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HomeMy WebLinkAboutR-2009-055 CDBG Economic Development Loan Agreement with United Builders of WashingtonRESOLUTION NO. R-2009-55 A RESOLUTION authorizing the City Manager of the City of Yakima to execute a Community Development Block Grant economic development loan agreement with United Builders of Washington, Inc. in the amount of $200,000. WHEREAS, United Builders of Washington, Inc., herein after referred to as "United Builders", is an established construction company, based in Yakima, and licensed to conduct business in the state of Washington; and WHEREAS, United Builders has established and subsidized a community performing arts facility in the downtown area of the Yakima Renewal Community; and WHEREAS, the City has received and is responsible for the administration of annual Entitlement Grants of Community Development Block Grant ("CDBG") funds made available through the United States Department of Housing and Urban Development (HUD) and authorized by Title I of the Housing and Community Development Act of 1974, as amended; and WHEREAS, federal regulations goveming the use of CDBG funds for special economic development projects allow the City to use such funds as an economic incentive to provide loans to assist private, for-profit businesses with projects that provide an appropriate level of public benefit; and WHEREAS, the City has determined that the CDBG assistance described below is necessary and appropriate to ensure that United Builders continues its economic development activities in the City of Yakima's Renewal Community Area; and WHEREAS, the City has determined that provision of CDBG assistance would provide substantial appropriate public benefits to the City and the Renewal Community, particularly by retaining jobs and supporting downtown revitalization; and WHEREAS, accordingly, the City wants to encourage United Builders to continue such operations in •the City of Yakima's Renewal Community Area as a special economic development project and is willing to use CDBG funds to assist United Builders through a working capital loan of not more than $200,000 over the course of two years according to the following terms and conditions: 1. Repayment Period: 24 months, total principal and interest due at end of term. 2. Interest rate: 4% 3. Security/collateral: a. 1'1 Deed of Trust for the real property located at 101 North Naches Avenue in Yakima, Washington. b. Any subordinate debt on the secured property must be pre -approved by the City Manager. c. In addition to the Loan Agreement and Promissory Note, the loan shall be evidenced by the personal Guaranties signed by the principals of United Builders (J. Patrick Strohsal and Steven R. Strohsal), with each member guaranteeing the full amount of the loan. 4. Clear title report 5. The borrower cannot be delinquent on any local, state or federal taxes. 6. All city, county, state and federal certificates, licenses and permits must be issued and current. 7. Liability insurance fully paid for the next year. 8. There are no material changes to the financial statements submitted for review by the City of Yakima for United Builders of Washington, Inc. as of Oct. 31, 2008; Stephen R. Strosahl dated November 25, 2008; and J. Patrick Strosahl dated March 13, 2009. 9. Provide for review by the City of Yakima a written appraisal report on the subject real property effective no more than six months from the date of loan funding and showing sufficient value to provide for full repayment of the loan; and WHEREAS, the City Council deems it to be in the best interest of the City to authorize execution of a CDBG economic development project loan agreement with United Builders, now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: The City Manager of the City of Yakima is hereby authorized and directed to execute a CDBG economic development project loan agreement with United Builders in the amount of $200,000 to retain their economic development activity in the City of Yakima's Renewal Community Area. The City Attorney shall approve the final form of the Agreements. ADOPTED BY THE CITY COUNCIL this 7Ih day of , 2009. City Clerk avid Edle ayor AGREEMENT BETWEEN THE CITY OF YAKIMA OFFICE OF NEIGHBORHOOD DEVELOPMENT SERVICES AND UNITED BUILDERS OF WASHINGTON INC. THIS AGREEMENT (hereinafter "Agreement") is made and entered into by and between the City of Yakima, Washington, a first-class city incorporated under the laws of the State of Washington, through the Office of Neighborhood Development Services (hereinafter "City") and United Builders of Washington Inc., a Washington corporation (hereinafter "United Builders of Washington"). WHEREAS, United Builders of Washington is a private, for-profit corporation. WHEREAS, United Builders of Washington seeks use of loan funds from the City for use as operating funds in the conduct of its business within the City of Yakima for two years. WHEREAS, the City has received and is responsible for the administration of annual Entitlement Grants of CDBG funds made available through the United States Department of Housing and Urban Development (HUD) and authorized by Title I of the Housing and Community Development Act of 1974, as amended. WHEREAS, federal regulations governing the use of CDBG funds for special economic development projects allow the City to use such funds as an economic incentive to provide loans to assist private, for-profit businesses with projects that provide an appropriate level of public benefit. WHEREAS, the City has determined that the CDBG assistance described below is necessary and appropriate to ensure that United Builders of Washington continues its business activity within the City of Yakima. WHEREAS, continuation of United Builders of Washington's business activity within the City of Yakima would provide substantial appropriate public benefits to the City, particularly by creating and retaining jobs. WHEREAS, accordingly, the City is willing to use CDBG funds to assist United Builders of Washington through a working capital loan of not more than $200,000 according to the following terms and conditions. NOW, THEREFORE, in consideration of the mutual covenants, promises, and agreements set forth herein, it is agreed by and between the City and United Builders of Washington as follows: 1. Term of Agreement. This Agreement shall commence upon execution by the parties hereto and full performance of all United Builders of Washington, Inc.'s obligations shall be due no later than the second annual anniversary date of this Agreement, unless the Agreement is earlier terminated by the parties in accordance with the terms of this Agreement. Page 1 of 9 2. The Loan. Subject to availability of loan funds from the identified source of funds and the other provisions of this Agreement, the City shall provide a loan to United Builders of Washington of $200,000, to be disbursed in accordance with the terms of the Promissory Note. The loan shall be paid as follows: A. United Builders of Washington shall make full and final payment of all amounts due and payable under the Promissory Note no later than the second annual anniversary date of the Promissory Note. 3. Source of Funds. The source of funds for this Agreement is the City's CDBG loan funds administered by HUD. It is expressly understood and agreed by the City and United Builders of Washington that the obligations under this Agreement are contingent upon the City's receipt of CDBG funds adequate to meet the City's loan funding obligations under this Agreement. 4. Contact with HUD. United Builders of Washington understands and agrees that, without the written consent of the City, all direct contact with HUD over any matter related to the project under this Agreement shall be made solely by the City unless otherwise provided herein or provided by law. 5. Conditions of Loan. The obligation of the City to advance any portion of the loan amounts identified in section 3 of this Agreement are subject to the following additional conditions: A. All actions undertaken in connection with this Agreement and all documents incidental thereto shall be satisfactory in form, scope and substance to the City in its reasonable discretion. B. United Builders of Washington shall have all applicable and necessary permits, licenses and approvals of any federal, state, and local government or governmental authority. The City shall not unreasonably withhold its approval of any necessary permit, license or other approval necessary for the project described in this Agreement. C. If United Builders of Washington, or an entity constituting part of United Builders of Washington, is a corporation, there shall be delivered to the City (with respect to each such corporation, if there be more than one) a certified copy of the record(s) of minutes and Board Resolution of the Board of Directors of each such corporation specifically authorizing its officers to execute this Agreement and all other documents necessary for the consummation of this transaction. The record(s) of the minutes and Resolution of the Board of Directors meeting shall be certified to be true by the Secretary or Assistant Secretary of such corporation(s). Page 2 of 9 D. United Builders of Washington shall have provided to The City a copy of an appraisal prepared by a real estate appraiser licensed by the State of Washington indicating a fair market value of the real property legally described on Exhibit "A" attached hereto (the "Collateral") of not less than One Million Dollars which valuation date is not more than six months old. E. United Builders of Washington shall have provided to The City a first position lien against the Collateral evidenced by a fully executed Deed of Trust. F. The loan shall be further secured by the personal Guaranties signed by J. Patrick Strosahl and Stephen L. Strosahl, with each jointly and severally guaranteeing the full repayment of the loan. 6. Maintenance and Inspection of Records. United Builders of Washington shall maintain standard business and accounting records, any other records required herein, and any other records required by the City in writing. Such records shall be available for inspection by City representatives, at the City's expense, at reasonable times during the term of this Agreement and for a period of three (3) years following termination of this Agreement. In the event that any audit or inspection identifies any discrepancy, United Builders of Washington shall provide the City with appropriate clarification and/or financial adjustments within thirty (30) calendar days of notification of the discrepancy by the City. 7. No City Funds. It is expressly understood that, except for CDBG Entitlement Grant funds, this Agreement shall in no way obligate any funds or resources of the City. 8. No Third Party Benefit. The City shall not be obligated or liable under this Agreement for provision of any goods or services or for payment of any monies to any party other than United Builders of Washington. 9. Disallowed Loan Advances. Should any loan advance made by the City to United Builders of Washington be subsequently disallowed or disapproved as a result of any auditing or monitoring by the City, HUD, or any other federal agency, United Builders of Washington shall repay such amount to the City within ten (10) working days of receipt of written notice specifying the amount disallowed. Repayment of disallowed loan advances may not be made from any CDBG, HUD, or other federal funds received from or through the City. 10. Annual Financial Report. During the term of this Agreement, United Builders of Washington shall submit a written financial report reviewed by a certified public accountant duly licensed by the State of Washington to the City within twenty (20) days after the end of its fiscal year that demonstrates United Builders of Washington' maintenance of a net worth sufficient to repayment the Loan. Page 3 of.9 11. Compliance with Law. United Builders of Washington must comply with any and all applicable laws, rules, and regulations promulgated by any federal, state, and/or local governmental agency or regulatory body. Laws that may apply to this Agreement include without limitation: • Title VI of the Civil Rights Act of 1964 (42 USC 200(d)); • Title VIII of the Civil Rights Act of 1968 (42 USC 3601); • Section 3 of the Housing and Urban Development Act of 1968, as amended (12 USC 1701(u)); • Section 109 of the Housing and Urban Development Act of 1974, as amended (42 USC 5309); • Age Discrimination Act of 1975, as amended (42 USC 6101); • Americans with Disabilities Act of 1990; • Civil Rights Restoration Act of 1987; • 49 CFR Part 21; • 24 CFR Part 570; • RCW 49.60; • Davis -Bacon Fair Labor Standards Act (40 US27600000a-276a-5); • Grant Agreement Work Hours and Safety Standards Act, as amended (40 USC 327-333); • Section 504 of the Rehabilitation Act of 1973 (29 USC 794); • Architectural Barriers Act of 1968, as amended (42 USC 4151); • Section 504 of the Rehabilitation Act of 1973, as amended (29 USC 792); • Equal Employment Opportunity (Executive Order 11246, September 24, 1965); • Equal Opportunity in Housing (Executive Order 11063, as amended by Executive Order 12259); • The Hatch Act (5 USC 1501 et seq.); • The National Environmental Policy Act of 1969; • Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 and Amendments of 1987; • Title IV of the Lead -Based Paint Poisoning Prevention Act (42 USC 4831); • HUD Reform Act; • Office of Management and Budget Circulars; • A-87—Cost Principles for State and Local Governments and 24 CFR Part 85, Administrative Requirements for Grants and Cooperative Agreements to State, Local and Federally Recognized Indian Tribal Governments; • A-128—Single Audit Act. 12. Status of United Builders of Washington. United Builders of Washington and the City understand and expressly agree that United Builders of Washington is an independent contractor in the performance of each and every part of this Agreement. United Builders of Washington, as an independent contractor, assumes the entire responsibility for carrying out and accomplishing the terms and conditions of this Agreement on its part to be performed. Additionally, and as an independent contractor, United Builders of Washington, its agents, employees, Page 4 of 9 and/or representatives shall make no claim of City employment nor shall claim against the City any related employment benefits, social security, and/or retirement benefits. Nothing contained herein shall be interpreted as creating a relationship of servant, employee, partnership or agency between United Builders of Washington and the City. 13. Representations and Warranties. 13.1 United Builders of Washington represents and warrants that: A. All information, reports and data furnished to the City are complete and accurate. B. The financial statement dated October 31, 2008 furnished to the City fairly reflects the financial condition of United Builders of Washington and there has been no material change in the financial condition of United Builders of Washington since the date of said financial statement. C. United Builders of Washington is current on all tax reports and returns required to be filed with all Washington State and United States of America governmental agencies and has paid all taxes assessable under those tax returns and reports. D. United Builders of Washington has obtained and is in good standing with regard to all necessary city, county, state and federal business certificates, licenses and permits. E. United Builders of Washington has obtained and fully paid all premiums for all commercially reasonable liability insurance relating to the conduct of its business for the next year. F. No provision of this Agreement contravenes or conflicts with the authority under which United Builders of Washington is doing business or with the provisions of any existing indenture or agreement of United Builders of Washington. G. United Builders of Washington possesses the legal authority to enter into this Agreement and accept payments hereunder and has taken all necessary action to authorize such acceptance. H. This Agreement will not violate any provision of law or result in any breach or constitute a default under any agreement to which United Builders of Washington is presently a party, or result in the creation of any lien, charge or encumbrance upon any of its property or its assets other than as specifically may be allowed under this Agreement. 13.2 J. Patrick Strosahl represents and warrants that his personal and marital community financial statement dated March 13, 2009 furnished to the City fairly reflects the financial condition of his marital community and Page 5 of 9 there has been no material change in the financial condition of his marital community since the date of said financial statement. 13.3 Stephen R. Strosahl represents and warrants that his personal and marital community financial statement dated November 25, 2008 furnished to the City fairly reflects the financial condition of his marital community and there has been no material change in the financial condition of his marital community since the date of said financial statement. 14. No Insurance. It is understood the City does not maintain liability insurance for United Builders of Washington and/or its employees, agents, officers, and subcontractors. 15. Liability Insurance. A. On or before the effective date of this Agreement, United Builders of Washington shall provide the City with a certificate of insurance as proof of commercial liability insurance with a minimum liability limit of Two Million Dollars ($2,000,000.00) per occurrence combined single limit bodily injury and property damage, and Four Million Dollars ($4,000,000.00) general aggregate. The certificate shall clearly state who the provider is, the coverage amount, the policy number, and when the policy and provisions provided are in effect. Said policy shall be in effect for the duration of this Agreement. The policy shall name the City, its elected officials, officers, agents and employees as additional insureds and shall contain a clause that the insurer will not cancel or change the insurance without first giving the City thirty (30) calendar days' prior written notice. The insurance shall be with an insurance company rated A -VII or higher in Best's Guide and admitted in the State of Washington. 16. Indemnification and Hold Harmless. United Builders of Washington agrees to protect, defend, indemnify, and hold harmless the City, its elected officials, officers, employees and agents from any and all claims, demands, losses, liens, liabilities, penalties, fines, lawsuits, and other proceedings and all judgments, awards, costs and expenses (including reasonable attorneys' fees and disbursements) to the extent arising out of, relating to, or resulting from United Builders of Washington' performance and/or nonperformance related to this Agreement. In the event that both United Builders of Washington and the City are negligent, United Builders of Washington' liability for indemnification of the City shall be limited to the contributory negligence for any resulting suits, actions, claims, liability, damages, judgments, costs and expenses (including reasonable attorney's fees) that can be apportioned to United Builders of Washington, its officers, employees, agents, and/or subcontractors. Page 6 of 9 Nothing contained in this section of this Agreement shall be construed to create a liability or a right of indemnification in any third party. This section of the Agreement shall survive the term or expiration of this Agreement and shall be binding on the parties to this Agreement. 17. Limitation of Liability. Neither party will be liable to the other party with respect to any subject matter of this Agreement for any indirect, incidental, consequential, special, or exemplary damages (including, without limitation, loss of revenue or goodwill or anticipated profits or lost business), even if such party have been advised of the possibility of such damages. 18. Assignment. United Builders of Washington' rights and duties under this Agreement, or any interest herein, or claim hereunder, shall not be assigned or transferred in whole or in part by United Builders of Washington to any other person or entity without the prior written consent of the City which shall not be unreasonably withheld. In the event that such prior written consent to an assignment is granted, thenthe assignee shall assume all duties, obligations, and liabilities of United Builders of Washington stated herein. 19. Termination. This Agreement may be terminated as follows: A. In the event that the funding contemplated herein is no longer available, United Builders of Washington may terminate this Agreement upon ten (10) calendar days written notice to the City. 20. Conflict of Interest. United Builders of Washington represents that it, its members, officers, employees, and/or agents do not have any interest, direct or indirect, and shall not hereafter acquire any interest, direct or indirect, which would conflict in any manner or degree with the performance of this Agreement. United Builders of Washington further covenants that it will not knowingly hire anyone or any entity having such a conflict of interest during the performance of this Agreement. 21. Non -Waiver. The waiver of either the City or United Builders of Washington of the breach of any provision of this Agreement by the other party shall not operate and/or be construed as a waiver of any subsequent breach by either party or prevent either party from enforcing such provision or the remaining terms of this Agreement. 22. Survival. Any provision of this Agreement that imposes an obligation after termination or expiration of this Agreement shall survive the term or expiration of this Agreement and shall be binding on the parties to this Agreement. 23. Severability. It is understood and agreed by the parties hereto that if any part, term, or provision of this Agreement is held by the courts to be illegal, the validity of the remaining provisions shall not be affected, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular provision held to be invalid. If it should appear that any provision hereof is in conflict with any statutory and/or regulatory provision of the United States or Page 7 of 9 the State of Washington, said provision which may conflict therewith shall be deemed modified to conform to such statutory and/or regulatory provision. 24. Integration and Modification. This Agreement sets forth all of the terms, conditions, and agreements of the parties relative to the subject matter hereof and supersedes any and all such former agreements which are hereby declared terminated and of no further force and effect upon the execution and delivery hereof. There are no terms, conditions, or agreements with respect thereto, except as herein provided and no amendment or modification of this Agreement shall be effective unless reduced to writing and executed by the parties. 25. Notices. Unless stated otherwise herein, all notices and demands shall be in writing and sent to the parties to their addresses as follows: TO CITY: City of Yakima Office of Neighborhood Development Services Attn: Archie Mathews City Hall—Second Floor 129 North Second Street Yakima, WA 98901 TO UNITED BUILDERS OF WASHINGTON: United Builders of Washington, Inc. P.O. Box 9488 Yakima, Washington 98907 Attn: J. Patrick Strosahl TO J. PATRICK STROSAHL: P.O. Box 9488 Yakima, Washington 98907 TO STEPHEN R. STROSAHL: P.O. Box 9488 Yakima, Washington 98907 or to such other addresses as the parties may hereafter designate in writing. Notices and/or demands shall be sent by registered or certified mail, postage prepaid, or hand delivered. Such notices shall be deemed effective when mailed or hand delivered at the addresses specified above. 26. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Washington. 27. Venue. The venue for any action to enforce or interpret this Agreement shall lie in the Superior Court of Washington for Yakima County, Washington. Page 8 of 9 28. Authority. The person executing this Agreement on behalf of United Builders of Washington represents and warrants that he or she has been fully authorized by United Builders of Washington to execute this Agreement on its behalf and to legally bind United Builders of Washington to all the terms, performances and provisions of this Agreement. The person executing this Agreement on behalf of the City represents and warrants that he or she has been fully authorized by the City to execute this Agreement on its behalf and to legally bind the City to all the terms, performances and provisions of this Agreement. EXECUTED by the City of Yakima EXECUTED by United Builders of Washin, Inc. this A) "qday of f4ri 1 , 2009. this 72 day of 2009. CITY OF YAKIMA R. A. Zais, Jr., City Manager J. (�atrick trosahl Date: y ATTEST: , 2009 UNITED BUILDERS OF WASHINGTON, INC. By: w Title: 02) Stephen ' . Strosahl Date: 19-rt-- Deborah Z'Z Deborah Moore, City Clerk City Contract No. 2o09-'8 Resolution No. R -AO X:\CITY OF YAKIMA-20009\ONDS - United Builders COBG Loan-2009081\Loan Documents\Loan Agt (041409).DOC Page 9 of 9 , 2009 Exhibit A SUBJECT PROPERTY: The term "Subject Property" means and refers to the property located at 101 N. Naches Avenue, Yakima, WA 98902, commonly referred to as "The Seasons Building," "Seasons Performance Hall" and Yakima County Parcel No. 191319-21482, which is legally described as follows: Lots 15 and 16 Block, 109, Town of North Yakima, now Yakima, recorded in Volume "A" of Plats, page 10, re-recorded in Volume "E" of Plats, page 1, records of Yakima County, Washington Situated in Yakima County, Washington. PROMISSORY NOTE $200,000.00 April 11, 2009 Yakima, Washington 1. Promise to Pay. UNITED BUILDERS OF WASHINGTON, INC., a Washington corporation (referred to as "Maker" herein), hereby promises to pay to the order of THE CITY OF YAKIMA OFFICE OF NEIGHBORHOOD DEVELOPMENT SERVICES, ("Holder" herein), at Yakima, Washington or at such other place as the Holder may designate in writing, in lawful money of the United States of America, the principal sum of TWO HUNDRED THOUSAND ($200,000.00), with interest on the principal from the date of each advance, on the terms and conditions set forth herein. The loan funds shall be delivered to Maker upon execution of loan documents and adherence to terms and conditions. 2. Interest Rate. The rate of interest assessed from the date hereof upon the unpaid principal balance and any fees, expenses and charges chargeable under the terms of this Note shall be equal to four percent (4.0%) per annum. 3. Payment. Maker shall make full and final payment of all unpaid principal, interest, and any accrued fees, costs and charges to Holder on the second annual anniversary date of the Note Date stated above. 4. Prepayment. Maker shall have the right to prepay this Note in full or in part at any time without the prior approval of Holder. 5. Application of Payments. Payments made hereunder may be applied in any order to payments of costs, interest or principal due hereunder, at the option of the Holder. 6. Acceleration; Cross -Default; Default Interest Rate. This Note shall be in default if payment of any installment is not made when due or a default occur under any instrument evidencing, securing or relating to any other indebtedness of Maker to the Holder (whether direct or indirect), and such default continues after any notice from the Holder to Maker and the expiration of any period granted to Maker for curing such default as provided for in any such instrument. In the event of such default, the whole sum of principal and accrued interest hereunder shall, at the option of the Holder, become immediately due and payable, anything herein or any instrument securing this Note to the contrary notwithstanding, time being of the essence. As long as this Note is in default, then, at the option of the Holder, AFTER notice, this Note shall bear interest at a rate which is three and one-half (3.5) percentage points per annum above the Interest Rate. 7. Late Payment Charge - Curing of Monetary Defaults. If any payment is not delivered to Holder within five days after the payment due date, then a late payment fee of five percent (5.0%) of the payment due will be charged and immediately payable. A default in payment of any amount due hereunder may be cured only by payment in full of such amount Promissory Note Page -1- plus the applicable fees and charges, plus any attorneys' fees incurred by the Holder by reason of such default. 8. Nonwaiver. Failure to exercise any right the Holder may have or be entitled to in the event of any default hereunder shall not constitute a waiver of such right or any other right in the event of any subsequent default. 9. Waiver of Presentment. The Maker and all guarantors and endorsers hereof hereby severally waive presentment for payment, protest and demand, notice of protest, demand, dishonor and nonpayment of this Note; and consent that the Holder may extend the time of payment or otherwise modify the terms of payment of any part of the whole of the debt evidenced by this Note. Each and every party signing or endorsing this Note binds itself as a principal and not as a surety. In any action or proceeding to recover any sum herein provided for, no defense of adequacy of security or that resort must first be had to security or to any other person shall be asserted. This Note shall bind the undersigned and its or their successors and assigns, jointly and severally. 10. Security of Note. To secure full payment and performance of Maker hereunder, Maker has granted a first lien against Maker's real property commonly known as 101 North Naches Avenue in Yakima, Washington and Yakima County Tax Parcel Number 191319-21482. 11. Collection Costs. Maker agrees to pay all costs, including reasonable attorneys' fees, incurred by the Holder in any suit, action or appeal therefrom, or without suit, in connection with collection hereof or enforcement of Holder's rights under the other documents executed in connection with the loan evidenced hereby. 12. Maximum Interest. Neither this Note nor any instrument securing payment hereof or otherwise relating to the debt evidenced hereby shall require the payment or permit the collection of interest in excess of the maximum permitted by applicable law. If this Note or any other instrument does so provide, the provisions of this paragraph shall govern, and neither Maker nor any guarantors or endorsers of this Note nor their respective heirs, personal representatives, successors or assigns shall be obligated to pay the amount of interest in excess of the amount permitted by applicable law. 13. Business Purpose. The undersigned warrants and represents that all funds advanced under this Note shall be applied and are intended substantially for business or commercial purposes. 14. Notice. Any demand or notice to be made or given under the terms hereof or any instrument now or hereafter securing this Note by the Holder to Maker shall be effective when mailed to the following addresses: United Builders of Washington, Inc. c/o J. Patrick Strosahl P.O. Box 9488 Yakima, Washington 98907 Promissory Note Page -2- City of Yakima, Office of Neighborhood Development Services c/o Archie Mathews City Hall—Second Floor 129 North Second Street Yakima, WA 98901 United Builders of Washington, Inc. By: Title 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. X.\CITY OF YAKIMA•20009\ONDS - United Builders COBG Loan-2009081\Loan Documents\Promissory Note - Business.doc Promissory Note Page -3- UNCONDITIONAL GUARANTY PARTIES: City: The City of Yakima, a Washington municipal corporation through the Office of Neighborhood Development Services. Obligor: United Builders of Washington, a Washington corporation. Guarantor: J. Patrick Strosahl, a married person. RECITALS: Concurrent with this Guaranty, City and Obligor have entered into a Loan Agreement ("Agreement") and Promissory Note. Pursuant to the terms of the Agreement, Obligor is accepting a loan in the amount of Two Hundred Thousand Dollars ($200,000.00) from the City. The undersigned has agreed to enter into this Unconditional Guaranty of all Obligor's obligations under the Agreement. AGREEMENT: As an inducement and in consideration of any and all contemporaneous or future financial accommodations by City to Obligor, the undersigned Guarantor unconditionally guarantees the prompt payment when due and at all times thereafter of the Loan, including any and all existing, contemporaneously incurred and future indebtedness and liability of every kind arising therefrom (including all extensions, renewals, and modifications thereof), absolute or contingent, however created or evidenced, owing from Obligor to City plus such interest as may accrue thereon. City may grant credit to Obligor 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 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 Page 1 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 Obligor 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 Obligor and no dealings by City with Obligor 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 Obligor'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 Obligor, 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 Obligor 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 Obligor or Guarantor or the failure of City to file or enforce a claim against the estate (either in administration, bankruptcy, or other proceeding) of Obligor 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 Obligor, City, any endorser, creditor of Obligor 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 Obligor, it being understood and agreed that Guarantor is fully responsible for being and keeping informed of the financial condition of Obligor and of all circumstances bearing on the risk of non- payment of any indebtedness guaranteed hereby. Until all indebtedness of Obligor 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 Obligor 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 Obligor, 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 Obligor 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 Obligor to Guarantor to any and all indebtedness of Obligor to City. If City so requests, any such indebtedness of Obligor to Guarantor shall be collected and received by Guarantor as trustee for City and paid to City on account of Obligor'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 Obligor'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 Guaranty Page .3 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 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 22 day of , 2009. Patrick Strosahl CONSENT OF SPOUSE The undersigned, being the spouse of the J. PATRICK STROSAHL, and hereby acknowledges and consents to the personal guaranty set forth above as to any community property interest in which J. PATRICK STROSAHL and I now have or acquire in the future. Dated this _2Zday of , 2009. X:\CITY OF YAKIMA-20009\ONDS - United Builders COBG Loan-2009081\Loan Documents\Guaranty - Pat Strosahl (040909).doc Guaranty Page 4 UNCONDITIONAL GUARANTY PARTIES: City: The City of Yakima, a Washington municipal corporation through the Office of Neighborhood Development Services. Obligor: United Builders of Washington, a Washington corporation. Guarantor: Stephen R. Strosahl, a married person. RECITALS: Concurrent with this Guaranty, City and Obligor have entered into a Loan Agreement ("Agreement") and Promissory Note. Pursuant to the terms of the Agreement, Obligor is accepting a loan in the amount of Two Hundred Thousand Dollars ($200,000.00) from the City. The undersigned has agreed to enter into this Unconditional Guaranty of all Obligor's obligations under the Agreement. AGREEMENT: As an inducement and in consideration of any and all contemporaneous or future financial accommodations by City to Obligor, the undersigned Guarantor unconditionally guarantees the prompt payment when due and at all times thereafter of the Loan, including any and all existing, contemporaneously incurred and future indebtedness and liability of every kind arising therefrom (including all extensions, renewals, and modifications thereof), absolute or contingent, however created or evidenced, owing from Obligor to City plus such interest as may accrue thereon. City may grant credit to Obligor 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 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 Page 1 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 Obligor 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 Obligor and no dealings by City with Obligor 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 Obligor'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 Obligor, 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 Obligor 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 Obligor or Guarantor or the failure of City to file or enforce a claim against the estate (either in administration, bankruptcy, or other proceeding) of Obligor 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 Obligor, City, any endorser, creditor of Obligor 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 Obligor, it being understood and agreed that Guarantor is fully responsible for being and keeping informed of the financial condition of Obligor and of all circumstances bearing on the risk of non- payment of any indebtedness guaranteed hereby. Until all indebtedness of Obligor 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 Obligor 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 Obligor, 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 Obligor 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 Obligor to Guarantor to any and all indebtedness of Obligor to City. If City so requests, any such indebtedness of Obligor to Guarantor shall be collected and received by Guarantor as trustee for City and paid to City on account of Obligor'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 Obligor'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 Guaranty Page 3 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 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' day of , 2009. Liyek Stephen R. Strosahl CONSENT OF SPOUSE The undersigned, being the spouse of the STEPHEN R. STROSAHL, and hereby acknowledges and consents to the personal guaranty set forth above as to any community property interest in which STEPHEN R. STROSAHL and I now have or acquire in the future. Dated this 96 day of (A)4 , 2009. a4 GEANETTE L. STROSAHL X.\CITY OF YAKIMA-20009\ONDS - United Builders COBG Loan-2009081\Loan Documents\Guaranty - Steve Strosahl (040909).doc Guaranty Page 4 UNITED BiUI_LDERS SiNrh I 9 4 9 Dear Dick: To: Dick Zais, City Manager City of Yakima 129 N. 2"d Street Yakima, WA 98901 April 2, 2009 RECEIVED APR 0 2 2009 CITY OF YAKIMA COMMUNITY DEVELOPMENT Pursuant to our recent conversations, this letter confirms a request from United Builders of Washington, Inc., for a short-term loan of $200,000.00 from the City of Yakima. The need for this loan is to provide working capital for our company to continue operations. If approved, this financing will allow United Builders of Washington to free up resources within the company to ensure continued operation and code compliance at The Seasons Performance Hall. Our request is for a bridge loan to be repaid in twenty-four months or less. As you are aware, the Seasons is a facility owned by United Builders but donated to a non- profit organization that programs events and concerts at the hall, and has been recognized as a key component in the downtown Yakima recovery & renaissance. We have actively solicited lender resources for the last nine months, but because credit markets have been frozen and are particularly inaccessible for residential home construction businesses, we have been unable to secure the capital needed to continue our home building construction and to complete needed improvements to the Seasons facility. Over the last nine months we have approached several lenders without success in spite of a $1.6M appraisal of the building and no underlying debt. With this request, United Builders of Washington acknowledges the City of Yakima's underwriting requirements of: 1) personal guarantees from all owners of our company to repay the City's loan; 2) collateral security provided through a first lien position in favor of the City of Yakima on The Seasons Performance Hall property; and 3) other requirements, if any. I assure you, Dick, that our need is real and our commitment to repay the City's loan within twenty-four months or less is sincere. We have not, nor will we, diminish our efforts to secure permanent financing to repay the City's loan at the earliest opportunity. Sincere atrick Strosahl, CEO nited Builders of Washington Cc: Michael Morales, City of Yakima 2112 Nob Hill Blvd • P 0 Box 9488 • Yakima, WA 98902 • Ph 509-248-6321 • Fax 509-575-6527 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT THE SECRETARY — —_ WASHINGTON, DC 20410-0001 F' ; • '? C tJ. Y y _ March 6, 2009 The Honorable David Edler Mayor of Yakima 129 North Second Street Yakima, WA 98901 Dear Mayor Edler: tt; / EY` 1 OFFiCE 21.2109 I am pleased to inform you that the U.S'. Department of Housing and Urban Development has allocated $10.1 billion, made available through the American Recovery and Reinvestment Act of 2009 (Recovery Act) (Public Law 111-5) signed into law by President Obama on February 17, 2009. This letter provides the allocations from the Recovery Act for the following programs administered by the Department: Community Development Block Grants; Public Housing Capital Fund; Lead Hazard Reduction; Section 8 Project -Based Rental Assistance; Homelessness Prevention Fund; and Tax Credit Assistance. These programs provide funding for housing, community and economic development, and assistance for low- and moderate -income persons and special populations across the country. Table 1 reflects the level of funding directly available for those programs in your community. Table 2 identifies funding available through other partners in your community, and finally, Table 3 identifies the allocation provided to your state for which you may apply: Table 1— Grants awarded directly to your community Recovery Act of 2009 Program Grant Amount Community Development Block Grant $317,515 Homelessness Prevention Fund $0 Lead Hazard Reduction $0 www.hud.gov espanol.hud.gov As with all HUD Recovery Act programs, your community has HUD's commitment to be as flexible as possible to help communities such as yours address local needs in the most effective manner. I look forward to establishing a partnership to help strengthen your community for years to come. HUD is always available to help you implement your programs effectively. If you or your staff have any questions, please contact your local HUD Field Office. Sincerely, Shaun Donovan 3 e. Return Address: Donald A. Boyd Carlson, Boyd & Bailey, PLLC 230 South 2nd Street, Suite 202 Yakima, WA 98901 11q 111ill biliHMI i IIiiiii DEED OF TRUST -13)FV Grantor(s): 1. UNITED BUILDERS OF WASHINGTON, INC. FILE# 7650327 YAKIMA COUNTY, WA 04/24/2009 12:54:18PN DEED OF TRUST PAGES: 6 FIDELITY TITLE COMPANY Recording Fee: 48.00 Grantee(s): 1. THE CITY OF YAKIMA OFFICE OF NEIGHBORHOOD DEVELOPMENT SERVICES Legal Description: 1. LOTS 15 and16, BLK 109, TOWN OF NORTH YAKIMA, now Yakima. Assessor's Property Tax Parcel Number(s): 191319-21482 DEED OF TRUST (For Use in the State of Washington Only) THIS DEED OF TRUST, made this 22ire0day of April, 2009, between UNITED BUILDERS OF WASHINGTON, INC., a Washington corporation, GRANTOR, whose address is P.O. Box 9488, Yakima, Washington 98907; FIDELITY TITLE COMPANY, a Washington Corporation, TRUSTEE, whose address is 117 North 4th Street, Yakima, Washington 98901; and THE CITY OF YAKIMA OFFICE OF NEIGHBORHOOD DEVELOPMENT SERVICES, BENEFICIARY, whose address is City Hall—Second Floor, 129 North Second Street, Yakima, WA 98901. WITNESSETH: GRANTORS hereby bargain, sell and convey to TRUSTEE in Trust, with power of sale, the following described real property in Yakima County, Washington: Lots 15 and 16, Block 109, TOWN OF NORTH YAKIMA, now Yakima. 1 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 1 profits thereof. This deed is for the purpose of securing performance of each agreement between GRANTOR and BENEFICIARY, and to secure all obligations and indebtedness owed by Grantor to the Beneficiary either owing as of the date of this Deed of Trust or owed at any time prior to the reconveyance of this Deed of Trust, including, but not limited j to any and all obligations of Grantor arising from or evidenced by in accordance with the terms of a Promissory Note in the original principal balance of Two Hundred Thousand Dollars of even date herewith, payable to BENEFICIARY or order, and made by GRANTORS, and all renewals, modifications and extensions thereof, and also such further sums as may be advanced or loaned by BENEFICIARY to GRANTORS, 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, GRANTORS COVENANT AND AGREE: 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 fee 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 erectedon the property described herein continuously insured against loss by fire or other hazards in an amount not less than the total debt secured by this Deed of Trust. All policies shall be held by the Beneficiary, and be in such companies as the Beneficiary may approve and have loss payable first 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 indebted- ness 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. If all or any part of the property securing this Deed of Trust and the Promissory Note above referred to, or any interest therein is sold, transferred, leased or any other interest therein is created by GRANTORS without BENEFICIARY'S prior written consent, BENEFICIARY may, at their sole, unrestricted option, declare all 2 sums due hereunder and secured hereby immediately due and payable. Consent once given by BENEFICIARY shall not be deemed a waiver to any future consent. The parties recognize that strict enforcement of this provision is necessary for the protec- tion of the BENEFICIARY. 5. GRANTORS shall not dispose of or otherwise allow the release of any hazardous substance, waste or materials in, on or under the premises, or any adjacent property, or in any improvements placed on the premises, and GRANTORS represent and warrant that GRANTORS' intended use of the premises does not involve the use, production, disposal or bringing onto the premises of any hazardous substance, waste or materials. As used herein, the term "hazardous substance, waste or materials" includes any substance, waste or material defined or designated as hazardous, toxic or dangerous (or any similar such term) by any federal, state or local statute, regulation, rule or ordinance now or hereafter in effect, including, but not limited to, Federal Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and the Washington Model Toxics Control Act, RCW Chapter 70.105D. GRANTORS shall promptly comply with all statutes, regulations and ordinances, and with all orders, decrees or judgments of governmental authorities or courts having jurisdiction, relating to the use, collection, treatment, disposal, storage, control, removal or clean up of hazardous substances, waste or materials in, on or under the premises, or any adjacent property, or any improvements thereon, at GRANTORS' sole expense. GRANTORS agree to indemnify, defend and hold harmless BENEFICIARY and TRUSTEE against any and all losses, liabilities, suits, obligations, fines, damages, judgments, penalties, claims, charges, clean up costs, remedial action, costs and expenses (including, without limitation, attorney fees and disbursements) which may be imposed on, incurred or paid by, or asserted against BENEFICIARY and/or TRUSTEE in connection with all of those matters referred to or related to the provisions, representations and/or warranties of this provision. 6. GRANTORS must obtain and shall have the pre -approval and consent of BENEFICIARY at the time of any development and/or usage plan, improvements, tenancies, and/or financing arrangements for any improvements to the above-described premises. 7. 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 proceedings, and in any suit brought by Beneficiary to foreclose this Deed of Trust. 8. 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. 3 9. Should Grantors 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. 10. To not engage in any illegal activity and to not allow any illegal activity to occur on the subject property. 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 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 sumsecured 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 Grantor and 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 Grantor 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 shall sell the trust property, in accordance with the Deed of Trust Act of the State of Washington, at public auction to the highest bidder. Any 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 deposited with the Clerk of the Superior Court of the County in which the sale took place, to be distributed in accordance with the provisions of RCW 61.24.080. 5. Trustee shall deliver to the purchaser. at the sale its deed, without warranty, which shall reconvey to the purchaser the interest in the property which 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 purchaser and encumbrances for value. 4 6. The power of sale conferred by this Deed of Trust and by the Deed of Trust Act of the State of Washington is 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 may 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 and assigns. The term Beneficiary shall mean the holder and owner of the note secured hereby, whether or not named as Beneficiary herein. STATE OF WASHINGTON ) ss: County of Yakima United Builders of Washington, Inc. 0c-wC\ On this day personally appeared before meAc03_ c y `Thkif-0x\ , to me known to be the `T` moo,1\1&.,5 of United Builders of Washington, Inc., who executed the within and foregoing instrument, and acknowledged that he signed the same in his official capacity as authorized corporate officer and as the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned. GIVEN u hand and official seal this d.ay of April, 2009. X.\CITY OF YAKIMA-2 G us-- NOTARY PUBLIC in and for the State of Washington Residing at My Commission Expires: s COBG Loan-2009081\Loan Documents\deed of trust.doc 5 Lots 15 and 16, Block 109, TOWN OF NORTH YAKIMA, now Yakima, recorded in Volume "A" of Plats, Page 10, re-recorded in Volume "E" of Plats, Page 1, records of Yakima County, Washington. Situated in Yakima County, State of Washington. ADDRESS: 230 S. 2N0 STREET YAKIMA, WASHINGTON 98901 TELEPHONE: 509-834-6611 FACSIMILE: 509-834-6610 WEB SITE: www.cbblawfirm.com i•�, sig A a?.;t+ '�,'';t 4"9.s".:.t .,-' a x.:ar. j . y���.. September 9, 2009 Mr. Michael Morales City of Yakima Office of Community and Economic Development 129 North 2nd Street Yakima, Washington 98901 Re: ONDS — United Builders Loan. Dear Michael: • Via First Class Mail RECEIVE® SEP 10 2009 CITY OF YAKIMA COMMUNITY DEVELOPMENT DONALD A. BOYD E -Mail: dbovd@chhlawdinn.com I enclose the Loan Policy of Title Insurance received from Fidelity Title Company showing that the City of Yakima ONDS loan is the only encumbrance against The Seasons' property. Please retain this document with your original loan documents on this matter. Please call me if you have any questions. Very truly yours, ‘C Donald A. Boyd Encl. X.\CITY OF YAKIMA-20009\ONDS - United Builders COBG Loan -2009081\ Correspondence\Morales 090909 (ltr w Title Pohcy).doc Chicago Title Insurance Company POLICY NO.. WA2001-46-73980-2009.72307-78490709 LOAN POLICY OF TITLE INSURANCE Issued by Chicago Title Insurance Company Any notice of claim and any other notice or statement in writing required to be given to the Company ,under this Policy must be given to the Company at the address shown in Section 17 of the Conditions. COVERED RISKS SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B, AND THE CONDITIONS, CHICAGO TITLE INSURANCE COMPANY, a Nebraska corporation (the "Company') insures as of Date of Policy and, to the extent stated in Covered Risks 1I, 13, and 14, after Date of Policy, against loss or damage, not exceeding the Amount of Insurance, sustained or incurred by the Insured by reason of I Title being vested other than as stated in Schedule A 2. Any defect in or lien or encumbrance on the Title. This Covered Risk includes but is not limited to insurance against loss from (a) A defect in the Title caused by (i) forgery, fraud, undue influence, duress, incompetency, incapacity, or impersonation, (ii) failure of any person or Entity to have authorized a transfer or conveyance; (iii) a document affecting Title not properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered; (iv) failure to perform those acts necessary to create a document by electronic means authorized by law; (v) d document executed under a falsified, expired, or otherwise invalid power of attorney; (vi) a document not properly filed, recorded, or indexed in the Public Records includingfailure to perform those acts by electronic means authorized by law, or (vii) a defective judicial or administrative proceeding. (b) The lien of real estate taxes or assessments imposed on the Title by a governmental authority due or payable, but unpaid. (c) Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the :Title that would be disclosed by an accurate and complete land survey of the Land. The term "encroachment" includes encroachments of existing improvements located on the Land onto adjoining land, and encroachments onto the Land of existing improvements located on adjoining land. 3. Unmarketable Title. 4. No right of access to and from the Land. 5 The violation or enforcement of any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to (a) the occupancy, use, or enjoyment of the Land, (b) the character, dimensions, or location of any improvement erected on the Land, (c) the subdivision of land; or (d) environmental protection if a notice, describing any part of the Land, is recorded in the Public Records setting forth the violation or intention to enforce, but only to the extent of the violation or enforcement referred to in that notice. 6. An enforcement action based on the exercise ofa governmental police power not covered by Covered Risk 5 if a notice of the enforcement action, describing any part of the Land, is recorded in the Public Records, but only to the extent of the enforcement referred to in that notice. 7 The exercise of the rights of eminent domain if a notice of the exercise, describing any part of the Land, is recorded in the Public Records. 8. Any taking by a governmental body that has occurred and is binding on the rights ofa purchaser for value without Knowledge. 9 The invalidity or unenforceability of the lien of the Insured Mortgage upon the Title. This Covered Risk includes but is not limited to insurance against loss from any of the following impairing the lien of the Insured Mortgage (a) forgery, fraud, undue influence, duress, incompetency, incapacity, or impersonation, (b) failure of any person or Entity to have authorized a transfer or conveyance; (c) the Insured Mortgage not being properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered, (d) failure to perform those acts necessary to create a document by electronic means authorized by law, (e) a document executed under a falsified, expired, or otherwise invalid power of attorney; (9 a document not properly filed, recorded, or indexed in the Public Records includingfailure to perform those acts by electronic means authorized by law, or (g) a defective judicial or administrative proceeding. 10. The lack of priority of the lien of the Insured Mortgage upon the Title over any other lien or encumbrance. 11 The lack of priority of the lien of the Insured Mortgage upon the Title (a) as security for each and every advance of proceeds of the loan secured by the Insured Mortgage over any statutory lien for services, labor, or material arising from construction of an improvement or work related to the Land when the improvement or work is either (1) contracted for or commenced on or before Date of Policy; or (ii) contracted for, commenced or continued after Date of Policy if the construction is financed, in whole or in part, by proceeds of the loan secured • by the Insured Mortgage that the Insured has advanced or is obligated on Date of Policy to advance; and (b) over the lien of any assessments for street improvements under construction or completed at Date of Policy. 12. The' invalidity or unenforceability of any assignment of the Insured Mortgage, provided the assignment is shown in Schedule A, or the failure of the assignment shown in Schedule A to vest title to the Insured Mortgage in the named Insured assignee free and clear of all liens. 13. The invalidity, unenforceabilty, lack of priority, or avoidance of the lien of the Insured Mortgage upon the Title 72307 (6/06) ALTA Loan Policy (6/17/06) (a) resulting from the avoidance in whole or in part, or from a court order providing an alternative remedy, of any transfer of all or any part of the title to or any interest in the Land occurring prior to the transaction creating the lien of the Insured Mortgage because that prior transfer constituted a fraudulent or preferential transfer under federal bankruptcy, state insolvency, or similar creditors' rights laws, or (b) because the Insured Mortgage constitutes a preferential transfer under federal bankruptcy, state insolvency, or similar creditors' rights laws by reason of the failure of its recording in the Public Records (i) to be timely, or (ii) to impart notice of its existence to a purchaser for value or to a judgment or lien creditor. 14 Any defect in or lien or encumbrance on the Title or other matter included in Covered Risks 1 through 13 that has been created or attached or has been filed or recorded in the Public Records subsequent to Date of Policy and prior to the recording of the Insured Mortgage in the Public Records. The Company will also pay the costs, attorneys' fees, and expenses incurred in defense of any matter insured against by this Policy, but only to the extent provided in the Conditions. IN WITNESS WHEREOF, CHICAGO TITLE INSURANCE COMPANY has caused this policy to be signed and sealed by its duly authorized officers. Countersigned: WA2001 73980 Fidelity Title Company 117 North 4th Street Yakima , WA 98901 Tel:(509) 248-6210 Fax:(509) 248-2048 72307 (6/06) thonzed Signatory Karen Allen CHICAGO TITLR..INSURANCE 'COMPANY ih. ALTA Loan Policy (6/17/06) EXCLUSIONS FROM COVERAGE The following matters are expressly excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys' fees, or expenses that arise by reason of: I. (a) Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to (i) the occupancy, use, or enjoyment of the Land; (ii) the character, dimensions, or location of any improvement erected on the Land; (iii) the subdivision of land; or (iv) environmental protection, or the effect of any violation of these laws, ordinances, or governmental regulations. This Exclusion 1(a) does not modify or limit the coverage provided under Covered Risk 5. (b) Any governmental police power. This Exclusion 1(b) does not modify or limit the coverage provided under Covered Risk 6. 2. Rights of eminent domain. This Exclusion does not modify or limit the coverage provided under Covered Risk 7 or 8. 3. Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed, or agreed to by the Insured Claimant; (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy; (c) resulting in no loss or damage to the Insured Claimant; (d) attaching or created subsequent to Date of Policy (however, this does not modify or limit the coverage provided under Covered Risk 11, 13, or 14); or (e) resulting in loss or damage that would not have been sustained if the Insured Claimant had.paid value for the Insured Mortgage. 4. Unenforceability of the lien of the Insured Mortgage because of the inability or failure of an insured to comply with applicable doing -business laws of the state where the Land is situated. 5. Invalidity or unenforceability in whole or in part of the lien of the Insured Mortgage that arises out of the transaction evidenced by the Insured Mortgage and is based upon usury or any consumer credit protection or truth -in -lending law. 6. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that the transaction creating the lien of the Insured Mortgage, is (a) a fraudulent conveyance or fraudulent transfer, or (b) a preferential transfer for any reason not stated in Covered Risk 13(b) of this policy. 7 Any lien on the Title for real estate taxes or assessments imposed by governmental authority and created or attaching between Date of Policy and the date of recording of the Insured Mortgage in the Public Records. This exclusion does not modify or limit the coverage provided under Covered Risk 11(b). CONDITIONS 1. DEFINITION OF TERMS The following terms when used in this policy mean: (a) "Amount of Insurance". The amount stated in Schedule A, as may be increased or decreased by endorsement to this policy, increased by Section 8(b) or decreased by Section 10 of these Conditions. (b) "Date of Policy": The date designated as "Date of Policy" in Schedule A. (c) "Entity". A corporation, partnership, trust, limited liability company, or other similar legal entity. (d) "Indebtedness". The obligation secured by the Insured Mortgage including one evidenced by electronic means authorized by law, and if that obligation is the payment of a debt, the Indebtedness is the sum of (i) the amount of the principal disbursed as of Date of Policy; (ii) the amount of the principal disbursed subsequent to Date of Policy; (iii) the construction loan advances made subsequent to Date of Policy for the purpose of financing in whole or in part the construction of an improvement to the Land or related to the Land that the Insured was and continued to be obligated to advance at Date of Policy and at the date of the advance; (iv)interest on the loan; (v) the prepayment premiums, exit fees, and other similar fees or penalties allowed by law; (vi)the expenses of foreclosure and any other costs of enforcement; (vii) the amounts advanced to assure compliance with laws or to protect the lien or the priority of the lien of the Insured Mortgage before the acquisition of the estate or interest in the Title; (viii) the amounts to pay taxes and insurance; and (ix)the reasonable amounts expended to prevent deterioration of improvements; but the Indebtedness is reduced by the total of all payments and by any amount forgiven by an Insured. (e) "Insured": The Insured named in Schedule A. 72307 (6/06) (i) The term "Insured" also includes (A)the owner of the Indebtedness and each successor in ownership of the Indebtedness, whether the owner or successor owns the Indebtedness for its own account or as a trustee or other fiduciary, except a successor who is an obligor under the provisions of Section 12(c) of these Conditions; (B) the person or Entity who has "control" of the "transferable record," if the Indebtedness is evidenced by a "transferable record," as these terms are defined by applicable electronic transactions law; (C) successors to an Insured by dissolution, merger, consolidation, distribution, or reorganization; (D) successors to an Insured by its conversion to another kind of Entity; (E) a grantee of an Insured under a deed delivered without payment of actual valuable consideration conveying the Title (1) if the stock, shares, memberships, or other equity interests of the grantee are wholly-owned by the named Insured, (2) if the grantee wholly owns the named Insured, or (3) if the grantee is wholly-owned by an affiliated Entity of the named Insured, provided the affiliated Entity and the named Insured are both wholly-owned by the same person or Entity; (F) any government agency or instrumentality that is an insurer or guarantor under an insurance contract or guaranty insuring or guaranteeing the Indebtedness secured by the Insured Mortgage, or any part of it, whether named as an Insured or not; (ii) With regard to (A), (B), (C), (D), and (E) reserving, however, all rights and defenses as to any successor that the Company would have had against any predecessor Insured, unless the successor acquired the Indebtedness as a purchaser for value without Knowledge of the asserted defect, lien, encumbrance, or other matter insured against by this policy. (f) "Insured Claiimant": An Insured claiming loss or damage. (g) "Insured Mortgage": The Mortgage described in paragraph 4 of Schedule A. ALTA Loan Policy (6/17/06) (h) "Knowledge" or "Known": Actual knowledge, not constructive 'knowledge or notice that may be imputed to an Insured by reason of the Public Records or any other records that impart constructive notice of matters affecting the Title. (i) "Land": The land described in Schedule A, and affixed improvements that by law constitute real property The term "Land" does not include any property beyond the lines of the area described in Schedule A, nor any right, title, interest, estate, or easement in abutting streets, roads, avenues, alleys, lanes, ways or waterways, but this does not modify or limit the extent that a right of access to and from the Land is insured by this policy. (j) "Mortgage": Mortgage, deed of trust, trust deed, or other security instrument, including one evidenced by electronic means authorized by law. (k) "Public Records". Records established under state statutes at Date of Policy for the purpose of imparting constructive notice of matters relating to real property to purchasers for value and without Knowledge. With respect to Covered Risk 5(d), "Public Records" shall also include environmental protection liens filed in the records of the clerk of the United States District Court for the district where the Land is located. (1) "Title": The estate or interest described in Schedule A. (m)"Unmarketable Title": Title affected by an alleged or apparent matter that would permit a prospective purchaser or lessee of the Title or lender on the Title or a prospective purchaser of the Insured Mortgage to be released from the obligation to purchase, lease, or lend if there is a contractual condition requiring the delivery of marketable title. 2. CONTINUATION OF INSURANCE The coverage of this policy shall continue in force as of Date of Policy in favor of an Insured after acquisition of the Title by an Insured or after conveyance by an Insured, but only so long as the Insured retains an estate or interest in the Land, or holds an obligation secured by a purchase money Mortgage given by a purchaser from the Insured, or only so long as the Insured shall have liability by reason of warranties in any transfer or conveyance of the Title. This policy shall not continue in force in favor of any purchaser from the Insured of either (i) an estate or interest in the Land, or (ii) an obligation secured by a purchase money Mortgage given to the Insured. 3. NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT The Insured shall notify the Company promptly in writing (i) in case of any litigation as set forth in Section 5(a) of these Conditions, (ii) in case Knowledge shall come to an Insured of any claim of title or interest that is adverse to the Title or the lien of the Insured Mortgage, as insured, and that might cause loss or damage for which the Company may be liable by virtue of this policy, or (iii) if the Title or the lien of the Insured Mortgage, as insured, is rejected as Unmarketable Title. If the Company is prejudiced by the failure of the Insured Claimant to provide prompt notice, the Company's liability to the Insured Claimant under the policy shall be reduced to the extent of the prejudice. 4. PROOF OF LOSS In the event the Company is unable to determine the amount of loss or damage, the Company may, at its option, require as a condition of payment that the Insured Claimant furnish a signed proof of loss. The proof of loss must describe the defect, lien, encumbrance, or other matter insured against by this policy that constitutes the basis of loss or damage and shall state, to the extent possible, the basis of calculating the amount of the loss or damage. 5. DEFENSE AND PROSECUTION OF ACTIONS (a) Upon written request by the Insured, and subject to the options contained in Section 7 of these Conditions, the Company, at its own cost and without unreasonable delay, shall provide for the defense of an Insured in litigation in which any third party asserts a claim covered by this policy adverse to the Insured. This obligation is limited to only those stated causes of action alleging matters insured against by this policy. The Company shall have the right to select counsel of its choice (subject to the 72307 (6/06) right of the Insured to object for reasonable cause) to represent the Insured as to those stated causes of action. It shall not be liable for and will not pay the fees of any other counsel. The Company will not pay any fees, costs, or expenses incurred by the Insured in the defense of those causes of action that allege matters not insured against by this policy. (b) The Company shall have the right, in addition to the options contained in Section 7 of these Conditions, at its own cost, to institute and prosecute any action or proceeding or to do any other act that in its opinion may be necessary or desirable to establish the Title or the lien of the Insured Mortgage, as insured, or to prevent or reduce loss or damage to the Insured. The Company may take any appropriate action under the terms of this policy, whether or not it shall be liable to the Insured. The exercise of these rights shall not be an admission of liability or waiver of any provision of this policy. If the Company exercises its rights under this subsection, it must do so diligently. (c) Whenever the Company brings an action or asserts a defense as required or permitted by this policy, the Company may pursue the litigation to a final determination by a court of competent jurisdiction, and it expressly reserves the right, in its sole discretion, to appeal from any adverse judgment or order. 6. DUTY OF INSURED CLAIMANT'TO COOPERATE (a) In all cases where this policy permits or requires the Company to prosecute or provide for the defense of any action or proceeding and any appeals, the Insured shall secure to the Company the right to so prosecute or provide defense in the action or proceeding, including the right to use, at its option, the name of the Insured for this purpose. Whenever requested by the Company, the Insured, at the Company's expense, shall give the Company all reasonable aid (i) in securing evidence, obtaining witnesses, prosecuting or defending the action or proceeding, or effecting settlement, and (ii) in any other lawful act that in the opinion of the Company may be necessary or desirable to establish the Title, the lien of the Insured Mortgage, or any other matter as insured. If the Company is prejudiced by the failure of the Insured to furnish the required cooperation, the Company's obligations to the Insured under the policy shall terminate, including any liability or obligation to defend, prosecute, or continue any litigation, with regard to the matter or matters requiring such cooperation. (b) The Company may reasonably require the Insured Claimant to submit to examination under oath by any authorized representative of the Company and to produce for examination, inspection, and copying, at such reasonable times and places as may be designated by the authorized representative of the Company, all records, in whatever medium maintained, including books, ledgers, checks, memoranda, correspondence, reports, e-mails, disks, tapes, and videos whether bearing a date before or after Date of Policy, that reasonably pertain to the loss or damage. Further, if requested by any authorized representative of the Company, the Insured Claimant shall grant its permission, in writing, for any authorized representative of the Company to examine, inspect, and copy all of these records in the custody or control of a third party that reasonably pertain to the loss or damage. All information designated as confidential by the Insured Claimant provided to the Company pursuant to this Section shall not be disclosed to others unless, in the reasonable judgment of the Company, it is necessary in the administration of the claim. Failure of the Insured Claimant to submit for examination under oath, produce any reasonably requested information, or grant permission to secure reasonably necessary information from third parties as required in this subsection, unless prohibited by law or governmental regulation, shall terminate any liability of the Company under this policy as to that claim. 7, OPTIONS TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION OF LIABILITY In case of a claim under this policy, the Company shall have the following additional options: (a) To Pay or Tender Payment of the Amount of Insurance or to Purchase the Indebtedness. ALTA Loan Policy (6/17/06) (i) To pay or tender payment of the Amount of Insurance under this policy together with any costs, attorneys' fees, and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of payment or tender of payment and that the Company is obligated to pay; or (ii) To purchase the Indebtedness for the amount of the Indebtedness on the date of purchase, together with any costs, attorneys' fees, and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of purchase and that the Company is obligated to pay When the Company purchases the Indebtedness, the Insured shall transfer, assign, and convey to the Company the Indebtedness and the Insured Mortgage, together with any collateral security. Upon the exercise by the Company of either of the options provided for in subsections (a)(i) or (ii), all liability and obligations of the Company to the Insured under this policy, other than to make the payment required in those subsections, shall terminate, including any liability or obligation to defend, prosecute, or continue any litigation. (b) To Pay or Otherwise Settle With Parties Other Than the Insured or With the Insured Claimant. (i) to pay or otherwise settle with other parties for or in the name of an Insured Claimant any claim insured against under this policy. In addition, the Company will pay any costs, attorneys' fees, and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of payment and that the Company is obligated to pay; or (ii) to pay or otherwise settle with the Insured Claimant the loss or damage provided for under this policy, together with any costs, attorneys' fees, and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of payment and that the Company is obligated to pay. Upon the exercise by the Company of either of the options provided for in subsections (b)(i) or (ii), the Company's obligations to the Insured under this policy for the claimed loss or damage, other than the payments required to be made, shall terminate, including any liability or obligation to defend, prosecute, or continue any litigation. 8. DETERMINATION AND EXTENT OF LIABILITY This policy is a contract of indemnity against actual monetary loss or damage sustained or incurred by the Insured Claimant who has suffered loss or damage by reason of matters insured against by this policy. (a) The extent of liability of the Company for loss or damage under this policy shall not exceed the least of (i) the Amount of Insurance, (ii) the Indebtedness, (iii) the difference between the value of the Title as insured and the value of the Title subject to the risk insured against by this policy, or (iv)if a government agency or instrumentality is the Insured Claimant, the amount it paid in the acquisition of the Title or the Insured Mortgage in satisfaction of its insurance contract or guaranty. (b) If the Company pursues its rights under Section 5 of these Conditions and is unsuccessful in establishing the Title or the lien of the Insured Mortgage, as insured, (i) the Amount of Insurance shall be increased by 10%, and (ii) the Insured Claimant shall have the right to have the loss or damage determined either as of the date the claim was made by the Insured Claimant or as of the date it is settled and paid. (c) In the event the Insured has acquired the Title in the manner described in Section 2 of these Conditions or has conveyed the Title, then the extent of liability of the Company shall continue as set forth in Section 8(a) of these Conditions. (d) In addition to the extent of liability under (a), (b), and (c), the Company will also pay those costs, attorneys' fees, and expenses incurred in accordance with Sections 5 and 7 of these Conditions. 9. LIMITATION OF LIABILITY (a) If the Company establishes the Title, or removes the alleged defect, lien or encumbrance, or cures the lack of a right of access to or from the Land, or cures the claim of Unmarketable Title, or establishes 72307 (6/06) the lien of the Insured Mortgage, all as insured, in a reasonably diligent manner by any method, including litigation and the completion of any appeals, it shall have fully performed its obligations with respect to that matter and shall not be liable for any loss or damage caused to the Insured. (b) In the event of any litigation, including litigation by the Company or with the Company's consent, the Company shall have no liability for loss or damage until there has been a final determination by a court of competent jurisdiction, and disposition of all appeals, adverse to the Title or to the lien of the Insured Mortgage, as insured. (c) The Company shall not be liable for loss or damage to the Insured for liability voluntarily assumed by the Insured in settling any claim or suit without the prior written consent of the Company. 10. REDUCTION OF INSURANCE; REDUCTION OR TERMINATION OF LIABILITY (a) All payments under this policy, except payments made for costs, attorneys' fees, and expenses, shall reduce the Amount of Insurance by the amount of the payment. However, any payments made prior to the acquisition of Title as provided in Section 2 of these Conditions shall not reduce the Amount of Insurance afforded under this policy except to the extent that the payments reduce the Indebtedness. (b) The voluntary satisfaction or release of the Insured Mortgage shall terminate all liability of the Company except as provided in Section 2 of these Conditions. 11. PAYMENT OF LOSS When liability and the extent of loss or damage have been definitely fixed in accordance with these Conditions, the payment shall be made within 30 days. 12. RIGHTS OF RECOVERY UPON PAYMENT OR SETTLEMENT (a) The Company's Right to Recover Whenever the Company shall have settled and paid a claim under this policy, it shall be subrogated and entitled to the rights of the Insured Claimant in the Title or Insured Mortgage and all other rights and remedies in respect to the claim that the Insured Claimant has against any person or property, to the extent of the amount of any loss, costs, attorneys' fees, and expenses paid by the Company. If requested by the Company, the Insured Claimant shall execute documents to evidence the transfer to the Company of these rights and remedies. The Insured Claimant shall permit the Company to sue, compromise, or settle in the name of the Insured Claimant and to use the name of the Insured Claimant in any transaction or litigation involving these rights and remedies. If a payment on account of a claim does not fully cover the loss of the Insured Claimant, the Company shall defer the exercise of its right to recover until after the Insured Claimant shall have recovered its loss. (b) The Insured's Rights and Limitations (i) The owner of the Indebtedness may release or substitute the personal liability of any debtor or guarantor, extend or otherwise modify the terms of payment, release a portion of the Title from the lien of the Insured Mortgage, or release any collateral security for the Indebtedness, if it does not affect the enforceability or priority of the lien of the Insured Mortgage. (ii) If the Insured exercises a right provided in (b)(i), but has Knowledge of any claim adverse to the Title or the lien of the Insured Mortgage insured against by this policy, the Company shall be required to pay only that part of any losses insured against by this policy that shall exceed the amount, if any, lost to the Company by reason of the impairment by the Insured Claimant of the Company's right of subrogation. (c) The Company's Rights Against Noninsured Obligors The Company's right of subrogation includes the Insured's rights against noninsured obligors including the rights of the Insured to indemnities, guaranties, other policies of insurance, or bonds, notwithstanding any terms or conditions contained in those instruments that address subrogation rights. ALTA Loan Policy (6/17/06) The Company's right of subrogation shall not be avoided by acquisition of the Insured Mortgage by an obligor (except an obligor described in Section 1(e)(i)(F) of these Conditions) who acquires the Insured Mortgage as a result of an indemnity, guarantee, other policy of insurance, or bond, and the obligor will not be an Insured under this policy. 13. ARBITRATION Either the Company or the Insured may demand that the claim or controversy shall be submitted to arbitration pursuant to the Title Insurance Arbitration Rules of the American Land Title Association ("Rules"). Except as provided in the Rules, there shall be no joinder or consolidation with claims or controversies of other persons. Arbitrable matters may include, but are not limited to, any controversy or claim between the Company and the Insured arising out of or relating to this policy, any service in connection with its issuance or the breach of a policy provision, or to any other controversy or claim arising out of the transaction giving rise to this policy. All arbitrable matters when the Amount of Insurance is $2,000,000 or less shall be arbitrated at the option of either the Company or the Insured. All arbitrable matters when the Amount of Insurance is in excess of $2,000,000 shall be arbitrated only when agreed to by both the Company and the Insured. Arbitration pursuant to this policy and under the Rules shall be binding upon the parties. Judgment upon the award rendered by the Arbitrator(s) may be entered in any court of competent jurisdiction. 14. LIABILITY LIMITED TO THIS POLICY; POLICY ENTIRE CONTRACT (a) This policy together with all endorsements, if any, attached to it by the Company is the entire policy and contract between the Insured and the Company. In interpreting any provision of this policy, this policy shall be construed as a whole. (b) Any claim of loss or damage that arises out of the status of the Title or lien of the Insured Mortgage or by any action asserting such claim shall be restricted to this policy. (c) Any amendment of or endorsement to this policy must be in writing and authenticated by an authorized person, or expressly incorporated by Schedule A of this policy. 72307 (6/06) (d) Each endorsernent to this policy issued at any time is made a part of this policy and is subject to all of its terms and provisions. Except as the endorsement expressly states, it does not (i) modify any of the terms and provisions of the policy, (ii) modify any prior endorsement, (iii) extend the Date of Policy, or (iv) increase the Amount of Insurance. 15. SEVERABILITY In the event any provision of this policy, in whole or in part, is held invalid or unenforceable under applicable law, the policy shall be deemed not to include that provision or such part held to be invalid, but all other provisions shall remain in full force and effect. 16. CHOICE OF LAW; FORUM (a) Choice of Law: The Insured acknowledges the Company has underwritten the risks covered by this policy and determined the premium charged therefor in reliance upon the law affecting interests in real property and applicable to the interpretation, rights, remedies, or enforcement of policies of title insurance of the jurisdiction where the Land is located. Therefore, the court or an arbitrator shall apply the law of the jurisdiction where the Land is located to determine the validity of claims against the Title or the lien of the Insured Mortgage that are adverse to the Insured and to interpret and enforce the terms of this policy In neither case shall the court or arbitrator apply its conflicts of law principles to determine the applicable law. (b) Choice of Forum: Any litigation or other proceeding brought by the Insured against the Company must be filed only in a state or federal court within the United States of America or its territories having appropriate jurisdiction. 17. NOTICES, WI ERE SENT Any notice of claim and any other notice or statement in writing required to be given to the Company under this policy must be given to the Company at Chicago Title Insurance Company, Attn. Claims Department, P 0. Box 45023, Jacksonville, Florida 32232-5023. ALTA Loan Policy (6/17/06) LOAN POLICY Schedule A Rate Code Std State 48 City 077 Property Type 10 Office File Number 00073980 Policy Number 72307 78490709 Date of Policy April 24, 2009 at 12:55 a.m. Amount of Insurance $200,000.00 Premium $776.00 1. Name of Insured: CITY OF YAKIMA, OFFICE OF NEIGHBORHOOD DEVELOPMENT SERVICES 2. The estate or interest in the land herein described which is covered by this policy is: A Fee 3. The estate or interest in the land referred to herein is at date of policy vested in: UNITED BUILDERS OF WASHINGTON, INC., a Washington Corporation 4. The insured mortgage and assignments thereof, if any, are described as follows: Deed of Trust, wherein United Builders of Washington, Inc., a Washington Corporation is Grantor, and Fidelity Title Company is Trustee, and City of Yakima Office of Neighborhood Development Services is Beneficiary, in the original amount of $200,000.00, dated April 22, 2009, and recorded April 24, 2009, under Auditor's File Number 7650327. 5. The land referred to in this Policy is described as follows: Lots 15 and 16, Block 109, TOWN OF NORTH YAILMMA, now Yakima, recorded in Volume "A" of Plats, Page 10, re-recorded in Volume "E" of Plats, Page 1, records of Yakima -County, Washington. Situated in Yakima County, State of Washington. This policy valid only if Schedule B is attached. i LOAN POLICY SCHEDULE B - PART I File Number: 00073980 Policy Number: 72307 78490709 EXCEPTIONS FROM COVERAGE This policy does not insure against Toss or damage by reason of the (and the Company will not pay costs, attorneys fees or expenses), which arise by reason of: GENERAL EXCEPTIONS: A. Rights or claims disclosed only by possession, or claimed possession, of the premises. B. Encroachments and questions of location, boundary and area disclosed only by inspection of the premises or by survey. C. Easements, prescriptive rights, rights-of-way, streets, roads, alleys or highways not disclosed by the public records. D. Any lien, or right to a lien, for contributions to employees benefit funds, or for state workers' compensation, or for services, labor or material heretofore or hereafter furnished, all as imposed by law and not shown by the public records. E. Taxes or special assessments which are not yet payable or which are not shown as existing Liens by the public records. F. Any service, installation, connection, maintenance, or construction charges for sewer, water, electricity, natural gas or other ,.utilities or garbage collection and disposal. G. ',Reservations or exceptions in United States Patents or in Acts authorizing the issuance thereof. H. Indian tribal codes or regulations, Indian treaty or aboriginal rights, including easements or equitable servitudes. I. Water rights, claims or title to water. SPECIAL EXCEPTIONS: 1. Real property taxes for the second half of the assessment year 2009 in the sum of $2,439.25, which shall be delinquent after October 31st. 2. Obligation to pay future annual assessments by reason of inclusion within the boundaries of City of Yakima Stormwater Fee and Horticulture Pest & Disease Control District, which sums are not now due or payable. FIDELITY TITLE COMPANY agent for CHICAGO TITLE INSURANCE COMPANY Countersigned Oj/08-20-09 This policy valid only if Schedule A is attached. wnship 13 Section 19 NW 1/4 gO7 e'"0,197.TmlitiPit4v11",--- ! ; " • .This r••• Is ni•Int•/••• th. aeffelial and ••••••ment of real •••••rM., „The Yikheui, Cituntv d.Ia'"••••17"7;:!!‘ • • 'BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. ) 2 -- For Meeting Of: April 7, 2009 ITEM TITLE: Consideration of a resolution authorizing the City Manager of the City of Yakima to execute a $200,000 CDBG economic development loan agreement with United Builders of Washington, Incorporated. SUBMITTED BY: Michael Morales, Deputy Director CED CONTACT: Michael Morales, Deputy Director 575-3533 SUMMARY EXPLANATION: United Builders of Washington, Inc. (UB) has requested a working capital loan from the city to allow them to sustain their current workforce, and release sufficient UB capital to continue operation of the Seasons Music Festival (Seasons). The source of funds for the loan is the city's Community Development Block Grant Economic Development budget. The future availability of additional CDBG funds from the American Recovery and Reinvestment Act has provided the additional resources to make this loan possible. The allocation of funds, however, will be from the approved 2009 annual action plan and budget. United Builders purchased the property located at 101 North Naches Avenue in 2005. The building was constructed as a church in 1902, and was converted to a music performance hall, known thereafter as The Seasons Music Festival (Seasons). Seasons was established as a philanthropic effort by.UB and the Strohsal family to enhance and expand the musical performance market in Yakima. Seasons Music Festival is a not for profit community arts organization that operates the facility, and UB has subsidized this cost from the inception, including over $350,000 of investments necessary to convert its use from church to concert venue. CONTINUED ON NEXT PAGE Resolution X Ordinance Contract Other: Funding Source: CDBG. Economic Development Approval for Submittal: . City Manater STAFF RECOMMENDATION: Staff recommends approval of the resolution. BOARD RECOMMENDATION: This proposal has not been formally presented to a committee COUNCIL ACTION: 1 Don Boyd of Carlson, Boyd & Bailey, LLC has served as the city's legal counsel for Section 108 and CDBG loans, and is assisting with this project. Mr. Boyd has reviewed the financial statements for UB and the personal financial statements of the guarantors to determine if the city's risks are adequately mitigated. In particular, Mr. Boyd will analyze whether United Builders and the guarantors possess sufficient assets and net worth to back this loan in case of default. Mr. Boyd's opinion will be available at the city council meeting. Based upon the information reviewed thus far, and balanced against the city's proposed collateral position, staff recommends approval of the $200,000 working capital loan, subject to the following terms and conditions being agreed to and/or met prior to loan closing and fund disbursement: 1. Repayment Period: 24 months, total principal and interest due at end of term. 2. ,Interest rate: 4% - Based on prior Section 108 and CDBG Float Loans. 3. Security/collateral: a. 1st Deed of Trust for the real property located at 101 North Naches Avenue in Yakima, Washington (Seasons Performance Hall). b. Any subordinate debt on the secured property must be pre -approved by the City Manager. c. In addition to the Loan Agreement and Promissory Note, the loan shall be evidenced by the personal Guaranties signed by the principals of United Builders (J. Patrick Strohsal and Steven R. Strohsal), with each member guaranteeing the full amount of the loan. 4. Clear title report 5. The borrower cannot be delinquent on any local, state or federal taxes. 6. All city, county, state and federal certificates, licenses and permits must be issued and current. 7. Liability insurance fully paid for the next year. 8. There are no material changes to the financial statements submitted for review by the City of Yakima for United Builders of Washington, Inc. as of Oct. 31, 2008; Stephen R. Strosahl dated November 25, 2008; and J. Patrick Strosahl dated March 13, 2009. 9. Provide for review by the City of Yakima a written appraisal report on the subject real property effective no more than six months from the date of loan funding and showing sufficient value to provide for full repayment of the loan 2