**Exhibit 10.9**

CONSTRUCTION/PERMANENT LOANAGREEMENT

 

THIS LOANAGREEMENT is made as of the __17__ day of December 1999, by and among CUL (SINT MAARTEN) N.V., a Netherlands Antilles limitedliability company, whose mailing address is 12410 SE 32nd Street, Bellevue, Washington 98005 (the “Borrower”),COST-U-LESS, INC., a Washington corporation whose mailing address is 12410 SE 32 Street, Bellevue, Washington 98005Street, Bellevue, Washington 98005 (“CULUSVP”, and, together with Cost-U-Less, the “Guarantors”), and BANStreet, Bellevue, Washington 98005 (“CULUSVP”, and, together with Cost-U-Less, the “Guarantors”), and BANCOPOPULAR DE PUERTO RICO, a commercial banking institution whose mailing address is P.O. Box 8580, St. Thomas, U.S. Virgin Islands00801 (the “Bank”).

WHEREAS, theBank has agreed to make, the Borrower has accepted and the Guarantors have agreed to guarantee, a loan upon the terms and conditionshereinafter described (the “Loan”), to be used by the Borrower for the construction of a retail building and relatedfacilities (the"Project") on the real property herein described and in accordance with plans and specifications submitted to and approved by theBank (the “Plans and Specifications”);

 

NOW, THEREFORE,in consideration of the premises and the mutual agreements contained herein, the parties hereto agree as follows:

1.               REPRESENTATIONS. The Borrower and the Guarantors.respectively, represent, covenant and warrant that:
1.1             Corporate /Company Existence and Power. The Borrower is a limited liability company, duly organized, validly existingand in good standing under the laws of St. Maarten, Netherlands Antilles, and has the power to make this Agreement and to borrowhereunder. Each of the Guarantors is a corporation duly organized, validly existing and in good standing under the lawsof the State of Washington and the U.S. Virgin Islands, respectively, and has the corporate power to make this Agreement and toguarantee the Loan.

1.2             CorporateAuthority. The making and performance by the Borrower and Guarantors of this Agreement has been dulyauthorized by all necessary corporate action and will not violate any provision of law or of their Articles of Incorporation, Bylawsor other organizational documents or result in the breach of, or constitute a default under, or, except as hereinafter provided,result in the creation of any lien, charge or encumbrance upon any property or assets of the Borrower or 

 

 

 

 

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Guarantors pursuant to anyindenture or bank loan or credit agreement, or other agreement or instrument to which any of the Borrower or Guarantors is a partyor by which any of the Borrower, Guarantors or the property or any of them may be bound or affected.

1.3            Financial Condition. The most recent financial statements of the Borrower and Guarantors, and other related information,heretofore furnished to the Bank, are complete and correct and fairly present the financial condition of the Borrower and Guarantorsand the results of operations for the period(s) specified therein. To the best of the Borrower’s and each Guarantor’sknowledge andbelief, neither the Borrower nor any Guarantor has contingent obligations, liabilities for taxes, or unusual forward or long termcommitments, except as herein specifically mentioned, not disclosed by, or reserved against, in said financial statements, and, atthe present time, there are no material unrealized or anticipated losses from anyunfavorable commitments of the Borrower or Guarantors. Said financial statements have been prepared in accordance with generallyaccepted accounting principles and practices consistently maintained by the Borrower and Guarantors throughout the period involved.Since the dates of such financial statements, and since the date of the other financial information provided to the Bank, there havebeen no material adverse changes in the financial condition of the Borrowers or Guarantors from that set forth in said financialstatements or in said other financial information as of the date thereof.
1.4         Litigation.  Except as the Bankhas been advised in writing, there are no suits or proceedings pending, or, to the knowledge of the Borrower or Guarantors,threatened, against or affecting the Borrower or Guarantors which, if adversely determined, would have a material adverse effect onthe financial condition or business of the Borrower or Guarantors.  There are no proceedings by or before any governmentalcommission, bureau or other administrative agency pending, or to the knowledge of the Borrower or Guarantors threatened, against anyof the Borrower or Guarantors.
1.5         Titles; Liens.  The Borrowerand Guarantors have exclusive good and marketable title to each of the fixed properties and assets reflected in their financialstatements free and clear of all mortgages, liens and encumbrances, except (a) liens, if any, for current taxes, assessments andgovernmental charges not delinquent or whose validity is being contested at the time in good faith
 

 

 

 

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and by appropriate proceedings, andcovenants, restrictions, rights, easements, liens, encumbrances and minor irregularities in title which, in their opinion, do notand will not interfere with the occupation, use and enjoyment of such properties and assets in the normal course of business aspresently conducted or planned or materially impair the value of such properties and assets for the purpose of such business, (b)mortgages, liens and encumbrances disclosed in the financial statements provided in Subsection 1.3 above, and (c) mortgages, liens and encumbrances in favor of the Bank.
1.6           Environmental Compliance.  To the best of the Borrower’s knowledge and belief the Borrower has duly complied with, and the Property(as hereinafter defined) and Borrower’s business operations, assets, equipment, property, leaseholds or other facilities are incompliance with the provisions of all Netherlands Antilles environmental, health, and safety laws, codes and ordinances, and allrules and regulations promulgated thereunder and the Borrower has been issued and will maintain all required Netherlands Antillespermits, licenses, certificates, and approvals relating to (1) air emissions, (2) discharges to surface water or groundwater, (3)noise emissions, (4) solid or liquid waste disposal, (5) the use, generation, storage,transportation or disposal of toxic or hazardous substances or wastes (intended hereby and hereafter to include any and all suchmaterials listed in any federal or territorial law, code or ordinance, and all rules and regulations promulgated thereunder, ashazardous or potentially hazardous), or (6) other environmental, health, or safety matters, and the Borrower has received no noticeof, and neither knows of nor suspects, facts which might constitute any violations of any Netherlands Antilles environmental,health, or safety laws, codes or ordinances, and any rules or regulations promulgated thereunder with respect to the Property orBorrower’s business, operations, assets, equipment, property, leaseholds, or other facilities and except in accordance with avalidgovernmental permit, license, certificate or approval, there has been no emission, spill, release, or discharge into or upon (1) theair, (2) soils or any improvements located thereon, (3) surface water or groundwater, or(4) the sewer, septic system or waste treatment, storage or disposal system servicing the Property, of any toxic or hazardoussubstances or wastes at or from the Property; and accordingly, except for inventory of raw materials, supplies, work in progress andfinished, that are to be used or sold in the ordinary course of business,
 

 

 

 

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the Property is free of all suchtoxic or hazardous substances or wastes and there has been no complaint, order, directive, claim, citation, or notice by anygovernmental authority or any person or entity with respect to (1) air emissions, (2) spills, releases, or discharges to soils orimprovements located thereon, surface water, groundwater or the sewer, septic system or waste treatment, storage or disposal systemsservicing the Property, (3) noise emissions, (4) solid or liquid waste disposal, (5) the use, generation, storage, transportation,or disposal of toxic or hazardous substances or waste, or (6) other environmental, health, or safety matters affecting the Borrower,the Property or Borrower’s business, operations, assets, equipment, property, leaseholds, or other facilities. The Borrower hasreceived no notice of indebtedness, obligation or liability, absolute or contingent,matured or not matured, with respect to the storage, treatment, cleanup, or disposal of any solid wastes, hazardous wastes, or othertoxic or hazardous substances (including without limitation any such indebtedness, obligation or liability with respect to anycurrent regulation, law or statute regarding such storage, treatment, cleanup, or disposal) which has not been previously disclosedto the Bank in writing.

1.7         Contract Obligations.  The Borrower isnot a party to any contractor agreement which materially and adversely affects Borrower’s business,properties, or assets, or Borrower’s condition, financial or otherwise, except as hereinafter identified; and neither theexecutionand delivery of this Agreement, the consummation of the transactions contemplated herein, nor compliance with the terms, conditionsand provisions of this Agreement, the Security Instruments referred to herein and the Note issued hereunder will conflict with orresult in a breach of the terms, conditions, or provisions of any indenture or other agreement or instrument to which the Borroweris a party or by which the Borrower is bound or will result in the creation or imposition ofany lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Borrower, except as permittedby the provisions hereof. To the best of Borrower’s knowledge and belief, the Borrower has no contingent obligations exceptthosearising in the ordinary course of the Borrower’s business.
1.8             The Property.The Borrower has a leasehold interest in the Property (hereinafter defined) and there are noencumbrances, restrictions or covenants of record which would prevent or otherwise affect the development of the Project or whichwould prevent the Bank from obtaining or
 

 

 

 

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maintaining a first priorityinterest pursuant to the Assignment (as defined below), except as has been disclosed to and approved by the Bank in writing.

1.9           Business Licenses andGovernmental Permits.  The Borrower possesses or will obtain all licenses, franchises, and permits necessaryfor the conduct of Borrower’s business as now, or proposed to be, conducted, and for the development and construction of theProjectwithout substantial known conflict with the rights of others.
1.10           Use of Loan Proceeds.  The proceeds of theLoan shall be solely for the purposes herein stated in connection with the Project in accordance with the provisions hereof.
1.11          Enforceability.  This Agreement,the Note (as defined in Subsection 2.4), the SecurityInstruments (as defined in Section 3) and other documents to be delivered andexecuted simultaneously herewith (collectively, the “Loan Documents”) are the legal, valid and binding obligations of theBorrowerand Guarantors, enforceable against the Borrower and Guarantors in accordance with their respective terms.
2.                THE     AGREEMENT TO LEND
2.1             Type. TheLoan shall be in the form of a fifteen year installment loan in the maximum principal amount of TWO MILLION AND00/100 UNITED STATES DOLLARS (U.S. $2,000,000.00) payable in one hundred eighty (180) consecutive monthly installments of principaland interest after an initial period of interest only payments as set forth below.
2.2             Principal andInterest Payments. The Borrower shall repay the principal amount of the Loan to the Bank in one hundredeighty (180) consecutive monthly installments of principal as follows: (a) one hundred seventy nine (179) consecutive monthlyinstallments consisting of principal in the amount of ELEVEN THOUSAND ONE HUNDRED ELEVEN, AND 00/100 DOLLARS (U.S. $11,111.00) each,commencing on the first day of the seventh full month from the date hereof and continuing on the first day of each consecutivemonth, and (b) a one hundred eightieth (180th), final installment of principal then outstanding, together with all accrued andunpaid interest. Interest accrued on the principal sum from time to time outstanding at the rate setforth in Subsection 2.3 below shall be due and payable monthly together with eachmonthly payment of principal as set forth above, provided however, that interest accrued from the date hereof until the
 

 

 

 

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date that monthly payments ofprincipal commence asprovided above shall be due and payable on the first day of each month commencing on the first day of the first month following thedate hereof and continuing on the first day of each subsequent month. The Loan may be prepaid at any time, and from time to time, inwhole or in part, without any premium or penalty therefor. All payments and prepayments shall be applied first to late charges(including any interest charged at the Default Rate, as defined below), if any, second to other accrued interest and the remainderto the outstanding principal balance.

2.3           Interest.  The Loan shallbear interest on the principal sum advanced and outstanding at a per annum rate equal to one percent(1%) above the prime rate as it varies (any change in interest resulting from the change in the prime rate to be effective at thebeginning of the day on which such change in the prime rate is announced). The term “prime rate” as used herein means thatrate ofinterest from time to time announced by The Chase Manhattan Bank (“Chase”) at its principal offices in New York, New Yorkas itsfloating prime rate, which is not necessarily the lowest rate charged by Chase or the Bank. Interest shall be calculated daily on athree hundred sixty (360) day basis at the rate hereinabove set forth and shall be due andpayable monthly commencing on the first day of the first full month following the date hereof as set forth in Subsection 2.2 above.
Notwithstandingthe foregoing, at any time that an Event of Default, as defined in Section 10 hereof,shall have occurred and be continuing, the Loan shall bear interest at a rate per annum equal to two percent (2.0%) above the primerate as it varies (the “Default Rate”) (any change in interest resulting from the change in the prime rate to be effectiveat thebeginning of the day on which such change in the prime rate is announced). Interest at the Default Rate shall be calculated daily ona three hundred sixty (360) day basis and shall be due and payable monthly on the first day of each month as provided in thepreceding paragraphs.

2.4            The Note.  The Loanshall be evidenced by a promissory note of the Borrower (the “Note”), in the amount of the Loan, dated thedate hereof, due and payable to the order of the Bank as hereinabove and therein set forth.
3.               SECURITY. The Loanshall be secured by this Agreement and the following agreements, pledges, and assignmentsof the Borrower (collectively, the “Security Instruments”):

 

 

 

 

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3.1 Assignment of Lease.  An Assignment of Lease Rights (the “Assignment”) from the Borrower to theBank, which shall create a first priority lien over the Borrower’s leasehold interest in the real property described belowpursuantto a lease agreement dated February 19, 1999 and amended November _____, 1999 (the “Lease”), between Caribe Lumber &TradingN.V. (St.Maarten), as landlord (the “Landlord”), and Borrower, as lessee, pursuant to which the Borrower possesses thereal propertyand improvements located or to be constructed thereon as follows:
theproperty located at **The Bush Raod, Cul-de-Sac, St. Maarten, N.A.,**consisting of6,295M2 of the land described in **Meetbrief #13/1966,**532M2 of the land described in**Meetbrief #67/1967,**17M2 of the road described in **Meetbrief#100/1974,**and 5,956M2 of the land described in **Meetbrief #78/1967,**all as shown on the drawings and descriptions attached hereto and made a part hereof as EXHIBIT A, and consisting inthe aggregate of 12,800M2.

(collectively, the“Property”).

3.2 Fiduciary Transfer of Ownership and Deed of Assignment.  A Fiduciary Transfer of Ownershipin favor of the Bank (the “Security Agreement”), granting to the Bank a first priority security interest in the followingassets ofthe Borrower: all inventory, whether on the Property, as stored, or in transit, accounts receivable, machinery, apparatus,equipment, fittings, fixtures, and all other articles of personal property used or procured for use in connection with theconstruction, maintenance or operation of the Property. The lien of said Security Agreement shall be evidenced and perfected by thefiling of the executed originals of the Security Agreement and such other documentation as may be required in St. Maarten,Netherlands Antilles, with such governmental offices as shall be necessary to perfect such lien.
3.3 Assignment of Plans and Specifications. An Assignment of Plans and Specifications, assigningto the Bank the Borrower’s interest in the Plans and Specifications, together with the consent of the Architect to suchassignment.
3.4 Assignment of Construction Contract. An Assignment of Construction Contract assigning to theBank the Borrower’s interest in the contract(s) with the general contractor and/or construction manager for the Project(collectively, the “Construction Contract”), together with the consent of the general contractor to such assignment.
 

 

 

 

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3.5          Unlimited Guaranty. The unlimited andunconditional guaranty (the “Guaranty”) of the Guarantors, jointly and severally guaranteeingrepayment of the Loan, and the Borrower’s obligations under this Agreement and the Security Instruments securing the Note.
4.            CONDITIONS TO CLOSING. TheBank shall close the Loan (but shall not be obligated to make any advance for construction costs unless anduntil the Borrower and Guarantors have complied with all other provisions of this Agreement), subject to the fulfillment to thesatisfaction of the Bank of the following conditions and all other applicable terms of this Agreement and the Loan Documents:
4.1          Title. The Bankshall have received such evidence as may be required by the Bank or its counsel showing that (a) the leasehold title to the Propertyis vested in the Borrower, and (b) the interest of the Bank under the Assignment will be a first priority lien over theBorrower’sleasehold interest in the Property with no exceptions other than (i) liens for real estate taxes not yet due and payable, and (ii)such other exceptions acceptable to the Bank and its counsel.
4.2         Survey. The Bank shallhave received two (2) copies of a survey and legal description (including a metes and bounds description) of the Property togetherwith such certification(s) and related documents as may be necessary or advisable under Netherlands Antilles law or pursuant togeneral real estate practices in Netherlands Antilles, satisfactory in substance and form to the Bank and its counsel, showing alleasements, encroachments, rights-of-way, roads, alleyways, paths, and set-backs and such other matters as revealed by inspection andsurvey of the Property, and shall clearly indicate all monuments and other controls relied upon by the surveyor (the“Survey”).
4.3          Plans and Specifications. The Bankshall have received the Plans and Specifications together with any and all changes made to the date of theadvance, together with such evidence as the Bank may require showing that such Plans and Specifications have been approved by allgovernmental authorities having or claiming jurisdiction thereover, which Plans and Specifications shall be satisfactory and havethe written approval of the Borrower and the Bank. No material modification of said Plans and Specifications shall be effectiveunless the Bank shall consent in writing thereto.
 

 

 

 

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4.4          Supervisory Inspector’s Review andReport. The Supervisory Inspector appointed by the Bank as provided in Section 12 hereof shall review all Plansand Specifications, and any other relevant material related to the Project, prior tothe making of the first advance. The Bank shall have received the written opinion of the Supervisory Inspector satisfactory to theBank with regard to: (i) general completeness of the Plans and Specifications, (ii) sufficiency of the design criteria, (iii)compliance with all applicable building and zoning laws and regulations and other laws requiring governmental permits for thedevelopment or construction of the Project, (iv) adequacy of the structural, electrical andmechanical systems for the Project, (v) adequacy of the construction schedule, the Construction Contract, major subcontracts and anyagreements with the architect(s) and engineer(s) of record for the Project, (vi) adequacy of the final construction hard costsbudget and proposed trade payments schedule for the Project submitted by or on behalf of the Borrower, (vii) adequacy of the survey,plot plan, and soil report provided by or on behalf of Borrower along with the Plans and Specifications and (viii) the SupervisoryInspector’s satisfaction that the projected construction costs are in line with market conditions.
4.5         Security Instruments. The Bank shallhave received the fully executed Security Instruments described in Section 3 hereof.
4.6         Proof ofCorporate and Company Action and Organization. The Bankshall have received forthe Borrower and each of the Guarantors certified copies of all corporate and company action taken to authorize the execution anddelivery of this Agreement and the borrowing and guaranties hereunder, current Certificates of Good Standing, certified Articles ofOrganization, Articles of Incorporation. Bylaws, and other organizational documents, Certificates of Incumbency, Certificates ofCorporate Ownership, current business licenses and such other papers and documents as the Bank shall reasonably request.
4.7         Subordination ofShareholders’ Loans.  All shareholders for Borrower shall have executed and delivered to the Bank asubordination agreement, satisfactory in form and substance to the Bank and its counsel, subordinating its shareholder loans, ifany, to the Loan.
 

 

 

 

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4.8           Insurance.The Bank shall have received from the Borrower the following policies of insurance procured through agencies licensed to do businessin the Netherlands Antilles, from insurance companies which shall be financially sound, reputable and satisfactory to the Bank:
 (a)          Until Completion of the Project (asdefined in Section 7 hereof), insurance coverage providing for payment to the Bank asmortgagee/loss payee against the risk of fire, flood, windstorm, earthquake with extended coverage endorsements in Builder’sRiskCompleted Value Non-reporting form (or the equivalent thereto under Netherlands Antilles law and practice) with limits of not lessthan the full insurable value of the improvements being built on the Property.

 (b)         Upon Completion of the Project (as defined inSection 7 hereof), insurance coverage with respect to the improvements comprising theProperty and the other assets of Borrower pledged to the Bank as security for the Loan providing for payment to the Bank asmortgagee/loss payee against loss or damage by fire, flood, earthquake, windstorm and other risks now embraced by the so-calledbroad form extended coverage endorsement (or the equivalent thereto under Netherlands Antilles law and practice), in amounts notless than the full insurable value of the improvements and such assets.

 (c)          Comprehensive General and ExcessLiability Insurance coverage, including employer’s liability “stop-gap”, personal injury, hired and no-ownedautomobiles,products/completed operations, independent contractors (if any), blanket liability broad form, property damage and personal injury(or the equivalent thereto under Netherlands Antilles law and practice), in form, amount and coverage satisfactory to the Bank andits counsel.

 (d)         Appropriate workers’ compensationinsurancein respect of any work on or about the Property in accordance with Netherlands Antilles law.

 (e)          Such other insurance with respect tothe Property and the Borrowers’ other assets pledged to the Bank as security for the Loan in such amounts and against suchinsurablehazards as the Bank from time to time may reasonably require.

 (f)          The foregoing insurance policies shallprovide that they may not be canceled, or the amount(s) of coverage provided reduced, for any reason until not less than thirty (30)days written notice shall have been given to the Bank of the insurance company’s intention to cancel or

 

 

 

 

 

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reduce the amount(s) of coverageprovided under such policy or policies during which time the Borrower shall replace said policy or policies with new, substitute orsuccessor policies to comply with the requirements of this Subsection 4.8.

4.9           Loan Fees. The Bank shall havereceived from the Borrower the Commitment Fee in the amount of TWENTY THOUSAND UNITED STATES DOLLARS (U.S.$20,000.00) and the Application Fee in the amount of ONE HUNDRED FIFTY UNITED STATES DOLLARS (U.S. $150.00).
4.10         Taxes and Permits. TheBank shall have received copies of all site development, construction and similar permits required in connection with the currentstage of construction of the Project together with evidence that all fees for such permits have been paid. The Bank shall havereceived such written evidence as it or its counsel may require that all applicable property taxes, due or past due have been paid.
4.11        Cost Breakdown — Construction Schedule. The Bank shall have received from Borrower a projected development and construction cost breakdown, satisfactoryto the Bank in form and substance, specifying in reasonable detail projected amounts to be payable for each category of work to beperformed and materials to be supplied in connection with the development and construction of the Project, along with a projectedschedule for the progress of such construction (the Construction Cost Breakdown and Schedule").
4.12         Draw Schedule. The Bank shallhave received from Borrower a draw schedule satisfactory to the Bank.
4.13        List of Contractors and Materialsmen. TheBank shall have received from Borrower a list of contractors and materialsmen intended by the Borrower toperform work or supply materials in connection with the development and construction of the Project, together with conformed copiesof the fully executed Construction Contract and subcontracts for such work and materials in form and substance satisfactory to theBank.
4.14         Landlord’s Consent andEstoppel Certificate.  The Bank shall have received a validly executed Consent and Estoppel Certificate fromthe Landlord, satisfactory in form and substance to the Bank and its counsel, consenting to the Borrower’s execution and therecording of the
 

 

 

 

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Assignment,stating that the Borrower is not in default under the terms of the Lease and establishing certain rights and obligations of theLandlord, the Borrower and the Bank, and/or such other documents executed by the Landlord or any other party having an interest inthe Property as may be necessary or desirable under the Lease or under Netherlands Antilles law to create, perfect or enforce theBank’s lien, rights and remedies under the Assignment.

4.15        Lease Memorandum or OtherEvidence of Leasehold Interest.  If and to the extent necessary for the creation, perfection or enforcementof the Bank’s interest and rights under the Assignment, the Bank shall have been provided with a lease memorandum or otherevidence of the Borrower’s leasehold interest in the Property, in such form as may be necessary under Netherland Antilles law,describing the provisions of the Lease.
4.16       Approval of Bank Counsel. Alllegal matters incident to the transactions hereby contemplated shall be satisfactory to counsel for the Bank,including both U.S. Virgin Islands and St. Maarten, Netherlands Antilles counsel.
4.17       Opinion of Counsel for Borrower andGuarantors. The Bank shall have received from counsel for the Borrower and Guarantors favorable opinionsdated the date hereof addressed to the Bank and satisfactory in scope, form and substance to the Bank and its counsel, covering thefollowing matters:
 (a)          Borrower. The Borrower is a limited liability company, duly organized, validly existing and in good standing underthe laws of St. Maarten, Netherlands Antilles, and has the legal capacity and authority to borrow the Loan, pledge the collateralunder the Security Instruments, lease the Property, complete the Project thereon and to own and otherwise possess other property tothe extent required to properly and adequately conduct its business and that no part of this transaction violates any restriction,term, condition or provision of the Borrower’s Articles of Incorporation, Bylaws or other organizational documents.
 (b)         Cost-U-Less.Cost-U-Less is a corporation duly organized, validly existing and in good standing under the laws of theState of Washington and has the legal capacity and authority required to properly and adequately conduct its business, to provideits Guaranty under the terms of
 

 

 

 

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this Agreement and that no part ofthis transaction violates any restriction, term, condition or provision of its Articles of Incorporation or Bylaws.

 (c)          CULUSVI.CULUSVI is a corporation duly organized, validly existing and in good standing under the laws of the U.S. Virgin Islands and has thelegal capacity and authority required to properly and adequately conduct its business, to provide its Guaranty under the terms ofthis Agreement and that no part of this transaction violates any restriction, term, condition or provision of its Articles ofIncorporation or Bylaws.
 (d)         Loan Agreement.This Agreement has been duly executed and delivered by the Borrower and Guarantors and constitutes a legal, valid and bindinginstrument except as may be limited by bankruptcy, insolvency, moratorium, reorganization and similar laws generally affecting therights of creditors.
 (e)          Note. TheNote has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding instrument, enforceable inaccordance with its terms, except as may be limited by bankruptcy, insolvency, moratorium, reorganization and other laws generallyaffecting the rights of creditors.
 (f)          Security Instruments. TheSecurity Instruments have been duly executed and delivered by the Borrower and Guarantors and constitute legal,valid and binding instruments, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency,moratorium, reorganization and other laws generally affecting the rights of creditors.     
 (g)          Remedies.  The remediescontained within all the Loan Documentsare effective under the laws of the State of Washington, U.S. Virgin Islands and St. Maarten, Netherlands Antilles in order toeffectuate and expedite the collection of the Loan and/or foreclosure and realization upon the collateral upon default under theterms of the Loan Documents.
 (h)          Other Matters.  Such othermatters as may be reasonably required by the Bank or its counsel.
4.18        Lease.  The Bank shallhave received from the Borrower a copy of the Lease, the term of which, including any options to extend, shall be for a periodof not less than the repayment period of the Loan.
 

 

 

 

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4.19       Other Documentation.  The Bank shall havereceived from the Borrowersuch other items and documents required to be provided by the Borrower as may be set forth on the Closing Agenda utilized by theBank and the Borrower to close the Loan, but not otherwise specifically referred to herein.
5.          ADDITIONAL CONDITIONSOF LOAN ADVANCES.  TheBank shall make advances on the Loan and under the Note, subject to the fulfillment to the satisfaction of the Bank of the followingconditions and all other applicable terms of this Agreement and the other Loan Documents:
5.1        In General.  Subject to theBorrower’s compliance to the Bank’ssatisfaction with the terms and conditions set forth in Section 5 and any and allother applicable terms and conditions in this Agreement and the Loan Documents and provided that no Event of Default (as defined inSection 10 hereof) shall have occurred and be continuing, the Bank shall makeadvances on the Loan for construction costs upon not less than three (3) business days prior written notice from the Borrower to theBank, on standard A.I.A. Application for Payment G-702 and G-703 forms, not more frequently than monthly, and in amounts not lessthan Twenty Five Thousand Dollars ($25,000.00) each, in accordance with the draw scheduleapproved by the Bank. All advances shall be made at the principal office of the Bank or at such other place as the Bank may fromtime to time designate. The Bank shall have no obligation to make a requested advance unless and until the Borrower has complied tothe satisfaction of the Bank and its counsel with all applicable terms and conditions of this Agreement.
(a)      Amount of Advances.  In the case ofadvances under the Loan with respect to construction items, said advances shall be comprised as the total sum of:
(i)       the aggregate value of the class of work completed to thereasonable satisfaction of the Bank; plus  

(ii)     reimbursement for non-construction expenditures as categorized in thebudget; plus  

 

 

 

 

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(iii)  the aggregate value of the materials and equipment incorporated into the Project to thereasonable satisfaction of the Bank, or ordered, with deposits placed, or stored on the Property and insured; less

(iv)  a sum equal to ten percent (10%) of the items described in Subparagraphs (i) and (iii)above which sum shall be held by the Bank until the Project is substantially completed; and less

(v)   the amount of prior advances;

for purposes of Subparagraphs (i)and (iii) above, “value” shall be computed substantially in accordance with the amounts assigned thereto in theConstruction CostBreakdown and Schedule or other schedule of payments as shall have been approved by the Borrower and the Bank, provided however,that if there has not been a Construction Cost Breakdown and Schedule or other schedule of payments agreed upon and approved by theBorrower and the Bank, said values shall be determined by the Bank in its discretion.

(b)  Non-Construction Expenses.Reimbursement for non-construction expenditures ("soft costs") shall not exceed the sums allocated to such purpose in the drawschedule approved by the Bank and shall be based upon requisitions for expenditures as approved by the Bank’s SupervisoryInspector.

5.2        Draw Fee and Wire Transfer Fee.  The Bank shallhave received a draw fee equal to one-eighth of one percent (.125%) of the amount advanced, which shall be due and payable at thetime of the advance by debit from the amount advanced. In addition, the Borrower shall pay one-half of any wire transfer feesassociated with each advance.
5.3        Permits.  The Bank shall have receivedcopies of all building and other permits required in connection with the then current stage of construction of the Project togetherwith evidence that all fees for such permits have been paid.
5.4        Work in Place.  The Bank shall have received a reportfrom its Supervisory Inspector as to the value of the work in place (including the fair market value of the Property).
5.5        Certificate From Supervisory Inspector.Once each week during the term of the Project, the Bank shall have received a written report from its Supervisory Inspector that thework

 

 

 

 

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completed as of such date complieswith the Plans and Specifications, as they may have been amended in compliance with this Agreement, and that such work has beenperformed in a good and workmanlike manner, and that all materials, supplies and fixtures usually furnished and installed at suchstage of the Project have been furnished or installed and are of appropriate quality and that the Construction Cost Breakdown andSchedule has been adhered to, and any other pertinent aspects of the Project which, in his opinion, should be known to the Bank.Borrower shall reimburse the Bank for all fees paid for each inspection trip performed by the Supervisory Inspector.

5.6        Work in Place.  The Bank shallbe satisfied that all workcompleted at the time of the Borrower’s request for an advance has been performed in a good and workmanlike manner and that allmaterials and fixtures usually furnished and installed to that state of construction have been furnished and installed.
5.7        Title.  The Bank shall have received such updated titlesearches or reports as shall be necessary to evidence that, as of the date of the contemplated advance, that there is no lien,encumbrance or other exception on the Property other than those previously reported to and approved by the Bank.
5.8        Surveyor’s Certificate.  The Bankshall have been furnishedwith two copies of a certificate prepared by a licensed land surveyor (satisfactory to the Bank and authorized to exercise his/herprofession in St. Maarten. Netherlands Antilles), certifying that the location of the improvements to date are within the boundariesof the Property and established building setback lines, if any, as shown on the Survey provided in connection with the firstadvance, and disclosing no other state of facts which, in the opinion of the Bank, would render title to the Property unmarketable;provided, however, that after the construction of the foundations of all buildings to be erected on the Property have beencompleted, an updated survey shall have been furnished showing the “as built” location ofthe foundations of the buildings, and thereafter the condition set forth in this Subsection shall be satisfied if the Bank shallhave been furnished with a certificate of the licensed surveyor who shall have prepared such survey or such other licensed surveyorsatisfactory to the Bank, stating that there have been no changes in the exterior lines of the improvements as shown on the surveyfurnished in connection with the first advance and that there
 

 

 

 

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is no encroachment over theProperty or by any part of the improvements over the boundary lines or any established building setback line of the Property.

6.         INSPECTION.  The Borrower shall permit anyauthorized representative designated by the Bank to inspect the Property and the Borrower’s books and records pertaining to theProperty, the Project or the Borrower’s financial condition, and to make extracts therefrom and to discuss the affairs,finances andaccounts of the Borrower, all at such reasonable times and as often as may reasonably be requested and at the Borrower’sexpense.The Bank or its representative shall be permitted, at all reasonable times, to enter upon the Property, inspect the Project and theconstruction thereof and all materials, fixtures and articles used or to be used and to examine all detailed plans, shop drawings,specifications, construction agreements and documents. The Borrower shall furnish tothe Bank, or its authorized representative, when requested, copies of such plans, drawings, specifications, construction agreementsand documents.
7.          FINAL ADVANCE.  When the Bank hasdetermined to its satisfaction that the Project has been substantially completed in accordance with the Plans and Specifications(including all amendments and modifications thereof which have been approved by the Bank) in a good and workmanlike manner and inconformity with good construction and engineering practice, and the Bank shall have received (a) a certificate to that effect fromits Supervisory Inspector, (b) evidence satisfactory to the Bank that all work requiring inspection by governmental or regulatoryauthorities having or claiming jurisdiction has been duly inspected and approved by such authorities and by any rating or inspectionorganization, bureau, association or office having or claiming jurisdiction, (c) to theextent any such certificate is a condition of the lawful use and occupancy of the improvements, a copy of the certificate or otherdocument validly issued by the appropriate governmental authority allowing the occupancy of the improvements; (d) two copies of afinal survey showing the “as built” conditions of the completed Project which survey shall be made in a manner and scopesimilar tothat described in Subsection 4.2 above, (e) a current and updated appraisal showingan estimated value satisfactory to the Bank as set forth in Subsection 8.9, and (e) afinal release of liens from the Contractors and all subcontractors and materialssuppliers (all of the foregoing being defined herein as “Completion of the Project”), and so long as the Borrower is notin defaulthereunder, the Bank
 

 

 

 

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shall advance to the Borrowerthe proceeds of the Note which have not theretofore been disbursed. If the conditions of this Section have not been fully satisfied,the Bank shall have no obligation to make the final advance under the Loan.

8.         AFFIRMATIVE COVENANTS.  The Borrower andGuarantors agree that so long as credit shall remain available hereunder and until payment in full of the Note, and performance ofall of the Borrower’s covenants and other obligations under this Agreement are satisfied, unless the Bank shall otherwiseconsent inwriting, they will:
8.1        Payment of Taxes.  Pay and discharge, or cause to be paidand discharged, all taxes, assessments and governmental charges or liens imposed upon the Borrower or upon the income or profits ofthe Borrower, or upon any property belonging to the Borrower prior to the date on which penalties attach thereto, and all lawfulclaims which, if unpaid, might become a lien or charge upon the property of the Borrower; provided that the Borrower shall not berequired to pay any such tax, assessment, charge, levy or claim the payment of which is being contested in good faith and by properproceedings and so long as Borrower furnishes the Bank. immediately upon such tax, assessment, charge, levy or claim becomingoverdue, notice of that which Borrower intends to contest.
8.2        Real Property Taxes.  Pay or cause tobe paid all taxes on the Property and submit to the Bank evidence of such payments.
8.3        Insurance.  Maintain, or cause to bemaintained, the insurance coverage specified in Subsection 4.8 above.
8.4        Notice of Litigation.  Promptly give notice inwriting to the Bank of any material contingent liability of the Borrower or any Guarantor and of all litigation and of allproceedings by or before any governmental regulatory agency, against or affecting the Borrower or any Guarantor, where the amount incontroversy exceeds S 100,000.00 or which, if adversely determined, would otherwise have a material adverse effect on the financialcondition or business of the Borrower or any Guarantor.
8.5        Loan Proceeds.  Applyproceeds of the Loan for the specific purposes provided for herein.
 

 

 

 

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8.6        Subordination of Loans.  Subordinate allexisting and future shareholders’ loans and/or advances to the Loan; provided that the Borrower or any Guarantor may makeroutineinstallment payments under such shareholders’ loans so long as (a) no Event of Default has occurred and is continuing, and (b)interest on any such shareholders’ loans does not exceed the interest rate charged on the Note.
8.7        Financial Statements.  Furnish the Bank (1)within ninety (90) days after the end of each fiscal year of the Borrower and Guarantor, (a) audited financial statements ofCost-U-Less and its subsidiaries and of Borrower as of the close of such fiscal year, (b) financial statements of CULUSVI as of theclose of such fiscal year, prepared in such manner as is acceptable to the Bank, which financial statements may be unaudited andprepared internally, and (c) the income tax returns of Borrower and Guarantors, and (2) such other information regarding thebusiness affairs and financial condition of the Borrower and Guarantors as may be requested by the Bank, at such times, and preparedin such manner and by such persons as are acceptable to the Bank.
8.8        Deposits.  At any time that the Bank shallhave an office located in St. Maarten,  Netherlands Antilles, maintain all direct and indirect depository accounts of the Borrowerwith the Bank at any time that the Bank has a branch office in St. Maarten, Netherlands Antilles.
8.9        Appraisal.  Upon Completion of theProject, provide the Bank with an appraisal report, in form and substance satisfactory to the Bank, indicating that the Propertywith improvements has a value of not less that $3,000,000.00.
8.10       Debt Service Ratio.  Maintain a debt service coverage ratio of 1.5,which ratio shall be the sum of operating income and depreciation less royalties, divided by the sum of the current portion of longterm debt and interest expense.
8.11       Environmental Compliance.  Be and remain in compliance with theprovisions of all Netherlands Antilles environmental, health, and safety laws, codes and ordinances, and all rules andregulations issued thereunder; notify the Bank immediately of any notice of a hazardous discharge or environmental complaintreceived from any governmental agency or any other party; notify the Bank immediately of any hazardous discharge from or affectingthe Property; immediately contain and remove the same, in compliance with all applicable laws; promptly pay any fine or penalty
 

 

 

 

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assessed in connectiontherewith; and at the Bank’s request, and at the Borrower’ s expense, provide a report of a qualified environmentalengineer,satisfactory in scope, form, and content to the Bank, and such other and further assurances reasonably satisfactory to the Bank thatthe condition has been corrected.

8.12       Inspection and Maintenance.  Allow the Bank or its duly authorizedrepresentatives to inspect the Property, books, records, assets, other property and operations of the Borrower at any reasonabletime on reasonable notice and maintain said books, records, assets, property and operations of the Borrower to the satisfaction ofthe Bank.
8.13       Licenses.  Obtain and promptly renew fromtime to time all consents, licenses, approvals and authorizations as may be required under any applicable law or regulation for theProject and the Borrower’s business operations and for the making, performance, validity and enforceability of the SecurityInstruments.
8.14       Workers’ Compensation.  Pay or cause to be paid to the appropriategovernmental authority workers’ compensation premiums for all employees of the Borrower, and submit to the Bank upon paymentevidence of said payments and insurance coverage.
8.15       Vouchers and Receipts.  Provide the Bank promptly on demand anycontracts, bills of sale. statements, receipts, vouchers or agreements pursuant to which the Borrower has any claim of title to any materials, furniture, fixtures or other articles delivered or to be delivered to the Property or incorporated or to beincorporated into the Project.
8.16       Payments for Inventory, Labor and Materials.  Pay when due all bills formaterials supplied (including without limitation furniture and fixtures) for, and for services of labor performed in connectionwith, the Project, and for inventory supplied to the Borrower, and provide the Bank promptly on demand a verified written statement,in such form and with such detail as the Bank may require, showing all amounts paid and unpaid for labor, materials or inventory andall items of labor and materials furnished for the Project or inventory furnished to the Borrower for which payment has not beenmade and the amount to be paid therefor.
8.17       Loan to Value Ratio. Maintain a loan-to-value-ratioof not more than 70%of the value of the Property.
 

 

 

 

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8.18       Publicity.  Allow the Bank to announce and publicize the source of thefinancing of the Project in such manner as the Bank may elect and at the Bank’s expense, including without limitation theplacementof a sign for display on the Property, and the Borrower shall provide a prominent and suitable location for the display of such signfor the duration of the Project or until the Loan has been repaid in full, whichever shall first occur.
9.         NEGATIVE COVENANTS.  TheBorrower hereby agrees that so long as credit shall remain available hereunder and until payment in full of the Note, and all othercredit advanced by the Bank to the Borrower, without the prior written consent of the Bank, Borrower will not: 
9.1        Limitation of Liens to Secure Indebtedness.Sell, mortgage, pledge, hypothecate, assign, transfer, suffer to exist, or voluntarily subject to any lien or encumbrance to secureany indebtedness, the Property or the other assets pledged to the Bank as collateral for the Loan, excluding, however, from theoperation of this covenant, the Loan hereunder, other loans made by the Bank and routine insurance premium financings.
9.2        Limitation of Construction and Other Liens. Allow to exist any mechanics lien or similar encumbrance in respect to work performed by any contractor,subcontractor or workman of any sort or any other lien as would preclude the Bank from obtaining recognition of its valid firstpriority lien over the Property.
9.3        Limitation on Indebtedness.  Createor incur any indebtedness or obligation for borrowed money or issue or sell any obligations of the Borrower, excluding, however,from the operation of this covenant, the Loan hereunder, other loans made by the Bank and subordinated shareholders’ loans.
9.4        Contingent Liabilities.  Assume,guarantee, endorse or otherwise become liable upon the obligations of any person, firm, partnership, corporation or any other entityexcept by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course ofbusiness.
9.5        Consolidation or Merger.  Merge into orconsolidate with or into any other corporation, partnership or business entity. For the purposes of this Subsection 9.5, the acquisition by the Borrower of all or substantially all of the assets, together with the assumption of all or
 

 

 

 

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substantially all of the obligationsand liabilities,of any other corporation or entity shall be deemed to be a consolidation of such corporation or entity with the Borrower.

9.6        Disposition of Assets.  Lend, sell, lease, transfer or otherwise disposeof any of the assets of the Borrower (other than obsolete or worn-out property not used or useful in its business), whether nowowned or hereafter acquired, except in the ordinary and regular course of the Borrower’s business.
9.7        Capital Expenditures.  Incur capital expenditures in excess of $50,000.00 annually,without the prior written approval of the Bank.
9.8        Dividends and Distributions.  Declare or pay any dividends or authorizeor make any other distribution of any profits or other revenues of the Borrower to any shareholder or third person, except as may berequired to service approved shareholder loans or to fund such payments as are made out of surplus revenues, provided that suchdistributions shall not be allowed at any time that an Event of Default has occurred and is continuing.
9.9        Capital Stock/Treasury Stock.  Purchase, acquire, redeem or retire anycapital stock of the Borrower, or issue any further capital stock or permit the sale of any treasury stock of the Borrower.
9.10       Change in Borrower’s Business.  Effect, cause or permit any change in the Borrower’sbusiness.
9.11       Change in Stock Ownership.  Effect, cause or permit any change in the ownership of Borroweror in the beneficiary or legal ownership of any shares in Borrower, except by descent or demise or through an approved dividendreinvestment plan.
9.12       Amendment to Articles or Bylaws.  Amend the Borrower’s Articles of Incorporation, Bylaws orother organizational documents.
10.        DEFAULT.  The occurrence of any of the following events shall constitute an event ofdefault under this Agreement (each, an “Event of Default”):
(a) if theBorrower fails to payany principal of or interest on the Note, or of any other indebtedness, which term shall mean any obligation or liability forborrowed money, owing by the Borrower to the Bank now existing or hereafter incurred, when the same shall be due;

 

 

 

 

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 (b)    if the Borrower or any Guarantor shall fail to comply with any other term of this Agreement, theNote or any of the Security Instruments;

 (c)    if the Bank shall not approve of any requested payment because of any lienor encumbrance (other than a construction lien, notice of which has been filed and which is being contested pursuant to theAssignment) which might have priority over any advances made or to be made hereunder or because of any structural or other defectwith respect to the Project which materially impairs the value of the security for the advances made or to be made hereunder;

 (d)    if the Borrower does not construct the Project in a good and workmanlike manner in accordance withthe Plans and Specifications as they may have been modified or changed in compliance with this Agreement; or fails to complypromptly with, or diligently proceed with compliance with, any requirement, note or notice of violation of law issued by or filed inany department of any governmental authority having jurisdiction, against the Property or against the Borrower by reason of anymaterial matter in or about such construction, or fails to furnish to the Bank, when requested, copies of official inquiries made bygovernmental authorities having jurisdiction;

 (e)    if the Project be at any time discontinued for a period of more than 30 consecutive days, ornot carried on with reasonable dispatch, except for Enforced Delays (the term “Enforced Delays” meaning delays in theperformance ofBorrower’s obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, withoutlimitation, Acts of God, acts of the public enemy, acts of the Netherlands Antilles government, fires, floods, strikes and unusuallysevere weather or delays of trade contractors due to such causes, but excluding delays caused by the Borrower’s lack of fundstocontinue or complete the Project);

 (f)    if the Borrower executes any conditional bill of sale, chattel mortgage,deed of assignment or other security agreement, except the Security Instruments, covering any materials, fixtures or articles usedin the Project, or articles of personal property placed therein, or if any of such materials, fixtures or articles be not purchasedso that the ownership thereof will vest unconditionally in the Borrower, free from encumbrance, on delivery at the premises, or ifthe Borrower does not produce to the Bank promptly after demand the contracts, bills of sale, statements,

 

 

 

 

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receipt vouchers or agreements, orany of them, under which the Borrower claims title to such materials, fixtures and articles;

 (g)    if the Borrower assigns this Agreement or any of the advances or any interest therein, orBorrower’s right to receive any advance or portion thereof, or if the Property be transferred or encumbered in any way withoutthe if the Bank or the Bank’s representative be not permitted, at all reasonable tiProperty;
 (h)    if any improvements or any portion thereof shall encroach over the boundary lines or anyestablished building setback lines of the Property or violate the requirement of any governmental authority having or claimingjurisdiction, or if any structure on adjoining property shall encroach upon the Property;

 (i)    if the improvements, in the judgment of the Bank, be materially injured or destroyed byfire or other cause and not have been promptly repaired or restored;

 (j)    any representation or warranty made by the Borrower or Guarantor in connection with theLoan proves to have been incorrect in any material respect as of the date of this Agreement or as of the date on which it is made,or any statement, certificate or data furnished by the Borrower or Guarantor proves to have been incorrect in any material respectas of the date when the facts therein set forth were stated or certified;

 (k)    a judgment for the payment of money shall be rendered against the Borrower or Guarantor andany such judgment shall remain unsatisfied and in effect for any period of sixty (60) consecutive days without a stay of execution;

 (1)    theBorrower or Guarantor shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator of the Borrower orGuarantor or of all or a substantial part of the assets of the Borrower or Guarantor, (ii) be unable, or admit in writing, theinability to pay debts as they mature, (iii) make a general assignment for the benefit of creditors; (iv) be adjudicated a bankruptor insolvent, or (v) file a voluntary petition in bankruptcy or a petition or an answer seeking reorganization or an arrangementwith creditors or to take advantage of any insolvency law or an answer admitting the material allegations of a petition filedagainst the Borrower or Guarantor in any bankruptcy, reorganization or insolvency law or an answer admitting the materialallegations of a

 

 

 

 

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petition filed against theBorrower or Guarantor in any bankruptcy proceeding, reorganization or insolvency proceeding, or corporate action shall be taken bythe Borrower or Guarantor for the purpose of effecting any of the foregoing;

 (m)    if an order, judgment or decree shall be entered, without the application, approval or consent ofthe Borrower or Guarantor, by any court of competent jurisdiction, appointing a receiver, trustee or liquidator of all or asubstantial part of the assets of the Borrower or Guarantor, and such order, judgment or decree shall continue unstayed and ineffect for any period of sixty (60) consecutive days;

 (n)    if the Bank or theBank’s representative be not permitted, at all reasonable times, toenterupon the Property, to inspect the improvements and the construction thereof and all materials, supplies, chattels, fixtures,machinery and equipment used or to be used in the construction and to examine all detailed plans, shop drawings and specificationswhich are or may be kept at the site of the improvements, or if the Borrower shall fail to furnish to the Bank or the Bank’sauthorized representative, when requested, copies of such detailed plans, shop drawings and specifications;

 (o)    if any of the materials, supplies, chattels, fixtures, machinery or equipment used in theconstruction of the improvement or appurtenances thereto or to be used in the operation thereof be not in accordance with the Plansand Specifications as approved by the Supervisory Inspector and the Bank, unless any substitutions therefor or variations thereinhave been waived or approved in writing by said parties;

 (p)    the financial condition of the Borrower or either of the Guarantors, or the physicalcondition of the Property, shall adversely change in any material respect from the condition of any of the foregoing represented inthe information and documentation submitted by the Borrower in support of its application for the Loan; or

 

 

 

 

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 (q)    the Borrowershall default under the Lease.

11.         REMEDIES

11.1       Remedies Without Period of Grace.  Upon theoccurrence of an event specified in Section 11, the Bank shall have, in addition tothe rights otherwise existing, the following rights and remedies:
 (a)    Refusal of Advances.  All obligation onthe Bank’s part to make the Loan or to make any advances shall be suspended, if the Bank so elects.
 (b)    Payment of Advances.  The Bank may makeany advance, if it deems it advisable so to do, or may postpone or defer any advance or parts thereof. All such advances orpostponements or deferrals thereof shall be deemed to have been made in pursuance of this Agreement and not in modification hereof.The Bank may make any such advance, notwithstanding that the Borrower shall have refused to request the same, such advance to bebased upon work completed and costs incurred since the time of the last previous advance. The making of any advance or part thereofshall not be deemed an approval or an acceptance by the Bank of the work theretofore done, and election to make any such advanceshall not be deemed a waiver of the right to demand payment of the Note, or an obligation to make anyother advance. The Bank may, at its option, upon written notice to Borrower pay all or any part of any advance directly to anyperson, firm or corporation whom the Borrower would otherwise be obligated to pay out of the proceeds of such advance.
 (c)    Default Rate.  For so long as such eventof default shall continue, the Loan shall accrue, and the Borrower shall pay to the Bank, interest at the Default Rate.
11.2        Remedies After Period of Grace.  Upon theoccurrence of an event specified in Section 10, and after ten (10) days writtennotice thereof from the Bank to the Borrower, the Bank shall have, in addition to the rights specified in Subsection 11.1 hereof and any rights otherwise existing, the following rights and remedies: all sumstheretofore advanced with all accrued interest thereon shall at the option of the Bank become immediately due and payable, or,without waiving the Bank’s rights at any time thereafter to elect to declare all sums advanced with all accrued interest to bedueand payable, the Bank may undertake to perform any and all work and labor necessary to complete the Projectin accordance with the Plans and Specifications as they may have been
 

 

 

 

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amended in compliance with thisAgreement and make such payments as may be required by this Agreement, the Assignment or other Security Instruments. All sums soexpended by the Bank, including any amount in excess of the principal amount of the Note, shall be deemed to have been paid to theBorrower and deemed to be secured by the Assignment and the other Security Instruments. For this purpose, the Borrower herebyconstitutes and appoints the Bank its true and lawful attorney-in-fact with full power of substitution to complete the work in thename of the Borrower, and hereby empowers such attorney (i) to use any funds of the Borrower, including any funds which may remainunadvanced under the Note and hereunder for the purpose of continuing the Project in the manner called for by the Plans andSpecifications, as they may have been amended in compliance with this Agreement, or paying,settling or compromising all existing bills and claims which are or may be liens against the Property, or as may be necessary ordesirable for the continuation of the work, or for the clearance of title, or paying, for the account of the Borrower, any amountspayable by the Borrower under this Agreement, the Assignment or other Security Instruments; (ii) to make such additions and changesand corrections in the Plans and Specifications as may be necessary or desirable to complete the Project; (iii) to employ suchcontractors, subcontractors, agents, architects and inspectors as shall be required for such purpose; and (iv) to execute allapplications and certificates in the name of the Borrower which may be required by any of the contract documents and to do any andevery act which the Borrower might do in its own behalf. Such appointment shall be deemed to be coupled with an interest whichcannot be revoked. Such attorney-in-fact shall also have power to prosecute and defend allactions or proceedings in connection with the Property and to take such action and require such performance as it deems necessary.The Borrower hereby assigns and quitclaims to the Bank all sums to be advanced under the Note and hereunder (together with anyinterest in respect thereof), conditioned upon the use of such sums as provided in this Section, such assignment to becomeeffective, however, only in case of the Borrower’s default.

11.3       Forbearance of Remedies Upon Default.  The Bank will not exercise anyright, power or remedy with respect to any default hereunder until the expiration of any grace or notice period provided withrespect thereto, if any. The Bank will not exercise any right, power or remedy
 

 

 

 

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described in Subsection 11.2 hereof with respect to any default other than a default under Subsection 10(a) if the Bank shall have been provided with information or evidence satisfactoryto the Bank (i) that the default has been cured and adequate compensation has been made for all damages occasioned by the default;or (ii) that the Borrower intends to cure the default, so that the same can be and will be cured expeditiously and in no event morethan 30 days after the date of such default (or such shorter time period as may be provided for herein, in the Note or in theSecurity Instruments) or the date of the occurrence which ripened into a default by passage of time, whichever shall first occur,and that adequate provision has been made for any damage which might be occasioned by the default.(Borrower’s undertaking of a “Permitted Contest” as defined in and pursuant to the terms of the Assignment shall bedeemed by theBank as satisfactory evidence that the Borrower intends to cure any such default).

12.         SUPERVISORY INSPECTOR.  The Borroweragrees to the appointment by the Bank of Theresa S. Roberts as the Bank’s Supervisory Inspector and, in order to enable theSupervisory Inspector and its representatives conveniently to perform the Supervisory Inspector’s duties to the Bank, agrees tocooperate with the Supervisory Inspector and to cause the Borrower’s architect and general contractor, and the employees orsubcontractors of each of them, to cooperate with the Supervisory Inspector, and, upon its request, to furnish it whatever it mayconsider necessary or useful in connection with the performance of its duties aforesaid including, without limiting the generalityof the foregoing, true copies of working details, shop drawings and the Plans and Specificationsand details thereof, samples of materials, licenses, permits, relevant certificates of public authorities, applicable zoningordinances and building codes. If the Supervisory Inspector shall be, or for any reason become, disqualified or unable to continueto act as such, or if its services are terminated, the Bank may appoint a successor Supervisory Inspector and any such successorshall have the same duties to the Bank and shall be entitled to the same cooperation as if it had originally been named herein asSupervisory Inspector. The Borrower acknowledges that the duties of the Supervisory Inspector run solely to the Bank, and that insuch capacity the Supervisory Inspector shall have no obligations or responsibilities whatsoever to the Borrower or to any of theBorrower’s agents, employees or contractors.
 

 

 

 

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13.        RELATIONSHIP OF PARTIES, INDEMNIFICATION.  It isagreed between the parties hereto that Borrower has selected or will select all architects, engineers, contractors, materialmen, aswell as all others furnishing services or materials for the construction of the Project and the Bank has, and shall have, noresponsibility whatsoever for them or for the quality of their materials or workmanship, it being understood that the Bank’ssolefunction is that of lender and the only consideration passing from the Bank to Borrower is the loan proceeds in accordance with andsubject to the terms of this Agreement. It is also agreed that Borrower shall have no right to rely on any procedures required bythe Bank herein, such procedures being for the sole protection of the Bank as lender and no oneelse. Borrower hereby agrees to hold and save the Bank harmless and indemnify it against and from claims of any kind of any persons,including, but without limiting the generality of the foregoing, employees of Borrower and contractors constructing the Project andany of their respective employees, any tenant of Borrower, any subtenant or concessionaire of any such tenant, and the employees andbusiness invitees of any such tenant, subtenant or concessionaire, arising from or out of the construction, use, occupancy, orpossession of the Project in accordance with the Plans and Specifications so long as Borrower shall remain in possession of thepremises.
14.        CHANGE OF PARTIES.  The Borrower will not assign thisAgreement or the monies due hereunder or convey or further encumber the Property without the prior written consent of the Bank; andin the event of any such approved assignment, conveyance or encumbrance the Bank shall continue to make advances hereunder to theBorrower or to the Borrower’s successor or assignee, and all sums so advanced shall be deemed advances under this Agreement andnotin modification hereof. In the event the Borrower shall part with or in any manner be deprived of its leasehold interest to theProperty in violation of this Section, the Bank may, at its option, continue to make advances under this Agreement and not inmodification hereof. The Bank may assign this Agreement and the Note and cause the assigneeto make any advances not made at the time of the assignment, in which event all of the terms hereof shall continue to apply to theLoan, the Note, the Assignment and the Security Instruments. All sums so advanced shall be deemed advances under this Agreement andnot in modification hereof.
 

 

 

 

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15.        LOAN EXPENSES.  The Borrower agrees to pay allreasonable expenses (including legal expenses and attorneys’ fees for both U.S. Virgin Islands and St. Maarten, NetherlandsAntilles counsel) payable in connection with the execution and delivery of this Agreement and of the Note, and the Security Instrumentsherein referred to, and all fees for the creation and perfection of the Bank’s liens pursuant to the Security Instruments, aswell as all expenses (including legal expenses and attorneys’ fees for both U.S. Virgin Islands and St. Maarten, NetherlandsAntilles counsel) of every kind incidental to the collection or enforcement of this Agreement, the Note and the other said SecurityInstruments; and the Borrower shall indemnify the Bank against all reasonable claims for suchfees, charges and commissions arising in connection with the transaction contemplated by this Agreement.
16.        NO WAIVER; REMEDIES CUMULATIVE.  No failure toexercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partialexercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remediesherein provided are cumulative and are not exclusive of any remedies provided by law.
17.        ENTIRE AGREEMENT.  The Borrower and Guarantorsunderstand and agree that this Agreement, along with Security Instruments executed simultaneously herewith, constitute the entireagreement of the parties with respect to the subject matter hereof, and supersede any and all prior agreements, written or oral,among the parties concerning the subject matter hereof (except that Commitment Letter dated June 8, 1999 and accepted June 10, 1999,the terms and provisions of which are incorporated herein by this reference and, to the extent not inconsistent with the LoanDocuments, shall survive the closing of the Loan as set forth in Paragraph 16 of said Commitment Letter).
18.        AMENDMENT TO LOAN AGREEMENT.  This Agreement may not bechanged orally, but only by an agreement in writing signed by both parties to this Agreement.
**19.        WAIVER OF RIGHT TO TRIAL BY JURY. THE BORROWER AND GUARANTORS HEREBYKNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY WITH
 

 

 

 

**Construction/Permanent Loan Agreement**

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**RESPECT OF ANY LITIGATION BASEDON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND THE LOAN DOCUMENTS, AND/OR ANY AGREEMENT CONTEMPLATED TO BEEXECUTED IN CONJUNCTION THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS BYANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK’S PERFORMANCE UNDER THIS AGREEMENT. FURTHER, THE BORROWER ANDGUARANTORS HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF THE BANK, NOR THE BANK’S COUNSEL, HAS REPRESENTED, EXPRESSLY OROTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.NO REPRESENTATIVE OR AGENT OF THE BANK, NOR THE BANK’S COUNSEL HAS THE AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.**

20.         MISCELLANEOUS.
20.1       Definitions.  Any accounting term used herein shall, unless the contextotherwise specifies, be defined as most commonly defined in accordance with generally accepted accounting principles.
20.2       Notice.  Any notice given hereunder or under any of the other LoanDocuments shall be deemed to have been properly served if sent by United States first class certified mail, postage prepaid, returnreceipt requested, or if sent by a nationally recognized overnight courier, addressed as set forth above in this Agreement (or atsuch other address as such party shall have furnished to the other party in writing), provided, however, that a copy of all noticesand other communications sent to the Bank shall be sent to:
George H.T.Dudley, Esq.**