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HomeMy WebLinkAboutR-2003-042 Trail Wagons, Inc. (Gary & Mary Lukehart) Yakima Commercial Development LoanRESOLUTION NO. R-2003-42 A RESOLUTION to approve the loan application and enter into a loan with Trail Wagons, Inc. to loan up to $3,000,000 from the Yakima Commercial Development Loan Fund. WHEREAS, the City of Yakima has set up the Yakima Commercial Development Loan Fund; and WHEREAS, the City has worked with the National Development Council to develop the guidelines for a program to use the Commercial Development Loan Fund; and WHEREAS, Trail Wagons, Inc., as an existing recreational vehicle business located in a low income area, has submitted an application for a loan from the Commercial Development Loan Fund, with the funds to be used to purchase vehicle chassis and re -tool its manufacturing equipment for two new models as well as increase its working capital; and WHEREAS, the City and the National Development Council have reviewed Trail Wagon's application and corresponding collateral and guaranties for payment; and WHEREAS, the City and the National Development Council have determined that Trail Wagon's application meets the criteria for this type of loan, demonstrates a good plan for expanding its business, and possesses sufficient collateral to back this loan in case of default ; BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: 1. The City is empowered to loan to Trail Wagons, Inc. the sum of $3,000,000 dollars from the City's Commercial Development Loan Fund. The loan shall be evidenced by a Loan Agreement and a Promissory Note signed by the City and the Borrower, a personal Guaranty signed by Gary Lukehart and Mary Lukehart, and a Deed of Trust given by Gateway Center Associates, L.L.C. These agreements are in the form as attached in Exhibit 1, Exhibit 2, and Exhibit 3. 2. The City Manager is hereby designated as the official representative of the City to act in connection with signing of the Loan Agreement, the Promissory Note, and any other agreement associated with this loan with Trail Wagons, Inc. • ADOPTED BY THE CITY COUNCIL THIS 18th day of March, 2003. ATTEST: /?A City Clerk F:\CLIENTS\DAB\YAKIMA\Trailwagons\TW resolution.doc , IP 11; ft LOAN AGREEMENT between TRAIL WAGONS, INC. and THE CITY OF YAKIMA - .200 3 -V LOAN AGREEMENT THIS LOAN AGREEMENT (as supplemented or amended from time to time, and including all documents and terms incorporated herein by reference, the "Agreement"), dated as of December j 2003, is entered into by and between TRAIL WAGONS, INC., ("Obligor"), a Washington corporation, hereinafter called "Obligor" and THE CITY OF YAKIMA, a Washington municipal corporation, hereinafter called "City" or "the City." This Agreement supercedes and fully replaces the Loan Agreement between the Obligor and City, entered into on March 24, 2003. RECITALS This Agreement is entered into upon the basis of the following facts and circumstances: A. Obligor is a company that manufactures recreation vehicles. Obligor has requested a loan from the City in the amount of $475,722.00 for funds to be used for working capital, to acquire vehicle chassis, and to retool for its two new models of motor homes (the "Loan"). The Obligor's use of the funds is to be made pursuant to this Agreement. Obligor paying off bridge loans used to start acquiring vehicle chassis and retooling for its two new models of motor homes, as well as current and future working capital needs, are to be funded with proceeds of the Loan (defined in Section 1.1 below) to be made pursuant to this Agreement, and is referred to herein collectively as the "Project." B. City has applied for and received a commitment from the United States Department of Housing and Urban Development ("HUD") to guarantee a non-recourse note or notes (as supplemented or amended from time to time, and together with any replacements thereof issued by the City and guaranteed by HUD pursuant to the HUD Contract described below, the "City Note") to be issued by City to fund the Project, in accordance with Section 108 of the Housing and Community Development Act of 1974, as amended (such Act and the federal regulations promulgated under it are called the "Act"). The City Note is the subject of a Contract for Loan Guarantee Assistance between the City and HUD (as supplemented or amended from time to time, the "HUD Contract") and certain Letter Agreements for Section 108 Guarantee Program Custodial Account (as supplemented or amended from time to time, the "Letter Agreements") among the City, HUD and JPMorgan Chase Bank (hereinafter referred to, with any successors under such agreement or successor agreement, as "Custodian"). City has also entered into an Indenture of Trust and Custodial Agreement with the Custodian (as supplemented or amended from time to time, together with any substitute in accordance with Section 7.2 below, the "Custodial Agreement"), which provides for, among other things, the Custodian to hold certain security for the City Note on behalf of HUD and for the establishment and management of certain accounts pursuant to the HUD Contract and Letter Agreements. The HUD Contract is entered into pursuant to an application submitted to HUD by the City dated November 1.4, 2002, a copy of which Obligor has received and reviewed (as supplemented or amended from time to time, the "Application"). The Application, HUD Contract, Letter Agreements and Custodial Agreement are incorporated herein by this reference. Unless the context otherwise provides, capitalized terms used herein and Loan Agreement Page 1 not otherwise defined shall have the meanings assigned to them in the HUD Contract or City Note, as applicable. C. The Department of Community and Economic Development ("DCED") is responsible within The City of Yakima for making, subject to City Council approval, loans of funds obtained from HUD by pledges of Community Development Block Grant ("CDBG") funds to be made available to the City by HUD, pursuant to the Act. Unless the City otherwise notifies Obligor in writing, the DCED shall be responsible for performance of the obligations of the City under this Agreement and the other Loan Documents, and for oversight of performance of such agreements by Obligor, and references hereinafter made to the City shall be deemed to mean the City, acting through DCED. D. The Loan shall be evidenced by this Agreement and by Obligor's Promissory Note ("Obligor Note") in the form attached hereto as Attachment A and hereby incorporated by reference, and together with Obligor's other obligations under the Loan Documents. The Obligor Note, this Agreement, and any other documents or instruments executed by Obligor in favor of City pursuant hereto, are collectively referred to herein as the "Loan Documents". Where the context so requires, to the extent that the Loan Documents provide that Obligor's obligations or duties are determined by reference to any terms or provisions of documents incorporated by reference in any of the Loan Documents, any reference to the "Loan Documents" shall include such terms or provisions. E. The Obligor's obligations under this Agreement and the other Loan Documents shall be further secured by the assignment of certain additional collateral as required by HUD and security interests in certain Reserves. F. Obligor's obligations under this Agreement and the other Loan Documents shall be unconditionally guaranteed under a Guaranty (defined in Section 1.4(b) of this Agreement), executed by the Guarantor and delivered to the City as a material inducement to the City's agreement to make the Loan in accordance with this Agreement. Obligor's obligations under this Agreement and the other Loan _ Documents shall_ also be secured by two Deeds of Trust, substantially in the form of Attachments Band C hereto, (as supplemented or amended from time to time in accordance with this Agreement, the "Deed of Trust") given by Chinook Business Park LLC ("Chinook Business Park") on property located in Yakima, Washington ("Property"). A full legal description of the properties is in Attachment D. The Guaranty and the Deeds of Trust shall be dated on or about the date hereof. NOTICE: ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. NOW, THEREFORE, in consideration of the foregoing Recitals and the covenants, conditions, representations and warranties contained herein, the parties hereto agree as follows: Loan Agreement Page 2 ARTICLE I — THE LOAN 1.1 The Loan. In reliance upon Obligor's representations and warranties, and subject to the terms and conditions contained in this Agreement and the other Loan Documents (including without limitation, the HUD Contract, the Letter Agreements, and the Custodial Agreement), the City hereby agrees to cause funds to be advanced to Obligor through the Custodian (which advances collectively shall constitute the "Loan") in a maximum aggregate principal amount of Four Hundred Seventy -Five Thousand Seven Hundred Twenty -Two Dollars ($475,722.00) solely for the purposes set forth in Section 1.2 below. Loan disbursements shall be made only to the extent of available funds received by the Custodian for such purposes through issuance by the City of the City Note, and except with respect to the payment of interest from EDI Grant funds allocated for such purpose as more particularly described in Section 4.4(b) of this Agreement and the Custodial Agreement, the City shall have no obligation to make disbursements to or for the benefit of Obligor for the Project or otherwise, from any other source. Obligor shall have the right to receive Loan funds only pursuant to the terms and conditions of this Agreement and in accordance with the Act. 1.2 Purpose of Loan. Loan proceeds shall be used by Obligor to pay off bridge loans used to acquire vehicle chassis, to retool for its two new models of motor homes, and for any current or future working capital needs. 1.3 Loan Documentation; Interest. (a) . Loan Documentation. The Loan shall be evidenced by this Agreement and by the Obligor Note, and together with Obligor's other obligations under the Loan Documents, shall be secured by the Guaranty, substantially in the form of Attachment E and the Deeds of Trust, substantially in the form of Attachments B and C hereto. The principal of and interest on this Loan shall be due and payable in accordance with the termq set forth in the Obligor Note. (b) Variable Rate. Obligor acknowledges and agrees that, as provided in the Obligor Note, interest shall accrue on each advance of Loan funds from the date of the correlative Advance under the City Note until repayment in full, at a rate or rates equal to the correlative interest rate or rates on the City Note, as the same may change from time to time under the terms of the City Note and HUD Contract. Initially and continuing to the Conversion Date, interest shall accrue at a rate equal to twenty (20) basis points (0.2%) over the Applicable LIBO Rate. From and after the Conversion Date (whether conversion to a fixed rate or rates is effected with the consent of Obligor or otherwise), each principal amount scheduled to become due on a particular date pursuant to the City Note shall bear interest at a separate, stated rate, and the corresponding Obligor Principal Amount (as defined by the Obligor Note) under the Obligor Note shall bear interest at the same rate. Any principal of the Loan or interest thereon, which is unpaid after the date when payment is due, shall bear interest at the rate stated for amounts past due in the Obligor Note. Loan Agreement Page 3 Obligor shall pay interest to City in accordance with the provisions of Paragraph 4.4 (b), below. Obligor shall make all payments on behalf of City to the Custodian, as provided in the Loan Documents. (c) Consent to Conversion. So long as no default shall have occurred under this Agreement and the other Loan Documents which has not been cured or waived in accordance with the terms hereof and thereof, the City shall not request or consent to conversion of the interest rate on the City Note to a fixed rate or rates, without the prior written consent of the Obligor. However, Obligor acknowledges and agrees that under the HUD Contract, HUD will have the unilateral right (with or without notice to or consent of the City and/or Obligor) to fix the interest payable on the City Note. 1.4 Security. (a) Personal Guaranty and Deed of Trust. The obligations of Obligor under the Loan Documents at all times shall be secured by an unconditional guarantee of payment and performance (as supplemented or amended from time to time, the "Guaranty") from Gary Lukehart and Mary Lukehart, husband and wife, ("Guarantor"), substantially in the form of Attachment E hereto and fully incorporated herein. The Guarantor will also cause 1) Chinook Business Park, LLC to execute two Deeds of Trust on the Property as additional security for the Loan. The Property is more particularly described on Attachment D and fully incorporated herein. (b) Reserve Accounts. Obligor's obligations under the Loan Documents also shall be secured by all funds and investments in all of the accounts now or hereafter established under the Loan Documents, including without limitation, the Custodial Agreement, and specifically including without limitation, the Debt Service Reserve Account and the Loan Repayment Account (all accounts collectively referred to herein as the "Reserve Accounts"). Obligor hereby pledges to the City, and grants the City a security interest in, all right, title and interest of Obligor in and to the funds and investments now or hereafter in the Reserve Accounts, and all earnings thereon and proceeds thereof (the "Collateral Assignments"). This Loan Agreement shall also constitute a security agreement under RCW 62A.9A. Obligor and City will execute a Deposit Account Control Agreement, substantially in the form of Attachment F hereto and fully incorporated herein. Obligor agrees that such funds and other assets shall constitute "cash collateral" as described in the United States Bankruptcy Code. Obligor shall promptly take such actions as shall be reasonably requested by the City or Custodian, and pay all fees and costs reasonably required in order to perfect and continue perfection as a first priority lien and security interest, so long as the Loan remains outstanding, the City's security interest in such accounts, the funds and investments therein, and the proceeds thereof. Obligor agrees that, in addition to all other rights and remedies with respect to Reserve Accounts and otherwise under the Loan Documents, immediately upon acceleration of the balance owing on the Loan, whether upon an Event of Default or any other circumstance permitting acceleration, the City shall have the absolute right, without notice or demand, to apply all funds and assets pledged under this Section to amounts owing under the Loan Documents, and for such purpose to liquidate or cause to be liquidated any investments in any commercially reasonable manner, and irrevocably authorizes any Custodian, upon notice from the City of an Event of Default or any other circumstance permitting acceleration, to comply with the Loan Agreement Page 4 City's directions to so apply any or all such funds and assets and to liquidate investments for such purpose. (c) Rights of City With Respect to Security. Obligor irrevocably agrees that, to the full extent permitted by applicable law, the City may realize upon any security for the Loan either before, concurrently with, or after either (1) any action to realize upon any other form of security (including without limitation the Deeds of Trust and/or Guaranty), or (2) any suit or other proceeding on the Obligor Note, in each case without affecting the status of or waiving any rights or remedies under the Loan Documents or with respect to any security. Obligor consents to any and all actions that the City or Custodian may take to release, subordinate, accept substitution for, modify, compromise, or waive any or all security with respect to the Loan, and Obligor agrees that no such action shall impair any rights or remedies of the City or Custodian under the Loan Documents. 1.5 Loan Fee. Obligor shall pay to City a loan fee of Four Thousand Seven Hundred Fifty -Seven and 22/100 Dollars ($4,757.22), representing one percent (1.0%) of the amount of the Loan, payable directly to City upon and from the first disbursement of Loan funds hereunder. This fee is in addition to Obligor's duty to pay City's costs and fees pursuant to Section 1.6 of this Agreement 1.6 Obligor's Payment of Costs and Fees. Obligor shall pay to City or at City's direction, as and when due, all other costs and fees of whatever nature incurred by City (whether or not with recourse to the City) in connection with the Loan, including without limitation, fees and costs incurred by the City pursuant to the HUD Contract and City Note (to be allocated on a pro rata basis according to the total principal amount outstanding on the Obligor Note and the City Note at the time fees or costs are incurred from time to time). The costs and fees payable by Obligor shall include, without limitation, (i) any and all charges and costs billed by the Fiscal Agent in respect of the City Note under the Amended and Restated Master Fiscal Agency Agreement among HUD and The Chase Manhattan Bank (now known as JP Morgan Chase Bank) as Fiscal Agent dated as of May 17, 2000, (ii) on and after the Conversion Date, any charges and costs in respect of the City Note billed by the trustee under that _certain Trust Agreement by and between HUD and JP Morgan Chase Bank, as Trustee, dated as of of January 1, 1995, as now and hereafter amended and supplemented, and under any other trust agreement or similar instrument that may be executed by HUD in connection with a public offering conducted with respect to notes guaranteed by HUD under the Section 108 program (each such offering is referred to herein as a "Public Offering") that involves the City Note, (iii) fees and costs of the Custodian in connection with the Custodial Agreement and Letter Agreements; (iv) fees and costs of the City's outside counsel and the Custodian's outside counsel; title insurance and escrow fees and costs in connection with Closing. Obligor shall also pay the following: the fees described in Section 1.5; fees and costs of the Custodian, if any, other than the initial set-up fee; and any fees or costs of the City's Outside Counsel or Custodian's Outside Counsel incurred after the date of closing, including without limitation, in connection with a Public Offering, and as may be incurred in case of breach or failure to perform by Obligor or in case of any litigation arising in connection with this Agreement. 1.7 City Funds Not Obligated. The Loan will be made only from non -City funds that the Custodian receives under the HUD Contract and City Note, and interest subsidy payments in Loan Agreement Page 5 accordance with Section 4.4(b) hereof will be made only from available funds under the EDI Grant Agreement. In accordance with RCW 35.21.735, the City Note, and any payments or obligations under the HUD Contract and any documents or agreements relating thereto, including without limitation this Loan Agreement shall be a valid claim only against and payable solely from, the Accounts held by the Custodian and from the security pledged under the HUD Contract, and shall not be an obligation of The City of Yakima or the State of Washington, and neither the faith and credit nor the taxing power of the City or State or any municipal corporation or subdivision of the State or any agency of any of the foregoing is pledged to the payment of principal, interest or premium, if any, on the City Note or for any amounts due under the HUD Contract or any documents or agreements relating thereto including without limitation this Agreement. Nothing herein shall constitute a debt or indebtedness of the City payable from public funds within the meaning of any constitutional or statutory limitation on the incurrence of debt. Obligor agrees and acknowledges that this Agreement does not create any recourse to or claim upon the City's general fund, or any other funds of the City, and Obligor hereby disclaims any such claim. 1.8 Application of Payments. So long as the City or the Custodian shall have received, in immediately available funds, timely payments of interest and principal on the Obligor Note in the amounts required, the City shall apply such payments to payment of interest on and the principal of the City Note, as such interest and principal shall become due. 1.9 Acceleration on Certain Events. The City shall have the absolute right, in its discretion, to declare all or any part of the principal balance owing on the Loan immediately due and payable in the event that: (a) HUD or any court of competent jurisdiction shall determine that the Loan or the issuance of the City Note must be terminated, canceled, or rescinded for failure to comply with the Act or other applicable law, or that for any reason any City Note cannot be issued or cannot be guaranteed by HUD; or (b) HUD shall notify the City that any or all of the City Note cannot be included in the pool of notes for purposes of a scheduled Public Offering for any reason, and that HUD or the holder of the City Note is not willing to allow the interim terms of the City Note to remain in effect pending a later public offering, provided, that unless otherwise required by HUD or by the effect of a court order, Obligor shall be allowed a period of ninety (90) days after notice to Obligor thereof to seek to have such determination reversed or rescinded, or the effect thereof stayed, prior to acceleration of all or any part of the principal balance. If any such stay is obtained, then the City shall have the right to accelerate all or part of the principal balance immediately upon the lifting or termination of such stay. ARTICLE II — OBLIGOR'S, GUARANTOR'S, CHINOOK BUSINESS PARK'S PROPERTIES', REPRESENTATIONS AND WARRANTIES In order to induce City to make the Loan and enter into the HUD Contract, Obligor, Guarantor and Chinook Business Park, LLC represent and warrant as set forth below in this Article II as of the date hereof, as of the date of Closing, and at all times any of the principal of or interest Loan Agreement Page 6 on the Loan remain outstanding. These representations and warranties shall survive the execution, delivery, and performance of the Loan Documents but shall terminate upon the satisfaction of all of the obligations of Obligor under this Agreement and the other Loan Documents, subject to revival after such satisfaction if any amount paid under the Loan Documents is recaptured in bankruptcy or similar proceedings. 2.1 Organization of Obligor; Authority to Enter into Agreement. Obligor is a for profit corporation, duly organized and validly existing pursuant to the laws of the State of Washington. Obligor has the right and power to undertake the Project, and Obligor has full power and authority to enter into this Agreement, to borrow money as contemplated herein, and to execute and perform the provisions of the Loan Documents. The execution, delivery, and performance of this Agreement and the other Loan Documents have been duly authorized by all necessary corporate action, and no other action of Obligor or any other party is required for the execution, delivery, and performance of this Agreement and the other Loan Documents. This Agreement and the other Loan Documents constitute valid and binding obligations of Obligor, each enforceable in accordance with their respective terms. 2.2 Nondiscrimination. During the performance of this Loan Agreement, neither Obligor nor any party contracting with Obligor who would be paid with Loan funds under this Loan Agreement shall discriminate on the basis of race, color, sex, religion, national origin, creed, marital status, sexual orientation, gender identity, age, or the presence of any sensory, mental or physical handicap in employment or application for employment or in the administration or delivery of services or any other benefits under this Loan Agreement. The Obligor shall comply fully with all applicable federal, state and local laws, ordinances, executive orders and regulations that prohibit such discrimination. These laws include, but are not limited to, Chapter 49.60 of the Revised Code of Washington, and Titles VI and VII of the Civil Rights Act of 1964. 2.3 No Litigation. There are no actions, suits, or proceedings pending, or to the knowledge of Obligor threatened against or affecting Obligor in any court of law or in equity, or before or by any governmental or municipal authority. 2.4 Guaranty. When Guarantor executes the Guaranty, it will not cause the Guarantor to violate any existing contract to which they are a party. 2.5 Other Entities' Authority. Chinook Business Park, LLC is authorized to execute the Deeds of Trust Hypothecation and the execution of such will not cause Chinook Business Park, LLC to violate any existing contract to which it is a party. 2.6 Title. Chinook Business Park, LLC is the owner in fee simple absolute of the Property, as listed below from Attachment D. The Property shall be subject to no liens or encumbrances except: (a) Parcel 1— 607 East R. St. (parcels 191307-34004, 191318-21001) Loan Agreement Page 7 (1) The Deed of Trust in favor of City securing the Loan; (b) Parcel 2 —.716 North 40t Ave. (parcel 181315-43013) (1) The Deed of Trust in favor of City securing the Loan; 2.7 Covenants, Zoning, and Codes and Permits. Except as disclosed to the City in writing, as of the date of Closing, the Property and its current and intended uses are in compliance in all material respects with, and Chinook Business Park, LLC's Properties covenants that the Property and its uses will at all times comply in all material respects with, all applicable zoning and land use codes, and other laws, ordinances, and regulations applicable to the Property. Chinook Business Park, LLC has not received notice from any regulatory body or agency of any actual or alleged noncompliance with any applicable law, regulation, code, ordinance or permit affecting the Property. 2.8 Compliance With Documents. Obligor is and will remain in full compliance with all of the telins and conditions of this Agreement and the other Loan Documents, and any and all other material agreements, instruments or other documents affecting the Property, and no occurrence has or shall have occurred and be continuing, which, with the passage of time or the giving of notice, or both, would constitute a default under any of the foregoing. 2.9 Taxes Are Paid. Obligor, Guarantor, and Chinook Business Park LLC have filed all material tax returns which are required and have paid or made provision for the payment prior to the last day on which payment may be made without interest or penalty of all taxes which have or may become due pursuant to said returns or pursuant to any assessments levied against the Obligor, Guarantor, Chinook Business Park, LLC or its personal or real property by any taxing agency, fed- eral, state or local, and Obligor, Guarantor, and Chinook Business Park, LLC have withheld any paid over to proper authorities all withholding taxes required by law. No due or overdue tax liability or lien has been asserted by the Internal Revenue Service or other taxing agency, federal, state or local, and the Obligor, Guarantor, and Chinook Business Park, LLC know of no basis for any such deficiency assessment or lien. ARTICLE III — CONDITIONS PRECEDENT TO LOAN CLOSING The City's obligation to perform its duties under this Agreement, including without limitation causing disbursement of any funds, shall be subject to the full and complete satisfaction of the following conditions precedent: 3.1 Documents. City shall have received fully executed originals of each of the following, each of which shall have been duly authorized, executed (and acknowledged where appropriate) and delivered by the parties thereto, and shall be in form required by this Agreement, with such modifications as may be approved by the City in accordance with the Ordinance: this Agreement; the Obligor Note; the Guaranty; Chinook Business Park, LLC's two Deeds of Trust; Loan Agreement Page 8 the Deposit Account Control Agreement; the Assignment; the Demand Note; and such other documents as City shall reasonably request. 3.2 Evidence of Authority; Officer's Certificate. City shall have received evidence satisfactory to it that Obligor, and Chinook Business Park, LLC and the persons signing on behalf of the respective party have the capacity and authority to execute and deliver Loan Documents on behalf of Obligor, including, but not limited to, a copy of said party's charter, bylaws, or other operating agreement, and appropriate resolutions authorizing the transactions contemplated hereby, all as certified by an officer of Obligor as true, complete, and in full force and effect. City shall have received a Certificate of said party, executed by said party's designated person(s), in a form and content acceptable to the City. 3.3 Insurance. The Obligor, Chinook Business Park, LLC shall have provided to the City evidence of insurancecoverage for Obligor's operations, for Chinook Business Park, LLC's Property. 3.4 Title Insurance; Other Confirmation of No Liens. Obligor shall have caused to be furnished to the City, at Obligor's expense, from Stewart Title Guaranty Company ("Title Company"), an ALTA 1970 Form Extended Coverage lender's policy of title insurance in the amount of the maximum principal of the Loan, showing City as an insured mortgagee, that fee title to the Property is vested in Chinook Business Park, LLC and that the Deeds of Trust are a valid first lien upon Chinook Business Park, LLC's interest in the Property, subject only to such encumbrances and exceptions as may be explicitly permitted by the Loan Documents, including Section 2.4 of this Agreement,. and any others that may be acceptable to City in its sole discretion. The title policy shall be Attachment G and fully incorporated herein. The title policy shall be in form, and shall include the endorsements, satisfactory to the City, shall limit exceptions for taxes limited to those not yet due and payable, and shall show no additional exceptions or encumbrances, whether senior or junior to the Deed of Trust. Finally, the City shall have received such other evidence reasonably requested and satisfactory to the City that all security instruments, guaranties, and assignments contemplated by this Agreement are in full force and effect and have the priority contemplated hereby. 3.5 Legal Opinions. (a) City shall have received a legal opinion, containing reasonable and customary exclusions and qualifications, and in form and content reasonably satisfactory to City and the City's outside counsel, from Obligor's counsel, who shall be satisfactory to City, to the effect that: (1) Obligor and Chinook Business Park, LLC are duly organized and validly existing and in good standing as a for profit corporation or limited liability company in the State of Washington, and have full power and authority to execute and deliver the Loan Documents and to perform all of their obligations; (2) The execution and delivery of the Loan Documents, Guaranty, Deeds of Trust, and Assignment by Obligor, Guarantor and Chinook Business Park, LLC do not, Loan Agreement Page 9 and the transactions contemplated by the Loan Documents will not, violate any laws or regulations applicable to the respective parties and will not conflict with and will not cause a default under (i) any provisions of the respective parties' charter, bylaws or other governing documents, or (ii) any other material agreements, instruments, judgments, decrees, orders or undertakings known to such counsel after reasonable inquiry by which the respective parties are bound or to which Chinook Business Park, LLC's Property is subject; and (3) The Loan Documents have been duly authorized, executed, and delivered by Obligor, Guarantor and Chinook Business Park, LLC, and constitute the legal, valid, binding obligations of such party, enforceable in accordance with their terms. (b) The City shall have received such additional items as may be required pursuant to the HUD Contract, including without limitation, an opinion of outside counsel to the City. 3.6 Additional Conditions Precedent to Each Advance of Funds. (a) The City shall have received such additional documents and HUD or any federal, state or county regulatory agency requires further assurances as it may reasonably request or which. (b) Obligor shall be in full compliance and shall not be in breach or default under this Agreement or any of the other Loan Documents; provided, however, that City may, in its discretion, elect to make advances notwithstanding the existence of Obligor's noncompliance or default, and any advance so; made shall be deemed to have been made pursuant to this Agreement and secured by the Deeds of Trust. (c) Neither Chinook Business Park, LLC's Property nor any part thereof shall have been materially damaged, destroyed, condemned, or threatened with condemnation. (d) The representations and warranties of Obligor, Guarantor and Chinook Business Park, LLC contained herein shall remain accurate in all material respects as of the date of the requested disbursement. (e) Neither HUD nor any court of competent jurisdiction shall have determined that the issuance of the City Note or the making of the Loan must be terminated, canceled or rescinded for failure to comply with the Act or other applicable law, or that for any reason any City Note cannot be issued or cannot be guaranteed by HUD. ARTICLE IV — LOAN DISBURSEMENTS AND REPAYMENTS; RESERVE ACCOUNTS 4.1 Initial and Subsequent Disbursement. (a) Conditioned upon receipt of proceeds of the City Note and satisfaction of all other applicable conditions to Loan disbursements under this Agreement, Loan funds in the amount Loan Agreement Page 10 of Four Hundred Seventy-five Thousand, Seven Hundred and Twenty-two Dollars ($475,722.00) shall be disbursed on the date (the "Closing Date") of closing of the Loan (the "Closing"), to be applied to related Closing costs, the Loan fee payable to the City in accordance with Section 1.5 of this Agreement, and other fees and costs due and payable at Closing pursuant to Section 1.6 of this Agreement. 4.2 Costs Related to Public Offering. (a) On the Closing Date, the amount of Three Thousand Five Hundred Sixty -Seven and 92/100 Dollars ($3,567.92), out of the City Loan proceeds, shall be held in the Guaranteed Loan Funds Account.established by the Custodian under the Letter Agreements ("Guaranteed Loan Funds Account"), for the purpose of paying the costs to be incurred in connection with the Public Offering, including without limitation trustee's fees and underwriters' fees and costs. Such funds shall nonetheless be considered Outstanding under the Obligor Note. After the Conversion Date, upon payment of all of such fees and costs allocable to the City Note, any remaining amount in the Guaranteed Loan Funds Account shall be transferred to the Loan Repayment Account maintained by the Custodian under the Letter Agreements ("Loan Repayment Account"), and the next deposit(s) required to the Debt Service Reserve Account in respect of principal under Section 4.4 below shall be reduced, dollar for dollar, by the amount of such transfer. In any event all amounts remaining in the Guaranteed Loan Funds Account on September 1, 2013 shall be transferred to the Loan Repayment Account unless otherwise agreed by HUD and the City. If the Obligor Note shall be paid in full prior to the Conversion Date, the amount so withheld, and earnings thereon, shall be applied as part of such prepayment of the Obligor Note and transferred to the Loan Repayment Account to redeem the City Note. (b) The City may elect, in its sole discretion, to waive the foregoing requirement in subsection (a) upon receipt of evidence satisfactory to the City that the payment of such costs has otherwise been duly provided for and that funds necessary to pay such costs will be available when demanded by City. If the City so elects, Obligor shall execute a demand note ("Demand Note"), substantially in the form of Attachment H attached hereto, in favor of the City for an amount not expected to exceed one percent (1%) of the Loan amount. City shall give Obligor at least ten (10) days written notice of its call for payment of the Demand Note. If Obligor fails to perform under the Demand Note that shall be a breach of the Demand Note and an Event of Default, as defined in section 6.1, and the City may use the remedies outlined in section 6.3, as well as any other remedies available under the Loan Documents. 4.3 Delegation of Loan Administration. City may delegate administration of any or all of the matters described in this Article IV to the Custodian in accordance with the provisions of the HUD Contract, the City Note, and the Custodial Agreement. Upon execution of the Custodial Agreement by the parties thereto Obligor shall provide the appropriate requests and information to the Custodian and to the City at such times and in such form as is provided in the Custodial Agreement. 4.4 Debt Service Reserve Account. Loan Agreement Page 11 (a) Monthly Deposits. Commencing in the first month disbursement of principal of the City Note in respect of the Obligor Note is to be made, Obligor shall make monthly installment payments to the Custodian for deposit in an account maintained by the Custodian for the accumulation of funds for payments on the Obligor Note (the "Debt Service Reserve Account," which term shall include any related Debt Service Reserve Investment Account established under the Custodial Agreement and Letter Agreements), in order that the Custodian shall have sufficient funds to make transfers to the Loan Repayment Account in payment of installments on the Obligor Note as they come due (each such due date being an "Obligor Payment Date"). Funds in the Loan Repayment Account shall be used to make payments on the City Note as they come due. Each such monthly payment shall be due and payable, in immediately available funds, on the "Deposit Day," which shall be the fifteenth (15th) day of the month, or if such day is not a Business Day, then on the previous Business Day; subject to adjustment in respect of any Conversion Date. Subject to the provisions of Section 4.4(b) hereof, each such payment shall be in an amount equal to the actual interest accruing on the Obligor Note during the corresponding month, at the rate or blended rate, as the case may be, then in effect (the "Interest Component"), plus one -twelfth (1/12th) of the total principal coming due on the Obligor Note on the next Obligor Payment Date (the "Principal Component"); provided that the monthly payment obligation in respect of the Interest Component shall be adjusted ratably in any month the Loan is not outstanding for the entire month; and provided further, that the monthly payment obligation in respect of the Principal Component shall be adjusted ratably during any period that fewer than twelve (12) Deposit Days are scheduled to occur prior to the corresponding Obligor Payment Date in respect of principal of the Obligor Note. Except as provided in Section 4.4(b) below, Obligor shall not be entitled to any reductions in, or credits against, deposits to the Debt Service Reserve Account based upon interest or earnings credited to the Debt Service Reserve Account (including any Debt Service Reserve Investment Account). (b) Interest Stabilization Payments and Subsidy. Obligor and the City intend, notwithstanding the actual rate of interest payable on the Loan and Obligor Note from time to time, that to the extent feasible, Obligor's monthly interest payment obligations shall be based upon a deemed rate of interest equal to four percent (4.0%) per annum. The actual interest payable by Obligor shall be determined as follows: (i) If the rate or blended rate, as the case may be, of interest on the Loan and Obligor Note during any month is less than four percent (4.0%) per annum as calculated under Paragraph 1.3(b), above, Obligor shall pay to the Custodian on the corresponding Deposit Day, for deposit into the Debt Service Reserve Account, an amount equal to the interest payment calculated at four percent (4.0%) per annum, notwithstanding that the actual interest accruing on the Obligor Note during such period may be less. (ii) If the actual rate of interest on the Loan and Obligor Note during any month as calculated under Paragraph 1.3(b), above, exceeds four percent (4%) per annum, unless the Custodian shall have delivered to Obligor and City a Shortfall Notice (defined in this Section, below), Obligor shall pay to the Custodian on the corresponding Deposit Day, interest at a rate equal to four percent (4%) per annum on the then -Outstanding principal balance of the Loan and Obligor Note, and the Custodian shall look to other funds on deposit in the Debt Service Reserve Account and the EDI Grant Loan Payment Reserve Account to pay the balance Loan Agreement Page 12 of interest next scheduled to become due on the City Loan; provided, that the Custodian shall exhaust funds on deposit in the Debt Service Reserve Account from time to time prior to making any withdrawals from the EDI Grant Loan Payment Reserve Account to pay any portion of the Interest Component of any monthly deposit; and provided further, that Custodian is not authorized to and shallnot withdraw from the EDI Grant Loan Payment Reserve Account for such purposes, an aggregate amount greater than Thirty -One Thousand Seven Hundred Fourteen and 80/100 Dollars ($31,714.80). (iii) If not less than five (5) Business Days prior to any Deposit Day the Custodian determines that there shall or may be insufficient funds available in the Debt Service Reserve Account and EDI Grant Loan Payment Reserve Account to pay the full amount of principal and interest, as calculated under Paragraph 1.3(b), above, to become due on the City Note on the next date such interest is required to be paid, taking into account the expected payment of interest at a deemed rate of four percent (4.0%) per annum required to be made by Obligor on such Deposit Day and each subsequent Deposit Day scheduled to occur prior to the corresponding Obligor Payment Date, the Custodian shall promptly deliver written notice (each, a "Shortfall Notice") to that effect to the Obligor (with a copy to the City). Upon receipt of any such Shortfall Notice, and in any event, on or before the corresponding Deposit Day, the Obligor shall pay to the Custodian, for deposit into the Debt Service Reserve Account, the full amount of interest actually accruing on the Loan and Obligor Note during the corresponding month as calculated under Paragraph 1.3(b), above. Obligor acknowledges and agrees that interest stabilization payments made by Obligor in accordance with this Section 4.4(b) and deposited in the Debt Service Reserve Account, together with the earnings thereon, if any, shall be held, without right of withdrawal or reimbursement. (c) Transfers Authorized; Crediting Payments on Obligor Note. The Custodian is hereby irrevocably authorized to transfer funds from the Debt Service Reserve Account to the Loan Repayment Account on each Obligor Payment Date, in the full amount due on the Obligor Note on each such date. The Custodian is then authorized and directed to apply funds in the Loan Repayment Account to the timely payment of amounts due on the City Note. Obligor's monthly installment payments into the . Debt Service. Reserve Account shall not constitute payments under the Obligor Note. Obligor shall be credited with the payment of interest and principal on the Obligor Note only when and solely to the extent that funds shall be transferred to the Loan Repayment Account under this Section 4.4(c). The Custodian is further irrevocably authorized by Obligor to liquidate investments in the Debt Service Reserve Account, in the Custodian's discretion, and without liability for any loss on any such liquidation, for the purposes described in this Section 4.4(c). The authorization by Obligor in this Section 4.4(c) is in addition to, and not in limitation of, the authorization in Section 1.4 above. (d) Investment of Funds; Earnings Remain on Deposit. Funds in the Debt Service Reserve Account shall be invested at the direction of City, but only in instruments that mature (or are redeemable without penalty) within six (6) months and in any event no later than five (5) Business Days before the next Obligor Payment Date, and that are guaranteed as to payment of principal by the United States Government, or in money market funds that invest solely in such instruments. All earnings in the Debt Service Reserve Account shall remain therein until applied in accordance with this Agreement or until all amounts owing under the Loan Documents Loan Agreement Page 13 have been paid in full. When all amounts owing under the Loan Documents have been paid in full, then the remaining balance shall be disbursed to or upon the order of the City. (e) Late Charge. If any deposit required to be made into the Debt Service Reserve Account is not received within ten (10) days after the date when such deposit is due, in addition to additional interest required to be paid in accordance with the Obligor Note, Obligor agrees to pay a late charge equal to five percent (5.0%) of theamount past due, as compensation to the City and Custodian for the staff time and resources required to handle such delinquencies, and not as a penalty. Such late charges shall not be credited to the Debt Service Reserve Account or Loan Repayment Account, but shall be retained by the City and/or Custodian. Late charges under this Section are in addition to, and not in substitution for, the other remedies provided in the Loan Documents. 4.5 Application of Payments. Any amounts transferred into the Loan Repayment Account in accordance with this Agreement shall be applied first to accrued interest on the Obligor Note, next to any premium then due, and the balance, if any, to reduction of principal. Notwithstanding the foregoing, City or Custodian shall have the right, each in its respective discretion, to apply funds available in the Debt Service Reserve Account to fees, costs, reimbursements, and late charges then due under the Loan Documents prior to application of funds against the Obligor Note. ARTICLE V — OBLIGOR'S LOAN COVENANTS Obligor covenants and agrees as follows: 5.1 General. From and after the date hereof and so long as any amount remains unpaid on the Obligor Note, or for so long as any commitment exists to extend credit hereunder, Obligor, Chinook Business Park, and Trail Wagons/Chinook Properties covenant and agree that: (a) Obligor shall promptly pay. principal, interest, and premium (if any) pursuant to the Obligor Note as and when the same becomes due and payable, and make any and all other payments and depositsrequired by the Loan Documents; (b) Obligor shall preserve and keep in full force and effect its existence as a for profit corporation under the laws of the State of Washington; (c) Chinook Business Park, LLC shall maintain, preserve, and keep its' Property in good condition, ordinary wear and tear excepted, and from time to time make all necessary repairs, renewals, and replacements. 5.2 Reserved 5.3 Compliance with Laws. Run its business in compliance with all material respects with all applicable laws, ordinances, rules and regulations and executive orders of federal, state, county or municipal governments or agencies now in force or which may be enacted hereafter. Loan Agreement Page 14 5.4 Inspections. Upon written notification by City to Obligor, City and its representatives shall have the right to inspect and copy Obligor's books and records relating to its business. Without limiting the foregoing, Obligor shall permit City to examine and copy all books, records and other papers relating to Obligor's use of the Loan proceeds and to Obligor's compliance with this Agreement, the Act ,and applicable provisions of federal, state, and local laws, ordinances, rules and regulations. 5.5 Notify City of Litigation or Complaints. Obligor shall promptly notify City in writing of all litigation or threatened litigation involving its business or the Property, and any other litigation that reasonably could have a material adverse affect on the financial condition of Obligor, and of all complaints or charges made by any governmental authority affecting Obligor. 5.6 Federal Regulations. Obligor acknowledges that the Loan is to be made with funds received by the Custodian under the Section 108 program of the Act and that such funds are subject to CDBG program regulations of HUD, and certain other federal laws and regulations. Accordingly, Obligor agrees, represents, and warrants that Obligor shall comply with all applicable requirements under HUD regulations for the CDBG program and under other laws and regulations applicable to loans of such federal funds, including without limitation: (a) Benefit to Low- and Moderate Income Individuals. Obligor's Project shall benefit . low- and moderate -income individuals (as defined by HUD) to the maximum extent feasible. The Project shall result in the creation of at least one hundred and fifty new permanent jobs (full-time equivalent). Obligor shall provide quarterly reports containing data required by the City on the jobs created and the demographics of persons initially interviewed and hired for such jobs, as set forth in Attachments I and J and fully incorporated herein. Obligor shall provide the reports on January 15, April 15, July 15, and October 15 and shall continue to provide the reports until one hundred and fifty full time equivalent permanent jobs are created (e.g. if two half time positions are created, that counts for one full time equivalent position). If Obligor fails to submit the report within fifteen days after the due date, the City may, in its sole discretion, increase the interest rate on the Loan to the greater of the variable interest rate in effect (as set forth in section 1.3(b) above) or 12%. The City must give Obligor notice of its intent to increase the interest rate under this section and ten days to cure before increasing the interest rate. Once the City .increases the interest rate under this section, it shall remain at that level until Obligor submits its reports. City retains the right to the increased interest paid and Obligor cannot offset the increased interest against any future payments. (b) Nondiscrimination. No person shall on the grounds of race, color, national origin, religion, or sex be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity funded in whole or in part with CDBG funds. Obligor shall comply fully with all requirements of Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d et seq., which provides that no person in the United States shall on the ground of race, color, or national origin, be excluded from participation in, denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance; and with Department of Housing and Urban Development ("HUD") regulations implementing such requirements, 24 C.F.R. Part 1. Loan Agreement Page 15 Obligor shall comply with all applicable requirements and prohibitions of the following: 24 C.F.R. Section 570.602, implementing the nondiscrimination requirements of Section 109 of the Act; HUD regulations under the Rehabilitation Act of 1973, as amended, 24 C.F.R. Part 8; HUD Regulations under the Americans with Disabilities Act; and HUD regulations under the Age Discrimination Act of 1975, 42 U.S.C. Section 6101 et seq., at 24 C.F.R. Part 146. No otherwise qualified handicapped individual in the United States shall, solely because of handicap, be excluded from the participation in, be denied the benefits, or be subjected to discrimination under any program or activity receiving Federal financial assistance. (c) Conflict of Interest. Obligor shall ensure compliance with the provisions of 24 CFR Section 570.611, which provide generally that no officer, agent, employee, consultant, or elected or appointed official of The City of Yakima or of any subrecipient receiving CDBG funds who exercises or has exercised any functions or responsibilities with respect to activities assisted by CDBG funds or who is in a position to participate in a decision-making process or gain inside information with respect to these activities, shall obtain any financial interest or benefit from, or have any financial interest in, the activity funded under this Loan Agreement or any contract or subcontract or agreement with respect thereto or the proceeds thereof, for himself or herself or those with whom he or she has business or immediate family ties; nor shall (s)he for one year after completion of his or her tenure with the City or such subrecipient obtain or have any such financial interest or benefit. Obligor shall incorporate in all such contracts or subcontracts a provision prohibiting any conflict of interest prohibited by this subsection. (d) Lobbying. Obligor hereby certifies and agrees as follows, in accordance with 31 U.S.C. Section 1352, to the best of its knowledge and belief: (1) No Federal appropriated funds have been paid or will be paid, by or on behalf of Obligor, to any person for influencing or attempting to influence an officer or employee of any agency, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress in connection with the awarding of any Federal contract, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement; (2) If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress in connection with this Federal loan, it will complete and submit Standard Form "Disclosure Form to Report Lobbying," in accordance with its instructions; and (3) It will require that the language of this Section be included in the award documents for subawards at all tiers (including subcontracts, subgrants, and contracts under grants, loans and cooperative agreements) and that all subrecipients shall certify and disclose accordingly. Loan Agreement Page 16 This certification is a material representation of fact upon which reliance was placed when this transaction was made or entered into. Submission of this certification is made a prerequisite for making or entering into this transaction by section 1352, title 31, U. S. Code. Any person who fails to file the required certification shall be subject to a civil penalty of not less than $10,000 and not more than $100,000 for each such failure. (e) Economic Opportunities for Low- and Very Low -Income Persons. Obligor shall comply, and cause all contractors and subcontractors to comply, with any and all applicable provisions of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u, the purpose of which is to ensure that employment and other economic opportunities generated by Federal financial assistance for housing and community development programs shall, to the greatest extent feasible, be directed toward low- and very low-income persons, particularly those who are, recipients of government assistance for housing. Obligor shall comply, and shall require all contractors and subcontractors to comply, with all applicable provisions of regulations issued pursuant thereto by the Secretary of HUD and set forth in 24 C.F.R. Part 135, and with all applicable rules and orders of HUD issued thereunder. (f) Records. Obligor shall maintain and make available to the City and HUD all records reasonably required to demonstrate compliance with all of the requirements of this Agreement, for at least four (4) years after full repayment of the Loan. (g) Disclosures. Obligor represents, warrants, and agrees that it has provided to City any and all disclosures required by the HUD Reform Act, 42 U.S.C. Section 3545, and regulations thereunder, 24 CFR Part 4; that it will provide timely updated disclosures to City to the extent required by such act and regulations; and that all such disclosures are and shall be complete and accurate. (h) Prior Actions. Obligor represents and warrants that in all actions related to the Project to date Obligor has complied with all requirements referred to in this Section 5.6. (1) Indemnity. Obligor shall indemnify and hold harmless the City from any loss, damage, expense, claim or demand resulting from Obligor's failure to comply with any federal requirement to be complied with pursuant to this Agreement or failure to maintain adequate records to demonstrate such compliance. Obligor shall indemnify and hold harmless the City from any loss of value for Chinook Business Park, LLC's Property, including but not limited to any environmental or hazardous waste issue. This provision shall survive expiration of this Agreement. 5.7 Reports. Obligor shall deliver to the City reports and information as City may require for purposes of monitoring and evaluating the performance of the Obligor. 5.8 Liens or Claims of Liens. Obligor shall cause the Chinook Business Park, LLC to keep the Property free from liens and encumbrances of all kinds, superior or inferior to the Deed of Trust, except for those permitted pursuant to Section 2.4 above and any of the following: (a) Liens for property taxes on the Property not yet due and payable; Loan Agreement Page 17 (b) Mortgage (c) Liens subordinate to the lien of the Deed of Trust, created after the date of Closing with the prior written consent of the City, which consent shall not be unreasonably withheld. If any claims of lien shall be asserted against the Property other than as permitted by this Section, Obligor, regardless of any action that City may otherwise be authorized to take, shall obtain a release and satisfaction of such lien claim, bond the lien claim, procure title insurance satisfactory to City protecting City from any loss relating to such lien claim, or otherwise provide to City assurances and security satisfactory to City that the lien claim will be paid or satisfied not later than ten (10) days after a judgment on the lien claim. If such a lien claim is not released or satisfied or a bond or other security satisfactory to City provided within forty-five (45) days of written request from City to Obligor, then the failure to do so shall allow the City to declare an Event of Default (as defined in Section 6.1 below) regardless of whether such lien claim is or is not superior to the Deed of Trust. 5.9 Political Activity. No portion of the Loan shall be used for any political activity or to further the election or defeat of any candidate for public office or to influence the approval or defeat of any ballot issue or legislation. 5.10 Further Actions. Obligor will at any time and from time to time upon request of City take or cause to be taken any action, execute, acknowledge, deliver or record any further documents, opinions, or other instruments or obtain such additional insurance as City is required to do or obtain by HUD or other federal, state or county regulatory agency. 5.11 Payment of Compensation of Custodian. Obligor shall be responsible for and pay the fees of the Custodian as provided under the Custodial Agreement. The Custodian's acceptance fee, prorated first annual fee and counsel fees and expenses shall be disbursed to Custodian from the Guaranteed Loan Funds Account at the time of initial Loan disbursement. The Custodian is hereby authorized to withdraw from interest and/or investment earnings on the Debt Service Reserve Account established pursuant to such Custodial Agreement up to the amount of its annual fee and any other fees and expenses to which it is entitled thereunder, and if such interest and/or investment earnings are insufficient to pay in full the Custodian's fees and expenses, then upon Custodian's notice thereof to Obligor, Obligor shall promptly pay the remaining amount of the Custodian's fees and expenses directly to the Custodian. 5.12 Payment of Other Indebtedness. Obligor shall timely pay the principal, interest and all other amounts due on any other indebtedness or liability now or hereafter owing by the Obligor to any person and secured by the Property; provided that nothing in this Section shall authorize Obligor to make any payment from any funds or assets pledged to the City hereunder. 5.13 Transfer of Property. Obligor shall not cause or permit Chinook Business Park, LLC to transfer the Property or any interest of Obligor therein, voluntary or involuntary, without the advance written consent of the City, except for the creation of liens, encumbrances or leases that are expressly permitted under the Loan Documents without the City's consent. Loan Agreement Page 18 ARTICLE VI — DEFAULT AND REMEDIES 6.1 Events of Default. Upon the occurrence of any of the following events and prior to the complete cure thereof by Obligor in a manner satisfactory to the City, the City shall have the right to declare an Event of Default hereunder, without notice or demand by City, except as expressly provided in this Section: (a) Any failure to pay when due any deposit into the Debt Service Reserve Fund in respect of principal or interest on the Obligor Note; (b) Any failure to make a payment or deposit of money required by any of the Loan Documents, other than amounts referred to in Section 6.1(a) above, that is not cured within ten (10) days of the due date of such payment or deposit (or within ten (10) days of demand in case of amounts due on demand); (c) Any transfer of the Chinook Business Park, LLC's Property or any interest therein, voluntary or involuntary, contrary to Section 5.13 of this Loan Agreement; (d) Any failure to comply with the terms of Section 5.8 of this Loan Agreement (relating to lien claims) within the time period permitted by such Section; (e) Any breach or nonperformance by Obligor of any provision of any of the Loan Documents not included within any of Subsections (a) -(d) above that is not cured within sixty (60) days after notice to Obligor of such breach or nonperformance, or such longer cure period as may be permitted under the specific terms of the Loan Document; provided, however, that unless HUD shall otherwise require, if (1) such breach or nonperformance is susceptible to cure but cannot reasonably be cured within such cure period, (2) Obligor shall commence to cure such breach or nonperformance within such cure period and shall thereafter diligently and expeditiously proceed to cure the same, and (3) Obligor shall inform the City in writing of the status of the cure at the expiration of such cure period and every thirty days thereafter, then such cure period shall be extended for such time as is reasonably necessary for Obligor in the exercise of due diligence to cure such breach or nonperformance; (f) A petition in bankruptcy or for reorganization or for an arrangement under any bankruptcy or insolvency law or for a receiver or trustee for any of Obligor's property is filed by Obligor, or is filed against Obligor and is not dismissed within ninety (90) days, or if Obligor makes an assignment for the benefit of creditors or becomes insolvent or unable to pay its debts as they mature or any attachment or execution is levied against a substantial portion of the property of Obligor and is not discharged within ninety (90) days, or if any law or court order shall require the City, Custodian or any other party to refund or otherwise relinquish any portion of any amount paid under the Obligor Note or this Agreement as a preference or for any other reason except refund of duplicative payment; (g) Any representation, warranty or disclosure made to City by Obligor, or contained in any information submitted by Obligor to City or to any government agency in Loan Agreement Page 19 connection with the Loan or the Property, proves to be materially false or misleading as of the date when made or reaffirmed, whether or not such representation or disclosure appears in this Agreement. (h) Any default by Guarantor or Chinook Business Park or Gary Lukehart of its obligations under the Guaranty. 6.2 Declaration of Event of Default. City's declaration of an Event of Default hereunder shall be made by notice to Obligor pursuant to Section 7.15 of this Agreement and shall be effective as provided therein. 6.3 Remedies. (a) Upon declaring an Event of Default, City may, in addition to any other remedies that City may have hereunder or under the Loan Documents or by law, at its option and without prior demand or notice take any or all of the following actions: (1) Immediately terminate any further advances of Loan funds hereunder and revoke any instructions to any third party holding any such funds; (2) Cause the Custodian to stop making interest subsidy payments; (3) Declare the Loan immediately due and payable in full; (4) Foreclose under the Deed of Trust, judicially or nonjudicially; (5 Apply any or all funds in the Reserve Accounts to amounts due under the Loan Documents, whether by reason of acceleration or otherwise, and cause investments in such accounts to be liquidated for such purpose; and (6) Seek judicial appointment of a receiver. (b) All remedies of City provided for herein and in any other Loan Documents are cumulative and shall be in addition to all other rights and remedies provided by law. The exercise of any right or remedy by City hereunder shall not in any way constitute a cure or waiver of default hereunder or under any other Loan Document or invalidate any act done pursuant to any notice of default, or prejudice City in the exercise of any of its rights hereunder or under any other Loan Documents unless, in the exercise of said rights, City realizes all amounts owed to it under such Loan Documents. 6.4 No Default Prior to Declaration. No default or Event of Default shall exist under this Agreement or the Obligor Note until the same shall have been declared by the City or other party authorized to make such declaration; provided, that failure to declare, or delay in declaring, a default hereunder shall not constitute a waiver of any rights or remedies or excuse any failure by Obligor to strictly comply with its obligations under all of the Loan Documents. Loan Agreement Page 20 ARTICLE VII — MISCELLANEOUS 7.1 No Waiver. No waiver of any noncompliance or breach by Obligor hereunder shall be implied from any failure by City to take action on account of such noncompliance or breach, and no express waiver shall affect any breach or noncompliance other than as specified in the waiver. Any waiver shall be operative only for the time and to the extent therein stated. Waivers of any covenant, term, or condition contained herein shall not be construed as a waiver of any subsequent breach of the same covenant, term or condition. The consent or approval by City to, or of, any act by Obligor requiring further consent or approval shall not be deemed to waive or render unnecessary the consent or approval to, or of, any subsequent similar act. 7.2 Successors and Assigns; Delegation to Custodian; Changes in Custodian and Custodial Agreement. This Agreement is made and entered into for the sole protection and benefit of City, HUD, and Obligor, their successors and assigns, and no other person or persons shall have any right of action hereunder. The terms hereof shall inure to the benefit of the successors and assigns of the parties hereto; provided, however, that the Obligor's interest hereunder cannot be assigned or otherwise transferred without the prior written consent of City. Obligor acknowledges and agrees that City may assign to HUD or any custodian or trustee for HUD any or all of City's rights under this Agreement and any of the Loan Documents and may direct that any payment or performance be provided directly to HUD or such custodian or trustee, whether or not the Obligor Note or this Agreement have been assigned. Obligor agrees that City may delegate to the Custodian the right to make demands and give directions on behalf of City under the Loan Documents, but that the scope of any such delegation shall be strictly limited to the terms of a written instrument duly signed on behalf of the City. Obligor further acknowledges that the Custodial Agreement may be modified or terminated, or a substitute Custodial Agreement executed, or a successor Custodian appointed, in each case without the consent of Obligor so long as the obligations of Obligor are not increased and the rights of the Obligor under the Loan Documents are not adversely affected in any material respect. Except for minor modifications to the Custodial Agreement not affecting Obligor, City agrees to give reasonable advance notice to the Obligor of any action as described in the preceding sentence, and agrees in each case to provide a copy of any modification or substitute Custodial Agreement to Obligor within fifteen (15) days after the execution thereof. 7.3 No Defense Based on City Regulatory Actions. Obligor understands that (a) the operations of Obligor are subject to numerous laws, regulations, ordinances and permits, including those of City and other governmental bodies, and (b) the modification, interpretation, application, or revocation of such laws, regulations, rules or permits could adversely affect economic return to Obligor. Obligor has conducted its own investigation and relied on the advice of its own counsel and experts as to all such matters in connection with Obligor's expanding its product line. Obligor acknowledges that by entering into this Agreement the City does not make, and that the City expressly disclaims, any representation or assurance whatever as to the availability, issuance or continuation of any permits, approvals, or interpretations of any kind that may be required or desired by Obligor or any other party in connection with its operations. Obligor agrees that notwithstanding any regulatory action or omission of City affecting Obligor, no defense, offset or reduction of liability shall be available to Obligor, at law or in equity. Loan Agreement Page 21 7.4 Time. Time is of the essence of all provisions of the Loan Documents. 7.5 Entire Agreement Amendments. This Agreement, the other Loan Documents, and the documents, laws and regulations incorporated by reference herein constitute the entire agreement of the parties hereto with respect to the Loan and supersede any prior agreements or understandings, written or oral, with respect to the Loan. Obligor is not relying upon any promises, representations or understandings, written or oral, in entering into the Loan Documents, other than as expressly set forth in the Loan Documents. The obligations of Obligor under the Loan Documents are not conditioned upon, and shall not be affected by, any other agreement, understanding, performance or nonperformance by the City or any other party, and in any proceeding to enforce any of Obligor's obligations under the Loan Documents, Obligor shall not be entitled to assert, by way of excuse, offset, counterclaim, grounds for equitable relief, or otherwise, any actual or alleged action or inaction by or on behalf of the City except to the extent that any such action or inaction is expressly required of the City by, and is made a condition of Obligor's obligation by, the Loan Documents. No amendment, modification, or termination of any provisions of this Agreement or of any of the Loan Documents shall in any event be effective unless the same shall be in writing and signed by a duly authorized officer of City and by Obligor, and no such writing shall be construed to modify, waive, or affect the terms of the Loan Documents except to the extent that such document expressly so provides. 7.6 Headings. The article and section headings in no way define, limit, extend or interpret the scope of this Agreement or of any particular article or section. 7.7 Number and Gender. When the contexts in which the words are used in this Agreement indicate that such is the intent, words in the singular number shall include the plural and vice -versa. References to any one gender shall also include the other gender if applicable under the circumstances. 7.8 Validity. In the event that any provision of this Agreement shall be held to be invalid, the same shall, not affect in any respect whatsoever .the validity of.the_remainder of. this Agreement. 7.9 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Washington, and The City of Yakima, except to the extent federal law applies. 7.10 Survival. All agreements, representations and warranties made herein and in the Obligor Note shall survive the execution and delivery of this Agreement and of the Loan Documents and the making of the Loan hereunder and continue in full force and effect until the obligations of Obligor hereunder and the indebtedness evidenced by the Obligor Note have been fully paid and satisfied, and thereafter to the extent provided in the Loan Documents, regardless of whether the Obligor Note is surrendered or marked as canceled or paid in full. Loan Agreement Page 22 7.11 Venue and Forum. In the event that any legal action should be filed by either party against the other, the venue and forum for such action shall be the Superior Court of the State of Washington for the County of Yakima. 7.12 Attorney's Fees. In the event either party shall bring an action to enforce the terms and conditions of this Agreement, the prevailing party shall be entitled to recover all of its costs and expenses, including, but not limited to, reasonable attorney's fees as determined by the court. 7.13 Duplicate Originals; Counterparts. This Agreement shall be executed in duplicate and each of the parties hereto shall receive an original. Each original shall constitute one and the same agreement. This Agreement may be executed in counterparts, and each such counterpart shall be deemed to be an original. 7.14 Construction. The Loan Documents shall be construed so as to conform to the requirements of the HUD Contract and applicable federal laws and regulations. The Loan Documents are the product of negotiation between the parties and therefore shall not be construed strictly in favor of, or against, either party except as may be specifically provided in the Loan Documents with respect to particular provisions thereof. 7.15 Notices. Any notice, demand or request required hereunder shall be given in writing at the addresses set forth below by personal service, by facsimile transmission, or by first class mail. The addresses may be changed by notice to the other party given in the same manner as provided above. Notices personally served or sent be facsimile shall be effective when actually received during normal business hours, and otherwise on the following Business Day. If notice is given by mail, it shall be deemed received on the earlier of: (i) if by certified mail, the date of receipt as shown on the return receipt, or (ii) three (3) days after its deposit in the U.S. mail. If to Obligor: If to City: Trail Wagons, Inc.. 607 East R St. Yakima, Washington 98901 Attn: Gary Lukehart fax: 509-574-3891 Department of Economic and Community Development City of Yakima 129 N. 2nd Street Yakima, Washington 98901 Attn: Director fax: 509-576-6792 IN WITNESS WHEREOF, Obligor and City and Chinook Business Park and Trail Wagons/Chinook Properties have executed this Agreement as of the date first written above by and through their duly authorized representatives; Chinook Business Park and Trail Wagons/Chinook Properties sign this Agreement solely as pertains to their covenants, representations, and warranties specifically contained herein. Loan Agreement Page 23 CITY: THE CITY OF YAKIMA, a Washington municipal corporation By: R. A. Zais, Jr., City Manager OBLIGOR: TRAIL WAGONS, INC., a Washington corporation G Lukehart, President CHINOOK BUSINESS PARK, LLC, a Was . ' : on limited liability company: Gam+ ukehart By: Title: Loan Agreement Page 24 FIRST AMENDED VARIABLE/FIXED RATE PROMISSORY NOTE Yakima, Washington $2,395,000.00 January 5 , 2004 FOR VALUE RECEIVED, TRAIL WAGONS, INC., ("Obligor"), a Washington corporation, and THE CITY OF YAKIMA, WASHINGTON ("Payee"), a Washington municipal corporation, hereby amend and modify that Variable/Fixed Rate Promissory Note dated July 23 2003 executed in thee principal amount of $2,395,000.00, as follows: Paragraph 8. of the Note dated July 23, 2003 is amended to provide that the "Due Date" for final payment under the Note, iii%riidiiig all priiiclpar,''riruciCSt, icca, vaso -and-other charges that Obligor is obligated to pay in connection with this Note and the Loan shall be due and payable, in full, on July 15, 2013. To the extent not specifically amended hereby, the terms and conditions of the Note dated July 23, 2003 shall remain in full force and effect. ORAL AGREEMENTS, OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. STATE OF WASHINGTON ss: County of Yakima TRAIL WAGONS, INC. Gary Lukehart, President I certify that I know or have satisfactory evidence that GARY LUKEHART is. the person who appeared before me, and said person acknowledged that he signed this instrument, on oath, stated that he was authorized to execute the instrument and acknowledged. it as President of TRAIL WAGONS, INC., a Washington Promissory Note Page 1 corporation, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: January , 2004. NOTAR P ' BLIC in and for the State of Was ington Residing at: My appointm xpires: 9 ASSIGNMENT AND ACKNOWLEDGMENT: The Payee hereby assigns to JPMorgan Chase Bank, as Trustee, with full right of assignment for the benefit of HUD under that certain Indenture of Trust and Custodial Agreement dated as of , 2003 and the Master Agreement, all of its rights under the foregoing Amended Promissory Note. Dated this day of January, 2004. CITY OF YAKIMA By: R. A. Zais, Jr., City Manager Obligor hereby acknowledges the foregoing assignment and agrees to recognize and render all performance to the Trustee and HUD as assignee of the Promissory Note dated July 23; 2003, as amended. TRAI W. hi WAGONS, INC., a on corporation By: Promissory Note Gary Lu': ehart, President Page 2 corporation, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: January , 2004. NOTARY PUBLIC in and for the State of «Tashington Residing at: My appointment expires: ASSIGNMENT AND ACKNOWLEDGMENT: The Payee hereby assigns to JPMorgan Chase Bank, as Trustee, with full right of assignment for the benefit of HUD under at certain Indenture of Trust and Custodial Agreement dated as of c 2.9' , 2003 and the Master Agreement, all of its rights under the foregoing Amended Promissory Note. Pir Dated this.6 day of January, 2004. CITY OF YAKIMA R. A. Zais' Jr. City Manager er Obligor hereby acknowledges the foregoing assignment and agrees to recognize and render all performance to the Trustee and HUD as assignee of the Promissory Note dated July 23, 2003, as amended. TRAIL WAGONS, INC., a Washington corporation By: Gary Lukehart, President Promissory Note Page 2 LIST OF ATTACHMENTS Attachment A Form of Obligor Note Attachment B Deed of Trust — Boise -Cascade Property Attachment C Deed of Trust - Kern Property Attachment D Legal Description Attachment E Guaranty Attachment F Deposit Account Control Agreement Attachment G Title Insurance for Property Attachment H Demand Note Attachment I Job Creation Summary Report Attachment J Income Verification Form Loan Agreement Page 25 Attachment A See attached Obligor Note Loan Agreement Page 26 FIRST AMENDED VARIABLE/FIXED RATE PROMISSORY NOTE Yakima, Washington January, 2004 FOR VALUE RECEIVED, TRAIL WAGONS, INC., ("Obligor"), a Washington corporation, and THE CITY OF YAKIMA, WASHINGTON ("Payee"), a Washington municipal corporation, hereby amends and modify that Variable/Fixed Rate Promissory Note dated December 24, 2003 executed in the principal amount of $475,729.00 as follows: $475,000.00 1. The principal amount loaned pursuant to the Loan Agreement dated December 24, 2003 (as supplemented or amended from time to time, the "December Loan Agreement"), between the Obli111.,1: - _+l> D o. Four Hundred Seventy_Fi ��e. Thousand gor allu line i. ayee-io 1 V...1 i. ua ul.,u w��....,.a ��' and no/100 Dollars ($475,000.00). 2. The Recitals under the Note dated December 24, 2003 are amended to provide that funds used by the Payee to make the Loan have been obtained by Payee exclusively through loan proceeds from a loan evidenced by a Promissory Note in the total principal amount of $475,000.00 issued by the Payee (the "City Note") pursuant to Section 108 of the Housing and Community Development Act of 1974 as amended (42 USC §5308) and 24 CFR 570.700, et seq. 3. Paragraph 8. of the Note dated December 24, 2003 is amended to provide that the "Due Date" for final payment under the Note, including all principal, interest, fees, costs and other charges that Obligor is obligated to pay in connection with this Note and the Loan shall be due and payable, in full, on July 15, 2013. To the extent not specifically amended hereby, the terms and conditions of the Note dated December 24, 2003 shall remain in full force and effect. ORAL AGREEMENTS, OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. TR4L TAGONS INC. B Promissory Note Gary • kehart, President Page 1 STATE OF WASHINGTON ) ) ss: County of Yakima ) I certify that I know or have satisfactory evidence that GARY LUKEHART is the person who appeared before me, and said person acknowledged that he signed this instrument, on oath, stated that he was authorized to execute the instrument and acknowledged it as President TR AIT WAGONa INr a Washington V1111V Y11V lAU of VL al..• 1��.J, INC., � gtVn corporation, to be the free and voluntary act of such party for the uses 'and purposes mentioned in the instrument. DATED: January , 2004. NOTARY ' : LIC in and for the State of Was ington Residing at: e� My appointor t xpires: 9-;0•Z ,V-(90 7 ASSIGNMENT AND ACKNOWLEDGMENT: The Payee hereby assigns to JPMorgan Chase Bank, as Trustee, with full right of assignment for the benefit of HUD under that certain Indenture of Trust and Custodial Agreement dated as of , 2003 and the Master Agreement, all of its rights under the foregoing Amended Promissory Note. Dated this __ day of January, 2004. CITY OF YAKIMA By: R. A. Zais, Jr., City Manager Promissory Note Page 2 STATE OF WASHINGTON ) ) ss: County of Yakima ) I certify that I know or have satisfactory evidence that GARY LUKEHART is the person who appeared before me, and said person acknowledged that he signed this instrument, on. oath, stated that he was authorized to execute the instrument and acknowledged it a7President of TRAIL WAGONS, INC., a Washington corporation, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: January , 2004. NOTARY PUBLIC in and for the State of Washington Residing at: My appointment expires: ASSIGNMENT AND ACKNOWLEDGMENT: The Payee hereby assigns to JPMorgan Chase Bank, as Trustee, with full right of assignment for the benefit of HU under at certain Indenture of Trust and Custodial Agreement dated as of Q2411 , 2003 and the Master Agreement, all of its rights under the foregoing Amended Promissory Note. Dated this 3 day of January, 2004. CITY OF YAKIMA By��? R. A. Zais, Jr., City Manager Promissory Note Page 2 Obligor hereby acknowledges the foregoing assignment and agrees to recognize and render all performance to the Trustee and HUD as assignee of the Promissory Note dated December 24, 2003, as amended. TRAIL WAGONS, INC., a Washi gton corporation \ , By:.11\nlialk A _411120 GarlR ikehart, President Promissory Note Page 3 VARIABLE/FIXED RATE PROMISSORY NOTE Yakima, Washington $475,722.00 December on 2003 FOR VALUE RECEIVED, TRAIL WAGONS, INC., ("Obligor"), a Washington corporation, promises to pay to THE CITY OF YAKIMA, WASHINGTON ("Payee"), a Washington municipal corporation, or order, at Yakima, Washington, at the time or times provided herein, the sum of Four Hundred .Seventy -Five Thousand Seven Hundred Twenty -Two Dollars ($475,722.00), with interest as provided herein. RECITALS This Note is given to evidence a loan (the "Loan") made pursuant to the Loan Agreement dated December �g2003 (as supplemented or amended from time to time, the "December Loan Agreement"),between the Obligor and the Payee. The funds used by the Payee to make the Loan have been obtained by Payee exclusively through loan proceeds from a loan evidenced by a Promissory Note in the total principal amount of $475,722.00 issued by the Payee (the "City Note") pursuant to Section 108 of the Housing and Community Development Act of 1974 as amended (42 USC §5308) and 24 CFR 570.700, et seq., pursuant to which the Payee has entered into certain agreements, including, but not limited to: (a) with the United States Department of Housing and Urban Development ("HUD"), a Contract for Loan Guarantee Assistance, (b) with HUD, the Application for Loan Guarantee, , (c) with HUD and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), an Amended and Restated Master Fiscal Agency Agreement, and (d) with JPMorgan Chase Bank, an Indenture of Trust and Custodial Agreement which documents, as amended or amended from time to time, may be referred to collectively as the "Master Agreement"). The Obligor acknowledges and agrees that the Loan has been made subject to all of the terms and conditions of the Master Agreement and the City Note. Any capitalized terms not defined herein shall have the meanings provided in the City Note, the December Loan Agreement or the Master Agreement as applicable. AGREEMENT NOW, 'in consideration of the Recitals and the covenants, conditions, representations, and warranties contained here, the parties agree as follows: 1. Variable Interest Rate. Loan advances made from time to time in accordance with the terms of this Note and the December Loan Agreement ("Advance") shall bear interest from the date of the Advance and at the rates applicable to the corresponding Advances made under the City Note until repayment of the loan is Promissory Note Page 1 made in full. Initially, such interest shall accrue at a variable interest rate on the unpaid principal balance of each Advance. The initial variable interest rate for each Advance hereunder will be set on the date of such Advance and will be equal to twenty basis points (0.2 %) above the Applicable LIBO Rate (as hereinafter defined) and thereafter will be adjusted monthly on the first day of each month (each, a "Reset Date") to a variable interest rate equal to twenty basis points (0.2 %) above the Applicable LIBO Rate (such interest rate, as reset from time to time, the "Standard Note Rate"). If the Conversion Date for the City Note has not occurred by nine and one half years following the initial Advance thereunder, then the ' �..� L L L 77 1 7 7 7 the interest rate hereunder will be equal to the variable interest rate on the City Note set pursuant to the terms of Appendix A to the City Note. If the Fiscal Agent does not receive notice of either a Negotiated Special Interest Rate or Holder Determined Special Interest Rate (as defined in Appendix A to the City Note) from the Secretary or Holder, respectively, by the times specified in Appendix A to the City Note, then the Standard -Note Rate shall apply for the period to which such Negotiated Special interest Rate or Holder Determined Special Interest Rate would otherwise apply. 1.1 "LIBO Rate" for any given Business Day means, except in the case of manifest error, the interest rate per annum published on that day in the Eastern Edition of The Wall Street Journal or any successor publication ("WSJ"), published by Dow Jones & Company, Inc., in the section titled "Money Rates" (or any successor section) and opposite the caption "London Interbank Offered Rates (LIBOR) -- three months" (or any successor caption). If such rate does not appear in WSJ on a given Business Day, for each interest period, the LIBO Rate shall be the interest rate, converted to a bond -equivalent yield basis, for deposits in U.S. dollars for three months which appears on Telerate Page 3750 or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying such rate (together, "Telerate Page 3750") as of 11:00 a.m., London time, on the day (the "Determination Date") that is two London Banking Days preceding the relevant Reset Date or Advance. If such rate does not appear on Telerate Page 3750 on such Determination Date, such rate shall be obtained from the Reuters Screen ISDA Page as of 11:00 a.m., London time, on such -Determination Date. If, in turn, such rate does not appear on the Reuters Screen ISDA Page on such Determination Date, the offered quotation from each of four reference banks (expressed as a percentage per annum) as of approximately 11:00 a.m., London time, on such Determination Date for deposits in U.S. dollars to prime banks on the London interbank market for a 3 -month period, commencing on the Reset Date or date of such Advance, shall be obtained. If at least two such quotations are provided, the LIBO Rate for such Reset Date or date of such Advance will be the arithmetic mean of the quotations, rounded to five decimal places. If fewer than two such quotations are provided as requested, the LIBO Rate for that Determination Date shall be the rate for the most recent day preceding such Determination Date for which the LIBO Rate shall have been Promissory Note Page 2 displayed on Telerate Page 3750. The LIBO Rate for any interest period shall be converted to a bond -equivalent yield basis by multiplying such rate by the actual number of days in such interest period and dividing that number by 180. 1.2 "Applicable LIBO Rate" means: (1) with respect to the initial interest rate for the first Advance hereunder, the LIBO Rate two London Banking Days before the date of such first Advance; (2) with respect to the initial interest rate for any subsequent Advance made before the first Reset Date, the interest rate borne by the first Advance; (3) with respect to the initial interest rate for any subsequent Advance made after the first Reset Date, the LIBO Rate two London Banking Days before the immediately preceding Reset Date; and (4) with respect to the subsequent interest rate at any Reset Date for any Advance, the LIBO Rate two London Banking Days before such Reset Date. 1.3 "London Banking Day" means any day in which dealings in deposits in United States dollars are transacted in the London interbank market. 2. Principal Amount. Prior to the Conversion Date, the aggregate amount of Advances under this Note for each specified Principal Due Date under the City Note shall be the Principal Amount to be paid by Payee on such Principal Due Date (as assigned in accordance with the Master Agreement), except to the extent such Principal Amount shall have been reduced by prepayment before such Principal Due Date as provided herein. 3. Conversion Date. On the Conversion Date (whether conversion to a fixed rate or rates is effected with the consent of the Obligor or otherwise), all Advances owed by the Obligor under this Note with the same Principal Due Date shall be aggregated into a single Principal Amount, which will accrue interest at the fixed rate determined as provided in Appendix A to the City Note. So long as no default shall have occurred under this Note and the other Loan Documents which has not been cured or waived in accordance with the terms hereof and thereof, the Payee shall not request or consent to conversion of the interest rate on the City Note to a fixed rate or rates, without the prior written consent of the Obligor. However, Obligor acknowledges and agrees that under the HUD Contract, HUD will have the unilateral right (with or without notice to or consent of the Payee and/or Obligor) to fix the interest payable on the City Note. 4. Calculate Interest. Interest payable on or before the Conversion Date shall be calculated based on a 360 -day year and the actual number of days elapsed. Interest after the Conversion Date shall be calculated based on a 360 -day year consisting of twelve 30 -day months. • 5. Payment of Principal and Interest. The principal of and interest on this Note shall be due and payable at the same time correlative principal of and interest on Promissory Note Page 3 the City Note is due and payable. Such interest is due and payable quarterly in arrears on February 1,, May 1, August 1, and November 1, and such principal is due as set out on Exhibit 1 attached hereto and incorporated herein by this reference. Payments of principal of and interest on this Note shall be made to the Loan Repayment Account. 5.1 In order to ensure timely payment of such principal and interest, commencing in the first month disbursement of principal of the City Note in respect of this Note is to be made, Obligor shall make monthly installment payments to the Custodian for deposit in an account maintained by the Custodian for the accumulation offunds for payments on this Note (the "Debt Service Reserve Account," which term shall include any related Debt Service Reserve Investment Account established under the Custodial Agreement and Letter Agreements). Each such monthly payment shall be due and payable, in immediately available funds, on the "Deposit Day," which shall be the fifteen (i5th) day of -the month, or if such day is not a Business Day, then on the previous Business Day; provided that the Deposit Day in respect of any Conversion Date shall be the day which is two Business Days prior to the Conversion Date. 5.2 Subject to the provisions of the next section, each such payment shall be in an amount equal to the actual interest accruing on this Note during the corresponding month (the "Interest Component"), at the rate or blended rate, as the case may be, then in effect, plus one -twelfth (1/12th) of the total principal coming due on this Note on the next scheduled principal payment date ("Principal Component"); provided, that the monthly payment obligation in respect of the Interest Component shall be adjusted ratably during any month the Loan is not outstanding for the entire month; and provided further, that the Principal Component shall be adjusted ratably during any period that fewer than twelve (12) Deposit Days are scheduled to occur prior to the corresponding Obligor Payment Date (as such term is defined in the next paragraph of this Note) in respect of a principal payment on this Note. 5.3 Except as provided in the next section, Obligor shall not be entitled to any reductions in, or credits against, deposits required to be made to the Debt Service Reserve Account based upon interest or earnings credited to the Debt Service Reserve Account (including any Debt Service Reserve Investment Account). The Obligor hereby irrevocably authorizes the Custodian to transfer funds from the Debt Service Reserve Account to the Loan Repayment Account on each Obligor Payment Date, in the full amount due on this Note on each such date. Obligor's monthly installment payments into the Debt Service Reserve Account shall not constitute payments under this Note. Obligor shall be credited with the payment of interest on and the principal of this Note only when and solely to the extent that funds shall be transferred to the Loan Repayment Account in accordance with the terms of the December Loan Agreement and this Note. The Custodian is further Promissory Note Page 4 irrevocably authorized by Obligor to liquidate investments in the Debt Service Reserve Account, in the Custodian's discretion, and without liability for any loss on any such liquidation, for the purposes described in this paragraph. 6. Interest Subsidy. Interest Stabilization Payments and Subsidy. Obligor and the City intend, notwithstanding the actual rate of interest payable on the Loan and Obligor Note from time to time, that to the extent feasible, Obligor's monthly interest payment obligations shall be based upon a deemed rate of interest equal to four percent (4.0%) per annum. The actual interest payable by Obligor shall be determined as follows: 6.1 If the rate or blended rate, as the case may be, of interest on the Loan and Obligor Note during any month is less than four percent (4.0%) per annum as calculated under Paragraph 1.3(b), above, Obligor shall pay to the Custodian on the corresponding Deposit Day, for deposit into the Debt Service Reserve Account, an amount equal to the interest payment calculated at four percent (4.0%) per annum, notwithstanding that the actual interest accruing on the Obligor Note during such period may be less. 6.2 If the actual rate of interest on the Loan and Obligor Note during any month as calculated under Paragraph 1.3(b), above, exceeds four percent (4%) per annum, unless the Custodian shall have delivered to Obligor and City a Shortfall Notice (defined in this Section, below), Obligor shall pay to the Custodian on the corresponding Deposit Day, interest at a rate equal to four percent (4%) per annum on the then -Outstanding principal balance of the Loan and Obligor Note, and the Custodian shall look to other funds on deposit in the Debt Service Reserve Account and the EDI Grant Loan Payment Reserve Account to pay the balance of interest next scheduled to become due on the City Loan; provided, that the Custodian shall exhaust funds on deposit in the Debt Service Reserve Account from time to time prior to making any withdrawals from the EDI Grant Loan Payment Reserve Account to pay any portion of the Interest Component of any monthly deposit; and provided further, that Custodian is not authorized to and shall not withdraw from the EDI Grant Loan Payment Reserve Account for such purposes, an aggregate amount greater than Thirty -One Thousand Seven Hundred Fourteen Dollars and 80/100 ($31,714.80). 6.3 If not less than five (5) Business Days prior to any Deposit Day the Custodian determines that there shall or may be insufficient funds available in the Debt Service Reserve Account and EDI Grant Loan Payment Reserve Account to pay the full amount of principal and interest, as calculated under Paragraph 1.3(b), above, to become due on the City Note on the next date such interest is required to be paid, taking into account the expected payment of interest at a deemed rate of four percent (4.0%) per annum required to be made by Obligor on such Deposit Day and each subsequent Deposit Day scheduled to occur prior to the corresponding Promissory Note Page 5 Obligor Payment Date, the Custodian shall promptly deliver written notice (each, a "Shortfall Notice") to that effect to the Obligor (with a copy to the City). Upon receipt of any such Shortfall Notice, and in any event, on or before the corresponding Deposit Day, the Obligor shall pay to the Custodian, for deposit into the Debt Service Reserve Account, the full amount of interest actually accruing on the Loan and Obligor Note during the corresponding month as calculated under Paragraph 1.3(b), above. Obligor acknowledges and agrees that interest stabilization payments made by Obligor in accordance with this Section 4.4(b) and deposited in the Debt Service Reserve Account, together with the earnings thereon, if_�__ L_77 be held, 7 7 7 of 7 i i , any, shall held, without right withdrawal or reimbursement. 7. Late Charge. If any deposit required to be made into the Debt Service Reserve Account is not received within ten (10) days after the date when such deposit is due, in addition to additional interest required to be paid in accordance with this Note, Obligor agrees to pay a"late charge equal to five percent (5:0%) of the amount past due, as compensation to Payee for the staff time and resources required to handle such delinquencies, and not as a penalty. Such late charges shall not be credited to the Debt Service Reserve Account or Loan Repayment Account, but shall be retained by Payee. Late charges under this Section are in addition to, and not in substitution for, the other remedies provided in the Loan Documents. 8. Due Date. Anything herein to the contrary notwithstanding, all principal, interest, fees, costs and other charges that Obligor is obligated to pay in connection with this Note and the Loan shall be due and payable, in full, on September 1, 2012. 9. Security. This Note, together with other obligations of Obligor under the Loan Documents is by security interests in the monies and investments held in certain Reserves established in accordance with the December Loan Agreement and Master Agreement. This Note is further secured by an Unconditional Guarantees of even date, executed and delivered by Gary Lukehart and Mary Lukehart, husband and wife, (the "Guarantor"), the two deeds of trust given by Chinook Business Park, LLC for property located in Yakima, Washington. All of the above security interests are perfected, to the extent allowable under Washington law, by recording in the records of Yakima County, Washington and by filing of financing statements with the Washington State Department of Licensing or taking possession of the collateral. 10. Prepayment. The principal hereof and any interest accrued hereon may be prepaid, provided, however, that any prepayment shall not reduce the principal payment required at any subsequent time until this Note is paid in full, together with interest hereon, and provided, further: 10.1 On or before the Conversion Date, this Note may be prepaid in whole or in part upon thirty (30) days prior written notice to the Payee and with, and only Promissory Note Page 6 with, the consent of HUD. Any prepayment of the principal hereof shall be accompanied by all accrued interest thereon to the date of prepayment, and partial prepayments shall be credited against the Principal Amount last becoming due hereunder. 10.2 After the Conversion Date, this Note may be prepaid in whole or in part at any time if the City Note allows, provided Obligor shall give 90 days prior written notice of its intention to make any prepayment. Any prepayment shall be applied to the payments last becoming due under this Note. No partial prepayment shall relieve the Obligor of the obligation to make any future payments due after the date of any prepayment. Any prepayment shall be in an amount not less than the amount which is sufficient to defease the portion of the City Note allocable to this Note or the portion hereof to be prepaid as provided in the Master Agreement, including the requirement that Principal Amounts under the City Note having the latest maturity must he defeased before those with shorter maturities. If in the event of any prepayment Payee incurs any costs, expenses, fees, charges, premiums or losses, the Obligor shall pay such items upon demand in addition to the principal and interest due hereunder. 10.3 Any prepayment by Obligor or any third party, or recovery from the disposition of any collateral, after default shall constitute a prepayment and be subject to all terms and conditions regarding prepayment. 11. Default. In the event of any default by Obligor in any term or condition of this Note, the December Loan Agreement, the Deed of Trust, or any other document executed in connection herewith, or in the event of any default by Guarantor under the Guaranty, if any, in any event, which default is not cured as permitted by the applicable document, the following may or shall occur. 11.1 Any interest rate subsidy for this Note shall cease. 11.2 The outstanding principal balance of the Loan and this Note shall bear interest at the greater of the rate set as provided above or twelve percent (12%) per annum. 11.3 The entire principal and accrued interest hereunder shall become immediately due and payable without notice or demand at the option of the Payee. 11.4 If Payee commences any action to enforce collection hereof or foreclosure under any security document given in connection herewith or therewith, the Obligor agrees to pay all costs and expenses incurred by Payee, including but not limited to Payee's reasonable attorneys' fees. Promissory Note : Page 7 11.5 Demand, protest, and notice of demand and protest are hereby waived, and the Obligor, to the extent authorized by law hereby waives any and all exemption rights which otherwise might apply to the obligation evidenced by this Note, and/or any property covered by any security document given in connection herewith. 12. The Obligor executes this Note as a principal and, not as a surety. ORAL AGREEMENTS, OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT' ENFORCEABLE UNDER WASHINGTON LAW. TRAIL WAGONS, INC. r\ By Gary ukehart, President STATE OF WASHINGTON ) ) ss: County of Yakima ) I certify that I know or have satisfactory evidence that GARY LUKEHART is the person who appeared before me, and said person acknowledged that he signed this instrument, on oath, stated that he was authorized to execute the instrument and acknowledged it as President of TRAIL WAGONS, INC., a Washington corporation, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: December At, 2003. Promissory Note Y P : LIC in and for the ate of Washin . n Residing at: My appoint.. • nt expires: 4/Z Page 8 ASSIGNMENT AND ACKNOWLEDGMENT: The Payee hereby assigns to JPMorgan Chase Bank, as Trustee, with full right of assignment for the benefit of HD unde that certain Indenture of Trust and Custodial Agreement dated as of a/ , 2003 and the Master Agreement, all of its rights under the foregoing Promissory Note. Dated thiso7y day of December, 2003. CITY OF fikKI1 Izk By: R. A. Zais, Jr., City Manager Obligor hereby acknowledges the foregoing assignment and agrees to recognize and render all performance to the Trustee and HUD as assignee of the Promissory Note. TRAIL WAGONS, INC., a Was s i ,._ on corporation By: ry Lukehart, President Promissory Note Page 9 Attachment B See attached Deed of Trust Hypothecation Owned by: Chinook Business Park, L.L.C. Address: 607 East R Street Yakima, WA 98901 Parcel Nos.: 191307-34404 and 191318-21001 Legal Description: See Attachment D Loan Agreement Page 27 Return Address: Donald A. Boyd - Carlson Boyd & Bailey PLiJC 230 South 2nd St., Suite 202 Yakima, WA 98907 This document is certified to be a true and correct copy of original document. DEED OF TRUST HYPOTHECATION Grantor: 1. CHINOOK BUSINESS PARK, LLC Borrower(s):. 1. TRAIL WAGONS, INC. Beneficiary: 1. THE CITY OF YAKIMA Trustee: 1. FIDELITY TITLE COMPANY Legal Description: 1. Portion of the Southeast 14 of the Southwest 1/4 of Section 7, and the Northeast 1/4 of the Northwest 1/4 of Section 18, all in Township 13 North, Range 19, E.W.M. 2. Full legal description attached hereto as Exhibit A, page 8. Assessor's Property Tax Parcel Number(s): 191307-34004 191318-21001 *********** THIS DEED OF TRUST ("Deed of Trust") is made on this . day of December, 2003, by CHINOOK BUSINESS PARK, LLC., Grantor, whose address is 1901 North 4th St., Yakima, WA 98901; FIDELITY TITLE COMPANY; Trustee, whose address is 406 N. 2nd St., Yakima, WA, 98901, and THE CITY OF YAKIMA, Beneficiary, whose address is 129 N. 3rd St, Yakima, WA 98901. 1 Recital Borrower has signed a loan agreement ("Loan Agreement") and promissory note ("Promissory Note") with the Beneficiary, dated on or about the date hereof. The Grantor is giving this Deed of Trust in consideration of accommodations made or to be made by Grantee to Borrower. WITNESSETH: Grantor hereby bargains, sells and conveys to Trustee in Trust, with power of sale, the following described real property in Yakima County, Washington: See Exhibit A, attached. which real property is not used principally for agricultural or farming purposes, together with all the tenements, hereditaments, and appurtenances now or hereafter thereunto belonging or in any wise appertaining, and the rents, issues and profits thereof. This deed is for the purpose of securing performance of the Borrower's Loan Agreement herein contained, and payment of the sum of Four Hundred Seventy-five Thousand Seven Hundred and Twenty-two Dollars ($475,722.00) with interest, in accordance with the terms of a Promissory Note of even date herewith, payable to Beneficiary, and made by Borrower, and all renewals, modifications and extensions thereof, and also such further sums as may be advanced or loaned by Beneficiary to Borrower, or any of their successors or assigns, together with interest thereon at such rate as shall be agreed upon. To protect the security of this Deed of Trust, Grantor covenants and agrees: 1. To keep the property in good condition and repair; to permit no waste thereof; to complete any building, structure or improvement being built or about to be built thereon; to restore promptly any building, structure or improvement thereon which may be damaged or destroyed; and to comply with all laws, ordinances, regulations, covenants, conditions and restrictions affecting the property. 2. To pay before delinquent all lawful taxes and assessments upon the property; to keepthe property free and clear of all other charges, liens, or encumbrances impairing the security of this Deed of Trust. 3. To keep all buildings now or hereafter erected on the property described herein continuously insured against loss by fire or other hazards in an amount not less than the full insurable value of the property. All policies shall be held by the 2 Beneficiary, and be in such companies as the Beneficiary may approve and have loss payable to the Beneficiary as its interest may appear and then to the Grantor. The amount collected under any insurance policy may be applied upon any indebtedness hereby secured in such order as the Beneficiary shall determine. Such application by the Beneficiary shall not cause discontinuance of any proceedings to foreclose this Deed of Trust. In the event of foreclosure, all rights of the Grantor in insurance policies then in force shall pass to the purchaser at the foreclosure sale. 4. To defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee, and to pay all costs and expenses, including cost of title search and attorney's fees in a reasonable amount, in any such action or proceeding, and in any suit brought by Beneficiary to foreclose this Deed of Trust. 5. To pay all costs, fees and expenses in connection with this Deed of Trust, including the expenses of the Trustee incurred in enforcing the obligation secured hereby and Trustee's and attorney's fees actually incurred, as provided by statute. 6. Should Grantor fail to pay when due any taxes, assessments, insurance premiums, liens, encumbrances, or other charges against the property hereinabove described, Beneficiary may pay the same, and the amount so paid, with interest at. the rate set forth in the note secured hereby, shall be added to and become a part of the debt secured in this Deed of Trust. IT IS MUTUALLY AGREED THAT: 1. In the event any portion of the property is taken or damaged in an eminent domain proceeding, the entire amount of the award or such portion thereof as may be necessary to fully satisfy the obligation secured hereby, shall be paid to Beneficiary to be applied; to said obligation. 2. By accepting payment of any sum secured hereby after its due date, Beneficiary does not waive its right to require prompt payment when due of all other sums so secured or to declare default for failure to so pay. 3. The Trustee _shall reconvey all or any part of the property covered by this Deed of Trust to the person entitled thereto, on written request of the Beneficiary, or upon satisfaction of the obligation secured and written request for reconveyance made by the Beneficiary or the person entitled thereto. 4. Upon default by Borrower in the payment of any indebtedness secured hereby or in the performance of any agreement contained herein, all sums secured hereby shall immediately become due and payable at the option of the Beneficiary. In such event and upon written request of Beneficiary, Trustee or trustee's authorized agent, shall sell the trust property, in accordance with the Deed of Trust Act of the State of Washington, (as amended), at public auction to the highest bidder. Any 3. person except Trustee may bid at Trustee's sale. Trustee shall apply the proceeds of the sale as follows: (1) to the expense of the sale, including a reasonable Trustee's fee and attorney's fee; (2) to the obligation secured by this deed of Trust; (3) the surplus, if any, shall be distributed .to the persons entitled thereto or shall be deposited (less clerk's filing fee) with the clerk of the superior court of the county in which sale takes place. 5. Trustee shall deliver to the purchaser at the sale its deed, without warranty, which shall convey to the purchaser the interest in the property that Grantor had or had the power to convey at the time of his execution of this Deed of Trust, and such as he may have acquired thereafter. Trustee's deed shall recite the facts showing that the sale was conducted in compliance with all the requirements of law and of this Deed of Trust, which recital shall be prima facie evidence of such compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value. 6. The power of sale conferred by this Deed of Trust and by the Deed of Trust Act for the State of Washington in not an exclusive remedy; Beneficiary may cause this Deed of Trust to be foreclosed as a mortgage. 7. In the event of the death, incapacity, disability or resignation of Trustee, Beneficiary shall appoint in writing a successor trustee, and upon the recording of such appointment in the mortgage records of the county in which this Deed of Trust is recorded, the successor trustee shall be vested with all powers of the original trustee. The trustee is not obligated to notify any party hereto of pending sale under any other Deed of Trust or of any action or proceeding in which Grantor, Trustee or Beneficiary shall be a party unless such action or proceeding is brought by the Trustee. 8. This Deed of Trust applies to, inures to the benefit of, and is binding not only on the parties hereto, but on their heirs, devisees, legatees, administrators, executors, successors and assigns. The term Beneficiary shall mean the holder and owner of the note secured hereby, whether or not named as Beneficiary herein. Chinon Business Park, LLC STATE OF WASHINGTON ) ) ss: County of Yakima ) I certify that I know or have satisfactory evidence that Gary Lukehart 4 signed this instrument, on oath stated that he was authorized to execute the instrument and .acknowledge it as the authorized member of Chinook Business Park, LLC, a Washington limited liability company, to be the free and voluntary act of such entity for the uses and purposes mentioned in the instrument. DATED this day of December, 2003. TARY PUBLIC in . nd for the tate of Residing at , My commission expires: -6/2.. 5 EXHIBIT "A" TO DEED OF TRUST FROM CHINOOK BUSINESS PARK, LLC TO CITY OF YAKIMA (BOISE -CASCADE PROPERTY) That portion of the Southeast 1/4 of the Southwest 14 of Section 7, and the Northeast 1/4 of the Northwest 14 of Section 18, all in Township 13 North, Range 19, E.W.M., lying Southwesterly of SR 82 as conveyed to the State of Washington for highway by instrument recorded February 6, 1959, under. Auditor's File No. 1757605, described as follows: Commencing thence South feet; thence North thence North thence North thence North thence North thence South thence South thence South thence North thence North at the Southwest corner of the Southwest '4 of said Section 7; 88°31'26" East along the South line of said Section 7, 1,833.07 76°50'00" East 118.62 feet to the Point of Beginning; 76°50'00" Eat 37.69 feet; 0°30'00" East 145.77 feet; 21°23'00" East 186.27 feet; 52°48'00" East 109.07 feet; 32°34'00" East 411.96 feet; 49°57'00" West 138.83 feet; 76°23'00" West 152.00 feet; 72°42'00" West 94.00 feet; 54°26'00" West 87.00 feet to the Point of Beginning. Assessor's Property Tax Property Tax Parcel Number(s): 191307-34004 191318-21001 REQUEST FOR FULL RECONVEYANCE Do not record. To be used only when note has been paid. TO: TRUSTEE The undersigned is the legal owner and holder of the note and all other indebtedness secured by the within Deed of Trust. Said note, together with all other indebtedness secured by said Deed of Trust, has been fully paid and satisfied; and you are hereby requested and directed, on payment to you of any sums owing to you under the terms of said Deed of Trust, to cancel said note above mentioned, and all other evidences of indebtedness secured by said Deed of Trust delivered to you herewith, together with the said Deed of trust, and to reconvey, without warranty, to the parties designated by the terms of said Deed of Trust, all the estate now held by you thereunder. Dated this day of , 20_. Mail reconveyance to: F:\CLIENTS\DAB\YAKIMA\Trailwagons\final docs\Deed of Trust hypoth 401 E S St - final.doc 6 Attachment C See attached Deed of Trust Hypothecation Owned by: Chinook Business Park, Address: 716 North 40th Ave. Yakima, WA 98908 Parcel Nos.: 181315-43013 Legal Description: See Attachment D Loan Agreement Page 28 Return Address: Donald A. Boyd Carlson Boyd & Bailey PT.T.0 230 South 2nd St., Suite 202 Yakima, WA 98907 This document is certified to be a true and correct copy o f original document. DEED OF TRUST HYPOTHECATION Grantor: 1. CHINOOK BUSINESS PARK, LLC Borrower(s): 1. TRAIL WAGONS, INC. Beneficiary: 1. THE CITY OF YAKIMA Trustee: 1. FIDELITY TITLE COMPANY Legal Description: 1. A portion of the Northwest 1/ of the Southwest 14 of the Southeast 1/ lying Westerly of North 40th Avenue, located within Yakima County, Washington. 2. Complete legal description attached as Exhibit A, page 7, hereof. Assessor's Property Tax Parcel Number(s): 181315-43013 *********** T4J THIS DEED OF TRUST ("Deed of Trust") is made on this 7 day of December, 2003; by CHINOOK BUSINESS PARK, LLC., Grantor, whose address is 1901 North 4th St., Yakima, WA 98901; FIDELITY TITLE COMPANY, Trustee, whose address is 406 N. 2nd St., Yakima, WA, 98901, and THE CITY OF YAKIMA, Beneficiary, whose address is 129 N. 3rd St, Yakima, WA 98901. 1 Recital Borrower has signed a loan agreement ("Loan Agreement") and promissory note ("Promissory Note") with the Beneficiary, dated on or about the date hereof. The Grantor is giving this Deed of Trust in consideration of accommodations made or to be made by Grantee to Borrower. WITNESSETH: Grantor hereby bargains, sells and conveys to Trustee in Trust, with power of sale, the following described real property in Yakima County, Washington: See Exhibit A, attached. which real property is not used principally for agricultural or farming purposes, together with all the tenements, hereditaments, and appurtenances now or hereafter thereunto belonging or in any wise appertaining, and the rents, issues and profits thereof. This deed is for the purpose of securing performance of the Borrower's Loan Agreement herein contained, and payment of the sum of Four Hundred Seventy-five Thousand Seven Hundred and Twenty-two Dollars ($475,722.00) with interest, in accordance with the terms of a Promissory Note of even date herewith, payable to Beneficiary, and made by Borrower, and all renewals, modifications and extensions thereof, and also such further sums as may be advanced or loaned by Beneficiary to Borrower, or any of their successors or assigns, together with interest thereon at such rate as shall be agreed upon. To protect the security of this Deed of Trust, Grantor covenants and agrees: 1. To keep the property in good condition and repair; to permit no waste thereof; to complete any building, structure or improvement being built or about to be built thereon; to restore promptly any building, structure or improvement thereon which may be damaged or destroyed; and to comply with all laws, ordinances, regulations, covenants, conditions and restrictions affecting the property. 2. To pay before delinquent all lawful taxes and assessments upon the property; to keep the property free and clear of all other charges, liens, or encumbrances impairing the security of this Deed of Trust. 3. To keep all buildings now or hereafter erected on the property described herein continuously insured against loss by fire or other hazards in an amount not less than the full insurable value of the property. All policies shall be held by the Beneficiary, and be in such companies as the Beneficiary may approve and have 2 loss payable to the Beneficiary as its interest may appear and then to the Grantor. The amount collected under any insurance policy may be applied upon any indebtedness hereby secured in such order as the Beneficiary shall determine. Such application by the Beneficiary shall not cause discontinuance of any proceedings to -----foreclose--this-Deed:-of Trust: Inthe-event of foreclosure, all rights of the Grantor in insurance policies then in force shall pass to the purchaser at the foreclosure sale. 4. To defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee, and to pay all costs and expenses, including cost of title search and attorney's fees in a reasonable amount, in any such action or proceeding, and in any suit brought by Beneficiary to foreclose this Deed of Trust. 5. To pay all costs, fees and expenses in connection with this Deed of Trust, including the expenses of the Trustee incurred in enforcing the obligation secured hereby and Trustee's and attorney's fees actually incurred, as provided by statute. 6. Should Grantor fail to pay when due any taxes, assessments, insurance premiums, liens, encumbrances, or other charges against the property hereinabove described, Beneficiary may pay the same, and the amount so paid, with interest at the rate set forth in the note secured hereby, shall be added to and become a part of the debt secured in this Deed of Trust. IT IS MUTUALLY AGREED THAT: 1. In the event any portion of the property is taken or damaged in an eminent domain proceeding, the entire amount of the award or such portion thereof as may be necessary to fully satisfy the obligation secured hereby, shall be paid to Beneficiary to be applied to said obligation. 2. By accepting payment of any sum secured hereby after its due date, Beneficiary does not waive its right to require prompt payment when due of all other sums so secured or to declare default for failure to so pay. 3. The Trustee shall reconvey all or any part of the property covered by this Deed of Trust to the person entitled thereto, on written request of the Beneficiary, or upon satisfaction of the obligation secured and written request for reconveyance made by the Beneficiary or the person entitled thereto. 4. Upon default by Borrower in the payment of any indebtedness secured hereby or in the performance of any agreement contained herein, all sums secured hereby shall immediately become due and payable at the option of the Beneficiary. In such event and upon written request of Beneficiary, Trustee or trustee's authorized agent, shall sell the trust proPerty, in accordance with the Deed of Trust Act of the State of Washington, (as amended), at public auction to the highest bidder. Any person except Trustee may bid at Trustee's sale. Trustee shall apply the proceeds of 3 the sale as follows: (1) to the expense of the sale, including a reasonable Trustee's fee and attorney's fee; (2) to the obligation secured by this deed of Trust; (3) the surplus, if any, shall be distributed to the persons entitled thereto or shall be deposited (less clerk's filing fee) with the clerk of the superior court of the county in which sale takes place. 5: Trustee shall deliver to the purchaser at the sale its deed, without warranty, which shall convey to the purchaser the interest in the property that Grantor had or had the power to convey at the time of his execution of this Deed of Trust, and such as he may have acquired thereafter. Trustee's deed shall recite the facts showing that the sale was conducted in compliance with all the requirements of law and of this Deed of Trust, which recital shall be prima facie evidence of such compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value. 6. The power of sale conferred by this Deed of Trust and by the Deed of Trust Act for the State of Washington in not an exclusive remedy; Beneficiary may cause this Deed of Trust to be foreclosed as a mortgage. 7. In the event of the death, incapacity, disability or resignation of Trustee, Beneficiary shall appoint in writing a successor trustee, and upon the recording of such appointment in the mortgage records of the county in which this Deed of Trust is recorded, the successor trustee shall be vested with all powers of the original trustee. The trustee is not obligated to notify any party hereto of pending sale under any other Deed of Trust or of any action or proceeding in which Grantor, Trustee or Beneficiary shall be a party -unless such action or proceeding is brought by the Trustee. 8. This Deed of Trust applies to, inures to the benefit of, and is binding not only on the parties hereto, but on their heirs,devisees, legatees, administrators, executors, successors and assigns. The term Beneficiary shall mean the holder and owner of the note secured hereby, whether or not named as Beneficiary herein: Chiho4k Business Park, LLC STATE OF WASHINGTON ) ) ss: County of Yakima ) I certify that I know or have satisfactory evidence that Gary Lukehart signed this instrument, on oath stated that he was authorized to execute the 4 instrument and acknowledge it as the authorized member of Chinook Business Park, LLC, a Washington limited liability company, to be the free and voluntary act of such entity for the uses and purposes mentioned in the, instrument. DATED this 6_" Clay of December, 2003. TARY P State of esiding at y commissi• expires:�/Z f` 5 EXHIBIT "A" TO DEED OF TRUST FROM CHINOOK BUSINESS PARK, LLC TO CITY OF YAKIMA (KERNS PROPERTY) That portion of the North 1/ of the Southwest 1/ of the Southeast 1/ of Section 15, Township 13 North, Range 18, E.W.M., lying West of North 40th Avenue, as conveyed to Yakima County by Auditor's File No. 2252501. Except the North 10 feet conveyed to Yakima County by deed rarnrded under Auditor's File No. 399232 for road. Situate in Yakima County, Washington. REQUEST FOR FULL RECONVEYANCE Do not record. To be used only when note has been paid. TO: TRUSTEE The undersigned is the legal owner and holder of the note and all other indebtedness secured by the, within Deed of Trust. Said note, together with all other indebtedness secured by said Deed of Trust, has been fully paid and satisfied; and you are hereby requested and directed, on payment to you of any sums owing to you under the terms of said Deed of Trust, to cancel said note above mentioned, and all other evidences of indebtedness secured by said Deed of Trust delivered to you herewith, together with the said Deed of trust, and to reconvey, without warranty, to the parties designated by the terms of said Deed of Trust, all the estate now held byyou thereunder. Dated this day of , 20 . Mail reconveyance to: F:\CT.IFNTS\DAB\YAKIIvIA\Trailwagons\falai docs\Deed of Trust hypoth 401 E S St - final.doc 6 Return Address: Donald A. Boyd Carlson Boyd & Bailey PLLC 230 South 2nd St., Suite 202 Yakima, WA 98907 Ma document is certified to be a true and correct copy of original document. DEED OF TRUST HYPOTHECATION Grantor: 1. GARY LUKEHART AND MARY LUKEHART; husband and wife Borrower(s): 1. TRAIL WAGONS, INC. Beneficiary: 1. THE CITY OF YAKIMA Trustee: 1. FIDELITY TITLE COMPANY Legal Description: 1. A portion of the Northwest 1/4 of the Southwest 1/4 of the Southeast 14 lying Westerly of North 40th Avenue, located within Yakima County, Washington. 2. Complete legal description attached as Exhibit A, page 7, hereof. Assessor's Property Tax Parcel Number(s): 181315-43013 *********** THIS DEED OF TRUST ("Deed of Trust") is made on this day of December, 2003, by GARY LUKEHART and MARY LUKEHART, husband and wife, Grantor, whose address is 1901 North 4th St., Yakima, WA 98901; FIDELITY TITLE COMPANY, Trustee, whose address is 406 N. 2nd St., Yakima, WA, 98901, and THE CITY OF YAKIMA, Beneficiary, whose address is 129 N. 3rd St, Yakima, WA 98901. 1 Recital Borrower has signed a loan agreement ("Loan Agreement") and promissory note ("Promissory Note") with the Beneficiary, datedon or about the date hereof. The Grantor is giving this Deed of Trust in consideration of accommodations made or to be made by Grantee to Borrower. WITNESSETH: Grantor hereby bargains, sells and conveys to Trustee in Trust, with power of sale, the following described real property in Yakima County, Washington: See Exhibit A, attached. which real property is not used principally for agricultural or farming purposes, together with allthe tenements, hereditaments, and appurtenances now or hereafter thereunto belonging. or in any wise appertaining, and the rents, issues and profits thereof. This deed is for the purpose of securing performance of the Borrower's Loan Agreement herein contained, and payment of the sum of Four Hundred Seventy-five Thousand Seven Hundred and Twenty-two Dollars ($475,722.00) with interest, in accordance with the terms of a Promissory Note of even date herewith, payable to Beneficiary, and made by Borrower, and all renewals, modifications and extensions thereof, and also such further sums as may be advanced or loaned by Beneficiary to Borrower, or any of their successors or assigns, together with interest thereon at such rate as shall be agreed upon. To protect the security of this Deed of Trust, Grantor covenants and agrees: 1. To keep the property in good condition and repair; to permit no waste thereof; to complete any building, structure or improvement being built or about to be built thereon; to restore promptly any building, structure or improvement thereon which may be damaged or destroyed; and to comply with all laws, ordinances, regulations, covenants, conditions and restrictions affecting the property. 2. To pay before delinquent all lawful taxes and assessments upon the property; to keep the property free and clear of all other charges, liens, or encumbrances impairing the security of this Deed of Trust. 3. To keep all buildings now or hereafter erected on the property described herein continuously insured against loss by fire or other hazards in an amount not less than the full insurable value of the property. All policies shall be held by the 2 Beneficiary, and be in such companies as the Beneficiary may approve and have loss payable to the Beneficiary as its interest may appear and then to the Grantor. The amount collected under any insurance policy may be applied upon any indebtedness hereby secured in such order as the Beneficiary shall determine. Such application by the Beneficiary shall not cause discontinuanceofany proceedings to foreclose this Deed of Trust. In the event of foreclosure, all rights of the Grantor in insurance policies then in force shall pass to the purchaser at the foreclosure sale. 4. To defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee, and to pay all costs and expenses, including cost of title search and attorney's fees in a reasonable amount, in any such action or proceeding, and in any suit brought by Beneficiary to foreclose this Deed of Trust. 5. To pay all costs, fees and expenses in connection with this Deed of Trust, including the expenses of the Trustee incurred in enforcing the obligation secured hereby and Trustee's and attorney's fees actually incurred, as provided by statute. 6. Should Grantor fail to pay when due any taxes, assessments, insurance premiums, liens, encumbrances, or other charges against the property hereinabove described, Beneficiary may pay the same, and the amount so paid, with interest at the rate set forth in the note secured hereby, shall be added to and become a part of the debt secured in this Deed of Trust. IT IS MUTUALLY AGREED THAT: 1. In the event any portion of the property is taken or damaged in an eminent domain proceeding, the entire amount of the award or such portion thereof as may be necessary to fully satisfy the obligation secured hereby, shall be paid to Beneficiary to be applied to said obligation. 2. By accepting payment of any sum secured hereby after its due date, Beneficiary does not waive its right to require prompt payment when due of all other sums so secured or to declare default forfailure to so pay. 3. The Trustee shall reconvey all or any part of the property covered by this Deed of Trust to the person entitled thereto, on written request of the Beneficiary, or upon satisfaction of the obligation secured and written request for reconveyance made by the Beneficiary or the person entitled thereto. 4. Upon default by Borrower in the payment of any indebtedness secured hereby or in the performance of any agreement contained herein, all sums secured hereby shall immediately become due and payable at the option of the Beneficiary. In such event and upon written request of Beneficiary, Trustee or trustee's authorized agent, shall sell the trust property, in accordance with the Deed of Trust Act of the State of Washington, (as amended), at publicauction to the highest bidder. Any 3 person except Trustee may bid at Trustee's sale. Trustee shall apply the proceeds of the sale as follows: (1) to the expense of the sale, including a reasonable Trustee's fee and attorney's fee; (2) to the obligation secured by this deed of Trust; (3) the surplus, if any, shall be distributed to the persons entitled thereto or shall be deposited (less clerk's filing fee) with the clerk of the superior court of the county in which sale takes place. 5. Trustee shall deliver to the purchaser at the sale its deed, without warranty, which shall convey to the purchaser the interest in the property that Grantor had or had the power to convey at the time of his execution of this Deed of Trust, and such as he may have acquired thereafter. Trustee's deed shall recite the facts showing that the sale was conducted in compliance with all the requirements of law and of this Deed of Trust, which recital shall be prima facie evidence of such compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value. 6. The power of sale conferred by this Deed of Trust and by the Deed of Trust Act for the State of Washington in not an exclusive remedy; Beneficiary may cause this Deed of Trust to be foreclosed as a mortgage. 7. In the event of the death, incapacity, disability or resignation of Trustee, Beneficiary shall appoint in writing a successor trustee, and upon the recording of such appointment in the mortgage records of the county in which this Deed of Trust is recorded, the successor trustee shall be vested with all powers of the original trustee. The trustee is not obligated to notify any party hereto of pending sale under any other Deed of Trust or of any action or proceeding in which Grantor, Trustee or Beneficiary shall be a party unless such action or proceeding is brought by the Trustee. 8. This Deed of Trust applies to, inures to the benefit of, and is binding not only on the parties hereto, but on their heirs, devisees, legatees, administrators, executors, successors and assigns. The term Beneficiary shall mean the holder and owner of the note secured hereby, whether or not named as Beneficiary herein. 4 STATE OF WASHINGTON ) ) ss: County of Yakima ) I certify that I know or have satisfactory evidence that Gary Lukehart signedthis instrument, on oath acknowledged it to be the free and voluntary act for the uses and purposes mentioned in the instrument. DATED this c Iay of December, 2003. rp TARY PT MT and for the e of , siding at y commis STATE OF WASHINGTON County of Yakima ) ss: ion expires: Z I certify that I know or have satisfactory evidence that Mary Lukehart signed this instrument, on oath acknowledged it to be the free and voluntary act for the uses and purposes mentioned in the instrument. DATED thi ay of December, 2003. TARY PUBLIC 1 c and for the tate of Residing at My commis on expires: 5 REQUEST FOR FULL RECONVEYANCE Do not record. To be used only when note has been paid. TO: TRUSTEE The undersigned is the legal owner and holder of the note and all other indebtedness secured by the within Deed of Trust. Said note, together with all other indebtedness secured by said Deed of Trust, has been fully paid and satis_fi_ed; and you are hereby requested and directed, on payment to you of any sums owing to you under the terms of said Deed of Trust, to cancel said note above mentioned, and all other evidences of indebtedness secured by said Deed of Trust delivered to you herewith, together with the said Deed of trust, and to reconvey, without warranty, to the parties designated by the terms of said Deed of Trust, all the estate now held by you thereunder. Dated this day of , 20_. Mail reconveyance to: F:\CLIENTS\DAB\YAKIMA\Trailwagons\final docs\Deed of Trust hypoth 401 E S St - final.doc 6 Attachment D Legal Descriptions BOISE -CASCADE PROPERTY: That portion of the Southeast 1/4 of the Southwest 14 of Section 7, and the Northeast 1/4 of the Northwest 14 of Section 18, all in Township 13 North, Range 19, E.W.M., lying Southwesterly of SR 82 as conveyed to the State of Washington for highway by instrument recorded February 6, 1959, under Auditor's File No. 1757605, described as follows: Commencing thence South thence North thence North thence North thence North thence North thence South thence South thence South thence North thence North at the Southwest corner of the Southwest -1/ of said Section 7; 88°31'26" East along the South line of said Section 7, 1,833.07 feet; 76°50'00" East 118.62 feet to the Point of Beginning; 76°50'00" Eat 37.69 feet; 0°30'00" East 145.77 feet; 21°23'00" East 186.27 feet; 52°48'00" East 109.07 feet; 32°34'00" East 411.96 feet; 49°57'00" West 138.83 feet; 76°23'00" West 152.00 feet; 72°42'00" West 94.00 feet; 54°26'00" West 87.00 feet to the Point of Beginning. Assessor's Property Tax Parcel Number(s): 191307-34004 191318-21001 KERNS PROPERTY: That portion of the North % of the Southwest 14 Township 13. North, Range 18, E.W.M., lying conveyed to Yakima County by Auditor's File No. Except the North 10 feet conveyed to Yakima Auditor's File No. 399232 for road. Situate in Yakima County, Washington. Assessor's Property Tax Parcel Number(s): 181315-43013 of the Southeast 14 of Section 15, West of North 40th Avenue, as 2252501. County by deed recorded under Loan Agreement Page 29 Attachment E Guaranty Form Loan Agreement Page 30 UNCONDITIONAL GUARANTY PARTIES: City: The City of Yakima, a Washington municipal corporation Borrower: Trail Wagons, Inc., a Washington corporation Guarantor: Gary Lukehart and Mary Lukehart, husband and wife RECITALS: Concurrent with this Guaranty, City and Borrower have entered into a Loan Agreement and Promissory Note to borrow Four Hundred Seventy-five Thousand Seven Hundred and Twenty- two Dollars ($475,722.00). Borrower is using the funds to acquire new chassis, and retool its operations, paying the closing costs for this advance under the loan agreement, and increasing working capital with the proceeds from this advance. The undersigned has agreed to enter into this Unconditional Guaranty of all Borrower's obligations thereunder. This Agreement supplements the Guaranty between the Borrower, Guarantor, and City, entered into on July 23, 2003. AGREEMENT: As an inducement and in consideration of any and all contemporaneous or future financial accommodations by City to Borrower, the undersigned Guarantor, unconditionally guarantees the prompt payment when due and at all times thereafter of any and all existing, contemporaneously incurred and future indebtedness and liability of every kind (including all extensions, renewals and modifications thereof), absolute or contingent, however created or evidenced, owing from Borrower to City plus such interest as may accrue thereon. Credit may be granted by City to Borrower from time to time without further authorization of or notice to Guarantor. Guarantor agrees to pay City all expenses of every kind including, without limitation, any and all fees and expenses incurred by it on account of the services of any attorney employed or retained by it, including in-house counsel, in protecting or defending City's interest and in attempting to collect all or any part of such indebtedness and in enforcing this guaranty, with or without suit. Every immediate and successive assignee of any part of such indebtedness guaranteed hereby shall have the right to Guaranty Page 1 enforce all agreements and obligations contained in this guaranty for its own benefit as fully as if named herein, but City shall nevertheless have the right to enforce this guaranty for its own benefit as to so much of the liability guaranteed as has not been assigned. Guarantor waives notice of (a) the acceptance of this guaranty; (b) any and all indebtedness of any kind covered by the guaranty; and (c) any and all demands, nonpayments or other defaults in respect of such indebtedness. If more than one person or legal entity signs this Unconditional Guaranty, all references to "Guarantor" herein shall bind each of the undersigned jointly and severally. The liability of Guarantor under this guaranty shall be continuing and shall remain in full force and effect as long as Borrower is or may be indebted to City on account of any indebtedness covered by the guaranty. It shall not be affected in any way by (and the City is hereby expressly authorized to make without notice to anyone) any sale, pledge, surrender, compromise, release, acceleration, discharge, renewal, extension, substitution, exchange or modification of any kind whatsoever of all or any part of the indebtedness covered by the guaranty, or of all or any part of the security or collateral given to secure such indebtedness, including the release or addition of other guarantors. In addition, such liability of Guarantor shall not be affected in any way by the failure or invalidity of or any defect in any security or collateral given to secure such indebtedness. No exercise or non -exercise, waiver, change, impairment or suspension by City of any right or remedy given it by this Unconditional Guaranty or by Borrower and no dealings by City with Borrower or any other person shall in any way affect any of the obligations of Guarantor hereunder or any security furnished by Guarantor, now or hereafter, or give Guarantor any recourse against City. The obligations of Guarantor to City hereunder are independent of Borrower's obligations and a separate action or actions may be brought and prosecuted by City against Guarantor, whether or not such action or actions are also brought against Borrower, other guarantors or any security granted to City. Guarantor waives and agrees not to assert or otherwise take advantage of (a) any right which it may have to require City to proceed against Borrower or any other person, firm or corporation or to proceed against or exhaust any security held by it at any time or to pursue any other remedy in its power; (b) any defense which it may have in the nature of statute of limitations in any action hereunder or for the collection of any indebtedness or the performance of any obligation guaranteed hereby; (c) any defense which it may have by reason of incapacity, lack of authority, or lack of shareholder or other approvals relating either to Borrower or Guarantor or the failure of City to file or enforce a claim against the estate (either in administration, bankruptcy, or other proceeding) of Borrower or of any other or others; (d) any lack of demand, protest and notice of any kind including, without limitation, notice of the existence, creation or incurring of new or additional indebtedness or of any action or non -action on the part of Guaranty Page 2 Borrower, City, any endorser, creditor of Borrower or Guarantor under this or any other agreement, or any person whomsoever, in connection with any obligation or evidence of indebtedness held by City as collateral or in connection with any indebtedness guaranteed hereby; (e) any defense which is may have based upon an election of remedies by City; and (f) any duty which City may have to disclose to Guarantor any facts which it may now or hereafter know about Borrower, it being understood and agreed. that Guarantor is fully responsible for being and keeping informed of the financial condition of Borrower and of all circumstances bearing on the risk of non-payment of any indebtedness guaranteed hereby. Until all indebtedness of Borrower to City is paid in full, Guarantor shall have no right of subrogation and waives any right which it may otherwise have to enforce any remedy whatsoever which City may have against Borrower and any benefit of or right to participate in realization or any security now or hereafter granted to City. With or without notice to Guarantor, City may, in its sole discretion and at any time and from time to time and in such manner and upon such terms as it considers fit, apply any or all payments or recoveries from Borrower, Guarantor, any other guarantor or source, or from any security granted to City, under this or any other agreement, in such manner and order or priority as City may determine, to any indebtedness of Borrower to City, whether or not such indebtedness is guaranteed hereby or is otherwise secured or is due at the time of such application. For consideration as recited above, Guarantor subordinates any and all indebtedness of Borrower to Guarantor to any and all indebtedness of Borrower to City. If City so requests, any such indebtedness of Borrower to Guarantor shall be collected and received by Guarantor as trustee for City and paid to City on account of Borrower's indebtedness to it, without reducing or affecting Guarantor's liability under any of the provisions of this guaranty. This guaranty is in addition to and independent of any other guaranties at any time in effect with respect to all or any part of Borrower's indebtedness to City and may be enforced regardless of the existence of any such other guaranties which shall continue to remain in full force and effect. No provision of this guaranty or any right or remedy of City hereunder can be waived nor can Guarantor be released from its obligations hereunder except in writing duly executed by an authorized officer of City. Should any one or more provisions of this guaranty be determined to be illegal or unenforceable, all other provisions shall nevertheless be effective. This guaranty shall be construed and performed according to the laws of the State of Washington. Guarantor irrevocably submits to the jurisdiction of any state or federal court sitting in Yakima County, Washington, in any action or proceeding brought to enforce or otherwise arising out of or relating to this guaranty and irrevocably waives Guaranty Page 3 to the fullest extent permitted by law any objection which it may have now or hereafter to venue or any claim that such forum is an inconvenient forum. EXECUTED this -1--1-day of December, 2003. Guaranty Page 4 Attachment F Deposit Account Control Agreement Form Loan Agreement Page 31 DEPOSIT ACCOUNT CONTROL AGREEMENT THIS Deposit Account Control Agreement (as supplemented or amended from time to time, and including all documents and terms incorporated herein by reference, the "Agreement"), dated as of December cni , 2003, is entered into by and between TRAIL WAGONS, INC., a Washington for profit corporation, hereinafter called "Obligor", THE CITY OF YAKIMA, a Washington municipal corporation, hereinafter called "City" or "the City", and JPNIORGAlN CHASE B/kNK, a New York 'oaniing corporation, hereinafter called "Custodian." This Agreement modifies and amends the Deposit Control Agreement between the Obligor and City, entered into on July 23, 2003. RECITALS The parties enter into this Agreement upon the following facts and circumstances: A. City has entered into an agreement with the United States Department of Housing and Urban Development ("HUD") for a $4,000,000.00 loan to capitalize the Yakima Commercial Development Loan Fund ("HUD Contract"). The City and Custodian have entered into the Indenture of Trust and Custodial Agreement, whereby Custodian will manage the flow of funds from HUD to City in order to disburse these funds to various borrowers, including Obligor, through loans by the City ("Junior Loans") and from the Obligor to the City to HUD in order to repay the Junior Loans. B. Obligor and City have entered into an agreement whereby City agreed to loan up to $3,000,000.00 to Borrower from City's Yakima Commercial Development Loan Fund. In July, 2003 Borrower and City entered into a Loan Agreement and Promissory Note, whereby Obligor borrowed $2,395,000.00 of the agreed loan amount. Borrower wishes to obtain an additional advance of $475,722.00 of the unadvanced funds available from the $3,000,000.00 pursuant to a new loan (hereinafter referred to as the "December 2003 Loan") to be evidenced by additional loan documents ("December 2003 Loan Documents"). C. The Obligor's obligations under the July Loan Agreement and related Loan Documents are secured in part by Obligor's assignment of any interest it has in the accounts with Custodian that are used to repay the July 2003 loan ("July Loan Deposit Account"). Obligor's obligations under both the July Loan Agreement and related Loan Documents and the December 2003 Loan Documents are secured in part by Obligor's assignment of any interest it has in the accounts with Custodian that are used to repay the July 2003 Loan Deposit Account and any interest it has in the Deposit Account Control Agreement page 1 accounts with Custodian that are used to repay the December 2003 Loan ("December 2003 Loan Deposit Account"). D. The parties intend that this Agreement give the City control over any interest Obligor may have in the July 2003 Deposit Account and the December 2003 Deposit Account, as set forth in RCW 62A.9A-314.and 62A.9A-104. AGREEMENT i. City - 's Security- T1+cIc7+ i1Deposit Account. T. uiuei to secure Obligor's debt to City pursuant to the collateral security arrangements between Obligor and City, Obligor has assigned and granted to City a security interest in and lien upon the July 2003 Deposit Account and the December 2003 Deposit Account, as well as any and all proceeds thereof, whether now or hereafter existing ("Deposit Account Collateral").- 2. olateral"). 2. Obligor's Dealings with Deposit Accounts. Obligor is not entitled to present items drawn on or otherwise to withdraw or direct the disposition of funds from the July 2003 Deposit Account and the December 2003 Deposit Account. 3. City's Right to Give Exclusive Instructions as to Deposit Accounts. City shall be entitled, for purposes of this Agreement, to give Custodian instructions, as to the withdrawal or disposition of any funds from time to time deposited to the July 2003 Deposit Account and the December 2003 Deposit Account, or as to any other matters relating to the July 2003 Deposit Account and the December 2003 Deposit Account or any of the Deposit Account Collateral, without Obligor's further consent. Custodian agrees to comply with any such request from City without any further consent from Obligor. Custodian is fully entitled to rely upon such instructions from City even if such instructions are contrary to any instructions or demands that Obligor may give to Custodian. 4. Choice of Law and Venue. This Agreement shall be governed by the laws of the state of Washington, without regard to any conflict of law provisions. Venue for any action related to this Agreement shall be in Yakima County, Washington. 5. Entire Agreement; Amendments. This Agreement and the documents, laws and regulations incorporated by reference herein constitute the entire agreement of the parties and supercede any prior agreements or understandings, whether written or oral. No amendment, modification, or termination of any provisions of this Agreement shall be effective unless it is in writing and signed by a duly authorized officer of City, Obligor, and Custodian, and no such writing shall be construed to modify, waive, or affect the terms of this Agreement except to the extent that such document expressly so provides. Deposit Account Control Agreement page 2 6. Construction. The Agreement shall be construed to conform to the requirements of the HUD Contract and applicable federal laws and regulations. IN WITNESS WHEREOF, Obligor, City, and Custodian have executed this Agreement as of the date first written above by and through their duly authorized representatives. CITY: THE CITY OF VA-KMA, a Washington municipal corporation By: �. R. A. 7a -is, •., City Manager OBLIGOR: TRAIL WAGONS, INC., a Was ! on for profit corporation By: Print Name: (;' ra cZy L .) & E-1 IA R. Title: CAA i /02M-67-1 CUSTODIAN: JPMorgan Chase Bank, a. New York banking corporation By: Print Name: Title: x/YakimalTrailwagons/Final Docs — Dec/bank control agmt - final Deposit Account Control Agreement page 3 Attachment G Title Policy Loan Agreement Page 32 Prepared for: 1lALLEY r, rL.E GLJA ANT, COMMITMENT FOR TITLE INSURANCE SCHEDULE A 502 NORTH SECOND STREET POST OFFICE BOX 1825 YAKIMA, WASHING ON 98907 PHONE (508) 248-4442 FAX (509) 575.1179 FIDELITY TITLE COMPANY Title Examiner: MURRAY SLAYE 406 NORTH 2ND STREET Order No: X-183921 YAKIMA, WA 98901 Your: TRAIL WAGONS Attn:.JOHN CORNING 1. Effective Date: December 22, 2003 at 8:00 A:M. 2. Policy or Policies to be issued: A. ALTA Owner's Policy Amount: [ ] Standard [ ] Extended Premium: Proposed insured: Tax: Total: Subdividers Rate B. ALTA Loan Policy Amount: $475,722.00 [ ]Standard [ x ] Extended Premium: $756.00 Proposed insured: Tax: 59.72 Total: $815.72 CITY OF YAKIMA 3. The estate or interest in the land which is covered by the Commitment is: FEE SIMPLE ESTATE 4. .Title to the estate or interest in the land is at the effective date hereof vested in: GARY D. LUKEHART AND MARY LUKEHART, HUSBAND AND WIFE, AS TO PARCEL A; AND CHINOOK BUSINESS PARK, L.L.C., A WASHINGTON LIMITED LIABILITY COMPANY, AS TO PARCEL B 5. The land referred to in this Commitment is in the State of Washington, County of Yakima and is described as follows: FOR LEGAL DESCRIPTION SEE EXHIBIT "A" ATTACHED HERETO. ALTA COMMITMENT Order No. X-183921 SCHEDULE B I. The following are the requirements to be complied with: A. Instruments necessary to create the estate or interest to be insured, must be properly executed, delivered, and duly filed for recorded. B. Payment to or for the account of the grantors or mortgagors of the full consideration for the estate or interest to be insured. II. Schedule B of the policy or policies to be issued (as set forth in Schedule A) will contain exceptions to the following matters, unless the same are disposed of to the satisfaction of the Company. A. Defects, liens, encumbrances, adverse claims or other matters, if any created, first appearing in the public records or attaching subsequent to the effective date hereof- but prior to the date the proposed Ins urari artnt_iire_s for value of record the estate Cr interest or mortgage thereon covered by this Commitment. General Exceptions: 1. Rights or claims of parties in possession not shown by the public records. 2 • Pu thlir` or private easements, or claims -of -easements, not shown th b c ,........, by the public records. 3. Encroachments, overlaps, boundary line disputes, or other matters which would be disclosed by an accurate survey or inspection of the premises. 4. Any lien, or right to a lien, for services, labor, or material heretofore or hereafter fumished, imposed by law and not shown by the public records, or Liens under the Workmen's Compensation Act not shown by the public records. 5. Rights of use, control or regulation by the United States of America, in the exercise of powers over navigation; any prohibition or limitation on the use, occupancy or improvement of the land resulting from the rights of the public or riparian owners to use any water which may cover the land. 6. (a) Unpatented mining claims; (b) reservations or exceptions in patents or in acts authorizing the issuance thereof; (c) water rights, claims or title to water. 7. Any service, installation, connection, maintenance, or construction charges for sewer, water, electricity, or garbage removal. 8. General taxes not now payable or matters relating to special assessments and special levies, if any, preceding the same becoming a lien. 9. Indian tribal codes or regulations, Indian treaty or Aboriginal rights, including, but not limited to, easements of equitable servitude. SPECIAL EXCEPTIONS: 1. Charges, if any, due the Yakima Tieton Irrigation District for water supplied. Inquiry should be made at the offices of said company relative to said charges. Affects: Parcel A 2. It is our understanding that Gary D. Lukehart and Mary Lukehart, will execute the forthcoming security instrument as members of Chinook Business Park, L.L.C., a Washington Limited Liability Company, as to Parcel B described herein. If other signatories are to sign on behalf of said entity, the proper resolutions and amendments should be submitted. 3. Easement or right-of-way for necessary canals, tunnels or other water conduits and for telephone and transmission lines required in connection with the Tieton Irrigation Project, contained in instruments of record. Affects: Parcel A 4. Relinquishment of right of access to State Highway and of Tight, view and air, under terms of Deed. to the State of Washington. Recorded: December 23, 1969 and February 6, 1959 Auditor's File Nos: 2210056 and 1757605 Affects: Parcel B ALTA COMMITMENT " Order No. X-183921 5. An nonexclusive easement 30 feet in width, granted by document, as attached. Recorded: February 3, 1987 Auditor's File No: 2789195 In favor of: Yakima River Regional Greenway Foundation Affects: Parcel B 6. Terms and conditions of Easement for Construction of Bank Protection along the Yakima River as recorded February 11, 1948, under Auditor's File No. 1198333, including right to enter upon adjacent lands for purposes relating thereto. Affects: Parcel B 7. Easement to construct and maintain a channel change of mill pond inlet canal over and across property of which real estate under search forms a part, granted to the State of Washington, by instrument, Recorded: January 4, 1960 Auditor's File No: 1804820 Affects: That portion of said premised located in Section 7, Parcel B 8. Easement or right-of-way for electric transmission and distribution line disclosed by instrument Recorded: April 15, 1954 Auditor's File No: 1511365 Grantee: Pacific Power & Light Company, a corporation Affects: Parcel B 9. Easement or right-of-way for electric transmission and distribution line disclosed by instrument Recorded: October 25, 1970. Auditor's File No: 2233562 Grantee: Pacific Power & Light Company, a corporation Affects: That portion of said premises located in Section 7, Parcel B 10. Easement for road purposes 40 feet in width running along the Southwesterly side of SR 82 and connecting with "R" Street, disclosed by instrument recorded February 6, 1959, under Auditor's. File No. 1757605, records of Yakima County, Washington. Affects: Parcel B 11. Right-of-way for Sandmeyer Ditch over an undisclosed portion of said premises as contained in. Deed recorded July 8, 1902, in Volume 14 of Deeds, Page 389, records of Yakima County, Washington. Affects: Parcel B 12. Regulatory control by the State Supervisor of Flood Control through the establishment of a. Flood Control Zone No. 9 inclusive within the boundaries thereof, these premises and other property as Tying within a flood basin. Control being exercised by issuance of regulatory orders and permits affecting the planning, construction, operation and maintenance of any structure of improvements, public or private, to be erected or built, or to be reconstructed or modified. (RCW 86.16.010 et seq.) Affects: Parcel B ALTA COMMITMENT Order No. X-183921 13. Pendency of Yakima County Superior Court Cause No. 77-2-01484-5, State of Washington, Department of Ecology, Plaintiff vs. (numerous named defendants), notice of which is given by Lis Pendens recorded under Yakima County Auditor's File No. 2479271, being an action for the determination of the rights to divert, withdraw, or otherwise make use of the surface waters of the Yakima River Drainage Basin, in accordance with the provisions of Chapters 90.03 and 90.44 Revised Code of Washington. (Attomey for Plaintiff: Charles B. Roe, Jr., Senior Assistant Attorney General) NOTE: As of the effective date of the commitment, the exceptions contained herein reflect matters, if any, disclosed by a judgment and lien search against the vestees, contract vendees, if any, and incoming purchasers, if any. NOTE: General taxes for the year 2003 in the amount of $788.74, which have been paid. Parcel No: 1 81 31 5-4301 3 Levy Code: 333 Affects: Parcel A described herein NOTE: Drainage District No. 39 assessment for the year 2003 in the amount of $8.00, which has been paid. Affects: Parcel A described herein NOTE: General taxes for the Parcel No: 191307-34004 Affects: NOTE: General taxes for the Parcel No: 1 91 31 8-21 001 Affects: year 2003 in the amount of $323.98, which have been paid. Levy Code: 333 That portion of Parcel B described herein located in Section 7, Township 13 North, Range 19, E.W.M. year 2003 in the amount of $13,486.75, which have been paid. Levy Code: 333 That portion of Parcel B described herein located in Section 18, Township 13 North, Range 19, E.W.M., and other property Abbreviated Legal: Parcel A: Ptn of North 1/2 SW SE of Sec 15, Twn 13, Rg 18 Parcel B: Ptn of SW of Sec 7,. Twn 13, Rg 19 and ptn of NW of Sec 18, Twn 13, Rg 19 END OF SCHEDULE B NOTE: The legal description contained herein has been derived from information submitted with the application and as available from the record title. Said description should be carefully reviewed to assure it meets the intentions of the parties to this transaction. NOTE: In the event this transaction fails to close, a cancellation fee will be charged to comply with our Rate Schedule filed with the State Insurance Commissioner THANK YOU FOR YOUR ORDER. IF WE MAY BE OF FURTHER ASSISTANCE, PLEASE FEEL FREE.TO GIVE US A CALL AT (509) 248-4442. ALTA COMMITMENT Order No: X-183921 EXHIBIT "A" Parcel A: That portion of the North 1/2 of the Southwest 1/4 of the Southeast 1/4 of Section 15, Township 13 North, Range 18, E.W.M., lying West of North 40th Avenue, as conveyed to Yakima County by Auditor's File No. 2252501, EXCEPT the North 10 feet conveyed to Yakima County by deed recorded under Auditor's File No. 399232 for road. Situate in Yakima County, Washington. Parcel B: That portion of the Southeast 1/4 of the Southwest 1/4 of Section 7, and the Northeast 1/4 of the Northwest 1/4 of Section 18, all in Township 13 North, Range 19, E.W.M., Tying Southwesterly of SR 82 as conveyed to the State of Washington for highway by instrument recorded February 6, 1959, under Auditor's File No. 1757605, described as follows: Commencing at the Southwest comer of the Southwest 1/4 of said Section 7; thence South 88°31'26" East along the South line of said Section 7, 1,833.07 feet; thence North 76°50'00" East 118.62 feet to the Point of Beginning; thence North 76°50'00" East 37.69 feet; thence North 0°30'00" East 14517 feet; thence North 21°23'00" East 186.27 feet; thence North 52°48'00" East 109.07 feet; thence South 32°34'00" East 411.96 feet; thence South 49°57'00" West 138.83 feet; thence South 76°23'00" West 152.00 feet; thence North 72°42'00" West 94.00 feet; thence North 54°26'00" West 87.00 feet to the Point of Beginning. Situate in Yakima County, Washington. END OF EXHIBIT"A" The sketch is for your aid in locating your land with reference to streets and other parcels. While it is believed to be correct, the Company assumes no liability for any Toss occurring by reason of reliance thereon. 42408 3 42407; 42411 33%9 42409 42410 4 5 6 3S4 PROFESSIONAL VIEW WEST 43477 0.62 1 7251005 43474 7-1 43478 0.37 2 7251005 L 41 p1 7011 1 TH AVE PROFESSIONALI 14$7 5 -CONDO 44 0. DEN PARK 34035 6.90 43464 PROFESSIONAL VIEW WESr 3 701139 CARRIL 34026 028 361.211 34010 0.64 34025 0.30 34022 0.35 43015 0.89 43006 0.40 43008 4 4 4346E 5 43404 0.96 92-90 I FIR n MINF 21 3 I 4 I i I I I I I I I I I I Range: 18 Township: 13 Section: 15 5 16 I 7i I I I I I I 9 12067 0125 10 12411 245! The sketch is for your aid in locating your land with reference to streets and other parcels. While it is believed to be correct, the Company assumes no liability for any loss occurring by reason of reliance thereon. SECTION %8 TOWNSHIP /3 RANGE ! 9 YAKIMA COUNTY, WASHINGTON ND DIRECT ACCESS ' TO 1-82 ALLOWED •s\ \Fryer o "4};� q 1 RES "R" ST. k 5 `" / '� FUTURE LOT 5 rt \\ \ 0 ) 7- i��%:1' ( X41 .\ J ry1 V-‘26 1o/.& / \ \/I LOT�4-1 3.28ARES ' 701 EAST "R" ST.\� \G 7.5 S 1759'43" E f_ 111.00' I I , 7 5. FUTURE LOT 4 , 1 1 , ..3 15' P.u. EASEMENT =,....---NEREON RESERVED 1 1 'J/ 1 , 1 1 1 % 1 5'50 . 115.62-6' TOP 0, SANK S 1/4 COR.. Privacy Policy Notice PURPOSE OF THIS NOTICE Title V of the Gramm -Leach -Bliley Act (GLBA) generally prohibits any financial institution, directly or through its affiliates, from sharing nonpublic personal information about you with a nonaffiliated third party unless the institution provides you with a notice of its privacy policies and of information that it collects about you and the categories ofpractices, such be the type disclosed. In Compliance with the GLBA, we are g �O� or entities to whom it may thee privacyproviding you with this document, which notifies you of policies and practices of Valley Title Guarantee and its underwriters Pacific Northwest Title and Stewart Title Guaranty Company, We may collect nonpublic personal information about you from the following sources: Information we receive from you, such as on applications or other forms. Information about your transactions we secure from our files, or from our affiliates or others. Information we receive from a consumer reporting agency. Information that we receive from others involved in your transaction, such as the real estate agent or lender. Unless it is specifically stated otherwise in an amended Privacy Policy Notice; no additional nonpublic personal information will be collected about you. We may disclose any of the above information that we collect about our customers or former customers to our affiliates or to nonaffiliated third parties as permitted by law. We also may disclose this information about our customers or former customers to the following types of nonaffiliated companies that perform marketing services on our behalf or with whom we have joint marketing agreements: Financial service providers such as companies engaged in banking, consumer finance, securities and insurance. Non-financial companies such as envelope staffers and other fulfillment service providers. WE DO NOT DISCLOSE ANY NONPUBLIC PERSONAL INFORMATION ABOUT YOU WITH ANYONE FOR ANY PURPOSE THAT IS NOT SPECIFICALLY PERMITTED BY LAW. We restrict access to nonpublic personal information about you to those employees who need to know that information in order to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your nonpublic personal information. Attachment H Demand Note Form Loan Agreement Page 33 DEMAND NOTE Yakima, Washington $4,757.00 December ply , 2003 FOR VALUE RECEIVED, TRAIL WAGONS, INC., ("Obligor"), a Washington corporation, promises to pay to THE CITY OF YAKIMA; WASHINGTON ("City"), a Washington municipal corporation, or order, at Yakima, Washington, at the time provided heroin Lir, the sum Tour Thousand Seven Hundred a a Fifty-seven provided • .auv u herein, up to of i V u1 i 11V uLDQ11U AJG V Gll 11 U11lLi CU a11U 1' 11 Ly -sC V Cll and 00/100 Dollars ($4,757.00). RECITALS 1. As of the date of this Note, Obligor hassigneda- Loan Agreement with the City to borrow Four Hundred Seventy-five Thousand Seven Hundred and Twenty-two Dollars ($475,722.00), which is funded by the United States Department of Housing and Urban Development ("HUD"). Obligor and the City have executed other Loan Documents as part of the Loan Agreement. 2. Under section 4.2. of the Loan Agreement, City can choose, in its own discretion, to waive the requirement that the Obligor must set aside proceeds from the Loan to pay the costs associated with a public offering of the HUD Loan to the City. 3. City chooses to waive the above requirement and instead have Obligor give a demand note to pay the costs associated with a public offering. AGREEMENT NOW, in consideration of the Recitals and the covenants, conditions, representations, and warranties contained here, the parties agree as follows: 1. Obligor shall pay to City up to Four Thousand Seven Hundred and Fifty-seven and 00/100 Dollars ($4,757.00) in cash or equivalent within ten business days after City makes a written demand under this Note. These funds shall be used solely for the costs described in section 4.2 of the Loan Agreement. 2. City may only make a demand on this Note when the HUD, or its agents, sell the City Note in a public offering, as described in the Loan Documents. 3. Both parties intend that this Note be non-negotiable. 4. Demand, protest, and notice of demand and protest are hereby waived, and the Obligor, to the extent authorized by law hereby waives any and all exemption Demand Note Page 1 rights which otherwise might apply to the obligation evidenced by this Note, and/or any property covered by any security document given in connection herewith. 5. The Obligor executes this Note as a principal and not as a surety. ORAL AGREEMENTS, OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. STATE OF WASHINGTON ) ss: County of Yakima T ; ► WAGONS, INC. 0 By: Gary Lukehart, President I certify that I know or have satisfactory evidence that GARY LUKEHART is the person who appeared before me, and said person acknowledged that he signed this instrument, on oath, stated that he was authorized to execute the instrument and acknowledged it as President of TRAIL WAGONS, INC., a Washington corporation, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: December Demand Note 1 /10TARY P : LIC in and for the State of Washi.oy Residing at:� My appoin •' ent expires: l,1.-./Qy Page 2 BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 41 For Meeting Of: March 18, 2003 ITEM TITLE: Consideration of a resolution approving a loan application and authonzing the City Manager to execute Loan Agreement and Promissory Note with Trail Wagons, Inc in the amount of $3,000,000 SUBMITTED BY: I ael Morales, Grants Officer CONTACT: Michael Morales, 575-3533 SUMMARY EXPLANATION: Attached are the Resolution, Loan Agreement and Promissory Note for the $3,000,000 loan to Trail Wagons, Inc Funding for the loan will come from the Economic Development Initiative grant and Section 108 loan from the U S Department of Housing and Urban Development. Trail Wagons, Inc, is a recreational vehicle manufacturer The loan request is for operating capital in the amount of $3;000,000 Trail Wagons wiuse the ntroduct onoan of twonew for working motor home capital, the acquisition of chassis and to retool for the i models Trail Wagons is located in the Renewal Community,, and their expansion will create 121 new full time manufacturing jobs within three years of loan closing. The majonty of these jobs will be created within 18 months of loan closing. In addition to the Loan Agreement and Promissory Note, the loan shall be evidenced by a personal guaranty signed by Gary and Mary Lukehart, and a Deed of Trust given by Gateway Center Associates, LLC. The National Development Council (NDC) has reviewed the application and determined that Trail Wagons' application meets the cntena for this type of loan, demonstrates a good plan for expanding its business, and possesses sufficient collateral to back this loan in case of default. Resolution _X_ Ordinance _ Contract Other Loan Agreement Funding Source U.S. Department • ousin Urban Development -)96)-' Approval for Submittal. City Manager STAFF RECOMMENDATION Staff recommends approval of the resolution. BOARD RECOMMENDATION Economic Development Committee recommends approval COUNCIL ACTION 1