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HomeMy WebLinkAboutALP construction Loan Agreement 06-10-08CONSTRUCTION LOAN AGREEMENT THIS CONSTRUCTION LOAN AGREEMENT dated June 10, 2008 is made and executed between Azusa Land Partners, LLC, a Delaware limited liability company ("Borrower') and the City of Azusa, a public corporation ("Lender") on the following terms and conditions. RECITALS A. Borrower is constructing several Projects, as defined below, as required or permitted by that certain Development Agreement dated May 27, 2004, by and between the Lender and Monrovia Nursery Company which was assigned to and assumed by the Borrower ("Development Agreement"). B. Pursuant to the Development Agreement, Borrower, as "Owner" under the Development Agreement, has commenced construction of (i) the Project Water System components which are more particularly described in Section 5.3(ii) of the Development Agreement (individually a "Component" and collectively, the "Components") and (ii) the Replacement Nursery Reservoir (as defined in Section 5.3(iv) of the Development Agreement). C. Pursuant to Section 5.3(vi) of the Development Agreement, the Incremental Costs and the ALW's Proportional Share (as those terms are defined in the Development Agreement) are to be reimbursed to Borrower by the City of Azusa Light and Water Department ("ALW") within 120 days after the completion of each of the Project Water System (or Component thereof) and the Replacement Nursery Reservoir, respectively (individually an "ALW Reimbursement" and collectively, the "ALW Reimbursements"). D. Pursuant to a Construction Loan Agreement dated August 27, 2004, Borrower obtained a construction loan ("SDNB Construction Loan") from San Diego National Bank, a national banking association ("SDNB"), in the original principal amount of up to $161,475,000 for the acquisition and development of the real property subject to the Development Agreement ("Entire Project"). The SDNB Construction Loan is secured by, among other things, (i) a first lien deed of trust recorded against the Entire Project and (ii) by a collateral assignment of the Borrower's right, title and interest under the Development Agreement, including the ALW Reimbursements (the "SDNB Entitlement Assignment"). The term "Senior Loan Documents" means the documents and agreements evidencing and securing the SDNB Construction Loan, as modified from time to time. E. Work on the Projects has been initiated, and Borrower is requesting financing to pay for a portion of the costs needed to complete the Projects pending receipt of the ALW Reimbursements. REOC IVC D JUN 12 2008 AZUSA LIGHT & MXF47 F. A portion of the financing for the Projects shall be provided to the Borrower by the loan in .� the original principal amount of up to $5,000,000 (" Loan"), which shall be evidenced by the Note, as defined below. G. The Loan will be governed by the terms and conditions of this Agreement and the Related Documents, including a Draw Agreement. H. Borrower acknowledges and agrees that as of the date of this Agreement, the Lender is not in default of any term or condition of the Development Agreement. AGREEMENT NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: TERM. This Agreement shall be effective as of June 10, 2008, and shall continue in full force and effect until such time as the principal amount of the Loan, together with interest thereon as provided in the Note and all other amounts expressly required to be paid by Borrower hereunder, has been paid in full, or until such time as the parties may agree in writing to terminate this Agreement. REIMBURSEMENT AUTHORITY. The following person currently is authorized to request Reimbursements, as defined below, and authorize payments hereunder until Lender receives from Borrower written notice of revocation of his authority: Dan O'Bannon, Chief Financial Officer of the Borrower. LOAN. The Loan shall be in an amount not to exceed the principal sum of U.S. $5,000,000 and shall bear interest pursuant to the terms of the Note. Borrower agrees that the Lender may offset any amounts due to Lender with equivalent amounts of ALW Reimbursements pursuant to the terms of the Note. Borrower shall use the proceeds of the Loan solely for the payment of the costs to construct the Projects and payment of Lender's Expenses. This Agreement shall have no force and effect unless and until the Note is executed by the Borrower. PROJECTS DESCRIPTION. The word "Projects" as used in this Agreement means the construction and completion of those specific Improvements described on Exhibit A hereto and incorporated herein by this reference. The word "Real Property" as used in this Agreement means the Real Property described in Exhibit B attached hereto and incorporated herein by reference which has been transferred to the Lender pursuant to the Development J Agreement together with all relevant Improvements, all equipment, fixtures, and other articles of personal property now or subsequently attached or affixed to the Real Property as well as all other real property, together with all accessions, parts, and additions to, all replacements of, and all substitutions for any of such property. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of the Loan, provided that, 2 on any future date upon which Borrower shall or shall be deemed to remake such representations and warranties, Borrower shall be entitled to update such representations and warranties with any material facts necessary to render such representations and warranties true and correct in all respects: Organization. Borrower is a limited liability company which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Delaware. Borrower is duly authorized to transact business in California, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign partnership in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 19 Corporate Plaza Dr., Newport Beach, CA 92660. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Projects. Borrower will notify Lender prior to any change in the location of Borrower's principal office address or any change in Borrower's name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi -governmental authority or court applicable to Borrower and Borrower's business activities. Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Authorization. Borrower's execution, delivery, and performance of this Agreement and all the Related Documents have been duty authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any prevision of (a) Borrower's articles or operating agreements, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower's properties. Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. Litigation and Claims. To the actual knowledge of Borrower, no material litigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened. Binding Effect. This Agreement, the Note and all Related Documents are binding upon the Borrower, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms. Projects Costs. To the best knowledge of Borrower, the costs to complete the Projects as reflected in Exhibit A are true and accurate estimates of the costs necessary to complete the Improvements in a good and workmanlike manner according to the Plans and Specifications presented by Borrower to Lender. 3 Utility Services. All utility services appropriate to the use of the Projects after completion of construction are or will be available at the boundaries of the Entire Project. Compliance with Governing Authorities. Borrower has examined and is familiar with all the easements, covenants, conditions, restrictions, reservations, building laws, regulations, zoning ordinances, and federal, state, and local requirements affecting the Projects. To the best knowledge of Borrower, the Projects will at all times and in all respects conform to and comply with the requirements of such easements, covenants, conditions, restrictions, reservations, building laws, regulations, zoning ordinances, and federal, state, and local requirements. Survival of Representations and Warranties. Borrower understands and agrees that in making the Loan, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the making of the Loan and delivery to Lender of the Related Documents, shall be continuing in nature, and shall remain in full force and affect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. Real Property. To Borrower's knowledge, the Real Property is free and clear of all liens and encumbrances except the lien in favor of SDNB which shall be released as soon as commercially possible after the execution of this Agreement. 5 CONDITIONS PRECEDENT TO EACH REIMBURSEMENT. Lender's obligation to make the initial Reimbursement and each subsequent Reimbursement under this Agreement shall be subject to the fulfillment to Lender's satisfaction of all of the conditions set forth in this Agreement and in the Related Documents. _; Approval of Contractors, Subcontractors, and Materialmen. Lender shall have received a list of all contractors employed in connection with the construction of the Improvements whose contracts exceed $250,000, showing the name, address, and telephone number of each contractor, a general description of the nature of the work to be done, the labor and materials to be supplied, the names of materialmen, if known, and the approximate dollar value of the labor, work, or materials with respect to each contractor or materialman. Lender shall have the right to communicate with any person to verify the facts disclosed by the list or by any application for any Reimbursement, or for any other purpose. Plans, Specifications, and Permits. The Plans and Specifications for the Projects shall have been approved by all applicable governmental agencies, and Borrower shall have J obtained all permits and requisite approvals of any governmental body necessary for the construction of the Projects. Construction Contracts. Upon Lender's request, Borrower shall furnished to Lender an executed copy of each of the Construction Contracts for the Projects. v� Budget. Lender shall have approved a detailed budget of total Projects costs. rd Borrower's Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. Insurance. Borrower has delivered to Lender certificates evidencing the insurance policies currently in force for the Entire Project ("Existing Insurance Certificates"). Workers' Compensation Coverage. Upon Lender's request, Borrower shall provide to Lender proof of the General Contractors' compliance with all applicable workers' compensation laws and regulations with regard to all work performed on the Projects. Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document. Satisfactory Construction. All work which is the subject of a disbursement requested shall have been done in a good and workmanlike manner, all in compliance with the Plans and Specifications. Borrower shall also have furnished to Lender such proofs as Lender may require to establish the progress of the work, compliance with applicable laws, and the basis for the requested disbursement in addition to the requirements of the Draw Agreement. Lien Waivers. Borrower shall have obtained and attached to each application for a Reimbursement, including the Reimbursement to cover final payment to the General Contractors, executed acknowledgments of payments of all sums due and releases of mechanic's and materialmen's liens, satisfactory to Lender, from any party having lien rights, which acknowledgments of payment and releases of liens shall cover all work, labor, equipment, materials done, supplied, performed, or furnished prior to such application for a Reimbursement. No Event of Default. There shall not exist at the time of any Reimbursement an Event of Default under this Agreement or under any Related Document. _a Draw Agreement. All conditions referenced in paragraph 5 of the Draw Agreement shall be complied with. DISBURSEMENT OF LOAN FUNDS. The following provisions relate to the disbursement of funds from the Loan Fund. Application for Reimbursements. Each application shall be submitted pursuant to the -� Draw Agreement in the form attached hereto as Exhibit C and incorporated herein by reference, executed by Borrower. Borrower shall apply only for disbursement with respect to work actually done by the General Contractors and for materials and equipment actually incorporated into the Projects. Each application for a Reimbursement shall be deemed a certification of Borrower that as of the date of such application, all representations and J warranties contained in the Agreement are true and correct in all material respects, and that Borrower is in compliance with all of the provisions of this Agreement. Payments. At the sole option of Lender, (a) Reimbursements may be paid in the joint names of Borrower and the General Contractors subcontractor(s), or suppliers(s) in payment of sums due under the Construction Contracts or (b) Lender may directly pay the General Contractors r and any subcontractors or other parties the sums due under the Construction Contracts. Borrower appoints Lender as its attorney-in-fact to make such payments. This power shall be 5 deemed coupled with an interest, shall be irrevocable, and shall survive an Event of Default under this Agreement. Final Payment to General Contractors. Upon completion of each of the Projects substantially in accordance with the Plans and Specifications for the Projects and provided sufficient Loan Funds are available ( or if not, Borrower funds the shortfall), Lender shall make a Reimbursement to cover the final payment due to the General Contractors following the posting of the completion notice, as provided under applicable law. Construction shall not be deemed complete for purposes of final disbursement unless and until Lender shall have received all of the following: (1) Evidence satisfactory to Lender that all work under the Construction Contracts relating to the Project for which final payment is requested requiring inspection by any governmental authority with jurisdiction has been duly inspected and approved by such authority, and that all parties performing work have been paid, or will be paid, for such work; (2) A certification by an engineer, architect, or other qualified inspector acceptable to Lender that such Project have been completed substantially in accordance with the Plans and Specifications and the Construction Contracts and that direct connection has been made to all utilities set forth in the Plans and Specifications, to the extent applicable to the particular Project; and (3) Evidence satisfactory to the Lender that all terms and conditions of paragraph 6 of the Draw Agreement have been complied with. Construction Default. If Borrower fails in any material respect to comply with the provisions of this Agreement after having received written notice from Lender and a reasonable opportunity to cure such failure, Lender, at its option, may refuse to make further Reimbursements , and without thereby impairing any of its rights, powers, or privileges, may enter into possession of the construction site and perform or cause to be performed any and all work and labor necessary to complete the Improvements, substantially in accordance with the Plans and Specifications. DAMAGE OR DESTRUCTION. If any of the Improvements is damaged or destroyed by casualty of any nature, Lender shall not be obligated to make disbursements under this Agreement with respect to any Project so damaged or destroyed until such restoration has been accomplished. Borrower shall be entitled to use insurance proceeds for restoration. CESSATION OF REIMBURSEMENTS. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Reimbursements or to disburse Loan proceeds if, (A) Borrower is in default under the terms of this Agreement or any of the Related Documents or (B) Borrower files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt. LEWrATION OF RESPONSIBILITY. The making of any Reiinbun emcnt by Lender shall not constitute or be interpreted as either (A) an approval or acceptance by Lender of the work done through the date of the Reimbursement, or (B) a representation or indemnity by Lender to any party against any deficiency or defect in the work or against any breach of any contract. Inspections and approvals of the Plans and Specifications, the Improvements, the workmanship and materials used in the Improvements, and the exercise of any other right of inspection, approval, or inquiry granted to I J Lender in this Agreement are acknowledged to be solely for the protection of Lender's interests, and under no circumstances shall they be construed to impose any responsibility or liability of any nature whatsoever on Lender to any party. Neither Borrower nor any contractor, subcontractor, materialman, laborer, or any other person shall rely, or have any right to rely, upon Lender's determination of the appropriateness of any Reimbursement. No disbursement or approval by Lender shall constitute a representation by Lender as to the nature of the Projects, its construction, or its intended use for Borrower or for any other person, nor shall it constitute an indemnity by Lender to Borrower or to any other person against any deficiency or defects in the Projects or against any breach of any contract. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will: Insurance. Maintain fire and other risk insurance, hail, public liability insurance, and such other insurance as currently maintained by Borrower as of the date hereof as evidenced by the Existing Insurance Certificates. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act., omission or default of Borrower or any other person. Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. Charges and Expenses. Whether or not the Projects are completed, Borrower also shall pay within ten (10) business days of its receipt of Lender's written demand therefor, all reasonable out-of-pocket expenses incurred by Lender in connection with the preparation of this Agreement and the Related Documents and the making of the Loan, including, without limitation, all closing costs, fees, and disbursements, all reasonable expenses of Lender's legal counsel (collectively, "Lender's Expenses"). Loan Proceeds. Use all Loan proceeds solely for the construction of the Improvements and payment of Lender's Expenses. Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents. Inspection. Permit employees or agents of Lender at any reasonable time upon reasonable notice to inspect the Projects. Construction of the Projects. Construction of the Projects has already commenced and Borrower shall cause the Improvements to be constructed and equipped in a diligent and orderly manner and in substantial accordance with the Plans and Specifications approved by applicable governmental entities, the Construction Contracts, and all applicable laws, <� ordinances, codes, regulations, and rights of adjoining or concurrent property owners. 7 �, Defects. Upon demand of Lender, promptly correct any defect in the Improvements or any departure from the Plans end Specifications to the extent Borrower is required to do so by law or the Senior Loan Documents. Projects Claims and Litigation. Inform Lender promptly after Borrower becomes aware of (1) all material adverse changes in the financial condition of the General Contractors, (2) any litigation and claims, actual or threatened, affecting the Projects or the General Contractors, which could materially affect the successful completion of the Projects or the ability of the General Contractors to complete the Projects as agreed; and (3) any condition or event which constitutes a breach or default under any of the Related Documents or any contract related to the Projects. Payment of Claims and Removal of Liens. (1) Cause all claims for labor done and materials and services furnished in connection with the Improvements to be fully paid and discharged in a timely manner, subject to Borrower's right to contest any such claim, (2) diligently file or procure the filing of a valid notice of completion of the Improvements, or such comparable document as may be permitted under applicable lien laws, (3) diligently file or procure the filing of a notice of cessation, or such comparable document as may be permitted under applicable lien laws, upon the happening of cessation of labor on the Improvements for a continuous period of thirty (30) days or more, and (4) take all reasonable steps necessary to remove all claims of liens against the Real Property, the Improvements or any part of the Real Property or Improvements, or any rights or interests appurtenant to the Real Property or Improvements in connection with the construction of the Improvements. Upon Lender's request, Borrower shall make such demands or claims upon or against laborers, materialmen, subcontractors, or other persons who have furnished or claim to have furnished labor, services, or materials in connection with the Improvements, which demands or claims shall under the laws of the State of California require diligent assertions of lien claims upon penalty of loss or waiver thereof. Borrower shall, within thirty (30) days after the filing of any claim of lien that is disputed or contested by Borrower, record or cause the General Contractors for the construction of the Improvements to either record in the appropriate governmental office, a surety bond pursuant to California law sufficient to release the claim of lien or to insure over any such claim of lien to the reasonable satisfaction of Lender.. GENERAL PROJECTS PROVISIONS. The following provisions relate to the construction and completion of the Projects: Change Orders. All requests for changes in the Plans and Specifications, other than minor changes involving no extra cost, must be in writing, signed by Borrower, and delivered to Lender. Borrower will obtain any required permits or authorizations from governmental authorities having jurisdiction before approving or requesting a new change order. i Lender's Right of Entry and Inspection. Lender and its agents shall have at all times the right of entry and free access to the Projects and the right to inspect all work done, labor performed, and materials furnished with respect to the Projects. Lender shall have unrestricted access to and the right to copy all records, accounting books, contracts, subcontracts, bills, statements, vouchers, and supporting documents of Borrower relating in any way to the Projects. Lender's Right to Stop Work. If Lender in good faith determines that any work or materials do not conform to the approved Plans and Specifications or sound building practices, or otherwise depart from any of the requirements of this Agreement, Lender may require such work to be stopped and withhold disbursements relating to such work until the matter is corrected. In such event, Borrower will promptly correct the work to Lender's satisfaction. Lender is under no duty to supervise or inspect the construction or examine any books and records. Any inspection or examination by Lender is for the sole purpose of protecting Lender's security and preserving Lender's rights under this Agreement. No default of Borrower will be waived by any inspection by Lender. In no event will any inspection by Lender be a representation that there has been or will be compliance with the Plans and Specifications or that the construction is free from defective materials or workmanship. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Borrower fails to make any payment when due under the Loan as referenced in the Note. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of, the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower and expiration of the cure period provided herein. Default In Favor of Third Parties. Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially negatively affect any of the Projects or Borrower's ability to repay the Loan or perform its obligations under this Agreement or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Death or Insolvency. The dissolution or termination of Borrower's existence as a going business or the death of any partner, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower which is not dismissed in 60 days. Defective Agreements. This Agreement or any of the Related Documents ceases to be in full force and effect at any time and for any reason. Breach of Construction Contracts. The Improvements are not constructed substantially in accordance with the Plans and Specifications or in accordance with the terms of the Construction Contracts except to the extent required by law. Cessation of Construction. Prior to the completion of construction of the Improvements and equipping of the Projects, the construction of the Improvements or the equipping of the Projects is abandoned or work thereon ceases for a period of more than twenty (20) consecutive days for any reason beyond the reasonable control of Borrower. W Right to Cure. Except as otherwise stated in the Note, if any default, other than a default on Indebtedness, is curable, and if Borrower has not been given a notice of a similar default during the term of the Note, it may be cured if Borrower after receiving written notice from Lender demanding cure of such default (1) cures the default within thirty (30) days; or (2) if the cure requires more than thirty (30) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continue and complete all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. EFFECT OF AN EVENT OF DEFAULT; REMEDIES. Upon the occurrence of any Event of Default and at any time thereafter, Lender may at its option, but without any obligation to do so, and in addition to any other right Lender without notice to Borrower may have, do any one or more of the following without notice to Borrower: (a) Cancel this Agreement; (b) Institute appropriate proceedings to enforce the performance of the Agreement; (c) Withhold further disbursement of Loan Funds; (d) Expend funds necessary to remedy the default; (e) Continue construction of the Projects subject to the terms and conditions of the Senior Loan Documents; (f) Bring an action on the Note and/or Indebtedness if the Note is not repaid on the Maturity Date; and (f) Exercise any other right or remedy which it has under the Note or Related Documents, or which is otherwise available at law or in equity or by statute. Notwithstanding anything to the contrary contained herein or in the Related Documents, Lender shall not be entitled to accelerate the Indebtedness upon the occurrence, or during the continuance of an Event of Default except an Event of Default if the Note is not repaid on the Maturity Date. COST BREAKDOWN. All disbursements shall be based upon a detailed breakdown of the costs, as approved by Lender, of construction, improvements and any financing or development costs for which Borrower might request disbursement in accordance with the Draw Agreement. Disbursements need not be made by Lender unless and until the revised cost breakdown is approved. Lender reserves the right to approve or disapprove any revised cost breakdown in its sole discretion. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or Injunction), appeals, and any anticipated post judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court. Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement 10 Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of California. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower shall constitute a waiver of any of Lender's rights or of any of Borrower's obligations as to any future transactions. ^� Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement. Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower's successors and assigns and shall inure to the benefit of Lender and its successors and assigns. neither Lender nor Borrower shall , however, have the right to assign their respective rights under this Agreement or any interest therein, without the prior written consent of the other. Survival of Representations and Warranties. Borrower understands and agrees that in making the Loan, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the making of the Loan and delivery to Lender of the Related Documents, shall be continuing in nature, and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. Time Is of the Essence. Time is of the essence in the performance of this Agreement. WAIVE JURY. TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL PARTIES TO THIS AGREEMENT HEREBY WAIVE THE RIGHT TO ANY 11 12 ,J JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM d, BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY. Multiple Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall be deemed one and the same instrument. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined In this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement Agreement. The word "Agreement" means this Construction Loan Agreement, as this Construction Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Construction Loan Agreement from time to time. Construction Contracts. The words "Construction Contracts" mean the contracts between Borrower and contractors for the Projects, and any subcontracts with subcontractors, materialmen, laborers, or any other person or entity for performance of work on the Projects or the delivery of materials to the Projects. Event of Default. The words "Event of Default" mean any of the events of default set forth in this Agreement in the section of this Agreement entitled "DEFAULT". General Contractors. The term "General Contractors" means those contractors that have a direct contractual relationship with the Borrower. Improvements. The word "Improvements" means all improvements to be constructed for the Projects contemplated by this Agreement. Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the Note or Related Documents, Including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents. Loan. The word "Loan" has the meaning ascribed to such term in Recital F of this Agreement. Loan Fund. The words "Loan Fund" mean the undisbursed proceeds of the Loan under this Agreement together with any equity funds or other deposits required from Borrower under this Agreement. Note. The word "Note" means the promissory note, in the original principal amount of up to $5,000,000, from Borrower to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissory note. 12 ,J Plans and Specifications. The words "Plans and Specifications" mean the plans and specifications for the Projects which have been submitted to and initialed by applicable governmental agencies, together with such changes and additions as may be approved by applicable governmental agencies. Projects. The word "Projects" means the construction projects as described in the "Projects Description" section of this Agreement. Projects Documents. The words "Project Documents" mean the Plans and Specifications, all studies, data and drawings relating to the Projects, whether prepared by or for Borrower, the Construction Contracts, and all other contracts and agreements relating to the Projects or the construction of the Improvements. Real Property. The words 'Real Property" mean the real property transferred to the Lender pursuant to the Development Agreement. Reimbursement. The word "Reimbursement" means a disbursement of Loan amounts made, or to be made, to Borrower or on Borrower's behalf under the terms and conditions of this Agreement. Related Documents. The words 'Related Documents" means the Note and the Draw Agreement and any other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan. (signatures on the following page) 13 BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS CONSTRUCTION LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. LENDER: CITY OF AZUSA By: ��.— City Manager, Francis M. Delach BORROWER: AZUSA LAND PARTNERS, LLC, a Delaware limited liability company By: PLC Azusa Land Investment, LLC, a Delaware limited liability company, its Administrative Member 0 Christopher C. Gibbs, President 14 BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS CONSTRUCTION LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. LENDER: CITY OF AZUSA BORROWER: AZUSA LAND PARTNERS, LLC, a Delaware limited liability company By: PLC Azusa Land Investment, LLC, a Delaware limited liability company, its Administrative Member By: 44- Christopher C. Gibbs, President 14 EXHIBIT A to the Construction Loan Agreement Projects Description Non CFD Portion Remaining Project/Task Budget to Complete Sierra Madre Road "Utilities) Edison 60,000 Slone Stabilization on SM 25 000 nd it for lites xing, JT 60 000 . Streets Street Labor 22,000 Glendora Residents 50,000 GVWD Improvements Driveway 51,000 Parking Lot 15,000 Wets 15,000 Site Improvements 75,000 Orange Blossom/Old SM Street Labor 12,000 Backbone Dry's 20,000 Subtotal 405,000 ------ ...... Water System 023 Pump Station and 890 Tanks Tanks Construction 561,573 Change Orders 100,000 Pump 640,095 Change Orders 150,000 1023 Tank Dry Utilities 200,000 830 Transmission 198,513 776 Transmission 17,067 Mankowski Water re -tie 50,000 Dhamakaya Water Meter 35,000 Subtotal 1,952,248 'Grading & Storm Drain Complete Storm Drain Backbone Phase I and II Complete Rough Grading 750,000 Arroyo Grading/Storm 375,000 Complete Basin 3A 150,000 Subtotal 1,275,000 Project/Task Non CFD Portion Remaining Budget to Complete Other Items Conduit/Grading 20,000 Complete Dhamakaya 50,000 Tie in Wets at Palm 50,000 Repair at Basins 250,000 Clean Up of Erosion devices 25,000 Stabilized Slopes and Pad 60,000 Job Safety Issues 50,000 Street Sweeping 20,000 Erosion Budget 08/09 150,000 Weed Abatement 08/09 50,000 Ninth Street Basin Repair 25,000 Citrus Basin Repair 20,000 Cemetery Interim Repair 20,000 Tree Preservation to 12/08 50,000 General Landscape Maint 100,000 Repair Damage Landscp. 50,000 Complete Rancho Park 60,000 Project Onsite Overhead 115,000 Unknown 3rd Party Req. 50,000 City Consultants 50,000 Garcia Trail 15,000 Covina Canal Add! MovelTie 25,000 Street Lights on Mc Neal 15,000 Street Lights on Vosberg 20,000 Legal/Closing 27,752 Subtotal Grand Total 1,367,752 5,000,000 2 EXHIBIT B to the Construction Loan Agreement Real Property description LEGAL DESCRIPTION Those portions of Lots 4, 5, 6, "A" and `B" of Tract No. 062150 in the City of Azusa, County of Los Angeles, State of California as shown on a map thereof filed in Book 1311, Pages 28 through 50 of Maps, together with that portion of Lot "C' of Tract No. 54057-2 as shown on a map thereof filed in Book 1318, Pages 44 through 47 of Maps, both in the Office of the County Recorder of said Los Angeles County, described as follows: Parcel 1: (Access Road and Utility Easement) A strip of land, 20.00 feet wide, the centerline of which is described as follows: COMMENCING at the southeasterly terminus of that certain course shown as being "North 56°0154" West 160.33 feet" in the general northerly line of said Lot "C" on said Tract No. 54057-2; thence along said general northerly line North $6001154" West 30.20 feet to the TRUE POINT OF BEGINNING; thence North 83039'32" West 3.24 feet to the beginning of a tangent curve concave northerly and having a radius of 265.00 Feet; thence along said curve westerly 59.45 feet through a central angle of 12051'16"; thence tangent from said curve North 70°48'16" West 75.41 feet to the easterly right=oF-way lute of Viewerest Drive as shown on said Tract No. 54057-2. Said strip of land shall ble lengthened qr shortened so as to originate in said general northerly line and terminate in said easterly ri4ht-0f--way line. Parcel 2: (Access Road and Utility Easement) A strip of land, 20.00 feet wide, the centerline of which is described as follows: COMMENCING at the southeasterly terminus of that certain course drown as being "North 56°01`54" West 160.33 feet" in the general northerly line of Lot "C" of Tract No. 54057- 2 as shown on a map thereof filed in Book 1318, Pago 44 through 47 of Maps, in the Office of the County Recorder of said bx Angeles County; thence along said general northerly line North 56001134" West 30.20 feet to the TRUE POINT OF BEGINNING; thence South 83"3932" East 58.87 feet to the beginning of a tangent curve concave northerly and having a radius of 195.00 feet; thence along said curve easterly 60,98 feet through a central angle of 17°55'05"; thence tangent from said curve North 78125'23" East 60.13 feet to the beginning of a tangent curve concave sdutherly and having a radius of 20.00 feet; thence along said curve easterly 15.87 feet through a central angle of 45°2750 to a point of reverse curvature with a curve concave northeasterly and having a radius of 1450.00 feet, a radial line of said curve from said point bears North 33053'13" Bast; thence along said curve southeasterly 135,37 feet through a central angle of 05°20'57" to a point of compound curvature with a curve concave northeasterly and having a radius of 733.00 feet, a radial line of said curves from said point bears North 28°32'16" East; thence along said curve southeasterly 321.56 feet through a central angle of 25°08'05" to a paint hereinafter referred to as Point "A" Said strip of land shall be lengthened or shortened so as to originate in said general northerly Iine of said Lot "C" and terminate in a line which bears North 04°09'07' East and passes through said Point "A". Parcel 3: (reservoir Site) BEGINNING at said point "A" herein above described in Parcel 2; thence North 04°09'07" East 20.73 feet to a point on a non -tangent curve concave southeasterly and having a radius of 109.00 feet, a radial line of said curve from said point bears South 59°02'52" East; thence along said curve northeasterly and easterly 138.08 feet through a central angle of 72°34'54"; thence tangent from said curve South 76°27'58" East 176.03 feet to the beginning of a tangent curve concave northerly and having a radius of 204.00 feet; thence along said curve easterly 32.10 feet through a central angle of 09101'00" to a point of reverse curvature with a curve concave southerly and having a'radius of 112.00 feet, a radial line of said curve from said point bears South 04°31'02" West; thence along said curve easterly 26.99 feet through a central angle of 13°48'35"; thence tangent from said. curve South 7104073" East 18.86 feet to the beginning of a tangent curve concave southwesterly and having a radius of 337,00 feet; thence along said curve southeasterly 104.92 feet through a central angle of 17°50'19" to a point of compound curvature with a curve concave westerly and having a radius of 25.00 feet, a radial line of said curves from said paint bears South 36*W56" West; thence along said curve southeasterly, southerly and southwesterly 54.29 feet through a central angle of 124°26'-02'; thence tangent from said curve South 7003558" West 146.93 feet to the beginning of a tangent curve concave southeasterly and having a radius of 619.00 feet; thence along said curve southwesterly 36.62 feet through a central angle of 03°23'23" to a point of reverse curvature with a curve concave northerly and having a radius of 88.00 feet, a radial line of said curve from said point bears North 22°47'25" West; thence along said curve westerly 59.26 feet through a central angle of 38°34'49"; thence tangent from said curve North 74°12'36" West 121.52 feet to the beginning of a tangent curve concave southerly and having a radius of 310.00 feet; thence along said curve westerly 34.55 feet through a central angle of 06°23'08" to a point of reverse curvature with a curve concave northeasterly and having a radius of 88.00 feet, a radial litre of said curve f-orn said point bears 2 North 09024116" East; thence along said curve northwesterly and northerly 130.16 feet through a central angle of 84°44'51" to a tangent intersection with a line which hears North 04°09107" East and passes through said Point "A'; thence tangent from said curve North 04°09'07° East 16.29 feet to the POINT OF BEGINNING. CONTAINING: 1.595 acres, more or less. Parcel 4: (A.ccew Road and Utility Easement) A strip of land, 20.00 feet wide, the centerline of which is described as follows: COMMENCING at the easterly terminus of that certain course shown as being "North 89016'15" East 47.93 feet" in the northerly line of Azusa Veterans Way as shown on Tract No. 54057-1 filed in book 1312, Pages 39 through 47 of Maps, in the Office of the County Recorder of said Los Angeles County; thence along said northerly line South 89°16'15" West 20.07 feet to the TRUE POINT OF BEGINNING and a point on a non -tangent curve concave southeasterly and having a radius of 1000.00 feet, a radial line of said curve from said point bears South 69°23'03" East; thence along said curve northeasterly 64,40 feet through a central angle of 03°41'24" to a point of reverse curvature with a curve concave southwesterly and having a radius of 41.00 feet, a radial line of said curve frorn said point bears North 65°41'39" West; thence along said curve northeasterly, northerly and northwesterly 69.72 feet through a central angle of 97°2535" to a point of compound curvature with a curve concave southerly and having a radius of 700.00 feet, a radial line of said curves from said point bears South 16°52'46" West; thence along said curve westerly 173:20 feet through a central angle of 1490'37" to a point of reverse curvature with a curve concave northeasterly and having a radius of406.00 feet, a radial line of said curve from said point bears North 02042'09" East; thence along said cove northwesterly 188.94 feet through a central angle of 27°03'51' ; thence tangent from said carve North 60°14'00" West 69.26 feet to the beginning of a tangent curve concave southwesterly and having a radius of 480.00 feet; thence along said curve northwesterly 216.82 feet through a central angle of 25°52'50" to a point of reverse curvature with a curve concave northeasterly and having a radius of 50.00 feet, a radial line of said curve from said point bears North 03°5Y10" East; thence along said curve northwesterly 68.02 feet through a central angle of 77°56'26" to a point of compound curvature with a curve concave easterly and having a radius of 2435.00 feet, a radial line of said curves from said point bears North 81049136" East; thence along said curve northerly 184.24 feet through a central angle of 04020'07" to a point of reverse curvature with a curve concave westerly and having a radius of 840.00 feet, a radial line of said curve from said point bears South 8609'43" West; thence along said curve northerly 74.33 feet through a central angle of 05°04'12" to a point of reverse curvature with a curve concave southeasterly and having a radius of 50.00 feet, a radial line of said curve from said point bears North 81°05'31" East; thence along said curve northerly and northeasterly 81.77 feet through a central angle of 93°42'13" to a point of compound curvature with a curve concave southerly and having a radius of 1067.00 'feet, a radial line of said: curves From said point bears South OS' 12' i 6" East; thence along said curve easterly 379.86 feet through a central angle of 3 20123'52" to a point of compound curvature with a curve concave southwesterly and having a radius of 4712.00 feet, a radial line of said carves from said point bears South 1S°11'36" West; thence along said curve southeasterly 400.39 feet through a central angle of 04°52'07" to a point of reverse curvature with a curve concave northwesterly and having a radius of 30.00 feet, a radial line of said curve from said point bears North 20°03'43" East; thence along said curve southeasterly, northeasterly and northwesterly 77.66 feet through a central angle of 148°19'361; thenct tangent from said curve North 38°15'53" West 49.55 feet to a point hereinafter referred to as Point "B" and the beginning of a tangent curve concave easterly and having a radius of 76.50 feet; thence along said curve northwesterly, northerly and northeasterly 10 L I I feet through a central angle of 75043'42" to a point or reverse curvature with a curve concave northwesterly and having a radius of 335.00 feet, a radial line of said curve from said point bears North 52132'l 1 " Nest; thence along said curve northeasterly 41.41 feet through a central angle of 07°04`55" to a point of reverse curvature with a curve concave southeasterly and having a radius of 282,50 feet, a radial Iine of said cwve from said point bears South 59°37'06" Fast; thence along said curve northeasterly 129.97 feet through a central angle of 26121'34'; thence tangent from said curve North 56144'28" East 17.17 feet to the beginning of a tangent curve concave southeasterly and having a radius of 210.00 feet; thence along said curve northeasterly 112.77 feet through a central angle of 30°46'09" to an intersection with the general westerly line of said Lot "B" as shown on said Tract No. 062150, said intersection being distant thereon North 38°07'43" West 91.90 feet from southeasterly terminus of that certain course shown as being "North 38°47'43" West 185.82 feet" in said general westerly line; thence continuing along said curve easterly 26.44 feet through a central angle of 07°06121'; thence. tangent from said curve South 85°23'02" East 9.79 feet to the beginning of a tangent curve concave southerly and having a radius of 100.00 feet; thence along said curve easterly 16.80 feet through a central angle of 09°3742" to a point of compound curvature with a curve concave southwesterly and having a radius of 60.00 feet, a radial line of said curves from said point bears South 14114'40" West; thence along said curve southeasterly 9.41 feet through a central angle of 08°59'26" to a point of reverse curvature with a curve concave northwesterly and having a radius of 15.00 feet, a radial line of said curve from said point bears North 23114'06" East; thence along said curve southeasterly, castorly and norfhcasterly 19.52 feet through a central angle of 74°3348`; thence tangent from said curve North 38°40'18" Last 33.33 feet to the beginning of a tangent curve concave southeasterly and having a radius of 120.00 feet; thence along said curve northeasterly 54.91 feet through a central angle of 26°10'44"; thence tangent firm said curve North 64°50'22" East 183.22 feet to the beginning of a tangent curve concave southerly and having a radius of 85.00 feet; thence along said curve easterly 97.40 feet through a central angle of 659910" to a point of reverse curvature with a curve concave northeasterly and having a radius of 110.00 feet, a radial line of said curve from said point bears North 40°29'42" East; thence along said curve southeasterly 40.18 feet through a central angle of 20°55'45"; thence tangent from said curve South 70°26'03" East 51.41 _feet to the beginning of a tangent curve concave southwesterly and having a radius of 137.00 feet; diorite along said curve southeasterly 29.54 feet through a central angle of 12°21'12"; thence tangent from said cuf•ve South 58°04'51" East 11.96 feet to a point hereinafter referred to as Point "C". C! Said strip of land shall Azusa Veteran's Way through said Point "C". be lengthened or shortened so as to originate in said northerly line of and teminate in a line which bears North 49°16'55" East and passes Parcel 5: (Access Road and Utility Easement) COMMENCING at said Point "B".herein above described in Parcel 4; thence South 511144'07" West '10.00 feet to the TRUE POINT OF BEGINNING; thence North 38015'53" West 18.20 feet to the beginning of a tangent curve concave, southwesterly and having u radius of 728.00 feet; thence along said curve northwesterly 55.91 feet through a central angle of 04°24'021; thence non -tangent from said curve North 43°28'16" East 68.03 feet to a point of cusp with a non -tangent curve concave easterly and having a radius of 86.50 feet, a radial line of said cune from said point bears South 52°32'11" East; thence along said curve southerly and southeasterly 114.33 feet through a central angle of 75°43'42" to the TRUE POINT OF BEGINNING. Parcel 6: (Reservoir Site) BEGINNING at said Point "C" herein above described in Parcel 4; thence North 49016'55" East 13-13 feet; thence South 23°37'15" East 59.71 feet to the beginning of a tangent curve concave northeasterly and having a radius of 73.00 feet; thence along said curve southerly, southwesterly, westerly, northwesterly, northerly, northeasterly and easterly 399.69 feet through a central angle of 313°42'13" to a non -tangent intersection with a line which bears North 4901055" East and passes through said Point "A'; thence non -tangent from said curve North 49016'55" East 10.48 feet to the POINT OF BEGINNING. CONTAINING; 1.7,188 square fect. EXHIBIT C to the Construction Loan Agreement Draw Agreement DRAW AGREEMENT THIS DRAW AGREEMENT (this "Agreement") is made as of June 10, 2008, between AZUSA LAND PARTNERS, LLC, a Delaware limited liability company (the "Borrower") and THE CITY OF AZUSA, a public corporation, ("Lender") with reference to the following facts: RECITALS Borrower is constructing several improvement projects ("Projects") more particularly described in the Construction Loan Agreement, described below, by and between Borrower and Lender and as required or permitted by that certain Development Agreement dated May 27, 2004 by and between the Lender and Monrovia Nursery Company which was assigned to and assumed by the Borrower ("Development Agreement"). Work on the Projects has been initiated, but the Borrower now needs financing to complete the Projects. Financing for the Projects shall be provided to the Borrower by a loan from the Lender in the original principal amount of up to $5,000,000 ("Lender Loan"), which shall be evidenced by a Promissory Note ("Promissory Note"). The Lender Loan will be governed by the terms and conditions of a Construction Loan Agreement executed by the Borrower. Borrower shall be responsible, during the construction period, to provide funds if and as need to pay for cost overruns and contingencies not otherwise funded by other sources of construction financing, in accordance with the requirements and procedures of the Construction Loan Agreement or otherwise. The Lender and Borrower desire to enter into this Agreement solely to provide for the disbursement of the Lender Loan. AGREEMENT NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: Definitions. The following terms shall have the following meanings. Unless defined herein, capitalized terms shall have the meanings set forth in the Construction Loan Agreement. J "Category" shall mean any category of expense items shown on the Projects Budget. "Construction Contracts" shall mean the construction contracts entered into between the Borrower and the Contractors, and all exhibits and attachments thereto, as the same may be amended from time to time. i1 "Construction Monitor" shall mean such person or entity as Lender may designate from time to time to inspect the construction of the improvements to be constructed for the Projects ("Improvements") and to perform other services with respect thereto on behalf of Lender. "Contractors" shall mean the Contractors which have or will have a direct contractual relationship with the Borrower with respect to the Projects pursuant to the Construction Contracts furnished to Lender in accordance with the terms of the Construction Loan Agreement. "Disbursement Request" shall have the meaning set forth in Section 2(b). "Lender" shall mean the City of Azusa, a public corporation, and any assignee of or successor to its rights, powers and responsibilities. "Lender Documents" shall mean and include the Construction Loan Agreement, and all documents relating or attached to the Construction Loan Agreement, including without limitation, the Promissory Note. "Plans" shall mean the final plans and specifications for the design, construction and equipping of the Improvements, representing complete construction documents as defined in the Development Agreement between the Borrower and the Lender, including all schematic and working drawings and, to the extent determined, designations of all manufacturers and model numbers of all equipment, as the same shall have been approved by the applicable governmental agencies, and as amended from time to time in accordance with this Agreement and the Lender Documents. "Projects Budget" shall mean the development budget for the Projects approved by the Lender in writing, as amended from time to time with the approval of the Lender. "Retainage" shall mean the retainage with respect to certain construction costs of the Improvements as provided in Section 5. Draw Procedures. The Lender Loan proceeds shall be disbursed as provided in this Agreement. In addition to satisfaction of any procedures required by the terms of the Lender Documents for each disbursement of funds, to request that the Lender authorize disbursement of the Lender Loan, the Borrower shall submit to the Lender a disbursement request ("Disbursement Request") on a Standard AIA Form G702 and G703 or such other disbursement request form that may be acceptable to the Lender, setting forth a detailed breakdown of the disbursement requested (the "Draw Summary"), including the requisition of the Contractors, not more frequently than once monthly. Concurrently with the Disbursement Request, Borrower shall also furnish to the Lender a copy of the Construction Monitor's inspection report or other documentation indicating the percentage of work complete pertaining to the Disbursement Request. Upon such request, the Lender may cause an inspection to be made of the progress of construction. If the Lender determines that construction is proceeding diligently in accordance with the Plans and otherwise in the manner required by this Agreement and if all conditions to such disbursement shall have been fulfilled, the Lender shall authorize the disbursement to Borrower for payment of the costs 2 set forth in the Disbursement Request. All disbursements shall be made approximately ten (10) days after receipt of all information required by the Lender to approve the requested disbursements. The Lender may also require verification of the information contained in the Disbursement Request by the Contractors, applicable subcontractors, the Construction Monitor, and may require separate lien waivers and releases from all Contractors and subcontractors covering all prior disbursements (except that lien waivers for the final disbursement shall cover all disbursements other than punchlist work). Notwithstanding the foregoing, each Disbursement Request shall be subject to the approval of the Lender, with respect to the Lender Loan, in accordance with this Agreement. Borrower shall pay all reasonable costs and expenses incurred by the Lender hereunder within ten (10) business days of its receipt of written demand therefor by the Lender. After demand on 7 the Borrower, Borrower may request, and the Lender may elect to authorize, disbursements of the proceeds of the Lender Loan to pay, as and when due, any unpaid or unsatisfied fees, costs or other amounts owing hereunder to the Lender. Borrower may change the Plans without the consent of the Lender provided that Borrower shall provide Lender with copies of any change order which involves a budget adjustment of more than $25,000 within three business days from execution. Any item in the Disbursement Request which is not specifically approved in the time set forth in this Section 2 shall be deemed disapproved. On the basis of the progress of the work performed on the Projects or the conditions precedent to making disbursements contained in the Lender Documents, the Lender may disapprove all or part of a requested disbursement. In the event the Lender disapproves any portion of the amount requested by Borrower in a Disbursement Request, the Lender shall promptly notify Borrower of the disapproved amount and the reason for such disapproval. In the event any item shall be disapproved or deemed disapproved, the representatives of the Borrower and the Lender shall meet promptly and in good faith to attempt to resolve the matter to their mutual satisfaction. Disbursement Amounts. The aggregate amount advanced for any Category shall be limited to the amount shown in the Projects Budget for such Category, taking into account any reallocation authorized by the Lender pursuant to this Agreement. Subject to the terms of this Agreement, the Lender will authorize disbursements of the Lender Loan to defray actual costs incurred and shown on the Projects Budget or otherwise approved by J Lender, and labor performed on the Improvements and equipment and materials incorporated into the Improvements, since the date of the last disbursement less Retainage. Cost Information. If the Borrower becomes aware of any change in the approved costs set forth in the Projects Budget which would increase the Projects Budget by more than $100,000 or cause a reallocation of the costs as shown on the Projects Budget by more than $100,000, the Borrower shall immediately notify the Lender in writing and promptly submit a proposed revised Projects Budget to the Lender for approval. The Borrower shall have no right to receive further disbursements of the Lender Loan unless and until the revised Projects Budget is approved by the Lender, which approval shall not be unreasonably withheld. Conditions Precedent to Draw. The Lender shall determine whether or not the conditions precedent to its obligation to advance the Lender Loan have been satisfied or whether or not to waive, in its sole discretion, any condition precedent to its obligation to advance the Lender Loan which the Lender City Manager, or designee, determines has not been satisfied. As conditions precedent to approval of any Disbursement Request, each of the following conditions shall have been fulfilled to the satisfaction of the Lender, as applicable: All representations and warranties contained in this Agreement and the Lender Documents shall be true and correct in all material respects; All insurance coverage required to be maintained by the Borrower under the Lender Documents or by law shall be in full force and effect; The Lender Documents shall be in full force and effect; No Event of Default under the Lender Documents shall have occurred and be continuing; Except to the extent waived the Lender City Manger, or designee, in their sole discretion, all governmental consents, licenses, permits and all other authorizations or approvals then required with respect to the construction of the Projects shall have been obtained and/or issued, or will be timely obtained; The Lender shall have received copies of notarized partial lien waiver forms executed by the Contractors and each appropriate subcontractors, supplier and materialman, including, without limitation, from all parties sending statutory notices to Contractors, notices to owners, or notices of nonpayment, specifying in each such partial lien waiver the amount paid in consideration of such partial release; Before any disbursements after the initial disbursement, the Borrower shall furnish to Lender a list (if not previously delivered) of all subcontractors employed in connection with the construction of the Projects, containing the name, address, and telephone number of each such subcontractors, a general statement of the nature of the work to be done, the labor and materials to be supplied, the names of new materialmen, if known, and the approximate dollar value of such labor or work with respect to each. Lender shall have the right to make direct contact with each subcontractors and materialmen to verify the facts disclosed by said list or for any other purpose; Copies of invoices or other acceptable documentation shall be submitted to substantiate Borrower's request for payment of construction costs, including "soft costs"; if required by Lender, Lender shall have received a copy of the Construction Monitor's approval of Borrower's requisition for "hard costs"; Disbursements of the Lender Loan will be made on the basis of the cost of the work and materials in place on the Improvements less any Retainage, less the amount of previous 11. disbursements. The percentage of disbursements held back during the course of construction ,.� of the Improvements shall be equal to the retainage required under the applicable Construction Contract and shall be hereinafter referred to as "Retainage". There shall be no Retainage for the non -construction items and such disbursements will be made on the basis of one hundred percent (100%) of the cost of approved invoices for such items. However, disbursement for amounts shown in the Projects Budget, as construction profits shall be funded based on the percentage of construction completed. Disbursements will be made for materials stored on the Land provided (i) such materials are adequately identified and insured; (ii) no materials are stored for a period exceeding forty-five (45) days; and (iii) the Lender has received and approved all invoices for materials to be stored on-site. No disbursement of the Lender will be made based on the cost of materials not stored on the Land (other than in accordance with Section 7) or for the cost of deposits required by manufacturers or fabricators of building materials, furnishings, fixtures or equipment for the Improvements. Conditions Precedent to Final Disbursement. Subject to any additional conditions set forth in the Lender Documents, the following conditions shall be satisfied prior to the final disbursement of the Lender Loan and the Retainage for each Project: All conditions of Section 5 shall continue to be met as of the date of the release of the final disbursement and the Retainage; Lender shall have received a certificate of Borrower to the effect, inter alia, that the Improvements for the Project that is the subject of the final disbursement have been completed substantially in accordance with the Plans approved by the Lender and all applicable building, fire, safety and similar codes and the matters in such certificate shall have been verified by the Construction Monitor; Lender shall have received final lien releases and waivers from the Contractors and all subcontractors for the work performed under the Construction Contract relating to the Project for which final disbursement is requested; Lender shall have received two (2) sets of detailed as -built plans and specifications for the Improvements. The plans shall be approved as such in writing by the Borrower and the Contractors. The Plans must include plans and specifications for architectural, structural, mechanical, plumbing, electrical and site development work (including storm drainage, utility lines and landscaping); and Lender shall have received a copy of a satisfactory inspection report from the Construction Monitor and the Construction Monitor's written approval of the final draw request; Draws for Stored Materials. Notwithstanding anything to the contrary contained in this Agreement, Borrower shall be entitled to submit a Disbursement Request to pay for costs actually incurred by Borrower for stored materials required in connection with the construction of the Improvements provided that the following conditions are satisfied, in addition to the conditions contained in Section 5: (i) such materials are in accordance with the Plans, (ii) such materials are securely stored in a locked or fenced area, properly inventoried, fully insured and clearly stenciled or otherwise marked to indicate that they are the property of Borrower, and if 5 stored on-site shall be stored in a locked building or enclosure and reference is made to the location of such materials, (iii) such materials, if stored off-site, shall be stored in a bonded warehouse or with a Contractors, materialman or fabricator who bears the risk of loss until delivery and installation of such materials to the Land as part of the work in place, and who has supplied a bond securing such contractor's, materialman's, or fabricator's obligation to so deliver and install such materials, which bond shall be issued by a company, shall be in an amount and shall be in form and substance satisfactory to the Lender and shall name Lender as an obligee, > and Borrower shall submit such financial information on the storer as the Lender may require, (iv) the bills of sales and contracts under which such materials are being provided shall be in form and substance satisfactory to the Lender, (v) such materials are insured against casualty, vandalism, loss and theft in a manner satisfactory to the Lender, (vi) Borrower owns, or will own with the funding of the Disbursement Request, such materials and establishes such ownership by - evidence satisfactory to the Lender, , (viii) the aggregate amount of disbursements for costs incurred by Borrower for such materials shall in no event at any time exceed the actual costs incurred by Borrower for such materials as verified by the Construction Monitor pursuant to the provisions of this Agreement, (ix) the types of materials for which the Lender will approve of the making of disbursements pursuant to this paragraph shall be limited to the following categories: _ hardware, railings, security screens and grating, electrical equipment, lumber, masonry brick, 7 pre -cast concrete, doors, windows, and plumbing fixtures and (x) Borrower shall submit evidence satisfactory to the Lender that the materials, whether stored on-site or off-site are insured against damage or destruction for their full replacement value, and the Lender shall be designated as the loss payee on such insurance policies. Notices. Any and all notices, demands or other communications required or desired to be given hereunder by any party shall be in writing and shall be validly given or made to another party only (a) if served personally, (b) if deposited in the United States first class mail, certified or registered, postage prepaid, or (c) if sent by overnight delivery service and a confirmation of receipt is obtained. If such notice, demand or other communication is served personally, service shall be conclusively deemed made at the time of such personal service. If such notice, demand or other communication is given by mail, such shall be conclusively deemed given seventy-two (72) hours after the deposit thereof in the United States mail addressed to the party to whom such notice, demand or other communication is to be given at the following address set forth below. If such notice, demand or other communication is sent by overnight delivery service, such shall be conclusively deemed given at the time confirmation of receipt is obtained, provided the overnight delivery is addressed to the party to whom such notice, demand or other communication is to be given at the address set forth below. If to the Borrower: Azusa Land Partners, LLC c/o PLC Azusa Land Investment, LLC 19 Corporate Plaza Drive Newport Beach, California 92660 Attn: Mr. Christopher C. Gibbs Fax No.: (949) 729-1214 With copies to: Con Allen, Matkins, Leck Gamble & Mallory LLP 1900 Main Street, 5th Floor Irvine, California 92614-7321 Attn: Anne E. Klokow, Esq. Fax No.: (949) 553-8354 If to the City of Azusa: City Manager P.O. Box 1399 Azusa, CA 91702 �l With a copy to: Director of Utilities P.O. Box 9500 Azusa, CA 91702 Best Best & Krieger LLP 5 Park Plaza Suite 1500 Irvine, CA 92614 Fax: 949.260.0972 Any party hereto may change its address for the purpose of receiving notices, demands and other communications as herein provided by a written notice given in the manner aforesaid to the other party or parties hereto. Governing Law. This Agreement shall be governed by, and construed in accordance with, the substantive laws of the State of California without regard to principles of conflicts of laws. Headings. The headings used herein are for convenience only and do not limit or alter the terms of this Agreement or in any way affect the meaning or interpretation of this Agreement. Successors and Assigns. All rights of each party shall inure to the benefit of its successors and assigns, and all obligations, liabilities, and duties of each party shall bind its successors and assigns subject to the limitations set forth in the Loan Agreement regarding assignment. Entire Agreement; Amendment and Modification. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein, supersedes all prior agreements and understandings, both written and oral, between the parties in respect of the subject matter hereof and no changes, amendments, or alterations hereto shall be effective unless pursuant to written instrument executed by the Borrower and the Lender. Notwithstanding the foregoing sentence or any other provision of this Agreement, this Agreement does not supersede and shall not be deemed to amend any of the Lender Documents. Borrower and Lender anticipate modifications and supplements to this Agreement from time to time, in writing, signed by the Lender City Manager or designee, and the Borrower. 7 No Waiver of Strict Compliance. No waiver or failure of a party to insist upon strict compliance F� with any obligation, covenant, agreement, representation, warranty, or condition shall operate as a waiver of, or estoppel with respect to, any subsequent or other failure to comply with such obligation, covenant, agreement, representation, warranty, or condition, or with any other obligation, covenant, agreement, representation, warranty, or condition contained herein. Failure to exercise any right, power, or remedy shall not constitute a waiver of any obligations under this Agreement or constitute a modification of this Agreement. Validity. The invalidity or unenforceability of any terms or provisions of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect, and, if any such unenforceable provision hereof is enforceable in any part or to any lesser extent, such provision shall be enforceable in all such parts and to the greatest extent permissible under applicable law. Supervision of Construction. The Lender shall be under no obligation to perform any of the construction or complete the construction of the improvements on the Property, or to supervise any construction on the Property, and shall not be responsible for inadequate or deficient Contractors, subcontractors, materials, equipment or supplies. The Lender is not the agent for Borrower, nor is the Lender a partner or joint venturer with Borrower. The Lender shall not have any fiduciary duty or obligation to the Borrower. Reservation of Rights. Nothing contained herein shall be construed as restricting, limiting, amending or modifying the rights of the parties in the Lender Documents, as they relate to defaults or remedies. Termination of Agreement. This Agreement shall terminate when all of the Lender Loan has been fully disbursed. Further Assurances. The parties hereto hereby agree to execute such other documents and to take such other action as may be reasonably necessary to further the purposes of this Agreement. Counterparts. This Agreement may be signed by each party on a separate signature page, and when the executed signature pages are combined, shall constitute one single instrument with the same effect as if all signatories had executed the same instrument. (Signatures on next page) Hl- IN WITNESS WHEREOF, each party has executed this Agreement on the date first hereinabove written. ORANGE\BHOLDEN\47379.4 AZUSA LAND PARTNERS, LLC, a Delaware limited liability company By: PLC Azusa Land Investment, LLC, a Delaware limited liability company, its Administrative Member By: Christopher C. Gibbs, President THE CITY OF AZUSA By: City Manager 0 IN WITNESS WHEREOF, each party has executed this Agreement on the date first hereinabove written. ORANGE\BHOLDEM47379.4 AZUSA LAND PARTNERS, LLC, a Delaware limited liability company By: PLC Azusa Land Investment, LLC, a Delaware limited liability company, its Administrative Member Christopher C. Gibbs, President THE CITY OF AZUSA By: r, I't. 4't - City Manager 9 J PROMISSORY NOTE $5,000,000 Azusa, California June 10, 2008 1. FUNDAMENTAL PROVISIONS. The following terms will be used as defined terms in this Promissory Note (as it may be amended, modified, extended and renewed from time to time, this "Note"): Lender/Payee: CITY OF AZUSA, or the holder of this Note subject to the restrictions on assignment contained in the Loan Agreement. Borrowers/Makers: AZUSA LAND PARTNERS, LLC, a Delaware limited liability company. Principal Amount: FIVE MILLION DOLLARS ($5,000,000). Interest Rate: No interest will be charged, except that the Lender may apply the Default Interest Rate to the Principal Amount while an Event of Default is continuing. Default Interest Rate: Five percent (5.00%) per annum above the Prime Rate. Maturity Date: The sooner of, (a) April 30, 2009 or (b) the date Borrower receives reimbursement of all payments due Borrower under Section 5.3 of the Development Agreement ("ALW Reimbursements"). Borrower hereby authorizes Lender to apply the ALW Reimbursements to the then outstanding principal balance of this Note with the balance payable directly to San Diego National Bank ("SDNB"), its Construction Lender, pursuant to the escrow instructions executed by Borrower in favor of SDNB dated June 10, 2008 and acknowledged by the City on June 10, 2008. Business Day: Any day of the year other than Saturdays, Sundays or any other day on which national lenders are authorized or required to close. Loan Documents: The Construction Loan Agreement, the Note, and the Draw Agreement. Loan: The loan from Lender to Borrower in the Principal Amount and evidenced by this Note and/or the Loan Documents. Prime Rate Means the variable rate of interest per annum established by the Loan No. Bank of America from time to time as its United States "prime rate." Such "prime rate" is set by Bank of America as a general reference rate of interest, taking into account such factors as Bank of America may deem appropriate, it being understood that many of Bank of America commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that Bank of America may make various > commercial or other loans at rates of interest having no relationship to such rate. For purposes of this Note, the Prime Rate shall be the Prime Rate as of the opening of business on the date established as the effective date of any change in such "prime rate." Construction Loan Agreement: That certain Construction Loan Agreement of even date herewith between Borrower, as Borrower, and Lender. Advance: Any disbursement of Loan proceeds by Lender pursuant to the terms and provisions of this Note and/or any disbursement made pursuant to any of the Loan Documents. 2. PROMISE TO PAY. For value received, Borrower promises to pay to the order of Lender, at its office at 213 East Foothill Boulevard, Azusa, CA 91702 or at such other place as the Lender hereof may from time to time designate in writing, the Principal Amount or the aggregate unpaid principal amount of all Advances made by Lender to the undersigned from time to time and remaining outstanding on the Maturity Date, whichever is less, plus outstanding interest, if any, and Lender's Expenses, as that term is defined in the Construction Loan Agreement. 3. INTEREST; PAYMENTS. (a) Absent an Event of Default hereunder, each Advance made hereunder shall bear no interest. From and after the Maturity Date interest assessed hereunder shall be calculated on a 360 -day year with respect to the unpaid balance of the Principal Amount and, in all cases, shall be computed for the actual number of days elapsed. (b) All payments of principal and interest due hereunder shall be made (i) without deduction of any present and future taxes, levies, imposts, deductions, charges or withholdings, which amounts shall be paid by Borrower, and (ii) without any other set off, claim or defense or any kind or nature, provided, however, that ALW Reimbursements may be applied or credited to the Loan. (c) Payment of all unpaid principal, interest, and any other amounts due hereunder are due and payable on the Maturity Date. If any payment of principal and interest to be made by Borrower hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day. Loan No. �1 4. PREPAYMENT. (a) Borrower may prepay the Loan, in whole or in part, at any time and from time to time without any prepayment penalty, premium, fee or other charge. (b) In no event shall Borrower be entitled to re -borrow any amounts prepaid. LAWFUL MONEY. Principal and interest are payable in lawful money of the United States of America. 6. APPLICATION OF PAYMENTS. (a) Unless otherwise agreed to, in writing, or otherwise required by applicable law, payments will be applied first to accrued, unpaid interest, then to unpaid Lender's Expenses, as defined in the Construction Loan Agreement, then to any unpaid collection costs, and any remaining amount to principal, provided, however, during the continuance of an Event of Default, as defined herein, Lender reserves the right to apply payments among principal, interest, late charges, collection costs and other charges in such order of priority as Lender shall from time to time determine in its sole discretion. All prepayments shall be applied to the indebtedness owing hereunder in such order and manner as Lender may from time to time determine in its sole discretion. (b) The undersigned acknowledges that, during the continuance of an Event of Default hereunder, Lender will incur losses that are impracticable, costly, and inconvenient to ascertain. Those losses include, without limitation, the ability to invest amounts then due at the current rate of return and the unavailability of liquid funds. The undersigned agrees that the interest payable hereunder represents a reasonable sum considering all of the circumstances existing on the date of the execution of this Note and represents a reasonable estimate of the losses Lender will incur by reason of late payment. The undersigned further agrees that proof of actual losses would be costly, inconvenient, impracticable, and extremely difficult to fix. Acceptance of the interest will not constitute a waiver of the default with respect to the overdue installment and will not prevent Lender from exercising any of the other rights and remedies available under this Note and/or the Loan Documents. Notwithstanding anything contained herein, the interest rate will not exceed the maximum rate permitted by applicable law. 7. EVENTS OF DEFAULT. The occurrence of the following shall be deemed to be an event of default ("Event of Default") hereunder: (a) default in the payment of principal and/or interest, and/or any other sum advanced by Lender on the Maturity Date for a period exceeding ten (10) days after Borrower's receipt of written notice thereof. Loan No. 8. REMEDIES Upon the occurrence of an Event of Default hereunder (and so long as such Event of Default shall continue), the entire balance of principal hereof, together with all other amounts due under the Loan Documents, and any judgment for such principal and other amounts due under the Loan Documents shall bear interest at the Default Interest Rate, subject to the limitations contained in Section 13 hereof. No delay or omission on the part of the holder hereof in exercising any right or remedy under this Note and/or under any of the other Loan Documents hereof shall operate as a waiver of such right. 9. WAIVER. Borrower hereby waives diligence, demand for payment, presentment for payment, protest, notice of nonpayment, notice of protest, notice of intent to accelerate, notice of acceleration, notice of dishonor, and all other notices or demands of any kind (except notices specifically provided for in the Loan Documents, if any). Borrower waives to the full extent permitted by law, the right to plead any and all statutes of limitations and/or any defenses relating to marshaling of assets as a defense. 10. CHANGE, DISCHARGE, TERMINATION, OR WAIVER. No provision of this Note may be changed, discharged, terminated, or waived except in a writing signed by the party against whom enforcement of the change, discharge, termination, or waiver is sought. No failure on the part of the holder hereof to exercise and no delay by the holder hereof in exercising any right or remedy under this Note and/or the Loan Documents and/or under the law shall operate as a waiver thereof. 11. ATTORNEY'S FEES. The undersigned agrees to pay all reasonable costs including, without limitation, reasonable attorney fees, incurred by the holder of this Note in enforcing payment, whether or not suit is filed, including, without limitation, all costs, attorney fees, and expenses incurred by the holder of this Note in connection with any bankruptcy, reorganization, arrangement, or other similar proceedings involving the undersigned that in any way affects the exercise by the holder of this Note of its rights and remedies under this Note. All costs incurred by the holder of this Note in any action undertaken to obtain relief from the stay of bankruptcy statutes are specifically included in those costs and expenses to be paid by the undersigned. Borrower will pay to Lender all attorney fees and other costs referred to in this Section 11 on demand, together with interest from the date of the demand at the Default Interest Rate until paid. 12. SEVERABILITY. If any provision of this Note is unenforceable, the enforceability of the other provisions shall not be affected and they shall remain in full force and effect. Loan No. 13. INTEREST RATE LIMITATION. Borrower hereby agrees to pay an effective rate of interest that is the sum of the interest rate provided for herein, together with any additional rate of interest resulting from any other charges of interest or in the nature of interest paid or to be paid in connection with the Loan, including, without limitation, and any fees to be paid by Borrower pursuant to the provisions of the Loan Documents. Lender and Borrower agree that none of the terms and provisions contained herein or in any of the Loan Documents shall be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by the laws of State of California. In such event, if any holder of this Note shall collect monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of the maximum rate permitted to be charged by the laws of the State of California, all such sums deemed to constitute interest in excess of such maximum rate shall, at the option of the holder, be credited to the payment of other amounts payable under this Note and/or the Loan Documents or returned to Borrower. 14. NUMBER AND GENDER. In this Note the singular shall include the plural and the masculine shall include the feminine and neuter gender, and vice versa. 15. HEADINGS. Headings at the beginning of each numbered section of this Note are intended solely for convenience and are not part of this Note. 16. CHOICE OF LAW; VENUE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES. ANY DISPUTE INVOLVING ANY ISSUE REGARDING THIS NOTE MAY BE HEARD IN ANY APPROPRIATE COURT LOCATED IN EITHER ORANGE COUNTY, CALIFORNIA OR LOS ANGELES COUNTY, CALIFORNIA. 17. INTEGRATION. The Loan Documents contain the complete understanding and agreement of the holder hereof and Borrower and supersede all prior representations, warranties, agreements, arrangements, understandings, and negotiations. 18. BINDING EFFECT. The Loan Documents will be binding upon, and inure to the benefit of, the holder hereof, Borrower, and their respective successors and assigns. Borrower may not assign its obligations under the Loan Documents. Loan No. J 5 J 19. TIME OF THE ESSENCE. Time is of the essence with regard to each provision of the Loan Documents as to which time is a factor. 20. SURVIVAL. The representations, warranties, and covenants of the Borrower in the Loan Documents shall survive the execution and delivery of the Loan Documents and the making of the Loan. 21. JURY WAIVER. TO THE EXTENT PERMITTED BY LAW, BORROWER AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG BORROWER AND LENDER ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR ANY OTHER RELATED DOCUMENT OR LOAN DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS. 22. JOINT AND SEVERAL OBLIGATIONS. If this Note is signed by more than one party as Borrower, all obligations of Borrower herein shall be the joint and several obligations of each party executing this Note as Borrower. (signature on the following page) 6 Loan No. IN WITNESS WHEREOF, Maker has caused this Note to be properly executed as of the date first above written and have authorized this Note to be dated as of the day and year first above written. "BORROWER" AZUSA LAND PARTNERS, LLC, a Delaware limited liability company By: PLC Azusa Land Investment, LLC, a Delaware limited liability company, its Administrative Member By: L4k. Christopher C. Gibbs, President ORANGE\B HOLDEN\473 82.4 Loan No. 1 Azusa Land Partners, LLC c/o PLC Azusa Land Investment, LLC 19 Corporate Plaza Drive Newport Beach, California 92660 June 1 D , 2008 City of Azusa 213 East Foothill Boulevard Azusa, California 91702 Attn: City Manager Re: Development Agreement dated July 7, 2004 (the "Development Agreement"), executed by the City of Azusa, a municipal organization organized and existing under the laws of the State of California ("City"), and Monrovia Nursery Comj2anX, a California corporation "MNC" Ladies and Gentlemen: This irrevocable instruction letter (this "Letter") is being delivered to City pursuant to that certain Assignment of Development Agreement and Entitlements dated as of August 27, 2004, executed by San Diego National Bank, a national banking association ("Lender") and Azusa Land Partners, LLC, a Delaware limited liability company ("Developer") and MNC's successor -in -interest under the Development Agreement. This Letter revokes and replaces that certain irrevocable instruction letter dated March 20, 2008, executed by Developer (the "Original Letter"), in its entirety such that the Original Letter shall be of no further force or effect from and after the execution of this Letter by Developer, Lender and City. Developer irrevocably instructs City to (a) pay all amounts to be paid by City to Developer pursuant to the Development Agreement, and (b) instruct the City of Azusa Light and Water Department ("ALW") to pay all amounts to be paid by ALW to Developer pursuant to the Development Agreement, including the payment of "Incremental Costs" and "ALW's Proportional Share" (as those terms are defined in the Development Agreement) pursuant to Section 5.3(vi) thereof (such "Incremental Costs" and "ALW's Proportional Share" being collectively referred to herein as the "ALW Reimbursements"), to Lender in accordance with the payment instructions contained in Attachment A attached to this Letter; provided, however, that the ALW Reimbursements shall be paid (i) first to City to repay any amounts due under that certain Promissory Note dated June 10, 2008, executed by Borrower and payable to City in the original principal amount of Five Million Dollars ($5,000,000) (the "Note"), until the outstanding principal balance of the Note has been reduced to zero ($0); and (b) second to Lender in accordance with the payment instructions contained in Attachment A attached to this Letter. This Letter is irrevocable unless revocation or amendment is consented to by Lender. In the event of any conflict between the instructions set forth in this Letter and the provisions of the Development Agreement, the instructions set forth in this Letter shall prevail and shall be complied with by City and ALW, and City and ALW shall have no liability for complying with the instructions set forth in this Letter notwithstanding any claim by Developer that requiring City or ALW to do so was improper and/or invalid. [This Space Intentionally Left Blank; Signatures On The Next Page] 2 DEVELOPER: AZUSA LAND PARTNERS, LLC, a Delaware limited liability company By: PLC Azusa Land Investment, LLC, a Delaware limited liability company, its Administrative Member M. Christopher C. Gibbs, President LENDER: SAN DIEGO NATIONAL BANK, a national banking association By: ...... S-1 ACKNOWLEDGEMENT AND AGREEMENT City acknowledges receipt of the Irrevocable Instruction Letter attached hereto and agrees to comply with the instructions set forth therein and to provide a copy of such Irrevocable Instruction Letter (including this Acknowledgement and Agreement executed on behalf of City) to Developer and Lender. Dated: June 10, 2008 CITY: CITY OF AZUSA, a municipal organization organized and existing under the laws of the State of California By: X City Manager Francis M. Delach Acknowledgement and Agreement EXHIBIT A WIRING INSTRUCTIONS ABA NUMBER: 1222-38682 ACCOUNT NUMBER: 6166680580 LENDER: San Diego National Bank 1420 Kettner Boulevard San Diego, California 92101 Phone: (619) 231-4989 LOAN NUMBER: 1690079 ORANGE\BHOLDEN\473 843 A-1