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How to Draw Up a Loan Agreement


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									                                    DRAW AGREEMENT

       THIS DRAW AGREEMENT (this “Agreement”) is made as of __________, 2008,
between AZUSA LAND PARTNERS, LLC, a Delaware limited liability company (the
“Borrower”) and THE CITY OF AZUSA, a public corporation, (“Lender”) with reference to the
following facts:


       A. Borrower is constructing several improvement projects (“Projects”) as required by
that certain Development Agreement by and between the Lender and Monrovia Nursery
Company which was assigned to and assumed by the Borrower (“Development Agreement”).

      B. Work on the Projects has been initiated, but the Borrower now needs financing to
complete the Projects.

       C. Financing for the Projects shall be provided to the Borrower by a loan from the
Lender in the original principal amount of up to $5,000,000 (“Lender Loan”), which shall be
evidenced by a Promissory Note (“Promissory Note”).

      D. The Lender Loan will be governed by the terms and conditions of a Construction
Loan Agreement executed by the Borrower.

       E. Borrower shall be responsible, during the construction period, to provide funds if and
as need to pay for cost overruns and contingencies not otherwise funded by other sources of
construction financing, in accordance with the requirements and procedures of the Construction
Loan Agreement.

       F. The Lender and Borrower desire to enter into this Agreement solely to provide for the
disbursement of the Lender Loan.


       NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as follows:

              1.     Definitions. The following terms shall have the following meanings.
Unless defined herein, capitalized terms shall have the meanings set forth in the Construction
Loan Agreement.

                         (a) “Category” shall mean any category of expense items shown on the
    Projects Budget.

                          (b) “Construction Contracts” shall mean the construction contracts
    entered into between the Borrower and the Contractors, and all exhibits and attachments
    thereto, as the same may be amended from time to time with the prior consent of the Lender.

                           (c) “Construction Monitor” shall mean such person or entity as Lender
    may designate from time to time to inspect the construction of the improvements to be
    constructed for the Projects (“Improvements”) and to perform other services with respect
    thereto on behalf of Lender.

                            (d) “Contractors” shall mean the Contractors which have or will have a
    direct contractual relationship with the Borrower and are approved in writing by the Lender.

                          (e) “Disbursement Request” shall have the meaning set forth in
    Section 2(b).

                          (f) “Impositions” shall mean all (i) real estate and personal property
    taxes and other taxes and assessments, water and sewer rates and charges and all other
    governmental charges and any interest or costs or penalties with respect thereto and charges
    for any easement or agreement maintained for the benefit the real property of the Projects, if
    any, to be transferred to the Lender pursuant to the Development Agreement (“Real
    Property”), general and special, ordinary and extraordinary, foreseen and unforeseen, of any
    kind and nature whatsoever which, with respect to any of the foregoing, at any time may be
    assessed, levied or imposed upon the Real Property, or the rent or income received therefrom,
    or any use or occupancy thereof, and (ii) other taxes, assessments, fees and governmental
    charges levied, imposed or assessed upon or against Borrower or any of its properties.

                          (g) “Lender” shall mean the City of Azusa, a public corporation, and
    any assignee of or successor to its rights, powers and responsibilities.

                          (h) “Lender Documents” shall mean and include the Construction Loan
    Agreement, and all documents relating or attached to the Construction Loan Agreement,
    including without limitation, the Promissory Note.

                          (i) “Plans” shall mean the final plans and specifications for the design,
    construction and equipping of the Improvements, representing complete construction
    documents as defined in the Development Agreement between the Borrower and the Lender,
    including all schematic and working drawings and, to the extent determined, designations of
    all manufacturers and model numbers of all equipment, as the same shall be approved by the
    Lender in accordance with this Agreement and the Lender Documents and as amended from
    time to time in accordance with this Agreement and the Lender Documents.

                          (j) “Projects Budget” shall mean the development budget for the
    Projects approved by the Lender in writing, as amended from time to time with the approval of
    the Lender.

                           (k) “Retainage” shall mean the retainage with respect to certain
    construction costs of the Improvements as provided in Section 5.

                 2.    Draw Procedures.

                          (a) The Lender Loan proceeds shall be disbursed as provided in this

                           (b) In addition to satisfaction of any procedures required by the terms of
    the Lender Documents for each disbursement of funds, to request that the Lender authorize
    disbursement of the Lender Loan, the Borrower shall submit to the Lender a disbursement
    request (“Disbursement Request”) on a Standard AIA Form G702 and G703 or such other
    disbursement request form that may be acceptable to the Lender, setting forth a detailed
    breakdown of the disbursement requested (the “Draw Summary”), including the requisition of
    the Contractors, not more frequently than once monthly. Concurrently with the Disbursement
    Request, Borrower shall also furnish to the Lender a copy of the Construction Monitor’s
    inspection report or other documentation indicating the percentage of work complete
    pertaining to the Disbursement Request. Upon such request, the Lender may cause an
    inspection to be made of the progress of construction. If the Lender determines that
    construction is proceeding diligently in accordance with the Plans and otherwise in the manner
    required by this Agreement and if all conditions to such disbursement shall have been
    fulfilled, the Lender shall authorize the disbursement in a manner that has been mutually
    agreed to by the parties, on the basis of the pro rata percentage set forth in Section 5 of this
    Agreement. All disbursements shall be made approximately ten (10) days after receipt of all
    information required by the Lender to approve the requested disbursements. The Lender may
    also require verification of the information contained in the Disbursement Request by the
    Contractors, applicable subcontractors, the Construction Monitor, and may require separate
    lien waivers and releases from all Contractors and subcontractors covering all prior
    disbursements (except that lien waivers for the final disbursement shall cover all
    disbursements other than punchlist work). Notwithstanding the foregoing, each Disbursement
    Request shall be subject to the approval of the Lender, with respect to the Lender Loan, in
    accordance with this Agreement.

                          (c) Borrower shall pay all reasonable costs and expenses incurred by
    the Lender hereunder upon demand by the Lender. After demand on the Borrower, the Lender
    may elect to authorize disbursements of the proceeds of the Lender Loan to pay, as and when
    due, any unpaid or unsatisfied fees, costs or other amounts owing hereunder to the Lender.

                           (d) Borrower shall not agree to any change in the Plans without the
    consent of the Lender other than an individual change order which involves a budget
    adjustment of less than $25,000.

                          (e) Any item in the Disbursement Request which is not specifically
    approved in the time set forth in this Section 2 shall be deemed disapproved. On the basis of
    the progress of the work performed on the Projects and the conditions precedent to making
    disbursements contained in the Lender Documents, the Lender may disapprove all or part of a
    requested disbursement. In the event the Lender disapproves any portion of the amount
    requested by Borrower in a Disbursement Request, the Lender shall promptly notify Borrower
    of the disapproved amount and the reason for such disapproval.

                           (f) In the event any item shall be disapproved or deemed disapproved,
    the representatives of the Borrower and the Lender shall meet promptly and in good faith to
    attempt to resolve the matter to their mutual satisfaction.

                3.      Disbursement Amounts.

                           (a) The aggregate amount advanced for any Category shall be limited to
    the amount shown in the Projects Budget for such Category, taking into account any
    reallocation authorized by the Lender pursuant to this Agreement.

                          (b) Subject to the terms of this Agreement, the Lender will authorize
    disbursements of the Lender Loan to defray actual and reasonable costs incurred and approved
    by the Lender and shown on the Projects Budget and labor performed on the Improvements
    and equipment and materials incorporated into the Improvements, since the date of the last
    disbursement less Retainage.

                4.     Cost Information. If the Borrower becomes aware of any change in the
approved costs set forth in the Projects Budget which would increase, change, or cause a
reallocation of the costs as shown on the Projects Budget, the Borrower shall immediately notify
the Lender in writing and promptly submit a proposed revised Projects Budget to the Lender for
approval. The Borrower shall have no right to receive further disbursements of the Lender Loan
unless and until the revised Projects Budget is approved by the Lender, which approval shall not
be unreasonably withheld but shall be subject to, among other things, the next sentence.

               5.       Conditions Precedent to Draw. The Lender shall determine whether or not
the conditions precedent to its obligation to advance its loan have been satisfied or whether or
not to waive, in its sole discretion, any condition precedent to its obligation to advance the
Lender Loan which the Lender City Manager, or designee, determines has not been satisfied. As
conditions precedent to approval of any Disbursement Request, each of the following conditions
shall have been fulfilled to the satisfaction of the Lender, as applicable:

                        (a) All representations and warranties contained in this Agreement and
    the Lender Documents shall be true and correct in all material respects;

                        (b) All insurance coverage required to be maintained by the Borrower
    under the Lender Documents or by law shall be in full force and effect;

                          (c) The Lender Documents shall be in full force and effect;

                          (d) No Event of Default under the Lender Documents shall have
    occurred and be continuing;

                            (e) Except to the extent waived the Lender City Manger, or designee, in
    their sole discretion, all governmental consents, licenses, permits and all other authorizations
    or approvals then required with respect to the construction of the Projects shall have been
    obtained and/or issued, or will be timely obtained;

                           (f) The Lender shall have received copies of notarized partial lien
    waiver forms executed by the Contractors and each appropriate subcontractors, supplier and
    materialman, including, without limitation, from all parties sending statutory notices to
    Contractors, notices to owners, or notices of nonpayment, specifying in each such partial lien
    waiver the amount paid in consideration of such partial release;

                            (g) Before any disbursements after the initial disbursement, the
    Borrower shall furnish to Lender a list (if not previously delivered) of all subcontractors
    employed in connection with the construction of the Projects, containing the name, address,
    and telephone number of each such subcontractors, a general statement of the nature of the
    work to be done, the labor and materials to be supplied, the names of new materialmen, if
    known, and the approximate dollar value of such labor or work with respect to each. Lender
    shall have the right to make direct contact with each subcontractors and materialmen to verify
    the facts disclosed by said list or for any other purpose;

                           (h) Copies of invoices or other acceptable documentation shall be
    submitted to substantiate Borrower’s request for payment of construction costs, including “soft

                         (i) Lender shall have received a copy of the Construction Monitor’s
    approval of Borrower’s requisition for “hard costs”;

Disbursements of the Lender Loan will be made on the basis of ninety percent (90%) of the cost
of the work and materials in place on the Improvements, less the amount of previous
disbursements. The percentage of disbursements held back during the course of construction of
the Improvements shall be hereinafter referred to as “Retainage”. There shall be no Retainage
for the non-construction items and such disbursements will be made on the basis of one hundred
percent (100%) of the cost of approved invoices for such items. However, disbursement for
amounts shown in the Projects Budget, as construction profits shall be funded based on the
percentage of construction completed. Disbursements will be made for materials stored on the
Land provided (i) such materials are adequately identified, secured and insured; (ii) no materials
are stored for a period exceeding forty-five (45) days; (iii) the Lender has a first priority lien on
such materials; and (iv) the Lender has received and approved all invoices for materials to be
stored on-site. No disbursement of the Lender will be made based on the cost of materials not
stored on the Land (other than in accordance with Section 7) or for the cost of deposits required
by manufacturers or fabricators of building materials, furnishings, fixtures or equipment for the

                6.      Conditions Precedent to Final Disbursement. Subject to any additional
conditions set forth in the Lender Documents, the following conditions shall be satisfied prior to
the final disbursement of the Lender Loan and the Retainage:

                            (a) All conditions of Section 5 shall continue to be met as of the date of
    the release of the final disbursement and the Retainage;

                          (b) Lender shall have received a certificate of Borrower and Contractors
    to the effect, inter alia, that the Improvements have been completed substantially in
    accordance with the Plans approved by the Lender and all applicable building, fire, safety and
    similar codes and the matters in such certificate shall have been verified by the Construction

                          (c) Lender shall have received evidence that all Impositions which are
    due and payable for the current tax year have been paid in full;

                           (d) Lender shall have received final lien releases and waivers from the
    Contractors and all subcontractors for the work performed under the Construction Contract;

                           (e) Lender shall have received two (2) sets of detailed as-built plans and
    specifications for the Improvements. The plans shall be approved as such in writing by the
    Borrower and the Contractors. The Plans must include plans and specifications for
    architectural, structural, mechanical, plumbing, electrical and site development work
    (including storm drainage, utility lines and landscaping); and

                         (f) Lender shall have received a copy of a satisfactory inspection report
    from the Construction Monitor and the Construction Monitor’s written approval of the final
    draw request;

                7.       Draws for Stored Materials. Notwithstanding anything to the contrary
contained in this Agreement, Borrower shall be entitled to submit a Disbursement Request to pay
for costs actually incurred by Borrower for stored materials required in connection with the
construction of the Improvements provided that the following conditions are satisfied, in addition
to the conditions contained in Section 5: (i) such materials are in accordance with the Plans,
(ii) such materials are securely stored in a locked or fenced area, properly inventoried, fully
insured and clearly stenciled or otherwise marked to indicate that they are the property of
Borrower, and if stored on-site shall be stored in a locked building or enclosure and reference is
made to the location of such materials, (iii) such materials, if stored off-site, shall be stored in a
bonded warehouse or with a Contractors, materialman or fabricator who bears the risk of loss
until delivery and installation of such materials to the Land as part of the work in place, and who
has supplied a bond securing such contractor’s, materialman’s, or fabricator’s obligation to so
deliver and install such materials, which bond shall be issued by a company, shall be in an
amount and shall be in form and substance satisfactory to the Lender and shall name Lender as
an obligee, and Borrower shall submit such financial information on the storer as the Lender may
require, (iv) the bills of sales and contracts under which such materials are being provided shall
be in form and substance satisfactory to the Lender, (v) such materials are insured against
casualty, vandalism, loss and theft in a manner satisfactory to the Lender, (vi) Borrower owns, or
will own with the funding of the Disbursement Request, such materials free and clear of all liens
and encumbrances of any nature whatsoever and establishes such ownership by evidence
satisfactory to the Lender, (vii) Borrower executes and delivers to the Lender such additional
security documents as the Lender shall deem necessary to create and perfect a first lien in such
materials in favor of the Lender, (viii) the aggregate amount of disbursements for costs incurred
by Borrower for such materials shall in no event at any time exceed the actual costs incurred by
Borrower for such materials as verified by the Construction Monitor pursuant to the provisions
of this Agreement, (ix) the types of materials for which the Lender will approve of the making of
disbursements pursuant to this paragraph shall be limited to the following categories: hardware,
railings, security screens and grating, electrical equipment, lumber, masonry brick, pre-cast
concrete, doors, windows, and plumbing fixtures and (x) Borrower shall submit evidence
satisfactory to the Lender that the materials, whether stored on-site or off-site are insured against
damage or destruction for their full replacement value, and the Lender shall be designated as the
loss payee on such insurance policies.

                8.      Notices. Any and all notices, demands or other communications required
or desired to be given hereunder by any party shall be in writing and shall be validly given or
made to another party only (a) if served personally, (b) if deposited in the United States first
class mail, certified or registered, postage prepaid, or (c) if sent by overnight delivery service and
a confirmation of receipt is obtained. If such notice, demand or other communication is served
personally, service shall be conclusively deemed made at the time of such personal service. If
such notice, demand or other communication is given by mail, such shall be conclusively
deemed given seventy-two (72) hours after the deposit thereof in the United States mail
addressed to the party to whom such notice, demand or other communication is to be given at the
following address set forth below. If such notice, demand or other communication is sent by
overnight delivery service, such shall be conclusively deemed given at the time confirmation of
receipt is obtained, provided the overnight delivery is addressed to the party to whom such
notice, demand or other communication is to be given at the address set forth below.

                       If to the Borrower:


                       with copies to:

                       If to the City of Azusa:

                       City Manager
                       P.O. Box 1399
                       Azusa, CA 91702

                       With a copy to:

                       Director of Utilities
                       P.O. Box 9500
                       Azusa, CA 91702

                       Best Best & Krieger LLP
                       5 Park Plaza
                       Suite 1500
                       Irvine, CA 92614

                Any party hereto may change its address for the purpose of receiving notices,
demands and other communications as herein provided by a written notice given in the manner
aforesaid to the other party or parties hereto.

                9.    Governing Law. This Agreement shall be governed by, and construed in
accordance with, the substantive laws of the State of California without regard to principles of
conflicts of laws.

                10.    Headings. The headings used herein are for convenience only and do not
limit or alter the terms of this Agreement or in any way affect the meaning or interpretation of
this Agreement.

                11.    Successors and Assigns. All rights of each party shall inure to the benefit
of its successors and assigns, and all obligations, liabilities, and duties of each party shall bind its
successors and assigns.

                12.     Entire Agreement; Amendment and Modification. This Agreement
constitutes the entire agreement and understanding of the parties hereto in respect of the subject
matter contained herein, supersedes all prior agreements and understandings, both written and
oral, between the parties in respect of the subject matter hereof and no changes, amendments, or
alterations hereto shall be effective unless pursuant to written instrument executed by the
Borrower and the Lender. Notwithstanding the foregoing sentence or any other provision of this
Agreement, this Agreement does not supersede and shall not be deemed to amend any of the
Lender Documents. Borrower and Lender anticipate modifications and supplements to this
Agreement from time to time, in writing, signed by the Lender City Manager or designee, and
the Borrower.

               13.     No Waiver of Strict Compliance. No waiver or failure of a party to insist
upon strict compliance with any obligation, covenant, agreement, representation, warranty, or
condition shall operate as a waiver of, or estoppel with respect to, any subsequent or other failure
to comply with such obligation, covenant, agreement, representation, warranty, or condition, or
with any other obligation, covenant, agreement, representation, warranty, or condition contained
herein. Failure to exercise any right, power, or remedy shall not constitute a waiver of any
obligations under this Agreement or constitute a modification of this Agreement. The making of
this Agreement shall not waive or impair any other security a party may have or hereafter acquire
for the payment of obligations under this Agreement, and the taking of any additional security it
may have in the order it may deem proper.

               14.     Validity. The invalidity or unenforceability of any terms or provisions of
this Agreement shall not affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect, and, if any such unenforceable provision
hereof is enforceable in any part or to any lesser extent, such provision shall be enforceable in all
such parts and to the greatest extent permissible under applicable law.

             15.    Supervision of Construction. The Lender shall be under no obligation to
perform any of the construction or complete the construction of the improvements on the

Property, or to supervise any construction on the Property, and shall not be responsible for
inadequate or deficient Contractors, subcontractors, materials, equipment or supplies. The
Lender is not the agent for Borrower, nor is the Lender a partner or joint venturer with Borrower.
The Lender shall not have any fiduciary duty or obligation to the Borrower.

                16.     Reservation of Rights. Nothing contained herein shall be construed as
restricting, limiting, amending or modifying the rights of the parties in the Lender Documents, as
they relate to defaults or remedies, including, inter alia, the right of each party under its
respective security instruments to foreclose on the Property, or to seek recourse under any

              17.    Termination of Agreement. This Agreement shall terminate when all of
the Lender Loan has been fully disbursed.

              18.    Further Assurances. The parties hereto hereby agree to execute such other
documents and to take such other action as may be reasonably necessary to further the purposes
of this Agreement.

               19.    Counterparts. This Agreement may be signed by each party on a separate
signature page, and when the executed signature pages are combined, shall constitute one single
instrument with the same effect as if all signatories had executed the same instrument.

       IN WITNESS WHEREOF, each party has executed this Agreement on the date first
hereinabove written.

                                     AZUSA LAND PARTNERS, LLC,
                                     a Delaware limited liability corporation

                                     By:     PLC LAND COMPANY
                                             a California corporation

                                                    Dan O’Bannon, Vice President

                                     By:     FIELDSTONE COMMUNITIES


                                                    Executive Vice President

                                     THE CITY OF AZUSA

                                             City Manager



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