Filed by Bowne Pure Compliance






Exhibit 4.3




BUSINESS LOAN AGREEMENT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call / Coll	 	Account	 	Officer	 	Initials
	$6,597,500.00
	 	07-09-2008
	 	07-09-2011
	 	05500412-10
	 	6/21
	 	 	 	053	 	 





References in the boxes above 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:
	 	NETREIT, A CALIFORNIA CORPORATION	 	Lender:	 	MILE HIGH BANKS
	 
	 	365 S. RANCHO SANTA FE ROAD, SUITE 300	 	 	 	DTC BRANCH
	 
	 	SAN MARCOS, CA  92078	 	 	 	8400 E. CRESCENT PKWY #150
	 
	 	 	 	 	 	GREENWOOD VILLAGE, CO 80111
	 
	 	 	 	 	 	(303) 221-5100






THIS BUSINESS LOAN AGREEMENT dated July 9, 2008, is made and executed between NETREIT, A
CALIFORNIA CORPORATION (“Borrower”) and MILE HIGH BANKS (“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. 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 July 9, 2008, 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 July 9, 2011.



ADVANCE AUTHORITY. The following person or persons are authorized to request advances and
authorize payments under the line of credit until Lender receives from Borrower, at Lender’s
address shown above, written notice of revocation of such authority: KENNETH W. ELSBERRY,
SECRETARY & CFO of NETREIT, A CALIFORNIA CORPORATION or JACK K. HEILBRON, PRESIDENT OF
NETREIT, A CALIFORNIA CORPORATION.



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) 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 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 corporation for profit 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 California. 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
corporation 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 365 S. RANCHO SANTA FE ROAD,
SUITE 300, SAN MARCOS, CA 92078. 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 incorporation or organization, or bylaws, 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.




Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing,
Borrower represents and warrants that: (1) During the period of Borrower’s ownership of the
Collateral, there has been no use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any Hazardous Substance by any person on, under, about or
from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that
there has been (a) any breach or violation of any Environmental Laws; (b) any use,
generation, manufacture, storage, treatment, disposal, release or threatened release of any
Hazardous Substance on, under, about or from the Collateral by any prior owners or
occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of
any kind by any person relating to such matters. (3) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the Collateral shall use, generate,
manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about
or from any of the Collateral; and any such activity shall be conducted in compliance with
all applicable federal, state, and local laws, regulations, and ordinances, including
without limitation all Environmental Laws. Borrower authorizes Lender and its agents to
enter upon the Collateral to make such inspections and tests as Lender may deem appropriate
to determine compliance of the Collateral with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower’s expense and for Lender’s
purposes only and shall not be construed to create any responsibility or liability on the
part of Lender to Borrower or to any other person. The representations and warranties
contained herein are based on Borrower’s due diligence in investigating the Collateral for
hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any
future claims against Lender for indemnity or contribution in the event Borrower becomes
liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend,
and hold harmless Lender against any and all claims, losses, liabilities, damages,
penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting
from a breach of this section of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release of a hazardous waste or
substance on the Collateral. The provisions of this section of the Agreement, including the
obligation to indemnify and defend, shall survive the payment of the Indebtedness and the
termination, expiration or satisfaction of this Agreement and shall not be affected by
Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or
otherwise.


 


 









 





					
	 	 	 	 	 
	 
	 	BUSINESS LOAN AGREEMENT	 	 
	Loan No: 05500412-10
	 	(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, prepared by Borrower.




Tax Returns. As soon as available, but in no event later than thirty (30) days after the
applicable filing date for the tax reporting period ended, Federal and other
governmental tax returns, prepared by a tax professional satisfactory to Lender.




Additional Requirements. FINANCIAL REQUIREMENTS RECAP:




1. BORROWER’S SIGNED AND DATED AUDITED FINANCIAL STATEMENTS ARE TO BE FURNISHED TO THE
BANK ANNUALLY
BEGINNING 12/31/2008




2. BORROWER’S SIGNED AND DATED TAX RETURNS FILED WITH THE INTERNAL REVENUE SERVICE AND
ANY APPLICATION FOR EXTENSION FILED WITH THE INTERNAL REVENUE SERVICE ARE TO BE FURNISHED TO THE BANK AS SOON
AS COMPLETED BUT IN NO EVENT LATER THAN 30 DAYS AFTER FILING, BEGINNING WITH THE 2007 TAX YEAR




ADDITIONAL CONDITIONS OF APPROVAL:




1. THE LENDER WILL CHARGE A FEE OF 0.125% PER QUARTER ON THE UN-USED PORTION OF THE LOAN. THE
UN-USED PORTION OF THE LOAN WILL BE DETERMINED QUARTERLY AND WILL BE BASED UPON THE LOAN AMOUNT
LESS THE AVERAGE OUTSTANDING PRINCIPAL BALANCE FOR THE QUARTER. THE LENDER WILL NOT CHARGE A
FEE IF THE AVERAGE OUTSTANDING PRINCIPAL BALANCE FOR THE QUARTER IS GREATER THAN $4,630,000.00.




2. BORROWER TO PROVIDE THE LENDER WITH QUARTERLY RENT ROLLS ON PROPERTIES LOCATED AT:
1271, 1277, 1283, AND 1295 KELLY JOHNSON BOULEVARD, COLORADO SPRINGS, CO 80920 AND 727
COLORADO BOULEVARD, DENVER, CO 80206.




3. BORROWER TO PROVIDE ON AN ANNUAL BASIS PROOF OF PROPERTY TAXES PAID CURRENT ON THE
PROPERTIES LOCATED AT: 1271, 1277, 1283, AND 1295 KELLY JOHNSON BOULEVARD, COLORADO SPRINGS,
CO 80920 AND 727 COLORADO BOULEVARD, DENVER, CO 80206 NO LATER THAN MAY 15, 2009 IF PAID
ANNUALLY OR JULY 15, 2009 IF PAID SEMI-ANNUALLY.




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.




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.




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 properties, income, or
profits. Provided however, Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall
be contested in good faith by appropriate proceedings, and (2) Borrower shall have
established on Borrower’s books adequate reserves with respect to such contested assessment,
tax, charge, levy, lien, or claim in accordance with GAAP.




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 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.


 


 









 






					
	 	 	 	 	 
	 
	 	BUSINESS LOAN AGREEMENT	 	 
	Loan No: 05500412-10
	 	(Continued)
	 	Page 3







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.




Environmental Compliance and Reports. Borrower shall comply in all respects with any and all
Environmental Laws; not cause or permit to exist, as a result of an intentional or
unintentional action or omission on Borrower’s part or on the part of any third party, on
property owned and/or occupied by Borrower, any environmental activity where damage may result
to the environment, unless such environmental activity is pursuant to and in compliance with
the conditions of a permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty (30) days after
receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower’s part in connection with any environmental
activity whether or not there is damage to the environment and/or other natural resources.




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, 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) pay any dividends on Borrower’s stock
(other than dividends payable in its stock), provided, however that notwithstanding the
foregoing, but only so long as no Event of Default has occurred and is continuing or would
result from the payment of dividends, if Borrower is a “Subchapter S Corporation” (as defined
in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock
to its shareholders from time to time in amounts necessary to enable the shareholders to pay
income taxes and make estimated income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as Shareholders of a Subchapter S
Corporation because of their ownership of shares of Borrower’s stock, or purchase or retire any
of Borrower’s outstanding shares or alter or amend Borrower’s capital structure.




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 all such
accounts.



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.




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.




Insolvency. The dissolution or termination of Borrower’s existence as a going business, 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.




Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common
stock of Borrower.




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.


 


 









 





					
	 	 	 	 	 
	 
	 	BUSINESS LOAN AGREEMENT	 	 
	Loan No: 05500412-10
	 	(Continued)
	 	Page 4






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.



SUBSEQUENT TRANSACTIONS INVOLVING OTHER COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor’s business, or as otherwise provided for in this
Agreement, Grantor shall not sell, offer to sell, or otherwise permit the Collateral to be subject
to any lien, security interest, encumbrance, or charge, other than the security interest provided
for in this Agreement, without the prior written consent of Lender. This includes security
interests even if junior in right to the security interests granted under this agreement. Unless
waived by Lender, all proceeds from any disposition of the Collateral (for whatever reason) shall
be held in trust for Lender and shall not be commingled with any other funds provided however,
this requirement shall not constitute consent by Lender to any sale or other disposition. Upon
receipt, Grantor shall immediately deliver any such proceeds to Lender.



SUBSEQUENT TRANSACTIONS INVOLVING REAL ESTATE COLLATERAL. Grantor shall not allow or permit the
real property described in the Deed of Trust to become encumbered by any lien, security interest,
or charge, other than the encumbrance created by the Deed of Trust, without the prior written
consent of the lender. This includes any and all security interests, even if junior in right to
the security interests granted under the Deed of Trust.



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 reasonable 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 reasonable 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 Colorado without regard to its
conflicts of law provisions. This Agreement has been accepted by Lender in the State of
Colorado.




Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the
jurisdiction of the courts of BOULDER County, State of Colorado.




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. 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. Unless otherwise provided or required by law, 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 extending
Loan Advances, 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 extension of Loan Advances and delivery to Lender of the Related Documents, shall
be continuing in nature, shall be deemed made and redated by Borrower at the time each Loan
Advance is made, 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.



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.


 


 









 





					
	 	 	 	 	 
	 
	 	BUSINESS LOAN AGREEMENT	 	 
	Loan No: 05500412-10
	 	(Continued)
	 	Page 5







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 NETREIT, A CALIFORNIA CORPORATION 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.




Environmental Laws. The words “Environmental Laws” mean any and all state, federal and
local statutes, regulations and ordinances relating to the protection of human health or
the environment, including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
(“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
(“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or federal laws, rules, or regulations adopted pursuant thereto.




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.




Hazardous Substances. The words “Hazardous Substances” mean materials that, because of
their quantity, concentration or physical, chemical or infectious characteristics, may
cause or pose a present or potential hazard to human health or the environment when
improperly used, treated, stored, disposed of, generated, manufactured, transported or
otherwise handled. The words “Hazardous Substances” are used in their very broadest sense
and include without limitation any and all hazardous or toxic substances, materials or
waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances”
also includes, without limitation, petroleum and petroleum by-products or any fraction
thereof and asbestos.




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 MILE HIGH BANKS, 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 NETREIT, A CALIFORNIA CORPORATION in the
principal amount of $6,597,500.00 dated July 9, 2008, 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 JULY 9, 2008.



	 	 	 	 	 
	BORROWER:	 	 
	 
	 	 	 	 
	NETREIT, A CALIFORNIA CORPORATION	 	 
	 
	 	 	 	 
	By:

	 	/s/ Kenneth W. Elsberry
 

KENNETH W. ELSBERRY, Secretary & CFO of
	 	 
	 

	 	NETREIT, A CALIFORNIA CORPORATION	 	 
	 
	 	 	 	 
	LENDER:	 	 
	 
	 	 	 	 
	MILE HIGH BANKS	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	 

	 	Authorized Signer	 	 





LASER PRO Lending, Ver. 5.40.00.003 Copr. Harland Financial Solutions, Inc. 1997, 2008.





All Rights Reserved.  — Co l:\CF\LPL\C40.FC TR-1533 PR-8