HomeMy WebLinkAboutAD05-332 - Original - Springboard Holdings, LLC - Centurion Financial Group, LLC Loan Agreement - 09/14/2006 LOAN AGREEMENT
Dated as of September 14, 2006
among
CENTURION FINANCIAL GROUP,LLC
a Wasbington limited liability company
as Lender
and
SPRINGBOARD HOLDINGS,L.L.C.
as Borrower
COPY
�
`
°
TABLE OF CONTENTS
DEFINITIONS............................................................... ' ..... .... .- -^-.~-^^^.� �
l.l Defined Terms... ~ ........... ..... ' ...... ... . ....... .-........ .... ......
� --.- 1 �
].2 Accounting Tern-is. . ...................................____...... . .--. - ......... - 6
L3 Rules of Construction_ . .... . ..... . .......... ................. . ..-.,.... .... .... ...6
1.4 Incorporationof Recitals, Exhibits and Schedules..... . ............... -7
2. THELOAN ........ .....__ __........... ......... ................ .... - ... ..........7
2.1 Loan -' - -.. ,' . .......____- .... .., _ ~.. ... .... . .... .' - ^.7
22 Interest—_ ...................... .. - ................. . , -7
23 Repayment.... .. ....... ......._.--- ...... ... ............ ...8
24 Loan Fun. ... ___, .... ...... ........... . , -~ . ..~ '. .................... ......... ............8
25 Use n{Ptvceedo ................................ _...................................... - ...........8
2.6 Promissory Note.................... ......... _. ........ .-.... . .....-. ......... -...... ' ~8
2.7 Security. ^ .......,.. ~ ^ .... ..................... .......................___... ........ ^..`...8
28 Gnezuotes.---. ...... ................ .' . .. . ..............._..-_A �
19 Indemnity Agreement.... . .., . ........... ^ .. .. ^ ._ ..- ...... ^..^9
3, GENERAL PROVISIONS APPLICABLE TO THE[.[D\N-.,_ , .... 9
3.1 Manner of --..-.._ .......~~-....... .,--, -. - ,.. .. . . .- .. ~ .9
32 ComputationsofInterest - - .. . ~-.. . . ... ..... `.. ' ....... -..-.-`. � ^.�
3.3 DcfbuUR4te . . . - ........................ . ,....... ....~... .... ,....... ........ ......9
3'4 Maximum Interest Ratc-................ ..,_.-,. .......................................9
� 15 Late Charge .. ~ .'., . -..-.. .... ......- ...... ........... ,.- ,.^. - 10
� 3.6 Prepayments . ...... ^ ~~ - ..... ...... .... .... ~ ... .... _ . .......... ....___ 10
3'7 Extensions,Renewals and Modifications......................~ ......................... l0
3.8 Increased Costs. ........- ......... -.... ...... . . ........... .. ... . 10
3�9 Interest Rate Records...... . . ....... .......... .... . ..... ___ ,. . .. - . ... 1|
4` CONDITIONS TO CLOSING_-. , .... ` ..... ...... .., -.,, .......... ^ , - . ` ...... 1l
41 Property Documents. -- - .^ ....................... .. .. _ '
4.2 Insurance Requirements. . ................................ . ............... ..--.~--. 12
4'3 Other Documents and Rcouiremcots. ... ....� � _.^ � -� � - � -� ., � -.-.��
5. REPRESENTATIONS AND WARRANTIES~ ..... .... - - ..... .... -.- - .-. .., - l6
5,1 Organization... .... ~ ..... ...... . ' ' .... .... . 16
5.2 Financial Stateornoto .-,......-. , .... . . - ...... ........... . ^, .................. . 16
53 No No }]ofnzlt-- -. `' ... .^............ . .. . .-.- 16
5.4 Taxes ......^...... ...... ,....................... . . . .-.....^..T7
� 5.5 �of�ro�a���vof[oan��Voonznoty 17
� � ', ~.^^^ -` .- -� `-� ^ � � ~- -,- -- -,,.`^
5.6 No Conflict .. - - .................... . .... ............,- . . ^ . . -- . l7
`
"
5.7 No Consents ........... .........._. ........... ........................ - ........ .... ,-,.,17
5.8 Commencement of Construction........................,...... . ~......--` ....... 17
5.9 Services -. . -^- .... ` ... , `. _ . -~,. --^~. 18
510 Good Title; Subdivision. .---.. '.~.---..-. . .. . ..... . .^- l8
5 }} Pc«o6ta- ................ ............. ...... .... ..................... 18
5.12 Other Documents....... ..... . ..,., - . ' .-.......^-....� ...... ...... lQ
5.13 Nn Default. . .-.. .......... ........... . ..-.'--... .... . ....� .' � .� .'. � ,^.—. 18
5'14 Other Warranties—........ . . ~ ..... .......... .- 18
6. CONSTRUCTION OF IMPROVEMENTS...... .............. .........._..~ ..... .... .... l8
6.1 Commencement and Completion ofCooStouctos ^. l8
62 Change {b8ezn- -............ . - ............ ......... ^. .. . .... ......... l9
6i3 Progress Reports_. `-- . . .. . - ....—., . - .~.. ~1 19
6.4 Maintenance of Records;Access tu Borrower's Books and
Rnrordp--.... ...... ..... ^^ ... . _-`^ . -' ^... -~19
65Inspections...... ............ . -~.. .... ........_,-` ~-... . _ 30
6'6 Corrective Work_. ... .... ......... ........ _.......-, ........ ... ... ............ .....___20
6'7 ........ . ..............—... ............................ .......................20
6'8 Disputes Endangering Completion.........__................ ..._ ._ -- ......--.%1
� 6-9 Restriction . - ......... ,` ... , ... ........... ~^~ ^-^ ....... _ ........21
6.10 Payment of Charges...................... .,^^. ................. ... ... ......................2l
6-11 Ionureooe . . ..,^..-.-.-....-.... 27
6.12 Other Agreements_ .........- ..... ..... ..... ..-........ ..... .^. _ ...... .---�22
6.13 Construction Contract...- --........... .. ........... ..... ... . 22
6./4 Bodmer. ., ....... - .. . . ....... ............. ............. ......... . ~..............22
7. `...', ., . .. ................... _. ..... .... 22
7.1 General Conditions ........ ..' ZZ
7.2 Closing Coots... - . ..- -. -~-.--.. ...... .... . 24
73 Z)ravv Requests...'--~-....-. ..... ............. ......... . ....... ... ..... . 24
7.4 Hard Costs ..........._ __.... ......... ~..............................~- ,...................24
7.5 Interest}leoeive... . ' ........ . ... .... . . ...... .... ... .. . - , 25
� 7,6 Disbursement of Retaougeood Final Disbursement..... .. ................... . 25
7.7 Contingency Reserve , -- . . ..... .- ........ ........... ...J6
7.8 }u Balance. ..... ^ .... . ~ ............._......._ . -. ' ,26
7/9 Manner of Disbursement...... .^. ...........- ..- .., .. . ............... ,-.- ..27
7 18 Expenses, Fees and Interest...... . ..... - .... ... '. ,--....... .'27
7.11 Use nƒFunds ............. ...... -.-..-. . ........................................... ..... ... ^37
7'12 ResponsibilityFor Application of Funds- - ' - ... ... .�-�-
7.13 Government Set Asides. . .... .. `_ . , .^ ...' ... . .... . ... 27
W, COVENANTS (]FBODR()WER.. .-.... .... - ' ......... . .......... 28
8 1 Financial Statements and Other Information..... . . . ......... - ...... .... 29
82 Other Reporting Reoniztmco1 . . . - _~......... . ^ ......... . ..... .... ` .Z8
8.3 Net Cash Flow. ,. . ..... .-` . . ~. ..... ... . ..... .28
� � � �
84 No Subordinate Financing. .............. ... ............... .................. .... .... ....29
8.5 Further Assurances. .... ... ....... .................................... ............................29
86 Other Agreements,No Modifications......,..... . . .. .....-29
87 Leases.. .. ...-.. ................ ... .......... .... .................................. . . . ....... 29
8-8 Appraisals_ ........ .......... ...__...... ......_ -............................. ......_...29
9. RELEASE OF RESIDENTIAL UNITS..... .._.......... .. ...... _30
91 Conditions of Release Residential Units. ......... .. ...30
9.2 Release Prices............ .. . ._.... ........ ..... . ... ____ _30
10. EVENTS OF DEFAULT... ............ ... .........._...... .. ... .._ _. .... ...___ _30
11. REMEDIES .. .... . .. .... . ... .. ... .. .. ... ........30
11.1 Right to Complete Construction. ............. ..... .......30
112 Acceleration .. ......... .. ..... . .... .. . .....30
113 Withhold Funds..... ........... ........... ............................ ...... .......................33
11 4 Appointment of a Receiver...... ............ .................................__........ _ - .33
11.5 Remedies Not Exclusive........ ............ .. .. .. .....34
12. MISCELLANEOUS............ .. . ..... . ..... ........... . . . ........ .. ........... ... .__....... 34
12.1 Independent Evaluation .......... ............ ...... . ..... 34
122 Nature of Relationship.. ......._ __ _... .. ..... ......... . .. . ...... ... ..... 34
123 Assignment... _ - _. . ................. .... .... .. . ......... .......... . 35
12A Costs and Expenses, Indemnification........ _........ ...... ......_35
12.5 Signs. _ ............ __.................. ... .. .......... ........ 36
12-6 Notices_,...... .,, ............ ............................................. ........ 36
12-7 Third Parties............................. . ................................. .. .... .......... ....... .37
12,8 Singular and Plural. .. ..... .. ....... .. __37
12,9 Captions.... . ..... ...... .. .......... .. ..................... .... . ..........37
12.10 Entire Agreement; Modifications............................... ........................ .....37
12,11 Counterparts.......... .. ....... ... .. ........ ..... ...... ... .... .. . ........_. __ 37
12-12 Severability...... .... ... . ........ ....... .37
1113 Setoff, . ............................................_ 37
12.14 Term.............................. .....• __...... 38
12 15 Governing Law 38
1216 Consent to Jurisdiction and Venue... ....... .......... .. . 38
12.17 Patriot Act Notice .. .. . .. . .. .._. .. .... ..................... ............ .. .___ 38
12.18 Jury Waiver. ..... ... . ......__ _............ .. .......... ... .... _38
1219 Statutory Notice............... ... .. .. .. ....... ... ....... 39
EXHIBITS
Exhibit A Legal Description, Section 1.1
Exhibit B Permitted Exceptions, Section 5.10
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement') is made and entered into as of the 14th
day of September, 2006, between CENTURION FINANCIAL GROUP, LLC, a Washington
limited liability company ("Lender") and SPRINGBOARD HOLDINGS, L L C , a
Washington limited liability company ("Borrower").
RECITALS
A. Borrower has requested Lender to advance a construction loan to finance a
portion of the cost of Borrower's construction of Phase I of the Project (as hereinafter
defined).
B. This Agreement sets forth certain terms and conditions under which Lender is
willing to extend the requested loan to Borrower.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants set forth herein, the
parties hereto agree as follows
1. DEFINITIONS
1.1 Defined Terms
The following terms used in this Agreement are defined as follows:
"Access Laws" means Americans with Disabilities Act of 1990, the Fair Housing
Amendments Act of 1988, all federal, state and local laws and ordinances related to
handicapped access, and all statutes, rules, regulations, ordinances and orders of
Governmental Bodies and regulatory agencies, and orders and decrees of any court adopted
or enacted with respect thereto.
"Applicable Laws" means all applicable provisions and requirements of all (a)
constitutions, statutes, ordinances, rules, regulations, standards, orders and directives of any
Governmental Bodies, (b) Governmental Approvals. and (c) orders, decisions, decrees,
judgments, injunctions and writs of all courts and arbitrators, whether such Applicable Laws
presently exist, or are modified, promulgated or implemented after the date hereof.
"Applicable Margin"means 3 0 percent.
"Appraisal" means the appraisal of the Project prepared by CB Richard Ellis and
dated as of February 20, 2006, together with all updates or replacement appraisals required by
Lender.
LOAN AGREEMENT
(R lChcnts\16340\S411985 DOC) Page i
"Architect" means Jensen/Fey Architecture&Planning PS.
"Architect's Contract" means AIA Document B151 (Abbreviated Standard Form of
Agreement Between Owner and Architect) entered into November 10, 2005, between
Borrower and Architect
"Assignment of Construction Contract" has the meaning set forth in Section 4.1(p).
"Assignment of Plans" has the meaning set forth in Section 4.1(o).
"Budget" means the budget for Phase I.
"Business Day" means any day other than a Saturday, Sunday, or other day that
cornineicial banks in Seattle, Washington or New York City are authorized or required by
law to close; provided, however that when used in connection with the LIBOR Rate, such
term shall also exclude any day on which dealings in US. dollar deposits are not carried on in
the London interbank market
"Change Order"has the meaning set forth in Section 6,2(a).
"Collateral" means all property which is or hereafter may become or is intended to
become subject to a lien in favor of Lender,
"Completion Date" means May 12, 2007_
"Completion of Construction" means as to the applicable Phase of the Project,that(a)
all Improvements (other than tenant improvements for retail space that has not yet been
leased as of the date of determination) shall have been completed in accordance with the
Plans and Specifications, (b) a final certificate of occupancy for the applicable Phase of the
Project (other than for retail space that has not yet been leased as of the date of
determination) shall have been issued by the relevant Governmental Body, (e) Lender shall
have received a certificate of substantial completion (AIA G704 (1992)) issued by the
Architect, (d) Lender shall have received a contractor's affidavit of payment of debts and
claims (AIA G706 (1994)), (e) Lender shall have received a contractor's affidavit of release
of liens (AIA G706A (1994)), (f) Lender shall have received an architect's certification of
compliance that the applicable Phase of the Project was built in accordance with ADA and,
based upon personal inspections at adequate intervals during construction, all work has been
completed in a good workmanlike maiinei and in accordance with the Plans and
Specifications, and (g) Lender shall have received a certificate of insurance evidencing
coverage of the completed applicable Phase of the Project
"Construction Contract" means the construction contract between Borrower and
Contractor for the construction of Phase I in a form approved by Lender, as well as any
supplement or amendment thereto
"Construction Schedule" has the meaning set forth in Section 4 10).
LOAN AGREEMENT
(R 1Chents116340\S411985 DOC) Page 2
"Contractor"means Swinerton Builders Northwest,Inc., General Corporation.
"Deed of Trust" has the meaning set forth in Section 2 7 and includes all amendments
and replacements thereof,
"Default" means any event, circumstance or condition that with notice or the passage
of time or both would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 3.3.
Draw Request has the meaning set forth in Section 71(h).
"Event of Default"has the meaning set forth in Section 10.
"Funding" means any disbursement of Loan proceeds.
"Funds" has the meaning set forth in Section 5.
"Governmental Approval" means any authorization, consent, approval, certificate of
compliance, license, permit or exemption from, contract with, registration or filing with, or
report or notice to, any Governmental Body required or pennitted by Applicable Laws.
"Govermnental Body" means the government of the United States, any state or any
foreign country, of any governmental or regulatory official, body, department, bureau,
subdivision, agency, conu3nssion, court, arbitrator or authority, or any instrumentality thereof,
whether federal, state, or local.
"Guaranties" has the meaning set forth in Section 2 98 and includes all amendments
and replacements thereof
"Guarantors" means Ben Errez, and Plan B Development,L L.C.
"Hard Costs" has the meaning set forth in Section 7.4(a).
"Improvements" means all on-site and off-site improvements of which the Project or
applicable Phase of the Project(as the context may require) is comprised.
"In Balance" has the meaning set forth in Section 7.8(a).
"Indemnity Agreement" has the meaning set forth in Section 2.9 and includes all
amendments and replacements thereof'.
I '
"Inspector" has the meaning set forth in Section 4 1(m).
"Intercreditor Agreement" has the meaning set forth in Section 4.3(i).
"Interest Reserve" has the meaning set forth in Section 7.5.
LOAN AGREEMENT
(RkChcnts\163401S411985 DOC) Page 3
"Lender" means Centurion Financial Group, LLC, a Washington limited liability
company, and its successors and assigns
"LIBOR Borrowing Rate" means a variable rate of interest per annum equal to the
LIBOR Rate plus the Applicable Margin The LIBOR Borrowing Rate shall be adjusted
without notice effective on the day the LIBOR Rate changes, but in no event shall the rate of
interest be higher than allowed by law.
"LIBOR Rate" means, for any day, (the "Current Day"), the average offered rate for
deposits in United States Dollars for delivery of such deposits on the Current Day for the
one-month period commencing on the Current Day, which appears on Telerate Page 3750 as
of 11-00 a.m. London time (or such other time as of which such rate appears) on the day that
is two Business Days preceding the Current Day, or the rate for such deposits determined by
Lender at such time based on such other published service of general application as shall be
selected by Lender for such deposits in United States Dollars in determining the rate in the
foregoing manner, Lender may determine the rate based on the rates offered to Lender for
deposits in Unites States Dollars in the interbank eurodollar market at such time for delivery
on the Current Day for the one-month period commencing on the Current Day; and provided,
further, that in any case the LIBOR Rate shall be adjusted to take into account the maximum
reserves required to be maintained for Eurocurrency liabilities by banks as specified in
Regulation D of the Board of Governors of the Federal Reserve System or any successor
regulation. The LIBOR Rate for any day which is not a Business Day shall be the LIBOR
Rate in effect on the irr nediately preceding Business Day When the LIBOR Rate is
applicable, the interest rate hereunder shall be adjusted without notice effective on the day the
LIBOR Rate changes, but in no event shall the rate of interest be higher than allowed by law.
"Liens" has the meaning set forth in Section 6 7.
Loan has the meaningset forth in Section 2.1 a
� )
"Loan Documents" means this Agreement, the Note, the Deed of Trust, the Indemnity
Agreement, the Guaranties, the Assigiunent of Plans, the Assignment of Construction
Contract, and all other documents, agreements, financing statements and instruments relating
to the Loan and includes all amendments, renewals and replacements thereof.
Maturity Date" means July 17, 2007
"Net Cash Flow" has the meaning set forth in Section 8.3.
"Note" has the meaning set forth in Section 2.47b and includes all amendments,
renewals and replacements thereof,
"Out of Balance" has the meaning set forth in Section 7.8(a).
"Permitted Exceptions" has the meaning set forth in Section 5.10.
LOAN AGREEMENT
(R Uien(sk1634okS411985 DOC) Page 4
"Permits"has the meaning set forth in Sections 4.1(g),
"Person(s)" means any individual, partnership, joint venture, firm, corporation,
limited liability company, association, trust, or other enterprise or any governmental body,
authority, agency or instiurnentality.
"Phase I" means that portion of the Project comprised of the parking garage which is
to contain approximately 367 parking stalls, together with the retail space to be situated in the
parking garage.
"Phase II" means that portion of the Project comprised of the residential condominium
buildings which are to contain approximately 80 units, together with the retail space to be
situated in the residential condominium buildings
"Phase III" means that portion of the Project comprised of the hotel, reception area,
lobby,conference center, spa, indoor water park and residential condominiums.
"Plans and Specifications" means plans and specifications for Phase I or Phase II (as
the case may be) prepared by the Architect and approved by Lender in writing, as modified
from time to time with the written approval of Lender
"Prime Borrowing Rate" means a variable rate of interest per annum equal to the
Prime Rate plus the Prime Rate Applicable Margin. The Prime Borrowing Rate shall be
adjusted without notice effective on the day the Prime Rate changes, but in no event shall the
rate of interest be higher than allowed by law.
"Prime Rate" means the rate of interest that Lender from time to time establishes as its
prime or reference rate and is not, for example, the lowest rate of interest which Lender
collects from any borrower or class of boiroweis When the Prime Rate is applicable, the
interest rate hereunder shall be adjusted without notice effective on the day the Prime Rate
changes,but in no event shall the rate of interest be higher than allowed by law.
"Prime Rate Applicable Margin" means 0,5 percent.
"Project" means a three-phase development in downtown Kent, Washington
consisting of a parking garage which is to contain approximately 367 parking stalls, together
with the retail space to be situated in parking garage, residential condominium buildings
comprised of approximately 80 units, together with the retail space to be situated in such
building and a hotel, reception area, lobby, conference center, spa, indoor water park and
residential condominiums.
"Project Account" has the meaning set forth in Section 4.3(k)_
"Property" means the real property described in Exhibit A hereto_
LOAN AGREEMENT
(R When[SU634D\s411985 DOC) Page 5
"Public Parking Easement" has the meaning ascribed to such term in the Replacement
Parking Agreement
"Release Price"has the meaning set forth in Section 9.2.
"Replacement Parking Agreement" means that certain Replacement Parking
Agreement dated as of September 30, 2005, among the City of Kent, Borrower and Second
Avenue Real Estate LLC_
"Required Phase II Equity" means an amount determined by Lender to be sufficient,
together with the arnount of Loan proceeds, to bring the Loan In Balance for Phase 11.
"Residential Unit"means a residential condominium unit located in Phase II.
"Set Aside Funds"has the meaning set forth in Section 7.13.
"Telerate Page 3750" means the display designated as such on the Dow Tones
Markets, service or any successor service (or such other page as may replace page 3750 on
such service for the purpose of displaying London interbank offered rates of major banks for
Unites States Dollar deposits)
1.2 Accounting Terms
Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made and all financial
statements required to be delivered hereunder shall be prepared in accordance with generally
accepted accounting principles consistently applied.
1.3 Rules of Construction
Unless the context otherwise requires, the following rules of construction apply to the
Loan Documents:
(a) Words in the singular include the plural and in the plural include the singular.
(b) Provisions of the Loan Documents apply to successive events and
transactions.
(c) In the event of any inconsistency between the provisions of this Agreement
and the provisions of any of the other Loan Documents, the provisions of this Agreement
govern.
1.4 Incorporation of Recitals, Exhibits and Schedules
The foregoing recitals are incorporated into this Agreement by reference. All
references to "Exhibits" and "Schedules" contained herein are references to the exhibits and
LOAN AGREEMENT
JRtChents\16340IS411985 DOC) Page 6
schedules attached hereto, the terms and conditions of which are made a part hereof for all
purposes
2. THE LOAN
2.1 Loan Commitment
(a) Subject to and upon the terms and conditions set forth herein and in reliance
upon the representations, warranties and covenants of Borrower contained herein or made
pursuant hereto, Lender hereby agrees to advance Fundings to Borrower under the Loan from
time to time during the period commencing on the date of this Agreement and ending on the
Maturity Date, provided that the outstanding principal balance of the Loan shall at no time
exceed $11,413,000 ("Loan"). The Loan is not a revolving line of credit.
The maximum arnount of each Funding to which Borrower is entitled under the Loan
shall be determined by Lender, based on the percentage of completion of the Project as
determined in accordance with Sections 6.5, 7.3 and 7 4 and governed by the provisions of
Section 7.8.
2.2 interest
(a) Subject to Section 2 2(b) and (c) and Section 3.3, interest shall accrue on the
unpaid principal balance of the Loan from time to time at the rates set forth in the Note.
2.3 Repayment
(a) Interest on the Loan is payable beginning on the first day of the month after
the initial Funding under the Loan, and on the same date of each consecutive month
thereafter,plus a final interest payment with the final payment of principal.
(b) Borrower shall pay Lender all outstanding principal, accrued interest and other
charges with respect to the Loan on the Maturity Date
2. Loan Fee
On or before September 19, 2006, Borrower shall pay Lender a nonrefundable fee for
the Loan in the amount of $1.141,300.00, which fee is fully eained upon execution of this
Agreement regardless of whether the conditions to the initial Funding set forth in Section 4
are ever satisfied.
2.5 Use of Proceeds
The proceeds of the Loan shall be used by Borrower to finance the Improvements to
Phase L
LOAN AGREEMEN r
JR\Chcn1s\1634M411985 DOC► Pager
2.6 Promissory Note
The Loan shall be evidenced by a Promissory Note in the amount of$11,413,000.00
("Note")
2.7 Security
Payment of the Note and performance of all of Borrower's obligations under the Loan
Documents shall be secured by a Deed of Trust, Assignment of Rents and Leases and
Security Agreement (the "Deed of Trust") which shall be a hen on (a) the fee-simple title to
the Property and the Improvements; (b) all fixtures and personal property (tangible or
intangible) now owned or hereafter used or acquired by Borrower in connection with the
ownership, development, operation or maintenance of the Project, (c) all leases, rents,
revenues, investment property and cash collateral arising out of or related to the Project, and
(d) all other property described in the Deed of Trust. Notwithstanding the foregoing, the
obligations under the Indemnity Agreement shall not be secured by the Deed of Trust.
2.8 Guaranties
Each of the Guarantors shall execute and deliver to Lender a Guaranty in a form
designated by Lender(the "Guaranties")
2.9 Indemnity Agreement
Borrower and Guarantors shall execute a Certificate and Indemnity Agreement
Regarding Hazardous Substances (the "Indemnity Agreement"), pursuant to which Borrower
and Guarantor agree to indemnify Lender against certain claims relating to the Project.
Borrower and Guarantor further agree to indemnify and hold Lender harmless from any
claims, liabilities, and damages arising out of the Lender's failure to fulfill the Borrower's
funding needs under the Loan as a result of the City of Kent's actions under any one of the
subordination agreements of even date, between Lender and the City of Kent, with respect to
the Project.
3. GENERAL PROVISIONS APPLICABLE TO THE LOAN
3.1 Manner of Payment
All sums payable to Lender pursuant to this Agreement shall be paid directly to "
Lender in immediately available United States funds Whenever any payment to be made on
the Loan becomes due and payable on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day and such extension of time shall in such case be
included in computing interest on such payment.
L OAN AGRL-EM EN T
(R When�sU634M411985 DOC( Page s
3.2 Computations of Interest
All computations of interest shall be based on a 360-day year for the actual number of
days elapsed
3.3 Default Rate
Upon the occurrence and during the continuance of any Event of Default, Lender
may, at its option, raise the rate charged on the Loan to the default rate set forth in the Note
(the "Default Rate")
3.4 Maximum Interest Rate
Notwithstanding any provision contained herein or in the Note, the total liability of
Borrower for payment of interest pursuant hereto, including late charges, shall not exceed the
maximum amount of interest permitted by Applicable Laws to be charged, collected or
received from Borrower; and if any payments by Borrower includes interest in excess of that
maximum amount, Lender shall apply the excess to reduce the unpaid balance of the Loan or
if there is not principal amount outstanding under the Loan, the excess shall be returned to
Borrower
3.5 Late Charge
If any payment of principal or interest required under the Loan is not timely paid,
Borrower will be subject to late charges in accordance with the Note.
3.6 Prepayments
Borrower shall have the right, at any time, to prepay the whole or any part of the Loan
without prepayment charges. All prepayments shall be applied first to accrued interest on the
Loan and then to the outstanding principal balance of [lie Loan in the inverse order of
maturity.
3.7 Extensions,Renewals and Modifications
Any extensions, renewals, and modifications of the Loan shall be governed by the
terms and conditions of this Agreement and the other Loan Documents unless otherwise
agreed to in writing by Lender and Borrower.
3.8 Increased Costs
If, as a result of any Iaw, rule, regulation, treaty or directive, or any change therein or
in the interpretation or administration thereof, or compliance by Lender with any request or
directive (whether or not having the force of law) from any court, central bank, Governmental
Body, agency or instrumentality, or comparable agency:
LOANAGREEMENr
(R\Chents\I6340\541196>DOC) Page 9
(a) Any tax, duty or other charge to the Loan is imposed thereunder, modified or
deemed applicable, or the basis of taxation of payments to Lender of interest or principal of
the Loan or of the loan fees (other than federal income taxes and taxes imposed on the overall
net income of Lender by the jurisdiction in which has its principal office) is changed,
(b) Any reserve, special deposit, special assessment or similar requirement against
assets of, deposits with, or for the account of, or credit extended by, Lender is imposed,
modified or deemed applicable;
(c) Any increase in the amount of capital required or expected to be maintained
by Lender or any Person controlling Lender is imposed, modified or deemed applicable, or
(d) Any other condition affecting the Loan is imposed on Lender or the relevant
funding markets,
and Lender determines that, by reason thereof, the cost to Lender, of making or maintaining
the Loan is increased, or the amount of any sum receivable by Lender hereunder or under the
Note is reduced; then, Borrower shall pay to Lender upon demand such additional amount or
amounts as will compensate Lender (or the controlling person or entity in the instance of
clause (c) above) for such additional costs or reduction Determinations by Lender for
purposes of this Section 3.8 of the additional amounts required to compensate Lender shall be
conclusive in the absence of manifest error In determining such amounts, Lender may use
any reasonable averaging, attribution and allocation methods
3.9 Interest Rate Records
Lender's internal records of applicable interest rates shall be determinative in the
absence of manifest error.
4. CONDITIONS TO CLOSING
Lender shall have no obligation to make any Fundings unless each of the conditions
set forth in Sections 4.1, 4 2 and 4.3 has been satisfied on or before September 19, 2006_
Each of the conditions is for the benefit of Lender and may be deferred or waived by Lender;
provided that any waiver must be in writing and signed by Lender Lender may close the
Loan without requiring satisfaction of each condition, but in the absence of a written waiver,
Lender may condition further disbursements upon satisfaction of such conditions All of the
documents and agreements required below, together with the Loan Documents, shall be in
form and substance satisfactory to Lender
4.1 Property Documents
(a) Lender shall have received and approved an update of the Appraisal dated
within 90 days prior to the initial Funding of Loan proceeds
LOAN AGREEMENT
(RUicntsV6340\S41I9B5DOC) Page ro
(b) Lender shall have received and approved duplicate copies of an ALTA/ACSM
"Class A" land title survey of the Property certified by a licensed surveyor or engineer and
dated not more than six months prior to delivery to Lender, The survey shall show the
compass bearing, the legal description, the dimensions, boundaries and total square foot area
of the Property, the location of any existing improvements, all interior lot lines, easements,
and utilities, the location of adjoining streets and the distance to and the name of the nearest
intersecting street.
(c) Lender shall have received and approved a Phase I Environmental Report
acceptable to Lender and from a geoteclnnical engineer or other person acceptable to Lender
verifying that, after investigation into the prior uses of the Property, there is no material
possibility that the Property is contaminated by hazardous substances, or that hazardous
substances have been generated, stored or disposed of on, under or around the Property in an
unlawful or potentially dangerous manner If the Phase I Environmental Report does not
indicate to Lender's satisfaction that there is no material possibility of contamination by
hazardous substances, then Borrower shall provide a Phase lI Environmental Report
acceptable to Lender and from a geotechnical engineer or other person acceptable to Lender
verifying to Lender's satisfaction after due inspection and tests of the Property, that there is
no hazardous substance located on, under or around the Property. Lender shall have also
received and approved an environmental questionnaire prepared and signed by Borrower.
(d) Lender shall have received satisfactory evidence that the Property consists of
one or more contiguous legal lots in compliance with all subdivision and platting laws,
ordinances and regulations.
(e) Lender shall have received evidenced that all streets adjoining the Property
have been completed, dedicated, and accepted for maintenance and public, use by the
appropriate govermnental authorities, and that the Property has access-
(f) if there are any underground storage tanks on the Property, Lender shall have
received evidence of compliance with all applicable requirements of federal, state and local
laws, rules, regulations and ordinances, together with a certificate of completion approved by
Lender from the engineering firm responsible for the removal of any storage tanks from the
Property.
(g) Lender shall have received and approved copies all approvals from governing
entities or outside agencies necessary for the construction of Phase I (the "Permits") and other
evidence satisfactory to Lender evidencing that (i) the Project complies with all applicable
zoning ordinances, building and use restrictions and codes and any requirements with respect
to licenses, permits and agreements necessary for the lawful use and operation of the Project
and (ii) necessary utilities and municipal services required for the Project are in place, or will
be in place by the completion of construction of the Project and are available at budgeted
cost.
LOAN AGREEMENT
f R\Chcn(aU 63MSA 1 i 985 DOC) Page u
(h) Lender shall have received and approved a true and complete copy of the
Construction Contract for Phase I, together with financial information acceptable to Lender
with respect to Contractor, a cost breakdown of all project costs (including a breakdown for
all Hard Costs) for Phase I approved by Lender and a list to the extent then identified (to be
updated with each request for an advance of Loan proceeds) of subcontractors' names,
addresses,phone numbers and contract amounts
(i) Lender shall have received and approved a payment and performance bond for
Phase I and shall have been named as a dual obligee on such bonds.
6) Lender shall have received and approved a schedule ("Construction
Schedule") for Phase I that shall set out a realistic schedule for completion of the
Improvements and for drawing the proceeds of the Loan
(k) True and complete copies of the Plans and Specifications for Phase I prepared
by Architect for construction of the Project and identified in the Construction Contract for
Phase I shall have been delivered to Lender and approved by Borrower and Lender-
(1) Lender shall have received and approved a soils report with respect to the
Property.
(m) At Borrower's expense, an independent third-party inspector of Lender's
choice and under contract to Lender ("Inspector") shall have (i) performed a cost and
eonstructability review of the Plans and Specifications, the Budget, the Construction
Contract, the Construction Schedule, the Pen-nits and such other information regarding Phase
I as detennined by the Inspector and shall have certified that the hard cost budgets set forth in
1 the Budget are adequate to construct Phase I, (11) reviewed and approved executed
subcontracts representing at least 80 percent of the gross hard cost dollars for Phase I and (iii)
determined that Borrower can achieve Completion of Construction of Phase I on or before
May 12, 200T In lieu of executed subcontracts, the Inspector shall provide a definitive
quantity take-off estimate of the cost of construction of Phase I to determine the hard cost
schedules from which the Loan will be administered, which review and certification shall be
subject to Lender's review and approval Borrower acknowledges that Lender will rely un
part on the report of the Inspector in reviewing and approving the Plans and Specifications,
the Permits,the Construction Schedule and the Construction Contract.
(n) Lender shall have received and approved a true and complete copy of the
Architect's Contract for Phase I.
(o) Lender shall have received, duly executed and delivered by Borrower and
consented to by the Architect, an assignment of the Architect's Contract for Phase I, in a form
acceptable to Lender ("Assignment of Plans").
(p) Lender shall have received, duly executed and delivered by Borrower and
consented to by the Contractor, an assignment of the Construction Contract for Phase I. in a
form acceptable to Lender("Assigrunent of Construction Contract").
LOAN AGREEMENT
(R\C1ews\16340\S41 f985 DOC) Page 12
L
4.2 Insurance Requirements
(a) Lender shall have received a certified copy of an original hazard insurance
policy on the Project, with terrorism coverage and such endorsements or other insurance
policies as may be necessary to insure all perils reasonably required to be insured by Lender.
Each policy shall be issued by a company reasonably acceptable to Lender. The form of
coverage shall be "special cause of loss" The policy shall be in an amount not less than 100
percent of the full replacement cost of the Project and any other improvements on the
Property, and shall contain an agreed value endorsement updated yearly, a replacement cost
endorsement without deduction for depreciation, a fluctuating value endorsement with a
waiver of the co-insurance clause (or an agreed amount endorsement and inflation guard
endorsement), and loss of rents and/or business interruption coverage (covering six months'
loss). The policy shall not be subject to cancellation without 30 days' prior written notice to
Lender. Lender shall be named as loss payee on a form 438-13FU or CP 12 18 attached to the
policy.
(b) If the Property is located in an area designated by the Department of Housing
and Urban Development as a special flood hazard area, Borrower must purchase a flood
insurance policy as required by the Flood Disaster Protection Act of 1973. The policy shall
name Lender as loss payee on a Form 438-BFU or acceptable equivalent attached to the
policy
(c) Borrower shall have furnished to Lender a certificate evidencing a commercial
general liability insurance policy with respect to the Project in such amounts as Lender may
jrequire and from an insurance company acceptable to Lender. Lender shall be named as
additional insured, with respect to its mortgagee's interest.on the insurance policy
(d) There shall have been issued to Lender an ALTA Lender's title insurance
policy with extended coverage (1970 form with 1984 revisions) in the Loan amount, insuring
Lender for the benefit of Lender as the holder of the Deed of Trust with the priority required
by this Agreement. The title policy shall be issued by a title insurance company acceptable to
Lender with such endorsements as Lender may require, including endorsements ALTA 100
(compliance with covenants), 102 5 (foundation), 103 7 (abuts a public street), 1 l6 (address),
116.1 (survey), 122 (date down), a variable interest rate endorsement, a contiguity
endorsement, a subdivision endorsement, a zoning endorsement, an enviromnental lien
endorsement, and an intervening lien endorsement, as well as a rider removing the creditor's
rights exclusion All title exceptions shall be subject to Lender's approval. The title
insurance policy shall insure that the Property is free of the possibility of any prior mechanics'
or materialmen's liens, and that all taxes and assessments on the Property or any part thereof
which are due and payable on the date of closing have been paid
(e) If and to the extent not included in the foregoing, Borrower shall provide
evidence of all insurance required under all leases of all or any portion of the Project.
LOAN AGREEMENT
(R\Clients\16340\S411985 DGC( Page 13
4.3 Other Documents and Requirements
(a) Lender shall have received the Loan Documents, duly executed and delivered
by the respective parties thereto
(b) Lender shall have received and approved Uniform Commercial Code and
federal tax lien searches for Borrower from the appropriate office of the state where the
Property is located, Borrower's state of organization and where Borrower maintains its
principal office. The search shall show no Uniform Commercial Code filings with respect to
the Project and no federal tax liens against Borrower
(c) Borrower shall have received and Lender shall have approved true, accurate
and complete copies of(i)the limited liability company certificate of formation and operating
agreement for Borrower and all amendments thereto, (ii) organizational documents and all
amendments thereto for all direct and indirect owners of any equity interest in Borrower and
all Guarantors who are not natural persons and (iii) a certificate of existence/authorization or
certificate of good standing issued by the Secretary of State of the state of formation with
respect to Borrower, all of Borrower's direct and indirect owners of any equity interest in
Borrower and all Guarantors that are not natural persons, each dated within 30 days prior to
the initial Funding of Loan proceeds-
(d) Lender shall have received and approved certified copies of such resolutions
as Lender may require for Borrower, all direct and indirect owners of any equity interest in
Borrower and all Guarantors who are not natural persons authorizing the execution of the
Loan Documents, and identifying the name and title of the persons authorized to execute the
Loan Documents on behalf of such entities.
(e) Lender shall have received and approved current financial statements of
Borrower, each Guarantor, and all members of Borrower, certified as correct by such Persons,
together with such other financial information concerning such Person and the Project as
Lender may require, including an updated pro forma operating statement showing Borrower's
j operation of the Project.
(f) Lender shall have received and approved opinion letters from counsel to
Borrower addressing such matters relating to Borrower and the Loan Documents as Lender
may require. Such counsel shall be acceptable to Lender
(g) Lender shall have received and approved such other certificates, documents
and agreements relating to Borrower, the Property and Project as Lender reasonably may
require
(h) As of the date of the initial Funding of Loan proceeds, there shall not have
occurred any material deterioration in the financial condition of Borrower or any Guarantor-
(i) The Loan shall be In Balance.
L.DAN AGREEMENT
IR 1ChcntsU63401S411995 DOC) Page 14
(j} Lender shall have received and approved a detailed summary or recap of
Borrower's investment in the Project through the date of the initial Funding of Loan proceeds,
as well as opening balance sheet(prior to construction) for Borrower.
5. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Lender as of the date
of this Agreement, and as of the date of each disbursement of any portion of the proceeds of
the Loan ("Funds").
5.1 Organization
Borrower is a limited liability company duly organized and validly existing under the
laws of the State of Washington
5.2 Financial Statements
The financial statements delivered to Lender by Borrower and Guarantors (other than
Guarantors who are natural persons) were prepared in accordance with generally accepted
accounting principles consistently applied, and accurately represent the financial condition of
Borrower and Guarantors. No material adverse change has occurred in the financial
condition of Borrower or any Guarantor that could adversely affect the ability of Borrower or
any Guarantor to pay and perform its obligations under the Loan Documents,
5.3 No Litigation; No Default
There is no litigation or administrative proceeding pending, nor to the knowledge of
Borrower threatened, that affects the Project. There is (a) no litigation or administrative
proceeding pending, nor to the knowledge of Borrower threatened, that affects Borrower or
any Guarantor and (b) Borrower is not in default with respect to any contract, agreement or
other instrument, or any order, writ, injunction, decree or demand of any court or
administrative agency, that in either case could, if adversely determined, materially and
adversely affect the Project or, to the best of Borrower's knowledge, involving Architect or
Contractor that could or might adversely affect their ability to perform their obligations under
this Agreement or any other agreement related to the Project.
5.4 Taxes
Borrower has paid all license, franchise and other taxes, fees, imposts, duties or
charges, levied, assessed or imposed upon Borrower of whatsoever kind Or description and
which are due and payable (a) in connection with the Project and (b) upon any of its other
properties and which may affect the Project.
LOAN AGREEMENT
(R 1Chents11 63 4 0154 1 1 98 5 DOC) Page 15
5.5 Enforceability of Loan Documents
The Loan and the execution, delivery and performance of the Loan Documents when
executed by Borrower has been duly authorized by all necessary action, and the obligations of
Borrower under the Loan Documents constitute the legal, valid and binding obligations of
Borrower,enforceable in accordance with their terms.
5.6 No Conflict
The execution, delivery and performance of the Loan Documents by Borrower do not
conflict with or violate any federal, state or local law or regulation, or any contract,
agreement or other instrument.
5.7 No Consents
No consent, approval, authorization or order of any court or governmental agency is
required for the performance by Borrower of its obligations under the Loan Documents.
5.8 Commencement of Construction
Construction of Phase I will start in connection with recordation of the Deed of Trust.
The Construction Contract and the Architect's Contract are effective and binding, and
Borrower has submitted full,complete and accurate copies thereof to Lender
5.9 Services
All streets, easements, utilities and related services necessary for the construction and
operation of the Improvements for their intended purpose are available to the Property,
including, without limitation, water, storm and sanitary sewers, electric and telephone
facilities, and garbage removal.
5.10 Good 'Title; Subdivision
Borrower has good and marketable title to the Property, subject to no liens,
mortgages, pledges, encumbrances or charges of any kind except as described on Exhibit B
hereto ("Permitted Exceptions") The Property consists of one or more legally subdivided
and segregated lots and the Property may be mortgaged, conveyed, and otherwise dealt with
as a separate lot or parcel
5.11 Permits
Borrower has obtained all final approvals, licenses, permits, certifications and filings
necessary to construct the Improvements. Borrower shall use its best efforts and shall
exercise due diligence in taking all actions necessary to obtain as soon as practicable any
other approval, license, permit, certification and filing necessary to complete construction of
the Improvements before the Completion Date. Borrower's right to construct or use the
LOAN AGRLL-MLNr
JR%Clients1163401S411985 DOC) Page 16
Improvements is to no extent dependent upon or related to any real property other than the
Property.
5.12 Other Documents
To the best of Borrower's knowledge after diligent investigation, the documents
submitted to Lender in connection with the Loan are complete and accurate The Plans and
Specifications are identical to the documents on which the building permit has been issued.
5.13 No Default
There exists no Event of Default and no event which would constitute an Event of
Default if not cured within any applicable cure period.
5.14 Other Warranties
All representations and warranties of Borrower and Guarantors in the other Loan
Documents are true and correct.
6. CONSTRUCTION OF IMPROVEMENTS
6.1 Commencement and Completion of Construction
The parties acknowledge that construction of the Impio�,wnents has not cornmenced
as of the date of this Agreement. The Improvements shall be constructed in a good and
workmanlike manner, free from all material defects in materials and wod manslvp.
Construction and use of the Improvements shall conform to the Plans and Specifications, and
all federal, state and local laws, ordinances, regulations and rules relating to the development
and operation of the Project, including, without limitation, all building, zoning, planning,
subdivision, fire, traffic, safety, health, disability, labor, discrimination, environmental, air
quality, wetlands, shoreline and flood plain laws, ordinances, regulations and rules ("Laws"),
and with all government and private covenants, conditions and restrictions applicable to the
Project. Construction of the Improvements shall proceed continuously, diligently and with
dispatch, and the Improvements shall be completed and ready for occupancy on or before the
Completion Date The Improvements shall not be deemed to be completed until satisfaction
of the conditions for the final disbursement of Loan proceeds under Section T6.
6.2 Change Orders
(a) All requests for changes ("Change Orders") in the Plans and Specifications
(other than minor field changes involving no extra cost) shall be in writing, signed by
Borrower and Architect, and delivered to Lender promptly after execution.
(b) Borrower agrees to not permit any work pursuant to any "material" Change
Order without Lender's prior written approval. A Change Order shall be deemed "maternal" if
(i) it adversely affects the value or the use of the Improvements, or (ii) it increases or
LOAN AGREEMENT
(R iChcnlsU63401S4 r i9Bi QOCJ Page 17
decreases the costs of construction of the Improvements by more than $50,000, or (iii) when
added to other Change Orders not requiring the approval of Lender, it increases or decreases
the costs of construction of the Improvements by more than $50,000,
(c) If the cost of construction of the Improvements is increased by any Change
Order and there are insufficient Funds to pay the increased cost, Borrower shall deposit the
increased cost into the Project Account in cash before permitting any work pursuant to the
Change Order,
6.3 Progress Reports
Borrower shall deliver to Lender a report of the progress of construction of the
Improvements, the cost of the Improvements compared to the line items in the Budget,
leasing and such other data and information concerning the Project as may be requested by
Lender on a monthly basis of more frequently if required by Lender.
6.4 Maintenance of Records; Access to Borrower's Books and Records
Borrower shall at all times keep books of account and other records in which full,true
and correct entries will be made of all dealings or transactions related to the Project. Lender
or its agents shall have unrestricted access to Borrower's books and records, and to contracts,
sub-contracts, invoices, bills and statements of Borrower related to the Project, including any
supporting or related vouchers or other instruments. If Lender so requires, copies of such
items shall be delivered to Lender or its agent for audit, examination, inspection and
photocopying
6.5 Inspections
Lender and its agents shall at all times during development and construction have the
right of entry and free access to the Project, and the right to inspect all work done, labor
performed and materials furnished on or about the Project. To assist in Lender's
adiminstiation of the Loan, Lender will retain an Inspector to review the Construction
Contract, the Plans and Specifications, and the Budget to determine that the stated costs are
adequate to complete the Improvements, that the Plans and Specifications conform with all
Laws and are consistent with the Appraisal, and that utility, storin and sanitary sewer and
street access will be available to the Project. The Inspector will make periodic inspections of
the Improvements during construction to review and comment on the construction progress
and percentage of completion, the conformity with the Plans and Specifications and Laws,
the activity and coordination among trades, the quality of workmanship and the accuracy of
Borrower's estimates of the percentage of work completed. The Inspector may also perform
such other duties as Lender deems necessary or desirable. Borrower shall pay the fees of the
Inspector, Borrower acknowledges and agrees that all inspections by Lender and its agents
are solely for the purpose of protecting the security of Lender. No such inspection shall
constitute a representation by Lender to any person that the Improvements comply with the
Plans and Specifications and the Laws,or that the construction is free fiom faulty materials or
LOAN AC,REEMENr
(R ThcnOl63401S411985 DOC) Page ig
workmanship, nor shall any inspection by Lender constitute approval of any certification or
representation given to Lender or relieve any person making such certification or
representation from the responsibility therefor.
6.6 Corrective Work
If any Improvements do not conform with the requirements of this Agreement or the
Plans and Specifications, Lender shall have the right to require corrective work by delivery of
written demand to Borrower, if Lender determines that the corrective work may delay
completion of the Improvements, no further construction except corrective work shall be
performed without the prior written consent of Lender, and the corrective work shall be
completed to Lender's satisfaction within 15 days from the date of the written demand or, if
Lender detennmes that the corrective work is not reasonably capable of being completed
within 15 days, within such additional time as Lender reasonably determines is adequate.
6.7 Liens
Borrower shall keep the Project free from all liens,judgments and encumbrances of
any kind ("Liens"), whether or not superior to the Deed of Trust. If any Lien is filed or
placed against the Property, Borrower shall obtain a release and satisfaction of the Lien, or
provide Lender with a lien bond acceptable to Lender in the amount of 150 percent of the
Lien or other security satisfactory to Lender, within 20 days of written notice by Lender to
Borrower of the existence of the Lien. At any time within such 20-day period, Lender may,
at its option, restrict disbursements of Funds to reserve sufficient suns to pay 150 percent of
the Lien. If Borrower does not post the bond or other security satisfactory to Lender within
said 20 days, Lender may, at its option, disburse Funds to pay such Lien. Lender's rights
under this section shall not be affected by any claim of Borrower that the Lien is invalid, it
being understood that the decision of Lender to pay or withhold is to be made by Lender in its
sole discretion, subject only to Borrower's right to provide a bond or other security
satisfactory to Lender as provided above
6.8 Disputes Endangering Completion
If disputes arise which, in the good faith opinion of Lender, may endanger completion
of the Phase I Improvements by the Completion Date, or the fulfillment of any condition
precedent or covenant herein,then upon three days'prior notice to Borrower or, if there is any
uncured Event of Default, without notice, Lender may disburse Funds for the account of
Borrower without prejudice to Borrower's rights, if any, to recover from the party to whom
paid Lender may, without limitation, indemnify a title insurer against possible assertion of
Liens, or agree to pay any disputed amounts to contractors or subcontractors if Borrower is
unable or unwilling to pay the same. All sums paid or agreed to be paid shall be for the
account of Borrower, and Borrower agrees to reimburse Lender for all such payments,
together with interest at the Default Rate uitiI the date of reimbursement. Such
disbursements, whether or not in excess of the Loan, shall be secured by the Deed of Trust
LOAN AGREEMENT
(R Whentau63aohsa 1 i9s5 DOC) Page i9
6.9 Restriction
Without Lender's prior written consent, Borrower shall not purchase or install any
materials, equipment, fixtures or any other part of the Improvements under conditional sales
agreements or other arrangements wherein the right is ieserved to remove or repossess any
such items
6.10 Payment of Charges
Borrower shall duly pay and discharge all (a)taxes, assessments, levies and any other
charges of governmental bodies imposed on or against Borrower or the Project, prior to the
date on which penalties attached thereto, unless and to the extent only that such taxes,
assessments, levies and any other charges of governmental bodies,after written notice thereof
having been given to Lender, are being contested in good faith and by appropriate
proceedings; (b) claims for labor, materials, rentals or anything else, which could, if unpaid,
become a lien or charge on the Project (unless and to the extent only that the validity thereof
is being contested in good faith and by appropriate proceedings after written notice thereof
has been given to Lender and after security satisfactory to Lender has been provided); (c)
trade bills in accordance with the terms thereof or generally prevailing industry standards;
and (d) other indebtedness heretofore or hereafter incurred or assumed by Borrower, unless
such indebtedness be renewed or extended.
6.11 Insurance
Borrower shall:
(a) Maintain insurance upon the Project insuring against such risks as is
customary in the industry in which Borrower is engaged and as described in Section 4 2.
(b) From time to time upon request by Lender, promptly furnish or cause to be
furnished to Lender evidence, in form and substance reasonably satisfactory to Lender, of the
maintenance of all insurance required by this Section 6 11.
6.12 Other Agreements
Borrower shall comply with all covenants and agreements set forth in or required
pursuant to any of the other Loan Documents, as well as the Replacement Parking Agreement
and Public Parking Easement.
6.13 Construction Contract
Borrower shall, promptly upon execution thereof, furnish Lender with the executed
Construction Contract for the construction of the Improvements for the Project, which
construction contract shall not be amended, modified or terminated without the prior written
consent of Lender. The construction contract shall provide for a guaranteed maximum price
in an amount acceptable to Lender. Borrower shall furnish Lender with an executed
L oAN AGREEMEN r
1RiChcnls\163401S411985 DOCI Page 20
Contractor's Qualification Statement (A.I.A. 305A) and such other information regarding the
contractor as Lender may request. Lender's approval of the construction contract shall not be
deemed to modify or waive any of the provisions of the Loan Documents.
6.14 Budget
The Budget may be modified by Borrower with the prior written consent of Lender.
In addition, the Budget may be modified by Lender upon written notice to Borrower in the
event that Lender determines in its good faith business judgment that such modification is
necessary To the best of Borrower's knowledge after diligent investigation, the Budget sets
out the total itemized costs, direct and indirect, of acquisition of the Property, construction of
the Project Improvements in accordance with the Plans and Specifications, and payment and
performance of its other obligations under the Loan Documents
7. DISBURSEMENTS
7.1 General Conditions
Notwithstanding any other provision of this Agreement, Lender's obligation to
disburse any Funds is subject to satisfaction of each of the following conditions in connection
with each request for Funds.
(a) Each and every condition to closing of the Loan provided for in Section 4 has
been satisfied or waived in writing by Lender.
(b) There exists no Default or Event of Default.
(c) Lender has received, at Borrower's expense, an updated endorsement to
Lender's title policy showing no exceptions to title to the Property other than those approved
by Lender.
(d) Lender is satisfied that the Loan is In Balance.
(e) Lender, in its reasonable opinion, is not prohibited from disbursing Funds
under any applicable lien laws or stop notice statutes.
(f) The Project has not been materially damaged by fire or other casualty, and
there is no eminent domain proceeding pending or tlueatened- So long as there are sufficient
funds available or made available and the Completion Date is not affected, both as
determined by Lender in its sole and reasonable discretion, the foregoing condition shall be
deemed satisfied
(g) All representations and warranties of Borrower under Section 5 and of
Borrower under the other Loan Documents are true and correct in all material respects as of
the date of disbursement.
LOAN AGREEMENT
)R\Chcros\16340\S411985 DOC) Page 21
(h) Borrower has submitted to Lender a request for payment("Draw Request") in
a form acceptable to Lender, together with all supporting documents required under this
Agreement, including, without limitation, work progress certifications by Architect and
Contractor, approval from the Inspector named by Lender, invoices for items identified as
soft costs, and lien claim waivers from Contractor.
(i) Borrower has made payment to Contractor for the amounts covered by prior
payment requests for which payment is due
0) The Project is being constructed in a good and workmanlike manner by
appropriate means substantially in accordance with the Plans and Specifications and all
required inspections and approvals have been obtained as and when necessary or desirable
(k) Borrower and each Guarantor are solvent,
(1) In the event of a change in the Construction Schedule from the last
Construction Schedule delivered to Lender, Lender shall have received and approved an
updated Construction Schedule.
(m) Borrower is substantially on time with respect to the Construction Schedule
for the Project.
(n) With respect to the first disbursement subsequent to the completion of
foundations and footings of any Phase, Lender shall have received a supplemental survey
showing that all foundations and footings of the Project are within the boundaries of the
Property and showing that no buildings or improvements are to be constructed within the area
of any easement, together with a foundation endorsement to Lender's title policy.
(o) Lender shall have received and approved copies of all Permits issued since the
date of the Funding immediately preceding the requested Funding
7.2 Closing Costs
Upon closing of the Loan, Lender may disburse Funds to or for the account of
Borrower to pay Lender's expenses for which Borrower is liable, and such other amounts for
such other items in the Budget as Lender may approve.
7.3 Draw Requests
No more often than once each month, Borrower may request disbursements to pay the
costs set forth in the Budget actually incurred by delivery of a Draw Request to Lender,
together with all supporting documents required by this Agreement. Lender shall use diligent
efforts to process the Draw Request and make the approved disbursement within ten (10)
days after receipt of the Draw Request Each Draw Request shall be accompanied by such
documents and instruments as Lender may request to establish that each person performing
labor or supplying materials has been paid or will be paid from the disbursement for all work
LOAN AGREEMENT
(R\Chents\1634O\S41 1985 DOC) Page 23
performed and materials supplied through the date of the Draw Request, including, without
limitation, paid invoices for soft cost items and conditional or unconditional lien waivers
from Contractor.
7.4 Hard Costs
(a) "Hard Costs" shall mean the direct costs of construction of the Project set
forth in the Budget. Each Draw Request shall be accompanied by an AIA Application and
Certificate for Payment signed by Contractor, Architect and Borrower, and indicating the
percentage of completion of each Hard Cost line item in the Budget.
(b) Each Draw Request for Hard Costs and the Contractor's fee shall be based
upon the percentage of completion of the Hard Cost Iine items, as well as the payment for
stored materials as allowed by Section 7 4(d) The percentage of completion shall be based
upon the amount set out in the AIA Application and Certificate for Payment signed by
Contractor,Architect and Borrower or the report of the Inspector,whichever is less.
(c) From each Hard Cost disbursement, Lender shall withhold retainage equal to 5
percent. The retainage shall be disbursed with the disbursement or retainage and the final
disbursement of Loan proceeds under Section 7.6.
(d) If any Draw Request covers, in whole or in part, a payment for materials not
incorporated into the Project, Lender shall have no obligation to make such disbursement
unless Lender determines, from evidence provided by Borrower, that (r) the materials are
stored at a location acceptable to Lender, (ii) the materials are fully insured under a
satisfactory insurance policy naming Lender and Borrower as loss payees, (iii) the materials
are identifiable and, if stored off the Property, are nonfungible and properly segregated from
materials not intended for the Improvements and (iv) Lender has a perfected security interest
in the materials.
7.5 Interest Reserve
The Budget contains a line item ("Interest Reserve") for interest payments under the
Note. Lender shall make disbursements of the Interest Reserve to make the monthly interest
payments on the Note only to the extent the Net Cash Flow from the Project is insufficient to
make such payments as provided in Section 8 3. Nothing herein is intended or shall be
construed to alter or limit Borrower's obligation to make the monthly interest payments on
the Note if the Interest Reserve is inadequate or the conditions under Section 7.1 are not
satisfied
7.6 Disbursement of Retainage and Final Disbursement
(a) The disbursement of retainage for Phase I shall be made only upon
Lender's receipt and approval of the following:
LOAN AGREEMENT
tR Uicnis\163401S41 I985 DOCI Page 23
(i) Completion of Construction of Phase I shall have occurred.
(ii) Duplicate copies of an ALTA/ACSM "Class A" Land Title
Survey of the Phase I describing the dimensions and location of all Improvements
constructed in place.
(iii) Duplicate copies of"as-built" plans and specifications for the
Improvements in Phase I.
(iv) If the time for filing liens has not expired for Phase I, fully
executed lien releases from all persons performing labor or services or supplying
materials for the construction of the Improvements in Phase I, or an appropriate surety
bond or affirmative title insurance coverage with respect to such liens
(v) An endorsement to Lender's title insurance policy updating the
coverage through the date of the final disbursement and showing no exceptions to title
other than those previously approved by Lender.
(vi) Such certificates and other evidence as Lender may require that
Borrower is in compliance with all insurance and other requirements under this
Agreement and the Deed of Trust.
7.7 Contingency Reserve
If costs are incurred in excess of any line item in the Budget, Funds may be advanced
from the contingency reserve line item or from other line items, subject to Lender's prior
written approval.
7.8 In Balance
(a) The Loan is "In Balance" whenever the amount of the undisbursed Loan
funds, are sufficient in the reasonable judgment of Lender to pay, through completion of the
Phase I Improvements and Maturity Date of the Loan, all of the following sums: (1) all costs
of construction, ownership, maintenance, marketing and sale or leasing of retail space in the
Phase I Improvements (including tenant improvement costs), and (i1) all interest and all other
sums which may accrue or be payable under the Loan. The Loan is "Out of Balance" if and
when Lender in its reasonable judgment determines that there are insufficient funds
(including all undisbursed Loan funds and any sums provided and to be provided by
Borrower) to pay for all such costs and sums payable-
(b) Borrower acknowledges that the Loan may become "Out of Balance" in
numerous ways, not all of which may now be foreseen. Borrower further acknowledges that
the Loan may become "Out of Balance" from a shortage of funds in any single Budget line
item or category of the Budget, even if there are undisbursed Loan funds in other line items
or categories. Undisbursed Loan funds in one category or line item shall not be applied to
another category or line item without the prior written consent of Lender.
LOAN AGREEMENr
tR\Clients\]634045 11985 DOC) Page 24
(c) Whenever the Loan becomes Out of Balance, Lender may make written
demand on Borrowei to deposit Borrower's own funds into the Project Account in an amount
sufficient in Lender's reasonable judgment to cause the Loan to be In Balance Borrower
shall immediately deposit all funds required by Lender's demand into the Project Account. If
required by Lender, any time funds are deposited (or required to be deposited) in the Project
Account pursuant to this Agreement, Borrower shall also submit, for Lender's approval, a
revised Budget within 10 days after any such demand
(d) At any time, Lender may evaluate the sufficiency of undisbursed Loan funds
allocated for payment of future interest on the Loan, exercising its reasonable judgment in
light of. (i) Lender's projections of interest rates for period through the Maturity Date and (r1)
cost overruns or change orders. Based on Lender's evaluation of these data and projections,
the Loan may be Out of Balance. If this happens, Lender may exercise its rights under clause
(c) above, or if it so chooses, Lender may make written demand on Borrower to pay all future
interest out of Borrower's own funds until the interest reserve is sufficient in Lender's
reasonable judgment to cover any and all such amounts that might become due during the
remaining term of the Loan.
7.9 Manner of Disbursement
Lender may, at its option, disburse Loan proceeds through a title company, or, at any
time that there exists an Event of Default or event which would with the passage of time or
delivery of notice constitute an Event of Default, directly or by joint payee check to
contractors, material suppliers, laborers and other persons entitled thereto.
7.10 Expenses,Fees and Interest
Notwithstanding any other provision of this Agreement, upon prior notice to but
without authorization from Borrower, Lender may elect to use the Funds to pay when due the
Loan fee, any extension fee, interest on the Loan, reasonable legal fees and costs of Lender's
attorneys which are payable by Borrower, and such other sums as may be payable from time
to time by Borrower under the Loan Documents. Such payments, at the option of Lender,
may be made by debiting or charging the Funds in the amount of such payments without first
disbursing such amount to Borrower.
7.11 Use of Funds
Except as otherwise provided in Section 7.10, all Funds disbursed by Lender to or for
the benefit of Borrower shall be used only to pay the costs set out in the Budget and only in
accordance with a Draw Request approved by Lender.
7.12 Responsibility For Application of Funds
Lender shall have no obligation to assure that Funds disbursed by Lender are applied
against the costs shown in the Draw Request, and Borrower accepts sole and full
responsibility for and warrants proper application of all such disbursements_ Borrower
LOAN AGREEMENT
(R%Clients\IG340\5411985 DOC) Page?5
e
hereby releases and agrees to hold harmless, protect, indemnify and defend Lender and its
officers, directors, employees, attorneys and agents from all losses, demands, claims and
expenses that arise out or are related to any alleged misapplication or misuse of Funds, or any
liabilities, claims, or damages arising out of the Project not caused by Lender
7.13 Government Set Asides
If any Funds are set aside ("Set Aside Funds")to meet any governmental requirements
that funds be set aside to be available to pay for performance obligations imposed on
Borrower, then such Set Aside Funds shall be treated as disbursed Loan proceeds on the date
they are set aside The set aside amounts may be placed in a demand deposit account with
Lender, shall be in Borrower's names, but shall be under the sole dominion and control of
Lender Borrower hereby grants to Lender a security interest in the Set Aside Funds and in
the account in which the Set Aside Funds are deposited in order to secure Borrower's
obligations under the Loan Documents
8. COVENANTS OF BORROWER
8.1 Financial Statements and Other information
(a) Within sixty (60) days after the end of each calendar year, Borrower shall
furnish to Lender (i) financial statements of Borrower for such calendar ,year, consistently
applied, in reasonable detail and certified by Borrower to be correct to Borrower's best
knowledge and belief, prepared in accordance with generally accepted accounting principles,
(it) operating statements of the Project, in a form acceptable to Lender, showing the income
and expenses for such year and the net operating income for the Project, and (ni) a certified
rent roll for the Project in such form as Lender may reasonably require and such supporting
data as Lender may request.
(b) Within sixty (60) days of the end of each calendar year, Borrower shall furnish
to Lender a certified rent roll for the Project in such form as Lender may reasonably require
and such supporting data as Lender may request
(c) Within thirty (30) days after the filing thereof, Borrower shall furnish to
Lender a copy of Borrower's federal income tax return.
(d) Promptly upon request of Lender, Borrower shall provide Lender with such
additional information about Borrower, Guarantors or the Project as Lender reasonably
requests.
8.2 Other Reporting Requirements
Promptly upon request of Lender, Borrower shall provide to Lender (a) copies of all
permits required for construction of the Project, (b) as soon as available, bid breakdowns and
a list of suppliers and subcontractors for the Project, (c) certificates of insurance with respect
to all insurance policies required pursuant to tlus Agreement or pursuant to the Deed of Trust
LOAN AGREEMENT
(R 1Chents1163401S411985 DOC) Page z6
and maintain such insurance in full force and effect throughout the term of the Loan, and (d)
whenever requested by Lender, evidence that taxes and assessments, worker's compensation
insurance, and all other bills that could result in a lien against the Project are being promptly
paid when due.
8.3 Net Cash Flow
On the first day of each month throughout the term of the Loan and in the event the
Lender's interest reserve for the Loan will be depleted, Borrower shall apply Net Cash Flow
from the Property, if any, first to the monthly interest payments required under the Loan and
then to the outstanding principal balance of the Loan. Funds allocated to the Interest Reserve
will be disbursed only to the extent the Net Cash Flow is insufficient to make such payments.
As used herein, "Net Cash Flow" means the gross income produced by the Property from all
sources reduced by (a) ordinary and necessary operating expenses actually incurred and paid
with respect to the Property (including amounts paid to affiliates of Borrower only if
preapproved by Lender), (b)reasonable capital expenditures actually made with respect to the
Property (other than those funded out of Loan proceeds), and (c) reasonable reserves for
repairs and replacements to the Property, but only if and to the extent such reserves are
funded in cash and deposited with Lender and pledged to Lender as security for the
obligations of Borrower under the Loan Documents
8.4 No Subordinate Financing
Borrower shall not permit, allow or cause the Property or the Project or any part
thereof to be subject to any lien or encumbrance relating to financing subordinate to the Loan
without the prior written consent of Lender.
8.5 Further Assurances
Within ten (10) days of written request by Lender, Borrower shall duly execute and
deliver or cause to be duly executed and delivered to Lender such further instruments,
agreements and documents and do or cause to be done such further acts as may be necessary
or proper in the opinion of Lender to carry out more effectively the provisions and purpose of
this Agreement and the other Loan Documents, including, without limitation, the perfection
or continuation of perfection of Lender's liens against and security interests in the collateral
for the Loan
8.6 Other Agreements;No Modifications
Borrower shall timely pay and perform all of its obligations under all construction
contracts, architectural contracts, engineering contracts, management agleements, the
Replacement Parking Agreement, the Public Parking Easement and all other contracts or
agreements relating to construction of the Improvements or the ownership and operation of
the Project. Without Lender's prior written consent, Borrower shall not enter into any
material amendment or modification of any contract or agreement that Lender is required to
approve.
LOAN AGREEMENT
(R\ChcnlsV 634MS411985 DOC) Page 27
8.7 Leases
Borrower shall not lease or rent any of the retail or commercial space in the Project
without the prior written consent of Lender
8.8 Appraisals
Lender or its agents may enter upon the Property at any reasonable times to inspect or
appraise it, whether or not any Event of Default exists hereunder If Borrower refuses to
permit such inspection or appialsal, Lender may specifically enforce performance of this
provision Borrower agrees to pay the cost of all appraisals required by Lender in its sole
discretion (a) to comply with (i) any applicable statute or regulation or (it) the request or
directive (whether or not having the force of law)of any regulatory authority with jurisdiction
over Lender, (b) to comply with Lender's policies concerning appraisals, (c) at any time after
an occurrence of an Event of Default hereunder, or (d) in connection with a suit for a
deficiency judgment.
9. OMITTED
10. EVENTS OF DEFAULT
Any one or more of the following events constitutes an Event of Default ("Event of
Default")under this Agreement:
(a) Borrower fails to diligently and continually proceed with construction of the
Improvements in accordance with the Construction Schedule provided to Lender, which
failure, in Lender's reasonable judgment, threatens to delay completion of construction of the
Phase I Improvements beyond the Completion Date.
(b) A Lien is filed against the Property, and Borrower fails to obtain a release or
post a bond or other security satisfactory to Lender within the 20-day period required under
Section 6.7_
(c) Any warranty or representation by Borrower or any Guarantor under this
Agreement or any of the other Loan Documents is materially false or inaccurate when given
or at the time of any disbursement of Loan proceeds
(d) Except as otherwise provided in this Section 10, Borrower or any Guarantor
fails to perform any other covenant, agreement or obligation under this Agreement or any of
the other Loan Documents
(e) Borrower fails to pay the principal of or any installment of interest under the
Loan or any other amounts due pursuant to the Loan Documents, when due, whether at
scheduled maturity, by acceleration or otherwise.
LOAN AGREEMENT
(R 1Chcntsl163401s411985 DOC) Page 28
(f) Borrower or any Guarantor shall file a voluntary petition in bankruptcy or
such a petition shall be filed against Borrower or any Guarantor and is not dismissed within
60 days after filing; or if Borrower or any Guarantor shall file any petition or answer seeking
or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future federal, state or other statute,
law or regulation relating to bankruptcy, insolvency or other relief for debtors; or shall seek
or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of
Borrower or any Guarantor or of all or any part of the collateral encumbered by the Deed of
Trust, or of any or all of the royalties, revenues, rents, issues or profits thereof, or shall make
any general assignment for the benefit of creditors, or shall admit in writing its inability to
pay its debts generally as they become due.
(g) A court of competent jurisdiction shall enter an order, judgment or decree
approving a petition filed against Borrower or any Guarantor seeking any reorganization,
dissolution or similar relief under any present or future federal, state or other statute, law or
regulation relating to bankruptcy, insolvency or other relief for debtors and such order,
judgment or decree shall remain unvacated and unstayed for an aggregate of 60 days (whether
or not consecutive) from the first date of entry thereof, or any trustee,receiver or liquidator of
Borrower or any Guarantor or of all or any part of the collateral encumbered by the Deed of
Trust, or of any or all of the royalties, revenues, rents, issues or profits thereof, shall be
appointed without the consent or acquiescence of Borrower or any Guarantor and such
appointment shall remain unvacated and unstayed for an aggregate of 60 days (whether or not
consecutive).
(h) There is an attachment, execution or other judicial seizure of any property of
Grantor or any guarantor and such seizure is not discharged within ten days
(i) The dissolution, liquidation, bankruptcy, reorganization or insolvency,
voluntary or involuntary, of Contractor, and the failure of Borrower to find and contract with
a replacement reasonably satisfactory to Lender within 60 days thereafter.
0) The actual or attempted conveyance, assignment, transfer, mortgage, pledge,
encumbrance, hypothecation or other disposition of the Project, the Property, any shares,
membership interests, partnership interests or other ownership interests in Borrower, or
Borrower's rights under tlus Agreement except as specifically permitted by the terms of the
Deed of Trust without the prior written consent of Lender.
(k) Borrower does not construct the Project substantially in accordance with the
Plans and Specifications, as they may hereafter be revised or amended with Lender's written
approval, and all laws, rules, regulations and requirements now existing or hereafter enacted,
adopted or promulgated of all governmental authorities having jurisdiction over the Property,
or Borrower fails to file with the appropriate departments of any governmental authority
having jurisdiction over the Property amended or supplemental Plans and Specifications, if
required by law, or Borrower fails to furnish to Lender permits issued by such departments
LOAN AGREEMENT
(R1Chents\163401S411965 DOC) Page 29
approving the Plans and Specifications and such failure continues for ten days after Lender's
notice to Bonower of such failure
(1) Borrower fails to comply with any requirement of any Governmental Body
having jurisdiction over the Property within 30 days after notice in writing of such
requirement shall have been given to Borrower.
(m) The substantial delay, discontinuation or prohibition of construction of any
Phase of the Project.
(n) If any indebtedness of Borrower or any Guarantor for money borrowed or
credit extended becomes or is declared due and payable (after any applicable grace period)
prior to the stated matunty thereof or is not paid as and when it becomes due and payable, or
if any event occurs which constitutes a default or an event of default under any instrument,
agreement or evidence of indebtedness relating to any such obligation of Borrower or any
Guarantor
(o) If Borrower is in breach of any material provision of the Replacement Parking
Agreement or the Public Parking Easement.
(p) The occurrence of any material adverse change in the business or financial
condition of Borrower or any Guarantor that materially increases Lender's risk or materially
impairs the Collateral.
(q) The death of any Guarantor.
11. REMEDIES
11.1 Right to Complete Construction
Upon the occurrence of an Event of Default, Lender shall have the right, in person or
by agent and in its own name or the name of Borrower, to take possession of the Project and
perform any and all work and labor necessary to complete construction of the Improvements
in accordance with this Agreement. Borrower hereby irrevocably constitutes and appoints
Lender as its true and lawful attorney-in-fact with full power of substitution (exercisable only
after an Event of Default) to complete the Improvements in the name of Borrower or through
a receiver and to (a) use the Funds and Lender's funds for the purpose of completing the
Improvements, (b) make such additions, changes and corrections in the Plans and
Specifications and Budget as Lender in its reasonable discretion deems desirable; (c) employ
such contractors, subcontractors, agents, architects and inspectors as shall be required for
such purposes; (d) pay, settle or compromise all existing bills and claims which may be Iiens
against the Property or as may be necessary or desirable for the completion of the
Improvements or for clearance of title; (e) execute all applications and certificates in the
naive of Borrower that may be required by any of the contract documents; (f) prosecute and
defend all actions or proceedings in connection with the Property or the Project and take such
action and require such performance as Lender deems necessary under any guaranty of
LOAN AGRi•EMENr
tR Utems11634M-111985 DOC) Page 3o
completion, and (g) do any and every act that Borrower might do in its own behalf in order to
complete the Improvements. The power of attorney granted hereby shall be deemed to be a
power coupled with an interest and irrevocable. if Lender advances its own funds to
complete construction, such funds shall be deemed to be advances under the Note,
notwithstanding that such advances may cause the total amount advanced under the Note to
exceed the principal amount of the Loan, and Borrower shall reimburse Lender upon demand
for such advances,together with interest at the Default Rate
11.2 Acceleration
Upon the occurrence of an Event of Default, the entire amount disbursed is
immediately due and payable at the election of Lender.
11.3 Withhold Funds
Upon the occurrence of an Event of Default, Lender may withhold further
disbursement of Loan proceeds.
11.4 Appointment of a Receiver
(a) Upon the occurrence of an Event of Default, Lender shall be entitled
(regardless of the adequacy of the Collateral) to the appointment of a receiver and Borrower
hereby consents to the appointment of such receiver The receiver shall be entitled to receive
a reasonable fee for exercising its rights, the payment of which shall be an obligation of
Borrower, and if advanced by Lender, shall constitute an obligation that is secured by the lien
of the Deed of Trust The receiver may serve without bond and may be an employee of
Lender.
(b) In addition to all the rights and powers customarily given to and exercised by
receivers, the receiver shall have all the rights,powers and remedies granted to Lender under
Section 11 I and under the Deed of Trust The receiver's powers shall include, without
Iimitation, the power to take all steps deemed appropriate by the receiver to (i) continue and
complete construction of the Improvements (or any portion thereof), (ir) the borrowing of
Funds and other amounts to be used to facilitate the construction of the hriprovements and
the sale of the Residential Units, (iii) the preparation, execution and recording of
condominium declarations, (iv) operate the parking garage to be located in Phase I, and (v)
the satisfaction of all obligations of Borrower under the Replacement Parking Agreement and
the Public Parking Easement.
11.5 Remedies Not Exclusive
No remedy conferred upon or reserved to Lender in the Loan Documents shall be
exclusive of any other remedy provided in the Loan Documents or by law or in equity, and
each shall be cumulative and shall be in addition to every other remedy given Lender under
any of the Loan Documents or now or hereafter existing at law or in equity or by statute,
Lender at its sole option, without limiting or affecting any rights and remedies hereunder,
LOAN AGREEMENT
(R\ChcrosV6340\S41198i DOC) Page 31
may exercise any of the rights and remedies to which it may be entitled under the Loan
Documents concurrently or in such order as Lender may determine_ The exercise of any
rights of Lender shall not in any way constitute a cure or waiver of an Event of Default or
invalidate any act done pursuant to any notice of default or prejudice Lender in the exercise
of any of its rights. No failure of Lender to enforce its rights, remedies or options shall be
deemed to be a waiver of any such rights,remedies or options.
12. MISCELLANEOUS
12.1 Independent Evaluation
Borrower acknowledges that it has independently evaluated the economic viability of
the Project and the reliability and skills of Contractor, Architect and all other persons
involved in the Project Borrower shall rely solely on its own independent data, evaluations
and business judgment regarding the Project, and no action or statement by Lender shall be
construed as an endorsement or recommendation relating to any aspect of the Project.
12.2 Nature of Relationship
Lender and Borrower intend that the relationship between them shall be solely that of
creditor and debtor. Nothing in this Agreement or the other Loan Documents shall be
construed to create a partnership or any other relationship which would snake Lender in any
way responsible or liable for the debts, losses, obligations or duties of Borrower.
12.3 Assignment
(a) Borrower may not convey, assign, mortgage, pledge, transfer, hypothecate,
encumber or otherwise dispose of its rights or obligations under this Agreement, the Loan
Documents, the Property or the Project without the prior written consent of Lender A breach
of this provision, directly or indirectly, shall be an Event of Default and shall not vest any
rights in the purported transferee.
(b) Lender may assign its rights and obligations in and to this Agreement and the
Loan Documents to another lender or lenders having the financial ability to perform Lender's
obligations. Any such assignment by Lender shall be deemed to have been made pursuant to
this Agreement and not to be a modification hereof, and the disbursements made by any such
assignee hereunder shall be evidenced and secured by the Note and the Deed of Trust.
Lender shall also have the right to sell participations or syndication interests in the Loan and
the Loan Documents.
12.4 Costs and Expenses; Indemnification
(a) Whether of not the transactions hereby contemplated are consummated,
Borrower shall pay on demand all costs and expenses of Lender incurred in connection with
the preparation, negotiation, execution and delivery of the Loan Documents, as well as any
amendments, modifications, consents or waivers relating thereto, including, without
LOAN AGREEMENT
(R 1Chents1163401S411985 DOC) Page 32
limitation, reasonable attorneys' fees, appraisal fees (including an internal appraisal review
fee), environmental consultant fees (including an internal environmental review fee), title
insurance fees and recording fees. In addition, if there shall occur any Default or Event of
Default, Lender shall be entitled to recover any costs and expenses incurred in connection
with the preservation of rights under, and enforcement of, the Loan Documents, whether or
not any lawsuit or arbitration proceeding is commenced, in all such cases, including, without
limitation, reasonable attorneys' fees and costs (including the allocated fees of internal
counsel). Costs and expenses as referred to above, shall include, without limitation, a
reasonable hourly rate for collection personnel, whether employed in-house or otherwise,
overhead costs as reasonably allocated to the collection effort and all other expenses actually
incurred. Reasonable attorneys' fees shall include, without limitation, attorneys' fees and
costs incurred in connection with any bankruptcy case or other insolvency proceeding
commenced by or against Borrower or any person or entity granting a security interest in any
item of collateral, including all fees incurred in connection with (a) moving from relief from
the automatic stay, to convert or dismiss the case or proceeding, or to appoint a trustee or
examiner, or (b) proposing or opposing confirmation of a plan of reorganization or
liquidation, in any case without regard to the identity of the prevailing party.
(b) Borrower hereby agrees to indemnify Lender, its affiliates, and each of their
directors, officers and employees against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all expenses of litigation or
preparation therefor whether or not Lender or any affiliate is a party thereto) which any of
them may pay or incur arising out of or relating to this Agreement, the other Loan
Documents, the transactions contemplated hereby or the direct or indirect application or
proposed application of the proceeds of any credit facility hereunder except to the extent that
they are determined in a final non-appealable judgment by a court of competent jurisdiction
to have resulted from the gross negligence or willful misconduct of the party seeking
indemnification. The obligations of the Borrower under this Section 12.4(b) shall survive the
temunation of this Agreement.
12.5 Signs
During construction, Lender reserves the right to erect, at its expense, a sign or signs
on the Property indicating that it is financing construction of the Improvements.
12.6 Notices
(a) All notices, requests, consents, approvals, waivers and other communications
shall be in writing and mailed, faxed or delivered to the address or facsimile number
specified below (provided, however, that any matter transmitted to Lender by facsimile (1)
shall be promptly confirmed by a telephone tail to Lender at the number specified below and
(ii) shall be followed promptly by delivery of a hard copy original thereof) or to such other
address or facsimile number as shall be designated by a party in a written notice to the other
party.
LOAN AGREEMENT
(R\ChemsU 634M411985 DOC) Page 33
If to Lender: Centurion Financial Group,LLC
10500 N E- 8"' Street, 91825
Bellevue, WA 98004
Attention: Scott G. Switzer
Telephone No (425)226-8936
Facsimile No. (425) 638-0225
With copy to: Lasher Holzapfel Sperry&Ebberson,PLLC
601 Union Street,42600
Seattle, WA 98101-4000
Attn: Eugene W. 'Jong
If to Borrower: Springboard Holdings, L.L.C.
c/o Plan B Development, L.L.C.
2018 156°i Avenue NE
Bellevue, WA 98007
Attention- Ben Errez
Telephone No (425) 748-5050
Facsimile No. (425) 644-2185
(b) All such notices, requests and communications shall, when transmitted by
overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or
transmitted in legible form by facsimile machine, respectively, or if mailed, upon receipt by
the addressee, or if delivered, upon delivery.
(c) Any agreement of Lender to receive certain notices by telephone or facsimile
is solely for the convenience and at the request of Borrower Lender shall be entitled to rely
on the authority of any person purporting to be a person authorized to give such notice and
Lender shall not have any liability to Borrower or other person on account of any action taken
or not taken by Lender in reliance upon such telephonic or facsimile notice.
12.7 Third Parties
No provision of this Agreement is intended or shall be construed to be for the benefit
of any third party.
12.8 Singular and Plural
Whenever in this Agreement the context so requires, the neuter gender shall include
the masculine and the feminine, the singular number shall include the plural, and the plural
shall include the singular, and vice versa as the context may require.
LOAN AGREEMENT
lR\Chen1s\16340\S411985 DOC) Page 34
12.9 Captions
All section or paragraph division, numbering and captions are for convenience of
reference only, and shall not affect the interpretation or construction of this Agreement or of
any term, condition, or provision hereof_
12.1d Entire Agreement; Modifications
This Agreement and the other Loan Documents constitute the entire agreement of the
parties and supersede all prior negotiations, agreements or understandings and may not be
contradicted by evidence of any alleged oral agreement. No modification or amendment of
this Agreement or the Loan Documents shall be effective unless set forth in writing and
signed by Lender and Borrower.
12.11 Counterparts
This Agreement may be executed in one or more counterparts, all of which together
shall constitute one and the same original.
12.12 Severability
If any term or provision of this Agreement is illegal or invalid for any reason, such
illegality or invalidity shall not affect the enforceability of the remaining provisions of this
Agreement and the other Loan Documents.
12.13 Setoff
As additional security for the payment of the obligations described in this Agreement
and the other Loan Documents and any other obligations of Borrower to Lender of any nature
whatsoever (collectively the "Obligations"), Borrower hereby grants to Lender a security
interest in, a lien on and an express contractual right to set off against all depository account
balances, cash and any other property of Borrower now or hereafter hi the possession of
Lender, and the right to refuse to allow withdrawals from any account (collectively "Setoff').
Lender may, at any time upon the occurrence of a Default or Event of Default
(notwithstanding any notice requirements or grace/cure periods under this Agreement or the
other Loan Documents) Setoff against the Obligations whether or not the Obligations
(including future installments) are then due or have been accelerated, all without any advance
or contemporaneous notice or demand of any kind to Borrower, such notice and demand
being expressly waived.
12.14 Term
This Agreement shall survive the completion of construction and shall rernain in
effect until the Loan has been repaid in full.
LOAN AGREEML'NT
(R\Chcnts\163401S411985 DOC) page 35
12.15 Governing Law
This Agreement shall be governed by the laws of the State of Washington.
12.16 Consent to Jurisdiction and Venue
Borrower hereby (a) irrevocably submits to the jurisdiction of any state or federal
court sitting in King County, Washington, in any action or proceeding brought to enforce, or
otherwise arising out of or relating to, this Agreement; (b) irrevocably waives to the fullest
extent permitted by law any objection that Borrower may now or hereafter have to the laying
of venue in any such action or proceeding in any such forum, and (c) further irrevocably
waives any claim that any such forum is an inconvenient forum. Borrower agrees that a final
judgment in any such action or proceeding shall be conclusive and may be enforced in any
other jurisdiction by suit on the judgment or in any other manner provided by law. Nothing
herein shall impair the right of Lender to bring any action or proceeding against Borrower in
any court of any other jurisdiction.
12.17 Patriot Act Notice
Lender hereby notifies Borrower and Guarantors that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law
October 26, 2001)) (the "Act"), it is required to obtain, verify and record information
that identifies Borrower and Guarantors, which information includes the names and
addresses of Borrower and Guarantors and other information that will allow Lender to
identify Borrower and Guarantors in accordance with the Act.
12.18 Jury Waiver
BORROWER HERE,BY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, WHETHER NOW OR HEREAFTER ARISING AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AND HEREBY CONSENTS
AND AGREES THAT ANY SUCH CLAIM MAY, AT LENDER'S ELECTION, BE
DECIDED BY TRIAL WITHOUT A JURY AND THAT LENDER MAY FILE AN
ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT
AS WRITTEN EVIDENCE OF THE WAIVER AND AGREEMENT CONTAINED
HEREIN.
12.19 Statutory Notice
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR FORBEAR FROM ENFORCING REPAYMENT OF A DEBT
ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF. the parties have signed this Agreement as of the date
written above.
LOAN AGREEMENT
)R UientsNl 6340\S411985 DOC) Page 36
"Lender"
CENTURI N FINANC OUP,LLC
By '
colt G. Switzer,t ger
"Borrower"
SPRINGBOARD HOLDINGS,L.L C.
By K'� )�:�
Ben E z, *n
LOAN AGREEMEN I
{R 1Clicnls1163401S411985 DOC) Page 37
Page
EXHIBIT A
to Loan Agreement
Legal Description
New Lots A, B and C,Kent Lot Line Adjustment No. LL-2005-37, recorded under
Recording No 20060110002592
All situated in the County of King, State of Washington,
i
EXHIBIT B
to Loan Agreement
Permitted Exceptions
1.. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:
GRANTEE: PUGET SOUND POWER&LIGHT COMPANY
PURPOSE: PAD MOUNT SWrFCHES AND VAULT WITH NECESSARY
APPURTENANCES
AREA AFFECTED: A PORTION OF VACATED STREET IN SAID PREMISES
RECORDED: JUNE 17, 1976
RECORDING NO.: 7606170770
AFFECTS' NORTHERLY PORTION OF PARCEL A
2. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:
GRANTEE' PUGET SOUND ENERGY, INC_
PURPOSE ONE OR MORE ELECTRIC UTILITY SYSTEMS
AREA AFFECTED: WESTERLY PORTION OF PARCEL A
RECORDED. JANUARY 6, 2005
RECORDING NO : 2005010600057S
3. ORD114ANCE AND THE TERMS AND CONDITIONS THEREOF:
RECORDED: AUGUST 7, 2003
RECORDING NO : 20030807000823
REGARDING' PLANNED ACTION FOR A SITE OF APPROXIMATELY 25 0 ACRES
4. ALL COVENANTS,CONDITIONS, RESTRICTIONS, RESERVATIONS, EASEMENTS OR OTHER
SERVITUDES, IF ANY, DISCLOSED BY THE BOUNDARY LINE ADJUSTI.4ENT RECORDED UNDER
RECORDING NO 20060110002592
5. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:
GRANTEE CITY OF KENT
PURPOSE. MECHANICAL ROOMS AND RELATED EASEMENTS
AREA AFFECTED: A PORTION LOT C
RECORDED: JULY 28, 2006
RECORDING NO : 20060728002540
"Lender"
CENTURI N FINANC OUP,LLC
By /
colt G. Switzer,n Ger
"Borrower"
SPRINGBOARD HOLDINGS, L L C.
By (1-) "
Ben E; z, i n
LOAN AGREEMENT
(R\Clients%1G34M41I985 DOC) Page 37