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2012, 12-05 US Bankruptcy Court Declaration for Relief from Automatic Stay1 David W. Criswell, WSBA No. 33410 dcriswell@balljanik.com balljanik.com 2 BALL JANIK LLP 101 SW Main Street, Suite 1100 3 Portland, OR 97204 Telephone: (503) 228-2525 4 Telephone: (503) 226-3910 E-mail: dcriswell@balljanik.com 5 6 7 8 9 In re 10 IWILL70 Properties, LLC, 11 Attorneys for AmericanWestBank UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF WASHINGTON 12 13 Debtor. Case No. 12 -03613 -PCW 11 DECLARATION OF NIINA DAGUE IN SUPPORT OF MOTION OF AMERICANWEST BANK FOR RELIEF FROM AUTOMATIC STAY UNDER 11 U.S.C. § 362(d)(1),(2) AND (3) 14 I, Niina Dague, declare as follows: 15 1. I am a loan officer at AmericanWestBank ("AmericanWest" or "Lender"). 16 2. I am an authorized representative of AmericanWest Bank ("Lender" or 17 "AmericanWest"), and am authorized to submit this Declaration on Plaintiff's behalf. The facts 18 set forth herein are stated from my personal knowledge or from the records of AmericanWest 19 maintained in the course of its regular business activities. If I were called upon to testify, I could 20 and would testify competently to the statements set forth herein. 21 3. In 2006, AmericanWest Bank made a loan to IWILL70 (the "Loan"). The Loan is 22 evidenced by a Promissory Note in the original principal amount of $1,572,500 dated as of 23 March 2, 2006, as amended by a Change in Terms Agreement dated as of June 15, 2006 24 (together, the "Note"). A copy of the Note is attached hereto as Exhibit 1. 25 4. The Loan is also evidenced by a Business Loan Agreement dated as of June 15, 26 2006 (the "Business Loan Agreement"). A copy of the Business Loan Agreement is attached as Page 1 - DECLARATION OF NIINA DAGUE ::ODMA\PCD OCS\PORTLAND\870917\2 Ball Janik LLP 101 SW Main Street, Suite 1100 Portland Oregonp,97204-3219 12-03613-PCW11 Doc 53 Filed 12/05/12 Entered 12/05/12 146433.228.2 1 of 3 1 Exhibit 2. 2 5. The indebtedness evidenced by the Note and Business Loan Agreement is secured 3 by a Deed of Trust dated March 2, 2006 and recorded on March 7, 2006 in the Spokane County 4 official records as Recording No. 5351320, as modified by that certain Modification of Deed of 5 Trust dated June 15, 2006 and recorded on July 13, 2006 in the Spokane County official records 6 as Recording No. 5405738 (together the "Deed of Trust"). A copy of the Deed of Trust is 7 attached hereto as Exhibit 3. 8 6. The Debtor failed to make principal and interest payments due under the Loan and 9 breached its obligations under the Loan Documents and Deed of Trust in additional respects, 10 including the non-payment of property taxes to Spokane County. On account of such events of 11 default, AmericanBank notified the Debtor of its intent to enforce remedies available to it in a 12 letter dated July 25, 2012. 13 7. In preparation for enforcement of its available remedies against the property 14 securing the Loan, AmericanWest commissioned Auble, Jolicoeur & Gentry to prepare an 15 appraisal of the property secured by the Deed of Trust (the "Property"). The appraisal, dated as 16 of November 12, 2012, concluded that the Property has a fee simple interest market value of 17 $930,000.00. A true and correct copy of the November 12, 2012 appraisal is attached hereto as 18 Exhibit 4. 19 8. As of the date of the petition, the amount owing to Spokane County for unpaid 20 property taxes was $66,817.11. Following a monthly interest rate of 1% on all amounts owing, 21 along with a 3% penalty for the current year owing as of June 1, 2012, that amount has increased 22 to $67,918.40 as of November 19, 2012. This amount continues to accrue interest, and will face 23 an additional 8% on the current year if payment is not made by December 1, 2012. True and 24 correct copies of charges statements are attached hereto as Exhibit 5. 25 9. As of December 3, 2012, the following sums were due and owing under the Loan 26 Documents: Principal of $797,081.40, interest of $36,045.57, and late fees, appraisal fees and Page 2 - DECLARATION OF NIINA DAGUE ::ODMA\PCDOCS\PORTLAND\870917\2 Ball Janik LLP 101 SW Main Street, Suite 1100 P�ortt�lan,d Oregon 97204-3219 12-03613-PCW11 Doc 53 Filed 12/05/12 Entered 12/05/12 14:CYY7�453.228.21Yf 2 of 3 1 attorneys' fees and costs totaling $44,255.71, for a total indebtedness of $877,382.68. 2 10. AmericanWest has received no interest payments on the Loan during this 3 Chapter 11 case. 4 I declare under penalty of perjury under the laws of the State of Washington that 5 the foregoing is true and correct. 6 DATED: December 5, 2012 7 /s/ Niina Dague Niina Dague 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Page 3 - DECLARATION OF NIINA DAGUE ::ODMA\PCDOCS\PORTLAND\870917\2 Ball Janik LLP 101 SW Main Street, Suite 1100 d, Oregon 97204-3219 12-03613-PCW11 Doc 53 Filed 12/05/12 Entered 12/05/12 14;6'6� 33,228 3 of 3 :i.' i;::!ii iii•'ii!i';?!iii'ii:: ;i. ;? =o-gi� •t;;;f;;;ll. , ••s::'•:C:- ,:;o-:::::':,; i : i o -:E .!qs 1 :.1: s , ;: '31( !~bl(: iiiill:'pe.,}N�-?i3iiiii.:i!;ijl s3.1F+.rr.�►.�?!{%u....:.i ss :� ; .::f:.a... ;3.:..!s�:!, .:L ., ; ii!ilii3ilili a,:. ! • .a '� :u ..s �r�RB�f>1� s : ...i i::'t : ris: :!:!ysi:::a!!: i.V•G!i!i! !3i::, i!3!:•.::.;::;t :'• ::• i.::ii!:. ::. i,isi:ii: •::p[' f?.I ''}Lies:::: •. ,;:p•F,� 3i sU:a:isi:iys!s!s.;s lis;3: !i3 .:.;! ..i .. .•ss::::. eis.:•s:: �•.i�. :3'•:E!1 ::3eEi hili iiia if:3 3 1"i i;!si!! 1 ,1 • iisii!niigy:J.i.i:.•.;. i ! i ,. }+..r .�y, kyr! .i'1i,!s��� /y• i :b. i:i:. ; }i:e iiito) Fc I;1�`:,;'h`�, i! ii3!3:i i!:1 i1::3:1::!il::::::i.:!?!:.:...........4i °. . 3's ! i ;;E 1 1 ! F: I :1• .: , � {• � ��ti .: Y;14'�1� i!Iil;3i}W pQ;ti�i�''T� (.iii. i.::l.,.:.:.t.: , .. . References : s i,Ijthe;shad i;., :!............:.: ..:Len i J References in the shaded area are for Lender's use only �a*d,dhas beenlimit omitted duetoitext fenthis gth limitations. ent to any particular loan or item. Any Item above containing ' u•;'isi Borrower: IWILL70 PROPERTIES, LLC 4403 SOUTH DISHMAN-MICA ROAD SPOKANE; WA 99206 • Lender: AMERICANWEST BANK DOWNTOWN FINANCIAL CENTER '41 WEST RIVERSIDE SPOKANE, WA 99201 (509) 232-1515 . Principal Amount: $925,000.00 Date of Agreement: June 15, 2006 ' DESCRIPTION OF EXISTING INDEBTEDNESS. ORIGINAL PROMISSORY NOTE DATED MARCH 2, 2006 IN THE AMOUNT OF $1,572,500.00, DESCRIPTION OF COLLATERAL. REAL ESTATE AND ALL EQUIPMENT. DESCRIPTION OF CHANGE IN TERMS. CURRENT PRINCIPAL BALANCE $925,000.00. REASON FOR CHANGE IN TERMS: CHANGE INTEREST RATE TO 7.67% FIXED UNTIL MARCH 20, 2011 WHEN THE INTEREST RATE WILL CHANGE TO THE. 5 YEAR FHLB + 2.50% ADJUSTED EVERY FIVE YEARS. - TERM OUT LOAN. MONTHLY PAYMENTS DUE BEGINNING JULY 20, 2006 UNTIL MATURITY OF JUNE 20, 2016 WHEN ALL PRINCIPAL PLUS ALL ACCRUED UNPAID •INTEREST WiLL BE DUE. A RECORDING FEE OF $36.00 TO BE COLLECTED IN CASH AT ST ACCRUAL CLOSING. JUNE IF TO 365/360. CHANGE LATE CHARGE CODE TO:A PAYMENT ISE 5 DAYS OR MORE AMOUNT OF 6LATE BORROWER WIL8.34. CHANGE LBE METHODBE CHARGED 5.00% OF THE REGULARLY SCHEDULED PAYMENT OR $100.00, WHICHEVER IS GREATER. ALL: AND CONDITIONS REMAIN THE SAME. • PROMISE TO PAY. 1WILL70 PROPERTIES, LLC ("Borrower") promises.to pay to AMERICANWEST BANK ("Lender"), or order, in lawful money , of the United States of America, the principal amount of Nine Hundred Twenty-five Thousand & 00/100 Dollars ($925,000.00), together with interest on the unpaid principal balance from June 16,2006, until paid in full. PAYMENT. Subject to any payment changes resulting from changes in the Index, Borrower will pay this loan in accordance with the following payment schedule: 66 monthly consecutive principal and interest payments in the initial amount of $7,620.58 each, beginning July 20, 2006, ,_with interest calculated on the unpaid principal balances at an Interest rate of 7.670% per annum; 63 monthly consecutive principal and interest `, payments in the initial amount of $7,793.69 each, beginning March 20, 2011, with interest calculated on the unpaid principal balances at an interest rate based on the 5 YEAR FiXED ADVANCE RATE OF THE FEDERAL HOME LOAN BANK OF SEATTLE AS POSTED EACH MONDAY ting In an �� (current5.530%), his a marn of 2.500payment of $646,,071.03 onJune 20, 2016, pwith interest gcalclatedion the unpaid! principal balances at anal Interest rate of interest principal%; and one rate based on the 5 YEAR ic L.,—. FIXED ADVANCE RATE OF THE FEDERAL HOME LOAN BANK OF SEATTLE AS POSTED EACH MONDAY (currently 5.530%), plus a margin of 2.500 percentage points, resulting in an initial interest rate of 8.030%. This estimated final payment is based on the assumption that alt payments will be made exactly as scheduled and that the Index does not change; the actual final payment will be for all principal lawn pa and accrued interest not yet paid, together with any other unpaid amounts on this loan, Unless otherwise agreed or required by applicable yments will be applied first to any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any late charges. Interest on this loan Is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. The Interest rate on this loan is subject to change from time to time based on changes in an independent index which is the 5 YEAR FIXED ADVANCE RATE OF THE FEDERAL HOME LOAN BANK OF SEATTLE AS POSTED EACH MONDAY (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the index becomes unavailable during the term of this Loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower's request, The interest rate change will not occur more often than each 60 MONTHS. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 6.530% per annum. The interest rate or rates to be applied to the unpaid principal balance during this loan will be the rate or rates set forth herein in the "Payment" section. Notwithstanding any other provision of this Agreement, after the first payment stream, the interest rate for each subsequent payment stream will be effective as of the last payment date of the just -ending paymentaWenever stream. NOTICE: Under no circumstances will the interest rate on this loan be more than the maximum rate allowed by applicable Increases occur in the interest rate, Lender, at Its option, may do one or more of the following: (A) increase Borrower's payments to ensure Borrower's loan will pay off by its original final maturity date, (B) Increase Borrower's payments to cover accruing interest, (C) increase the number of Borrower's payments, and (D) continue Borrower's payments at the same amount and increase Borrower's final payment. ' PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than It is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower's making.fewer payments. Borrower agrees not to send Lender i payments marked "paid In full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept It without losing any of Lender's rights under this Agreement, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: AMERiCANWEST BANK, DOWNTOWN FINANCIAL CENTER, 41 WEST RIVERSIDE, SPOKANE, WA 99201. LATE CHARGE. If a payment is 15 days or more late, Borrower will be charged 5.000% of the regularly scheduled payment or $100.00, whichever is greater. I INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this loan shall be increased to I 21.000% per annum ("Default Rate"). If judgment is entered in connection with this Agreement, interest will continue to accrue after the date of judgment at the Default Rate. However, in no event will the Interest rate exceed the maximum interest rate limitations under applicable law. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Borrower fails to make any payment when due under the Indebtedness. Other Defaults, Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.. Default in Favor of Third Parties. Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, Exhibit 1 12-03613-PCW11 Doc 53-1 Filed 12/05/12 Entered 12/05/12 14:06:43 Ptage1761f Liman No: 1100011278 {Continued) Page 2 or any other' agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to perform Borrower's obligations under this Agreement or any of the Related Documents. Environmental Default. Failure of any party to comply with or perform when due any term, obligation, covenant or condition contained in any environmental agreement executed in connection with any Indebtedness. ' False Statements. Any Warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now. or at the time made or furnished or becomes false or misleading at any time thereafter. Death or Insolvency. The dissolution of Borrower (regardless of whether election to continue is made), any member withdraws from Borrower, or any other termination -of Borrower's existence as a going business or the death of any member, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, • or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. • Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing•the Indebtedness. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of -the creditor or forfeiture proceeding and if•Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect.to any Guarantor of any of -the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the. validity of, or liability under, any •Guaranty of the Indebtedness evidenced by this Note. In the event of a death, Lender, at its option, may, but shall not be required to, permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default.' • Adverse Change. • A material adverse change occurs In Borrower's financial condition, or Lender believes the prospect of payment or performance of the indebtedness is impaired. insecurity. Lender in good faith believes Itself insecure. Cure Provisions. if any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Agreement within the preceding twelve (12) months, it maybe cured if Borrower, after receiving written notice from Lender demanding cure of such default; (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Agreement and all accrued unpaid interest immediately due, and then Borrower will pay that amount. ATTORNEYS'. FEES; EXPENSES. Lender may hire or pay someone else to help collect this Agreement if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a suit including s' fees, expenses s Nor vacate any automatic stay or injunction),and�appeals. tf not prohibitedfor bankruptcy by applicablelaw,,Brrowerralsodwilll(including l pay anycefforts court costs, in addition to all other sums provided by law. JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other. GOVERNING LAW. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Washington without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of Washington. CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of SPOKANE County, State of Washington. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $28.00 if Borrower makes a payment on Borrower's loan and the check or preauthorized charge with which Borrower pays is later dishonored. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open In the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph. COLLATERAL. Borrower acknowledges this Agreement is secured by DEED OF TRUST DATED MARCH 2, 2006 ON PROPERTY LOCATED IN SPOKANE COUNTY, STATE OF WASHINGTON. ALL EQUIPMENT DESCRIBED IN A COMMERCIAL SECURITY AGREEMENT DATED MARCH 2, 2006. ARBITRATION. Borrower and Lender agree that all disputes, claims and controversies between them whether individual, joint, or class In nature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to the Rules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or dispose of any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process- pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the / right or the power to enjoin or restrain any act of any party. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Agreement shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The / statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an Th. t:erinrnl Arhit,stinn•Ant shall aoolv to the construction, interpretation, and enforcement of this arbitration/ L Exhibit 1 12-03613-PCW11 Doc 53-1 Filed 12/05/12 Entered 12/05/12 14:06:43 Pla6 Loan,Nq; 1100011278 . .. -•--- (Continued) � Page 3 provision. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement -does not waive Lender's right to strict performance of the obligations) as changed, nor obligate Lender to' make any future change in terms.. Nothing in this Agreement will constitute a satisfaction of the obligationts), It is the intention of Lender•to retain as liable parties all makers and . endorsers of the original obligation(s), Including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser; including accommodation makers, will not be released by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that this Agreement is -given conditionally, based on the representation to Lender that the nori-signing party consents to the changes and -provisions of this Agreement or otherwise will not be released by it. This waiver applies•not only to any initial extension, modification or release, but also to all such subsequent actions. ADDITIONAL PROVISION. Borrower agrees to provide Lender financial statements, IRS tax returns and any other financial information deemed necessary at Lender's discretion. REQUIRED DEPOSIT ACCOUNT. Borrower agrees to maintain an active deposit account with AmericanWest Bank during the term of this agreement. Failure to do so shall be deemed a default of this agreement and subject to the default interest rate and annual percentage rate. ADDITIONAL PROVISION. No addition of new debt without approval of AmericanWest Bank. ADDITIONAL PROVISION. Limit total officer salaries to projected amount $153M. No owner withdrawals or officer -loans without prior bank approval. • • • SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Borrower's interest, this Agreement shall be binding upon and inure to the 'benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Borrower, Lender, without notice to Borrower, may deal with Borrower's successors with reference to -this Agreement and the indebtedness by way of forbearance or extension without releasing Borrower from the obligations of this Agreement or liability under the Indebtedness. • NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report any inaccurate informationabout your accountls) to a consimer reporting agency. Your written notice describing the specific inaccuracy(les) should be sent•to us at the following address: AMERICANWEST BANK 9019 E. APPLEWAY BLVD SPOKANE, WA 99212. MISCELLANEOUS PROVISIONS. If any part of this Agreement cannot be enforced, this fact will not affect the rest of the' Agreement. Lender may delay or forgo' enforcing any of its rights or remedies under this Agreement without losing•them. Borrower and any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Agreement, and unless otherwise expressly stated In writing, no party who signs this Agreement, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any Length of time) this loan or release any party or guarantor or collateral; or impair, fail -to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Agreement are Joint and several. PRIOR TO SIGNING THIS AGREEMENT, RATE PROVISIONS. OBORROWER AGREES TO UNDERSTOOD F THIS AGREEMENT, INCLUDING THE THE TERMS OF THE AGREEMENT, BORROWER: IWILL70;''i1PERTIES, LLC By: J By: •: •: /` %}�% of IWILL70 LINDA MCELHINN PROPERTIES, LLC 1i/fa-lager LASER PRO L.M0P, Ver. 6.31.00.004 Cope H.,bnd E'n.nda SpNTona,Io.. 1051, 2000. Af Meet) R.urv.d. - WA OACFR1PL1020C.FC TR.1D000 PR1& iWILL7 Exhibit 1 12-03613-PCW11 Doc 53-1 Filed 12/05/12 Entered 12/05/12 14:06:43 Pla816 r ril..J)V1100vR i rdv t a - :!::r :.:.:... r::.::. • !irl i :::•:::: i! ! '`'ti 's! 3 ii;'s': Q I .t t it lli if i • .. r= ;,. ::,:•:„.:•:.„i "l; rilii + RII :, :::::.,:ia:..,: ti�Ol?i:.:.:. :.:.:.a,:::::,!, ,! ', p llt it il' :! :..,.::.i iii,;, !r 3 . :.::::: .:.::t,..:;:;_;,!.;,; ;...;!:!.:.:..•...., ....:......:. r,•! :; iii;i; ;; i€� ::::::::Ei fa. •: •: ,.i.. !_•' .:i! ".` lit ! . . ,.. ti i:::.::::_ :,F.0 : ,: pi°Iii i i!ii°! : ,',,::::i !.; ;. p.n::.:., !!: l i1 1i27 Y.cr l ; :: i:F !i! :,l.!; :�! ;!i:;!i !!!!:.•;,:,. ••.f ... . •..t i, !i CIAO . �• . �" ,✓ •.".!+' I is ;1 N I . t . .iiE"� •� !, ,. l: • ; ,,:�Q��..� articular loan or it:� `l;iv References in..t• :. References the shaded eAny item above econtaining r's use l' "dhas been iomitted due toitext length limit tions.any p Lender: AMERICANWEST BANK BOYYOW@T: IWILL70 PROPERTIES, ES, LLC DOWNTOWN FINANCIAL CENTERQ . 4403 EAST 9920 MICA ROAD 41 WEST RIVERSIDE SPOKANE, WA 99208 SPOKANE, WA 99201 (509) 232-1515 Principal Amount: $1,572,500.00 Initial Rate: 7.670% Date of Note: March 2, 2006 PROMISE TO PAY. 1WILL70 PROPERTIES, LLC ("Borrower") promises to pay to AMERICANWEST BANK ("Lender"), or order, in lawful money of the United States of America, the principal amount of One Million Five Hundred Seventy-two Thousand Five Hundred & 00,100 Dollars ($1,572,500.00), together with interest on the unpaid principal balance from March 2, 2006, until paid in full. plus ue on PAYMENT. 3, 2006, willilbe fort all principal and all principal ed interest not yet pad. In addition, interest September wi pay regular arr monthly payment2006. This payment s of all accrued unpaid interest due as of each payment date, beginning April 5, 2006, with all subsequent interest payments to be due on the same day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; any charges. Interest on on a 365/365 imple ithen to principal; ten to any unpaid nterest basis; that is, by applying the rat ocof the annual interest lection costs; and then late rate verthe number of days in atyear, multiplied byis ote istthees. Ied nterest principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. which nt is the VARIABLE INTEREST YEAR FXED ADVANCE RATE OF THE FEDERAL HOME LOAN BANK OF SEATTLE AS POSTED EACH MONDAY (the "Index") The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, r ll Lender.may change will notoccur!ndex after more often than eacce to h 60 MONTHSorrower. . Borrower undeower rstandsthe thatcurrent Lenderr mayrate m make loans baseBorrower's on other rates as wel. ied o the upaid e at a rate of 2.5100 perclndex curreny is 5.170% per annum. The entage points over the Index, resulting in anrinitial srate of 7.670% per rtannum. NOTICE cltindearinocwillal bane of this Note circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. • PREPAYMENT. bBorrower agrees all (wh (whether voluntary ore as adfinance charges resut of default),are exceptearned asfully otherwise the requdate ired bythe law loan Except nd will fornot the foregoing, 9, refund upon early payment foregointog, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agree d p m Lender in reduce the principalrba balance due. Borrower!igation to continue to make payments under agrees not to send Lender payments marked the "paidyment n full","witule. hout recourse", ar payments will similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower orllotherapayment instrument obligated to pay any frther amunt owed to th to ndic tesothat the paymenteconstitutes "paym "payment In full) n of theos eamou disputed owed or that is tendered with other conditions or limitations n WEST RIVERSIDE,llisfaction of NEisWAed amount must be mailed or delivered to: AMERICANWEST BANK, DOWNTOWN FINANCIAL CENTER, 99201. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the regularly scheduled payment. INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, Lender, at its option, may, if permitted under applicable law, increase the variable interest rate on this Note to'21.000% per. annum. The interest rate will not exceed the maximum rate permitted by applicable law. DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note: Payment Default. Borrower fails to make any payment when due under this Note. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained In arty other agreement between Lender and Borrower. . Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents. Environmental Default. Failure of any party to comply with or perform when due any term, obligation, covenant or condition contained in any environmental agreement executed in connection with any loan. - False Statements. Any warranty,. representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Death or Insolvency. The dissolution of. Borrower (regardless of whether election to continue is made), any member withdraws from business or the death of any the appointment oft areceivernation for anyfpartrof Borrower's property, any goingence as a assignment for the benefit of creditors, ny type of creditor er, the insolvency of Bwo workout, the app or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for. the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, es being an adequate reserve or bond for the dispute. F.,nnro nffPrtino Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Exhibit 1 12-03613-PCW11 Doc 53-1 Filed 12/05/12 Entered 12/05/12 14:06:43 Plar419 Loan No: 1100011 278 Y'KVlvitaavn r (Continued) Page 2 Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty. of the indebtedness evidenced by this Note. In the event of a death, Lender, at its option, may, but shall not be required to, permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default. Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired. Insecurity. Lender in good faith believes itself insecure. Cure Provisions. 1f any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same rovision of ts Note wihin the precding twve (12) months, it may be curd tten notice from Le derpdemanding cure of su htdefault: (1) ;cures the default within fifteen (15) days; orlf (2) Borrower, if thecure requires morer receiving than fifteen (15) days, immediately initiates steps which Lender deems in' Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount. ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there lawsuit, alnotprohibited proceedings (including efforts to modify or vacate any. sstayomatic or injunction), and appeals. (f by applicable law, Borrower also will pay nycourt costs, in addition to all other law. JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other. GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State.of Washington without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of Washington. CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of SPOKANE County, State of Washington. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $28.00 if Borrower makes a payment on Borrower's loan and the check or preauthorized charge with which Borrower pays is later dishonored. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checing, savings,y with openkinthe future. or some other accout). This includes all accounts Borrower However, this doesn nnot include any IRA or Keogh accounts, or any trustds i accounts eBorrower which setoff would beprohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph. • COLLATERAL. Borrower acknowledges this Note is secured by the following collateral described in the security instruments listed herein: (Al a Deed of Trust dated March 2, 2006, to a trustee in favor of Lender on real property located in SPOKANE County, State of Washington. (B) equipment described in a Commercial Security Agreement dated March 2, 2006. osit account REQUIRED DEPOSIT DFailurreit do so shall be deemed agrees to default of this tagreementn en ive and subject to the default nt rest ratesst Bank and annual pec entagethe r rate. this ADDITIONAL PROVISION. Borrower agrees to provide Lender financial statements, IRS tax returns and any other financial information deemed necessary at Lender's discretion. ADDITIONAL PROVISION. No addition of new debt without approval of AmericanWest Bank. SUCCESSOR INTERESTS. , The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and, assigns. NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report any inaccurate Information about your account(s) to a consumer reporting agency. Your written notice describing the specific inaccuracylies) should be sent to us at the following address: AMERICANWEST BANK 9019 E. APPLEWAY BLVD SPOKANE, WA 99212. GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this endorser,Note, unless otherwise hall be released from liability. tAlled isuch pann ties anb gree that Lender may renew orrty who signs this Note, t extend her as r(repeatedlyaker, rand for any length antor, 'of tion me) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several. Exhibit 1 12-03613-PCW11 Doc 53-1 Filed 12/05/12 Entered 12/05/12 14:06:43 Plage8fr6 Loan No: 1100011278 r. rnvivi,o '-" i Lam— {Continued) Page 3 PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE. BORROWER: IWILL7PROPERTIES, LLC N MCELHINNY, Ma ger of IWILL70 OPERTIES, LLC • DA MHINNY, PROPERTIE:, LLC anager of IWILL70 LASLlI PRD LudF6 Vv. 0.7D,1D.001 Cep, µvdfnd Mme.) 501.ahm, hl. 1007, 2001. M Plphw Pawn']. • WA CACF00PL1070.0C 111.10000 10.07 Exhibit 1 12-03613-PCW11 Doc 53-1 Filed 12/05/12 Entered 12/05/12 14:06:43 ogee JJSINESS LOAN AGREEMEN' .) ;.s... Fu;•Y.:;>: :'•� •i:r:': i ":s'^••:•i • : i.::i'Ei i:;!Y!^?'! ••::••••i,'!:. •:i?' 1:1•� !!9! !}1i!!}?illi"? lli�,(!iii :;.,•...... ;;:•' !!i !! ! 1N • (11!}: T •i °fir tom# Ti : : i : f !!.i:,:?' 1.,,!?•S , ::t:!: i : IE!:= !:?:!:!:!:, ::,ti:!!1!i1il!i!! .::,::.!!, i,,.;i?•, ; � Ha:11!=i!l11�, ,:,t ,::`{',:,:: ::%•::i:!!?!!;:d??:II= :i.!.!n.?q: •:, : =,'r :.e•!, : 1I" •. .. it! e� �j�y �y�i 1 !r,,=. !.q(��j �y !• :: ? ..y!?!!E!! !_!: •i1� �'s�,M., : ?dl!!! !1! !?I ? ! i 's I ?°!`I'!i11�1�!t);'li!i i!!'1 !!! ..., .:. ! •... �.; : ;,!,•i.l::i41?":kT`M�7 a7:i' )y{7Nr; V;i1y":l¢: ili!i;lii l94y•,�,n,'::?iVt:'•:i:: tiE!!lii!?i Fk:S:•4„!i�•.•;�F!!?,!;!s!;::::1 j.�.!.!.;..!:! ,:;.....o-.. ..l.I...:. References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or ite Any item above containing ”***" has been omitted due to text length limitations. Borrower: IWILL70 PROPERTIES, LLC 4403 SOUTH DISHMAN-MICA ROAD SPOKANE, WA 99206 Lender: AMERICANWEST BANK DOWNTOWN FINANCIAL CENTER 41 WEST RIVERSIDE SPOKANE, WA 99201 (509) 232-1515 11 THIS BUSINESS LOAN AGREEMENT dated June 15, 2006, is made and executed between IWILL70 PROPERTIES, LLC ("Borrower") and AMERICANWEST BANK ("Lender") on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement ("Loan"). Borrower understands and agrees that (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower's representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender's sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement. TERM. This Agreement shall be effective as of June 15, 2006, and shall continue in full force and effect until such time as all of Borrower's Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys' fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement. CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender's satisfaction of all of the conditions set forth in this Agreement and in the Related Documents. Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; 42) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender's Security Interests; (4) evidence of insurance as required below; (5) guaranties; (6) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender's counsel. Borrower's Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require. Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document. Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct. No Evgnt of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists: Organization. Borrower is a limited liability company which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Washington. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign limited liability company in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 4403 SOUTH DISHMAN-MICA ROAD, SPOKANE, WA 99206. Unless Borrower has designated otherwise in writing, the principal office Is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any change in the location of Borrower's state of organization or any change in Borrower's name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi -governmental authority or court applicable to Borrower and Borrower's business activities. Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following Is a complete list of all assumed business names under which Borrower does business: None. Authorization. Borrower's execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result In a violation of, or constitute a default under (1) any provision of (a) Borrower's articles of organization or membership agreements, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower's properties. Financial Information. Each of Borrower's financial statements supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements. Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. Properties. Except as contemplated by this Agreement or as previously disclosed In Borrower's financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years. Exhibit 2 12-03613-PCW11 Doc 53-2 • Filed 12/05/12 Entered 12/05/12 14:06:43 P B 93 • Loan No: 1100011278 - BUSINESS LOAN AGREEMENT (Continued) Page 2 Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing. Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided, Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral. Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will: Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower's financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor. Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times. Financial Statements. Furnish Lender with the following: Annual Statements. As soon as available, but in no event later than thirty (30) days after the end of each fiscal year, Borrower's balance sheet and income statement for the year ended, compiled by a certified public accountant satisfactory to Lender. interim Statements. As soon as available, but in no event later than thirty (30) days after the end of each fiscal quarter, Borrower's balance sheet and profit and loss statement for the period ended, prepared by Borrower. Tax Returns. As soon as available, but in no event later than 10 days after the applicable filing date for the tax reporting period ended, Federal and other governmental tax returns, prepared by Borrower. All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct. Additional Information. Furnish such additional information and statements, as Lender may request from time to time. Financial Covenants and Ratios. Comply with the following covenants and ratios: Minimum Income and Cash flow Requirements. Borrower shall comply with the following cash flow ratio requirements: EBITDA -Cash Dividends -Cash Taxes, divided by, Prior Period CPLTD plus Interest Expense. Ratio. Maintain a ratio of EBITDA -Cash Dividends -Cash Taxes, divided by, Prior Period CPLTD plus Interest Expense. in excess of 1.200 to 1.000. The ratio of Earnings Before Interest Taxes Depreciation and Amortization less Cash Dividends less Cash Taxes, divided by, Prior Period CPLTD plus Interest Expense . This coverage ratio should be maintained at all times and may be evaluated at any time. Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct. Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, In form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of Insurance in form satisfactory to Lender, Including stipulations that coverages will not be cancelled or diminished without at least ten (10) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person, In connection with all policies covering assets in which Lender holds or is offered a security interest for the' Loans, Borrower will provide Lender with such lender's loss payable or other endorsements as Lender may require. Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values an the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon. request of Lender (however not more often than annually), Borrower will have an Independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower. Guaranties. Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans In favor of Lender, executed by the guarantors named below, on Lender's forms, and in the amounts and under the conditions set forth in those guaranties. Names of Guarantors Amounts MCFORE, INC. Unlimited JOHN MCELHINNY Unlimited LINDA MCELHINNY. Unlimited Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements. Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing. Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's Exhibit 2 12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05[12-'[4:06:43 PM x#4133 • BUSINESS LOAN AGREEMENT -' Loan No; 1100011278 (Continued) Page 3 properties, income, or profits. Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth In this Agreement, in the Related Documents, and in ail other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default in connection with any agreement. Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner. Environmental Studies. Promptly conduct and complete, at Borrower's expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower. Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower's properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender's interest. Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense, Compliance Certificates. Unless waived in writing by Lender, provide Lender at least annually, with a certificate executed by Borrower's chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement. Environmental Compliance and Reports. Borrower shall comply in all respects with any and all covenants, terms, conditions and provisions set forth in the Hazardous Substances Certificate and Indemnity Agreement executed in connection with the Loan. Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests. LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially 'affect Lender's interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or•any Related Documents, including but not limited to Borrower's failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (6) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender: Indebtedness and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, Incur or assume Indebtedness for borrowed money, Including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower's accounts, except to Lender. Continuity of Operations. (1) Engage In any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, or (3) make any distribution with respect to any capital account, whether by reduction of capital or otherwise. Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor other than in the ordinary course of business. Agreements. Borrower will not enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower's obligations under this Agreement or in connection herewith. CESSATION OF ADVANCES. if Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account), This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and alt such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff Exhibit 2 12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05/12 14:06:4 - g 8 'h33 Loan No: 1100011278 BUSINESS LOAN AGREEMENT (Continued) Page 4 rights provided in this paragraph, DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Borrower fails to make any payment when due under the Loan. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. Environmental Default. Failure of any party to comply with or perform when due any term, obligation, covenant or condition contained in any environmental agreement executed in connection with any Loan. Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's or any Grantor's property or Borrower's or any Grantor's ability to repay the Loans or perform.thelr respective obligations under this Agreement or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Death or insolvency. The dissolution of Borrower (regardless of whether election to continue is made), any member withdraws from Borrower, or any other termination of Borrower's existence as a going business or the death of any member, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. In the event of a death, Lender, at its option, may, but shall not be required to, permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default. Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired. Insecurity. Lender in good faith believes itself insecure. Right to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor, as the case may be, after receiving written notice from Lender demanding cure of such default: (1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (16) days, immediately initiate steps which Lender deems in Lender's sole discretion to be sufficient to cure the . default and thereafter continue and complete all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies. ADDITIONAL PROVISION. No addition of new debt without approval of AmericanWest Bank. ADDITIONAL PROVISION. Limit total officer salaries to projected amount S153M. No owner withdrawals or officer loans without prior bank approval. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Arbitration. Borrower and Lender agree that all disputes, claims and controversies between them whether individual, joint, or class in nature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to the Rules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or dispose of any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; Invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing In this Agreement shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which_ wouldtotherwise be Exhib12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05/12 14:06:43 P 4 B 1133 Loan No: 1100011278 i BUSINESS LOAN AGREEMENT (Continued) Page 5 applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and 'expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post -Judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court. Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. Consent to Loan Participation. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender. Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Washington without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of Washington. Choice of Venue. if there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of SPOKANE County, State of Washington. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any of Borrower's or any Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. Notices. Subject to applicable law, and except for notice required or allowed by law to be given in another manner, any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower's current address. Subject to applicable law, and except for notice required or allowed by law to be given in another manner, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. if feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement. Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used in this Agreement shall include all of Borrower's subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower's subsidiaries or affiliates. Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower's successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower's rights under this Agreement or any interest therein, without the prior written consent of Lender. Survival of Representations and Warranties. Borrower understands and agrees that in making the Loan, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the making of the Loan and delivery to Lender of the Related Documents, shall be continuing in nature, and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. Time is of the Essence. Time is of the essence in the performance of this Agreement. Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined In this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not Exhibit 2 12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05/12 14:06:43 P § B#1133 Loan No: 1100011278 BUSINESS LOAN AGREEMENT (Continued) Page 6 otherwise defined In this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement: Advance. The word "Advance" means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower's behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement. Agreement. The word "Agreement" means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time. Borrower. The word "Borrower" means IWILL70 PROPERTIES, LLC and includes all co-signers and co -makers signing the Note and all their successors and assigns. Collateral. The word "Collateral" means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. Event of Default. The words "Event of Default" mean any of the events of default set forth in this Agreement in the default section of this Agreement. GAAP. The word "GAAP" means generally accepted accounting principles. Grantor. The word "Grantor" means each and all of the persons or entities granting a Security interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest. Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Loan. Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note. Indebtedness. The word "Indebtedness" means the Indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents. Lender. The word "Lender" means AMERICANWEST BANK, its successors and assigns. Loan. The word "Loan" means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time. Note. The word "Note" means the Note executed by IWILL70 PROPERTIES, LLC In the principal amount of $925,000.00 dated June 15, 2006, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement. Permitted Liens. The words "Permitted Liens" mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower's assets. Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan. Security Agreement. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security interest. Security Interest. The words "Security Interest" mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise. BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED JUNE 15, 2006. BORROWER: IWILL7tj P; OPERTIES, LLC, By N OPERTIES, NNY, c ger of IWILL70 Aor 0 •A MCEL'Iru�ji1011 anager of (WJ L70 PROPERTIES, C Exhibit 2 12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05/12 14:06:43 PQM 8#1133 Loan No: 1100011278 BUSINESS LOAN AGREEMENT ) (Continued) Page 7 LENDER: AMERICANWEST BANK USER PAO tondbo, 6,31.00,004 Cow. llolood Fleokruial Sokolone, Me. l7, POW AP Alohll fullowed. • WA COPFTILPL‘C40.PC TR.10003 PA46 Exhibit 2 12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05/12 14:06:43 Pfill7 EV133 USINESS LOAN AGREEMEN', ji II References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations. Borrower: IWILL7O PROPERTIES, LLC 4403 EAST DISHMAN-MICA ROAD SPOKANE, WA 99208 Lender: AMERICANWEST BANK DOWNTOWN FINANCIAL CENTER 41 WEST RIVERSIDE SPOKANE, WA 99201 (509) 232-1515 THIS BUSINESS LOAN AGREEMENT dated March 2, 2006, is made and executed between IWILL70 PROPERTIES, LLC ("Borrower") and AMERICANWEST BANK ("Lender") on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement ("Loan'). Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower's representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender's sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement. TERM. This Agreement shall be effective as of March 2, 2006, and shall continue in full force and effect until such time as all of Borrower's Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys' fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement. CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender's satisfaction of all of the conditions set forth in this Agreement and in the Related Documents. Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender's Security Interests; (4) evidence of insurance as required below; (5) guaranties; (6) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender's counsel. Borrower's Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require. Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document. Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, end in any document or certificate delivered to Lender under this Agreement are true and correct. No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists: Organization. Borrower is a limited liability company which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Washington. Borrower is duly authorized to transact business in all other states in which Borrower Is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign limited liability company in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 4403 EAST DISHMAN-MICA ROAD, SPOKANE, WA 99208. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any change in the location of Borrower's state of organization or any change in Borrower's name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi -governmental authority or court applicable to Borrower and Borrower's business activities. Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None. Authorization. Borrower's execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower's articles of organization or membership agreements, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower's properties. Financial information. Each of Borrower's financial statements supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements. Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, end binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower's financial statements or in writing to Lender end as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years. Exhibit 2 12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05/12 14:06:43 PIT@ 64133 Loan No: 1100011278 ' ...;BUSINESS LOAN AGREEMENT ' (Continued) Page 2 Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower Is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing. Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided. Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or Indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and -to such Collateral. Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable In accordance with their respective terms. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will: Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower's financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor. Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times. Financial Statements. Furnish Lender with the following: Annual Statements. As soon as available, but in no event later than thirty (30) days after the end of each fiscal year, Borrower's balance sheet and income statement for the year ended, compiled by a certified public accountant satisfactory to Lender. Interim Statements. As soon as available, but in no event later than thirty (30) days after the end of each fiscal quarter, Borrower's balance sheet and profit and loss statement for the period ended, prepared by Borrower. Tax Returns. As soon as available, but in no event later than 10 days after the applicable filing date for the tax reporting period ended, Federal and other governmental tax returns, prepared by Borrower. All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct. Additional Information. Furnish such additional information and statements, as Lender may request from time to time, Financial Covenants and Ratios. Comply with the following covenants and ratios: Minimum Income and Cash flow Requirements. Borrower shell comply with the following cash flow ratio requirements: EBITDA -Cash Dividends -Cash Taxes, divided by, Prior Period CPLTD plus Interest Expense. Ratio. Maintain a ratio of EBITDA -Cash Dividends -Cash Taxes, divided by, Prior Period CPLTD plus interest Expense. in excess of 1.200 to 1.000. The ratio of Earnings Before Interest Taxes Depreciation and Amortization less Cash Dividends less Cash Taxes, divided by, Prior Period CPLTD plus Interest Expense . This coverage ratio should be maintained at all times and may be evaluated at any time. Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct. _ Insurance. Maintain fire and other risk insurance,public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be Impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender's loss payable or other endorsements as Lender may require. Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower. Guaranties. Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantors named below, on Lender's forms, and in the amounts and under the conditions set forth in those guaranties. Names of Guarantors Amounts MCFORE, INC, Unlimited JOHN MCELHiNNY Unlimited LINDA MCELHINNY Unlimited Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender Immediately in writing of any default in connection with any other such agreements. Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing. Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge ugpn any(p{,Borrower's 12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05/12 14:06:43 P CC ST 1133 /BUSINESS LOAN AGREEMENT Loan No: 1100011278 (Continued) Page 3 properties, income, or profits. Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default in connection with any agreement. Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner. Environmental Studies. Promptly conduct and complete, at Borrower's expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower. Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower's properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation end withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender's interest. Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) In the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records It may request, all at Borrower's expense. Compliance Certificates. Unless waived in writing by Lender, provide Lender at least annually, with a certificate executed by Borrower's chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement, Environmental Compliance and Reports. Borrower shall comply in all respects with any and all covenants, terms, conditions and provisions set forth in the Hazardous Substances Certificate and Indemnity Agreement executed in connection with the Loan. Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or Its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests. LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower's failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures Incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender: Indebtedness and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, tease, grant a security interest in, or encumber any of Borrower's assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower's accounts, except to Lender. Continuity of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, or (3) make any distribution with respect to any capital account, whether by reduction of capital or otherwise. Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor other than in the ordinary course of business. Agreements. Borrower will not enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower's obligations under this Agreement or in connection herewith. CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). Thls includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff Exhibit 2 12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05/12 14:06:43 P4gM tlg)26fi�3 Lean No: 1100011278 BUSINESS LOAN AGREEMENT (Continued) Page 4 rights provided in this paragraph. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Borrower fails to make any payment when due under the Loan. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained In any other agreement between Lender and Borrower. Environmental Default. Failure of any party to comply with or perform when due any term, obligation, covenant or condition contained in any environmental agreement executed in connection with any Loan. Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's or any Grantor's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Death or insolvency. The dissolution of Borrower (regardless of whether election to continue is made), any member withdraws from Borrower, or any other termination of Borrower's existence as a going business or the death of any member, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid end perfected security interest or lien) at any time and for any reason. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. In the event of a death, Lender, at its option, may, but shall not be required to, permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, In doing so, cure any Event of Default. Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired. Insecurity. Lender in good faith believes itself insecure. Right to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor, as the case may be, after receiving written notice from Lender demanding cure of such default: (1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiate steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continue and complete all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described In the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, In equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies. ADDITIONAL PROVISION. No addition of new debt without approval of AmericanWest Bank. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post -Judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court. Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. Consent to Loan Participation. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sate of participation interests, as well as all notishofb�4y2repurchase Eki12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05/12 14:06:43 P4g(11111cgM3 /BUSINESS LOAN AGREEMENT • Loan No: 1100011278 (Continued) Page 5 of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests In the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loan irrespective of the failure or insolvency of any holder of any interest In the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender. Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Washington without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of Washington. Choice of Venue. If there Is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of SPOKANE County, State of Washington. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any of Borrower's or any Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. Notices. Subject to applicable law, and except for notice required or allowed by law to be given in another manner, any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacslmile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mall, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower's current address. Subject to applicable law, and except for notice required or allowed by law to be given in another manner, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to - all Borrowers. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. if the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement. Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used in this Agreement shall include all of Borrower's subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower's subsidiaries or affiliates. Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower's successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower's rights under this Agreement or any interest therein, without the prior written consent of Lender. Survival of Representations and Warranties. Borrower understands and agrees that in making the Loan, Lender is relying on ail representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the making of the Loan and delivery to Lender of the Related Documents, shall be continuing in nature, and shall remain In full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. Time Is of the Essence. Time is of the essence in the performance of this Agreement. Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require, Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement: Advance. The word "Advance" means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower's behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement. Agreement. The word "Agreement" means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time. Borrower. The word "Borrower" means IWILL70 PROPERTIES, LLC and includes all co-signers and co -makers signing the Note and all their successors and assigns. Collateral. The word "Collateral" means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, Igen or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. Event of Default. The words "Event of Default" mean any of the events of default set forth in this Agreement in the default section of this Agreement. Exhibit 2 12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05/12 14:06:43 Pqga Loan No: 1100011278 )BUSINESS LOAN AGREEMENT (Continued) Page 6 GAAP. The word "GAAP" means generally accepted accounting principles. Grantor. The word "Grantor" means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, Including without limitation all Borrowers granting such a Security Interest. Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Loan. Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note. Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the Note or Related Documents, including all principal and Interest together with alt other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents. Lender. The word "Lender" means AMERICANWEST BANK, Its successors and assigns. Loan. The word "Loan" means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, Including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time. Note. The word "Note" means the Note executed by IWILL70 PROPERTIES, LLC in the principal amount of $1,572,500.00 dated March 2, 2006, together with alt renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement. Permitted Liens. The words "Permitted Liens" mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) (lens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower's assets. Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan. Security Agreement. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest. Security Interest. The words "Security Interest" mean, without limitation, any and all types of collateral security, present and future, whether In the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise. BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED MARCH 2, 2006. BORROWER: IWILL7t6 E(ROPERTIES, LL By: B HN M ELHINNY, anager of IWILL70 ROPERTIE , LLC LENDER: AMERICANWEST BANK By: Authorized Si:ner 1, /%z ��._y ( •4r. INNY, M • • • ger PROPERTI , LLC IWILL70 USED MO Landing. Va. 5.90.10.001 Cope, H,d,M I"infnJ 1 So4donr, I,c. 1077. 1000. M NOhts 0o.o d. • WA C:iCfItPLlC40.FC T0.14003 N1.07 Exhibit 2 12-03613-PCW11 Doc 53-2 Filed 12/05/12 Entered 12/05/12 14:06:43 PgIM 11Wf43 C t 111 1 1 1 1 1 1111 SPOKANE, COUNTY TITLE CO RETURN ADDRESS: AMERICANWEST BANK 9019 E. APPLEWAY BLVD. SPOKANE, WA 99212 1 II 1 III 1 II 5405735 Paget 1 of 3 0711312008 11'00A MODAO $34.00 Spokane Co, WA 61 17(5 MODIFICATION OF DEED OF TRUST Reference # (if applicable): 1100011278 Grantor(s): 1. IW1LL70 PROPERTIES, LLC S-3,5"t3D-0 Additional on page Grantee(s) 1. AMERICANWEST BANK Legal Description: PTN SE1/4 S33, T25N. R44E. W.M., PTN SW1/4 S34, T25N, R44E, W.M., AND PTN NE1/4 S4, T24N, R44E, W.M. Additional on page 2 Assessor's Tax Parcel ID#: 45336.9191, 4404.1.9144, 45334.0108, 45334.0109 AND 45334.01 10 THIS MODIFICATION OF DEED OF TRUST dated June 15, 2006, is made and executed between between 1WILL70 PROPERTIES, LLC; A Washington Limited Liability Company ("Grantor") and AMERICANWEST BANK, whose address is DOWNTOWN FINANCIAL CENTER, 41 WEST RIVERSIDE, SPOKANE, WA 99201 ("Lender"). Exhibit 3 12-03613-PCW11 - Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 P 16'ht 11 1111 N iu 1 I 1 11 iI I IIIIi5405738 'HMI Page: 2 of 3 MONO $34.00 Spokai,e0Co, IWA00A SPOKANE, COUNTY TITLE CO MODIFICATION OF DEED OF TRUST Loan No: 1100011278 (Continued) Page 2 DEED OF TRUST. Lender and Grantor have entered into a Deed of Trust dated March 2, 2006 (the "Deed of Trust") which has been recorded in SPOKANE County, State of Washington, as follows: RECORDED ON MARCH 7, 2006 IN THE OFFICE OF THE SPOKANE COUNTY AUDITOR UNDER FILE NO. 5351320. REAL PROPERTY DESCRIPTION. The Deed of Trust covers the following described real property located in SPOKANE County, State of Washington: See LEGAL DESCRIPTION,which is attached to this Modification and made a part of this Modification as if fully set forth herein. The Real Property or its address is commonly known as 4403 SOUTH DiSHMAN-MICA ROAD, SPOKANE, WA 99206. The Real Property tax identification number is 46336.9191, 44041.9144, 45334.0108, 45334.0109 AND 45334.0110. MODIFICATION. Lender and Grantor hereby modify the Deed of Trust as follows: REDUCE PRINCIPAL AMOUNT TO $925,000.00. CONTINUING VALIDITY. Except as expressly modified above, the terms of the original Deed of Trust shall remain unchanged and in full force and effect. Consent by Lender to this Modification does not waive Lender's right to require strict performance of the Deed of Trust as changed above nor obligate Lender to make any future modifications. Nothing in this Modification shall constitute a satisfaction of the promissory note or other credit agreement secured by the Deed of Trust (the "Note"). It is the intention of Lender to retain as liable all parties to the Deed of Trust and all parties, makers and endorsers to the Note, including accommodation parties, unless a party is expressly released by Lender in writing, Any maker or endorser, including accommodation makers, shall not be released by virtue of this Modification. If any person who signed the original Deed of Trust does not sign this Modification, then all persons signing below acknowledge that this Modification is given conditionally, based on the representation to Lender that the non -signing person consents to the changes and provisions of this Modification or otherwise will not be released by it. This waiver applies not only to any Initial extension or modification, but also to all such subsequent actions. GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MODIFICATION OF DEED OF TRUST AND GRANTOR AGREES TO ITS TERMS. THIS MODIFICATION OF DEED OF TRUST iS DATED JUNE 15, 2006. GRANTOR: IWILL70,P TPERT1ES, LLC ' N MCELH BA, By: DA LENDER: Y, Man er of IW L70 PROPERTIES, LLC ELHIN2W, Manager of LL70 PROPERTIES, LLC AMERICANWEST BANK Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 T4':06`.43 13l�� Loan No: 1100011278 l� ii11111111111111111111 1111111111111111111 111111111111 SPOKANE, COUNTY TITLE CO NOM $34,60 MODIFICATION OF DEED OF TRUST (Continued) 5405738 Pager 3 of 3 - Spokane0Co,1WA 6R Page 3 STATE OF COUNTY OF LIMITED LIABILITY COMPANY ACKNOWLEBr111nITianm iimi m Timm o Notary Public = State of Washington MATTHEW E. KOWAL MY COMMISSION EXPIRES a March 24; 2010 11%e45 I} r nr 6 r4"1/ ) SS -7 611111111111111111111111111111111111111111111 On this J i'40 day of �/`� 20 0 % before me, the undersigned Notary Public, personally appeared JOHN MCELHINNY, Manager and LINDA MCELHINNY, Manager of IWILL70 PROPERTIES, LLC, and personally known to me or proved to me on the basis of satisfactory evidence to be members or designated agents of the limited liability company that executed the Modification of Deed of Trust and acknowledged the Modification to be the free and voluntary act and deed of "the limited liability company, by authority of statute, its articles of organization or its operating agreement, for the uses and purposes therein mentioned, and on oath stated that they ere authorized to execute this Modification and in fact executed the Modification on behalf of the limited liability comp / By '( Residing at $ e Notary Public in and for 4re State of iJfiL My commission expires /W A'/u l/ Z y 2OJ STATE OF VierSle/Y1 COUNTY OF cp a� n f LENDER ACKNOWLEDGMENT ) SS ID %11 UIIimiiIIIIIHUuIi1111111111U111111(1111❑ Notary Public ▪ State of Washington = MATTHEW E. KOWAL • MY COMMISSION EXPIRES March 24, 2010 111111111111111111111111111111111111111111115 On this 3 120 day of J J y , 20 06 , before me, the undersigned Notary Public, personally appeared . $eAd freSnchlaE7 and personally known to me or proved to me on the basis of satisfactory evidence to be the 01.944,17` , authorized agent for the Lender that executed the within and foregoing instrument and acknowledged said instrument to be the free and voluntary act and deed of the said Lender, duly authorized by the Lender through its board of directors or otherwise, for the uses and purposes therein mentioned, and on oath stated that he or she is authorized to execute this said instruent and that the seal affixed is the corporate seal of said Lender. Residing at $t 444 My commission expires 444 -AC if ZirZO)0 .771 By No ary Public in and fo the State ofW71 USER POO E4.6n0, V.. 6.21.00.004 Cop. H,And r 7n,.l SobUon,, M. 1997. 20013. Al 71101H R.1dve& • WA C:lCH11PLVG202.6C TA 10101 PH.! Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 1210[12 14:06:43 P1 RETURN ADDRESS: AMERICANWEST BANK 9019 E. APPLEWAY BLVD. SPOKANE, WA 99212 1III1111(111111111111111111111111111111ffl5383607 lIII111111IIi Page. l of 13 SPOKANE, COUNTY TITLE CO . DT $45 80 Spokane0Co,04R IP 5351320 Pa e� 12 0310712808 03148P Spokane Co, WR ie,egeoeDhW& rD 0A4eger" le -6% Dcse-E-fPrioA) '` DEED OF TRUST DATE: March 2, 2006 Reference # (if applicable): 1100011278 Grantor(s): 1. IWILL70 PROPERTIES, LLC Additional on page Grantee(s) 1. AMERICANWEST BANK 2. UPF Incorporated, a Washington Company, Trustee Legal Description: PTN SE1/4 S33, T25N. R44E. W.M., PTN SW1/4 S34, T25N, R44E, W.M., AND PTN NE1/4 54, T24N, R44E, W.M. Additional on page 2 Assessor's Tax Parcel ID#: 45336.9191, 44041.9144, 45334.0108, 45334.0109 AND 45334.0110 THIS DEED OF TRUST is dated March 2, 2006, among IWILL70 PROPERTIES, LLC; A Washington Limited Liability Company ("Grantor"); AMERICANWEST BANK, whose mailing address is DOWNTOWN FINANCIAL CENTER, 41 WEST RIVERSIDE, SPOKANE, WA 99201 (referred to below sometimes as "Lender" and sometimes as "Beneficiary"); and UPF Incorporated, a Washington Company, whose mailing address is 910 WEST BOONE AVE., Spokane, WA 99201 (referred to below as "Trustee"). Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 PRI4 It J Loan No: 1100011278 11 ei 11 uu i 1 iu 111 1 1 1111 11 SPOKANE, COUNTY TITLE CODT $45.00 5383607 Page: 2 of 13 : 05/24/2006 02:01P1 Spokane Co, WA 5351320 Paget 2 of 12 03/07/2006 03'4SP Spokane Co, WA (Continued) Page 2 CONVEYANCE AND GRANT. For valuable consideration, Grantor conveys to Trustee in trust with power of sale, right of entry and possession and for the benefit of Lender as Beneficiary, all of Grantor's right, title, and interest In and to the following described real property, together with all existing or subsequently erected or affixed buildings, improvements and fixtures; all easements, rights of way, and appurtenances; all water, water rights and ditch rights (including stock in utilities with ditch or irrigation rights); and all other rights, royalties, and profits relating to the real property, including without limitation all minerals, oil, gas, geothermal and similar matters, (the "Real Property") located in SPOKANE County, State of Washington: See LEGAL DESCRIPTION, which is attached to this Deed of Trust and made a part of this Deed of Trust as if fully set forth herein. The Real Property or its address is commonly known as 4403 SOUTH DISHMAN MICA ROAD, SPOKANE VALLEY, WA 99206. The Real Property tax identification number is 45336.9191, 44041.9144, 45334.0108, 45334.0109 AND 45334.0110. Grantor hereby assigns as security to Lender, all of Grantor's right, title, and interest in and to all leases, Rents, and profits of the Property. This assignment is recorded in accordance with RCW 65.08.070; the lien created by this assignment Is intended to be specific, perfected and choate upon the recording of this Deed of Trust, Lender grants to Grantor a license to collect the Rents and profits, which license may be revoked at Lender's option and shall be automatically revoked upon acceleration of all or part of the Indebtedness. THIS DEED OF TRUST, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT OF THE INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS UNDER THE NOTE, THE RELATED DOCUMENTS, AND THIS DEED OF TRUST. THIS DEED OF TRUST IS GIVEN AND ACCEPTED ON THE FOLLOWING TERMS: PAYMENT AND PERFORMANCE. Except as otherwise provided in this Deed of Trust, Grantor shall pay to Lender all amounts secured by this Deed of Trust as they become due, and shall strictly and in a timely manner perform all of Grantor's obligations under the Note, this Deed of Trust, and the Related Documents. POSSESSION AND MAINTENANCE OF THE PROPERTY. Grantor agrees that Grantor's possession and use of the Property shall be governed by the following provisions: Possession and Use. Until the occurrence of an Event of Default, Grantor may (11 remain in possession and control of the Property; (2) use, operate or manage the Property; and (3) collect the Rents from the Property (this privilege is a license from Lender to Grantor automatically revoked upon default). The following provisions relate to the use of the Property or to other limitations on the Property. The Real Property is not used principally for agricultural purposes. , Duty to Maintain. Grantor shall maintain the Property in tenantable condition and promptly perform all repairs, replacements, and maintenance necessary to preserve its value. Nuisance, Waste. Grantor shall not cause, conduct or permit any nuisance nor commit, permit, or suffer any stripping of or waste on or to the Property or any portion of the Property. Without limiting the generality of the foregoing, Grantor will not remove, or grant to any other party the right to remove, any timber, minerals (including oil and gas), coal, clay, scoria, soil, gravel or rock products without Lender's prior written consent. Removal of Improvements. Grantor shall not demolish or remove any Improvements from the Real Property without Lender's prior written consent. As a condition to the removal of any Improvements, Lender may require Grantor to make arrangements satisfactory to Lender to replace such Improvements with Improvements of at least equal value. Lender's Right to Enter. Lender and Lender's agents and representatives may enter upon the Real Property at all reasonable times to attend to Lender's interests and to inspect the Real Property for purposes of Grantor's compliance with the terms and conditions of this Deed of Trust. Compliance with Governmental Requirements. Grantor shall promptly comply, and shall promptly cause compliance by all agents, tenants or other persons or entities of every nature whatsoever who rent, lease or otherwise use or occupy the Property in any manner, with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the use or occupancy of the Property, including without limitation, the Americans With Disabilities Act. Grantor may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Grantor has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's interests in the Property are not jeopardized. Lender may require Grantor to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender's interest. Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 Pittty§ 6f lit j IB 11 111 1 1 1 1111 1 1 d SPOKANE, COUNTY TITLE CO DT DEED OF TRUST Loan No: 1100011278 (Continued) 11 111111 gr 37 C Pa3 of 13 05/24/2008 02101P $45.00 Spokane Co,. Oft_.. 5351320 Paget 3 of 12 03/07/22008 03' 48P Spokane Co, WA Page 3 Duty to Protect. Grantor agrees neither to abandon or leave unattended the Property. Grantor shall do alt other acts, in addition to those acts set forth above in this section, which from the character and use of the Property are reasonably necessary to protect and preserve the Property. DUE ON SALE - CONSENT BY LENDER. Lender may, at Lender's option, (A) declare immediately due and payable all sums secured by this Deed of Trust or (B) increase the interest rate provided for in the Note or other document evidencing the indebtedness and impose such other conditions as Lender deems appropriate, upon the sale or transfer, without Lender's prior written consent, of all or any part of the Real Property, or any interest in the Real Property. A sale or transfer" means the conveyance of Real Property or any right, title or interest in the Real Property; whether legal, beneficial or equitable; whether voluntary or involuntary; whether by outright sale, deed, installment sate contract, land contract, contract for deed, leasehold interest with a term greater than three (3) years, lease -option contract, or by sale, assignment, or transfer of any beneficial interest in or to any land trust holding title to the Real Property, or by any other method of conveyance of an interest In the Real Property. If any Grantor is a corporation, partnership or limited liability company, transfer also includes any change in ownership of more than twenty-five percent (25%) of the voting stock, partnership Interests or limited liability company interests, as the case may be, of such Grantor. However, this option shall not be exercised by Lender If such exercise is prohibited by federal law or by Washington law. TAXES AND LiENS. The following provisions relating to the taxes and liens on the Property are part of this Deed of Trust: Payment. Grantor shall pay when due (and in all events prior to delinquency) all taxes, special taxes, assessments, charges (including water and sewer), fines and impositions levied against or on account of the Property, and shall pay when due all claims for work done on or for services rendered or material furnished to the Property. Grantor shall maintain the Property free of all liens having priority over or equal to the interest of Lender under this Deed of Trust, except for the lien of taxes and assessments not due and except as otherwise provided in this Deed of Trust. Right to Contest. Grantor may withhold payment of any tax, assessment, or claim in connection with a good faith dispute over the obligation to pay, so long as Lender's interest in the Property is not jeopardized. If a lien arises or is filed as a result of nonpayment, Grantor shall within fifteen (15) days after the lien arises or, if a lien is filed, within fifteen (15) days after Grantor has notice of the filing, secure the discharge of the lien, or if requested by Lender, deposit with Lender cash or a sufficient corporate surety bond or other security satisfactory to Lender in an amount sufficient to discharge the lien plus any costs and attorneys' fees, or other charges that could accrue as a result of a foreclosure or sale under the lien. in any contest, Grantor shall defend itself and Lender and shall satisfy any adverse judgment before enforcement against the Property. Grantor shall name Lender as an additional obligee under any surety bond furnished in the contest proceedings. Evidence of Payment. Grantor shall upon demand furnish to Lender satisfactory evidence of payment of the taxes or assessments and shall authorize the appropriate governmental official to deliver to Lender at any time a written statement of the taxes and assessments against the Property. Notice of Construction. Grantor shall notify Lender at least fifteen (15) days before any work is commenced, any services are furnished, or any materials are supplied to the Property, if any mechanic's lien, materialmen's lien, or other lien could be asserted on account of the work, services, or materials. Grantor will upon request of Lender furnish to Lender advance assurances satisfactory to Lender that Grantor can and will pay the cost of such improvements. PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the Property are a part of this Deed of Trust. Maintenance of Insurance. Grantor shall procure and maintain policies of fire insurance with standard extended coverage endorsements on a replacement basis for the full insurable value covering all Improvements on the Real Property in an amount sufficient to avoid application of any coinsurance clause, and with a standard mortgagee clause in favor of Lender. Grantor shall also procure and maintain comprehensive general liability insurance in such coverage amounts as Lender may request with Trustee and Lender being named as additional insureds in such liability insurance policies. Additionally, Grantor shall maintain such other insurance, including but not limited to hazard, business interruption, and boiler insurance, as Lender may reasonably require. Policies shall be written in form, amounts, coverages and basis reasonably acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Grantor or any other person. Should the Real Property be located in an area designated by the Director of the Federal Emergency Management Agency as a special flood hazard area, Grantor agrees to obtain and maintain Federal Flood Insurance, if available, within 45 days after notice is given by Lender that the Property is located In a special flood hazard area, for the full unpaid principal balance of the loan and any prior liens on the property securing the loan, up to the maximum policy limits set under the National Flood Insurance Program, Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/1214:06:43 P9 8�1�5 Loan No: 1100011278 i I 1lly 11`I1llp 1 I 1 11It i h II I II I 151 fO1@ 5a8 3640 7 13 P05/24/200S 02.0 SPOKANE, COUNTY TITLECmr,., Spokane Co, , DEED . (Continued) Page 4 5351 .20 Page Spae00(B BPoknCo, or as otherwise required by Lender, and to maintain such insurance for the term of the loan, Application of Proceeds. Grantor shall promptly notify Lender of any loss or damage to the Property. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. Whether or not Lender's security is impaired, Lender may, at Lender's election, receive and retain the proceeds of any insurance and apply the proceeds to the reduction of the Indebtedness, payment of any lien affecting the Property, or the restoration and repair of the Property. if Lender elects to apply the proceeds to restoration and repair, Grantor shall repair or replace the damaged or destroyed Improvements in a manner satisfactory to Lender. Lender shall, upon satisfactory proof of such expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost of repair or restoration If Grantor is not in default under this Deed of Trust. Any proceeds which have not been disbursed within 180 days after their receipt and which Lender has not committed to the repair or restoration of the Property shall be used first to pay any amount owing to Lender under this Deed of Trust, then to pay accrued interest, and the remainder, if any, shall be applied to the principal balance of the Indebtedness. If Lender holds any proceeds after payment in full of the Indebtedness, such proceeds shall be paid without interest to Grantor as Grantor's Interests may appear. Grantor's Report on Insurance. Upon request of Lender, however not more than once a year, Grantor shall furnish to Lender a report on each existing policy of insurance showing: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the property insured, the then current replacement value of such property, and the manner of determining that value; and (5) the expiration date of the policy. Grantor shall, upon request of Lender, have an independent appraiser satisfactory to Lender determine the cash value replacement cost of the Property. LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Property or if Grantor fails to comply with any provision of this Deed of Trust or any Related Documents, including but not limited to Grantor's failure to discharge or pay when due any amounts Grantor is required to discharge or pay under this Deed of Trust or any Related Documents, Lender on Grantor's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying alt taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Property and paying all costs for insuring, maintaining and preserving the Property. All such expenditures incurred or pald by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be duo and payable at the Note's maturity. The Deed of Trust also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon Default. WARRANTY; DEFENSE OF TITLE: The following provisions relating to ownership of the Property are a part of this Deed of Trust: Title. Grantor warrants that: (a) Grantor holds good and marketable title of record to the Property in fee simple, free and clear of all liens and encumbrances other than those set forth in the Real Property description or in any title insurance policy, title report, or final title opinion issued in favor of, and accepted by, Lender in connection with this Deed of Trust, and (b) Grantor has the full right, power, and authority to execute and deliver this Deed of Trust to Lender. Defense of Title. Subject to the exception in the paragraph above, Grantor warrants and will forever defend the title to the Property against the lawful claims of all persons. In the event any action or proceeding is commenced that questions Grantor's title or the interest of Trustee or Lender under this Deed of Trust, Grantor shall defend the action at Grantor's expense. Grantor may be the nominal party in such proceeding, but Lender shalt be entitled to participate in the proceeding and to be represented in the proceeding by counsel of Lender's own choice, and Grantor will deliver, or cause to be delivered, to Lender such instruments as Lender may request from time to time to permit such participation. Compliance With Laws. Grantor warrants that the Property and Grantor's use of the Property complies with all existing applicable laws, ordinances, and regulations of governmental authorities. Survival of Representations and Warranties. All representations, warranties, and agreements made by Grantor in this Deed of Trust shall survive the execution and delivery of this Deed of Trust, shall be continuing in nature, and shall remain in full force and effect until such time as Grantor's Indebtedness shall be paid in full. CONDEMNATION. The following provisions relating to condemnation proceedings are a part of this Deed of Trust: Proceedings. If any proceeding in condemnation Is filed, Grantor shall promptly notify Lender in writing, and Grantor shall promptly take such steps as may be necessary to defend the action and obtain the award. Grantor may be the nominal party in such proceeding, but Lender shall be entitled to participate in the proceeding and to be represented in the proceeding by counsel of its own choice all at Grantor's expense, and Grantor will deliver or Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 PRI 7 6f 11 5 Loan No: 1100011278 1011111111111101111111111111111111111111111 5383607Page 5 aF 13 05/24/200G 02:01P SPOKANE, COUNTY TITLE CO DT X5.00 Spokane C0,141_, VrvgnIm Vvv)lt t 1'.,wr .,. DEED OF TRUST (Continued) 5351320 Page: 5 of 12 03/97/2002 03:4SP Spokane Co, WA Page 5 cause to be delivered to Lender such instruments and documentation as may be requested by Lender from time to time to permit such participation. Application of Net Proceeds. If all or any part of the Property Is condemned by eminent domain proceedings or by any proceeding or purchase in lieu of condemnation, Lender may at its election require that all or any portion of the net proceeds of the award be applied to the Indebtedness or the repair or restoration of the Property. The net proceeds of the award shall mean the award after payment of all reasonable costs, expenses, and attorneys' fees incurred by Trustee or Lender in connection with the condemnation. IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The following provisions relating to governmental taxes, fees and charges are a part of this Deed of Trust: Current Taxes, Fees and Charges. Upon request by Lender, Grantor shall execute such documents in addition to this Deed of Trust and take whatever other action is requested by Lender to perfect and continue Lender's lien on the Real Property. Grantor shall reimburse Lender for all taxes, as described below, together with all expenses incurred in recording, perfecting or continuing this Deed of Trust, including without limitation all taxes, fees, documentary stamps, and other charges for recording or registering this Deed of Trust. Taxes. The following shall constitute taxes to which this section applies: (1) a specific tax upon this type of Deed of Trust or upon all or any part of the Indebtedness secured by this Deed of Trust; (2) a specific tax on Grantor which Grantor is authorized or required to deduct from payments on the Indebtedness secured by this type of Deed of Trust; (3) a tax on this type of Deed of Trust chargeable against the Lender or the holder of the Note; and (4) a specific tax on all or any portion of the Indebtedness or on payments of principal and interest made by Grantor. Subsequent Taxes. If any tax to which this section applies is enacted subsequent to the date of this Deed of Trust, this event shall have the same effect as an Event of Default, and Lender may exercise any or all of its available remedies for an Event of Default as provided below unless Grantor either (1) pays the tax before it becomes delinquent, or (2) contests the tax as provided above in the Taxes and Liens section and deposits with Lender cash or a sufficient corporate surety bond or other security satisfactory to Lender. SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating to this Deed of Trust as a security agreement are a part of this Deed of Trust: Security Agreement. This instrument shall constitute a Security Agreement to the extent any of the Property constitutes fixtures, and Lender shall have all of the rights of a secured party under the Uniform Commercial Code as amended from time to time. Security Interest. Upon request by Lender, Grantor shall take whatever action is requested by Lender to perfect and continue Lender's security interest in the Rents and Personal Property. In addition to recording this Deed of Trust in the real property records, Lender may, at any time and without further authorization from Grantor, file executed counterparts, copies or reproductions of this Deed of Trust as a financing statement. Grantor shall reimburse Lender for all expenses incurred in perfecting or continuing this security interest. Upon default, Grantor shall not remove, sever or detach the Personal Property from the Property. Upon default, Grantor shall assemble any Personal Property not affixed to the Property in a manner and at a place reasonably convenient to Grantor and Lender and make it available to Lender within three (3) days after receipt of written demand from Lender to the extent permitted by applicable law. Addresses. The mailing addresses of Grantor (debtor) and Lender (secured party) from which information concerning the security interest granted by this Deed of Trust may be obtained (each as required by the Uniform Commercial Code) are as stated on the first page of this Deed of Trust. FURTHER ASSURANCES; ATTORNEY -1N -FACT. The following provisions relating to further assurances and attorney-in-fact are a part of this Deed of Trust: Further Assurances. At any time, and from time to time, upon request of Lender, Grantor will make, execute and deliver, or will cause to be made, executed or delivered, to Lender or to Lender's designee, and when requested by Lender, cause to be filed, recorded, reified, or rerecorded, as the case may be, at such times and in such offices and places as Lender may deem appropriate, any and all such mortgages, deeds of trust, security deeds, security agreements, financing statements, continuation statements, instruments of further assurance, certificates, and other documents as may, in the sole opinion of Lender, be necessary or desirable in order to effectuate, complete, perfect, continue, or preserve (1) Grantor's obligations under the Note, this Deed of Trust, and the Related Documents, and (2) the liens and security interests created by this Deed of Trust as first and prior liens on the Property, whether now owned or hereafter acquired by Grantor. Unless prohibited by law or Lender agrees to the contrary in writing, Grantor shall reimburse Lender for all costs and expenses incurred in connection with the matters referred to In this paragraph. Attorney -in -Fact. If Grantor fails to do any of the things referred to in the preceding paragraph, Lender may do so for and in the name of Grantor and at Grantor's expense. For such purposes, Grantor hereby irrevocably appoints Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 PRY@ g 'ht Loan No: 1100011278 i 1I1 II1 111 1 I1 1 11111 1 111 11 SPOKANE, COUNTY TITLE C4 OT „ DEED OF TRUST (Continued) 111111 P38age �360Sof7p13 05/24/2005 02:01P $45.00 Spokane Co, Wfl .: 5351320 Pagel 6 of 12 83/07/E008 08148P Page 6 Lender as Grantor's attorney-in-fact for the purpose of making, executing, delivering, filing, recording, and doing all other things as may be necessary or desirable, in Lender's sole opinion, to accomplish the matters referred to in the preceding paragraph. FULL PERFORMANCE. If Grantor pays all the Indebtedness when due, and otherwise performs all the obligations imposed upon Grantor under this Deed of Trust, Lender shall execute and deliver to Trustee a request for full reconveyance and shall execute and deliver to Grantor suitable statements of termination of any financing statement on file evidencing Lender's security interest in the Rents and the Personal Property. Any reconveyance fee shall be paid by Grantor, If permitted by applicable law. The grantee In any reconveyance may be described as the "person or persons legally entitled thereto", and the recitals in the reconveyance of any matters or facts shall be conclusive proof of the truthfulness of any such matters or facts. EVENTS OF DEFAULT. Each of the following, at Lender's option, shall constitute an Event of Default under this Deed of Trust: Payment Default. Grantor fails to make any payment when due under the Indebtedness. Other Defaults. Grantor fails to comply with or to perform any other term, obligation, covenant or condition contained in this Deed of Trust or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Grantor. Compliance Default. Failure to comply with any other term, obligation, covenant or condition contained in this Deed of Trust, the Note or in any of the Related Documents. Default on Other Payments. Failure of Grantor within the lime required by this Deed of Trust to make any payment for taxes or insurance, or any other payment necessary to prevent filing of or to effect discharge of any lien. Default In Favor of Third Parties. Should Grantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Grantor's property or Grantor's ability to repay the Indebtedness or perform their respective obligations under this Deed of Trust or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Grantor or on Grantor's behalf under this Deed of Trust or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Defective Collateralization. This Deed of Trust or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason. Death or Insolvency. The dissolution of Grantor's (regardless of whether election to continue is made), any member withdraws from the limited liability company, or any other termination of Grantor's existence as a going business or the death of any member, the insolvency of Grantor, the appointment of a receiver for any part of Grantor's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Grantor. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any governmental agency against any property securing the Indebtedness. This includes a garnishment of any of Grantor's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Breach of Other Agreement. Any breach by Grantor under the terms of any other agreement between Grantor and Lender that is not remedied within any grace period provided therein, including without limitation any agreement concerning any indebtedness or other obligation of Grantor to Lender, whether existing now or later. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. In the event of a death, Lender, at its option, may, but shall not be required to, permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Defauit. Adverse Change. A material adverse change occurs in Grantor's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness Is impaired. Insecurity. Lender in good faith believes itself insecure. Right to Cure. If any default, other than a default in payment is curable and if Grantor has not been given a notice Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 PRO 8 1�E Loan No: 1100011278 5383607 5351320 Pae' 7 of 13 Page: 7 of 12 05/24/2008 02:01P 03/07/2, 3 03/07/200S 6314$P Spokane Co, 141Spokane DEED ur (Continued) Page 7 of a breach of the same provision of this Deed of Trust within the preceding twelve (12) months, it may be cured if Grantor, after receiving written notice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Deed of Trust, at any time thereafter, Trustee or Lender may exercise any one or more of the following rights and remedies: Election of Remedies. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Deed of Trust, after Grantor's failure to perform, shall not affect Lender's right to declare a default and exercise its remedies. Accelerate Indebtedness. Lender shall have the right at its option to declare the entire Indebtedness immediately due and payable, including any prepayment penalty which Grantor would be required to pay. Foreclosure. With respect to all or any part of the Real Property, the Trustee shall have the right to exercise its power of sale and to foreclose by notice and sale, and Lender shall have the right to foreclose by judicial foreclosure, in either case in accordance with and to the full extent provided by applicable law. UCC Remedies, With respect to all or any part of the Personal Property, Lender shall have all the rights and remedies of a secured party under the Uniform Commercial Code. Collect Rents. Lender shall have the right, without notice to Grantor to take possession of and manage the Property and collect the Rents, including amounts past due and unpaid, and apply the net proceeds, over and above Lender's costs, against the Indebtedness. In furtherance of this right, Lender may require any tenant or other user of the Property to make payments of rent or use fees directly to Lender. If the Rents are collected by Lender, then Grantor Irrevocably designates Lender as Grantor's attorney-in-fact to endorse instruments received in payment thereof in the name of Grantor and -to negotiate the same and collect the proceeds. Payments by tenants or other users to Lender in response to Lender's demand shall satisfy the obligations for which the payments are made, whether or not any proper grounds for the demand existed. Lender may exercise Its rights under this subparagraph either in person, by agent, or through a receiver. Appoint Receiver. Lender shall have the right to have a receiver appointed to take possession of all or any part of the Property, with the power to protect and preserve the Property, to operate the Property preceding or pending foreclosure or sale, and to collect the Rents from the Property and apply the proceeds, over and above the cost of the receivership, against the Indebtedness. The receiver may serve without bond if permitted by law, Lender's right to the appointment of a receiver shall exist whether or not the apparent value of the Property exceeds the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver. Tenancy at Sufferance. If Grantor remains in possession of the Property after the Property is sold as provided above or Lender otherwise becomes entitled to possession of the Property upon default of Grantor, Grantor shall become a tenant at sufferance of Lender or the purchaser of the Property and shall, at Lender's option, either (1) pay a reasonable rental for the use of the Property, or (2) vacate the Property immediately upon the demand of Lender. Other Remedies. Trustee or Lender shall have any other right or remedy provided in this Deed of Trust or the Note or by law. Notice of Sale. Lender shall give Grantor reasonable notice of the time and place of any public sale of the Personal Property or of the time after which any private sale or other Intended disposition of the Personal Property Is to be made. Reasonable notice shall mean notice given at least ten (10) days before the time of the sale or disposition. Any sale of the Personal Property may be made in conjunction with any sale of the Real Property. Sale of the Property. To the extent permitted by applicable law, Grantor hereby waives any and all rights to have the Property marshalled. In exercising its rights and remedies, the Trustee or Lender shall be free to sell all or any part of the Property together or separately, in one sale or by separate sales. Lender shall be entitled to bid at any public sale on all or any portion of the Property. Attorneys' Fees; Expenses. If Lender Institutes any suit or action to enforce any of the terms of this Deed of Trust, Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys' fees at trial and upon any appeal. Whether or not any court action is involved, and to the extent not prohibited by law, all reasonable expenses Lender Incurs that in Lender's opinion are necessary at any time for the protection of its interest or the enforcement of its rights shall become a part of the Indebtedness payable on demand and shall bear interest at the Note rate from the date of the expenditure until repaid. Expenses covered by this paragraph include, without limitation, however subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post -judgment Exhibit 3 12-03613 PCW 11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 P�0 I1�i it 3 11111111\11111111111111111111 SPOKANE, COUNTY TITLE CO .. DT $4.8O Loan No: 1100011278 (Continued) 5383607 Page: 8 of 13 05/24/2006 02%01P Spokane Co, 14A_ 5351320 Page: 8 of 1a 83/87/2,80803:48P l118 Page 8 collection services, the cost of searching records, obtaining title reports (including foreclosure reports), surveyors' reports, and appraisal fees, title insurance, and fees for the Trustee, to the extent permitted by applicable law. Grantor also will pay any court costs, in addition to all other sums provided by law. Rights of Trustee. Trustee shall have all of the rights and duties of Lender as set forth In this section. POWERS AND OBLIGATIONS OF TRUSTEE. The following provisions relating to the powers and obligations of Trustee (pursuant to Lender's instructions) are part of this Deed of Trust: Powers of Trustee. In addition to all powers of Trustee arising as a matter of law, Trustee shall have the power to take the following actions with respect to the Property upon the written request of Lender and Grantor: (a} join in preparing and filing a map or plat of the Real Property, including the dedication of streets or other rights to the public; (b) join in granting any easement or creating any restriction on the Real Property; and (c) join In any subordination or other agreement affecting this Deed of Trust or the interest of Lender under this Deed of Trust. Obligations to Notify. Trustee shall not be obligated to notify any other party of a pending sale under any other trust deed or lien, or of any action or proceeding in which Grantor, lender, or Trustee shall be a party, unless required by applicable law, or unless the action or proceeding is brought by Trustee. Trustee. Trustee shall meet all qualifications required for Trustee under applicable law. In addition to the rights and remedies set forth above, with respect to all or any part of the Property, the Trustee shall have the right to foreclose by notice and sale, and Lender shall have the right to foreclose by judicial foreclosure, in either case in accordance with and to the full extent provided by applicable law. Successor Trustee. Lender, at Lender's option, may from time to time appoint a successor Trustee to any Trustee appointed under this Deed of Trust by an instrument executed and acknowledged by Lender and recorded in the office of the recorder of SPOKANE County, State of Washington. The instrument shall contain, in addition to all other matters required by state law, the names of the original Lender, Trustee, and Grantor, the book and page or the Auditor's File Number where this Deed of Trust is recorded, and the name and address of the successor trustee, and the Instrument shall be executed and acknowledged by Lender or its successors in interest. The successor trustee, without conveyance of the Property, shall succeed to all the title, power, and duties conferred upon the Trustee in this Deed of Trust and by applicable law. This procedure for substitution of Trustee shall govern to the exclusion of all other provisions for substitution. NOTICES. Subject to applicable law, and except for notice required or allowed by law to be given in another manner, any notice required to be given under this Deed of Trust, including without limitation any notice of default and any notice of sale shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited In the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Deed of Trust. All copies of notices of foreclosure from the holder of any lien which has priority over this Deed of Trust shall be sent to Lender's address, as shown near the beginning of this Deed of Trust. Any party may change its address for notices under this Deed of Trust by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor's current address. Subject to applicable law, and except for notice required or allowed by law to be given in another manner, If there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to all Grantors. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Deed of Trust: Amendments. This Deed of Trust, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Deed of Trust. No alteration of or amendment to this Deed of Trust shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Annual Reports. If the Property is used for purposes other than Grantor's residence, Grantor shall furnish to Lender, upon request, a certified statement of net operating income received from the Property during Grantor's previous fiscal year in such form and detail as Lender shall require. "Net operating Income" shall mean all cash receipts from the Property less all cash expenditures made in connection with the operation of the Property. Caption Headings. Caption headings In this Deed of Trust are for convenience purposes only and are not to be used to interpret or define the provisions of this Deed of Trust. Merger. There shall be no merger of the interest or estate created by this Deed of Trust with any other Interest or estate in the Property at any time held by or for the benefit of Lender in any capacity, without the written consent of Lender. Governing Law. This Deed of Trust will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Washington without regard to its conflicts of law provisions. This Deed of Trust has been accepted by Lender in the State of Washington. Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 PQM 1111 ctiM6 Loan No: 1100011278 flhIIII1III iu II I1ll 11I 1W3690071' goof 13 Pg:13923 1 Ii 93!07/ 80B 03=48P 05/24/2096 02.01P SPOKANE, COt)i TY TITLE SO, DT _ $45.00 . Spokane Go, WR Spokane Co, WR DEED Ut- MUST (Continued) Page 9 Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender's request to submit to the jurisdiction of the courts of SPOKANE County, State of Washington. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Deed of Trust unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Deed of Trust shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with_ that provision or any other provision of this Deed of Trust. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Deed of Trust, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. Severability. If a court of competent jurisdiction finds any provision of this Deed of Trust to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Deed of Trust. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Deed of Trust shall not affect the legality, validity or enforceability of any, other provision of this Deed of Trust. Successors and Assigns. Subject to any limitations stated in this Deed of Trust on -transfer of Grantor's interest, this Deed of Trust shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Property becomes vested in a person other than Grantor, Lender, without notice to Grantor, may deal with Grantor's successors with reference to this Deed of Trust and the indebtedness by way of forbearance or extension without releasing Grantor from the obligations of this Deed of Trust or liability under the Indebtedness. Time is of the Essence. Time Is of the essence in the performance of this Deed of Trust. Waive Jury. All parties to this Deed of Trust hereby waive the .right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party. Waiver of Homestead Exemption. Grantor hereby releases and waives all rights and benefits of the homestead exemption laws of the State of Washington as to all indebtedness secured by this Deed of Trust. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Deed of Trust. Unless specifically stated to the contrary, alt references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Deed of Trust shall have the meanings attributed to such terms in the Uniform Commercial Code: Beneficiary. The word "Beneficiary" means AMERICANWEST BANK, and its successors and assigns. Borrower. The word "Borrower" means IWILL70 PROPERTIES, LLC and includes all co-signers and co -makers signing the Note and all their successors and assigns. Deed of Trust. The words "Deed of Trust" mean this Deed of Trust among Grantor, Lender, and Trustee, and includes without limitation all assignment and security interest provisions relating to the Personal Property and Rents. Default. The word "Default" means the Default set forth in this Deed of Trust In the section titled "Default". Event of Default. The words "Event of Default" mean any of the events of default set forth in this Deed of Trust in the events of default section of this Deed of Trust. Grantor. The word "Grantor" means IWILL70 PROPERTIES, LLC. Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Indebtedness. Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note. Improvements. The word "Improvements" means all existing and future improvements, buildings, structures, mobile homes affixed on the Real Property, facilities, additions, replacements and other construction on the Real Property. indebtedness. The word "Indebtedness" means all principal,. interest, and other amounts, costs and expenses payable under the Note or Related Documents, together with all renewals of, extensions of, modifications of, consolidations of and substitutions for the Note or Related Documents and any amounts expended or advanced by Lender to discharge Grantor's obligations or expenses incurred by Trustee or Lender to enforce Grantor's Exhibit 3 12-0361 3-PCW1 1 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 PIT II�cgt”6 Loan No: 1100011278 1 1 1 1 VIIV 111 SPOKANE, COUNTY TITLE,CO _DT $45.00 111 1111111 111 5383607 Page: 10 of' 13 05/24/2006 02:01P ..$llokane Co, flR - 5351320 Page: 10 of 12 03/07/2008 03:48P Spokane Co, WA DEED OF TRUST (Continued) Page 10 obligations under this Deed of Trust, together with interest on such amounts as provided in this Deed of Trust. Lender. The word "Lender" means AMERICANWEST BANK, its successors and assigns. Note. The word "Note" means the promissory note dated March 2, 2006, in the original principal amount of $1,572,500.00 from Grantor to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissory note or agreement. NOTICE TO GRANTOR: THE NOTE CONTAINS A VARIABLE INTEREST RATE. Personal Property. The words "Personal Property" mean all equipment, fixtures, and other articles of personal property now or hereafter owned by Grantor, and now or hereafter attached or affixed to the Real Property; together with all accessions, parts, and additions to, all replacements of, and all substitutions for, any of such property; and together with all issues and profits thereon and proceeds (including without limitation all insurance proceeds and refunds of premiums) from any sale or other disposition of the Property. Property. The word "Property" means collectively the Real Property and the Personal Property. Real Property. The words "Real Property" mean the real property, interests and rights, as further described in this Deed of Trust. Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed In connection with the Indebtedness; provided, that the environmental indemnity agreements are not "Related Documents" and are not secured by this Deed of Trust. Rents. The word "Rents" means all present and future rents, revenues, income, issues, royalties, profits, and other benefits derived from the Property. Trustee. The word "Trustee" means UPF Incorporated, a Washington Company, whose mailing address is 910 WEST BOONE AVE., Spokane, WA 99201 and any substitute or successor trustees. GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS DEED OF TRUST, AND GRANTOR AGREES TO ITS TERMS. GRANTOR: PERTIES, LLC // /INN', 1. a^ of IWILL70 PROPERTIES, LLC MCELHI A , Manager o ILL70 PROPERTIES, LLC Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 P4gg 1 Loan No: 1100011278 11 N I Ii i i i 1 I I 1 11 11 1 SPOKANE, COUNTY TITLE CO DT t'45,8O arunnnc, •VVY1111 •---- DEED yr t rtuw (Continued) 5383607 Page: 11 of 13 05/24/2006 02:01P Spokane Co,.NA 5351320 Page: 11 of 12 03/07/280B 03:48P Page 11 STATE OF LIMITED LIABILITY COMPANY ACKNOWLEDGMENT Lv,/4 /I U Cj Lp.% COUNTY OF -Seal1VE ) SS } On this Y' day of M.AR-LW , 20 9C before me, the undersigned Notary Public, personally appeared JOHN MCELHINNY, Manager; LINDA MCELHINNY, Manager of IWILL70 PROPERTIES, LLC, and personally known to me or proved to me on the basis of satisfactory evidence to be members or designated agents of the limited liability company that executed the Deed of Trust and acknowledged the Deed of Trust to be the free and voluntary act and deed of the limited liability company, by authority of statute, its articles of organization or its operating agreement, for the uses and purposes, therein mentioned, and on oath stated that they are authorized to execute this De d of Trust and in fact: = d r he Deed of Trust on behalf of the limited liability company ! 444.44t ."F. At. r. ����s910'ry F�.U•Residing at Notary Public In and for the State of ICU J l0 \jOTARY -fu,\ y commission expires i - PUBLIC Ci e `i'q W Ob,94° REQUEST FOR .' `L 1-- -CONVEYANCE To: , Trustee The undersigned is the legal owner and holder of all indebtedness secured by this Deed of Trust. You are hereby requested, upon payment of all sums owing to you, to reconvey without warranty, to the persons entitled thereto, the right, title and interest now held by you under the Deed of Trust. Date: Beneficiary: By: Its: USER PRC Eondlne, Va. 6.30.10.001 Cop. Wand fWndd So7.8e88, t .1807,1008, N R0hls Reared. •WA CACfIHft\601.W TR.18603 PR87 Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 Pg10 1142M6 1111 II II 111 I I tll I 1 IIIIl I I ttltt! I I I!!I 05/ 4 2011 8 02 01P 03/07/2806/0 03 12 48P SPOKANE; COUNTY TITLE CO DT 445,00 Spokane Co, VA Spokane Co, 11R EXHIBIT A PARCEL "A"; .jL—.Q 77,46/. /%1//�Y `/�, _ A 2 i2 /p-7/ c7 ,c) That portio of the Southeast Quarter of Section 33, Township 25 North, Range 44 East of the Willamette Meridian, lyi Northeasterly ofDishman Mica Road; EXCEPT the No vest Quarter of the Southeast Quarter, And Except the Northw: t Quarter of the Northeast Quarter of the Southeast arter; And Except the West 141.2 eet of the Southwest Quarter of the North y st Quarter of the Southeast Quarter; And Except any portion lying witthe bounds of the County Ri t ilg Way as conveyed by Deeds recorded under Auditor's File No. 581841C a . 8809160323, records o pokane County; And Except a portion of the Northeast Q er of the No east Quarter of the Southeast Quarter of Section 33, Township 25 North, Range 44 Past ofth:'Willame • e Meridian, being more particularly described as follows: Beginning at the Northeast corner of said Sou -ast • uarter; Thence South 89 degrees 15'59" West, a10 the No • line of said Northeast quarter of the Northeast Quarter of the Southeast Quarter, 664.71 et to the No west comer of said Northeas tQuarter of the Northeast Quarter of the Southeast Qu er, Thence South 81 degrees 47'37" E 96.48 feet; Thence North 89 degrees 15'59" ast, 282.00 feet; Thence South 84 degrees 39' ' East, 94.71 feet; Thence North 89 degrees 1 59" East, 194.00 feet to the East line o said Northeast Quarter of the Northeast Quarter of the Southeast uarter; Thence North 01 de es 45'47" West, along the East line of said No'fast Quarter of the Northeast Quarter of the Southeast Qy rter, 125.02 feet to said point of beginning; Situate in they unty of Spokane, State of Washington. PARCEL"B" That portion of the Southwest Quarter of Section 34, Township 25 North, Range 44 East of the Willamette Meridian, lying Westerly of Madison Road; Except the North 300 feet thereof; And Except any portion lying within the bounds of the County Right of Way as conveyed by Deeds recorded under Auditor's File No. 581841C, records of Spokane County; Situate in the County of Spokane, State of Washington. PARCEL"C" That portion of the Northeast Quarter of Section 4, Township 24 North, Range 44 East of the Willamette Meridian, lying east of Dishnran Mica Road, North ofThorpe Road and Westerly of Madison Road; Except any portion lying within the bounds of the County Right of way as conveyed by Deeds recorded under Auditor's File No. 8809160323 and 9004120181, records of Spokane County; PARCEL -"D" Lots 8, 9 and 10, Tomlin's Addition to Chester, as per plat recorded in Volume "E" of Plats, page 10, records of Spokane County; Situate in the County of Spokane, State of Washington. Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 Pigg I1tR5t' 6 • `111IlIIlIIIIIIIII Page 137 1 IIIIIIIIIIIIII Page i3 of 13 IIIIIIIIIIIIIII 05/24/2006 02:01P I \I1III I ICo, WA ET $45.00 Spokane C SPOKANE, COUNTY TITLE COC4 Title Order No. 133916 PARCEL "A" That portion of the Southeast quarter of Section 33, Township 25 North, Range 44 East of the Willamette Meridian, lying Northeasterly of Dishman Mica Road; EXCEPT the Northwest quarter of the Southeast quarter; AND EXCEPT the Northwest quarter of the Northeast quarter of the Southeast quarter; AND EXCEPT the West 141.25 feet of the Southwest quarter of the Northeast quarter of the Southeast quarter; AND EXCEPT the West half of the Northeast quarter of the Southwest quarter of the Southeast; . AND EXCEPT any portion lying within the bounds of the County Right of Way as conveyed by Deeds recorded under Auditor's Fite No. 581841C and 8809160323, records of Spokane County; AND EXCEPT a portion of the Northeast quarter of the Northeast quarter of the Southeast quarter of Section 33, Township 25 North, Range 44 East of the Willamette Meridian, being more particularly described as follows: BEGINNING at the Northeast corner of said Southeast quarter; Thence South 89°15'59" West, along the North line of said Northeast quarter of the Northeast quarter of the Southeast quarter, 664.71 feet to the Northwest corner of said Northeast quarter of the Northeast quarter of the Southeast quarter; .'Thence South 01°34'38" East, along the West line of said Northeast Quarter of the Northeast Quarter of the Southeast Quarter, 100.00 feet; Thence South 81°47'37" East, 96.48 feet; Thence North 89°15'59" East, 282.00 feet; Thence South 84°39'42" East, 94.71 feet; Thence North 89°15'59" East, 194.00 feet to the East line of said Northeast quarter of the Northeast quarter of the Southeast quarter; Thence North 01°45'47" West, along the East line of said Northeast quarter of the Northeast quarter of the Southeast quarter, 125.02 feet to said Point of Beginning; Situate in the County of Spokane, State of Washington. Exhibit 3 12-03613-PCW11 Doc 53-3 Filed 12/05/12 Entered 12/05/12 14:06:43 PNO I1�5i595fif6 Appraisal of Real Property Painted Hills Golf Course 4403 S. Dishman Mica Road, Spokane Valley, Washington Client File No.: 12-000767-01 As of November 12, 2012 Summary Report Prepared by: Vicki K. Mundlin, MAI Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 PTS 815 PRINCIPALS Bruce C. Jolicoeur, MAI, President J. Michael Gentry, MAI Vicki K. Mundlin, MAI* Karen K. Meek, MAI Karlene R. Perry, CEO ADVISOR David C. Auble, MAI Real Property Analysts, Counselors & Appraisers) November 20, 2012 Mr. Brett Heidel AmericanWest Bank 110 S. Ferrall Street Spokane, WA 99202 AUBLE,L- OLICOEUR iss„ & GENTRY APPRAISAL ASSOCIATES Gary H. Zahller, CPA, MAI* David K. Adamson, MAI Mark F. Noble Carl C. Durkoop Kari J. Collins Kristin L. Hermann* Kimberly L. Smith Cody L. Hymas RE: Painted Hills Golf Course 4403 S. Dishman Mica Road Spokane Valley, Washington Client File No.: 12-000767-01 Dear Mr. Heidel: At your request, I have analyzed the real property referenced above to determine the Market Value of the Fee Simple Interest as of November 12, 2012. I personally inspected the property that is the subject of this analysis and report on November 12, 2012. The report was issued on November 20, 2012. I understand that you and AmericanWest Bank, as clients, intend to use the results of this analysis as a periodical valuation of the asset. Only you and the stated intended users may rely on the information and opinions expressed in this report and it may not be used for other purposes. The appraisal analysis and the resulting report were prepared in accordance with the Standards of Professional Practice and Code of Ethics of the Appraisal Institute, the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation, and the requirements of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). All applicable valuation approaches were employed and developed at sufficient depth to result in a credible opinion of value. The scope of my research and analysis and the results of the appraisal are described in the attached summary report. The subject of this appraisal is the existing nine -hole regulation golf course, nine -hole executive golf course, driving range, practice facility, and clubhouse known as Painted Hills Golf Course. The 88.94 -acre Painted Hills Golf Course was developed in 1988 between the intersections of Dishman Mica, Thorpe, and Madison Roads, generally south of 40th Avenue within Spokane Valley city limits. The subject property includes three additional 0.87 -acre parcels platted as single-family lots producing a total site area of 91.55 acres. The Painted Hills Golf Course sold in March 2006 at a reported price of $1,850,000, although the real estate was attributed a value of $1,520,000. Corporate Office • 324 N. Mullan Road, Spokane Valley, WA 99206.509-747.0999 • Fax 509-747-3559 *N. Idaho Office • 1023 W. LaCrosse Avenue, Coeur d'Alene, ID 83814.208-292-2965 • Fax 208-292-2971 www.auble.com • email: info@auble.com Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 PZ 8 Mr. Heidel RE: Painted Hills Golf Course November 20, 2012 Page 2 I have analyzed the golf course as a going concern based on historical and potential income production. The owner has filed for bankruptcy; therefore I have not been provided any current information with regard to the number of rounds played, or income and expenses for 2012. The most recent information available is from year-end 2011 financials. Only the exterior of the clubhouse was inspected; however, the interior is reasonably expected to be in similar condition. Information pertaining to the number of rounds played at the subject golf course, for either the regulation course or Par 3 course, has not been provided for prior years either. The gross revenues are combined; therefore, it is impossible to determine which of the two are more popular, or generate greater revenues. The owner has previously stated that the additional maintenance work associated with the Par 3 is nominal, since the adjacent grounds are already being maintained. I have analyzed the property's historic revenue and expenses and do not believe the lack of data associated with the rounds played at the subject significantly limits my ability to value the property as a going concern. In determining the net operating income associated with the going concern I have adjusted the profit and loss statements for tax -related expenses, personal expenses, owner's contribution competitive salary, and for some years, an exceptionally high over/short category. Amortization and depreciation are tax -related expenses included in the profit and loss statements, which should not be included in determining the net operating income of the going concern. Additionally, personal expenses allowed for tax purposes should not be included in the calculation of the net operating income. I have adjusted the operator's statements for automobile expense. The operator provided a description of duties and responsibilities associated with each owner/operator. There are four owner/operators, which are said to work approximately 40 -hour work weeks. Some of the roles and responsibilities appear to overlap. Linda and John McElhinny's responsibilities include planning and oversight of the residential subdivision, which should not be included as an expense of the golf course. I have estimated a competitive salary for the owner's contributions necessary to support the golf course operation at $100,000. The current owners have proposed development of 25 single-family residential lots amid 8.96 acres located at the northwest corner of the property. The single-family lots would incorporate the three 0.87 -acre parcels and a portion of the larger site not currently used for the golf course operation. The owners have submitted a preliminary plat application with the City of Spokane Valley. A moderate size portion of the subject site and immediately surrounding area is designated as Compensatory Storage Areas within flood plains identified by FEMA. Development within the flood plain areas would require mitigation including building sites one foot above the flood plain elevation. The City of Spokane Valley and FEMA updated the flood plain area with the work beginning in 2006. It was finally ratified in July 2010. The amendments to the flood plain area exclude a significant portion of the subject site. The City of Spokane Valley and subject property owners put the preliminary plat application on hold until the proposed amendments were confirmed. AUBLE, JOLICOEUR & GENTRY Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 PtiTi5Y2 Mr. Heidel RE: Painted Hills Golf Course November 20, 2012 Page 3 For the current appraisal, I have re -interviewed Micki Harnois, City Planner, and understand that although substantial work was completed in 2007, there has been little or no progress since the 2010 ratification of the revised FEMA Maps. The plat application still needs the SEPA . review, which will include recommendations regarding neighborhood road improvements and to go through a public hearing. My last interview with Tim McElhinny was in March 2012, when he indicated they are waiting for the residential market to improve prior to moving forward. It is further my understanding from Mr. McElhinny, as well as City Engineers, that substantial improvement to flooding on Thorpe Road near the Chester Creek Par 3 has been made with the relocation of culverts and unclogging of the pipe that allows water to pass beneath the road in this location. Since Thorpe Road represents the south boundary of the City of the Spokane Valley, residents south of Thorpe Road, including the owners of Haase Landscaping in this location, are pushing county officials to deal with the build-up of silt in the Chester Creek floodway that is causing the water to back up both north and south of Thorpe Road. It is my understanding there is no time line or work planned at this time by the County. It is difficult to say what conditions of plat approval would be placed on the proposed development if approved by the City of Spokane Valley. Off-site improvements to existing City of Spokane Valley roads and rights-of-way would be likely. The developer would also be required to extend water lines approximately 400' to the plat boundary. The proposed plat outlines the northwest corner of the existing golf course; however, development would likely result in realignment of the Hole 2 tee box as well as the fairway and green of Hole 3. As will be discussed within this report, the highest and best use of the subject property would be a large phased residential subdivision. Plat requirements would likely be far greater with full development of the site. The property has frontage on three city roads. The City of Spokane Valley would likely require modest improvements and widening of these streets. On November 12, 2012, Vicki K. Mundlin, MAI, personally inspected the exterior of the subject property and subsequently investigated the market for this type of property, as well as other pertinent facts affecting value. Based upon my examination and study of the property and the market in which it competes, and subject to the limiting conditions contained later in this report, I have formed the opinion that the Market Value of the Fee Simple Interest, as of November 12, 2012, is: NINE HUNDRED THIRTY THOUSAND DOLLARS ($910 000) Respectfully submitted, Vicki K. Mundlin, MAI Washington State Certified General Appraiser Cert. No.: 1100856 AUBLE, JOLICOEUR & GENTRY Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 P 4 8T Y2 TABLE OF CONTENTS CERTIFICATION B APPRAISAL PROBLEM, SCOPE OF WORK & INTENDED USE 1 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS5 Region & Community Description 5 Neighborhood Description 11 Market Overview 12 Market Overview — Golf Course 14 Site Description 18 Improvement Description 23 VALUATION ANALYSIS 28 Highest & Best Use 29 Income Approach to Value — Going Concern 32 Land Valuation — Proposed Cottages at Painted Hills Site 39 Land Valuation — Overall Site 43 RECONCILIATION AND VALUE CONCLUSION 48 ADDENDA 49 • Assumptions & Limiting Conditions • Definitions • Subject Photographs • Storhaug Engineering Letter • Land Sale Market Data • Letter of Engagement • Appraiser Qualifications/License Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 12-03613-PCW11 _�= J0LIC0EUR&GENTRY Page a COPYRIGHT 2012 Exhibit 4 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 P 5 81Y2 CERTIFICATION I certify that, to the best of my knowledge and belief: • The statements of fact contained in this report are true and correct. • The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. • I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved. • I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. • My engagement in this assignment was not contingent upon developing or reporting predetermined results. • My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. . • I performed professional services involving the subject property in March 2012. • The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. • The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. • I have made a personal inspection of the exterior of the property that is the subject of this report. • Kayla E. Wilson, Researcher, assisted in writing the property descriptions, collecting comparable data, and confirming comparables. No one else provided significant real property appraisal assistance to the person signing this certification. • I am a Certified General Real Estate Appraiser in the State of Washington. • As of the date of this report, I have completed the continuing education program of the Appraisal Institute. Vicki K. Mundlin, MAI Washington State Certified General Appraiser Cert. No.: 1100856 Valuation Date: November 12, 2012 Painted Hills Golf Course As of November 12, 2012 Page b File # 12636-P18 UBLE,__.._ COPYRIGHT 2012 sJOLICOEUR &GENTRY Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 PfV 8 APPRAISAL PROBLEM, SCOPE OF WORK & INTENDED USE CLIENT: Mr. Brett Heidel AtnericanWest Bank 110 S. Ferrall Street Spokane, WA 99202 OTHER INTENDED USERS: AmericanWest Bank. ANALYST/ APPRAISER: Vicki K. Mundlin, MAI Auble, Jolicoeur & Gentry 1023 W. LaCrosse Avenue Coeur d'Alene, Idaho 83814 INTENDED USE OF ANALYSIS AND REPORT: X Financing Comments Pricing for Purchase/Sale Internal/Business Condemnation Litigation Support '`Other REPORT TYPE: Self -Contained Comments X Summary Restricted Use APPRAISAL PROBLEM: Value Conclusion(s) Effective Date Comments X Market Value November 12, 2012 Prospective Mkt. Value -Completion Prospective Mkt. Value -Stabilization *Other INSPECTION DATE: X November 12, 2012 REPORT DATE: X November 20, 2012 INTEREST VALUED: X Fee Simple Comments Leased Fee Leasehold PROPERTY CHARACTERISTICS: Bare/Undeveloped Land Comments X Existing Building/Improvements Proposed Construction COMPETENCY: X Knowledgeable & competent in market and valuation techniques. Comments Took special measures under Competency Provision of USPAP (see comments) Painted Hills Golf Course . As of November 12, 2012 File # 12636-P18 ]0LIC0EUR&GENTRY Page 1 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 PT 8M APPRAISAL PROBLEM, SCOPE OF WORK &INTENDED USE SCOPE OF RESEARCH AND ANALYSIS: X Inspected exterior of property; X Measured improvements or verified improvement measurements; X Gathered and analyzed assessed value, property taxes, govt. regulations; X Assembled and analyzed economic and demographic data; X Interviewed individuals familiar with values, sales, and trends in the market; X Gathered and analyzed land sales data; determined value of site as vacant; X Gathered and analyzed data; developed Income Approach; X Gathered and analyzed data; developed Sales Comparison Approach. ASSISTANCE BY OTHERS: X Kayla E. Wilson provided market research assistance. Vicki K. Mundlin, MAI, inspected the property, conducted the necessary research, developed the analysis, and wrote the report. PERSONAL PROPERTY: X No Personal Property included. Comments Personal Property necessary for successful operation is included. SPECIAL APPRAISAL PROBLEMS: None. EXTRAORDINARY ASSUMPTIONS/ HYPOTHETICAL CONDITIONS: General Assumptions and Limiting Conditions are included in the Addenda. The owner has filed for bankruptcy; therefore, I have not been provided any current information with regard to the number of rounds played, or income and expenses for 2012. The most recent information available is from year-end 2011 financials. Only the exterior of the clubhouse was inspected; however, the interior is reasonably expected to be in similar condition. LEGAL DESCRIPTION: I have not been provided a legal description of the subject property. The Spokane County Assessor's Office legally describes the subject parcels as follows: Parcel 44041.9144: GOVT LT 1 LYG E OF CPH EXC W45FT & EXC THORPE RD & EXC MADISON RD. Parcel 45336.9191: PTN OF SE1/4 SEC 33 & PTN OF SW1/4 SEC 34 DAF; BEG AT E1/4 COR SEC 33, TH S ALG E LN TO SE COR OF THE GREENS AT MIDILOME PUD & TRUE POB, TH WLY ALG S LN OF SD PUD TO E LN OF NW1/4 OF NE1/4 OF SE1/4, TH S TO SE COR OF NW 1/4 OF NEI/4 OF SE1/4, TH W ALG SD S LN TO NE COR OF TOMLINS ADD TO CI -IES 11.R, TH S ALG E LN 145.57FT M/L, TH E 141.25FT, TH S519.431.1, TH W471.25FT, TH S TO NELY R/W OF DISHMAN-MICA RD, TH SELY ALG SD R/W TO S LN OF SEC 33, TH E ALGS LN TOS COM COR OF SEC 33 & SEC 34, TH CONT E ALG S LN OF SEC 34 TO WLY R/W OF MADISON RD, TH NLY ALG WLY R/W TO PT 300FT S OF N LN OF SW 1/4 OF SEC 34, TH W TO W LN OF SEC 34 PT BEING COM LN OF SEC 33 & 34 PT BEING COM LN OF SEC 33 & 34, TH N ALG COM LN TO POB. Parcel 45334.0108: TOMLINS ADD CHESTER L8. Parcel 45334.0109: TOMLINS ADD CHESTER L9. Parcel 45334.0110: TOMLINS ADD CHESTER L10. OWNER (S): IWILL 70 Properties. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 1JBLE,e�_- 10LIC0EUR&GENTRY Page 2 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 Pg 8 APPRAISAL PROBLEM, SCOPE OF WORK & INTENDED USE SALES HISTORY: The current owners purchased the subject property for $1,520,000 in March 2006 from Michael Senske. EXPOSURE TIME: "The estimated length of time the property interest being appraised would have been on the market prior to the hypothetical consummation of a sale at market value on the effective date of appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. Exposure time is always presumed to occur prior to the effective date of the appraisal."' The exposure time is similar to that of the marketing time; however, this analyzes a retrospective marketing time. The exposure time is the necessary retrospective marketing time to produce a transaction as of the effective date. Market conditions have been generally poor for four years. An exposure time slightly longer than the marketing time would be necessary. I have concluded an exposure time for the highest and best use as a residential subdivision near 24 months. MARKETING TIME: "The time it takes an interest in real property to sell on the market subsequent to the date of the appraisal."' The subject property is a large acreage site located at the southern extent of Spokane Valley city limits. The property is currently operated as the Painted Hills Golf Course including a nine -hole regulation golf course, nine -hole executive Par 3 course, driving range, practice facility, and clubhouse. There is limited supply of public golf courses available in the subject's immediate area. The few sales that have occurred after 2007, transferred as redevelopment opportunities with a highest and best use as vacant rather than a going concern golf course. The analyzed sales reflect marketing times near one year. As the sales transferred with a highest and best use as vacant, the marketing time does not reflect that of a golf course. Similarly active listings are marketed as redevelopment opportunities in which the golf course's net operating income does not support the listing prices. The analyzed listings reflect one- to two-year marketing times, although the real estate agents do not anticipate sales at the current prices. A marketing time of 12 to 24 months is estimated if the highest and best use was the going concern. In the analysis of the subject property I will conclude a highest and best use as a large scale residential development. There have been few such sales in the subject market. The most recent, similarly sized, residential development sale in the Spokane County market was a bank owned property that transferred in 2012 with some element of duress. The other most recent transfer without duress was in July 2009. This property was originally negotiated as a joint venture with the existing property owner. The property sold as an arm's-length transaction, although at the previously negotiated joint venture price. The most recent transaction occurred in 2011 at a relatively high price. It was purchased by the adjacent land developer who had a strong familiarity with the immediate neighborhood and had developed adjacent plats. Appraisal Institute, The Dictionary of Real Estate Appraisal, Fifth Edition, 2010. a lbid Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 12-03613-PCW11 BLE, ?Y=tiaJ0LIC0EUR & GENTRY Page 3 COPYRIGHT 2012 Exhibit 4 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 PV $t APPRAISAL PROBLEM, SCOPE OF WORK & INTENDED USE Painted Hills Golf Course As of November 12, 2012 Page 4 File # 12636-P18 AUBLE,� COPYRIGHT2012 ss )OLICOEUR&GENTRY Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 P9118(912 2 Development is generally deemed infeasible in present market conditions, and the large size of the subject property would produce a relatively long future development process. The subject property benefits from an interim use producing income while residential market conditions improve. The going concern is currently operated as a family run business and would require expertise or management to maintain the income production. A marketing time of 18 to 24 months would be necessary. DEFINITIONS: Definitions are in the Addenda. Painted Hills Golf Course As of November 12, 2012 Page 4 File # 12636-P18 AUBLE,� COPYRIGHT2012 ss )OLICOEUR&GENTRY Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 P9118(912 2 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS REGION & COMMUNITY DESCRIP'T'ION Region Location Map Spokane, Washington, is the second largest city in Washington State and the largest city in a region known locally as "The Inland Northwest," an 80,000 -square -mile area spanning eastern Washington, the Idaho Panhandle, northwestern Montana, and portions of two Canadian Provinces. Over 1.5 million people reside in the Inland Northwest. Spokane County, Washington, and Kootenai County, Idaho, form a metropolitan area with a combined population of over 600,000. Interstate 90 extends east and west through the metropolitan area, connecting Spokane, Washington, and Coeur d'Alene, Idaho, located approximately 30 miles apart. The Spokane -Coeur d'Alene metropolitan area is the primary economic, service, retail, and cultural area in the region. POPULATION Spokane County's population increased 56,606 or 15.7% between 1990 and 2000. Population growth moderated to 53,282 or 12.7% over the next decade, far greater than 9.6% growth in United States population but less than the 14.1% change in Washington State population. With its aura as a resort area, Kootenai County's population increased 28% over the same decade. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 ,;, J0L1C0EUR & GENTRY Page 5 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 Pf9 1111°18 2 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS Population projections released by Washington State in May 2012 (most current available), in compliance with Washington's Growth Management Act, predict a 25.8% increase from 2010 to 2040, or approximately 0.86%/year for Spokane County. PER CAPITA INCOME & MEDIAN AREA INCOME Per capita income and median area income are summarized in the adjoining graph. Per capita income in Spokane County is 83.35% of the Washington State average, due in large part to the limited manufacturing in the community compared to the Puget Sound area. According to the United States Department of Housing and Urban Development the median income for 2011 is $62,100 and 2012 is predicted to be $62,900. ,,-' atIffeRM -1 8. , .. j? ..- IT Tr O. t r w4p1-' . tpkrt se i• „, . 4, .„.. i , a T ,,, 'CC". t 4 - if, of • A 14, 417,1N • - 't .. ......' .. r 'q , ::. 1, -i,..— 7 '. " ' - Cril az- i - a w-, %. t fl EMPLOYMENT The adjoining graph illustrates the dominance of regional trade and service related businesses which account for over 88% of nonagricultural jobs. Of these, education and health services are the largest industry accounting for 20% of non-farm employment and 22.5% of services, reflecting the importance of the medical care industry in the local economy. Comparing August 2012 to August 2011, total non-farm employment increased 1.33%. Within the same time comparison professional and business services increased 9.5% and government decreased 1.89%. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 AULE— ==j0LIC0EUR &GENTRY Page 6 COPYRIGHT 2012 Exhibit 4 12-0361 3-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 P9MII9gf42 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS Government related employment is 18% of non-farm jobs. Fairchild Air Force Base, located just west of Airway Heights and 11 miles west of downtown Spokane, is the area's largest employer with nearly 5,800 employees. At its peak in 1997, manufacturing contributed 22,300 jobs and 12% of the nonagricultural ment base; manufacturing for 7% of employment. employ - today, accounts area ,t 2 rte, rx } Ty -R }.tip 4 {T'r" V Y. ti lye la P �"•. rte' ; � Y J yh1 �r .c y ,-1.j3'v ''�5 i,. f ``� i Grp lcgh4t1s�tY orf Y n o r } k d9 1 D3 z fit! r . f+u5iiti � i±',tt 1 �v> � �e(d,R. tlt rt.c7;€a. . '�t Y- �`"%i i } } € ' Jt �.Oclll; om z `ui S l 1�fL 4,3115A 3 11/ v e - g' t r'1f' cf?t rF`}4F ha k �yi' ,1's T `• r ■$p��-l■ . 10�CJ _.,. 'J !1M _'tJe. 310 i jllt t ate s tf r�!-i Manf6a<turink, I t -1470 14 d �f aS954'Si 4 �1 .. I VJhotes 11,:0gra11'. 6.67 z•,Zg5tlQ ,i - 6 n 891�QI1 e -4Z 35;A , e 'i�v 3F ; d Transp,J Dare .r .- t {lies - .` 'f r Si90dk 6ti; ! dpi 'it .. df KOi K '}n hist t .n '4411.01,04 4fhvf'Ve,{�(IrJa r609r. t yY{��(f �- lli T��aIg9Q0�n'.' '?`.f 41'� 9g0+j� �t Prat �nrl Ir iiite(s 1N 1 1 +e ji !bu y' ,l9r- .'� �JJ 1 ats ,`;� ch eal a. �iel4 �'y2 -1W �t' 1J £w?7..t. ;y, 'n^I �I }' I � `9.4 's' ;' � r(lti tj i5 y f 1 l 43 ! P! �t alfa ��li �t i�� q a 11 � ' � 17� �� �i 't++1.1 E I A Sf'i .i . ��te,t� ��a�' "�F� ��1��� �Jf���: '. �7/}a r j t'300.'1f11'1 �Y IY1 S>ik��V� rt-�'., 1 (,:.a I�jJ,00�.�v4,f��4fli d a C J;; � �� ,3y� �I tt'LVir'i,,�fi_ i l`` '',}o2�ra411 $ 7 iG"'rT'�wd a� ,1 %, S. e1p�6{4 / •1'7,:+,4 3E- }£ 716 t t1 iGtli. /1�' p�Jy q. Pr* '° �,y�,'.`J ti< I' lyj 1,�p Spokane's labor force grew over 13.6% between the years of 2000 and 2009, peaking at a 239,900 average in 2009. By year end 2010, the average labor force declined 2,400 or 1% from the 2009 peak. In 2011, the labor force averaged 233,305 or 4,195 lower than in 2010 and the lowest level since 2006. The declining labor force softened unemployment to a 9.1% average in 2011, 52 basis points (0.52 percentage points) lower than in 2010. The average unemployment rate through August of 2012 is 9.23%; that's an increase of 14 basis points since year-end average of 2011. p��i'�r v �2s� �t s f� t -'i ., thr'u'u ut(rrte art�>nv] ear'E, Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 12 -03613 -PCW 11 Doc 53-4 AUBLE,s..—_ '- „ -JOLICOEUR&GENTRY Filed 12/05/12 Entered Page 7 COPYRIGHT 2012 Exhibit 4 12/05/12 14:06:43 Pan 113°d 1 REGION, COMMUNITY, NEIGHBORHOOD &PROPERTY DESCRIPTIONS : :n Ale 92nd Air Refueling wing (Fairchild AFI3) Spokane Public Schools Providence Sacred Heart Medical Center City of Spokane Spokane County Deaconess Medical Center URM Stores Walmart Stores Central Valley School Dist. • Comm. Colleges of Spokane Gonzaga University West Corp. Eastern Washington Univ, Avista Corporation US. Postal Service Kaiser Aluminum Trentwood Providence Holy Family Hospital Spokane County Ma'or Employers Ranked by number of full-time equivalent employees ktbr6:111 afeiffaft6iffidliakVaiKree,,, j'ese4"" oI Govt. Educ. Health Govt Govt. Health Retail Retail Educ. Educ. Educ. Call Center Educ, Utilities Mall Delivery Ind. Health 5,794 3,191 3,138 2,008 1,929 1,418 1,347 1,332 1,248 1,193 1,134 1,122 1,088 1,012 891 850 844 Inland NW Health Services PAM! SpokaneVA Medical Center Group Health Eastern State Hospital Sterling savings Bank Ecova Triumph Composite Systems Jubilant Hollister -Stier Inland Imaging Trans -System Inc. Itron Inc. Spokane Transit Authority Valley Hospital West Valley School District Washington Trust Bank Whitworth University Health Health Health Health Health Fin. Energy Manuf./Aerospace manuffHealth Health Transp. Tech. Public Trans. Health Educ. Finance Education 835 831 818 726 659 652 560 560 553 546 529 514 489 485 485 470 450 Source:Journal of Business, Dec. 15, 2011 annually updated TAXABLE RETAIL SALES Wholesale and retail trade comprises 17% of the employment base making the trend in taxable retail sales a significant economic indicator. As the adjoining table illustrates, taxable retail sales grew at a healthy pace peaking in 2007, and declining in each subsequent year. Retail sales in 2010 were 12.1% lower .. • ' le, '-• '_ ..g.- z.d, • rij '.-.P' ,..... ,,,,---.1i whq, .,-.iff ''' l• ' .d -4 b - . 13 rce Wa WI .. *FP 'kJ. -, -...-,;.,_ ' '-.4 a . - 4, ti- ' eicp. -4 •c, 17....0,:; , . fE: - _..1 ,:..., , t•-•-, 4— -,- , ..N. . -''''' 6 '" . . Ni 1. -2'711 . I I fr. . . . o -..-v ..- i . .. i -.--,, z ut • . - * A-- "a- ' r -.5 ,f 7;*,,„4 - • - - . _ - it -7,- -vA•44 r, ...,,, ,_ r et.: .. 8. ' . 1,1'H; ...,„W .;."-Mgia!Plm . t . .-, , : : 1, .. ., : , 2 : r. ) , '•_ • . . WA ow - sr ---, .z yr, ...gtqry t , __..a, _ : Ti..: 1,1 Re . , ....,.." . _ i-, 4,09 • .• 41 Pr: :, '1'851 than s -- than in the 2007. The steep pace of decline in 2008 and 2009 slowed in 2010; retail sales in Spokane County decreased 1.1%, similar to decreases in the Cities of Spokane and Spokane Valley. Sales in Spokane County for 2011 were $6.901 billion, 2.16% higher than in 2010, suggesting some recovery in this important economic metric. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 12-03613-PCW11 OLICOEUR &GENTRY Page 8 COPYRIGHT 2012 Exhibit 4 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 P99a /AWL REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS CONSTRUCTION ACTIVITY As presented in the adjoining graph, total building permit valua- tion peaked in 2006 due in part to two large projects: the Davenport Tower Hotel and the Gonzaga University Baseball Stadium. The total value of permitting declined nearly 22% in 2007, leveled out in 2008 and then dropped nearly 29% in 2009. Although permitting has increased in each subsequent year (2011 was 5% higher than in 2010), total permitting in 2011 was only 8% higher than in 2000. Through September of 2012 total building permit valuation for Spokane County tripled compared to the same timeframe for 2011. This included two major public projects including Cheney Elementary School and two smaller commercial projects. Housing construction, which comprised much of the activity in 2004, 2005 and 2006, continues to remain weaker than that tiine. fa'. 41-1...1;4,. .,- -',', jit!r • ' ..,1 ig „ ,J it: ' ' _ '6'41r:!-- 1 ii-4:;1415A02We."VIA TIgl--1`,.rnl'• - - ,t,' 1 " --WI- 14.-11,., r .... - 0, 0 #n,,,,,,,.. ' ' „ , * ,,,- ... ", ,. ,.,' . 0, :t .0. ..,. t.. .., '-‘ .,,S' ' -1; ' , F.,`RIA,',.,' ' ' • 1-," . lagAlif; ' , - . • . • ... • ....• 1 -7'''" - Nu ',...: 14 .--• ' - " , - - * . ITII . '1.2 V lt '" 0.C4:6' -g 4,2g4,7 NJ Ir,; •''' -I, 40 4 , 3 ., , , • B ref, 1, ' -79 3r1 r3 • lg.- 4 ,.. , - II117" .,, h- ''''ZtVA $1" ...' 1V,,_, 14,,„ MI ..„...., ' • 4; _,,, t. - '-,, -,,:o ‘ B /4,•-ato . ,-,,,,firt..4.„, ,, ; . ,.. fiL-_, , ktok • - "„;sti. ,K_ 0,4,-.-01,sjtjtial4.'.. 1.14).$2 . • 1:‘,„ • HOME SALES As shown in the adjacent table, home sales peaked in 2005 at 8,200 units, 5.7% higher than 2004 levels. Sales activity has declined in each subsequent year, falling to 4,020 units in 2011, or 49% of the peak level. The average home price in 2011 was -8.2% lower than in 2010 and -20.8% lower than the $211,562 peak in 2007. Comparing the first 10 and a half months of 2012 to the same units sold and a 3.3% increase in the average sale timeframe in 2011, there is a 11.3% increase in total price. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 TY,3,t40LIC0EUR & GENTRY Page 9 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 P9sa g4 ,,, ,ia..7.,,11,1.. , '‘f -- oka e -C • - -10 ..,,ts--,,,,r.--•- , . 1 Eit-el, .,:- 1,i,, '1" - F1' ,.. , , 1 . lit '-.. -.AV , A., 1- ..,- ....0 - —' , ' r3 ' oF; if tI. • *; "41`.` , ".. ; ; 11 ---- . . -7,,, A - lti tt ,:,.7 ,,,,,, . _. . k ' , - ' ,-:? APA ... -r. '' 'Wb ' '''''' -. ta41W91,1-:# • 1,. g,n, q' ,— ,o' , ' . • ':i-4.-,;..- :ft,P:',- ‘'' i',„_.. -i ;TIN,iii;-_,:it,,tg• - si4iiipir$143.., ,5 . l';' ''' bt4! 11 .- 067 — - ‘?--r timeframe in 2011, there is a 11.3% increase in total price. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 TY,3,t40LIC0EUR & GENTRY Page 9 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 P9sa REGION, COMMUNITY, NEIGHBORHOOD &. PROPERTY DESCRIPTIONS GROWTH PROSPECTS & LIMITATIONS Larger communities in Spokane County plan under the Washington State Growth Management Act, which stipulates that each county must adopt a countywide Comprehensive Growth Plan and identify a 20 -year Urban Growth Area (UGA). Areas subject to UGA regulated planning must demonstrate the fiscal ability to provide all urban services, such as sewer and water, within the UGA for a 20 -year horizon. With few exceptions, development outside the 20 -year boundary may not exceed one dwelling unit/10 acres. The Growth Management Act (GMA) has forced development into Spokane County's urban areas. Residential development density has increased from the two to three lots/acre density common before the GMA to four to five lots/acre after the GMA. This higher density is a more efficient use of both the land and of municipal services. LIKELY TRENDS — SHORT TERM Spokane's economy grew strongly from 2003 through 2006, spurred in large part by migration from larger markets driving demand for homes, recreational properties, and retail goods and services. Economic growth slowed in 2007. Manufacturing, construction, and retail sales declined into 2008, 2009 and continued to decline into 2010 and local unemployment hit near record levels. For 2011 there was a slight increase in taxable retail sales and the unemployment levels are slowly rising. Migration from California and other highly populated areas drove much of the area's growth in the middle years of the past decade. Not surprisingly, in the face of poor economic conditions and declining home prices, migration has slowed constraining the local economy. Residential real estate sales are affected directly; visible evidence includes several large new but mostly empty condominium developments targeted at second- or third -home buyers. Lot platting, new home construction and sales of existing residential property will remain at low levels for at least two years. Retail sales declined in 2008, 2009 and 2010, creating a drag on employment and on local government budgets. While not insulated from national trends, the impact of the current national recession was evident in larger markets far before reaching Spokane and the Inland. Northwest in early to mid -2008. Markets such as Seattle, Washington; Portland, Oregon; and Boise, Idaho (which is smaller than Spokane) grew more rapidly. Boise has suffered a more severe contraction than the greater Spokane market while Seattle and Portland have rebounded. The Spokane/Coeur d'Alene corridor still offers relatively inexpensive real estate and a well-trained labor force making it relatively attractive. The prospects for growth in the next decade remain on par with other communities in the Pacific Northwest. Painted Hills Golf Course As of November 12, 2012 Page 10 File # 12636-P18 AUBLE,Ega.—_ COPYRIGHT 2012 R ii=JOLICOEUR&GENTRY Exhibit 4 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 P2 11%°912 12-03613-PCW11 REGION, COMMUNITY, NEIGHBORHOOD &PROPERTY DESCRIPTIONS NEIGHBORHOOD DESCRIPTION Neighborhood Map located in an attractive, suburban residential neighborhood immediatel t city li ' s of Spokane Valley. This location is approximately 10 miles east of the . .ne n .usiness District (CBD), five miles east of the Spokane city limits, four miles southeast of te Pines Road/Interstate 90 Interchange (I.90), and about 2.5 miles south of Sprague Avenue, the primary east/west commercial strip in Spokane Valley. The larger neighborhood is generally bound by Dishman Mica Road and residential development to the west, Conklin Road on the east, 32' Avenue on the north, and the imaginary extension of East Jackson Road on the south. This neighborhood includes densely developed suburban -style residential subdivisions, multi -family housing, large acreage residential tracts, and supportive commercial improvements at or near major intersections. A portion of the neighborhood, generally within Spokane Valley city limits, is served by public utilities including sewer, water, natural gas, telephone, electricity, and cable television. There are some areas that are still on private septic systems. Police and fire protection are good throughout the neighborhood, and the overall appeal of the neighborhood is strong in the single-family market. The subject neighborhood is in the Central Valley School District. Chester Elementary and Horizon Junior High Schools are located on the east side of Pines Road, in the vicinity of 38th Avenue. The new University High School is located at the southeast corner of Pines Road and 32"d Avenue. Midilome East and Pine Rock Ridge are located east of the public schools. The Opportunity Cemetery Association owns approximately 66 acres located along the west side of Highway 27 and north of the subject site. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 �AUBLE,� J0L1C0EUR & GENTRY Page 11 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 P9M 11770 f 2 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS The residential improvements in the neighborhood are approximately 90% single-family residences on city lots, although there are some gentleman farms on small tracts, with duplexes and apartments intermixed. Most of the improvements have been constructed since the 1950s, with the majority of residential construction taking place in the 1970s and 1980s. These subdivisions range from good quality, entry-level homes to some older and smaller but well- maintained homes. The newest residential developments are typically located on, relatively level, former farmland mostly south of 32'"Avenue. There is some commercial development at the intersection of Highway 27 at 32' Avenue. This includes a small convenience store with adjoining retail bays, a self -storage facility which has recently expanded, and some older apartment complexes, as well as some duplexes and new four-plexes. Also, at that intersection is a newer Albertsons grocery store, bank branch, and strip retail building. The intersection of Dishman Mica and University Roads, north of the subject property, has been improved with a gas station and self -storage facility. Other commercial and industrial uses have been developed along Dishman Mica Road with the majority of development occurring north of the subject neighborhood at the intersection of Sprague Avenue. The earlier Midilome subdivisions, consisting of eight additions, are located between Bowdish Road and Pines Road, and 32" Avenue and the Painted Hills Golf Course. These moderately - priced lots with single-family homes have been fully developed and completely sold. The Greens at Midilome is a 41 -lot subdivision located along the north side of the golf course. This subdivision targets emptynesters and provides amenities such as security entrance gates, green belts, and golf course views. Aspen Creek was developed in June of 2005 within the small residential portion of the subject neighborhood immediately west of Dishman-Mica Road. The development targeted a relatively high price point with some lots providing significant views over Dishman Mica Road. The first phase of Elk Ridge Heights is complete and additional phases are proposed. This project is located west of Highway 27, between 44th Avenue and 46`'' Avenue. This was a large scale development of 137 lots completed in August of 2007. Only 10 lots have absorbed since completion of the development, and the property was eventually transferred to the bank through foreclosure. The Bella Vista and Belle Terre developments are located to the east of the subject property on the east side of Highway 27 near 44' Avenue. MARKET OVERVIEW Spokane County platting activity far outpaced residential building permits between 2004 and 2008 with 11,500 lots platted and only 10,073 single-family building permits issued, creating significant oversupplies throughout the market. Platting activity decreased sharply in 2008, 2009, and 2010, although building permit activity remained very low. In 2009, 2010, and 2011, building permit activity outpaced platting activity. This trend has continued into the first quarter of 2012. Through the first three months of 2012, only 43 lots have been platted. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 UBLE,�_ OLICOEUR &GENTRY Page 12 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 Pim r3o 8 2 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS A study of sales activity for areas A210, A211, A220, A221, A612, and A622, reported through the Multiple Listing Service (MLS), is analyzed in the following table. Total new home sales reported through the MLS in the subject market were 54 in 2010 and 48 in 2011, and 32 year- to-date in 2012. The 2012 annualized data indicates slightly lower overall year-end activity being likely for both new and total home sales. Spokane County -South Quadrant less Than - 5120,000 5120,001 - 5150,000 $150,001 -$175,000 $175,001 -$200,000 $200,001 - 5250,000 $250,001 - $300,000 $300,001 - $350,000 5350,001 -$400,000 5400,001 plus Total Sales 0 0 1 6 21 10 5 4 7 136 108 103 107 156 101 56 28 85 15% 12% 12% 12% 18% 11% 6% 3% 10% 0 0 2 6 15 8 3 3 11 182 123 117 88 137 86 47 22 75 21% 14% 13% 10% 16% 10% 5% 3% 9% 0 1 2 4 8 10 4 2 1 106 95 100 83 125 67 45 26 50 15% 14% 14% 12% 18% 10% 6% 4% 7% 54 880 100% 48 877 100% 32 697 100% g441ci t` t '-'5' kt Syll ltIF -,,, 1.* i .M l r IV x! vg`s 7;• r��{r/F. ., A -r tmg_sf= Y&� 7}$ F 3, d�J NW a �' stifi ry .� _ Tngs P< =�Sat). _ r ,� Less Than - $120,000 0 42 10% $120,001-$150,000 0 40 9% $150,001-$175,000 4 36 8% $175,001 - $200,000 8 45 10% $200,001 -$250,000 14 88 20% $250,001-$300,000 10 60 14% $300,001 - $350,000 4 26 6% $350,001 - $400,000 7 34 8% $400,001 plus 6 71 16% Total Listings 53 442 100% I am aware of over 450 existing lots in the subject market at a variety of price points. The result is a total of approximately 503 existing lots and new home listings, which results in a supply of over 10 years, assuming an average of 50 homes sales per year. This estimate is likely overstated as some of the vacant lots are accounted for in the new home listings inventory. A more realistic estimate is four to five years. Although there are nearly 1,000 proposed lots in the subject's market, as developers have seen a significant reduction in residential sales and at lower prices over the past several years, many proposed projects have been held back until market conditions improve. It appears that there is minimal room for inventory to be added to the subject market. Painted Hills Golf Course As of November 12, 2012 . File # 12636-P18 AUBLE,- .., J0LIC0E;R&GENTRY Page 13 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 Piga 1%°cl$'�2 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS MARKET OVERVIEW — GOLF COURSE The going concern value as a golf course is based on its expected future performance. This is directly affected by the subject's market conditions and the property's position within that market. The following market analysis begins by introducing current and relevant market data gathered during this and prior assignments within this market. The data below provides a basis for the subsequent market analysis. Painted Hills Golf Course is a nine -hole regulation golf course with various practice areas. The subject is the only regulation golf course in Spokane Valley; however, many additional courses are located nearby. Painted Hills competes within a primary market of Spokane County including the Cities of Spokane, Spokane Valley, and Liberty Lake. This incorporates a 10 -mile radius around the Painted Hills Golf Course. I have analyzed the subject's primary market area as a 10 -mile radius; however, the 20 -mile and 30 -mile radii will also be addressed. A copy of the trade area map with rings for 10-, 20-, and 30 -mile radii is shown below. The 20 - mile radius brings Post Falls into the competitive market, while the 30 -mile radius incorporates Rathdrum, Coeur d'Alene, and areas around Lake Coeur d'Alene. Golf Courses within a 10 -20 -30 -Mile Radius The Site To Do Business web site, using data from ESRI, provides economic and population demographics trended from Census Data. The demographics for the subject site are shown on the following page, beginning with population and household trends. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 ' Aer'E,� j0LlCoEUR&GENTRY Page 14 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Entered 12/05/12 14:06:43 P99a NAt852 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS POPULATION TRENDS - Painted Hills Competitive Market 10 -Mile Radius 20 -Mile Radius 30 -Mile Radius Year Population Year Population Year Population 2010 275,312 2010 484,310 2010 612,813 2011 277,281 2011 489,416 2011 619,705 2016 289,972 2016 515,903 2016 652,961 I have also analyzed median household income for the three radii as shown in the chart below. The median income remains relatively the same within the three competitive market areas, although increasing slightly in the 20- and 30 -mile areas. This accounts for slightly higher median incomes in the Post Falls and Coeur d'Alene markets. Household income is a good indicator of spending power, as it relates to discretionary items such as golf. The median income is approximately $5,000 to $7,000 less than national averages. There is a fair amount of golf played in the Spokane County area, although discretionary funds have decreased throughout many households with the recent downturn in the economy. 2011 POPULATION AND INCOME - Painted Hills Competitive Market 10 -Mile Radius 20 -Mile Radius Population 277,281 489,416 Households 113,364 194,214 Average Household Size 2.45 2.52 Median Household Income $42,551 $44,972 30 -Mile Radius 619,705 245,073 2.53 $44,609 Existing Competition The chart on the following page summarizes existing golf courses within the competitive trade areas of the subject property. There are 33 total courses with a mix of nine- and 18 -hole courses including regulation and Par 3 courses. There are a total of 531 holes in the larger 30 - Mile Radius, producing an 18 -hole equivalent of 31 courses. There are 135 holes in the 10 -mile radius with an 18 -hole equivalent of eight courses. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 12 -03613 -PCW 11 Doc 53-4 =:It a.JOLICOEUR&GENTRY Filed 12/05/12 Entered 12/05/12 Page 15 COPYRIGHT 2012 Exhibit 4 14:06:43 Pifia X111 (38f852 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS EXISTING GOLF COURSES - Painted Hills Competitive Market 10 -Mile Radius 1 Painted Hills 2 The Creek at Qualchan 3 Esmeralda 4 Hangman Valley 5 Liberty Lake 6 Meadowwood 7 Manito Country Club 8 Trailhead Par 3 9 Chester Creek Par 3 TOTAL 18 Hole Equivalent Courses 20 -Mile Radius 1 Indian Canyon 2 Downriver 3 Wandermere 4 The Fairways 5 Sun Dance 6 Spokane Country Club 7 Pine Acres Para 8 Prairie Falls Golf Course 9 Links Golf Club 10 Circling Raven 11 The Club at Black Rock 12 Highlands Country Club TOTAL 18 Hole Equivalent Courses 30 -Mile Radius 1 Antler Springs 2 Ponderosa Springs Par 3 3 Avondale Golf Club 4 Coeur d'Alene Public 5 Coeur d'Alene Resort 6 Deer Park Golf & RV Resort 7 Gozzer Ranch 8 Hayden Lake Country Club 9 Hayden Lake Country Club -Junior 10 StoneRidge 11 Tekoa Golf Club 12 Twin Lakes TOTAL 18 Hole Equivalent Courses 33 Grand Total 18 Hole Equivalent Courses Spokane Valley, WA Spokane, WA Spokane, WA Spokane, WA Liberty La ke, WA Liberty La ke, WA Spokane, WA Liberty Lake, WA Spokane, WA Location Spokane, WA Spokane, WA Spokane, WA Spokane, WA Spokane, WA Spokane, WA Spokane, WA Post Falls, ID Post Falls, ID Worley, ID Kootenai County by boat Post Falls, ID Chattaroy, WA Spokane, WA Hayden, ID Coeur d'Alene, ID Coeur d'Alene, ID Deer Park, WA Kootenai County by boat Coeur d'Alene, ID Coeur d'Alene, ID Blanchard Tekoa, WA Rathdrum, ID 9 18 18 18 18 18 18 9 9 135 holes 8 Holes 18 18 18 18 18 18 9 18 18 18 18 18 207 holes 12 18 9 18 18 18 18 18 18 9 18 9 18 189 holes 11 531 holes 31 Daily Fee Daily Fee Daily Fee Daily Fee Daily Fee Daily Fee Private Daily Fee Daily Fee Remarks Daily Fee Daily Fee Daily Fee Daily Fee Daily Fee Private Daily Fee Daily Fee Daily Fee Daily Fee Private Daily Fee Daily Fee Daily Fee Daily Fee Daily Fee Dally Fee Daily Fee Private Private Private Daily Fee Daily Fee Daily Fee Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 AUBLE,tI — i:=J0LIC0EUR&GENTRY 12-03613-PCW11 Doc 53-4 Filed 12/05/12 Page 16 COPYRIGHT 2012 Exhibit 4 Entered 12/05/12 14:06:43 P15T Ho 8 2 REGION, COMMUNITY, NEIGHBORHOOD &. PROPERTY DESCRIPTIONS Demand Analysis: To understand golf demand, I have reviewed numerous trade publications, including those provided by the National Golf Foundation, SGA, and Pellucid Corporation. Further demographic highlights include the fact that the majority of core golfers are male, and that this segment of demand has decreased. Golf has failed to grow the junior golf, or female golfer segment, and there is increased competition from the entire digital world, and numerous other recreational opportunities. National Rounds Report Summary 2006-2011 Census Region 2006 Northeast 1.5% Mid Atlantic 1.1% Southeast 4.5% Central/S. Florida 3.4% Gulf Coast 2.6% S. Central 0.3% Lower Midwest -0.5% Upper Midwest -0.3% Mountain -0.8% 0.8% Southwest -1.1% 0.4% NgiEljwes ;_.5, is;;z , 1012 t4 2007 1.5% -0.7% 2.0% -0.8% -3.6% -6.8% -1.7% 1.2% Census Region Pacific ; Mountain West N. Central East N. Central South Central South Atlantic Mid -Atlantic New England U.S. 2008 /if -2.5% -4.7% -1.7% 0.9% -3.5% -2.0% 0.0% -1.8% 2009 2010 -0.9% -1.9% -1.9% -3.3 -4.3% 1.7% 3.6% -2.3% -1.4% 3.1% 0.6% -2.3% -3.0% 0.2% 0.6% -0.6% 2011 -2.1% -5.5% -9.3% 1.1% 3.7% -9.6% -5.1% -2.5% Yearly Averages ore as compo"red to the previous year total Format change in regions beginning in 2008 Golf Rounds: The number of rounds played has shown a steady decline in most markets, according to the National Golf Foundation. Washington was classified as Northwest in 2006 and 2007 with a 1.7% decrease in 2007 compared to 2006 annual rounds. The classifications changed in 2008 when the data was compiled utilizing Census Regions. Washington is now classified under Pacific, showing a -4.3 decrease in 2010, and 1.2% increase in 2011. Demand Summary: National statistics indicate that golf facilities are feasible and can be supported by population densities of 30,000 to 40,000 people per 18 -hole course. The trade areas, population, number of 18 -hole equivalent courses, and necessary population to support the existing supply are shown in the table below. 2011 DEMAND VERSUS SUPPLY - Painted Hills Competitive Market 10 -Mile Radius 20 -Mile Radius 30 -Mile Radius Population 277,281 489,416 619,705 Supply (18 -hole equivalent courses) 8 20 31 Population Requirements at 30,000 per course 240,000 600,000 930,000 Population Requirements at 35,000 per course 280,000 700,000 1,085,000 Population Requirements at 40,000 per course 320,000 800,000 1,240,000 % oversupplied based on minimum requirements of 35,000 1% 43% 75% Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 UBLE,i-_ •.yew ]0LIC0EUR&GENTRY Page 17 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 Partg2 g lY2 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS The oversupply is more pronounced when considering supply and demand for the 20- and 30 - mile radii, with the 20 -mile radius indicating an oversupply of 43%, and the 30 -mile radius indicating an oversupply of 75% based on an average demand factor of 35,000 people per 18 - hole course. The oversupply is less pronounced within the 10 -mile area; however, it is not difficult to understand why some of the courses are struggling to generate the number of rounds necessary to meet their financial goals. According to SGA's 2011 Investor Survey, there are about 16,000 golf properties in the United States, and it is estimated that at least 20% need to close their doors. SI 1 E DESCRIPTION k = _*,i0i�t ' ' �+ � ,; � E z ice: • ', r - io,7�}] V4,w •, t�, $• ��. = T' x amity -a' f� �r E !71 S •yil r,E i#Y," f j�L.,,,u. Aerial Parcel Map (Golf Course parcels outlined in yellow, residential lots in blue) Location: The subject property is located on Thorpe Road, between Madison Road and Dishman Mica Road, at the southern boundary of the City of Spokane Valley, Washington. The site address is 4403 S. Dishman Mica Road. Size &Shape: The subject is an irregularly shaped site made up of 91.55 acres. The property is currently a golf course operating under the name of Painted Hills Golf Course. This is a nine -hole course, which includes a driving range and a nine -hole executive Par 3 course. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 J0LIC0EUR&GENTRY Page 18 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 Pap ,.21 8 2 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS Access & Currently the subject property is accessed off of Thorpe Road, although the Visibility: property could be accessed off of Madison Road and/or Dishman Mica Road. Topography & The subject property has a topography which is level to undulating to the Soils: southeast. The soils are made up of Spokane Stony Loam and Bernhill Silt Loam according to the Spokane County Soil Survey. Both of these soils have good drainage potential and, based on the surrounding improvements, seem to be suitable for the subject site and potential uses. Flood Zone/Plain: The subject is shown on FEMA Community Panel #53063C0751D, effective July 6, 2010. The site was historically illustrated on panel #5301740401C, with an effective date of September 30, 1992. The historic map shows the majority of the site being designated Zone A, within the 100 - to 500 -year flood zone. A small portion in the southwest corner is shown to lie outside of the 100- and 500 -year flood zone. The new FEMA map allocates a smaller portion of the property to the AE zone, within the 100 - to 500 -year flood zone. I have estimated approximately two thirds of the site to be within the flood zone (61.03 acres) and one third of the site to be outside of the flood zone (30.515 acres). The portion of the subject property designated "Zone AE, Compensatory Storage Area" can be developed, although mitigation would be required. The most significant requirements are that building sites must be one foot above the flood elevation, storage area for water drainage must remain the same, and fill can only be used from within the site. The details can be reviewed in the Storhaug Engineering letter included in the Addenda. Historic Flood Map #530174040IC 1 LII. AILPILK ,,,a r _ 4rAir AtO.,..LAIE it, 4, 1/1 rat - 11 I. II .. Ili'' • — . i II , -1-41P4 ill Amu itra MOM noun I I *_ ...44. - ' "... .. ..:. , '`.1 - tr !I f ' 1 1 1 I, rx,,,,`A lei , b . , t . .... fili4 ,.. - • rli.,) ; ,..?„. ".4.7. ,.... ,.. t.. - elf % 446.:`,1' , .- ') , FIRM MHO %SWUM RAIE MAP I livico it 000AttilARtAil t Al I EL 401 Of 05 tontorry.,on natit 030174 040 0 t il. CI •67 r .1. 6 tap fltittCt I II Vvkr-''fr, A , r..4w, ZONE C v - ' 'Z.-..7....,077. 1 , .VAV:Z.• Painted Hills Golf Course As of November 12,2012 File # 12636-P18 12-03613-PCW11 Doc 53-5 Page 19 1JBLEgeb.—_ COPYRIGHT 2012 j0LIC0EUR &GENTRY Exhibit 4 Filed 12/05/12 Entered 12/05/12 14:06:43 PaPt2i582 REGION, COMMUNITY, NEIGHBORHOOD &PROPERTY DESCRIPTIONS New Flood Map #53063C 0751D FEMA Map with Parcel Overlays .,.„„,..-)N.,, , 4` /MP SCALE r .500. ..1_,. ,, 5 40T14 Alt — -- -- rezt 1--' __ 04.5RMIOCA '... 0 7..tri* . Ifi"'" (‘'-'1 • . ZONE ( tterg 1111 33 419 UM' 104, roxvi K VALI Vf 11 r; — ' 4.11 - ' . ....ff ,,, . qi'l ' , -,ii ':-'' ., 1 511h4 at„, ii' !V 1 • ,.: •.1* 1 ' J - tt - 0 . . 1"to T • • ' - t1P1 - '- = ."-- 0 PMfO%. 0/5113 (.! all- a -- 1 i ., I • gqi FIRM SPOKANR COUNTY. WASHINGTON AND INCONEMIXIM ARMS t.! tmautoplab , ....re.x ut tsrt41,1Ettto_rs t ---, etu... Mal 9.3:01. z. ..-.11 11 ,,G , .":".. -Z — 7, : i . a'i VAPSIUMIli 07.40',,, EMOIVE DATE AU 10311 . __, tt ',..,- e, ''. 14 1,3 Alt- „ * ' 'eSE . ° - ,-, 'N.-- 2011E 2 •X I.-,, •''' '''.; „P'. , - •,trr, ! . ,c -, X -'_.. -0 -0- "'" .. 64" — • ,. -.. • ,1./4.-111 L1 rwt.1:4. 1 A USN F tow:j a) la ZONE X ....: ...._, T24T2)1C Ina& h o 012 _M., k.2„,, MO- - , , • . ZONE X ap Chiller Ott* — eZA , ‘ e.., , , p, I / k :1--V1 • 4, L. t=ati 7C414 rrZYst''.`47.:4.0".1= ' :,..;--...- ,.',•.r.;.:',,l,trzl'ArAt=t2":fr,.:-.."..1.-v,',,—... APPROXIMATE WEST DELINEATION 11 A PVROXIMATE PRIERTY IAN 1 ItY N. r - Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 UBLE,ta.-- jOLICOEUR &GENTRY 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered Page 20 • COPYRIGHT 2012 Exhibit 4 12/05/12 14:06:43 Paftt2R BIY32 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS Adjoining Uses: North: South: East: West: Utilities: Environmental Concerns or Hazards: Easements & Encroachments: History of Use: Zoning: Chester Community Church, Carmel of the Holy Family Trinity Convent, and Midilome residential development. Mobile homes and homes on acreage parcels. Residential single-family homes located on acreage parcels. Industrial warehouse, cell/radio towers, and single-family residences on suburban to acreage size lots. Service Provider Adequacy Water: City of Spokane Valley Adeq./Typical Rates. Sewer: • City of Spokane Valley Adeq./Typical Rates. Electricity: Inland Power Avista Adeq./Typical Rates. Adeq./Typical Rates. Natural Gas: Refuse: City of Spokane Valley Adeq./Typical Rates. I have not been provided with an environmental audit on the subject property; therefore, an in-depth study has not been made. There were no items of concern noted during the physical property inspection other than the FEMA flood plains previously described. I have not been provided with a full title report on the subject property; however, I was provided a Schedule B of the title report in a previous appraisal. This was provided by the seller, at the time, and he indicated it was not the updated version; therefore, the conclusions included in the Schedule B that was provided cannot be relied upon to perform an in-depth study of recorded easements and encroachments necessary for the basis of this appraisal. Within this document there were multiple easements to the following subsidiaries: Washington Water Power Company, Pacific Northwest Bell Telephone Company, Inland Power & Light Company, Avista Corporation, and County of Spokane. The majority of the easements recorded are for utility reasons. Due to only a portion of the title report being provided, it is difficult to determine where on the property these easements are located. I have assumed typical easements in this appraisal. The subject property is currently improved as a golf course under the name of Painted Hills Golf Course. The site may have been used for agricultural purposes in the past. The subject property is zoned "R-3, Single -Family Residential" under the City of Spokane Valley's Zoning Code. The R-3 zone is a low density residential zone that requires residential lots to be 7,500 sf and duplex lots must be 6,000 sf per dwelling unit. The golf course is also indicated on the zoning map. Painted Hills Golf Course As of November 12, 2012 Page 21 File # 12636-P18-t1UBLEA1.— coPxRI4HT2012 -��u �J0LICOEUR&GENTRY tXhl �t 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 Pag .,2g 815 REGION, COMMUNITY, NEIGHBORHOOD &PROPERTY DESCRIPTIONS Assessed Value & The subject's taxes and assessed values are shown in the table below. Note that the owner is currently in default on taxes and, as of November 1, 2012, owes a remaining balance of $66,489.98. It is noted that the current assessment reflects a higher value than estimated in this appraisal and an appeal of the real estate taxes is recommended. Taxes: Assessed Values and Taxes - All Parcels Combined 2010 2011 2012 2013 $630,000 $630,000 $630,000 $630,000 $954,900 $954,900 $954,900 $950,800 $1,584,900 $1,584,900 $1,584,900 $1,580,800 $19,910.50 $20,735.89 $22,243.37 N/A 0.012563 0.013083 0.014035 N/A $633.96 $3,362.44 $633.96 $6,340.52 $633.96 $2,267.90 N/A N/A $23,906.90 $27,710.37 $25,145.23 N/A Painted Hills Golf Course As of November 12, 2012 -- -File-# 126364318 AUe . i J0L1C0EUR&GENTRY 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered Page 22 COPYRIGHT 2012 Exhibit 4 Pagf..2 84 12/05/12 14:06:43 111111111111P 1111 ■ = eir- •:,` -jangel ir ti 111111 11111118 m& �ln 1u888.1 : r1 pin r " � A 1 sauna ,r 11 Xlr ■ tar .' , 1� ■U11Pmai 911►+ am IIID` 1 6 'MIM iii 41 .. aIr my 4,41 � r _' kSSK �O fiy?�i, 2i 1 IYKI - 33 tag rpm rlit:„ VA ' .r. ��_1■ vow is 11 r :x Allrali awl ■A jr iSM gm Ake • i %' WIMPiteom t���Illa ' " �, �, ; .. p e IA`Er rt me, -2 a ci trAvAt Old \40,erik, *ir 12;S�a11.f' ) .. irj riri A3 rIKAg1:�1�i1 Yli Assessed Value & The subject's taxes and assessed values are shown in the table below. Note that the owner is currently in default on taxes and, as of November 1, 2012, owes a remaining balance of $66,489.98. It is noted that the current assessment reflects a higher value than estimated in this appraisal and an appeal of the real estate taxes is recommended. Taxes: Assessed Values and Taxes - All Parcels Combined 2010 2011 2012 2013 $630,000 $630,000 $630,000 $630,000 $954,900 $954,900 $954,900 $950,800 $1,584,900 $1,584,900 $1,584,900 $1,580,800 $19,910.50 $20,735.89 $22,243.37 N/A 0.012563 0.013083 0.014035 N/A $633.96 $3,362.44 $633.96 $6,340.52 $633.96 $2,267.90 N/A N/A $23,906.90 $27,710.37 $25,145.23 N/A Painted Hills Golf Course As of November 12, 2012 -- -File-# 126364318 AUe . i J0L1C0EUR&GENTRY 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered Page 22 COPYRIGHT 2012 Exhibit 4 Pagf..2 84 12/05/12 14:06:43 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS IMPROVEMENT DESCRIPTION HOLE T 2 ,3 4 ::5' 6 '7`: 8 9,_ OUT (-- • I •• Blue Tee 421 200 427 183 412 523 374 490 352 3382 10 11 :12`13 '14 15 16 17 18 IN TOT HCP „mow•i f If JlY 6'r1 i 6 b ��'� 421 200 427 183 412 523 374 490 352 3382 6764 11 3 : 4 3 ' 4, 5- 4 3 .4 5 4 72. Red Tee • 308.143366 :148 325 457343 445 322 2859 308145366148 325.457 343 445.322. 2859: 5718 Green Tee 288 131 313 109 286 437271 423 304 2562 288 131 313 109 286437271:423.304 2562 5124 Painted Hills Scorecard The Painted Hills Golf Course is a daily fee, public golf course designed by Michael Senske in 1988. The site includes 88.94 acres developed with a nine -hole regulation golf course, nine - hole executive Par 3 course, driving range, practice facility, and clubhouse. The nearly 89 -acre golf course is relatively large for a nine -hole regulation course. The driving range, practice facilities, Par 3 course, and modest out of bounds areas encompass a relatively large area. Most courses do not include this level of additional support components. The regulation course is located within the northern portion of the site. The Par 3 nine -hole regulation course is 3,382 yards from the blue tees. Three additional tee boxes include the short men's tees (white), long women's tees (red), and short women's tees (green). The course rating from the blue tees is 71.8 and slope is 116, although the golf pro stated that they are trying to get the USGA out to establish a new rating and slope for the course. The course rating takes into account length and obstacles identifying a difficulty rating. The rating is a number close to par and ratings increase above par with difficulty. The slope rating is similar to the course rating in that it identifies the difficulty of the course. The rating is based on a par golfer, while the slope is based on a bogey golfer. Spokane area golf courses are predominantly rated below par similar to that of the subject course. Painted I-Iills Golf Course As of November 12, 2012 File # 12636-P18 12 -03613 -PCW 11 Doc 53-5 ir'it J0LIC0EUR &GENTRY Page 23 COPYRIGHT 2012 Exhibit 4 Filed 12/05/12 Entered 12/05/12 14:06:43 PaPt2P8TY32 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS The Chester Creek Par 3 is located at the southeast corner of the property near the intersection of Thorpe Road and Madison Road. The Par 3 is a nine -hole course. The driving range is generally located between the regulation and Par 3 course, although Hole 9 of the regulation course runs along the southern portion of the driving range. The driving range is relatively centered within the site and includes 36 mats with a long marker of 250 yards, although the range extends approximately 275 yards. The Painted Hills Golf Course identifies as a golf academy. There are three separate practice greens. One green is located north of the clubhouse and includes five holes. The other two greens are used for pitching and bunker practice and are located west of the clubhouse across the creek. The clubhouse/pro shop is in good condition and includes a full kitchen snack bar, an atrium eating area, men's and women's restrooms, and an office. The building has a total of 1,924 sf and was built in 1988 with a concrete foundation and wood frame. The structure has T-111 siding, composition shingle roof, and vinyl windows. In addition to the clubhouse, there is a 1,728-sf storage shed that was built in 1988. The exterior of the shed is similar in design to the clubhouse, although it does not have windows and is finished as an industrial use. A small fenced area is located adjacent to the storage shed providing additional storage area for golf course equipment. The clubhouse has a black top parking lot with 73 parking spaces. The Par 3 course has a separate access and parking area along Thorpe Road with 20 additional on-site and street frontage parking spaces. Proposed Residential Development Pre -application Plat Map Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 „40LIC0EUR&GENTRY 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 1 Page 24 COPYRIGHT 2012 Exhibit 4 4:.06:43 Pag33 818 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS The current owners intend to develop a 25 -lot single-family residential subdivision, known as the Cottages at Painted Hills, at the northwest corner of the property. The preliminary plat application was filed in 2007, although it was put on hold due to delays in approval of the proposed FEMA flood map amendment. The proposed lots range in size from 7,147 sf to 9,462 sf. The Spokane Valley zoning requires a minimum lot size of 7,500 sf within the R-3 zone. Two of the proposed lots are smaller than the minimum lot size. If necessary the smaller lots could be increased by allocating lot areas from adjacent lots. A 60,962-sf drainage tract is proposed along the boundary between the residential development and golf course. I have reviewed the drainage and flood plain volume mitigation plan for the proposed Cottages at Painted Hills issued February 2008 and based on the new proposed FEMA flood plain map. The proposed development encompasses 315,685 sf of lot and road areas of which 222,591 sf are within the flood plain. The developer intends to fill approximately 180,000 sf of the flood plain area to develop with residential lots. The engineer has reconciled that development of this area would displace approximately 260,600 cf of flood 'volume. The 180,000-sf development site within the flood plain would require a cut of 260,600 cf from within the site. The engineer and developer have proposed a flood volume mitigation area of 262,000 sf at an average depth of one foot from within the larger golf course site. The flood plain mitigation area within the golf course will be used as a cut to fill the proposed development areas within the Cottages at Painted Hills. This has been deemed acceptable by the developer and engineer; however, the City of Spokane Valley has not reviewed the application for preliminary plat approval, and to my knowledge no additional engineering work has been completed since 2008. The mitigation requirements do not describe a maximum cut depth. The current owners did not want to gauge the land as they intend to maintain the golf course; however, it is conceivable that a smaller area could be used with a deeper cut to mitigate development within flood plain areas. Off -Site Costs: It is difficult to say what conditions of plat approval would be placed on the proposed development if approved by the City of Spokane Valley. Off-site improvements to existing City of Spokane Valley roads and rights-of-way would be likely. I have estimated 800 lineal feet of roadway from Dishrnan Mica Road around to the northwest corner of the plat. Road improvement requirements would be likely, although most would be widening. I have estimated a cost of $25/lf, or $20,000. The developer would also be required to extend water lines approximately 400' to the plat boundary. I have estimated a cost of $50/lf, or $20,000. The proposed plat outlines the northwest corner of the existing golf course; however, development would likely result in realignment of the Hole 2 tee box as well as the fairway and green of Hole 3. The golf course owner and proposed developer of the Cottages at Painted Hills are one in the same; however, if the residential site was developed by another, the current owner should require realignment costs as part of the deal. This would be an added cost either way. I have estimated realignment costs of $25,000. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 wAUBLE,� "sit.' JOLICOEUR&GENTRY Page 25 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 Pag„33 8 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS Extraordinary Costs: The proposed development is located within a flood plain boundary. Development will require cut and fill to raise the elevation to one foot above the flood plain elevation. This would increase costs slightly; however, the greatest increase in cost will include extensive on-site drainage. Typical drainage costs range from $1,000 to $1,500/lot. More difficult projects with terrain issues, rock, and wetlands produce costs from $2,500 to $4,000/lot and higher. I have concluded drainage costs of $2,000/lot, greater than typical developments; therefore, the subject development would generate drainage costs of $50,000 more than a typical development. Potential Development of the Overall Property In the following valuation I will analyze the larger subject property as potential residential development land. Development of the Cottages at Painted Hills includes approximately 180,000 sf within the flood plain, which would require 260,600 cf of fill from the flood plain mitigation area. This produces a ratio of 1.45 cubic feet of fill for one square foot of developed area. An average flood volume mitigation depth of 1.45 feet would produce a one to one ratio. This would not be an extensive cut, although some areas would likely be deeper and some not cut at all. The proposed Cottages at Painted Hills produced a lower cut depth, because the owners did not want to affect the golf course. I have concluded the larger site could support development within the flood plain at a one to one ratio where each square foot developed would require one square foot of flood volume mitigation area, based on the proposed development of the Cottages at Painted Hills and characteristics of the larger site. This mitigation would require an average depth of flood volume mitigation area at approximately 1.45 feet. I previously estimated approximately two thirds of the larger site to be within the flood zone (61.03 acres) and one third of the site to be outside of the flood zone (30.515 acres). The area outside of the flood zone is usable for development. The 61.03 acres within the flood zone would require flood volume mitigation, which I previously concluded at a one to one ratio. Of the 61.03 acres within the flood plains, approximately 30.515 would be usable, while the remaining 30.515 acres would be required for flood volume mitigation. The total usable area, based on this analysis, is 61.03 acrds. The proposed development of the Cottages at Painted Hills includes 25 single-family lots on approximately 8.96 acres at a density of 2.79 lots per acre. The relatively low density is due to necessary drainage easements, which would be likely throughout development of the larger site. I have concluded a similar density of 2.87 lots per acre with 175 lots overall. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 L WAUBLE,._ a .]0LIC0EUR&GENTRY Page 26 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 P92a Ro6t8 2 REGION, COMMUNITY, NEIGHBORHOOD & PROPERTY DESCRIPTIONS Off-site Costs: Again it is difficult to estimate off-site costs when a development has not yet received preliminary plat approval. The overall development would require off-site costs of $20,000 for roads and $20,000 for water line extension as previously estimated in the Cottages at Painted Hills. The hole realignment costs would not occur in this analysis. Additional off-site road costs for Dishman Mica Road (1,550 1f), Thorpe Road (1,300 10, and Madison Road (2,630 10 would be likely. Each road is improved to Spokane Valley and Spokane County standards; however, development may require modest widening of these roads. I have estimated costs of $40/If for Dishman Mica Road and $20/1f for Thorpe and Madison Roads. Extraordinary Costs: Development within the FEMA flood plains would require extensive drainage upgrades. I previously concluded an excess drainage cost of $2,000/lot greater than typical developments in the proposed Cottages at Painted Hills development. Development of the larger site would disperse the costs over a greater number of lots, while larger drainage ponds could be created. I have concluded an excess drainage cost of $1,500/lot for the larger development, or $262,500 based on 175 lots. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 12-03613-PCW11 Doc 53-5 Page 27 UBLE� COPYRIGHT 2012 sir„` ..j0LIC0EUR&GENTRY Exhibit 4 Filed 12/05/12 Entered 12/05/12 14:06:43 Piga 131%-f112 VALUATION ANALYSIS Appraisers commonly develop the Cost Approach, the Income Approach, and/or the Sales Comparison Approach to provide market value indications. Each approach mirrors different analyses that market participants may consider and each relies on comparable data drawn from the real estate marketplace. In the Cost Approach the appraiser first determines the market value of the site as if it were vacant and available to be put to its highest and best use. Next "Replacement or Reproduction Cost New" of the improvements is determined. Deductions are made for physical deterioration, functional inefficiencies or super -adequacies, and for economic obsolescence. The sum of land value and depreciated improvement value provides the indication of value by the Cost Approach. This approach is generally most applicable when the improvements are new or nearly new and represent the highest and best use of the site. It becomes less meaningful as the improvements age and depreciation and obsolescence increases, making the estimate of depreciation less reliable. The Cost Approach can also produce an unreliable indication of value if the improvements no longer represent the highest and best use of the site. The Inicuiue Apptuael► • analyzes the value of the- property through the eyes of the typical investor. The appraiser forecasts gross income by tempering the subject property's contract rent, if leased, with rents achieved by comparable and competitive properties. Deductions are made for anticipated vacancy and collection losses and for operating expenses paid by the property owner. The resulting net operating income is then translated (capitalized) into a value indication at a rate commensurate with the risks inherent with the ownership of the property. This approach is most reliable when there is an active rental and investor -driven market for the type of property being appraised. The Sales Comparison Approach compares the subject property to sales of similar or "comparable" properties. Sales are typically analyzed on a physical unit of comparison basis such as $/s£ or $/unit. Economic analyses employing gross income or effective gross income multipliers are also developed in the Sales Comparison Approach. Appropriate adjustments are made to the units of comparison indications for changes in market conditions (appreciation/depreciation) and for differences in factors such as location, physical characteristics, and sale terms. This approach is most reliable and applicable when there is an active market for properties like the one being appraised and an adequate number of comparable sales. The value indications produced by the various approaches are then analyzed collectively; the quantity and quality of market data available and the advantages and applicability of each approach to the property being appraised are carefully analyzed. The final step in the valuation process is a correlation of the approaches into a final value conclusion. The Income and Sales Comparison Approaches are developed in this appraisal. Painted Hills Golf Course As of November 12, 2012Page 28 File # 12636-P18 7: AUBLE,s.._ COPYRIGHT 2012 ..JOLICOEUR & GENTRY Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 P998l'°8fi 42 VALUATION ANALYSIS HIGHEST & BEST USE Highest and best use is defined as: "The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity."' Physically Possible The subject is made up of 91.55 acres, within five parcels, according to the Spokane County Assessor's office. All municipal services are available to the subject property. The property is generally level to undulating with sporadic trees throughout. The City of Spokane Valley and FEMA recently updated the flood plain map with a significant amendment affecting the subject property. Prior to these amendments the vast majority of the larger site was located within a FEMA flood plain; however, the proposed map includes approximately two thirds of the site within the AE designated flood plain. The AE (Compensatory Storage) designation would allow development with building sites one foot above the flood plain elevation, although the flood drainage volume must remain the same. This can only be mitigated through cut and fill on-site. Physically possible uses are predominantly limited to size and flood plains alone. Legally Permissible The subject property is zoned "R-3, Single Family Residential" under the City of Spokane Valley's zoning code. The city's zoning map illustrates the larger Painted Hills parcel with dots throughout, which at one time, represented a Community Facilities Zone. The property owner stated that the zone was changed approximately three years ago; however, the zone was changed back after protest from the property owner. I have confirmed with the City of Spokane Valley that the current zone is R-3. The R-3 zone is a low density residential zone that requires a maximum lot size of 7,500 sf for single-family lots and 6,000 sf per dwelling unit for duplex lots. Other permitted uses include bed and breakfasts, cemeteries, churches, community residence less than six persons, day cares, family homes, and other public uses. Golf courses and driving ranges may be permitted through a conditional use permit. Single-family residential developrnent is most typical of this zone, although zoning requirements could potentially permit a broader range of uses. The City of Spokane Valley and FEMA updated the flood plains map as described previously in the Physically Possible Uses section. This is a physical constraint of the property incorporating legal requirements as to permissibility of uses. 'Ibid Painted Hills Golf Course As of November 12, 2012 Page 29 File # 12636-P18 UBLE,� COPYRIGHT 2012 _;.i 40LICOEUR&GENTRY Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43' P19.5 lyc142 VALUATION ANALYSIS The FEMA flood plain map, effective as of July 2010, allocated areas of the subject property to the AE designation and other areas to be outside of the 100- to 500 -year flood plains. The developer would be required to mitigate flood volumes in order to .develop within the AE designation. In the Property Description, I discussed the proposed plans of the Cottages at Painted Hills with 25 single-family lots. I then discussed the mitigation process, which could potentially result in a one to one ratio. For example one square foot of land within the AE designation proposed for development would require one square foot of land dedicated to flood volume mitigation areas. I reconciled a total usable area of 61.03 acres. Approximately 30.515 acres is outside of the flood zone and another 30.515 acres could be usable through the mitigation process. Legally permissible uses are predominantly limited by the underlying zone and flood plain designation. The most common use within the R-3 zone is single-family residential development with a maximum lot size of 7,500 sf. Usable areas are limited based on mitigation of the flood plain areas. Financially Feasible and Maximally Productive The most probable use of the subject property is single-family residential development. The alternate uses described in the Legally Permissible section are not likely financially feasible and do not produce the maximum value to the underlying land. The Spokane Valley market is well oversupplied with a large number of residential subdivisions and decreasing new home demand from 2006 through 2009. New home sales volume increased in 2010, and again in 2011 with 2012 sales likely nearly 2011 levels. Typical single-family lots from 5,000 sf to 8,000 sf have produced sale prices between $45,000 and $55,000 within the past few years, although more recently typical sale prices range from $35,000 to $50,000. There have been few bulk sales in the subject market. Many lots are selling in takedown agreements with big builders. New development is generally considered infeasible at this time. There have been few projects completed since 2009. The majority of which were likely started earlier or have a large scale builder tied to the project. The subject property encompasses 91.55 acres, although approximately 61.03 acres would be usable. I forecast the relatively large site would produce a significant supply of 175 lots when ripe for development. In the Market Overview I projected an existing supply of four to five years; however, the lower price point supply is likely much less. Although bulk sales are rare, wholesale discounted values produce significant discounts from gross retail value depending on level of inventory. An average gross retail lot value of $45,000 would compete within the most active market, although the subject's location should support a slightly higher price point in normal market conditions. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 A U15L ,�. aJ0LIC0EUR &GENTRY Page 30 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 P11181$o 42 VALUATION ANALYSIS Wholesale discounts would be near 30% based on a moderate level of inventory near four years producing a wholesale value of $31,500 based on a gross retail value of $45,000. Hard and soft development costs are typically near $25,000, which would indicate a residual land value of $6,500. Land values as future development have generally held higher values than residual land values; therefore, development is not financially feasible. The highest and best use of the subject land is future development when financially feasible. An initial phase of development for the subject property will likely be financially feasible in four years based on the existing supply. Acquisition of the land in three years would be appropriate. The financial infeasibility and highest and best use of future development is the primary reason few development land sales are taking place. From the buyers' perspective, a significant discount would be necessary to hold the land for three to four years; however, land sales do not reflect such a discount. The buyer would like to negotiate the sale price based on a future value when ripe for development discounted to a present value; however, sellers are attempting to maintain higher prices by holding onto the property. There is a significant difference in the bid - ask spread of residential development land. The potential buyer instead will allow the seller to carry the costs and risk until the property is ripe for development, which is again why there have been few sales. HIGHEST AND BEST USE OF THE SUBJECT SITE As IMPROVED The subject property is improved as the Painted Hills Golf Course. The property includes a regulation nine -hole course, nine -hole executive Par 3 course, driving range, practice areas, and clubhouse. The proposed 25 -lot Cottages at Painted Hills development could be improved around the existing golf course with only modest expenses to relocate the tee box of Hole 2, and the fairway and green of Hole 3. The possible uses of the improved property, that could produce the highest and best use, include the existing golf course with proposed Cottages at Painted Hills or large scale future residential development land with an interim use as a golf course. The subject golf course is relatively secluded with no competition in the immediate area; however, golf courses compete in a much larger market area. I have identified golf course supply and demand within 10-, 20-, and 30 -mile radii of the subject property concluding significant oversupply in the 10 -mile and slightly less oversupply in the 20- and 30 -mile radii. The 10 -mile radius encompasses the majority of the subject's competitive area. This includes much of Spokane County. More than half of the regulation golf courses in Spokane County are municipally operated. Private operators report difficulties competing with these courses. In the past three years, annual rounds played have decreased at many golf courses. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 s :�t=J0LIC0EUR®'TRY Page 31 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 Piga 1.38f112 VALUATION ANALYSIS I have analyzed income and expenses of the Painted Hills Golf Course from 2007 through 2011. The subject property has historically generated a wide range of net operating income from $34,000 in 2008 to $102,000 in 2009, $59,000 in 2010, and $21,000 in 2011. The owners have filed for bankruptcy and 2012 data is not available. In the following valuation I will analyze the two alternate uses of the subject property. The first valuation is the Painted Hills Golf Course as a going concern assembled with the potential development of the Cottages at Painted Hills. The second valuation is of the larger site as a future residential development project with an interim use of a golf course. These are the two alternate uses, although only one produces the maximum return to the property. The highest and best use of the subject property is future residential development with an interim use as a going concern golf course. INCOME APPROACH TO VALUE — GOING CONCERN The Income Approach analyzes the value of the property through the eyes of the typical investor. It is based on the principle of anticipation: that value is the present worth of anticipated future benefits or income forecast to be derived from ownership of the property rights being appraised. The Income Approach involves capitalizing net operating income to produce an indication of value. The resulting net operating income is then translated (capitalized) into a value indication at a rate commensurate with the risks inherent with the ownership of the property. This approach is most reliable when there is an active rental and investor -driven market for the type of property being appraised. There are two capitalization methods commonly used in the Income Approach: direct capitalization and yield capitalization. _ Direct capitalization involves converting an estimate of stabilized net operating income into an indication of value by dividing it by an appropriate overall capitalization rate or multiplying by an income multiplier. Direct capitalization is the technique predominantly used in purchasing decisions and valuation analysis. Yield capitalization involves converting future benefits to present value by discounting the future cash flows at an appropriate yield rate. The appropriate rate is selected by analyzing market evidence pertaining to the yield anticipated by typical investors over a projected holding period for which all cash flows and their patterns and relationships have been identified and forecast. Painted Hills Golf Course As of November 12, 2012 - File # 12636-P18 UBLE,�_ —Vir,40LICOEUR &GENTRY Page 32 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 P996lto 92 VALUATION .ANALYSIS The Painted Hills Golf Course was purchased in 2006 for $1,850,000, although the buyers allocated $1,520,000 to the real estate and the remainder to the going concern. I have reviewed 2008 through 2011 profit and loss statements, as well as a 2007 tax return. The subject is a golf course in which income and expenses have varied significantly over time. In 2007, the property produced the highest gross revenue; however, expenses and costs of goods sold were relatively high as well. In 2008 and 2009 gross revenues were significantly lower, although the operators gained efficiencies in expenses. The 2009 profit and loss statements produced the highest net operating income production after purchase of the property in 2006, while 2010 and 2011 profits decreased significantly. The Painted Hills Golf Course, under new ownership, appears to have reached stabilized operation. Gross revenues were consistent between 2008 and 2010, although revenues in 2011 declined. Expense ratios are reaching a more appropriate level with some downward adjustment evident in 2011 as the owners sought to minimize the impact of reduced gross revenues which were felt industry wide in part due to the weather, but largely the economic recession overall. The direct capitalization approach is a reasonable method of valuing the going concern of the golf course with the appropriate consideration of risk associated with a recreational pursuit subject to the recession and uncertainty of unfavorable weather conditions. The golf course is presently being operated as a daily fee facility and is planned to continue in that form of operation. A daily fee course is open for public play with daily fees paid for use of the facility. SURVEY OF DAILY FEE COURSES A survey of Daily Fee courses was conducted within the subject's primary competitive market of Spokane, Spokane Valley, and Liberty Lake. The courses surveyed were considered to be the most comparable and competitive with the subject property. Emphasis was placed on courses that are in the same geographic area, in addition to courses that were considered to be of similar quality and competitive features. The following table illustrates specific characteristics of the most competitive courses in the subject's primary market area. This survey lists each golf course by name and location, year opened, number of holes, type of operation, greens fees, and rounds played. Some of the courses within the region were not included within this survey, as they are not considered to be comparable due to size, quality, or type of operation. These golf courses are located throughout the Spokane County area as identified in the following map. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 12 -03613 -PCW 11 Doc 53-5 Page 33 UBLE,�` COPYRIGHT 2012 n.q=j0LIC0EUR&GENTRY Exhibit 4 Filed 12/05/12 Entered 12/05/12 14:06:43 P9sa 19708t852 VALUATION ANALYSIS Competitive Golf Course Map .. '--' 7-' -17-1-' ie•WAI'l v; ' - ,. N . nargl 1! Nrif at -NI ,-, - - . .rWalTiP' i,_ . s ..1...n antoort - '...4.- . ° M.' q9.# -444 .,..t.4,... b . 1 ''." 0'1; i - !'..i• a-, -aalr't rit4. 1 =e1g:tlier:Iattt " - t 23 i • , . SUBJ. Painted Hills G.C. 1988 36 71.8 18 holes $22.00 $24.00 1,924-5f 2010: Not Provided Spokane Valley, WA 9 3382 116 9 holes $16.00 $18.00 2011: 30,000 Daily Fee 72 Par 3 - 18 holes $10.00 $10.00 Includes PH & Par 3 6764 Par 3 - 9 holes $13.00 $13.00 2012: NA 1 Creek at Qualchan 1988 72 71.3 18 holes $28.35 $30.45 Estimate 3,300-Sf 2010: Not Provided Spokane, WA 18 6599 127 9 holes $21.00 $30.45 2011: 33,000 Municipal - Daily Fee 2012: NA 2 Esmeralda G.C. 1956 70 69.5 18 holes $28.35 $30.45 Estimate 2,550-Sf Spokane, WA 18 6249 116 9 holes $21.00 $30.45 2011: 35,500 Municipal - Daily Fee 2012 : up slightly 3 Indian Canyon 1930 72 69.8 18 holes $28.35 $30.45 4,063-Sf 2010:36,000 Spokane, WA 18 6255 124 9 holes $21.00 $30.45 Municipal - Daily Fee • 2012: NA 4 Downriver G.C. 1916/1963 70 69.1 18 holes $28.35 $30.45 4,200-Sf Spokane, WA 18 6130 116 9 holes $21.00 $30.45 . 2011: 43,500 Municipal - Daily Fee 2012: NA 5 Hangman Valley G.C. 1969/2008 72 73.1 18 holes $27.00 $29.00 3,523-Sf 2010:32,000 Spokane Co., WA 18 6865 133 9 holes $21.00 $21.00 2011: 33,000 Municipal - Daily Fee2012: ' NA 6 Liberty Lake G.C. 1959 70 69.8 18 holes $28.24 $30.33 7,000-5f July 2010: 27,500 Liberty Lake, WA 18 6607 121 9 holes $21.97 $30.33 2011: 29895 Municipal - Daily Fee 2012: 28200 7 Meadowwood G.C. 1988 22 72.1 18 holes $28.24 $30.33 Liberty Lake, WA 18 6874 126 9 holes $21.97 $30.33 2011: 32,415 Municipal - Daily Fee 2012:32,000 8 Trailhead G.C. 1973 32 61.9 18 holes N/A N/A 3,600-5f 2010: Not Provided Liberty Lake, WA 9 2221 100 9 holes $15.00 $15.00 2011: Not Provided Municipal - Daily Fee 2012: Down 15% to 20%. 9 Wanderrnere G.C. 1970 70 68.5 18 holes $25.00 $29.00 2,304-5f 2010:45,000 Spokane, WA 18 6050 113 9 holes $19.00 $29.00 2,640-$f 2011: Not Provided Daily Fee 2012: Down slightly 10 The Fairways G.C. 1986 72 70.9 18 holes $24.00 $29.00 3,836-5f 2010: 29,400 West Plains, WA 18 6541 130 9 holes $17.00 $17.00 2011: 19,000 Dally Fee 2012: 20,407 11 Sun Dance G.C. 1966 70 69.7 18 holes $25.00 $25.00 2,800-Sf 2010: 29,400 Spokane, WA 18 6257 119 9 holes $12.50 $12.50 Daily Fee 2012: NA Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 12-03613-PCW11 225=10LIC0EUR &GENTRY Page 34 COPYRIGHT 2012 Exhibit 4 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 Pifia 1930m12 r1/Of`1��y�, W' VALUATION ANALYSIS PAINTED HILLS OPERATING HISTORY The Painted Hills operator has provided operating history income and expenses from 2008 through 2011. The expenses include personal and accounting expenses, which are not used in determining the value of the going concern. I have reconstructed the profit and loss statements excluding automobile expense, an excessive over/short, amortization, and depreciation. The automobile expense is generally considered a personal expense for this type of property. If the Painted Hills Golf Course were operated as a "hands free" investment, the managers would not require an automobile. The over/short, amortization, and depreciation are tax accounts, which do not affect the value of the property. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 12-03613-PCW11 Doc 53-5 et �AUBLE,�_ M1rx J0LIC0EUR &GENTRY Filed 12/05/12 Entered Page 35 COPYRIGHT 2012 Exhibit 4 12/05/12 14:06:43 P998 411AM2 2011 2010 2009 2008 ORDINARY INCOME -SALES Total % EGI Total % EGI Total % EGI Total % EGI Total Greens Fees 5242,228 43.73% 5280,871 50.70% $316,740 53.89% 5279,578 47.83% Food and Beverage 557,379 10.36% 571,305 12.87% $74,973 12.76% $73,981 12.66% Merchandise Sales 519,522 3.52% $37,925 6.85% 531,941 5.43% $48,221 8.25% Cart and Club Rentals $36,974 6.67% 547,772 8.62% 549,394 8.40% $54,839 9.38% Driving Range Income 588,853 16.04% 599,478 17.96% $96,934 16.49% 5110,588 18.92% Lessons $485 0.09% 516,594 3.00% 517,772 3.02% 517,340 2.97% Gift Cards 0.00% 0.00% Tournament Payments 0.00% 0.00% Promo Sales 0.00% 0.00% TOTAL INCOME 5445,442 80.41% $553,945 100.00% $587,755 100.00% 5584,546 100.00% COST OF GOODS SOLD Food and Beverage $35,756 6.45% $45,649 8.24% 548,285 8.22% $47,227 8.08% Merchandise Costs 512,188 2.20% $36,002 6.50% 536,832 6.27% 547,902 8.19% TOTAL COST OF GOODS SOLD 547,943 10.76% 581,651 14.74% $85,117 14.48% 595,129 16.27% GROSS PROFIT $397,498 69.65% $472,294 85.26% 5502,638 85.52% 5489,417 83.73% EXPENSES Utilities $33,132 5.98% $34,951 6.31% 541,936 7.13% 539,297 6.72% Laundry and Janitorial $4,293 0.77% 54,733 0.85% 55,256 0.89% $5,431 0.93% Professional Services $367 0.07% 53,142 0.57% $3,058 0.52% 53,458 0.59% Taxes and Licenses • adj for unpaid taxes 521,370 3.86% 520,544 3.71% $22,862 3.89% $24,205 4.14% Insurance 511,186 2.02% 513,905 2.51% 514,323 2.44% $15,547 2.66% Repairs and Maintenance 516,572 2.99% 512,143 2.19% 511,265 1.92% 526,651 4.56% Equipment Rental $1,916 0.35% 52,525 0.46% $3,781 0.64% 51,890 0.32% Telephone/TV/Internet $8,336 1.50% $7,971 1.44% $10,018 1.70% 59,909 1.70% Mower Fuel/Oil 58,697 1.57% 57,109 1.28% $5,782 0.98% $9,569 1.64% Tournaments $843 0.15% 51,272 0.23% $2,489 0.42% $3,324 0.57% Travel 50 0.00% $832 0.15% $1,176 0.20% $752 0.13% Entertainment and Promotions $0 0.00% 5584 0.11% 52,018 0.34% 51,759 0.30% Dues and Subscriptions 51,270 0.23% $4,826 0.87% 51,940 0.33% 54,743 0.81% Advertising $2,674 0.48% 53,359 0.61% 53,113 0.53% '$2,418 0.41% Office Expenses $722 0.13% 52,711 0.49% $2,045 0.35% $3,085 0.53% Supplies 57,703 1.39% 515,090 2.72% 59,084 1.55% 520,089 3.44% Salaries and Wages 5103,066 18.61% 5113,132 20.42% 5102,617 17.46% 5126,787 21.69% Payroll Taxes $25,666 4.63% 521,764 3.93% 518,273 3.11% 522,714 3.89% Employee Benefits 515,170 2.74% 528,400 5.13% 524,532 4.17% $17,677 3.02% Bad Debts $193 0.03% 5195 0.04% 554 0.01% $0 0.00% Bank Charges 511,763 2.12% 511,501 2.08% 59,986 1.70% $9,988 1.71% Interest Expense 5785 0.14% 5785 0.14% 52,051 0.35% $3,863 0.66% Officer Life Insurance $576 0.10% $576 0.10% $571 0.10% 5576 0.10% Miscellaneous $330 0.06% 51,196 0.22% 52,174 0.37% 51,741 0.30% Officers Competitive Salary 5100,000 • 18.05% $100,000 • 18.05% 5100,000 • 17.01% $100,000 • 17.11% TOTAL EXPENSES 5376,629 67.99% $413,246 74.60% $400,401 68.12% 5455,473 77.92% NET INCOME 520,869 4.60% $59,049 10.66% 5102,237 17.39% 533,944 5.81% Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 12-03613-PCW11 Doc 53-5 et �AUBLE,�_ M1rx J0LIC0EUR &GENTRY Filed 12/05/12 Entered Page 35 COPYRIGHT 2012 Exhibit 4 12/05/12 14:06:43 P998 411AM2 VALUATION ANALYSIS Gross Revenue was relatively stable from 2008 to 2009, near $585,000/year, decreasing to $553,945 in 2010, and 20% lower to $445,442 in 2011. I have used averages of revenues, and sales from food and merchandise to estimate the gross revenues of $543,812 on a following page. Cost of Goods Sold remained relatively constant throughout this time period, while operating expenses have generally decreased as the owners have attempted to stop the loss in profit. I have used Cost of Goods Sold estimates of 64% for food sales, and 95% for merchandise sales as a percentage of Product Sales based on historic activity. The owner -provided operating expenses do not include officer salaries for the owner -operators. Their salaries are realized through retained earnings. I have supplemented the owner's expenses with the allocation of owner's competitive salaries. The operator has provided the following description of officer roles and responsibilities. Linda McElhinny: President, Owner and Director of Public Relations, 40+ -hour work week. Duties consist of daily receipt management and banking, event coordinator, pro -shop merchandise, pro shop desk, and management of development for the Cottages at Painted Hills. John McElhinny: Vice President, Owner and Director of Personnel, 40+ -hour work week. Duties consist of overseeing personnel issues including compliance, assist with management of maintenance and grounds crew, pro -shop desk, men's club liaison, course marshal, management of the Cottages at Painted Hills. Tim McElhinny: Vice President, Owner and Director of Golf and General Manager of Golf Operations, 40+ -hour work week. Duties consist of general management, director of all golf and daily operations of facility, inventory, maintenance scheduling, and supervisor for all departments including: grille, maintenance crew, range crew, and pro -shop. Tim is a. PGA professional, golf instructor, golf camp facilitator, men's club liaison, tournament director, and marketing. Bonnie McElhinny: Secretaryffreasurer, Owner and Director of Marketing. Duties consist of bookkeeper and marketing. The operator has described various functions of the four owner/operators, although many of the duties overlap to some degree. Each owner is described as working approximately 40 -hour work weeks. Linda and John McElhinny are described to manage the residential development, which should not be included in the analysis of the going concern. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 r trte j0LIC0EUR &GENTRY Page 36 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 P9fia vlo 2 VALUATION ANALYSIS Bonnie is described as the bookkeeper and marketing director. These duties could be hired out relatively inexpensively. The golf pro typically operates as a general manager of the facility with support staff. Tim McElhinny appears to provide these duties and responsibilities. He is the primary owner/operator of the golf course. His duties are extensive, which is typical of golf pros. To analyze the going concern value as a "hands free" investment I must deduct the necessary expense associated with the owner's contributions. I have concluded a competitive owner's contribution salary of $100,000 including $50,000 for the golf pro, $15,000 for bookkeeping/marketing, and $35,000 for additional management responsibilities. Total Operating Expenses were reconstructed at $455,473, $400,401, and $413,246, and $376,629 from 2008 through 2011, respectively. The decrease in operating expenses from 2007 to 2008 reflects both gains in efficiencies and decreased variable expenses. Operating expense ratios were 77.92% in 2008, 68.12% in 2009, 74.6% in 2010, and 67.99% in 2011. The gain in efficiency in 2011 appears to be largely the result of reduced salaries and wages, and employee benefits. I have used a mid-range operating expense ratio of 71% in the following analysis. Reserves for Replacements: This expense category reflects the cost of setting aside an operating reserve to be held for replacement of clubhouse furniture, fixtures, and equipment, and course maintenance equipment. The subject is approximately 20 years old, although it has been well maintained. I have used a moderate rate of 2% for this analysis. Net Operating Income: The net operating income is based on gross revenues less COGS, operating expenses, and reserves. Net Operating Income has fluctuated significantly at the Painted Hills Golf Course. The driving factor is generally weather and when the golf season begins. I have concluded a mid-range net operating income including reserve allowance of $69,725 at normalcy for the Painted Hills golf course. Overall Capitalization Rate: There have been few recent comparable sales in the Pacific Northwest Region in which to generate overall capitalization rates. The few sales that I am aware of have transferred based on the value of the underlying land rather than income production of the going concern. In developing the appropriate overall capitalization rate I have reviewed two national surveys as well as discussed rates with market participants. The RealtyRates.corn survey provides average rates for golf course operations. The PwC (Korpacz) survey includes a range of rates and averages, although it does not have a golf course category. I have analyzed the National Limited Service rates from the PwC (Korpacz) survey. Lodging is a going concern based on discretionary income similar to that of golf course operations. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 wAUBLE,� . �J0LIC0EUR&GENTRY Page 37 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 Pi9 131°81112 VALUATION ANALYSIS The RealtyRates.com survey also provides average lodging rates. I have used this to calculate an adjustment from lodging to golf courses, which I have applied to the PwC (Korpacz) survey. The results are shown in the following table. Investor Surveys - RealtyRates.com and PwC (Korpacz) RealtyRates.com 2012 2011 2010 Avg Golf Course Average Cap Rate 12.06% 12.00% 12.22% Lodging Average Cap Rate 10.61% 10.81% 11.05% Difference 1.45% 1.19% 1.17% PwC (Korpacz) Qtr 3- 2012 Qtr 1- 2012 Qtr 3- 2011 Qtr 1- 2011 National Limited Service Cap Rate Range 8% - 12% 8% - 12% 8% - 12% 8% - 12% Average Cap Rate 9.70% 9.75% 9.80% 9.80% Adjusted to Golf Course 11.15% 10.94% 10.97% 10.97% Conversations with market participants confirm a range of capitalization rates from 10% to 14% with an average near 12%. The surveys previously outlined show moderate decreases in recent history. The 2011 and 2012 average of golf course rates are slightly lower than 2010 according to RealtyRates.cor. The National Limited Service Rates show a slight increase from the 3`1 Quarter 2011 to the 3' Quarter 2012. I have forecast a net operating income of $69,725 based on normal operating conditions which reflects an overall operating expense ratio, including COGS, of 88%. Successful golf courses typically produce operating expense ratios of 75% to 80%. The higher expense ratio of the Painted Hills Golf Course may indicate room for increased efficiencies. Also, increases in gross revenue would have only a nominal effect on expenses significantly impacting the net operating income. Conversely, the subject's historic operation has shown a decline over the past two years, which is largely due to weather and very wet springs, but also a sign of overall declines in rounds of play nationally as well. I have concluded an overall capitalization rate of 11.75% and net operating income multiplier of 7.5 based on the normalcy projections. The table on the following page illustrates the net operating income projections and values based on the concluded capitalization rate and multiplier. The values are relatively consistent at $590,000 and $600,000. I have reconciled a value of $600,000 for the going concern. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 OLICOEUR &GENTRY Page 38 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-5 Filed 12/05/12 Entered 12/05/12 14:06:43 PIST ' o f 52 VALUATION ANALYSIS VALUE - Painted Hills Competitive Market Year 2011 2010 2009 2008 2007 Average NOI From P&Ls - Does Not Include Reserves $20,869 $59,049 $102,237 $33,944 $70,672 $57,354 Normalcy Income & Expenses Direct Capitalization NOI Multiplier Reconciled Revenue from Services $440,000 $440,000 Revenue from Food and Beverage $69,410 $69,410 Revenue from Merchandise Sales $34,402 $34,402 Gross Income $543,812 $543,812 COGS - Food and Beverage (% based on Product Sales) 64% $44,422 64% $44,422 COGS - Merchandise (% based on Product Sales) 95% $32,682 95% $32,682 Operating Expenses 71% $386,106 71% $386,106 Reserves 2% $10,876 NOI 13% $69,725 15% $80,601 Overall Capitalization Rate and Multipliers 11.75% 7.5 Going Concern Value Rounded $590,000 $600,000 $600,000 LAND VALUATION - PROPOSED COTTAGES AT PAIN 1'ED HILLS SI 1'h The Painted Hills Golf Course would not be significantly impacted by development of a modest 8.96 -acre site located at the northwest corner of the larger property. The owners proposed development of the Cottages at Painted Hills, which is a 25 -lot single-family project with lot sizes ranging from 7,147 sf to 9,462 sf. The proposed project includes a significant portion of land areas within the proposed FEMA flood plain designation AE "Compensatory Storage." The AE designation would allow development, although mitigation would be required. The proposed development includes approximately 178,000 sf of lot and road area requiring fill. This area provides a volume of fill at approximately 260,600 cf. To mitigate the loss in flood plain volume, the developer must fill the area with cut from on-site. The proposed plan includes a cut of approximately 262,000 sf within the larger golf course site at a depth of one foot. This is the flood volume mitigation area. The subject's component land value is most appropriately estimated by using the Sales Comparison Approach, whereby sales of similar properties are compared to the subject property and adjustments are made for differences. I have reviewed numerous land sales in the local market. Five comparables are analyzed as being the best indication of the subject's value. These comparables are considered the best available data to represent the subject property in the present market. Detailed data sheets on comparable sales are included in the Addenda. A comparable sales location map is shown on the following page. Painted Hills Golf Course As of November 12, 2012 Page 39 File # 12636-P18 ifi UBLE,F� COPYRIGHT 2012 =t�t� j0LIC0EUR&GENTRY Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 PaPg4f 881 VALUATION ANALYSIS Land Sales Map ADJUSTMENTS The comparables are adjusted for financing, or conditions of sale, if warranted. Conditions of sale adjustments are typically for off-site costs or annexations fees to make the parcel a ready - to -develop site from the lot -line in. I have included a -9% annual market conditions adjustment to the comparable land sales beginning in 2008 through June 2012. Physical characteristic adjustments are applied for size based on the number of lots, absorption rate, location based on lot values, and preliminary plat status. Topography/Location/Appeal: The primary motivation behind a developer's purchase of raw land is the anticipation of future lot sales upon completion. All other things being equal, it is reasonable that a developer is willing to pay more on a per unit basis for sites that will yield higher gross retail values on the lots when complete. Entry level lots in the valley are selling for less than $40,000, whereas the subject's location is superior. I have used an average gross retail estimate of $50,000 in this analysis. In essence, this adjustment encompasses the average lot size, view, topography, and other amenities available to the end purchaser. This adjustment is made on 50% of the difference in anticipated gross retail value at the time of purchase. Entitlements: Future development is the most probable use of the subject property. Engineering has been completed for a 25 -lot development; however, financial feasibility is strained at this time. Preliminary plat approvals generally reflect $1,500 of additional value in good market conditions, although little added value is being realized at this time. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 4OLICOEUR &GENTRY 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered Page 40 COPYRIGHT 2012 Exhibit 4 12/05/12 14:06:43 Pargl8/1 1 VALUATION ANALYSIS The subject plat has some engineering complete; therefore, a moderate +$500/lot adjustment is made for the raw land comparables and -$500 adjustment is made to the comparables with an approved preliminary plat. The table below illustrates the comparable sales as analyzed with respect to the subject property. LAND SALES SUMMARY . • As of 12 -Nov -12 Sale 8 Subject1 2 3 4 5 Sale Date Nance 11/12/2012 Painted Hills Some Engineering 10/28/2011 Morningside Heights 6th Add. Pre Plat 3/9/2011 Avista land Purchase Raw land 6/8/2009 Granite Hill Add. Raw land 1/28/2009 6th Street land Raw Land 3/28/2008 1620 E. Center Road Raw Land Location South Spoke neValley South Spokene Valley West Spokane Greenacres Cheney Spokane County Sale Price Property Rights Financing Adjust Conditions of Sale ' Fee Simple 5483,000 Fee Simple Cash 50 Typical 5350,000 Fee Simple Cash 50 Typical 5425,800 Fee Simple Cash $0 Typical ($70,090) 5710,000 Fee Simple Cash 50 Typical 5180,000 Fee Simple Cash 50 Typical $10,000 Adjusted Sale Price 5483,000 $350,000 5355.800 5710,000 5190,000 Zoning Acres Price/Acre Lots Price/Lot Lots/Ave 5.3 8.96 - 25 2.79 LDR 7,69 562,809 25 519,320 3.25 LDR 9A5 537,037 40 $8,750 4.23 IDR 5.83 561,029 15 523,720 2.57 113 19.85 535,768 55 $12,909 2.77 LDR 2.92 565,068 16 511,875 5.48 Markel Conditions Adjustment .6.07% 518,148 -11.81% -27.57% 58,750 523,720 -30.80% 512,909 -38.34% 511,875 Market Adjusted Price/Lot Sire Similar 0% Larger Smaller 5% .5% Larger 10% Smaller -5°% Topography/Location Based on Gross Retail Difference @50% $50,000 570,000 -20.00% 540,000 560,000 10.00% -10.00% 545,000 5.00% 565,000 -15.00% Net Adjustment/Lot -20.00% 15.00% -15.00% 15.00% -20.00% Adjusted Price/Lot Preliminary Plat Adjustment 515,123 (5500) 510,294 $20,626 5500 $500 515,187 5500 $9,896 $500 Adjtilt'ed Piit�/L`al ttv ,. ., ... ,, n.:, i i .. ::5'14.6231.. 1,; '.S . „ .,$10;'19.0 :.,�,...., -:. 1$21,126 i . .-i..,,:. ,515.687,4 .,,. -.-..l ,:310:396 ;, ¢'I: MARKET LAND VALUE CONCLUSION The comparable sales reflect value indications from $10,396/lot to $21,126/lot. The low end of the range is established with a higher density project dispersing the underlying land value over a greater number of lots. Sale 2, a recent sale on the west plains was purchased by Avista, and for an alternate use with an adjusted rate near the low side of the range at $10,794. Excluding Sale 5, the remaining comparables are from $14,623 to $21,126. I have estimated a "Ready to Develop" land value of $14,000/lot, concluding a value of $350,000 for the relatively small 25 - lot proposed development. In the Property Description I addressed off-site costs and extraordinary on-site costs associated with development of this property. Off-site costs would likely include improvements to road infrastructure to the subject property as well as extension of water lines. I have estimated a cost of $40,000 accordingly. Extraordinary on-site costs include excessive drainage requirements, which I have estimated at $50,000. The development would also require realignment of the Hole 2 tee box, and Hole 3 fairway and green. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 AUBLE,bz...._ 'u�r; ,.j0L1C0EUR &GENTRY Page 41 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 Pag,44 881 VALUATION ANALYSIS This would likely occur at the same time a cut is extracted from the flood volume mitigation area; however, additional costs would be incurred. I have estimated additional costs of $25,000 for realignment. These costs are deducted from the "Ready to Develop" land value in concluding the "As Is" land value of $235,000 RD as shown in the following table. VALUE CONCLUSION: Value Conclusion Number of lots Total $14,000 25 Value Conclusion as "As Ready To Develop" Less Off -Site Costs Less Extraordinary On -Site Costs Less Realignment Costs Reconciled Value, "As Is" e`ad�iclle 0".414P $350,000 -$40,000 -$50,000 -$25,000 $235,000 The Cottages at Painted Mills could be developed, while maintaining the golf course operation. The value of this component is added to the previously concluded golf course going concern value as shown in the following table. Summary of Valuation - Scenario 1- "As Is" as of November 12, 2012 Situational Analysis of Going Concern Values Normalcy Going Concern Value* $600,000 Painted Hills Cottages Raw Land $235,000 Summed Value Rounded $835,000 *GoingConcern Value includes depreciated FF&E of $35,000 RD, but not inventory. Painted Hills Golf Course As of November 12, 2012 Page 42 File # 12636-P18 BL COPYRIGHT 2012 J0LIC0EUR&GENTRY Exhibit 4 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43,Pag4 861 12-03613-PCW11 VALUATION ANALYSIS LAND VALUATION — OVERALL SITE In the Highest and Best Use section of this report I described the maximally productive use of the site as a large future residential development site consistent with the highest and best use as vacant. In the Property Description I estimated a usable area of 61.03 acres based on approximately 30.515 acres outside of the flood zone and 30.515 acres of mitigated usable area within the flood. The mitigated usable area is based on characteristics of the proposed Cottages at Painted Hills, which required approximately 1.47 sf of flood volume mitigation area for every sf of developed area within the flood zone. I concluded the larger site .could support a deeper average cut concluding a one to one ratio. The 30.515 acres of mitigated usable area within the flood zone would require approximately 30.515 acres of designated flood volume mitigation area. Based on the usable area of 61.03 acres and proposed density of the Cottages at Painted Hills, I concluded a total of 175 developable lots within the larger 91.55 -acre site. To determine the subject's land value I have followed a very similar format as previously analyzed in the land valuation of the proposed Cottages at Painted Hills. The subject's land value is most appropriately estimated by using the Sales Comparison Approach, whereby sales of similar properties are compared to the subject property and adjustments are made for differences. I have reviewed numerous land sales in the local market. Five comparables are analyzed as being the best indication of the subject's value. These comparables are considered the best available data to represent the subject property in the present market. Detailed data sheets on comparable sales are included in the Addenda. A comparable sales location map is shown below. •.-.Yq P �: rt�t f� sx • • rasa+ Psi ?c[ea7va t'',tubt.stn, tWan kntrrt its,, �u w., to • t P. ✓•!10... x oatcmF t. II:M•Il.r .eu.,nly lk...ti•�w "t 1I/ Land Sales Map Painted Hills Golf Course As of November 12, 2012 Page 43 File # 12636-P18A COPYRIGHT 2012 tf4,::,•J0L1C0EUR&GENTRY Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 Pa0459 g 8i VALUATION ANALYSIS ADIUSTMENTS The comparables are adjusted for financing, or conditions of sale, if warranted. Conditions of sale adjustments are typically for off-site costs or annexation fees to make the parcel a ready -to - develop site from the lot -line in. I have included a -9% annual market conditions adjustment to the comparable land sales beginning in 2008, though June 2012. Physical characteristic adjusttnents are applied for size based on the number of lots, absorption rate, location based on lot values, and preliminary plat status. Topography/Location/Appeal: The primary motivation behind a developer's purchase of raw land is the anticipation of future lot sales upon completion. All other things being equal, it is reasonable that a developer is willing to pay more on a per unit basis for sites that will yield higher gross retail values on the lots when complete. Entry level lots in the valley are selling for less than $40,000, whereas the subject's location is superior. I have used an average gross retail estimate of $50,000 in this analysis. In essence, this adjustment encompasses the average lot size, view, topography, and other amenities available to the end purchaser. This adjustment is made on 50% of the difference in anticipated gross retail value at the time of purchase. Entitlements: Future development is the most probable use of the subject property. Engineering has been completed for a 25 -lot development; however, financial feasibility is strained at this time. The larger subject site will require substantial engineering and is essentially comparable to raw development land sales. The superior comparables with approved preliminary plats are adjusted downward $500 in this analysis. The table on the following page illustrates the comparable sales as analyzed with respect to the subject property. Painted Hills Golf Course As of November 12, 2012Page 44 File # 12636-P18 a ' AUBLE,t� COPYRIGHT 2012 aj0LIC0EUR &GENTRY Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 PaPg9 8TY1 VALUATION ANALYSIS MARKET LAND VALUE CONCLUSION I have analyzed five comparable properties with adjusted prices ranging from $5,711/lot to $11,599/lot. Comparable 1 is the most recent transaction and was a bank owned property with an adjusted value of $5,711/lot for a higher density development and lower priced lots. This comparable is given less weight for this reason. Comparable 3 is also near the low end of the range established with a comparable property that transferred in 2009, although it was negotiated in 2008. The sale price was initially negotiated as a joint venture, although the seller eventually backed out of the partnership. The transaction price remained the same, and the property was sold in 2009. The transfer was an arm's-length transaction; however, the initial price negotiation was based on a joint venture agreement. It is possible that the price paid was slightly below market accordingly; however, this is the most recent comparable of a larger site in close proximity to the subject property. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 RUBLE,®� COPYRIGHT 2012 ^.nt �aj0LIC0EUR &GENTRY Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 Pangs/ 81 Page 45 LAND SALES SUMMARY` - As of 12 -Nov -12 Sale # Subject 1 2 3 4 5 Sale Date Location Neighborhood 11/12/2012 Painted Hills Spokane Valley 5/24/2012 Vistas at Beacon Hill Spokane 10/28/2011 Morningside Heights 6th Add. Spokane Valley 7/1/2009 Highway 27 and Belle Terre Avenue Spokane Valley 1/28/2009 6th Street Land Cheney 1/24/2008 Cheltenham PUD Five Mile Sale Price land Status Financing Adjustments Conditions of Sale Adjustments Other Off -sites, Improvements, Etc. Raw Land $1,000,000 Raw Land Cash REO $100,000 Off-site 5483,000 Raw Land Cash Typical Off-site 51,656,240 Raw Land Cash Typical Off-site 6175,000 $710,000 Raw Land Cash Typical Typical $1,397,000 Preliminary Plat Cash Typical ($22,000) Off-site $270880 Adjusted Sale Price $1,100,000 $483,000 $1,831,240 6710,000 $1,645,880 Zoning Total Acres Usable Acres Price/Acre Lots Price/Lot Lots/Acre R3 91.55 61.03 175 2.87 RIF 19.09 19.09 $57,622 270 $4,074 14.14 1.05 7.69 7.69 $62,809 25 $19,320 3.25 LDR 55.21 55.21 $33,169 200 $9,156 3.62 R-1 19.85 19.85 $35,768 55 $12,909 2.77 RSF 26.91 26.91 $61,162 125 $13,167 4.65 Adjustments: Time -Annual -0.9% -6.1% -27,056 -30,836 -39.9% Market Adjusted Price/Acre (Total) Market Adjusted Price/Lot 657,096 $4,037 658,999 $18,148 $24,213 $6,684 $24,753 $8,933 $36,746 $7,911 Size Adjustment Based on #of Lots and Absorption Larger 10% Smaller -3036 Similar 096 Smaller -25% Slightly Smaller -5% Topography/Location Based on Gross Retail Difference @ 50% 650,000 $25,000 25% $70,000 -2056 $50,000 036 $50,000 0% 649,500 1% Net Adjustment/Lot 35% -50% 0% -25% -5% Adjusted Price/Acre Adjusted Price/Lot Preliminary Plat Adjustment $88,649 $6,211 ($500) $41,873 512,099 (5500) $33,169 56,684 $0 $28,615 $7,147 50 $58,529 $7,570 (5500) AdJi;stedPficeLlit -. ,.7_;NI na,. ,:::;.ice^. ....-.- -..x,(;55711, ti, 0( . .,3Si.599.�.'a tE€-_..:$6,684-m,, i,,.--timagaliaravigam MARKET LAND VALUE CONCLUSION I have analyzed five comparable properties with adjusted prices ranging from $5,711/lot to $11,599/lot. Comparable 1 is the most recent transaction and was a bank owned property with an adjusted value of $5,711/lot for a higher density development and lower priced lots. This comparable is given less weight for this reason. Comparable 3 is also near the low end of the range established with a comparable property that transferred in 2009, although it was negotiated in 2008. The sale price was initially negotiated as a joint venture, although the seller eventually backed out of the partnership. The transaction price remained the same, and the property was sold in 2009. The transfer was an arm's-length transaction; however, the initial price negotiation was based on a joint venture agreement. It is possible that the price paid was slightly below market accordingly; however, this is the most recent comparable of a larger site in close proximity to the subject property. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 RUBLE,®� COPYRIGHT 2012 ^.nt �aj0LIC0EUR &GENTRY Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 Pangs/ 81 Page 45 VALUATION ANALYSIS Comparable 2 is the most recent transaction, of a superior property in the established Morningside Heights neighborhood with just 25 lots. At $11,599/lot, it is higher than appropriate for the subject with an estimate of 175 lots. The remaining comparables are from $6,684/lot to $7,147/lot:-Reconciling the comparables with the subject's desirable location, but large size, I have estimated a "Ready to Develop" land value of $7,000/lot, concluding a value of $1,225,000. In the Property Description I addressed off-site costs and extraordinary on-site costs associated with development of this property. Off-site costs would likely include improvements to road infrastructure to the subject property as well as extension of water lines. I have estimated a cost of $40,000 to extend services to the northwest corner of the site and another $140,600 associated with improvements to the adjacent streets. Extraordinary on-site costs include excessive drainage requirements, which I have estimated at $262,500 based on $1,500/tot. I have deducted these costs in concluding the "As Is" value of the underlying land at $782,000 RD as shown in the table below. VALUE CONCLUSION: Value Conclusion Number of lots Total $7,000 175 Value Conclusion as "As Ready To Develop" Less Off-site Costs Less Extraordinary On-site Costs Reconciled Value, "As Is" Re oncileci.\ialue, 'as fsrR`OUNDEDr'� $1,225,000 -$180,600 -$262,500 $781,900 s�3 The highest and best use of the subject property was determined to be future residential development; however, the property benefits from the interim use until such development becomes feasible. The comparable sales are generally vacant properties. I have adjusted the sales to reflect the subject's future development potential; however, the sales do not benefit from cash flows through the holding period. The interim use as the Painted Hills Golf Course provides added value in the form of cash flows. In the going concern valuation I concluded a net operating income at normalcy of $69,725. The property is currently operated by the McElhinny family. A potential buyer would have to establish an employee base to take on the responsibilities currently supported by the family. To reestablish the business after transfer I have estimated net operating income would be 75% of the estimate previously concluded. As the operator assimilates to the business, net operating income should increase with efficiencies. I have estimated net operating income in Year 2 at 85%, Year 3 at 95%, and Year 4 to generate 100% of the previously concluded net operating income. I have estimated development to start in Year 5; therefore, the going concern cash flows would be eliminated. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 ..�:5; J0LICOEUR & GENTRY Page 46 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 Pagt„9 BTYI VALUATION ANALYSIS To determine the value of the going concern I have performed a discounted cash flow analysis. In the Income Approach to Value of the going concern I concluded an overall capitalization rate of 11.75%. Yield rates for this type of property are generally 1.5% to 2%, greater than the overall capitalization rate. There is additional risk to the going concern as an interim use; therefore, I have concluded a yield rate of 14% for the cash flows. The following table illustrates the interim use cash flows and adjustment to present value. I have concluded a 20% developer's profit to take over the business and convert it to a "hands free" interim use investment. The concluded value of $144,000 for the interim use going concern includes the FF&E associated with the business. Interim Value From Going Concern year - : AMEN A ?Dbnatt Pr Year 1 $52,294 0.8771930 $45,872 Year 2 $59,266 0.7694675 $45,603 Year3 $66,239 0.6749715 $44,709 Year4 $69,725 0.5920803 $41,283 Present Value of Interim Use CFs $180,000 Conversion from "Family Run" Business to "Hands Free" -$36,000 Interim Value Added Rounded* $144,000 *Includes depreciated FF&E of $35,000 RD, but not inventory. I have added the interim use value to the "Ready to Develop" land value in concluding the "As Is" value of the subject property at $930,000 RD. Summary of Valuation - Scenario 2 - "As Is" as of November 12, 2012 Situational Analysis of Going Concern Values Normalcy Underlying Land Value $782,000 Interim Use Value of the Going Concern $144,000 Summed Value Rounded $930,000 'Going Concern Va lue includes depreciated FF&E of $35,000 RD, but not inventory. Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 =^t; 10LIC0EUR &GENTRY Page 47 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 Pap ..5 88 1 RECONCILIATION AND VALUE CONCLUSION To determine the market value and highest and best use of the subject property I have analyzed the land and improvements from two alternate use scenarios. Scenario 1 is the existing operation of the Painted Hills Golf Course with potential for a small 8.96 -acre, 25 -lot residential subdivision. Scenario 2 is the underlying land value as a future residential development site with an interim use as the golf course going concern. Scenario 1: To develop the component values of this scenario I analyzed the golf course with the Income Approach to Value and the developable land with the Sales Comparison Approach to Value. I concluded values of $600,000 for the golf course going concern and $235,000 for the raw land associated with the 25 potentially developable lots. The summed value is $835,000. Scenario 2: To develop the component values of this scenario I analyzed the future residential development value of the underlying land with the Sales Comparison Approach to Value and the interim use value of the going concern with the Income Approach to Value. The summed component values total $930,000, thereby describing the highest and best use. Painted Hills Golf Course As of November 12, 2012,. Page 48 ,�_ File # 12636-P18 >� << UB COPYRIGHT 2012 0LIC0EUR &GENTRY Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 P91914821 ADDENDA Assumptions & Limiting Conditions Definitions Subject Photographs Storhaug Engineering Letter Land Sale Market Data Letter of Engagement Appraiser Qualifications/License Painted Hills Golf Course As of November 12, 2012 File # 12636-P18 AUBLE,I- =j0L1C0EUR&GENTRY Page 49 COPYRIGHT 2012 Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 P9sa 95108f1 ASSUMPTIONS & LIMITING CONDITIONS Unless otherwise stated, this appraisal report is made expressly subject to the following conditions and stipulations. 1. The appraiser(s) will not disclose the conclusions of this appraisal or the contents of the. appraisal report except as provided for in the Uniform Standards of Professional Praise of Practice, the requirements of the Appraisal Institute, and/or applicable federal, state, or local laws. This appraisal and appraisal report are confidential between the appraiser and the client. 2. The relationship between the client and appraiser is for this assignment only, and for the intended use and purpose stated in the report only. The appraisal/analysis may not be used for another purpose. 3. The Client is the party or parties who/that engage an appraiser in a specific assignment. Only client(s) and/or intended users specifically identified herein may rely on this appraisal report and/or on the data, opinions, and conclusions expressed therein. 4. Possession of an appraisal report and/or knowledge of its contents by anyone other than the client(s) and/or intended user(s) does not confer any right(s) to rely on the data, statements, opinions, conclusions and/or any other part the appraisal and/or report. We accept no accountability, obligation, or liability to any third party. 5. The liability of Auble, Jolicoeur & Gentry, Inc., and its employees, is limited to the client only and only up to the amount of the fee actually received for the assignment. 6. In the course of developing this analysis/appraisal, we gathered information from numerous individuals. These data have been verified to the extent reasonably possible and practicable. Data obtained in the verification process is assumed to be true and correct. No liability can be assumed should these data be proven inaccurate. 7. This analysis and the resulting report have been prepared in accordance with appraisal standards and reporting requirements of the Appraisal Institute and the Appraisal Foundation. 8. Neither all nor part of the contents of this report shall be conveyed to the public through advertising, public relations, news sales or other media, without the written consent and approval of the authors, particularly as to valuation conclusions, the identity of the appraisers or firm with which they are associated, or any reference to the Appraisal Institute or the MAI designation. 9. The date of value to which the opinions expressed in this report apply is set forth in the letter of transmittal. The appraiser/analyst assumes no responsibility for economic or physical changes or events occurring after the effective date of this analysis, even if the change or event would affect the opinions stated herein. Should any additional Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 P995 9I�°g1851 ASSUMPTIONS & LIMITING CONDITIONS pertinent information become available after the date of the appraisal, the appraisal may be subject to revision, and an additional fee. 10. Any projections included in this report are utilized to assist in the valuation process and are based on current market conditions and forecasted trends. Future market and property conditions are outside of the analyst's/appraiser's control and may vary from the projections made in this analysis/appraisal, resulting in different outcomes than project at the time of the analysis/appraisal. The appraiser(s)/analysts(s) make no assurances about the property's future performance or future value. 11. The appraiser(s)/analyst(s) intend to express no legal opinions or other opinions which would require specialized investigation or knowledge beyond that ordinarily employed by real estate appraisers, although such matters may be discussed in the report. A reasonable attempt has been made to consider all available governmental regulations or restrictions, but no responsibility for future conditions that are not readily available or public knowledge at the time of the appraisal is assumed. 12. No opinion as to title is rendered. Data on ownership and the legal description were obtained from sources generally considered reliable. Title is assumed to be marketable and free and clear of all liens and encumbrances, easements, and restrictions, except those specifically discussed in the report. 13. The property is assumed to operate under responsible ownership and with competent management, and available for its highest and best use. 14. The fact that possible easements, encroachments and/or encumbrances are not discussed in the report does not mean that they do not exist. We have not researched public records or other sources for easements, encroachments, or other encumbrances that may affect the property. Only those limitations on title that are specifically discussed or referenced in the report are considered in the appraisal or analysis. 15. The appraiser(s)/analyst(s) have made no engineering survey. The appraiser(s) accept no liability should the size(s) and/or area(s) of the property or properties be in error. 16. Only encroachments specifically identified in this appraisal report are assumed to exist. 17. Maps, plats, and exhibits included herein are for illustration only, as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose. 18. No opinion is expressed as to the value of subsurface oil, gas, or mineral rights, and the property is not known to be subject to surface entry for the exploration or removal of such materials, except as is expressly stated. 19. Testimony or attendance in court or at any other hearing is not required by reason of rendering this assignment. Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 P996 91W111 ASSUMPTIONS & LIMITINO CONDITIONS 20. There will be competent management and maintenance of the property at reasonable cost. 21. Income and expense data herein relied upon were provided by the owners, but do not represent an audited return. 22. No consideration has been given in this appraisal to personal property located on the premises or to the cost of moving or relocating such personal property. Only the real property has been considered. 23. No detailed soil studies covering the subject property were provided. Premises as to soil qualities employed in this report are not conclusive but have been considered consistent with available information. 24. Because no title report was provided, no responsibility is assumed for such items of record not disclosed by normal investigation methods. 25. We have not considered the possible existence of potentially hazardous material used in the construction or maintenance of the building—such as the presence of urea - formaldehyde foam insulation, radon gas, and/or existence of toxic waste. These substances may or may not be present on the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions or for any expertise or engineering knowledge required to discover them. We are not qualified to detect such substances. The client is urged to retain an expert in this field if desired. 26. It is assumed that the ownership and property are in full compliance with all applicable federal, state, and local environmental regulations and laws, unless noncompliance is stated, defined, and considered in the appraisal report. The presence of substances such as asbestos, urea -formaldehyde foam insulation, and other potentially hazardous material, or the existence of underground storage tanks for petroleum products, may affect the value of the property. We are not qualified to detect such substances. The value estimate is predicated on the assumption that there are no such materials or tanks on or in the property in a form or condition that would cause a loss in value. This appraisal has been developed under the assumption that there has been no discharge, dumping, spillage, uncontrolled loss, seepage, migration, or storage of hazardous substances that would adversely affect the value of the subject property. No responsibility is assumed for any such conditions or for any expertise or engineering knowledge required to discover them. The client is urged to retain experts in the various fields if desired. 27. The appraiser has no expertise with respect to toxic wastes, hazardous materials, or undesirable substances. A Level One Environmental Audit of the property by qualified experts is recommended to determine whether or not there are any hazardous materials or undesirable substances in or on the property. No representations, either expressed or Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 P998 9w°bil1 ASSUMPTIONS & LIMITING CONDITIONS implied, regarding the existence or nonexistence of hazardous materials or undesirable substances in, on, or by the property have been made. Problems involving toxic wastes, hazardous materials, or undesirable substances can be extremely costly to correct. It is the responsibility of the Sellers/Lessors, Buyers%I'enants, and Lenders to retain qualified experts to deal with the detection and correction of such matters. 28. We assume that the subject property meets an acceptable level of compliance with the design and construction requirements set forth in the Fair Housing Amendments Act of 1988 (The FHAA) and the Americans with Disabilities Act of 1990 (the ADA). The FHAA specifies certain requirements which must be satisfied in multifamily housing structures to enable accessibility for handicapped persons. The ADA states that similar provisions must be adhered to in development of all public accommodations, including places of employment. These statutes became effective March 31, 1991, and January 26, 1992, respectively. If the subject should be found to be in non-compliance, the eventual renovation costs and/or penalties may negatively impact the present value of the property. Auble, Jolicoeur & Gentry, Inc., its partners, agents, and employees, shall not be liable for any costs, expenses, assessments, penalties, or diminution in value resulting from non-compliance. 29. The conclusions expressed in this report are based on the assumption that the property is not, nor will it be, in violation of the National Environmental Policy Act, State Environmental Policy Act, Shoreline Management Act, or any and all similar government regulations or laws 30. The appraiser has not been provided with a survey of the subject property, nor had the benefit of legal markers from which to locate the boundaries of the property on the ground. This appraisal assumes the legal description provided to the appraiser corresponds with reasonable accuracy to the subject property, as it physically exists, as described in this report. The appraisal further assumes all building and site improvements, utilities, public road access, etc. are within the boundaries of the legal description in this document. The appraiser has no expertise in the area of surveying and makes no representations with regard to matters involving property boundaries. 31. Where the value of the various components of value are shown separately, the value of each is segregated only as an aid to better estimate the value of the subject: The independent value of the various components may or may not be the market value of the component. HYPOTHETICAL CONDITIONS AND EXTRAORDINARY ASSUMPTIONS The owner has filed for bankruptcy; therefore I have not been provided any current information with regard to the number of rounds played, or income and expenses for 2012. The most recent information available is from year-end 2011 financials. Only the exterior of the clubhouse was inspected; however, the interior is reasonably expected to be in similar condition. Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 Plfia 9%oof 1 DEFINITIONS Market Value is defined as: "The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: • Buyer and seller are typically motivated; • Both parties are well informed or well advised, and both acting in what they consider their own best interest; • A reasonable time is allowed for exposure in the open market; • Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and • The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."9 Prospective Value Estimate or Prospective Opinion of Value is defined as "A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of occupancy.s5 Fair Market Value as defined in Washington State Courts: The amount in cash which a well informed buyer, willing but not obligated to buy the property, would pay, and which a well informed seller, willing but not obligated to sell it, would accept, taking into consideration all uses to which the property is adapted and might in reason be applied. It may be assumed that the hypothetical buyer is ready, willing, and financially able to purchase for cash; further, it is never necessary to show that a willing buyer and a willing seller do, in fact, exist. If a hypothetical buyer, whose existence is to be assumed and need not be proven, would exact a discount for cash as opposed to terms, then the amount of such discount should be estimated. Insurable Value is defined as "A type of value for insurance purposes.s6 Often considered to be replacement or reproduction cost less deterioration and non -insurable items. Sometimes cash value or market value but often entirely a cost concept. Bulk Value is defined as "The value of multiple units, subdivided lots, or properties in a portfolio as though sold to a single buyer in one transaction."7 'Board of Governors of the Federal Reserve System (FRS), 12 CFR Part 225; Federal Deposit Insurance Corporation (FDIC), 12 CFR Part 323; National Credit Union Administration (NCUA), 12 CFR Part 722; Office of the Comptroller of the Currency (OCC), 12 CFR 34.42(g); Office of Thrift Supervision (OTS), 12 CFR 564.20); and the Resolution Trust Corporation (RTC), 12 CFR Part 1608. Washington, DC: Federal Register, Vol. 55, No. 251, pages 536110-53618; Monday, December 31, 1990. (Technical corrections published at 56 FR 1229 do not affect this definition.) 5 Dictionary of Real Estate Appraisal, Fifth Edition, The Appraisal Institute, 2010. 6 Ibid r Ibid Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 Papa 9(6°&91 1 DEFINITIONS Fee Simple Estate is defined as absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. Leased Fee Estate is defined as an ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others; usually consists of the right to receive rent and the right to repossession at the termination of the lease. Leasehold Interest the interest held by the lessee (the tenant or renter) through a lease transferring the rights of use and occupancy for a stated term under certain conditions. Entrepreneurial Profit: A market -derived figure that represents the amount an entrepreneur receives for his or her contribution to a project and risk; the difference between the total cost of a property (cost of development) and its market value (property value after completion), which represents the entrepreneur's compensation for the risk and expertise associated with development. In economics, the actual return on successful management practices, often identified with coordination, the fourth factor of production following land, labor, and capital; also called entrepreneurial return or entrepreneurial reward. See also entrepreneurial incentive. Exposure Time 1. The time a property remains on the market. 2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. Exposure time is always presumed to occur prior to the effective date of the appraisal. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. Exposure time is different for various types of real estate and value ranges and under various market conditions. (Appraisal Standards Board of the Appraisal Foundation, Statement on Appraisal Standards No. 6, "Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions"). Market value estimates imply that an adequate marketing effort and reasonable time for exposure occurred prior to the effective date of the appraisal. In the case of disposition value, the time frame allowed for marketing the property rights is somewhat limited, but the marketing effort is orderly and adequate. With liquidation value, the time frame for marketing the property rights is so severely limited that an adequate marketing program cannot be implemented. (The Report of the Appraisal Institute Special Task Force on Value Definitions qualifies exposure time in terms of the three above-mentioned values.) Marketing Time 1. The time it takes an interest in real property to sell on the market subsequent to the Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 PI! 11170 1 DEFINITIONS date of an appraisal. 2. Reasonable marketing time is an estimate of the amount of time it might take to sell an interest in real property at its estimated market value during the period immediately after the effective date of the appraisal; the anticipated time required to expose the property to a pool of prospective purchasers and to allow appropriate time for negotiation, the exercise of due diligence, and the consummation of a sale at a price supportable by the concurrent market conditions. Marketing time differs from exposure time, which is always presumed to precede the effective date of the appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, "Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions" address the determination of reasonable exposure and marketing time.) Traditional Appraisal Process - Approaches to Value: To estimate the value of a property, the appraiser traditionally develops the Cost, Income, and Sales Comparison Approaches to Value. These approaches are defined below: The Cost Approach to Value is based on the premise that a purchaser would pay no more for a property than the cost of obtaining an equally desirable site and building improvements of similar functional utility to the subject. To employ the Cost Approach, the appraiser estimates the market value of the subject site as vacant and available to be put to its highest and best use. The appraiser also estimates the cost new of the subject improvements and any depreciation that has accrued from various physical, functional and economic factors. The Income Approach to Value is based on the premise that a knowledgeable purchaser would pay no more for the property than the cost of obtaining an equally desirable, similar property as an investment, providing similar risk and opportunities for return on and return of the investment. To employ the Income Approach to Value, the appraiser reviews the operating history of the subject and compares its income and expenses against similar factors from competing properties. The net income estimate is then translated into a value indication by using significant ratios developed from analysis of comparable sales and from other investment indicators and criteria. The Sales Comparison Approach to Value is based on the premise that a knowledgeable purchaser would pay no more for a property than the cost of obtaining another equally desirable property of similar functional utility. To employ the Sales Comparison Approach to Value, the appraiser researches the market for recent sales of improved properties similar to the subject. These comparable sales are then adjusted to the subject for physical, functional, and economic differences. The area on which the tenant pays rent varies from building to building, and in the market, is typically rented on one of three ways: on a usable area basis; on a rentable (leasable) area basis; or on a gross building area (GBA) basis. The various lease and area definitions are as follows: Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 Pig 93308t9i DEFINITIONS Gross Building Area is the total floor area of a building, including below -grade space but excluding unenclosed areas, treasured from the exterior of the walls. Single -tenant buildings are typically leased on a gross building area basis. Gross Leasable Area is the total floor area designed for the occupancy and exclusive use of tenants, including basements and mezzanines, and measured from the center of interior partitioning to outside wall surfaces; the standard measure for determining the size of shopping centers where rent is calculated based on the GLA occupied. Gross or Full -Service Lease is a lease in which the landlord receives stipulated rent and is obligated to pay all or most of the property's operating expenses and real estate taxes. Modified Gross is a lease in which the landlord and tenant share any or all expenses. Net Lease/Triple Net Lease is a lease under which the lessee assumes all expenses of operating the property, including both fixed and variable expenses, in addition to the stipulated rent. Rentable Area is the amount of space on which the rent is based; calculated according to local practice. Usable Area is the actual occupiable area of a floor or an office; computed by measuring the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. The usable area of a floor is equal to the sum of all usable areas of that floor. No deductions are made for columns and projections necessary to the building. Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 P99 %cgttli Subject Photographs Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 P91 5.11f41 Subject Photographs Par 3 check in. [ North view from Thorpe Road. Exhibit 4 12-03613-PCW11 Doc 53-6 Filed 12/05/12 Entered 12/05/12 14:06:43 P998551°&851 Subject Photographs North view on Pines and Thorpe Roads. West view from Pines Road. Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Pa96 81(i Subject Photographs Easterly view across northerly section from Dishman Mica Road. South view on Dishman Mica Road, subject to left. Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Parg63 8T'A •STORHAUG ENGINEERING __Clvllhnglneering and Pio)ectlManagement February 20, 2006 Mr. Jason Kostelecky Auble, Jolicoeur & Gentry 107 South Howard Street, Suite 300 Spokane, Washington 99201 RE: Floodplain Consideration for Painted Hills Golf Course Dear Jason: We have completed our review of the current floodplain status on the referenced property, and the progress of the current work by WEST consultants. WEST consultants is under contract with FEMA to update the current floodplain designations and boundaries. Our review primarily focused on the anticipated future designation and its impact on the development potential of the subject property. A preliminary delineation had been recently completed by West Consultants and is as shown on the attached sketch. West consultants have indicated that the new delineation will be classified as "AE Compensatory" as decided in discussions with FEMA.. and the local community. This is a designation used by FEMA which applies to floodplain areas in which a flooded area serves a function of providing storage for a hydrologic event. It is our understanding that, construction in these areas would require replacement of lost floodplain storage, with new excavation to provide additional storage. For example, if a construction project within the delineated floodplain requires the import of 100 c.y. of fill, an excavation and export of 100 c.y. of existing material to a location out of the floodplain storage area would be necessary. Additional consideration for lost infiltration capacity would also likely need to accounted for. Review and concurrence of the ' mitigation proposal would be required by the City of Spokane Valley at a minimum. Regulatory agencies may require additional improvements prior to their approval. Larger size developments and subsequent mitigation proposals may require SEPA and FEMA review and compliance. Preliminary information provided by West consultants show that the storage volume provided within and near the subject property provide approximately 206 acre feet at the 100 year floodplain elevations. Reclamation of property within the development would require excavation (additional floodplain volume provided) at a maximum the following. 1 510 E. Third Avenue • S okane,Washington 99202; i1 Phone (509) 242-1000 • Fax (509) 24210011 i 1 i { S i ; I 1 3 1.--1- Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 PaPt9 8 1 Area of Golf Course outside of floodplain 33 % 50 % 60 % 75 % Acreage Reclaimed (Acre) 0 Excavation / Lake Area (Acre) 0 Depth (ft.) 0 17 27 42 17 20 20 12 10 10 The actual excavation / lake area will be less than shown. Our calculations have been simplified to illustrate a maximum lake size. A more accurate analysis can be determined at your request. The information presented is preliminary in nature, based upon discussions with WEST consultants. FEMA will need to review and concur with the technical data prepared by WEST consultants. Assuming that FEMA concurs with WEST, they will present their information, along with the revised boundary and designation to the City of Spokane Valley for their review and approval. Several opportunities exist for opponents to contest the revised information. However the level of detail and analysis done to date has been quite extensive and would appear to be difficult to challenge. The information presented is based upon our current understanding of FEMA policy and 'our limited knowledge of the current FEMA investigation. It is recommended that the user further investigate FEMA policy and local regulatory requirements to supplement and confirm our findings. Sincerely, Jerry Storhaug P.E. Storhaug EngineertNigi Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Pa g6R gT Y(1 F2iAI\•] r taSi_ I o: Copyright © 2012 Land Sale 1 Record No: 9764 Property Type: Land - Residential Development Land This is the October 2011 sale of 7.69 acres of preliminary platted land known as Morningside Heights 6th Addition. The land is located north of the 5th Addition of Morningslde Heights subdivision in the Spokane Valley just south of Saltese Road, between Sullivan and Barker Roads. The 7.69 -acre parcel is preliminary platted for 25 lots to be marketed as Morningside Heights 6th Addition. The lots in this phase will range between 8,498 sf and 15,228 sf, with an average of 11,416 sf. LOCATION DATA'► REMARKS u` , R P . a r 5 n '$ia"X I I� w = ttPlia- ter 4 • i 1 Identification: Morningside Heights 6th Addition Daystar Road and Incline Drive Spokane Valley, Spokane County, WA Geographic Area: Valley Tax ID/APN: 553022612 P : �YLyy,`'�`.5RF. i�fi�vaGi.PF 0:1--*4:_:-.44".; �-.. DATA Grantor: Jay Investment Company Property Rights: Fee Simple Grantee: Summit Properties, Inc. , Verification: Rich Dahm - Buyer, 509-928-5777, Recording Date; 10/28/2011 12/16/2011; HUD Statement; Confirmed by Sale Price: $483,000 Kristin Willson Adjusted Sale Price: $483,000 Sale Comments: Confirmed by Vicki Mundlin PHYSICAL DATA ANALYSIS Gross Land Area: 7.69 Acres; 334,976 sf Zoning: LDR Low Density Residential Topography: Level Utilities: All available in existing phases Shape: Irregular Flood Info: Not in a flood zone Existing/Proposed: Proposed Residential Use Highest & Best Use: Residential lots Planned Units: 25 ACTUAL ANALYSIS Sale Price: $483,000 $483,000 Sale Price/Gross Acre: $62,808.84 $62,808.84 Sale Price/Gross SF: $1.44 $1.44 Sale Price/Unit: $19,320 $19,320 PROPERTY DESCRIPTION This is the October 2011 sale of 7.69 acres of preliminary platted land known as Morningside Heights 6th Addition. The land is located north of the 5th Addition of Morningslde Heights subdivision in the Spokane Valley just south of Saltese Road, between Sullivan and Barker Roads. The 7.69 -acre parcel is preliminary platted for 25 lots to be marketed as Morningside Heights 6th Addition. The lots in this phase will range between 8,498 sf and 15,228 sf, with an average of 11,416 sf. REMARKS The developer of the larger Morningside Heights development purchased the land for $483,000, or $19,320/lot. As of December 2011, the buyer is moving forward with the final platting process on the 25 lots. The proposed finished home price range is for $300,000 to $380,000, with lots valued in the $70,000 range. Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Parg7e 8111 ..---I01,0111A tliNTRI Copyright © 2012 Land Sale 2 Record No: 8011 Property Type: Land - Residential Development Land This is 9.45 acres near the southwest corner of the Interstate 90 and Abbott Road intersection, immediately southwest of the Spokane city limits in the eastern extent of the West Plains area. The property is adjacent to the Interstate 90 off ramp, which has relatively significant noise deterrence. The property is zoned Low Density Residential (LDR), which allows a maximum of six units/acre. Developers rarely maximize this density. There is a small mobile home and shop on the property. The listing agent describes the improvements as potentially providing rental income in the interim prior to development. The improvements are in generally poor condition and will not provide value beyond the interim use. LOCATION DATA ' i` ~~ ' r Identification: Avista Land Purchase 2722 S. Abbott Road Southwest corner of Interstate 90 and Abbott Road intersection Near Spokane, Spokane County, WA 99224 Geographic Area: West Plains Legal Description: 27 25 42 PT of SW1/4 of SE1/4/ Tax ID/APN: 25274.9081 J (r 1 ,' - IN , 1 �-111 �}�/ � i 1 , `P ` 1 I t t IF �' i it „,- .AL - C. , 71,;� _. - lr , i `� tf- Ili ii y i/ V t •.e.- f' ' 1 SALE DATA Grantor: Prather, James & Carol Property Rights: Fee Simple Grantee: Avista Marketing Time: Since 6/2009 Recording Date: 3/9/2011 Verification: Brandon Marchand - Listing Agent, 509 - Sale Price: $350,000 990-7653, 3/22/2010; Public Records, MLS Adjusted Sale Price: $350,000 #29020186, 3/11 KJC; Confirmed by Christina Dickey PHYSICAL DATA ANALYSIS Gross Land Area: 9.45 Acres; 411,642 sf Front Footage: 660 ft Abbott Road; 200 ft 1-90 off ramp; Zoning: LDR Low Density Residential Topography: Level Utilities: All available Shape: Irregular Landscaping: Natural Flood Info: Not within a flood zone Access: Good from Abbott Road no access from Off Ramp Planned Units: 40 ACTUAL ANALYSIS Sale Price: $350,000 $350,000 Sale Price/Gross Acre: $37,037.04 $37,037.04 Sale Price/Gross SF: $0.85 $0.85 Sale Price/Unit: $8,750 $8,750 PROPERTY DESCRIPTION This is 9.45 acres near the southwest corner of the Interstate 90 and Abbott Road intersection, immediately southwest of the Spokane city limits in the eastern extent of the West Plains area. The property is adjacent to the Interstate 90 off ramp, which has relatively significant noise deterrence. The property is zoned Low Density Residential (LDR), which allows a maximum of six units/acre. Developers rarely maximize this density. There is a small mobile home and shop on the property. The listing agent describes the improvements as potentially providing rental income in the interim prior to development. The improvements are in generally poor condition and will not provide value beyond the interim use. REMARKS The listing agent is marketing the property at the maximum density allowance; however, typical densities in the Spokane market range from three to five unitslacre, with the majority near four units/acre. We have estimated 40 lots for the 9.45 -acre site, resulting in a density of 4.23 lotslacre, which is more consistent with typical development of the area. The listing agent believes the Tots will sell for $40,000 on average upon completion of development. The improvements provide some interim value off -setting holding and demolition costs. We have attributed no value to these improvements. As of March 2011, this property was listed for sale at $460,000 for 616 DOM. It sold in March 2011 for $350,000 to Avista. The agent was presented an offer from the Avista legal team and is unsure of the buyer's intention, although residential development is not a typical use of this buyer. Additionally, Avista owns a 3.06 -acre tract of land to the south. There were no other offers on this land. 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Exhibit 4 Pag.,77 5 Il: Copyright © 2012 Land Sale 3 Record No: ' 7951 Property Type: Land - Residential Development Land REMARKS • According to the buyer, FourC, LLC (Corey Condron, member), the existing home held no value in the overall purchase price; however, the buyer has a few options when the site is ready to develop. They can tear the home down, sell it on a lot at a discount, or update the home and remodel. In our opinion the improvements contribute substantially to the underlying tot value and could be sold with the segregated lot upon completion of the 15 -lot plat when completed sometime in the future. Approximately $70,000 has been deducted from the overall sale price for the home and shop. The site is zoned LDR. LOCATION DATA i 1 ~`^af � I :t--- �� .mo •i l 1 j :�i, ` J) 1 i • �—�- rf ,. �y � Identification: Geographic Area: Neighborhood: Legal Description: Tax ID/APN: Granite Hill Addition Land 623 S. H n Henry e Road East side of Henry Road and south of Cloverdale Court Greenacres, Spokane County, WA Valley West of Legacy Ridge 21-25-45 PTN OF NW1/4 55212.9046 ! _y / ,/4" { 4 it t •'i SALE DATA Grantor: Grantee: Document No.: Recording Date: Sale Price: Adjustments: Adjusted Sale Price: Miller Property Rights: FourC, LLC Verification: 200905809 6/8/2009 $425,800 Home held no value per buyer ($70,000) existing home $355,800 Fee Simple Jennifer Frieling Agent, on - Buyer,e509 10/14/2009; Corey Condron -509- 325-4865, 1/6/2012; MLS 29014316, KLH on 1/6/12; Confirmed by Kari Collins PHYSICAL DATA ANALYSIS Gross Land Area: Zoning: Topography: Utilities: Shape: Access: Existing/Proposed: Planned Units: 5.83 Acres; 253,955 sf LDR Gently Sloping All but sewer - see remarks Irregular Paved Henry Road 15 total lots 15 Sale Price: Sale Price/Gross Acre: Sale Price/Gross SF: Sale Price/Unit: ACTUAL ANALYSIS $425,800 $355,800 $73,036.02 $61,029.16 $1.68 $1.40 $28,386.67 $23,720 PROPERTY DESCRIPTION This is the 2009 sale of a 5.83 -acre site with an existing home. This site was purchased with the intent of development. At the time of sale, sewer service was not available to the site. The agent said that sewer extension is planned for 2010. The buyer received preliminary plat for 15 lots in 2010, and plans to wait to develop the site until the market conditions improve. REMARKS • According to the buyer, FourC, LLC (Corey Condron, member), the existing home held no value in the overall purchase price; however, the buyer has a few options when the site is ready to develop. They can tear the home down, sell it on a lot at a discount, or update the home and remodel. In our opinion the improvements contribute substantially to the underlying tot value and could be sold with the segregated lot upon completion of the 15 -lot plat when completed sometime in the future. Approximately $70,000 has been deducted from the overall sale price for the home and shop. The site is zoned LDR. Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Pag .,7. g l Copyright 02012 Land Sale 4 Record No: 7105 Property Type: Land - Residential Development Land REMARKS LOCATION DATA i i Ii i' t .-.; � - 74:3 IS i ff -r-- -- - i it�. y- + j - K f i i . s x!;71= t't'[_j i. 5r Identification: Geographic Area: Neighborhood: Leal Description: 9 P Tax ID/APN: 6th Street Land 6th Street South of Betz Road, north of Golden Hills Drive Cheney, Spokane County, WA 99004 West Plains Cheney The North Half of the Southeast Quarter of the Northwest Quarter of Section 12, Township 23 North, Range 41 East, W.M., City of Cheney, Spokane County, Washington 13122.0079 SALE SALE DATA Grantor: Grantee: Recording Date: Sale Price: Adjusted Sale Price: Stepping Stone Holdings, LLC Property Rights: Fee Simple Cheney School District #360 Conditions of Sale: See Remarks 1/28/2009 Marketing Time: Listed since 8/2008 al $879,990 $710,000 $710,000 Sale History: 6/2007: Part of larger parcel that sold for $1.8 M Verification: Eric Tucker - John L Scott, 509-455-8600, 10/30/2008; Mitch Swenson, NAI Black, 509-623-1000; MLS #28027054, Purchase & Sale Agreement, Updated as closed 2/27/09, # units 3/09 KJC; Confirmed by Christina Dickey PHYSICAL DATA ANALYSIS Gross Land Area: Front Footage: Zoning: Topography: Utilities: Shape: Planned Units: 19.85 Acres; 864,666 sf 665 ft on 6th Street; R-1 Residential Gently Sloping All Available Rectangular 55 ACTUAL ANALYSIS Sale Price: $710,000 $710,000 Sate Price/Gross Acre: $35,768.26 $35,768.26 Sale Price/Gross SF: $0.82 $0.82 Sale Price/Unit: $12,909.09 $12,909.09 PROPERTY DESCRIPTION These 19.85 acres are located north of the Cheney Golden Hills residential development, southeast of the proposed Eagle Point Apartments, and immediately south of lhe'LDS Church in Cheney, Washington. The site is zoned R-1, Single -Family Residential, allowing an average density of four units/acre, although a minimum lot size of 7,000 sf could potentially produce a higher density. At approximately four units/acre, the site could support residential development upwards of 80 units. The developer stated the usable area is limited by the required development Simpson Parkway. Their drawings show a potential for 50 to 60 units, estimated at 55 units for this analysis. There was the potential to develop the site with an R-3 zoning; however, the city is not allowing the zone change at this time. All utilities are at 61h Street to the east. REMARKS According to the listing agent, there were several offers on the property when it was listed at $879,990; however, with the slowing residential market, potential buyers have backed out due to the inherent risk associated with developing at this time. The sale to the Cheney School District was contingent upon approval by the Cheney Public School Board to purchase the property for $710,000, (approved November 2008) and a common understanding with the City of Cheney regarding the district's financial responsibility for the proposed Simpson Parkway. The school district owns the land to the north and plans to hold onto this parcel for future expansion of the high school's athletic facilities. 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Exhibit 4 Papg77 S 1 aracamx Copyright © 2012 Land Sale 5 Record No: 7416 Property Type: Land - Residential Development Land This generally level site is located near Northwood Middle School. All utilities are available; however, the sewer system will likely require a grinder pump due to topography and the available main at the north boundary of the site. LOCATION DATA . t1 This sale was listed at $239,900 in December 2007. The agent said buyer intends to improve site with eight or nine duplexes, 16 to 18 units. The developer did not estimate the additional extraordinary on-site cost associated with the pump, although this cost is relatively minimal. Typical pumps cost approximately $10,000 with installation, which we have adjusted for In this comparable. i { x j' j i A Identification: 1620 E. Center Road Southwest corner of Center Road and Pittsburg Street Spokane County, WA Geographic Area: North Spokane County Neighborhood: Near Farwell Park Legal Description: McManus 2nd Add Lot 2 Bik 1 Tax ID/APN: 36043.0402 -,��' SALE DATA Grantor: Mark McManus Partnership Property Rights: Fee Simple Grantee: Dennis & Melissa Crapo Marketing Time: 71 DOM Document No.: 200801298 Verification: Russel Grant - Agent, (509) 979-9279, Recording Date: 3/28/2008 3/20/2009; MLS 27036901; Confirmed by Sale Price: $180,000 Kari Collins Adjustments: $10,000 Adjusted Sale Price: $190,000 PHYSICAL DATA ANALYSIS Gross Land Area: 2.92 Acres; 127,195 sf Zoning: LDR Topography: Level Utilities: See remarks ExistinglProposed: Vacant/eight to nine duplexes Planned Units: 16 ACTUAL ANALYSIS Sale Price: $180,000 $190,000 Sale Price/Gross Acre: $61,643.84 $65,068.49 Sale Prlce/Gross SF: $1.42 $1.49 Sale Price/Unit: $11,250 $11,875 PROPERTY DESCRIPTION This generally level site is located near Northwood Middle School. All utilities are available; however, the sewer system will likely require a grinder pump due to topography and the available main at the north boundary of the site. REMARKS This sale was listed at $239,900 in December 2007. The agent said buyer intends to improve site with eight or nine duplexes, 16 to 18 units. The developer did not estimate the additional extraordinary on-site cost associated with the pump, although this cost is relatively minimal. Typical pumps cost approximately $10,000 with installation, which we have adjusted for In this comparable. Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 PaPt74 H 8l �rl'1i71ir..� Q1,1WFLR GE\TRY Copyright © 2012 Land Sale Comparable 1 Record No: 8468 Property Type: Land - Residential Development Land A large portion of the site was formerly overstocked with a variety of exotic animals. In December 2005, the larger 21.6 -acre site received approval for 276 residential units. One hundred thirty-eight units will be zero -lot line units with an average lot size of 2,158 sf and the remaining 138 units will be developed as a multi -family site in eight-plexes and 12-piexes. The existing residences and outbuildings have been removed and some utility and grading work is complete. As of June 2012: The bank -owner sold 19.09 acres to the adjacent land owner for $1,000,000, and plans to underwrite the development of this portion of the site with approximately 270 units. LOCATION DATA REMARKS �Yq ---_. ,� t% — Identification: Vistas at Beacon Hill Havana Street and Longfellow Avenue Spokane, Spokane County, WA Geographic Area: North Spokane Neighborhood: Hillyard Legal Description: A portion of Government Lot 4 in the NWQ of Section 2, Township 25N, Range 43 EWM, the City of Spokane, Spokane County, Washington. Tax ID/APN: 35022.0008_.-,__ S -T -R: 2-25-43 SALE DATA Grantor: Coastal Community Bank Verification: www.costalbank.com/properties-for-sale; Grantee: Pete Rayner Tyler Ferguson, 425-357-3663, 6/23/2011; Document No.: 201205260 Tyler Ferguson, (425) 357-3663, Recording Date: 5/24/2012 6/15/2012; Updated 6/15/12 KJC; Sale Price: $1,000,000 Confirmed by Kari Collins Adjustments: $100,000 Distress element @ 10% Adjusted Sale Price: $1,100,000 - PHYSICAL DATA ANALYSIS Gross Land Area: 19.09 Acres; 831,560 sf Zoning: RSF Topography: Rolling Land Utilities: All available Shape: Irregular Existing/Proposed: Vacant/270 units Planned Units: 270 ACTUAL ANALYSIS Sale Price: $1,000,000 $1,100,000 Sale Price/Gross Acre: $52,383.45 $57,621.79 Sale Price/Gross SF: $1.20 $1.32 Sale Price/Unit: $3,703.70 $4,074.07 PROPERTY DESCRIPTION A large portion of the site was formerly overstocked with a variety of exotic animals. In December 2005, the larger 21.6 -acre site received approval for 276 residential units. One hundred thirty-eight units will be zero -lot line units with an average lot size of 2,158 sf and the remaining 138 units will be developed as a multi -family site in eight-plexes and 12-piexes. The existing residences and outbuildings have been removed and some utility and grading work is complete. As of June 2012: The bank -owner sold 19.09 acres to the adjacent land owner for $1,000,000, and plans to underwrite the development of this portion of the site with approximately 270 units. REMARKS This is the prior listing of 276 preliminary platted lots on 21.6 acres for $2,075,000. According to the adjacent land owner, a recent survey indicated remaining costs to complete the partially developed site of $2,300,000. The neighboring owner felt that the cost estimate was high and there was likely $1,500,000 in costs to complete the infrastructure. This would indicate a range from $3,575,000 or $12,953/unit, up to $4,375,000 or $15,851/unit for completed lots. Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Plan °8f41 MIK BM! Copyright © 2012 Land Sale Comparable 2 Record No: 9764 Property Type: Land - Residential Development Land This is the October 2011 sale of 7.69 acres of preliminary platted land known as Morningside Heights 6th Addition. The land is located north of the 5th Addition of Morningside Heights subdivision in the Spokane Valley just south of Saltese Road, between Sullivan and Barker Roads. The 7.69 -acre parcel is preliminary platted for 25 lots to be marketed as Morningside Heights 6th Addition. The lots in this phase will range between 8,498 sf and 15,228 sf, with an average of 11,416 sf. LOCATION DATA'"" REMARKS --iv.:•--; irifts /( _ bfj r " I t }. u �T _. z a :!`;" "g'n r r � z�i j 4> ° [ ¢ Identification: Morningside Heights 6th Addition Daystar Road and Incline Drive Spokane Valley, Spokane County, WAaa��5 Geographic Area: Valley 2 Tax ID/APN: 55302.261 .l ¥.4 -''" �- t1�- SALE DATA Grantor: Jay Investment Company Property Rights: Fee Simple Grantee: Summit Properties, Inc. Verification: Rich Dahm - Buyer, 509-928-5777, Recording Date; 10/28/2011 12/16/2011; HUD Statomont; Confirmod by Sale Price: $483,000 Kristin Willson Adjusted Sale Price: $483,000 Sale Comments: Confirmed by Vicki Mundlin PHYSICAL DATA ANALYSIS Gross Land Area: 7.69 Acres; 334,976 sf Zoning: LDR Low Density Residential Topography: Level Utilities: All available in existing phases Shape: Irregular Flood Info: Not in a flood zone Existing/Proposed: Proposed Residential Use Highest & Best Use: Residential lots Planned Units: 25 ACTUAL ANALYSIS Sale Price: $483,000 $483,000 Sate Price/Gross Acre: $62,808.84 $62,808.84 Sale Price/Gross SF: $1.44 $1.44 Sale Price/Unit: $19,320 $19,320 PROPERTY DESCRIPTION This is the October 2011 sale of 7.69 acres of preliminary platted land known as Morningside Heights 6th Addition. The land is located north of the 5th Addition of Morningside Heights subdivision in the Spokane Valley just south of Saltese Road, between Sullivan and Barker Roads. The 7.69 -acre parcel is preliminary platted for 25 lots to be marketed as Morningside Heights 6th Addition. The lots in this phase will range between 8,498 sf and 15,228 sf, with an average of 11,416 sf. REMARKS The developer of the larger Morningside Heights development purchased the land for $483,000, or $19,32011o1. As of December 2011, the buyer is moving forward with the final platting process on the 25 lots. The proposed finished home price range is for $300,000 to $380,000, with lots valued in the $70,000 range. Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 P91. 61c)cY351 Ar _101,1 » UBEMI: Copyright © 2012 Land Sale Comparable 3 Record No: 8315 Property Type: Land - Residential Development Land LOCATION DATA ,i_,,,,,.. 4 t ; i y .I ` ° ( i , t . a7 `{4, ' Jfi--1'� „ T f "• ` e ', i E j , 1i S ' I ' i = 3 i ' 1� a sg _ al_f �l ._TM Identification: • Geographic Area: Pine Valley Ranch Northeast corner of Highway 27 and Belle Terre Avenue Spokane Valley, Spokane County, WA 99037 Valley Neighborhood: Tax IDIAPN: South of Valley 45341.9154 T.,- Y' ;k,5 ii r ;J ,r i -) 1 , l•_. i i rtr a. j i I,I �11, t ,.t .t .. N SALE DATA Grantor: Grantee: Document No.: Recording Date: Sale Price: Adjustments: Sale Price: Gus and Tom Enterprises & Louise Gustin Property Rights: Pine Springs Farm, 1 LLC Marketing Time: Excise 200910600 Financing: 7/1/2009 Negotiated in 2008 $1,656,240 Negotiated as a JV Sale History: $175,000 Off-site costs Verification: $1,831,240 Fee Simple Not actively marketed Conventional Not within five years Brady M. Peterson - Agent, 509-623-2046, 010; JoeAdjusted 443/4-8/26519, /8/22010; Organ(c Public Records; 509 Confirmed by Keven Russell PHYSICAL DATA ANALYSIS Gross Land Area: Front Footage: Zoning: Topography: Utilities: Shape: Landscaping: Access: Planned Units: 55.21 Acres; 2,404,948 sf 1785 ft Highway 27; 800 ft Belle Terre Avenue; 900 ft 32nd Avenue; LDR/MDR Residential Nearly Level to Steep All available Irregular Natural Good from Highway 27, Belle Terre Avenue, and 32nd Avenue 200 Sale Price: Sale Price/Gross Acre: Sale Price/Gross SF: Sale Price/Unit: ACTUAL ANALYSIS $1,656,240 $1,831,240 $29,998.91 $33,168.63 $0.69 $0.76 $8,281.20 $9,156.20 Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 P998 wgfiI1 •-_� Copyright © 2012 .`'r l B FAis...�d LICMIttlainat Land Sale Comparable 3 (Continued) • PROPERTY DESCRIPTION This property is located immediately south of and adjacent to the Spokane Valley city limits at the northeast corner of Highway 27 and Belle Terre Avenue, with additional frontage along 32nd Avenue. The property was zoned LDR, Low Density Residential, when the negotiations began, The negotiation will be discussed further in the remarks section. The property was priced based on the LDR zone; however, the developer intended to rezone a portion of the property to MDR and develop apartment units. The rezone was completed prior to sale and the developer has since begun construction on 256 units within 23 acres. The remaining land will be held for future development as single -family lots. As the property was negotiated based on the LDR zone, we have estimated a total of 200 lots for the 55.21-acre site at a density of 3.6 lots/acre. The density was discussed with the developer who believes the steeper topography of the east portion of the property would limit density, while the flat land should achieve approximately four lots/acre. In discussions with the developer, he anticipated single -family lot values from $50,000 to $60,000 at the time of purchase. Water and sewer services were available along Highway 27; however, the developer anticipated some off-site improvements associated with road widening and sidewalks. He estimated $100,000 to $150,000 for Highway 27, which included a fairly extensive entry and lighting project. He also considered a modest $50,000 for Improvements to Belle Terre and 32nd Avenues. We estimated a total off-site cost of $175,000 for road improvements. REMARKS The property was purchased in July of 2009; however, the negotiations began in early 2008. The original negotiation was a joint venture project with the previous property owner and the current property owner. In tate 2008, the previous owners decided they did not want to move forward with development. The current owners decided to purchase the property outright. The two parties entered into an agreement for the complete transfer to Pine Springs Farm 1, LLC, at the previously negotiated price. The safe was not technically an arm's-length transaction as the price was negotiated based on a joint venture agreement. The buyer believed the purchase price may have been a little lower than market when negotiated; however, with market conditions deteriorating Into 2009 the price was deemed reasonable by both parties. Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 P9sa vso 8 1 o) is ut GENTRY Copyright © 2012 Land Sale Comparable 4 Record No: 7105 Property Type: Land - Residential Development Land These 19.85 acres are located north of the Cheney Golden Hills residential development, southeast of the proposed Eagle Point Apartments, and immediately south of the LDS Church in Cheney, Washington. The site is zoned R-1, Single -Family Residential, allowing an average density of four units/acre, although a minimum lot size of 7,000 sf could potentially produce a higher density. At approximately four units/acre, the site could support residential development upwards of 80 units. The developer stated the usable area is limited by the required development Simpson Parkway. Their drawings show a potential for 50 to 60 units, estimated at 55 units for this analysis. There was the potential to develop the site with an R-3 zoning; however, the city is not allowing the zone change at this time. All utilities are at 6th Street to the east. LOCATION DATA —. i ii �sr ,i !-........_._._._ .• .. i i ; is � _.,-r;-.;:�.: ,,.-:'-;i; - r -P7--;i' ;; LZ?'y,, Fs �2� Y 2s t� 'tr2` l •_ _� _- , Identification: 6th Street Land 6th Street South of Betz Road, north of Golden Hills Drivel._ Cheney, Spokane County, WA 99004 Geographic Area: West Plains Neighborhood: Cheney Legal Description: The North Half of the Southeast Quarter of the Northwest Quarter of Section 12, Township 23 North, Range 41 East, W.M., City of Cheney, Spokane County, Washington Tax ID/APN: 13122.0079 SALE DATA Grantor: Stepping Stone Holdings, LLC Property Rights: Fee Simple Grantee: Cheney School District #360 Conditions of Sale: See Remarks Recording Date: 1/28/2009 Marketing Time: Listed since 8/2008 at $879,990 Sale Price: $710,000 Adjusted Sale Price: $710,000 Sale History: 6128 107: Part of larger parcel that sold for $ Verification: Eric Tucker - John L Scott, 509-455-8600, 10/30/2008; Mitch Swenson, NAI Black, 509-623-1000; MLS #28027054, Purchase & Sale Agreement, Updated as closed 2/27/09, # units 3/09 KJC; Confirmed by Christina Dickey PHYSICAL DATA ANALYSIS Gross Land Area: 19.85 Acres; 864,666 sf Front Footage: 665 ft on 6th Street; Zoning: R-1 Residential Topography: Gently Sloping Utilities: All Available Shape: Rectangular Planned Units: 55 ACTUAL ANALYSIS Sale Price: $710,000 $710,000 Sale Price/Gross Acre: $35,768.26 $35,768.26 Sate Price/Gross SF: $0.82 $0.82 Sale Price/Unit: $12,909.09 $12,909.09 PROPERTY DESCRIPTION These 19.85 acres are located north of the Cheney Golden Hills residential development, southeast of the proposed Eagle Point Apartments, and immediately south of the LDS Church in Cheney, Washington. The site is zoned R-1, Single -Family Residential, allowing an average density of four units/acre, although a minimum lot size of 7,000 sf could potentially produce a higher density. At approximately four units/acre, the site could support residential development upwards of 80 units. The developer stated the usable area is limited by the required development Simpson Parkway. Their drawings show a potential for 50 to 60 units, estimated at 55 units for this analysis. There was the potential to develop the site with an R-3 zoning; however, the city is not allowing the zone change at this time. All utilities are at 6th Street to the east. REMARKS According to the listing agent, there were several offers on the property when it was listed at $879,990; however, with the slowing residential market, potential buyers have backed out due to the inherent risk associated with developing at this time. The sale to the Cheney School District was contingent upon approval by the Cheney Public School Board to purchase the property for $710,000, (approved November 2008) and a common understanding with the City of Cheney regarding the district's financial responsibility for the proposed Simpson Parkway. The school district owns the land to the north and plans to hold onto this parcel for future expansion of the high school's athletic facilities. Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Piga �106i851 AL, __ .janijt&G tiTrY Copyright © 2012 Land Sale Comparable 5 Record No: 6402 Property Type: Land - Residential Development Land LOCATION DATA •, { e n P t J. r, ,�;.�., .. ,..,6, k ft tt y' .1 r .. � wail/"7te t) r-iu i 4 v4+ i- k .V' I , A i i ; 1 r P N a .r > t Identification: Cheltenham PUD Strong Road and Elm Street Spokane, WA Geographic Area: North Spokane County Neighborhood: Five Mile Prairie Tax ID/APN: 26241.0027, .0028i - ii 11 w t7 YT i 7,, J� SALE DATA Grantor: Greenstone Corp Property Rights: Fee Simple Grantee: Dahm Development Verification: Casey Mason, 458-5860, 1/9/2008; Recording Date: 1/24/2008 Confirmed by Vicki K. Mundlin Sale Price: $1,397,000 Cash Equivalent: $1,397,000 Adjustments: ($22,000) Two lots in Cimarron Included Adjusted Sale Price: $1,375,000 Off -Site Development $270,880 Roads, sewer, storm included Costs: Effective Sale Price: $1,645,880 PHYSICAL DATA ANALYSIS Gross Land Area: 26.91 Acres; 1,172,200 sf Usable Land Area: 26.91 Acres; 1,172,199 sf; Zoning: RSF Utilities: All available Shape: Irregular Planned Units: 125 ACTUAL ANALYSIS Sale Price: $1,397,000 $1,645,880 Sale Price/Gross Acre: $51,913.79 $61,162.39 Sale Price/Gross SF: $1.19 $1.40 Sale Price/Usable Acre: $51,913.79 $61,162.39 Sale Price/Usable SF: $1.19 $1.40 Sale Price/Unit: $11,176 $13,167.04 PROPERTY DESCRIPTION This is a 105 -lot preliminary plat with nearly complete construction drawings at the time of sale. There was a 4.28 -acre parcel near the center of the plat, previously held for storm drainage. The seller negotiated to send storm water off site to a city -owned parcel off Austin Road; therefore, the buyer anticipates developing the center parcel with another 20 lots, for a total of 125 lots. The first 71 lots of the 105 platted lots are projected for completion in June 2008 with an anticipated gross retail value of 549,500/1ot. The sale included two undeveloped lots in the adjacent Cimarron development, which were deducted from the analysis price at $11,000 each. The off-site cost estimate is $270,880 and includes asphalt, curb, sidewalk, and sewer along Strong Road, as well as off-site storm water pipes in Austin Road to the city -owned drainage pond. The analysis price is $1,645,880, or $13,167/lot for the 125 platted and proposed lots. Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 P9sa 9%°(!t4-1 Pak AmericanWest Bat Real Estate Services Department 110 S Ferrall Street Spokane, WA 99202 509-279-1307 509-462-7195 brett.heidel@awbank.net October 18, 2012 RE: Appraisal Assignment IWiLL 70 Properties aka painted hills golf course Sport/Entertainment Golf Related -Golf Course/Club 4403 S Dishman Mica Road Spokane Valley, WA 99206 RIMS Project#: 12-00.0767-01 Dear Vicki Mundlin: We would like to engage your services for the appraisal of the referenced property as indicated in the addendum to this letter. Your engagement is as an independent contractor and not as an employee or agent of AmericanWest Bank. The appraisal assignment is to be prepared in accordancewith the requirements of the current edition of Uniform Standards of Professional Appraisal Practice (USPAP). A qualified staff appraiser may perform the appraisal, but you must review and sign the report. The appraisal may not besubcontracted to an outside individual or firm without my prior written consent. By accepting this appraisal assignment, you and all members of your organization certify that they have no direct or indirect interest, financial or otherwise, in the property or transaction, or relationship with the ownership or borrower. Moreover, you agree not to accept or pursue the 'appraisal, or related assignments, of the subject property for a minimum of one year from the delivery dateof the final appraisal report without written consent from AmericanWest Bank. Timing and Fee of Appraisal Assignment: It is our understanding that the fee for this assignment Includes all expenses and an allowance for any technical assistance you feel necessary or appropriate. The original, signed appraisals should be delivered to the undersigned no later than the specified due date. If delays are anticipated or occur, you must immediately request an extension of the due date in writing from the undersigned in order to avoid late fees or penalties. The delivery date was a primary .consideration in engaging you and your firm for this appraisal assignment. A penalty may be deducted from the appraisal fee if we have not been so notified and agreed to an extension of time for completion. Should the appraisal not be delivered on or before this date, AmericanWest Bank reserves the right, at its sole discretion, to either cancel the assignment for cause without payment of the fee or deduct a penalty of one percent (1%) per business day until the appraisal is received. Additionally, AmericanWest Bank reserves the right to cancel this assignment. Upon Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Pa :Pagp Vicki Minidlin 10/18/2012 Re: RIMS Projectitr12-0p767;:01 caneellatiOn, payment of the fee will be. limited to actual time spent and any out-of-pocket eXpenseS incurred up to the date of termination. We understand that you and all personnel associated with the assignment will be OVoilableto discuss any concerns 'we -might have regarding the analysis and the value denclusions. ArnericonWeSt Bank reserves the right to withhold payment if, at our sole discretion, if the apPreiser fails to address our concerns with the appraisal within ten working days of such POOPP, Property Contact / information. Please arrange an inspection of the property and make your initl request for information with the property contact listed in the addendum to this letter. Yol:Ir. initial request for information should be made in writing within two business days, of receipt of this letter and copy of the request should be sent to the undersigned. Any questions regardlOg this 'assignment should he e-mailed to the undersigned at brett.,heidelgawbanicriet. When aPPlioaPle, discounted cash flow analysis should be performed using the Most tedent versioll of .AROUS. Please upload a copy of the ARCUS data file to RIMS Upon completion •along with yoUr COmpleted report. :Confidentiality. ArnerioariWest Sonic is your client and unless alathorized by the undersigned, you may not disclose confidential data, including the value conclusion, to anYbha other then the undersigned,, including .the s owner of the property, our borrower o any. -etherindividual connected directly Or indirectly to this transaction. To enable yeti to doinplete this assignment, we will provide to you information, oerne Of Which we regard as,111ohly. tenfideritial. Yew' acceptance of the assignment includes your agreement to keep confidential any and all lnformation proVided to you, regardless of 'Whether any trikirmatibh provided isniarked Or otherwise designated as "COrifideritial inforthation,'' SioecifleallY, any: and all information about customers Of ArneribanWest Bank, Of anynature whatsoever, inelUdina but not Whited to 'customer - financial information, and the fact of the existence of .0 relationship, or .potential relationShip, between AmerioanWest Bank and CtistOtriers, IS Confidential, Some Pithe information provided to. you may not be confidential if: 4 itWas. known to you before AmericanWest Bank or the COStOiner provided it to you; or • it was-publicknowledge before AmericanWest Bank or the: customer proVided itto you; or • it becomOS availablefrorn athird party, not subject to any restrictions, after AmericanWest Bank or cuStOiner provided RIO you. You must protect the Confidential Information provided to you using at least a reasonable degree of care, to prevent the unauthorized disclosure of -such Confidential Information. You can disclose the .Confidential inforrhation to your employees, but you must tell them that the information is confidential and must be maintained that way. You May use AmericanWest Bank's Confidential Infortnation only: • far thoputpose of completing your assignment, and !! for theourpose of meeting your professional obligations. Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 P19,5 1279:t41 Page. Vicki Mundlin 10/18/2012 Re: RIMS Project#:12-000767-01 Your obligation to maintain the confidentiality of AmericanWest Bank's Confidential Information continues even after the completion of your assignment, except that you have the right to use the Confidential Information to fulfill your professional obligations with respect to mandated file retention and disclosure for purposes of peer review. If you are, or may be, required by a court or a governmental agency to disclose any Confidential Information, you agree to notify AmericanWest Bank before you make any disclosure. If a representative of AmericanWest Bank inquires as to what provisions you have made to keep AmericanWest Bank's information confidential, you agree to disclose in detail what steps you have taken and are taking to ensure confidentiality. If you have any questions about your obligations.as set forth above, or about how to meet your obligations set forth above, contact Brett Heide! at brett.heidel@awbank.net immediately. Brett Heide] will assist you in meeting your obligations if at all possible. It is essential that AmericanWest Bank's Confidential Information be maintained as confidential. Acceptance: A copy of the fully executed engagement letter must be included In the addenda of each copy of the final appraisal report. During the course of this assignment, if you determine that changes to the terms of this agreement or requested scope of work are necessary, please contact the undersigned in writing. Any changes to this engagement must be authorized by Brett Heide!. Delivery Instructions: Please upload the final appraisal report including all addendum to RIMS. Additionally, please deliver additional copies of the final appraisal report as instructed in the addendum to this engagement letter. Sincerely, Brett Heide! Agreed and Accepted: Date: / By: Lf( K. ![ Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Pin %%1851 e*ArnericanWest Bank ADDENDUM TO ENGAGEMENT LETTER RIMS Project#:12-090767-01 Property Data PrOjeCt hlatne 'WILL -70 Properties aka painted hills.gollcourse Borrower: IVVILL 70 Properties property doriteet: Heidi Collins Affiliation; Account Officer Property Contact Phone; 509-434-3775 iProperty COMO Other phone: PrePerty GeriteOt Fax: Property Contact E -Mail: Subject Preperty Address 4403 S Dishman Mica Road Spokane Valley, WA .99206 ProPodY TYPO: Sport/Entertainment-Golf Related -Golf Conrse/Club Property DeSeription: Legal Description: 411:Waite' AtsWrirnent Appraisal Fee; $a,ncoo DUeDate: 11/1512012 Job Manager': Brett Heide! 509-279-1307, Fax: 509-462-7195, brett.heidel©awbenk*t Report Addressee(s): Brett Heide! ArnericanWest Bank 110 S Ferrell Street Spokane, WA 99202 Delivery Instructions: Electronic copies 1 Upload to RIMS upon completions, along with all supporting tiles. Hard copies 1 Brett Heide, ArneriCanVVest Bank 110 8 Ferrell Street Spokane, WA 99202 Scope of Services: Intended Use Use - Asset Valuation The intended use of this appraisal le for perloclic.Velpetion of.the'etSet per policy Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Ploa (ito,v9i ' RUBLE, calPropcuy,Urilym, JOLCOEUR & GENTRY Counselors &:1ppt��sers VICKI K. MUNDLIN, MAI PROFESSIONAL MEMBERSHIPS AND ASSOCIATIONS • Member Appraisal Institute, MAI Certificate #11615 • State of Washington Certified General Real Estate Appraiser, #1100856 • State of Idaho Certified General Real Estate Appraiser, #CGA -411 • State of Montana Certified General Real Estate Appraiser, #873 • Inland Northwest Chapter of Appraisal Institute, President, 2004-2005 BUSINESS EXPERIENCE • Auble & Associates, Inc„ dba Auble, Jolicoeur & Gentry, Principal and Analyst/Appraiser 2004 -Present • Auble & Associates, Inc., dba Auble, Jolicoeur &Gentry, Appraiser, 1992-2003 • Familiar with the valuation of a variety of property types and specialist in recreation development land, subdivisions, and apartments EDUCATION • Lewis -Clark State College - Lewiston, Idaho B.S. in Management, 1990 • North Idaho College, Dean's List • Lewis -Clark State College, President's List • Appraisal Institute Courses: • Standards of Professional Practice, Part C, 1999, 2002, 2004, 2006, 2007, 2008, 2010, 2011 • Business Practices & Ethics, 2005, 2010 • Evaluating Commercial Construction, 2004 • Land, Condo, &Subdivisions, Solutions to Hard Value Assets, 2010 • Condominiums, Coops and PUDs, 2007 • General Appraiser Market Analysis & Highest & Best Use, 2008 • Completed courses and passed the required examinations for: • Valuation of Detrimental Conditions, 2002 • Separating Real & Personal Property from Intangible Business Assets, 2002 • Comprehensive Appraisal Workshop, 2000 • Appraisal of Non -conforming Uses, 2000 • Level II: 520 Advanced Applications, 1999 • Appraisal Overview Curriculum, 2011 • Agricultural Land • Apartment Buildings • Assisted Living Facilities • Commercial Buildings • Commercial Land • Congregate Care Facilities • Development Land • Industrial Land • Nursing Homes • Completed the following seminars: • Residential Housing Inspection, 1998 • Affordable Housing Valuation, 1997 • Level II: 540 Report Writing and Valuation Analysis, 8/27/95 - 9/02/95 Data Mining, 2006 Attacking and Defending Litigation, 2007 Standards of Professional Practice, Part A and B, 1993 Appraisal of the Single -Family Residence, 1992 Capitaliza tion Theory &Techniques, Part Aand B, 1992 Foundations of Real Estate Appraisal, 1992 Introduction to Appraising Real Property Successfully challenged exam, 1992 PROPERTY TYPES ANALYZED • Office Buildings • Residential Condominiums • Retail/Warehouse Buildings • Right -of -Way Acquisitions • Rural Acreage • Single -Fancily Residential Timberland Waterfront Properties Wetlands Corporate Office • 324 N. Mullan Road, Spokane Valley, WA 99206.509-747-0999 • Fax 509-747-3559 *N. Idaho Office • 1023 W. LaCrosse Avenue, Coeur d'Alene, ID 83814.208-292-2965 • Fax 208-292-2971 Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 Pi98 5%851 *--TAMCWWMFA-41%,•>W-,. ,'"W.M744"6ar-3,4-"on.1*-41"fer-WAf6-re-445Y,z9.11.~.f.a-,t"' ----- =i,.• DEPARTMENT OP LICENSING —.IWSINESS AND:PROFESSIONS DIVISION THIS CERTIFIES THAT THE PERSON NAMED HEREON IS AUTHORIZED, AS PROVIDED EY LAW, AS A CERTIFIED GENERAL REAL ESTATE APPRAISER VICKI IS. MAI MUNDLIN 1023 W. LACROSS AVENUE COEUR 0 ALENE ID 83314 -.' -. . . • : . C rULIc No. !;';':i :.-. -- : ssued Da....,_ 1 ::':: •:' i. ,::: --------- -,0cii11P9PIIPP.,.:r.'::. ,:;!_!,:..,.m, i :•... :•••.....' -...:: 1 : • e . ' .-:: . ....:6/iiiiiii06, .:..:i ::: !:1-; ...::: ".1:93/I00914.--;; r:<: ,,,....!..,..,.-... . .. . ,„....,1?)00ti'... • :,:!;::: . PL -630-159(R12/04) Exhibit 4 12-03613-PCW11 Doc 53-7 Filed 12/05/12 Entered 12/05/12 14:06:43 P998 Y1 (38t851 Parcel Number: Description: Location: Bill to Party: Mortgage Co: SPOKANE COUNTY 2012 PROPERTY TAX AND OTHER CHARGES STATEMENT SPOKANE COUNTY TREASURER 45334.0110 Tax Code: TOMLINS ADD CHESTER L10 0 ADDRESS UNKNOWN IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 0144 MAKE CHECKS PAYABLE TO: SPOKANE COUNTY TREASURER Interest/Costs Computed To: Stmt Printed: Amount Owing by Year: Orig. Amt $158.46 $329.73 $353.08 Year 2010 2011 2012 All Amounts Owing 11/30/2012 11/16/2012 Int/Costs $52.18 $98.59 $35.22 Total $210.64 $428.32 $388.30 $1,027.26 KEEP THIS PORTION 111110111111111111111011111111111111111111111111111111111 Return With 2nd Half Payment 309358 Mail Payments To: PO Box 199 Spokane, WA 99210-0199 Telephone Nbr: Office Hours: Physical Location: 1116 W. Broadway Ave. Spokane, WA 99260 (509) 477-4713 8:30am - 4:OOpm, Monday through Thursday 8:30am - 1:OOpm on Fridays YOUR CANCELLED CHECK IS YOUR RECEIPT For tax payment options, please see our web site at www.spokanecounty.org/treasurer. Please note name and/or address changes on back of this statement. 2012 TAX INFORMATION: Land Value: Improvement Value: Personal Property Value: Taxable Value: Levy Rate: 24,500.00 0.00 0.00 24,500.00 14.08472898 TAXPAYER: IWILL70 PROPERTIES LLC Courtesy statement emailed to Ben @ law offices per request. mce YOUR CANCELLED CHECK IS YOUR RECEIPT Parcel Number: 45334.0110 Second half payments must be hand delivered or postmarked by 10/31/2012. By law, there is no grace period and partial payments cannot be accepted. IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 AA tear on perf AA Nov int & penalties included. Interest/Costs Computed To: Stmt Printed: 11/30/2012 11/16/2012 Please see stub below for amounts owing 111101111110111011100111111111111111111111111111111111 Return With 1st Half or Full Payment AA tear on perf AA Courtesy statement emailed to Ben @ law offices per request. Nov int & penalties included. mce YOUR CANCELLED CHECK IS YOUR RECEIPT Parcel Number: 45334.0110 Payments must be hand delivered or postmarked by 04/30/2012. By law, there is no grace period and partial payments cannot be accepted. IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 Interest/Costs Computed To: Stmt Printed: Year Orig. Amt Int/Costs 2010 2011 2012 158.46 329.73 353.08 Total Amount Due Payment Options: All Amounts Owing 45334-0110 000000000000001027262012 Exhibit5 52.18 98.59 35.22 11/30/2012 11/16/2012 Total 210.64 428.32 388.30 1,027.26 1,027.26 12-03613-PCW11 Doc 53-8 Filed 12/05/12 Entered 12/05/12 14:06:43 Fiagel1calf Spokane County Advance Tax Statement Spokane County Treasurer's Office (509) 477-5746 Parcel 05.190370 Business: IWILL70 PROPERTIES LLC Property Location 4403 S DISHMAN-MICA R TCA 0144 Levy Rate: 14.084728985 Regular Tax Due: $1,393.34 Advance Year 2013 Taxable Value $32,209.00 Advance Tax Calculated Advance Tax: Fee Amt: 25 % Total Advance Tax: $453.66 $113.41 Statement ID No. 1339 Statement created by MCE $567.07 on 11/8/2012 Make Checks Payable to: Spokane County Treasurer Mall Statement and Check to: Spokane County Treasurer P.O. Box 199 Spokane, WA 99210-0199 Retain this portion of your Advance Tax Statement for your records Parcel Business: DBA PAINTED HILLS GOLF COURSE Advance Year 2013 Statement ID No. 1339 Spokane County 2013 Advance Tax Statement 05.190370 Total 2013 Advance Tax Due IWILL70 PROPERTIES LLC DBA PAINTED HILLS GOLF COURSE PO BOX 14808 SPOKANE ,WA 99214 Advance Tax: Fee Amt: 25 % Total Advance Tax: $453.66 $113.41 $567.07 Make Checks Payable to: Spokane County Treasurer Mail Statement and Check to: Spokane County Treasurer P.O. Box 199 Spokane, WA 99210-0199 Exhibit 5 12-03613-PCW11 Doc 53-8 Filed 12/05/12 Entered 12/05/12 14:06:43 Ffage22Q,fa SPOKANE COUNTY 2012 PROPERTY TAX AND OTHER CHARGES STATEMENT SPOKANE COUNTY TREASURER Parcel Number: 05.190370 Description: Location: 4403 S DISHMAN-MICA RD Tax Code: Bill to Party: IWILL70 PROPERTIES LLC DBA PAINTED HILLS GOLF COURSE 4403 S DISHMAN MICA RD SPOKANE VALLEY WA 99206 Mortgage Co: 0144 MAKE CHECKS PAYABLE TO: SPOKANE COUNTY TREASURER Interest/Costs Computed To: Stmt Printed: Amount Owing by Year: Year Orig. Amt 2010 $236.41 2011 $457.04 2012 $472.48 11/30/2012 11/16/2012 Int/Costs $78.03 $137.11 $47.25 Total $314.44 $594.15 $519.73 All Amounts Owing $1,428.32 KEEP THIS PORTION 11110111111101111111111111111111111111111111111111111 Return With 2nd Half Payment 309359 Mail Payments To: PO Box 199 Spokane, WA 99210-0199 Telephone Nbr: Office Hours: Physical Location: 1116 W. Broadway Ave. Spokane, WA 99260 (509) 477-4713 8:30am - 4:OOpm, Monday through Thursday 8:30am - 1:OOpm on Fridays YOUR CANCELLED CHECK IS YOUR RECEIPT For tax payment options, please see our web site at www.spokanecounty.org/treasurer. Please note name and/or address changes on back of this statement. 2012 TAX INFORMATION: Land Value: Improvement Value: Personal Property Value: Taxable Value: Levy Rate: 0.00 0.00 33,546,00 33,546.00 14.08472898 TAXPAYER: IWILL70 PROPERTIES LLC Courtesy statement emailed to Ben @ law offices per request. mce YOUR CANCELLED CHECK IS YOUR RECEIPT Parcel Number: 05.190370 Second half payments must be hand delivered or postmarked by 10/31/2012. By law, there is no grace period and partial payments cannot be accepted. IWILL70 PROPERTIES LLC DBA PAINTED HILLS GOLF COURSE 4403 S DISHMAN MICA RD SPOKANE VALLEY WA 99206 AA tear on perf AA Nov int & penalties included. Interest/Costs Computed To: Stmt Printed: 11/30/2012 11/16/2012 Please see stub below for amounts owing 1111111111111111111111111111111111111111111111111111111 Return With 1st Half or Full Payment Courtesy statement emailed to mce YOUR CANCELLED CHECK IS YOUR RECEIPT Parcel Number: 05.190370 Payments must be hand delivered or postmarked by 04/30/2012. By law, there is no grace period and partial payments cannot be accepted. IWILL70 PROPERTIES LLC DBA PAINTED HILLS GOLF COURSE 4403 S DISHMAN MICA RD SPOKANE VALLEY WA 99206 AA tear on perf AA Ben @ law offices per request. Nov int & penalties included. Interest/Costs Computed To: Stmt Printed: 11/30/2012 11/16/2012 Year Orig. Amt Int/Costs Total 2010 2011 2012 236.41 457.04 472.48 Total Amount Due Payment Options: All Amounts Owing 05-190370 000000000000001428322012 Exhibit5 78.03 137.11 47.25 314.44 594.15 519.73 1,428.32 1,428.32 12-03613-PCW11 Doc 53-8 Filed 12/05/12 Entered 12/05/12 14:06:43 Plige334a SPOKANE COUNTY 2012 PROPERTY TAX AND OTHER CHARGES STATEMENT SPOKANE COUNTY TREASURER Parcel Number: 44041.9144 Tax Code: Description: 04-24-44 GOVT LT 1 LYG E OF CPH EXC W4FT & E 0145 MAKE CHECKS PAYABLE TO: SPOKANE COUNTY TREASURER Location: 0 ADDRESS UNKNOWN S Bill to Party: IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 Mortgage Co: Interest/Costs Computed To: Stmt Printed: Amount Owing by Year: Year Orig. Amt 2010 $607.43 2011 $1,249.81 2012 $1,316.39 All Amounts Owing 11/30/2012 11/16/2012 Int/Costs $186.91 $337.69 $121.50 Total $794.34 $1,587.50 $1,437.89 $3,819.73 KEEP THIS PORTION 1111111111111111111111111111111111111111111111111111 Return With 2nd Half Payment 309355 Mail Payments To: PO Box 199 Spokane, WA 99210-0199 Telephone Nbr: Office Hours: Physical Location: 1116 W. Broadway Ave. Spokane, WA 99260 (509) 477-4713 8:30am - 4:OOpm, Monday through Thursday 8:30am - 1:OOpm on Fridays YOUR CANCELLED CHECK IS YOUR RECEIPT For tax payment options, please see our web site at www.spokanecounty.org/treasurer. Please note name and/or address changes on back of this statement. 2012 TAX INFORMATION: Land Value: Improvement Value: Personal Property Value: Taxable Value: Levy Rate: 73,440.00 0.00 0.00 73,440.00 13.00177748 TAXPAYER: IWILL70 PROPERTIES LLC Courtesy statement emailed to Ben @ law offices per request. mce YOUR CANCELLED CHECK IS YOUR RECEIPT Parcel Number: 44041.9144 Second half payments must be hand delivered or postmarked by 10/31/2012. By law, there is no grace period and partial payments cannot be accepted. IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 1111111110111111111111111111111111111111111111111111 Return With 1st Half or Full Payment AA tear on perf AA Nov int & penalties included. Interest/Costs Computed To: Stmt Printed: 11/30/2012 11/16/2012 Please see stub below for amounts owing ^A tear on perf AA Courtesy statement emailed to Ben @ law offices per request. Nov int & penalties included. mce YOUR CANCELLED CHECK IS YOUR RECEIPT Parcel Number: 44041.9144 Payments must be hand delivered or postmarked by 04/30/2012. By law, there is no grace period and partial payments cannot be accepted. IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 Interest/Costs Computed To: Stmt Printed: 11/30/2012 11/16/2012 Year Oriq. Amt Int/Costs Total 2010 607.43 2011 1,249.81 2012 1,316.39 Total Amount Due Payment Options: All Amounts Owing 44041-9144 000000000000003819732012 Exhibit5 12-03613-PCW11 Doc 53-8 Filed 12/05/12 Entered 12/05/12 14:06:43 p4ie44¢affl 186.91 337.69 121.50 794.34 1,587.50 1,437.89 3,819.73 3,819.73 Parcel Number: Description: Location: Bill to Party: Mortgage Co: SPOKANE COUNTY 2012 PROPERTY TAX AND OTHER CHARGES STATEMENT SPOKANE COUNTY TREASURER 309356 45334.0108 Tax Code: TOMLINS ADD CHESTER L8 0 ADDRESS UNKNOWN IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 0144 MAKE CHECKS PAYABLE TO: SPOKANE COUNTY TREASURER Interest/Costs Computed To: Stmt Printed: Amount Owing by Year: Year 2010 2011 2012 Orig. Amt $158.46 $329.73 $353.08 11/30/2012 11/16/2012 Int/Costs $52.18 $98.59 $35.22 Total $210.64 $428.32 $388.30 All Amounts Owing $1,027.26 KEEP THIS PORTION 1111101111111111101111111111111111111111111111111111111111 Return With 2nd Half Payment Mail Payments To: PO Box 199 Spokane, WA 99210-0199 Telephone Nbr: Office Hours: Physical Location: 1116 W. Broadway Ave. Spokane, WA 99260 (509) 477-4713 8:30am - 4:OOpm, Monday through Thursday 8:30am - 1:OOpm on Fridays YOUR CANCELLED CHECK IS YOUR RECEIPT For tax payment options, please see our web site at www.spokanecounty.org/treasurer. Please note name and/or address changes on back of this statement. 2012 TAX INFORMATION: Land Value: Improvement Value: Personal Property Value: Taxable Value: Levy Rate: 24,500.00 0.00 0.00 24,500.00 14.08472898 TAXPAYER: IWILL70 PROPERTIES LLC An tear on perf ^^ Courtesy statement emailed to Ben @ law offices per request. Nov int & penalties included. mce YOUR CANCELLED CHECK IS YOUR RECEIPT Parcel Number: 45334.0108 Stmt Printed: Second half payments must be hand delivered or postmarked by 10/31/2012. By law, there is no grace period and partial payments cannot be accepted. Interest/Costs Computed To: IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII Return With 1st Parcel Number: 11/30/2012 11/16/2012 Please see stub below for amounts owing Courtesy statement emailed mce YOUR CANCELLED CHECK IS YOUR RECEIPT 45334.0108 Half or Payments must be hand delivered or postmarked by Full 04/30/2012. By law, there is no grace period and partial Payment payments cannot be accepted. IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 An tear on perf ^^ to Ben @ law offices per request. Nov int & penalties included. Interest/Costs Computed To: Stmt Printed: Year Orig. Amt 2010 2011 2012 158.46 329.73 353.08 11/30/2012 11/16/2012 Int/Costs Total Total Amount Due Payment Options: All Amounts Owing 45334-0108 000000000000001027262012 Exhibit5 52.18 210.64 98.59 428.32 35.22 388.30 1,027.26 1,027.26 12-03613-PCW11 Doc 53-8 Filed 12/05/12 Entered 12/05/12 14:06:43 Pfage`5dfl Parcel Number: Description: Location: BIII to Party: Mortgage Co: SPOKANE COUNTY 2012 PROPERTY TAX AND OTHER CHARGES STATEMENT SPOKANE COUNTY TREASURER 309357 45334.0109 Tax Code: TOMLINS ADD CHESTER L9 0 ADDRESS UNKNOWN IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 0144 MAKE CHECKS PAYABLE TO: SPOKANE COUNTY TREASURER Interest/Costs Computed To: Stmt Printed: Amount Owing by Year: Year Orig. Amt 2010 $158.46 2011 $329.73 2012 $353.08 11/30/2012 11/16/2012 Int/Costs $52.18 $98.59 $35.22 Total $210.64 $428.32 $388.30 All Amounts Owing $1,027.26 KEEP THIS PORTION 111111111111111111111111111111111111111111111111111111111111 Return With 2nd Half Payment Mail Payments To: PO Box 199 Spokane, WA 99210-0199 Physical Location: 1116 W. Broadway Ave. Spokane, WA 99260 Telephone Nbr: (509) 477-4713 Office Hours: 8:30am - 4:OOpm, Monday through Thursday 8:30am - 1:OOpm on Fridays YOUR CANCELLED CHECK IS YOUR RECEIPT For tax payment options, please see our web site at www.spokanecounty.org/treasurer. Please note name and/or address changes on back of this statement. 2012 TAX INFORMATION: Land Value: Improvement Value: Personal Property Value: Taxable Value: Levy Rate: 24,500.00 0.00 0.00 24,500.00 14.08472898 TAXPAYER: IWILL70 PROPERTIES LLC Courtesy statement emailed to Ben @ law offices per request. mce YOUR CANCELLED CHECK IS YOUR RECEIPT Parcel Number: 45334.0109 Second half payments must be hand delivered or postmarked by 10/31/2012. By law, there is no grace period and partial payments cannot be accepted. IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 111111111111111111111111111111111111111111111111111111111111 Return With 1st Half or Full Payment AA tear on perf AA Nov int & penalties included. Interest/Costs Computed To: Stmt Printed: 11/30/2012 11/16/2012 Please see stub below for amounts owing AA tear on perf AA Courtesy statement emailed to Ben @ law offices per request. Nov int & penalties included. mce YOUR CANCELLED CHECK IS YOUR RECEIPT Parcel Number: 45334.0109 Payments must be hand delivered or postmarked by 04/30/2012. By law, there is no grace period and partial payments cannot be accepted. IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 Interest/Costs Computed To: Stmt Printed: Year Orin. Amt 11/30/2012 11/16/2012 Int/Costs Total 2010 2011 2012 158.46 329.73 353.08 52.18 98.59 35.22 210.64 428.32 388.30 Total Amount Due 1,027.26 Payment Options: All Amounts Owing 1,027.26 45334-0109 000000000000001027262012 Exhibit5 12-03613-PCW11 Doc 53-8 Filed 12/05/12 Entered 12/05/12 14:06:43 Oa €.E64i� Parcel Number: Description: Location: Bili to Party: Mortgage Co: SPOKANE COUNTY 2012 PROPERTY TAX AND OTHER CHARGES STATEMENT SPOKANE COUNTY TREASURER 309354 45336.9191 Tax Code: 0144 MAKE CHECKS PAYABLE TO: SPOKANE COUNTY TREASURER 33-25-44 & 34-25-44 PTN OF SE1/4 SEC 33 & PTN 0 4403 S DISHMAN-MICA RD IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 Interest/Costs Computed To: Stmt Printed: Amount Owing by Year: Year Orig. Amt 2010 $9,189.44 2011 $19,130.85 2012 $20,501.70 11/30/2012 11/16/2012 Int/Costs Total $3,019.04 $12,208.48 $5,706.78 $24,837.63 $2,040.76 $22,542.46 All Amounts Owing $59,588.57 KEEP THIS PORTION Mail Payments To: PO Box 199 Spokane, WA 99210-0199 Telephone Nbr: Office Hours: Physical Location: 1116 W. Broadway Ave. Spokane, WA 99260 (509) 477-4713 8:30am - 4:OOpm, Monday through Thursday 8:30am - 1:00pm on Fridays YOUR CANCELLED CHECK IS YOUR RECEIPT For tax payment options, please see our web site at www.spokanecounty.org/treasurer. Please note name and/or address changes on back of this statement. 2012 TAX INFORMATION: Land Value: Improvement Value: Personal Property Value: Taxable Value: Levy Rate: 483,060.00 954,900.00 0.00 1,437,960.00 14.08472898 TAXPAYER: IWILL70 PROPERTIES LLC 1 111111 111111111111111 111111111 111111 11111 11111 111111111 1111 Return With 2nd Half Payment Courtesy statement emailed to Ben @ law offices per request. mce YOUR CANCELLED CHECK IS YOUR RECEIPT Parcel Number: 45336.9191 Second half payments must be hand delivered or postmarked by 10/31/2012. By law, there is no grace period and partial payments cannot be accepted. IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 ^^ tear on perf ^^ Nov int & penalties included. Interest/Costs Computed To: Stmt Printed: 11/30/2012 11/16/2012 Please see stub below for amounts owing 11111111111111111111111101 11111111111111111111 111111111 1111 Return With 1st Half or Full Payment AA tear on perf ^^ Courtesy statement emailed to Ben @ law offices per request. Nov int & penalties included. mce YOUR CANCELLED CHECK IS YOUR RECEIPT Parcel Number: 45336.9191 Payments must be hand delivered or postmarked by 04/30/2012. By law, there is no grace period and partial payments cannot be accepted. IWILL70 PROPERTIES LLC 4927 S BELLAIRE LN VERADALE WA 99037 Interest/Costs Computed To: Stmt Printed: Year Orig. Amt Int/Costs 2010 9,189.44 3,019.04 2011 19,130.85 5,706.78 2012 20,501.70 2,040.76 Total Amount Due Payment Options: All Amounts Owing 45336-9191 000000000000059588572012 Exhibit5 11/30/2012 11/16/2012 Total 12,208.48 24,837.63 22,542.46 59,588.57 59,588.57 12-03613-PCW11 Doc 53-8 Filed 12/05/12 Entered 12/05/12 14:06:43 Oage77ctra