at the southwesterly corner of Lot 5, Block 324, in that portion of the City of Bakersfield, in the County of Kern, State of California, as per map recorded November 25, 1898, in Book 1, Pages 13 and 14, of Maps in the office of the County Recorder of said county; Thence running easterly along the southerly line of Lots 5 and 6 of said Block, which is also the northerly line of AT&SF RY, north 90'00'00" east, a distance of 132.00 feet; Thence running northerly along a line separating Lots 6 and 7 of said Block, north 0'00'00" west, a distance of 36.70 feet; Thence running westerly along a line through Lots 6 and 5 of said Block, north 90~00'00'' west, a distance of 64.43 feet; Thence running northwesterly along a line through Lot 5 of said Block, north 9°01'33" west, a distance of 79.79 feet; Thence running westerly along the northerly line of Lot 5, which is also the southerly line of the alley, north 90°00'00'' east a distance of 55.06 feet; Thence running southerly along the westerly line of said Lot 5, which is also the easterly line of "H" Street, south 0°00'00'' east, a distance of 115.50 feet, to the point of beginning. Parcel 5: Lots 7 and 8 in Block 324, in the City of Bakersfield, County of Kern, State of California, as per map recorded November 25, 1898, in Book 1, Page 13, of Maps in the office of the County Recorder of said county. Excepting therefrom that portion described as follows: Beginning at the southwesterly corner of Lot 7; Thence running easterly along the southerly line of said Lots '7 and 8 in said Block, which is also the nodherly line of AT&SF Railway, north 90°00'00'' east, a distance of 132 feet; Thence running northerly along the easterly of Lot 8 in said Block, which is also the westerly line of Eye Street, north 0'00'00" east, a distance of 47.45 feet; Thence running southwesterly along a line through Lot 8 of said Block, south 45°00'00'' west, a distance of 15.20 feet; Thence running westerly along a line through said Lots 8 and 7, south 90~00'00'' west, a distance of 121.25 feet; Thence running southerly along the lot line separating Lots 7 and 6 of said Block, south 0°00'00'' east, a distance of 36.70 feet to the point of beginning, Assessor's Parcel No: 006~300-01,006-311-01,006-311-10 and 006-311-05 ATTAC}~/~ENT 1 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT LETTER AGREEMENT FOR SECTION 108 LOAN GUARANTEE PROGRAM CUSTODIAL ACCOUNT Name of Institution (and Branch) Street City, State, Zip Code Date: [ ] This account is established for funds received by the Borrower under Note(s) guaranteed by the United States Department of Housing and Urban Development (HUD) under the Section 108 Loan Guarantee Program. (Guaranteed Loan Funds Account) [ ] This account is established for repayment of the Note guaranteed by HUD under the Section 108 Loan Guarantee Program. (Loan Repayment Account) [ ] This account is established as a debt service reserve under the Section 108 Loan Guarantee Program. (Debt Service Reserve Account) You are hereby authorized and requested to establish a custodial account to be specifically designated: Trustee of United States Department of Housing and Urban Development." All deposits made in such account shall be subject to withdrawal therefrom by the Borrower named below and shall also be subject to withdrawal therefrom by HUD. No agent of the Borrower shall be authorized to withdraw funds from the account. You are also authorized to pay HLrD at any time, upon its written demand, which need not name a specific amount, the entire amount in such account subject only to notice requirements contained in applicable regulations governing this institution, but in no event to exceed seven business days. You are further authorized, upon the request of HUD, to refuse to honor any instrument drawn upon or withdrawals from such account by parties other than HUD and to change the name of the aforesaid account to the "United States Department of Housing and Urban Development." In no instance shall the funds in the custodial account be used to offset funds which may have been advanced to, or on behalf of, the Borrower by the custodian institution. This letter is submitted to you in duplicate. Please execute the duplicate copy of the certification below, acknowledging the existence of such account, so that we may present the copy signed by you to HI_rD. Name of Borrower By: [Signature] Title The undersigned institution certifies to the United States Department of Housing and Urban Development (HUD) that the account identified is in existence in this institution under Account Number: , and agrees with the Borrower named above and HUD to honor demands on such account in the manner provided in the above letter, subject only to notice requirements contained in applicable regulations governing this institution, but in no event to exceed seven business days. The undersigned institution further agrees, upon the written request of HUD, to refuse to honor any instruments drawn upon or withdrawals from such account by parties other than HUD and to change the name of the aforesaid account to "United States Department of Housing and Urban Development." In no instance shall the funds in the custodial account be used to offset funds which may have been advanced to, or on behalf of, the Borrower by the custodian institution. Deposits in this institution are insured by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, or the National Credit Union Administration. Name of Institution By (Signature and Title) Date: ATTACI{MENT 2 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT LETTER AGREEMENT FOR SECTION 108 LOAN GUARANTEE PROGRAM CUSTODIAL INVESTMENT ACCOUNT Name of Institution (and Branch) Street City, State, Zip Code Date: [ ] This account is established to hold obligations and their assignments, such obligations having been purchased with funds from the Guaranteed Loan Funds Account. (Guaranteed Loan Funds Investment Account) [ ] This account is established to hold obligations and their assignments, such obligations having been purchased with funds from the Loan Repayment Account. (Loan Repayment Investment Account) [ ] This account is established to hold obligations and their assignments, such obligations having been purchased with funds from the Debt Service Reserve Account. (Debt Service Reserve Investment Account) You are hereby authorized and requested to hold obligations and assignments of those obligations in trust for the United States Department of Housing and Urban Development (HUD) in an account specifically designated: Trustee of United States Department of Housing and Urban Development." All obligations and assignments shall be subject to release to the Borrower named below and shall also be subject to release to HUD. No agent of the Borrower shall be authorized to release the obligations or assignments. You are also authorized to release the obligations and assignments to HUD at any time, upon its written demand, which need not name specific obligations and assignments, all obligations and assignments being held in such account subject only to notice requirements contained in applicable regulations governing this institution, but in no event to exceed seven business days. You are further authorized, upon the request of HUD, to refuse to honor any request for release of the obligations and assignments from such account by parties other than HUD and to change the name of the aforesaid account to the "United States Department of Housing and Urban Development." In no instance shall the obligations in this- account be used to offset funds which may have been advanced to, or on behalf of, the Borrower by the custodian institution. This letter is submitted to you in duplicate. Please execute the duplicate copy of the certification below, acknowledging the existence of such account, so that we may present the copy signed by you to HUD. Name of Borrower By: [Signature] Title The undersigned institution certifies to the United States Department of Housing and Urban Development (HUD) that the account identified is in existence in this institution under Account Number: , and agrees with the Borrower named above and HUD to honor requests for release on such account in the manner provided in the above letter, subject only to notice requirements contained in applicable regulations governing this institution, but in no event to exceed seven business days. The undersigned institution further agrees, upon the written request of HUD, to refuse to honor any request for release of the obligations and assignments from such account by parties other than HUD and to change the name of the aforesaid account to "United States Department of Housing and Urban Development." In no instance shall the obligations in the account be used to offset funds which may have been advanced to, or on behalf of, the Borrower by the custodian institution. Deposits in this institution are insured by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, or the National Credit Union Administration. Name of Institution By (Signature and Title) Date: