AMENDED AND RESTATED LOAN AGREEMENT
This Amended and Restated Loan Agreement("AGREEMENT")is made as of
November 25, 1996 by and among MELODY HOMES, INC., a Delaware corporation
("MELODY"), having its principal office at 00000 Xxxxxxxx Xxxxxxxxx,
Xxxxxxxxxxx, Xxxxxxxx 00000, FALCON DEVELOPMENT CORPORATION, a Nevada
corporation ("FDC"), having its principal office at 0000 Xxxxx Xxxxx, Xxxxx 000,
Xxx Xxxxx, Xxxxxx 00000 (Melody and FDC shall hereinafter be collectively
referred to as "BORROWER") and BANK ONE, ARIZONA, NA, a national banking
association ("LENDER"), whose mailing address is Western Region Real Estate,
P. O. Xxx 00000, Xxxxxxx, Xxxxxxx 00000.
RECITALS
A. Melody previously entered into that certain Loan Agreement dated
December 18, 1993, with Lender for the acquisition, development and
construction of residential subdivisions, and a letter of credit facility (as
amended, the "MELODY LOAN AGREEMENT"). FDC previously entered into that certain
Loan Agreement dated July 7, 1993, with Lender for the acquisition, development
and construction of residential subdivisions (as amended, the "FDC LOAN
AGREEMENT").
B. Borrower now desires to consolidate the Melody Loan Agreement and FDC
Loan Agreement into one facility, including the letter of credit facility, and
otherwise amend such agreements, upon the terms and subject to the conditions
set forth herein. Upon the execution and delivery of this Agreement and the
other Loan Documents, and the satisfaction of closing conditions, this Agreement
and all of the other Loan Documents shall restate, amend and supersede the
Melody Loan Agreement, the FDC Loan Agreement and all of the loan documents
related thereto.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used herein, the following terms shall have the
meanings set forth below:
"A & D BUDGET" shall mean the cost breakdown/budget for A & D Improvements
submitted by Borrower for each Subdivision A & D Loan, and approved by Lender in
its absolute and sole discretion.
"A & D COMMENCEMENT DATE" shall mean not later than thirty (30) days after
initial disbursement of a Subdivision A & D Loan.
"A & D COMPLETION DATE" shall mean not later than nine (9) months after
the
applicable A & D Commencement Date.
"A & D DISBURSEMENT SCHEDULE" shall mean the disbursement schedule for each
Subdivision A & D Loan, in form and substance satisfactory to Lender.
"A & D IMPROVEMENTS" shall mean certain offsite improvements on the
Premises (including without limitation grading, sewers, paving, landscape and
utilities) necessary to create individual Lots within a Subdivision suitable for
the construction of single family homes.
"A & D LOAN" shall mean, collectively, the individual Subdivision A & D
Loans from Lender to Borrower to reimburse Borrower for certain costs and
expenses incurred by Borrower in acquiring the Premises and constructing the
A & D Improvements.
"A & D LOAN AMOUNT" shall mean an amount of up to (i) Fifteen Million and
No/100 Dollars ($15,000,000.00) with respect to the aggregate value of the
Melody Loans, which includes all principal amounts outstanding and all amounts
committed but not yet advanced, or (ii) Five Hundred Thousand and No/100 Dollars
($500,000.00) with respect to the aggregate value of the FDC Loans, which
includes all principal amounts outstanding and all amounts committed but not yet
advanced. Notwithstanding anything contained herein to the contrary, the
maximum principal amount advanced and/or committed under the Loan, including the
A & D Loan Amount, shall never exceed Thirty-Eight Million Five Hundred Thousand
and No/100 Dollars ($38,500,000.00). In the event that Borrower does not
utilize all of the A & D Loan Amount, Lender may elect, in its reasonable
discretion, to allow Borrower to utilize the unused portion of the A & D Loan
Amount for Home Loans.
"A & D LOAN COMMITMENT" shall mean loan commitments from Lender to Borrower
to fund the A & D Loan.
"A & D LOAN FEE" shall mean an annual fee equal to one percent (1%) per
annum of each A & D Loan.
"A & D LOAN LOT RELEASE PRICE" shall be an amount equal to one hundred
twenty-five percent (125%) of Par; provided, however, ten percent (10%) of the
release price shall be deferred until the closing and sale of any Home to a
purchaser. As used herein, "Par" means the amount derived by dividing the
Subdivision A & D Loan amount for the Subdivision in question by the number of
Lots securing the A & D Loan.
"ADVANCE" shall mean a disbursement of Loan proceeds.
"AFFILIATE" shall mean certain limited liability companies, partnerships
and/or corporations in which Borrower owns a controlling interest, subject to
Lender's review and approval.
"AGREEMENT" shall mean this Amended and Restated Loan Agreement, as the
same may be amended and supplemented as hereinafter provided.
"BASE APPRAISAL" shall mean the value of each Home as determined by a
qualified residential appraiser, which appraisal shall be satisfactory to Lender
in all respects and shall establish a base appraised value, provided, however,
such value may be adjusted upwards by the appraised value of average options and
upgrades anticipated per Unit, as determined by the appraiser through comparable
sales.
"BORROWER" shall mean, collectively and jointly and severally, Melody and
FDC.
"BUSINESS DAY" shall mean any day of the year other than Saturdays,
Sundays, and legal holidays on which Lender's main branch located at 000 Xxxxx
Xxxxxxx Xxxxxx, Xxxxxxx, Arizona, is closed.
"CC&R'S" shall mean any covenants, conditions, restrictions, maintenance
agreements or reciprocal easement agreements affecting any Subdivision or
individual lots therein.
"CALENDAR MONTH" shall mean the twelve (12) calendar months of the year.
With respect to any payment or obligation that is due or required to be
performed within a specified number of Calendar Months, then such payment or
obligation shall become due on the day in the last of such specified number of
Calendar Months that corresponds numerically to the date on which such payment
or obligation was incurred or commenced; provided, however, that with respect to
any obligation that was incurred or commenced on the 29th, 30th or 31st day of
any Calendar Month and if the Calendar Month in which such payment or obligation
would otherwise become due does not have a numerically corresponding date, such
obligation shall become due on the last day of such Calendar Month.
"COLLATERAL" shall mean all real and personal property encumbered or
otherwise covered by the Loan Documents, construction materials and equipment
and all furniture, furnishings, fixtures, machinery, equipment, inventory and
any other items of personal property in which Borrower now or hereafter owns or
acquires an interest or right, including any leased Collateral, which are used
or are useful in the construction, operation, use or occupancy of the Project;
all of Borrower's documents, instruments, contract rights including, without
limitation, general intangibles relating to the construction, use, operation,
occupancy, or sale of the Project or of any Home; and all insurance proceeds
from any policies of insurance covering any of the aforesaid.
"COMMITMENT FEE" shall mean an annual fee equal to one quarter of one
percent (0.25%) of the Loan Amount.
"COMPLETION DATE" shall mean nine (9) months from the date of the first
advance of any Home Loan.
"COMPLETION GUARANTY" shall mean a guaranty executed by each Guarantor, in
form and content satisfactory to Lender, guaranteeing the completion of the
Improvements.
"CONDEMNATION PROCEEDS" shall mean all compensation, awards, damages,
rights of action and proceeds awarded to Borrower by reason of any taking of or
damage to the Premises or the Project, or any part thereof or interest therein,
for public or quasi-public use under the power of eminent domain, by reason of
any public improvement or condemnation proceeding, or in any other manner.
"CONSTRUCTION LOAN" shall mean the loan to be made pursuant to this
Agreement for the construction of Homes which loan shall consist of individual
Home Loans.
"CONSTRUCTION LOAN AMOUNT" shall mean (i) with respect to the Melody Loans,
an amount up to the sum of Thirty-Eight Million Five Hundred Thousand and No/100
Dollars ($38,500,000.00), which includes all principal amounts outstanding and
all amounts committed but not yet advanced, or (ii) with respect to the FDC
Loans, an aggregate amount up to Five Hundred Thousand and No/100 Dollars
($500,000.00), which includes all principal amounts outstanding and all amounts
committed but not yet advanced. Notwithstanding anything contained herein to
the contrary, the maximum principal amount advanced and/or committed under the
Loan, including the Construction Loan Amount, shall never exceed Thirty-Eight
Million Five Hundred Thousand and No/100 Dollars ($38,500,000.00).
"CONSTRUCTION LOAN COMMITMENT" shall mean the loan commitments from Lender
to Borrower to fund the Construction Loan, including, without limitation, the
Model Home Commitment which is included within the Construction Loan Commitment.
"CONVERSION DATE" shall mean October 31, 1997.
"CONVERSION PERIOD" shall mean the period of time following the Conversion
Date during which the Loan Amount is reduced from time to time pursuant to
SECTION 2.10.
"COUNTY" shall mean each respective county in the State of Colorado or
Nevada, as applicable, in which one or more Subdivisions are situated.
"DAY" or "DAYS" shall mean calendar days unless expressly stated to be
Business Days.
"DEFAULT INTEREST RATE" shall mean a rate of interest equal to the
aggregate of four percent (4%) per annum plus the Interest Rate. The Default
Interest Rate shall change from time to time as and when the Interest Rate
changes as a result of changes in the Index Rate.
"DRAW REQUEST" shall mean the draw request submitted by Borrower to Lender
in a form acceptable to Lender.
"ENVIRONMENTAL INDEMNITY" shall mean Lender's form of Environmental
Indemnity Agreement Regarding Hazardous Substances, to be executed by Borrower
and Guarantor.
"EVENT OF DEFAULT" shall mean the occurrence of any of the events listed in
SECTION 11.1 of this Agreement.
"EXPIRATION DATE" shall mean April 30, 1999.
"FDC LOAN" shall mean an Advance disbursed to FDC. Borrower and Lender
agree that any unused portion of the FDC Loans may not be allocated to the
Melody Loans.
"FINANCIAL STATEMENTS" shall mean the audited Balance Sheet, Income
Statement, Change in Financial Condition and Cash Flow Statements of Borrower as
of the last day of and for any fiscal year or portion thereof prepared and
reported according to generally accepted accounting principles (GAAP),
consistently applied.
"FINANCING STATEMENT" shall mean a UCC-1 financing statement executed by
Borrower as debtor, in favor of Lender as secured party, and perfecting Lender's
security interest in the Collateral now owned or hereafter acquired by Borrower,
in form and substance satisfactory to Lender, to be filed in the Office of the
Secretary of State of Colorado or Nevada, as applicable, and in such other
offices for recording or filing such statements in such jurisdictions as Lender
shall desire to perfect Lender's security interest or reflect such interest in
appropriate public records.
"FIRST PAYMENT DATE" shall mean the first day of the first Calendar Month
after the date hereof.
"GOVERNMENTAL AUTHORITY" shall mean (a) any governmental municipality or
political subdivision thereof, (b) any governmental or quasi-governmental
agency, authority, board, bureau, commission, department instrumentality or
public body, or (c) any court, administrative tribunal or public utility.
"GUARANTOR" shall mean, individually and collectively, Xxxx X. Xxxxx,
Madison X. Xxxxxx XX and Xxxxx Xxxxxx, husband and wife, Xxxx X. Xxxxxxxx and
Xxxxx Xxxxxxxx, husband and wife, and Xxxxx X. Xxxxxxx and Xxxxxxxx X. Xxxxxxx,
husband and wife.
"HARD COSTS" shall mean the onsite cost of labor and materials directly
related to the construction of each Home, including, without limitation,
construction costs and permits, which costs shall be subject to Lender's review
and approval and shall not include any cost and expenses related to upgrades,
options or decorator items, unless otherwise approved by Lender.
"HOME" or "UNIT" shall mean a single family dwelling unit to be constructed
on the Premises of any one of the model, design and type more particularly
described in the Home Plans, including any furniture, furnishings, fixtures, and
equipment to be installed
therein as shown on the Home Plans.
"HOME CONSTRUCTION BUDGET" shall mean the total budget approved by Lender
that is necessary to construct a Home, which budget shall be comprised of the
land acquistion cost, Hard Costs and Soft Costs.
"HOME DESCRIPTION" shall mean a general description of the size and pricing
of each product line to be constructed by Borrower in each Subdivision, and such
other information with respect thereto as Lender may require.
"HOME LOAN" shall mean the portion of the Construction Loan advanced or to
be advanced for the construction of each Home.
"HOME LOAN MATURITY DATE" shall mean the date upon which the Home Loan for
each Home becomes due and payable, which date shall be (i) nine (9) Calendar
Months after the initial disbursement for the Presold Home in question, unless
extended pursuant to SECTION 2.9; (ii) twelve (12) Calendar Months after the
initial disbursement for the Spec Home in question; and (iii) twenty-four (24)
Calendar Months after the initial disbursement for the Model Home in question.
"HOME PLANS" means the plans and specifications for the construction of the
Homes approved by Lender pursuant to this Agreement.
"IMPROVEMENTS" shall mean (i) the A & D Improvements and (ii) Homes and
other related facilities and appurtenances to be constructed on the Premises.
"INDEX RATE" shall mean the rate of interest most recently announced by
Lender, or its successors, in Phoenix, Arizona as its "prime rate." Any change
in the rate at which the Note bears interest resulting from a change in the
"prime rate" shall become effective as of the same date at which such change in
the "prime rate" becomes effective.
"INSPECTION FEE" shall mean with respect to the Construction Loan, Two
Hundred and No/100 Dollars ($200.00) per Home payable to Lender upon initial
disbursement of each Home Loan.
"INTEREST PAYMENT DATE" means the First Payment Date and the first day of
each month thereafter.
"INTEREST RATE" shall mean a rate of interest equal to the aggregate of
three-quarters of one percent (0.75%) per annum plus the Index Rate. The
Interest Rate shall change from time to time as and when the Index Rate changes.
"LETTERS OF CREDIT" means the letters of credit in Lender's standard form
from time to time issued in the normal course of Melody's business and pursuant
to SECTION 2.21.
"LETTER OF CREDIT AGREEMENT" means Lender's standard form Application and
Agreement for Commercial Letter of Credit, Lender's standard form Application
for Standby Letter of Credit and Standby Letter of Credit Agreement, or other
standard application and agreement for letters of credit in use by Lender from
time to time.
"LIEN OR ENCUMBRANCE" and "LIENS AND ENCUMBRANCES" mean, respectively, each
and all of the following: (i) any lease or other right to use; (ii) any
assignment as security, conditional sale, grant in trust, lien, mortgage,
pledge, security interest, title retention arrangement, other encumbrance, or
other interest or right securing the payment of money or the performance of any
other liability or obligation, whether voluntarily or involuntarily created and
whether arising by agreement, document, or instrument, under any law, ordinance,
regulation, or rule (federal, state, or local), or otherwise; and (iii) any
option, right of first refusal, or other interest or right.
"LLC LOAN" shall mean a committed or disbursed Loan to an Affiliate (as
defined herein), subject to the terms and conditions set forth herein.
"LOAN" shall mean collectively the A & D Loan and the Construction Loan.
"LOAN AMOUNT" shall mean an amount up to Thirty-Eight Million Five Hundred
Thousand and No/100 Dollars ($38,500,000.00), subject to the various sublimits
set forth herein.
"LOAN DOCUMENTS" shall mean the documents described in SECTION 3.1 hereof.
"LOT" means an individual lot designated on the final subdivision plat or
filing for each Subdivision.
"MATERIAL ADVERSE CHANGE" shall mean any change in the assets, financial
condition, or results of operations of Borrower or Guarantor or any other event
or condition with respect to Borrower or Guarantor that in the reasonable
opinion of Lender (i) could affect the likelihood of performance by Borrower or
Guarantor of any of the Obligations, (ii) could affect the ability of Borrower
or Guarantor to perform any of the Obligations, (iii) could affect the legality,
validity, or binding nature of any of the Obligations or any Lien or Encumbrance
securing any of the Obligations, or (iv) could affect the priority of any Lien
or Encumbrance securing any of the Obligations.
"MAXIMUM ALLOWED ADVANCE" shall mean as follows:
PRESOLD HOMES
The lesser of (A) eighty percent (80%) of the Base Appraisal, or (B) eighty
percent (80%) of the sales price set forth in the Purchase Contract with
respect to each applicable Presold Home, or (C) ninety percent (90%) of
Total Costs.
SPEC HOMES
The lesser of (A) seventy-five percent (75%) of the Base Appraisal, or
(B) ninety percent (90%) of Total Costs, provided, however, with respect to
Home Loans for Spec Homes which remain outstanding after nine (9) months
following the initial disbursement for such Home Loan, the Maximum Allowed
Advance shall be sixty-five percent (65%) of the Base Appraisal.
MODEL HOMES
The lesser of (A) eighty percent (80%) of the Base Appraisal or (B) ninety
percent (90%) of Total Costs, provided, however, with respect to Home
Loans for Model Homes which remain outstanding (I) after twelve (12) months
following the initial disbursement for such Home Loan, the Maximum Allowed
Advance shall be sixty-five percent (65%) of the Base Appraisal, or (II)
after eighteen (18) months following the initial disbursement for such Home
Loan, the Maximum Allowed Advance shall be fifty percent (50%) of the Base
Appraisal.
"MELODY LOAN" shall mean an Advance disbursed to Melody.
"MODEL HOME" shall mean a Home constructed and furnished initially for
inspection by prospective purchasers, which is not intended to be sold until all
or substantially all of the other Homes are sold.
"MODEL HOME COMMITMENT" shall mean Lender's commitment to advance (i) with
respect to the Melody Loans, an aggregate amount up to the sum of Three Million
Five Hundred Thousand and No/100 Dollars ($3,500,000.00) for construction of
Model Homes, which includes all principal amounts outstanding and all amounts
committed but not yet advanced, or (ii) with respect to the FDC Loans, an
aggregate amount up to the sum of Five Hundred Thousand and No/100 Dollars
($500,000.00) for construction of Model Homes, which includes all principal
amounts outstanding and all amounts committed but not yet advanced. In the
event that Borrower does not utilize all of the Model Home Commitment with
respect to FDC Loans, Lender may elect, in its sole and absolute discretion, to
allow Borrower to utilize such unused portion for the Model Home Commitment as
applied to the Melody Loans. Notwithstanding anything contained herein to the
contrary, the maximum principal amount advanced and/or committed under the Loan,
including the Model Home Commitment, shall never exceed Thirty-Eight Million
Five Hundred Thousand and No/100 Dollars ($38,500,000.00).
"MORTGAGE" shall mean a mortgage, or deed of trust, as applicable, from
time to time executed by Borrower in the form attached hereto as EXHIBITS B-1
AND B-2.
"NON-RELATED PARTY" shall mean a person or entity that is not an officer
of, or parent or subsidiary corporation of, Borrower or a person or entity
otherwise controlled directly or indirectly by Borrower.
"NOTE" shall mean the Amended and Restated Secured Promissory Note of even
date herewith evidencing the Construction Loan and the A & D Loan.
"OBLIGATIONS" means the obligations of the Borrower and Guarantor under the
Loan Documents, including, without limitation, the obligations of Melody under
the Letter of Credit facility described in SECTION 2.21.
"PERSON" means a natural person, a partnership, a joint venture, an
unincorporated association, a limited liability company, a corporation, a trust,
any other legal entity, or any Governmental Authority.
"PLANS AND SPECIFICATIONS" shall mean collectively (i) all plans and
specifications applicable to the A & D Improvements that have been approved by
Lender, and (ii) the Home Plans.
"PREMISES" or "PROPERTY" shall mean the Subdivisions from time to time
approved by Lender pursuant to the terms hereof.
"PRESOLD HOME" shall mean a Home that is subject to a Purchase Contract
without contingencies. In the event any Presold Home ceases to constitute a
Presold Home for any reason, then, any such Presold Home shall automatically
become a Spec Home, and Borrower agrees to immediately comply with all
conditions, restrictions and limitations applicable to a Spec Home. The Maximum
Allowed Advance for any Spec Home or Model Home shall not be increased by reason
of such Home becoming a Presold Home, nor decreased by reason of a Presold Home
becoming a Spec Home or Model Home.
"PROJECT" shall mean the Premises and the Improvements.
"PURCHASE CONTRACT" shall mean a bona fide written agreement entered into
by Borrower and a third party purchaser that is a Non-Related Party for the sale
in the ordinary course of Borrower's business of any Home, supported by a
satisfactory and customary xxxx xxxxxxx money deposit or down payment and
evidence of prequalification for a mortgage loan.
"QUARTERLY LOAN FEE" shall mean a fee equal to .3125% of the then effective
loan amount, payable on the Conversion Date and on each Reduction Date pursuant
to SECTION 2.12(a).
"REDUCTION DATE" shall mean as defined in SECTION 2.10.
"REIMBURSEMENT AMOUNT" means the amount Melody is obligated to pay to
Lender under a Letter of Credit Agreement in respect of a draft drawn and paid
by Lender under the respective Letter of Credit, which amount shall be amount of
the draft or acceptance and all costs, expenses, fees, and other amounts then
payable by Melody to Lender under the Letter of Credit Agreement.
"REPAYMENT GUARANTY" shall mean a guaranty executed by the Guarantor, in
form and content satisfactory to Lender guaranteeing the repayment of the Loan.
"SOFT COSTS" shall mean with respect to each Home, the fees and costs that
are not directly related to the onsite construction of such Home as approved by
Lender, including, without limitation, interest, inspection fees, escrow and
title fees, processing and closing fees, wiring fees, legal fees, appraisals and
all closing costs, insurance costs and costs of direct project supervision
(which in the aggregate shall not exceed the amount of the Soft Costs set forth
for each type of Home set forth in the Home Construction Budget).
"SPEC HOME" shall mean a Home constructed for the purpose of adding to
Borrower's inventory, and which Home is not subject to a Purchase Contract.
"SUBDIVISION" shall mean a group of lots designated on an individual
subdivision plat or filing (which may be developed in phases), and which has
been approved by Lender (or for which Borrower is requesting approval) pursuant
to SECTION 2.14 of this Agreement. For purposes of this Agreement, a
"Subdivision" shall also include all plats or filings of record within a given
construction project offering the same product line.
"SUBDIVISION A & D LOAN" shall mean an individual loan for A & D
Improvements in a specific Subdivision (or phase thereof) subject to the terms
of this Agreement.
"SUBDIVISION A & D LOAN MATURITY DATE" shall mean the maturity date
applicable to each Subdivision A & D Loan as determined by Lender based on the
anticipated Lot takedown schedule, provided, however, such maturity date shall
not exceed twenty-four (24) months.
"SUBORDINATION AGREEMENT" shall mean, collectively, subordination
agreements in favor of Lender, (i) executed by FDC with respect to indebtedness
of Melody to FDC, and (ii) executed by the Guarantors with respect to
indebtedness of Melody to the Guarantors.
"TITLE COMPANY" shall mean Land Title Guaranty, or such other title company
mutually agreed upon by Borrower and Lender.
"TITLE INSURANCE POLICY" shall mean a title insurance policy in the form of
an American Land Title Association Loan Policy-1992 extended coverage (without
revision, modification or amendment) issued by the Title Company, in form and
substance satisfactory to Lender and containing such endorsements as Lender may
require.
"TOTAL COSTS" shall mean the sum of the Lot cost, Hard Costs and Soft
Costs.
"UNIT LOAN FEE" shall mean a fee equal to (i) one quarter of one percent
(0.25%) of the Maximum Allowed Advance for a Presold Home, (ii) one-half of one
percent (0.50%) of the Maximum Allowed Advance for a Spec Home, and (iii)
three-quarters of one percent (0.75%) of the Maximum Allowed Advance for a Model
Home.
1.2 ACCOUNTING TERMS. For purposes of this Agreement, all accounting
terms not otherwise defined herein or in the Recitals shall have the meanings
assigned to them in conformity with generally acceptable accounting standards
and principles (GAAP).
ARTICLE II
THE LOAN
Subject to the terms and conditions of this Agreement, Lender agrees to
lend to Borrower and Borrower agrees to borrow from Lender the Loan. The Loan
shall be comprised of the A & D Loan and the Construction Loan.
2.1 A & D LOAN. The A & D Loan shall be for the purpose of paying for or
reimbursing Borrower for certain costs and expenses incurred by Borrower in
acquiring the Property and constructing the A & D Improvements, as more
particularly provided in this Agreement. The A & D Loan shall be a revolving
line of credit. Except as provided in SECTION 2.11, and so long as no Event of
Default has occurred, the A & D Loan may be drawn, repaid and drawn again
through individual Subdivision A & D Loans in unlimited repetition so long as
the sum of (a) the amounts outstanding on the A & D Loan, and (b) the cumulative
Subdivision A & D Loan amounts that are committed but not yet advanced on the A
& D Loan never exceed the A & D Loan Amount.
2.2 EVIDENCE OF INDEBTEDNESS UNDER A & D LOAN. The A & D Loan shall be
evidenced by the Note. Disbursements of the A & D Loan shall be charged and
funded under the Note. In the event of any inconsistency between the Note and
this Agreement, the provisions of this Agreement shall prevail.
2.3 CONSTRUCTION LOAN. The Construction Loan shall be for the purpose of
paying for or reimbursing Borrower for certain costs and expenses incurred in
connection with the construction of the Homes and other costs and expenses
incidental to a Project, as more particularly provided in this Agreement. The
Construction Loan shall constitute a revolving line of credit. Except as
provided in SECTION 2.11, and so long as no Event of Default has occurred, the
Construction Loan may be drawn, repaid and drawn again through individual Home
Loans in unlimited repetition so long as the sum of (a) the amounts outstanding
on the Construction Loan, and (b) the cumulative Home Loan amounts that are
committed but not yet advanced on the Construction Loan never exceed the
Construction Loan Amount, and provided that (i) the aggregate value of Home
Loans for Presold Homes and Spec Homes that are outstanding or committed but not
yet advanced do not exceed the Construction Loan Commitment; and (ii) the
aggregate value of Home Loans for Model Homes that are outstanding or committed
but not yet advanced do not exceed the Model Home Commitment.
2.4 EVIDENCE OF INDEBTEDNESS UNDER CONSTRUCTION LOAN. Amounts outstanding
under the Construction Loan shall be evidenced by the Note. Disbursements of
the Construction Loan shall be charged and funded under the Note.
In the event of any inconsistency between the Note and this Agreement, the
provisions of this Agreement shall prevail.
2.5 INTEREST RATE.
(a) PAYMENT. Interest at the Interest Rate shall accrue on the
outstanding and unpaid balance of the Loan Amount, commencing on the date
of each advance until repaid, and shall be due and payable on each Interest
Payment Date until repayment of the outstanding principal balance of the
Loan Amount in full, together with all other sums owed to Lender pursuant
to any Loan Document.
(b) RATE AFTER DEFAULT. Upon and after the occurrence of an Event of
Default, hereunder or under any of the Loan Documents, at the option of
Lender, the outstanding principal balance of the Loan shall bear interest,
payable on demand, at a rate per annum equal to the Default Interest Rate.
The application of the Default Interest Rate shall not be interpreted or
deemed to extend any cure period set forth in this Agreement or otherwise
to limit any of Lender's remedies under this Agreement or any of the other
Loan Documents.
(c) COMPUTATION OF INTEREST. Interest shall be calculated on a
360-day year for all Advances, but, in any case, shall be computed for the
actual number of days in the period for which interest is charged, which
period shall consist of 365-days on an annual basis. If any payment of
interest under the Note would otherwise be due on a day which is not a
Business Day, the payment instead shall be due on the next succeeding
Business Day.
(d) NO DEDUCTIONS. All payments of principal or interest under the
Note shall be made without deduction of any present and future taxes,
levies, imposts, deductions, charges or withholdings, which amounts shall
be paid by Borrower. Borrower will pay the amounts necessary such that the
gross amount of the principal and interest received by Lender is not less
than that required by the Note.
(e) ORDER OF APPLICATION. Prior to the occurrence of an Event of
Default, any payments received by Lender will be applied in the following
order: (1) late charges; (2) payments for taxes and insurance; (3)
interest; and (4) principal.
(f) INTEREST RESERVE. Borrower hereby authorizes Lender to disburse
the proceeds of the Loan to pay interest accrued on the Loan,
notwithstanding that Borrower may not have requested a disbursement of such
amount. The authorization hereby granted shall be irrevocable and at
Lender's discretion, and no further direction or authorization from
Borrower shall be necessary for Lender to make such disbursements. Nothing
contained herein shall be deemed to obligate Lender to make such
disbursements to pay interest
beyond the portions of the Loan specifically allocated to the payment of
interest.
2.6 PAYMENTS. All amounts payable by Borrower on or with respect to the
A & D Loan and the Construction Loan or pursuant to the terms of any other Loan
Documents, shall be paid in lawful money of the United States of America at 000
Xxxxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000, in same day funds, not later than
1:00 p.m. (Arizona time) on the date due.
2.7 PREPAYMENT OF PRINCIPAL. Borrower shall have the right to prepay the
A & D Loan and the Construction Loan, in whole or in part at any time, without
premium or penalty.
2.8 TERM OF LOAN. The Loan and all interest and other charges thereon
shall be due and payable on the Expiration Date and all obligations to make
loans and advances (except as provided in SECTION 2.11) under the Loan shall
expire on the Expiration Date.
2.9 TERM OF INDIVIDUAL HOME LOANS AND SUBDIVISION A & D LOANS. Each Home
Loan and each Subdivision A & D Loan shall be due and payable in full on the
earlier to occur of (i) the Home Loan Maturity Date, or the Subdivision A & D
Loan Maturity Date, respectively, applicable to that loan or (ii) the Expiration
Date, provided, however, the Home Loan Maturity Date for a Presold Home shall be
extended for one period of three (3) Calendar Months upon Borrower's failure to
pay in full such Loan on or before the original Home Loan Maturity Date and
Borrower's satisfaction of the following terms and conditions prior to such
extension:
(a) No Material Adverse Change has occurred; and
(b) At the time of such extension, no Event of Default or event which
with notice or lapse of time (or both) would become an Event of Default
shall have occurred or be continuing.
In the event that the original Home Loan Maturity Date is extended pursuant
to this Section, Borrower shall pay to Lender in cash or immediately available
funds a non-refundable extension fee equal to .063% of the Maximum Allowed
Advance for each Presold Home within two (2) days from such extension.
2.10 CONVERSION PERIOD.
(a) From and after the Conversion Date, the Loan Amount shall be
reduced on the first day of each quarterly annual period (a "REDUCTION
DATE") as follows:
REMAINING
PERIOD REDUCTION LOAN AMOUNT
------ --------- -----------
3 Calendar Months after $6,416,667 $32,083,333
Conversion Date
6 Calendar Months after $6,416,667 $25,666,666
Conversion Date
9 Calendar Months after $6,416,667 $19,249,999
Conversion Date
12 Calendar Months after $6,416,666 $12,833,332
Conversion Date
15 Calendar Months after $6,416,666 $ 6,416,666
Conversion Date
18 Calendar Months after $6,416,666 $ -0-
Conversion Date
All such reductions shall be applied FIRST, to the Collateral being
released by any refinancing, SECOND, to any excess availability under
the A & D Loan, THIRD, to any excess availability under the
Construction Loan, FOURTH, to the A & D Loan, and FIFTH, to the
Construction Loan, with the oldest Lots and Units being paid first
(first to Spec Homes, then Presold Homes and Model Homes).
(b) Lender may accelerate the Conversion Date, and proceed to
enact the Conversion Period, upon the occurrence of any of the
following: (i) the breach of any covenant set forth in SECTION 10.21 ;
or (ii) FDC on a consolidated basis experiences two consecutive
quarterly losses (excluding the effects of amortization of the
purchased inventory markup), which losses exceed in the aggregate the
sum of One Million and No/100 Dollars ($1,000,000.00).
2.11 ADVANCES DURING CONVERSION PERIOD. Borrower may continue to submit
Draw Requests during the Conversion Period pursuant to the terms of this
Agreement; PROVIDED, HOWEVER, from and after the first anniversary of the
Conversion Date (i) no new Subdivisions shall be approved and no new Home Loans
or Subdivision A & D Loans shall be made, and (ii) all amounts prepaid or
prepaid by Borrower may not be reborrowed, as the Loan shall be automatically
converted from a revolving line of credit to a line of credit.
2.12 FEES. As additional consideration for the Loan, Borrower agrees to
pay to Lender the following fees, from Borrower's own funds and not from
proceeds of the Loan, which shall be earned by Lender on the date due under the
Loan Documents and shall be non-refundable to Borrower:
(a) A Commitment Fee computed for the period commencing on the date
hereof and ending on the scheduled Conversion Date, and which shall be
payable on or before the date hereof. On the Conversion Date and on each
Reduction Date during the Conversion Period, Borrower shall pay a Quarterly
Loan Fee on the Loan Amount then in effect, after giving effect to any
reductions thereof pursuant to SECTION 2.10.
(b) An unused commitment fee computed at the rate per annum of one
quarter of one percent (.25%) on the unused and uncommitted portion of the
Loan Amount, calculated quarterly from the date hereof and payable
quarterly in arrears until the Expiration Date. For each quarter-annual
period (or portion thereof), the unused commitment fee shall be equal to
(A) the Loan Amount (as in effect at the beginning of such month) MINUS (B)
the "average quarterly outstandings" for such quarter-annual period (or
portion thereof) with respect to which the unused commitment fee is being
computed, with the resulting number multiplied by (C) one-fourth (1/4th) of
the rate per annum set forth herein. As used herein, "average quarterly
outstandings" means the sum of (i) the outstanding amount of the Advances
on each day during such quarter-annual period (or portion thereof for which
the fee is being computed) with respect to which the unused commitment fee
is being computed, plus (ii) all amounts committed but not yet advanced,
divided by the number of days in such quarter-annual period (or portion
thereof). If the unused commitment fee is being computed for less than a
full quarter, the percentage used in clause (C) above shall be computed on
a daily basis for the number of days for which the fee is being computed.
Such fee shall continue to be payable quarterly during the Conversion
Period.
(c) A documentation fee for the Lender's processing of the closing of
the transaction contemplated hereby and the ongoing processing of
Mortgages, such fee to be in the amount of Three Thousand Five Hundred and
No/100 Dollars ($3,500.00), payable on or before the date hereof.
(d) Attorneys costs, expenses, and fees for Lender's counsel as
provided in the Loan Documents, payable on or before the date hereof and
during the term of the Loan, from time to time upon the presentation by
Lender of statements therefor.
(e) Appraisal fees, appraisal review fees, title insurance premium,
release and reconveyance fees, and other costs, expenses, and fees that the
Borrower is obligated to pay pursuant to the Loan Documents, including,
without limitation, the fees and expenses described in SECTION 12.10 and
all fees and costs associated with periodic inspections of the
Project (by personnel of Lender or independent contractors retained by
Lender for such purposes) and Borrower's books and records, in the amounts
specified by Lender, payable on or before the date hereof.
2.13 SECURITY. Payment of the Note shall be secured by the following:
(a) The Mortgages; and
(b) the assignment of agreements set forth in SECTION 2.18 below.
Notwithstanding anything contained herein to the contrary, the Collateral for
any LLC Loan shall not act as collateral for any FDC Loan, Melody Loan or Melody
Obligation under the Letter of Credit Facility. In all other instances,
however, all Collateral shall act as collateral for each and every other loan
and/or facility.
2.14 APPROVAL OF SUBDIVISIONS AND SUBDIVISION A & D LOANS. Borrower may,
from time to time, request Lender to approve additional Subdivisions and
Subdivision A & D Loans. Approval of new Subdivisions shall be at Lender's sole
and absolute discretion and Lender shall have no obligation to approve such
Subdivisions. When requesting approval of a new Subdivision, Borrower shall
deliver to Lender the following documents, in form and content satisfactory to
Lender:
(a) SUBDIVISION PLAT OR SURVEY. Borrower shall deliver to Lender a
duly recorded subdivision plat, or a survey acceptable to Lender in form
and substance, covering the Subdivision for which Borrower is requesting
approval. No Subdivision (or the aggregate of the phases thereof) whose
(i) plat or filing provides for more than one hundred fifty (150) Lots, or
(ii) anticipated Lot takedowns exceed twenty-four (24) months, shall be
approved.
(b) CC&R'S. Borrower shall provide Lender with all CC&R's, easements
and other rights that exist or are contemplated with respect to the
Subdivision for which Borrower is requesting approval.
(c) TYPES OF HOMES. With respect to the Construction Loan, Borrower
shall provide Lender with a description of the types of Homes to be
constructed within such Subdivision.
(d) APPROVALS. Borrower shall provide evidence of appropriate zoning
and existence of all necessary governmental and other third-party
approvals; including, without limitation, public reports, architectural
committee approvals (to the extent Borrower does not control the granting
of such approvals) and any other approvals required under the CC&R's.
(e) SOILS TESTS. Borrower shall provide a soils test report prepared
by a licensed soils engineer satisfactory to Lender showing the
locations of, and containing boring logs for, all borings, together with
recommendations for the design of the foundations, paved areas and
underground utilities for the Subdivision.
(f) ENVIRONMENTAL QUESTIONNAIRE. Borrower shall provide an
environmental questionnaire with respect to each Subdivision for which
Borrower is requesting approval in form satisfactory to Lender.
(g) UTILITIES. With respect to the Construction Loan, Borrower shall
provide evidence satisfactory to Lender, which may be in the form of
letters from local utility companies or local authorities, that (a)
telephone service, electric power, storm sewer, sanitary sewer and water
facilities are available to the Subdivision and Lots therein; (b) such
utilities are adequate to serve the Subdivision and Lots therein and exist
at the boundary of the Subdivision; and (c) no conditions exist to affect
Borrower's right to connect into and have unlimited use of such utilities
except for the payment of a normal connection charge and except for the
payment of subsequent charges for such services to the utility supplier.
(h) TAXES. Borrower shall provide satisfactory evidence to Lender
that all real property taxes, assessments, water, sewer or other charges
levied or assessed against the Subdivision have been paid in full.
(i) FLOOD REPORT. Lender shall have obtained evidence satisfactory
to Lender, as to whether (a) the Subdivision is located in an area
designated by the Department of Housing and Urban Development as having
special flood or mudslide hazards, and (b) the community in which the
Subdivision is located is participating in the National Flood Insurance
Program.
(j) PRELIMINARY TITLE REPORT. Borrower shall provide Lender with a
preliminary title report, including all Schedule B items, and evidence
satisfactory to Lender that the Title Company is prepared to issue the
Title Insurance Policies with respect to Home Loans within each Subdivision
for which Borrower is requesting approval.
(k) A & D COSTS. If applicable, Borrower shall provide Lender with
the cost breakdown for the land acquisition and development costs to a
finished Lot status on the Subdivision for which Borrower is requesting
approval, together with all documents evidencing or relating to such costs.
(l) MORTGAGE. With respect to any Subdivision, Borrower shall
execute a Mortgage with respect to the new Subdivision in the form attached
hereto as EXHIBIT "B-1" or EXHIBIT "B-2", as applicable.
(m) TITLE INSURANCE. With respect to each new approved Subdivision
that is subject to a prior lien of Lender securing acquisition
and development financing or that is owned free and clear by Borrower,
Borrower shall provide to Lender a Title Insurance Policy insuring a
Mortgage provided for in paragraph (l) above, in the aggregate amount of
the title insurance of the Loan Amount, or adding the new Subdivision by
endorsement to an existing Title Insurance Policy, subject to Lender's
review and approval.
(n) HOME COST BREAKDOWN. Borrower shall provide to Lender a cost
breakdown for each type of Home to be constructed in the approved
Subdivision, in form and substance acceptable to Lender.
(o) PHASE I ENVIRONMENTAL REPORT. Borrower shall provide to Lender a
Phase I Environmental Assessment Report with respect to the Subdivision
prepared by an environmental engineer acceptable to Lender, and in form and
substance acceptable to Lender, in Lender's sole and absolute discretion.
(p) PLANS AND SPECIFICATIONS. Borrower shall provide to Lender the
Plans and Specifications.
(q) BASE APPRAISAL. Borrower shall provide Lender with a Base
Appraisal of each type of Unit to be constructed in the Subdivision.
(r) SUBDIVISION A & D LOANS. If Borrower desires a Subdivision A & D
Loan for the Subdivision in question, Borrower shall submit, for Lender's
approval, which may be granted or withheld in lender's sole and absolute
discretion, an A & D Budget and A & D Disbursement Schedule. Lender shall
also determine, in Lender's sole and absolute discretion, the applicable
Subdivision A & D Loan Maturity Date and the minimum Lot takedown
requirements applicable to such Subdivision.
(s) TERM SHEET. Borrower must execute a Term Sheet in the form
attached hereto as EXHIBIT "G", agreeing to all the terms and
conditions set forth therein.
(t) OTHER. Borrower shall provide such other documents and
information that Lender may reasonably require.
2.15 EFFECT OF SUBDIVISION APPROVAL. The approval by Lender of a
Subdivision shall mean only that Borrower may apply for (i) Subdivision A & D
Loans, and/or (ii) Home Loans for the construction of Homes within such
Subdivision pursuant to SECTION 2.16 of this Agreement.
2.16 APPROVAL OF HOME LOANS. From and after such time that Lender has
approved a Subdivision pursuant to SECTION 2.14 of this Agreement, Borrower may
apply for Home Loans for the construction of Homes within such Subdivision.
Borrower
shall apply for any Home Loan before the first day of each month, or such other
day as may be mutually agreed upon by Borrower and Lender. Lender will review
and approve or disapprove such Home Loan applications in its sole and absolute
discretion. In connection with each request for a Home Loan, Borrower shall
deliver to Lender the following documents in form and content satisfactory to
Lender:
(a) TYPE OF HOME. Borrower shall provide Lender with a description
of the type of Home to be constructed with the requested Home Loan (Presold
Homes, Model Homes or Spec Homes), and Home Descriptions.
(b) PRELIMINARY TITLE REPORT. Borrower shall provide Lender with a
Preliminary Title Report, including all Schedule B items, and evidence
satisfactory to Lender that the Title Company is prepared to issue a Title
Insurance Policy.
(c) PURCHASE CONTRACT. Borrower shall provide Lender with a copy of
the Purchase Contract if any of the Homes to be constructed with the
requested Home Loan is a Presold Home.
(d) OTHER. Borrower shall provide Lender with such other documents
that Lender may reasonably require.
2.17 UNIT LIMITATIONS. The number of Spec Homes which may be funded under
the Loan in a Subdivision shall not exceed (i) five (5) Units per phase, or (ii)
ten (10) Units per Subdivision. The number of Model Homes shall be limited to
four Units (4) per product per Subdivision. The number of Presold Home Loans
shall be limited to the available Construction Loan Amount.
2.18 ADDITIONAL SECURITY. As additional security for the indebtedness and
obligations of Borrower under the Loan Documents, Borrower hereby transfers and
assigns to Lender, and grants a first priority security interest in favor of
Lender in, under, and to all written agreements that have been or will be
entered into by Borrower relating to Property, including, without limitation,
all construction contracts, architect's and engineer's agreements, the Plans and
Specifications, drawings, surveys, licenses, permits, franchises,
authorizations, approvals, and any other documents, instruments and agreements
relating to the construction of any Home, or required for the use, occupancy or
operation of any Home, and upon the occurrence of an Event of Default, Borrower
hereby irrevocably constitutes and appoints Lender as its attorney-in-fact, with
full power of substitution to enforce Borrower's rights with respect to any such
agreements.
2.19 MANDATORY PREPAYMENT. If for any reason at any time (i) the aggregate
outstanding Home Loans for Model Homes or for Presold Homes and Spec Homes
exceeds the Model Home Commitment or the Construction Loan Commitment,
respectively; (ii) the aggregate outstanding Subdivision A & D Loans exceed the
A & D Loan Amount; or (iii) the outstanding balance of any Home Loan exceeds the
applicable
Maximum Allowed Advance, Borrower, without notice or demand, shall, within one
(1) Business Day, make a payment to Lender in an amount equal to such excess
principal amount.
2.20 LLC LOANS. Borrower and Lender hereby acknowledge that with respect
to certain Subdivisions, the "Borrower" may be an Affiliate. Such affiliates
must provide certified copies of such formation documents, certificates and
resolutions as Lender may require and such Affiliate must execute a Joinder and
Agreement to be Bound in the form of EXHIBIT "F" attached hereto, agreeing to
assume all obligations and liabilities under this Agreement, excluding, however,
all of Borrower's obligations to repay the Loans. The execution and delivery of
the Joinder and Agreement to be Bound shall be a condition precedent to closing
any Home Loan or Subdivision A & D Loan to an Affiliate, together with such
other Loan Documents as may be required by Lender from time to time. While the
Loan has been made to Borrower and Borrower is the primary obligor for the
repayment of the Loan, Lender acknowledges that Borrower will be making Advances
available to Affiliates for the purposes set forth in this Agreement with
respect to the Subdivisions. Lender hereby agrees to the use of Advances for
such purposes provided:
(a) All other terms and conditions of this Agreement to be satisfied
as a condition of Lender's obligation to authorize Advances shall have been
satisfied as to each such Advance including, but not limited to, a Mortgage
executed and delivered to Lender by the Affiliate meeting all requirements
set forth in this Agreement for Mortgages; and
(b) Prior to the initial Advance for the benefit of an Affiliate,
such Affiliate shall provide to Lender certified copies of such formation
documents and a resolution or certification, as appropriate, that the
execution and delivery of Mortgages by such Affiliate have been duly
authorized in accordance with the governing documents of such Affiliate.
Notwithstanding any other provision of this Agreement or such Affiliate
Mortgages to the contrary, Lender expressly agrees that in the event of default
under this Agreement or any other Loan Documents, any Affiliate shall not be
required to pay off any Loan (unless the LLC Loan in question is in default) and
Lender shall nevertheless allow each Affiliate Mortgage to be released and fully
reconveyed upon the payment to Lender of (i) the respective Home Release Price
or A & D Loan Lot Release Price or (ii) the amount actually disbursed in
connection with the Property encumbered by such Affiliate Mortgage, whichever is
lesser, plus the trustee's and reasonable attorney's fees and costs, if any,
incurred by Lender in initiating and processing foreclosure of such Affiliate
Mortgage; provided, however, that Lender shall be under no obligation to release
an Affiliate Mortgage at any time the Affiliate requesting such release is,
itself, in default in the performance of its obligations pursuant to any
Affiliate Mortgage and the Loan Documents executed by it, and all release
payments must be paid to Lender, or to the trustee under the Mortgage for which
release is requested, prior to ten (10) days before the earliest foreclosure
sale
date for a Mortgage. The phrase "earliest foreclosure sale date" means the
earliest date a Property may actually, not theoretically, be sold pursuant to,
and after full compliance with, applicable law governing judicial or
non-judicial foreclosures, as the case may be, of mortgages.
2.21 LETTER OF CREDIT FACILITY. As a separate credit facility, separate
and apart from any other credit facility described herein, Melody and Lender
agree as follows:
(a) ISSUANCE OF LETTERS OF CREDIT. Subject to the terms and
conditions of this Agreement and the Letter of Credit
Agreements and subject to the policies, procedures, and
requirements of Lender in effect from time to time for
issuance of Letters of Credit (including, without
limitation, payment of letter of credit fees), Lender agrees
to issue, from time to time on or before the Conversion
Date, Letters of Credit upon request by and for the account
of Melody, provided that as to each requested Letter of
Credit Melody has delivered to Lender a completed and
executed Letter of Credit Agreement, and provided further
that (i) Letters of Credit shall not be required to be
issued for a term of more than twenty-four (24) months,
(ii) the date that is the last date for payment of drafts
drawn or drawn and accepted under a requested Letter of
Credit is before the Expiration Date, and (iii) the
requested Letter of Credit relates to a Lender financed
Subdivision. Each reference in this Agreement to "issue" or
"issuance" or other forms of such words in relation to
Letters of Credit shall also include any extension or
renewal of a Letter of Credit. Upon occurrence and during
the continuance of an Event of Default, Lender, in its
absolute and sole discretion and without notice, may suspend
or terminate the commitment to issue Letters of Credit.
Notwithstanding the foregoing, the sum of (i) the stated
amounts of all outstanding Letters of Credit and (ii) all
unpaid Reimbursement Amounts shall not exceed Three Million
and No/100 Dollars ($3,000,000.00). Lender shall not be
obligated to issue any Letter of Credit with an automatic
renewal or "evergreen" provision. All of Melody's
obligations under the Letters of Credit shall be secured by
the Collateral.
(b) ISSUANCE PROCEDURE. To obtain a Letter of Credit, Melody shall
(i) provide a budget for the specific improvements covered
by the Letter of Credit, together with a legal description
of the subject real property, and (ii) complete and execute
a Letter of Credit Agreement
and submit it to the letter of credit department of Lender.
Upon approval of the budget and receipt of a completed and
executed Letter of Credit Agreement, Lender will process the
application in accordance with the policies, procedures,
and requirements of Lender then in effect. If the
application meets the requirements of Lender and is within
the policies of Lender then in effect, Lender will issue the
requested Letter of Credit.
(c) REIMBURSEMENT OF LENDER FOR PAYMENT OF DRAFTS DRAWN OR DRAWN AND
ACCEPTED UNDER LETTERS OF CREDIT. The obligation of Melody
to reimburse Lender for payment by Lender of drafts drawn or
drawn and accepted under a Letter of Credit shall be as
provided in the respective Letter of Credit Agreement.
Lender will notify Melody of payment by Lender of a draft
drawn or drawn and accepted under a Letter of Credit and of
the respective Reimbursement Amount and Melody shall pay the
Reimbursement Amount pursuant to the respective Letter of
Credit Agreement. If Melody is to pay the Reimbursement
Amount pursuant to the Letter of Credit Agreement, Melody
shall also pay to Lender interest on the Reimbursement
Amount from and including the date Lender pays the
respective draft or acceptance at the Interest Rate until
the Reimbursement Amount and such interest are paid in full
at a rate of interest equal to two percent (2%) plus the
Index Rate, provided that if Melody fails to pay the
Reimbursement Amount and accrued interest thereon within two
(2) days after notification by Lender to Melody of payment
of the respective draft or acceptance, an Event of Default
shall occur and interest thereafter will accrue at the
Default Interest Rate. Such interest shall be computed on
the basis of a 360-day year and accrue on a daily basis for
the actual number of days elapsed. Notwithstanding the
above, if Melody elects or is deemed to have elected to pay
the Reimbursement Amount pursuant to the Letter of Credit
Agreement and fails to pay the Reimbursement Amount and
interest thereon within five (5) days after notification by
Lender to Melody, Lender, in its absolute and sole
discretion and without notice to Melody and regardless of
whether the terms and conditions in this Agreement for
Advances are satisfied, may (i) increase the Release Price
pursuant to SECTION 13.2(e), or (ii) make an Advance under
this Agreement in the amount of the Reimbursement Amount and
accrued interest thereon and apply the proceeds of
such Advance to pay the Reimbursement Amount and accrued
interest.
(c) LETTER OF CREDIT FEE. Melody shall pay to Lender an additional
fee for each Letter of Credit equal to one and one-quarter
percent (1.25%) of the face amount of each Letter of Credit, in
no event to be less than $325.00 per Letter of Credit payable in
advance for the term of each Letter of Credit.
ARTICLE III
CONDITIONS PRECEDENT
3.1 CLOSING. Lender's obligations to close the Loan and perform under
this Agreement are expressly conditioned upon (i) Borrower's satisfaction of all
of the conditions set forth in EXHIBIT C hereto; (ii) Borrower's satisfaction of
the conditions for disbursement set forth in ARTICLE IV (as applicable); (iii)
the Title Company's unconditional commitment to issue the Title Insurance Policy
("TITLE COMMITMENT"); and (iv) Borrower's delivery to Lender of the following
documents, in form and content satisfactory to Lender, duly executed (and
acknowledged where necessary) by the appropriate parties thereto:
(a) This Agreement;
(b) The Note;
(c) The Mortgage(s), or amendments to Mortgage(s) with respect to all
existing Mortgages;
(d) The Financing Statement, which shall be duly filed with the
Colorado or Nevada Secretary of State, as applicable;
(e) The Environmental Indemnity;
(f) The Completion Guaranty;
(g) The Repayment Guaranty;
(h) The Subordination Agreement;
(i) Assignments of the Plans and Specifications and all other
agreements, contracts, rights, permits, licenses, entitlements,
authorizations, and franchises relating to the Project, and consents to
such assignments where deemed appropriate by Lender; and
(j) Such other documents that Lender may reasonably require.
3.2 HOME LOAN CLOSINGS/SUBDIVISIONS A & D LOAN CLOSINGS/LLC LOAN
CLOSINGS. In addition to the satisfaction of the closing conditions set
forth in SECTION 3.1 above, Lender's obligations to close any Home Loan,
Subdivision A & D Loan and/or LLC Loan and perform under this Agreement are
expressly conditioned upon (i) Borrower's satisfaction of the conditions for
disbursement set forth in ARTICLE IV (as applicable); (ii) the Title
Company's unconditional commitment to issue the Title Commitment; and (iii)
Borrower's delivery to Lender of the following documents, in form and content
satisfactory to Lender, duly executed (and acknowledged where necessary) by
the appropriate parties thereto:
(a) The Mortgage, provided a Mortgage has not been previously
executed, delivered, recorded and insured;
(b) The Financing Statement, which shall be duly filed with the
Colorado or Nevada Secretary of State, provided a Financing Statement has
not been previously executed, delivered and filed;
(c) Such other loan documents as may be required by Lender,
including, without limitation, the Joinder and Agreement to be Bound with
respect to any LLC Loan, assignments, an Environmental Indemnity, and such
consents as Lender may require.
ARTICLE IV
LOAN DISBURSEMENTS
4.1 A & D LOAN DISBURSEMENTS.
(a) RECORDATION DISBURSEMENTS. Upon recordation of a Mortgage and
satisfaction of all conditions set forth herein, provided that the Title
Company has issued or irrevocably committed in writing to issue to Lender
the Title Insurance Policy, Lender shall disburse, subject to the
limitations of each A & D Disbursement Schedule, to Borrower or to the
persons, firms or corporations entitled thereto the amounts (if approved in
writing by Lender) necessary to pay all or portions of: (i) costs, charges
and expenses incurred by (1) Lender and payable by Borrower hereunder or
(2) Borrower in connection with title insurance charges and premiums, tax
and lien service charges, recording fees, escrow fees, real property taxes
and assessments, insurance premiums, and loan brokerage commissions payable
in connection with the Loan, if any, and title insurance charges and
premiums, recording fees, escrow fees, prorations in respect to real
property taxes and assessments and insurance premiums payable in connection
with Borrower's acquisition of fee title to the Property; (ii) the amount
necessary to complete the purchase of the Property; and (iii) other Project
costs and expenses theretofore incurred by Borrower.
(b) COURSE-OF-CONSTRUCTION DISBURSEMENTS. Subsequent to recordation
of a Mortgage and subject to the provisions of this Agreement, Borrower
shall be entitled to disbursements, within the limitations of the
applicable A & D Disbursement Schedule, of sums as are required to be used
for the payment of:
(i) interest on borrowings under the applicable Subdivision
A & D Loan;
(ii) the costs and expenses of Lender which are payable by
Borrower or reimbursable by Borrower as set forth herein; and
(iii) the costs and expenses of the labor and materials used in
constructing the A & D Improvements and costs and expenses incidental
thereto in accordance with the applicable provisions of the applicable
A & D Disbursement Schedule.
(c) REQUEST FOR ADVANCE. Concurrently with the request for any
disbursement of proceeds of the A & D Loan other than advances that,
pursuant to the applicable A & D Loan Disbursement Schedule, may be made
without a request for advance, Borrower shall furnish to Lender, separately
with respect to each disbursement request, a request for advance on
Lender's form (the "REQUEST FOR ADVANCE") and executed by Borrower,
together with AIA forms G702 and G703 (or acceptable equivalents and such
other forms and schedules of values as may from time to time be approved or
required by Lender) duly signed and sworn to by Borrower and Borrower's
general contractor (if any), with all blanks appropriately filled in,
setting forth such details concerning construction of the A & D
Improvements as Lender shall require. Upon request of Lender at any time
or from time to time, Borrower shall also deliver to Lender (i) a list of
the names and addresses of all material dealers, laborers and
subcontractors with whom written agreements have been made by Borrower or
Borrower's general contractor (if any) and (ii) unconditional lien waivers
and releases with respect to all work performed and materials supplied in
connection with the A & D Improvements and previously paid for by a prior
Advance, and conditional lien waivers and releases with respect to all work
performed and materials supplied in connection with the current Request for
Advance. Each Request for Advance and all such other items and information
shall be delivered to Lender at least ten (10) Business Days prior to the
date of such advance.
(d) RETAINAGE; FINAL DISBURSEMENT. With respect to all new
Subdivisions and Subdivision Loans approved by Lender pursuant to
SECTION 2.14, and at Lender's option, Lender shall hold back ten percent
(10%) of all "HARD COSTS" identified in the applicable A & D Budget for
major scopes of work identified as grading, water, sewer, paving and
concrete. Lender agrees to disburse retainage on a trade-by-trade basis,
subject to Lender's verification that such work has been completed to
Lender's satisfaction and such other conditions that Lender may reasonably
require. Subject to the provisions of this Agreement, and so long as there
is no Event of Default hereunder, the final
disbursement of proceeds of each Subdivision A & D Loan proceeds constituting
the holdback portion shall be made when Borrower has delivered or caused to be
delivered to Lender the following:
(i) such additional title policy endorsements or such additional
policies of title insurance with endorsements thereto as Lender may
require, with a liability limit not less than the Title Insurance
Policy amount, issued by the Title Company with coverage and in form
satisfactory to Lender, insuring Lender's interest under the Mortgage
as a valid first lien on the Premises, excepting only such items as
shall have been approved in writing by Lender and providing
affirmative insurance therein against mechanics' liens, materialmen's
liens or claims or liens in the nature thereof on account of any
construction of the A & D Improvements;
(ii) if requested by Lender, the execution of AIA Form G704 or
other document satisfactory to Lender by Borrower's engineer,
contractor (if any) and Borrower;
(iii) if requested by Lender, a notice of completion on
Lender's approved form executed by Borrower and duly recorded in the
county recorder's office where the Premises is located;
(iv) if requested by Lender, an "AS-BUILT" ALTA survey of the
Premises or other satisfactory evidence, showing the location of the
completed A & D Improvements, the location of all points of access to
the Premises and the A & D Improvements and the location of all
easements affecting the Premises and certifying that there are no
encroachments of the A & D Improvements onto any easements affecting
the Premises or onto any adjoining property and that all applicable
setback requirements and other restrictions have been complied with;
(v) "AS-BUILT" plans and specifications of the A & D
Improvements, showing the final specifications of all A & D
Improvements;
(vi) letter of acceptance or its equivalent from all Governmental
Authorities regarding completion of the A & D Improvements;
(vii) if requested by Lender, the execution of AIA Form G706
(Contractor's Affidavit of Payments of Debts), AIA Form G706A
(Contractor's Affidavit of Release of Liens), and AIA Form G707
(Consent of Surety of Final Payment); and
(viii) unconditional lien waivers on Lender's approved form
from any party that has recorded a preliminary notice of lien against
the Project.
(e) LENDER'S INSPECTOR. Throughout the course of construction of the
A & D Improvements, Lender shall have the right to employ, at Borrower's sole
cost and expense, an inspector or inspectors who shall review as agent for
Lender all construction activities undertaken in regard to the Project. A
certificate or indication from such inspector or inspectors that construction
substantially complies with the Plans and Specification will be completed not
later than the applicable A & D Completion Date shall be a further condition
precedent to Lender's approval of Borrower's then submitted Request for Advance.
(f) METHOD OF ADVANCES. The proceeds of the A & D Loan disbursed under
this Agreement through individual Subdivision A & D Loans, and shall be
evidenced by the Note and shall be secured by a Mortgage, and all such proceeds
shall be disbursed at Lender's option (a) directly to Borrower or the Borrower's
general contractor, (b) jointly to Borrower and the Borrower's general
contractor, (c) directly to persons supplying labor, materials and services in
connection with the A & D Improvements, or (d) jointly to Borrower and said
persons. Prior to any disbursements for hard costs or soft costs as identified
in the applicable A & D Budget, Borrower shall establish and maintain an account
with Lender, which account shall be used by Lender to advance A & D Loan funds
and Construction Loan funds into during the term of the A & D Loan and the
Construction Loan.
(g) LIMITATIONS ON DISBURSEMENTS. Borrower shall be entitled to
disbursements of the A & D Loan only in accordance with the terms and conditions
of the applicable A & D Loan Disbursement Schedule (unless waived or modified by
Lender) and, in addition, the following conditions (unless waived or modified by
Lender):
(i) the representations and warranties of Borrower contained in all
of the Loan Documents shall be correct on and as of the date of the
disbursement as though made on and as of that date and no Event of Default
(or event which, with the giving of notice and/or the passage of time,
could become an Event of Default) shall have occurred and be continuing as
of the date of the disbursement;
(ii) disbursement of A & D Loan proceeds shall be available only to
defray costs actually incurred by Borrower in connection with the
construction of the A & D Improvements;
(iii) in the event the A & D Improvements (or any portion thereof)
are completed prior to total disbursement of all of the budget categories
on the applicable A & D Loan Disbursement Schedule (or those budget
categories that relate to the portion completed), Lender will not be
obligated to reallocate undisbursed amounts to other budget categories on
the applicable A & D Disbursement Schedule and such undisbursed amounts may
be retained by Lender.
(iv) disbursements on account of the direct costs of constructing the
A & D Improvements shall be limited to the lesser of (a) the actual cost to
Borrower of work and labor performed on the Improvements and materials
incorporated into the Improvements or suitably stored on the Property, or
(b) the actual value (as determined by Lender) of said work and labor
performed and materials stored or (c) the amounts allocated to the work,
labor and materials in question on budgets and schedules of values approved
by Lender multiplied by the percentage of completion (as determined by
Lender) of such work, labor and materials;
(v) disbursements on account of indirect or "soft" costs relating to
the construction of the A & D Improvements shall be limited to the actual
amounts of such costs as indicated by invoices, statements, vouchers,
receipts or other written evidence satisfactory to Lender;
(vi) all disbursements of the A & D Loan shall be limited to the
purposes and amounts set forth in the categories set forth in the
applicable A & D Loan Disbursement Schedule; provided that notwithstanding
any limitations on disbursements set forth in this Agreement, the
applicable A & D Loan Disbursement Schedule, or otherwise, Borrower shall
pay all costs and expenses arising in connection with the Project;
(vii) Borrower shall not submit more than one (1) Request for
Advance per month for the A & D Loan. Each such Request for Advance shall
be submitted on or before the last day of the month and Lender shall not be
required to make any requested advance before the later to occur of the
tenth (10th) day of the month or ten (10) days after the receipt of the
applicable Request for Advance; and
(viii) Borrower shall not be entitled to any advances of a
Subdivision A & D Loan for any costs under the heading "BORROWER EQUITY" on
the applicable A & D Budget and such costs will either be paid directly by
Borrower at or prior to closing if so required in the applicable A & D
Budget, deposited with Lender pursuant to the requirements of SECTION
4.1(h) below if so required by Lender, or otherwise paid directly by
Borrower.
(h) DEFICIENCIES In no event shall Lender be required to disburse
any amount which, in Lender's opinion, will either (i) reduce the total
undisbursed amount of the Subdivision A & D Loan below the amount necessary
to pay for the balance of the work, labor and materials necessary to fully
complete construction of the A & D Improvements and the payment of all
costs in connection therewith, or (ii) reduce the undisbursed amount of
Subdivision A & D Loan proceeds allocated to the costs described in any
paragraph contained in the applicable A & D Disbursement Schedule or in any
cost category set forth in
any schedule of values approved by Lender below the amount which Lender, in
Lender's opinion, deems sufficient to pay in full the costs to which such
amount is allocated (the deficiencies described in clauses (i) and (ii) of
this sentence being hereinafter collectively referred to as an "A & D LOAN
DEFICIENCY"). Borrower hereby agrees that if Lender determines that an
A & D Loan Deficiency exists, Borrower shall, upon five (5) days' written
notice from Lender, either (A) deposit with Lender the amount that Lender,
in its sole opinion, deems necessary to pay for the balance of the costs of
completing the construction of the A & D Improvements or the costs in the
cost category described in any paragraph contained in the applicable A & D
Loan Disbursement Schedule or in any such schedule of values, as the case
may be, less the undisbursed amount of the Loan or undisbursed portion
thereof under the cost category in question, or (B) furnish Lender with
paid invoices, bills and receipts indicating that Borrower has paid, from
Borrower's own funds, for the costs of completing the construction of the
A & D Improvements or the costs in the cost category in question, as the
case may be, in a sufficient amount to make the undisbursed amount of the
Subdivision A & D Loan or the undisbursed portion thereof under the cost
category in question sufficient to pay for the entire balance of the costs
of completing the construction of the A & D Improvements or the entire
balance of the costs in such cost category, as the case may be. All
amounts deposited by Borrower pursuant to this Section shall be disbursed
in accordance with the terms of this Agreement for the payment of the cost
of construction of the A & D Improvements prior to any further disbursement
of the Subdivision A & D Loan. Notwithstanding anything to the contrary
set forth in this paragraph, in determining the A & D Loan Deficiency,
Lender, at its option, may determine what sums are available by
reallocating between specific line items, and Lender may also review the
amount of any holdback before requesting any sum by Borrower under this
paragraph.
(i) APPRAISALS. If reasonably required by Lender or if required by law,
Lender shall have the right to order appraisals of the Project from time to
time from an appraiser selected by Lender, which appraisals shall comply
with all federal and state standards for appraisals and otherwise shall be
satisfactory to Lender in all material respects. Borrower agrees to pay
the cost and expense for all appraisals and reviews thereof ordered by
Lender pursuant to this paragraph.
(j) LOAN-TO-VALUE; LOAN-TO-COST. At all times during the term of the
Loan, the unpaid principal balance, plus amounts committed but not yet
advanced, of any Subdivision A & D Loan shall not exceed seventy-five
percent (75%) of the bulk wholesale discounted value of the specific
Project, nor more than eighty percent (80%) of Total Costs, as determined
by Lender in its sole discretion. If for any reason the loan-to-value
ratio or loan-to-cost ratio exceeds said percentage, then Borrower shall,
upon Lender's demand, immediately reduce the unpaid principal balance of
the Loan, or deposit sufficient sums with Lender to reduce the
loan-to-value ratio or loan-to-value ratio to at or below said percentage.
4.2 CONSTRUCTION LOAN DISBURSEMENTS.
(a) DISBURSEMENTS. Subsequent to the recordation of the Mortgage and
subject to satisfaction of all conditions of this Agreement, Lender shall
make advances of the Construction Loan in connection with the construction
of Homes. Advances of the Construction Loan shall be made through
individual Home Loans and each Home Loan shall be available for the payment
of the A & D Lot Release Price (or a portion thereof), Hard Costs, and Soft
Costs and such other costs and expenses as Lender may approve for the Home
in question.
(b) ADDITIONAL CONDITIONS APPLICABLE TO CONSTRUCTION LOAN. Borrower
shall not be entitled to any advances of the Construction Loan unless and
until each of the following additional conditions precedent have been
satisfied:
(1) Borrower shall have submitted to Lender and Lender shall
have approved Home Plans for each type of Home, which Home Plans shall
(i) be prepared by an architect acceptable to Lender, (ii) be
consistent with the general description of the Homes set forth in the
Home Descriptions, and (iii) be otherwise satisfactory to Lender;
(2) At Borrowers sole cost and expense, Lender shall have
obtained Base Appraisals with respect to each type of Home, which Base
Appraisals shall be (i) prepared by an appraiser acceptable to Lender,
(ii) consistent with the valuations set forth in the Home Descriptions
and (iii) otherwise satisfactory to Lender;
(3) Borrower shall have submitted to Lender all other
information requested by Lender to formulate a Home Construction
Budget for each type of Home (including, without limitation,
construction contracts and other verifications of costs) and Lender
shall have formulated such Home Construction Budgets;
(4) Borrower shall have executed and delivered to Lender an
assignment of Borrower's agreement with its architects and all Plans
and Specifications and such architect shall have consented to such
assignment;
(5) Borrower shall have submitted to Lender evidence of (i)
building permits for the construction of the Homes (ii) all necessary
permits, licenses and approvals in connection with the sale of Homes,
and (iii) Architectural Control Committee and other approvals required
under the CC&Rs;
(6) For all Presold Homes, Lender shall have received the
following:
(A) Copy of the duly executed Purchase Contract;
(B) Satisfactory evidence of Borrower's customarily
required down payment acceptable to Lender from a Non-Related
Party; and
(C) Satisfactory evidence of the Non-Related Party's
prequalification for a permanent mortgage loan;
(7) Borrower shall pay to Lender, from Borrower's own funds, a
monthly processing and closing fee of One Hundred and No/100 Dollars
($100.00) per County for the processing and closing of all Home Loans
per start package.
(8) As an additional condition precedent to each Home Loan,
Borrower shall have paid to Lender, the Unit Loan Fee for such Home
Loan, which shall be fully earned by Lender and non-refundable to
Borrower.
(c) APPRAISAL UPDATES. Each Base Appraisal shall be updated, at the
sole cost and expense of Borrower, and all FNMA appraisals or other
appraisals accepted by Lender that do not have a specific expiration date
shall be updated at Lender's request. Based on such revised appraisals and
any other information provided to Lender, Lender shall be entitled to
revise the Home Construction Budgets and Maximum Allowed Advances
applicable to any Home.
(d) INITIAL DISBURSEMENTS FOR EACH HOME. On the date of the initial
advance for each Home Loan, Lender will disburse ninety-two percent (92%)
of the applicable A & D Loan Lot Release Price (which is equivalent to 115%
of Par as defined herein) or any portion thereof in accordance with the
Home Construction Budget (the balance of the A & D Loan Lot Release Price
of 10% of Par shall be paid by Borrower at the closing and sale of any Home
to a purchaser). Such disbursement shall be made by Lender to itself and
applied to the outstanding amount of the applicable Subdivision A & D Loan,
and such disbursement shall not entitle Borrower to a release of the
Property. In addition, the Inspection Fee for each Home Loan shall be
disbursed by Lender to itself on or about the date of the initial advance
of each Home Loan. Notwithstanding the foregoing, in the event that the
Home Construction Budget for the Home in question exceeds the Maximum
Allowed Advance for such Home, then to the extent of such excess, Borrower
shall pay from its own funds and not from proceeds of the loan, first the
A & D Loan Lot Release Price and then prior to any advance of the
Construction Loan with respect to the Home in question. Once the
Subdivision A & D Loan has been paid in full no further disbursements for
the A & D Loan Lot Release Price shall be made by Lender, and Borrower
shall not be entitled to any disbursement, offset or credit for the A & D
Loan Lot Release Price. If Borrower has paid other costs associated with
the approved
Hard or Soft Costs portion of the Home Construction Budget then Lender
shall review documentation of such prepaid expenses and determine if the
Borrower has satisfied the equity requirement on a loan-by-loan basis.
(e) COURSE OF CONSTRUCTION DISBURSEMENTS. With respect to each Home
Loan, upon the satisfaction of all conditions set forth herein, and the
making of the disbursements described in SECTION 4.2(d) above, Borrower
shall be entitled to disbursements, within the limitations of the
applicable Home Construction Budget, of such sums as are required to be
used for the payment of: (i) Hard Costs and (ii) Soft Costs. In addition,
if specifically provided in the Home Construction Budget with respect to
the Home in question Borrower shall be entitled to disbursements, within
the limitations of the applicable Home Construction Budget, of amounts
necessary to pay interest on the Construction Loan. If such interest
reserve is not specifically provided in the applicable Home Construction
Budget, or if any interest reserve has been fully advanced, Borrower shall
pay interest from its own funds and not from proceeds of the Loan.
(f) ARDI-DRAW SYSTEM. All advances of each Construction Loan for
Hard Costs and those Soft Costs identified in the applicable Home
Construction Budget shall be made in accordance with the terms and
conditions of the "ARDI Draw System", as outlined and described in
EXHIBIT D attached hereto.
(g) DRAW REQUESTS. Concurrently with the request for any
disbursement of proceeds of the Construction Loan, other than advances for
the A & D Loan Lot Release Price, and the Inspection Fee, Borrower shall
furnish to Lender separately with each disbursement for each Home, a Draw
Request (including all documentation required thereby) duly executed and
sworn to by Borrower with all blanks appropriately filled in. At Lender's
option and upon Lender's request, with respect to the initial disbursement
of the Construction Loan: (i) Borrower shall submit to Lender a list of
names and addresses of all material dealers, laborers and subcontractors
with whom written agreements have been made by Borrower with respect to the
construction of the Home or Homes in question; (ii) receipted invoices or
bills of sale shall be available for Lender's review together with
unconditional releases and waivers of liens from each material dealer,
supplier, laborer and subcontractor who has done work or furnished
materials in connection with the construction of the Home or Homes in
question; (iii) Borrower shall submit to Lender evidence that any required
inspection by any Governmental Authority has been satisfactorily completed;
(iv) Borrower shall submit to Lender such other invoices, bills and
statements as may be required by Lender to substantiate the Draw Request;
and (v) Borrower shall submit to Lender such other information as Lender
may reasonably request, including, without limitation, building permits
with respect to Homes in question.
(h) LENDER'S INSPECTOR. Throughout the course of construction of the
Homes, Lender shall have the right to employ, at Borrower's sole cost and
expense, an inspector or inspectors who shall review as agent for Lender
all construction activities undertaken in regard to the Project. A
certificate or indication from such inspector or inspectors that
construction complies with the Home Plans and will be completed not later
than the Completion Date for each Home shall be a further condition
precedent to Lender's approval of each Draw Request.
(i) METHOD OF ADVANCES. The proceeds of the Construction Loan
disbursed under this Agreement shall be evidenced by the Construction Loan
Note and shall be secured by the Mortgage, and all such proceeds may be
disbursed at Lender's option, (a) directly to Borrower or the Borrower's
general contractor; (b) jointly to Borrower and the Borrower's general
contractor; (c) directly to such persons as have actually supplied labor,
materials or services in connection with or incidental to construction of
the Homes; or (d) jointly to Borrower and such persons.
(j) LIMITATIONS ON DISBURSEMENTS. Borrower shall be entitled to
disbursements of the Construction Loan only in accordance with and subject
to the following conditions (unless waived or modified by Lender):
(i) the representations and warranties of Borrower contained in
all of the Loan Documents shall be correct on and as of the date of
the disbursement as though made on and as of that date and no Event of
Default (or event, which with the giving of notice and/or the passage
of time could become an Event of Default) shall have occurred and be
continuing as of the date of the disbursement;
(ii) disbursements of Construction Loan proceeds shall be made by
Lender only to defray costs actually incurred by Borrower;
(iii) in the event any Home is completed and all costs and
expenses in connection therewith are paid in full from the
Construction Loan funds, as applicable, Lender shall not be required
to make further advances with respect to such Home notwithstanding
that there are undisbursed Loan funds allocated to that Home;
(iv) with respect to the Soft Costs disbursements on the account
of such Soft Costs relating to the construction of any Home shall be
limited to the actual amounts of such costs as indicated by invoices,
statements, vouchers, receipts or other written evidence as may be
required by Lender;
(v) Lender shall have no obligation to disburse funds in excess
of the Maximum Allowed Advance for each Home;
(vi) Lender shall have no obligation to disburse funds in excess
of the available Construction Loan Commitment;
(vii) Borrower shall not have under construction or complete more
than the number of Model Homes or Spec Homes in each Subdivision determined
pursuant to SECTION 2.17.
(viii) Borrower shall submit Draw Requests for the construction of
Homes not more than twice per Calendar Month, and Lender shall have no
obligation to approve, or disburse funds with respect to, more than two (2)
Draw Request packages.
(k) DEFICIENCIES. In no event shall Lender be required to disburse any
amount which, in Lender's reasonable opinion, will either (i) reduce the total
undisbursed amount of any Home Loan below the amount necessary to pay for the
balance of the Hard Costs and Soft Costs in connection with the construction of
the Home to which such Construction Loan relates, or (ii) reduce the undisbursed
amount of any Construction Loan proceeds allocated to any budget category
(including Hard Costs and Soft Costs) set forth in the applicable Home
Construction Budget relating to the Home Loan in question, below the amount
which Lender, in Lender's sole opinion, deems sufficient to pay in full the
costs to which such amount is allocated (the deficiencies described in clauses
(i) and (ii) of this sentence being hereinafter collectively referred to as a
"CONSTRUCTION LOAN DEFICIENCY"). Borrower hereby agrees that if Lender
determines that a Construction Loan Deficiency exists, Borrower shall, upon five
(5) days' written notice from Lender, either (A) deposit with Lender the amount
that Lender, in its sole opinion, deems necessary to pay for the balance of the
construction of the Home in question, or the costs set forth in any budget
category in the Home Construction Budget relating to the Home Loan in question,
less the undisbursed amount of such Home Loan or undisbursed portion thereof
under the budget category in question, or (B) furnish Lender with paid invoices,
bills and receipts indicating that Borrower has paid, from Borrower's own funds,
for the Hard Costs and Soft Costs in connection with the construction of the
Home in question or the costs set forth in any budget category in the Home
Construction Budget, in a sufficient amount to make the undisbursed amount of
the applicable loan or the undisbursed portion thereof under the budget category
in question sufficient to pay for the entire balance of the Hard Costs and Soft
Costs in connection with the construction of the Home or the entire balance of
the costs in such budget category, as the case may be. All amounts deposited by
Borrower pursuant to this Section shall be disbursed in accordance with the
terms of this Agreement for the payment of Hard Costs and Soft Costs prior to
any further disbursement of the Loan in question.
ARTICLE V
TITLE INSURANCE
5.1 BASIC INSURANCE. Concurrently with the recording of each Mortgage,
Borrower shall, at Borrower's sole cost and expense, deliver or cause to be
delivered to Lender a Title Insurance Policy issued by the Title Company (and
such reinsurers and coinsurers as Lender may require) with a liability limit of
not less than the Loan Amount, and with coverage and in form satisfactory to
Lender, insuring Lender's interest under the Mortgage as a valid first lien on
the Project, together with such reinsurance or coinsurance agreements or
endorsements to the Title Insurance Policy as Lender may require, which policy
shall contain only such exceptions from its coverage as shall have been approved
in writing by Lender, and thereafter Borrower shall, at its own cost and
expense, do all things necessary to maintain the Mortgage as a valid first lien
on the Property.
5.2 CONTINUATION AND DATE-DOWN ENDORSEMENTS. After recordation of the
Mortgage and as a condition precedent to each disbursement under ARTICLE IV
above, Borrower shall (if required by Lender) at its own cost and expense,
deliver or cause to be delivered to Lender from time to time such continuation
and date-down endorsements to be attached to the Title Insurance Policy referred
to above, in form and substance satisfactory to Lender, as Lender reasonably
deems necessary to insure the priority of the Mortgage as a valid first lien on
the Project as of the date of and including the amount covered by each such
disbursement, and Borrower agrees to furnish to the Title Company such surveys
and other information as are required by Lender or the Title Company to enable
the Title Company to issue such endorsements to Lender.
ARTICLE VI
CONSTRUCTION OF THE IMPROVEMENTS
6.1 COMMENCEMENT AND COMPLETION. Borrower shall cause construction of the
Improvements to be prosecuted and completed with due diligence and in good
faith, and without delay. The construction of the A & D Improvements shall be
commenced no later than the A & D Commencement Date, provided, however, such
date may be extended for matters occurring outside of Borrower's control, and
shall be fully completed on or before the A & D Completion Date and Borrower
shall secure the issuance of all permits and approvals required by the requisite
Governmental Authority on or before such date. Each Home shall be fully
completed and ready for occupancy not later than the Completion Date, provided,
however, such date may be extended for matters occurring outside of Borrower's
control, and Borrower shall secure the issuance of a permanent certificate of
occupancy or other permit required by the requisite Governmental Authority on or
before such date. Borrower shall cause the Improvements to be constructed in a
good and workmanlike manner in accordance with the Plans and Specifications and
in all respects in compliance with all applicable laws, rules, permits,
requirements and regulations of any Governmental Authority, and Borrower will
not cause, permit or allow any deviations from the Plans and Specifications
without the prior written consent of Lender thereto. Upon written demand from
Lender, Borrower shall, at Borrower's sole cost and expense, correct any defect
in
the Improvements or any departure from the Plans and Specifications not
theretofore approved in writing by Lender, and it is expressly understood and
agreed that the advancement by Lender of any Loan proceeds shall not constitute
a waiver of Lender's right to require compliance with this covenant with respect
to any such defects or departures from the Plans and Specifications not
theretofore approved by Lender in writing.
6.2 CHANGE ORDERS. Without Lender's prior written consent, Borrower shall
not permit any material amendments or modifications of the Plans and
Specifications; provided, however, Lender does not need to consent to any
standard options or upgrades offered to Home buyers as approved by Lender from
time to time. If Lender's consent to any such amendment or modification is
required hereunder, Borrower shall deposit with Lender, promptly upon Borrower's
receipt of a written request from Lender, cash or current funds in an amount
equal to any increase resulting from such amendment or modification; such funds
shall be disbursed by Lender in accordance with ARTICLES III and IV hereof.
ARTICLE VII
LIABILITY, RISK, AND FLOOD INSURANCE
At all times throughout the Loan term Borrower shall, at its sole cost and
expense, maintain insurance, and shall pay, as the same becomes due and payable,
all premiums in respect thereto, including, but not necessarily limited to:
7.1 PROPERTY. Insurance against loss or damage by fire, lightning and
other perils, on an all risk basis, such coverage to be in an amount not less
than Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00).
During the period of construction of the Project, such policy shall be written
in the so-called "BUILDER'S RISK COMPLETED VALUE REPORTING FORM," on an all-risk
basis, with no coinsurance requirement, and shall contain a provision granting
the insured permission to complete and/or occupy the Project. With respect to
the Construction Loan, casualty insurance may be evidenced and issued on a lot
by lot basis.
7.2 LIABILITY. Insurance protecting the Borrower and the Lender against
loss or losses from liability imposed by law or assumed in any written contract
and arising from personal injury, including bodily injury or death, having a
limit of liability of not less than One Million and No/100 Dollars
($1,000,000.00) (combined single limit for personal injury and property damage)
and an umbrella excess liability policy in an amount not less than Ten Million
and No/100 Dollars ($10,000,000.00) protecting the Borrower and the Lender
against any loss or liability or damage for personal injury, including bodily
injury or death, or property damage. Such policies must be written on an
occurrence basis so as to provide blanket contractual liability, broad form
property damage coverage, and coverage for products and completed operations.
7.3 FLOOD. A policy or policies of flood insurance in the maximum amount
of
flood insurance available with respect to the Project under the Flood Disaster
Protection Act of 1973, as amended. This requirement will be waived upon
presentation of evidence satisfactory to the Lender that no portion of the
Premises is located within an area identified by the U.S. Department of Housing
and Urban Development as having special flood hazards.
7.4 CONSTRUCTION. Borrower shall be required to carry liability insurance
of the type and providing the minimum limits set forth below:
(a) Xxxxxxx'x compensation insurance, disability benefits insurance
and such other forms of insurance as the Borrower is required by law to
provide, covering loss resulting from injury, sickness, disability or death
of employees of the Borrower located on or assigned to the Project.
(b) Comprehensive general liability insurance on an occurrence basis
providing coverage for:
Premises and Operations
Products and Completed Operations
Blanket Contractual Liability
Personal Injury Liability
Broad Form Property Damage
(including completed operations)
Explosion Hazard
Collapse Hazard
Underground Property Damage Hazard
Such policy shall have a limit of liability of not less than Three Million
Five Hundred Thousand and No/100 Dollars ($3,500,000.00) (combined single
limit for personal injury, including bodily injury or death, and property
damage).
(c) Business auto liability insurance including all owned, non-owned
and hired autos with a limit of liability of not less than One Million and
No/100 Dollars ($1,000,000.00) (combined single limit for personal injury,
including bodily injury or death, and property damage).
(d) Excess "UMBRELLA" liability providing liability insurance in
excess of the coverages in (a), (b) and (c) above with a limit of not less
than Ten Million and No/100 Dollars ($10,000,000.00).
7.5 ENGINEER. During the Loan term, and if required by Lender, the soils
engineer or environmental contractor shall be required to provide engineer's
professional liability insurance with a limit of liability of not less than Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00), or such other amount as
may be required by Lender. This policy shall permit claims for a period of not
less than three (3) years after the completion of the Project.
7.6 ADDITIONAL INSURANCE. Borrower shall provide such other policies of
insurance as Lender may request in writing.
7.7 OTHER. All required insurance shall be procured and maintained in
financially sound and generally recognized responsible insurance companies
selected by the Borrower and subject to the approval of Lender. Such companies
should be authorized to write such insurance in the State of Colorado or Nevada,
as applicable. The company issuing the policies shall be rated "A" or better by
A.M. Best Co., in Bests' Key Guide, or such other rating acceptable to Lender.
All property policies evidencing the required insurance shall name Lender as
first mortgagee, and all liability policies evidencing the insurance required
shall name Lender as additional insured, shall provide for payment to the Lender
of the net proceeds of insurance resulting from any claim for loss or damage
thereunder, shall not be cancelable as to the interests of the Lender due to the
acts of Borrower, and shall provide for at least thirty (30) days prior written
notice of the cancellation or modification thereof to the Lender.
7.8 EVIDENCE. All policies of insurance, or certificates of insurance
evidencing that such insurance is in full force and effect, shall be delivered
to the Lender on or before the closing date (together with proof of the payment
of the premiums thereof). At least thirty (30) days prior to the expiration or
cancellation of each such policy, Borrower shall furnish Lender evidence that
such policy has been renewed or replaced in the form of a certificate reflecting
that there is in full force and effect, with a term covering the next succeeding
calendar year, insurance of the types and in the amounts required.
ARTICLE VIII
RIGHTS OF INSPECTION; AGENCY
Lender shall have the right at any time and from time to time to enter upon
the Premises for purposes of inspection. If Lender, in its judgment, determines
that any work or materials are not in conformity with the Plans and
Specifications (or any other applicable plans and specifications), as the same
were theretofore approved in writing by Lender, or with any applicable laws,
regulations, permits, requirements or rules of any Governmental Authority, or
are not otherwise in conformity with sound building practice, Lender shall have
the right to stop the work and to order replacement or correction of any such
work or materials regardless of whether or not such work or materials have
theretofore been incorporated into the Improvements. Inspection by Lender (or
by Lender's inspector referred to in SECTIONS 4.1 and 4.2 hereof) of the
Premises or the Improvements is for the sole purpose of protecting the security
of Lender and is not to be construed as a representation by Lender that there
has been compliance with the Plans and Specifications or that the Improvements
will be free of faulty materials or workmanship. Borrower may make or cause to
be made such other independent inspections as Borrower may desire for its own
protection, and nothing contained herein shall be construed as requiring Lender
to construct or supervise construction of the Improvements. Borrower hereby
appoints and authorizes Lender, as
Borrower's agent and attorney-in-fact, to record any notices of completion,
cessation of labor and other notices that Lender deems necessary to record in
order to protect any interest of Lender under the provisions of this Agreement
or under the Note or the Mortgage. This agency and power of attorney is a power
coupled with an interest and is irrevocable.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
9.1 CONSIDERATION. As an inducement to Lender to execute this Agreement
and to disburse the proceeds of the Loan, Borrower represents and warrants to
Lender that the following statements set forth in this ARTICLE IX are true,
correct and complete as of the date hereof and will be true, correct and
complete as of the Closing Date.
9.2 ORGANIZATION, POWERS AND GOOD STANDING.
(a) ORGANIZATION AND POWERS. Borrower is a corporation, duly
organized and validly existing under the laws of the State of its
incorporation, and is qualified to transact business in the State of
Colorado or Nevada, as applicable. Borrower has all requisite power and
authority, rights and franchises to own and operate its properties, to
carry on its businesses as now conducted and as proposed to be conducted,
and to enter into and perform this Agreement and the other Loan Documents.
The address of Melody's chief executive office and principal place of
business is 00000 Xxxxxxxx Xxxxxxxxx, Xxxxxxxxxxx, Xxxxxxxx 00000. The
address of FDC's chief executive office and principal place of business is
0000 Xxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxx 00000.
(b) GOOD STANDING. Borrower has made all filings and is in good
standing in the State of its incorporation and in each other jurisdiction
in which the character of the property it owns or the nature of the
business it transacts makes such filings necessary or where the failure to
make such filings could have a materially adverse effect on the business,
operations, assets or condition (financial or otherwise) of Borrower.
(c) NON-FOREIGN STATUS. Borrower is not a "FOREIGN CORPORATION,"
"FOREIGN PARTNERSHIP," "FOREIGN TRUST," or "FOREIGN ESTATE," as those terms
are defined in the Internal Revenue Code and the regulations promulgated
thereunder. Borrower's U.S. employer identification number is as set forth
in the Certificate of Non-foreign Status.
9.3 AUTHORIZATION OF LOAN DOCUMENTS.
(a) AUTHORIZATION. The execution, delivery and performance of the
Loan Documents by Borrower are within the Borrower's powers and have been
duly authorized by all necessary action by Borrower.
(b) NO CONFLICT. The execution, delivery and performance of the Loan
Documents by Borrower will not violate (i) Borrower's Articles of
Incorporation and Bylaws; or (ii) any legal requirement affecting Borrower
or any of its properties; or (iii) any agreement to which Borrower is bound
or to which it is a party and will not result in or require the creation
(except as provided in or contemplated by this Agreement) of any lien upon
any of such properties.
(c) GOVERNMENTAL AND PRIVATE APPROVALS. Except as may be provided
for on EXHIBIT E attached hereto, all governmental or regulatory orders,
consents, permits, authorizations and approvals required for the
construction, use, occupancy and operation of the Improvements have been
obtained and are in full force and effect. No additional
governmental or regulatory actions, filings or registrations with respect
to the Improvements, and no approvals, authorizations or consents of any
trustee or holder of any indebtedness or obligation of Borrower are
required for the due execution, delivery and performance by Borrower of the
Loan Documents.
(d) BINDING OBLIGATIONS. This Agreement and the other Loan Documents
have been duly executed by Borrower, and are legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with
their terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and by general principles of equity.
9.4 NO MATERIAL DEFAULTS. There exists no material violation of or
material default by Borrower or Guarantor and, to the best knowledge of Borrower
and Guarantor, no event has occurred which, upon the giving of notice or the
passage of time, or both, would constitute a material default with respect to
(a) the terms of any instrument evidencing or securing any indebtedness secured
by the Project, (b) any lease or other agreement affecting the Project to which
Borrower or Guarantor is a party, (c) any license, permit, statute, ordinance,
law, judgment, order, writ, injunction, decree, rule or regulation of any
Governmental Authority, or any determination or award of any arbitrator to which
Borrower or the Project may be bound, or (d) any mortgage, instrument, agreement
or document by which Borrower or Guarantor, or any of their properties is bound:
(i) which involves any Loan Document, (ii) which involves the Project and is not
adequately covered by insurance, (iii) that might materially and adversely
affect the ability of Borrower or Guarantor to perform their obligations under
any of the Loan Documents or any other material instrument, agreement or
document to which it is a party, or (iv) which might adversely affect the first
priority of the liens created by this Agreement or any of the Loan Documents.
9.5 LITIGATION; ADVERSE FACTS. There is no action, suit, investigation,
proceeding or arbitration (whether or not purportedly on behalf of the Borrower
or Guarantor) at law or in equity or before or by any foreign or domestic court
or other governmental entity (a "LEGAL ACTION"), pending or, to the knowledge of
Borrower and Guarantor, threatened against or affecting Borrower or Guarantor or
any of their assets which could reasonably be expected to result in any material
adverse change in the business, operations, assets (including the Project) or
condition (financial or otherwise) of Borrower or Guarantor or would materially
and adversely affect Borrower's or Guarantor's ability to perform their
obligations under the Loan Documents. There is no basis known to Borrower or
Guarantor for any such action, suit or proceeding. Borrower and Guarantor are
not (a) in violation of any applicable law which violation materially and
adversely affects or may materially and adversely affect the business,
operations, assets (including the Project) or condition (financial or otherwise)
of Borrower or Guarantor, (b) subject to, or in default with respect to any
other legal requirement that would have a materially adverse effect on the
business, operations, assets (including the Project) or condition (financial or
otherwise) of Borrower or Guarantor, or (c) in default with respect to any
agreement to which Borrower or Guarantor is a party or to which it is bound.
There is no Legal Action pending or, to the knowledge of Borrower or Guarantor,
threatened against or affecting Borrower or Guarantor questioning the validity
or the enforceability of this Agreement or any of the other Loan Documents.
9.6 TITLE TO PROPERTIES; LIENS. Borrower has good, sufficient and legal
title to all properties and assets reflected in its most recent balance sheet
delivered to Lender, except for assets disposed of in the ordinary course of
business since the date of such balance sheet. Borrower is the sole owner of,
and has good and marketable title to the fee interest in the Premises, and the
Improvements and all other real property described in the Mortgage, free from
any adverse lien, security interest or encumbrance of any kind whatsoever,
excepting only (a) liens and encumbrances shown on the Title Commitment, (b)
liens and security interests in favor of Lender, and (c) other matters which
have been approved in writing by Lender.
9.7 DISCLOSURE. There is no fact known to Borrower that materially and
adversely affects the business, operations, assets or condition (financial or
otherwise) of Borrower that has not been disclosed in this Agreement or in other
documents, certificates and written statements furnished to Lender in connection
herewith.
9.8 PAYMENT OF TAXES. All tax returns and reports of Borrower required to
be filed by it have been timely filed, and all taxes, assessments, fees and
other governmental charges upon Borrower and upon its properties, assets, income
and franchises which are due and payable have been paid when due and payable.
Borrower knows of no proposed tax assessment against it that would be material
to the condition (financial or otherwise) of Borrower, and Borrower has not
contracted with any government entity in connection with such taxes.
9.9 SECURITIES ACTIVITIES. Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or
carrying any margin stock (as defined within Regulations G, T and U of the Board
of Governors of the Federal Reserve System), and not more than twenty-five
percent (25%) of the value of Borrower's assets consists of such margin stock.
No part of the Loan will be used to purchase or carry any margin stock or to
extend credit to others for that purpose or for any other purpose that violates
the provisions of Regulations U or X of said Board of Governors.
9.10 GOVERNMENT REGULATIONS. Borrower is not subject to regulation under
the Investment Company Act of 1940, the Federal Power Act, the Public Utility
Holding Company Act of 1935, the Interstate Commerce Act or to any federal or
state statute or regulation limiting its ability in incur indebtedness for money
borrowed.
9.11 RIGHTS TO PROJECT AGREEMENTS, PERMITS AND LICENSES. Borrower is the
true owner of all rights in and to all existing agreements, permits and licenses
relating to the Project, and will be the true owner of all rights in and to all
future agreements, permits and licenses relating to the Project. Borrower's
interest in all such agreements, permits and licenses is not subject to any
present claim (other than under the Loan Documents or as otherwise approved by
Lender in its discretion), set-off or deduction other than in the ordinary
course of business.
9.12 UTILITIES AND ACCESS. Telephone services, electric power, storm
sewers, sanitary sewer, potable water facilities and all other utilities and
services necessary for the construction, use, operation and maintenance of the
Improvements are available to the Premises, are adequate to serve such
improvements, and are not subject to any conditions limiting the use of such
utilities, other than normal charges to the utility supplier. All streets and
easements necessary for the operation and maintenance of the Improvements are
available to the boundaries of the Premises.
9.13 COMPLIANCE WITH LAWS. Except as may be provided for on EXHIBIT E
attached hereto, the Improvements and the Premises, and the uses to which the
Improvements and the Premises are and will be put, comply fully with all
applicable laws and restrictive covenants, including, without limitation, all
requirements of the Colorado Department of Real Estate or Nevada Department of
Real Estate, as applicable, and all requirements under the Interstate Land Sales
Disclosure Act.
9.14 FINANCIAL CONDITION. The financial statements and all financial data
previously delivered to Lender in connection with the Loan are true, correct and
complete in all material respects. Such financial statements comply with the
requirements of SECTION 10.11 and fairly present the financial position of the
parties who are the subject thereof as of the date thereof. No material adverse
change has occurred in the financial position of Borrower. Except for this
Loan, no borrowings have been made by Borrower which are secured by, or might
give rise to, a lien or claim against the Project, the proceeds of this Loan, or
other assets of Borrower.
9.15 PERSONAL PROPERTY. Borrower is now and shall continue to be the sole
owner of the Collateral free from any adverse lien, security interest or adverse
claim of
any kind whatsoever, except for liens or security interests in favor of Lender.
9.16 NO CONDEMNATION. No condemnation proceedings or moratorium is pending
or, to Borrower's knowledge, threatened against the Project or the Premises (or
any portion thereof) which would impair the use, occupancy or full operation of
the Project in any manner whatsoever.
9.17 OTHER LOAN DOCUMENTS. Each of the representations and warranties of
Borrower contained in any of the other Loan Documents is true and correct in all
material respects. All of such representations and warranties are incorporated
herein for the benefit of Lender.
9.18 GUARANTOR. Guarantor has full right, power and authority to execute,
deliver and carry out the terms of the Repayment Guaranty and the Completion
Guaranty and, when executed and delivered pursuant thereto, each guaranty will
constitute the valid, binding and legal obligations of Guarantor, enforceable
against Guarantor in accordance with its terms.
ARTICLE X
COVENANTS OF BORROWER
10.1 CONSIDERATION. As an inducement to Lender to execute this Agreement
and to make each disbursement of the Loan, Borrower hereby covenants as set
forth in this ARTICLE X, which covenants shall remain in effect so long as
either the Note shall remain unpaid or any obligation of Borrower under any
other Loan Documents remain outstanding or unperformed.
10.2 NO ENCUMBRANCES. Borrower will not permit any lien, levy, attachment
or restraint to be made or filed against the Project, or any portion thereof, or
permit any receiver, trustee or assignee for the benefit of creditors to be
appointed to take possession of the Project or any portion thereof, except for
lien claims filed or asserted against the Premises or the Project and concerning
which Borrower is in full compliance with the applicable provisions of the
Mortgage.
10.3 COMPLIANCE WITH LAWS. Borrower will comply and, to the extent it is
able, will require others to comply with all laws and requirements of all
Governmental Authorities having jurisdiction over the Premises or construction
of the Improvements and will furnish Lender with reports of any official
searches for violation of any requirements established by such governmental
authorities. Borrower will comply and, to the extent it is able, will require
others to comply with applicable CC&Rs and all restrictive covenants and all
obligations created by private contracts and leases which affect ownership,
construction, equipping, fixturing, use or operation of the Project. The
Improvements, when completed, shall comply with all applicable building, zoning
and use laws, requirements, regulations and ordinances and will not violate any
restrictions of record against the Premises or the terms of any lease of all or
any portion of the
Premises.
10.4 PERSONAL PROPERTY. Borrower will not install materials, personal
property, equipment or fixtures subject to any security agreement or other
agreement or contract wherein the right is reserved to any person, firm or
corporation to remove or repossess any such materials, equipment for fixtures,
or whereby title to any of the same is not completely vested in Borrower at the
time of installation, without Lender's prior written consent.
10.5 RECORDS. Borrower shall keep and maintain full and accurate accounts
and records of Borrower's operations with respect to the Loan according to sound
accounting practices for Borrower's type of business, and permit Lender or its
representatives to inspect and copy the same upon reasonable notice to Borrower
and during normal business hours upon any date prior to the expiration of thirty
(30) days after repayment in full of the Loan.
10.6 ASSESSMENTS. Borrower shall pay or discharge all lawful claims,
including taxes, assessments and governmental charges or levies imposed upon
Borrower or its income or profits or upon any property (including the Project)
belonging to Borrower prior to the date upon which penalties attach thereto, and
submit evidence satisfactory to Lender confirming the payment of all taxes
assessments and charges against the Project.
10.7 EXPENSES. Without limiting the generality of the foregoing, Borrower
shall pay (1) all taxes and recording expenses, including stamp taxes, if any,
relating to the Mortgage and any other documents and instruments securing the
Loan, (2) the fees and commissions (if any) lawfully due to brokers in
connection with this transaction and hold Lender harmless from all such claims,
whether or not lawfully due, (3) the fees and expenses of Lender's counsel
relating to Lender's consultation with such counsel in connection with the Loan,
the negotiation, documentation and closing of the Loan, and (4) the other fees,
costs and expenses incurred by Lender in connection with the Loan.
10.8 COMPLETION. Borrower shall cause the construction of the Improvements
to be prosecuted with diligence and continuity and completed in accordance with
the Plans and Specifications and in accordance with SECTION 6.1 hereof, free and
clear of any liens or claims for liens.
10.9 DISBURSEMENTS. Borrower shall receive the disbursements to be made
hereunder as a trust fund for the purpose of paying the costs and expenses
approved hereunder by Lender as provided herein.
10.10 FIXTURES. Borrower shall deliver to Lender, on demand, any
contracts, bills of sale, statements, receipted vouchers or agreements under
which Borrower claims title to any materials, fixtures or articles incorporated
into the Improvements.
10.11 FINANCIAL INFORMATION. Borrower shall furnish or cause to be
furnished to
Lender:
(a) as soon as the same are available, and in any event within one
hundred twenty (120) days after the end of each fiscal year and forty-five
(45) days after the end of the first three (3) of interim quarterly
accounting periods of the subject, a copy of the current financial
statements of Borrower (to be CPA audited in the case of the annual
statements), and with respect to FDC, such annual financial statements
shall be on a consolidated basis, excluding any affiliates, which shall
consist of (A) a balance sheet as of the end of the relevant fiscal period,
(B) statements of income and expenses and of changes in financial position
of Borrower for such fiscal period (together, in each case, with the
comparable figures for the corresponding period of the previous fiscal
year), (C) statements of income and expenses and changes in financial
position of the Project for such fiscal period (together, in each case with
comparable figures for the corresponding period of the previous fiscal
year), (D) cash flow statements of Borrower, and (E) a schedule of all
debt of Borrower including the name of lender, name of property financed
(if applicable), appraised value of property financed (if applicable),
amount of commitment, outstanding balance, interest rate or required rate
of return and maturity date;
(b) as soon as the same are available, and in any event no later than
April 15th after the end of each calendar year of the subject, a copy of
the current CPA compiled financial statements of each of the Guarantors,
which shall consist of a balance sheet and income statement as of the end
of the relevant calendar period;
(c) as soon as the same are available, and in any event within
fifteen (15) days after the end of each month, monthly sales reports for
the Project and inventory reports for the Project relating to the
Construction Loan; and
(d) as soon as filed, a copy of the federal income tax returns and/or
extensions for each of the Guarantors.
All such financial statements delivered from and after the date hereof shall be
in reasonable detail, prepared in accordance with generally acceptable
accounting principles consistently applied throughout the period involved and,
in the case of audited statements, with generally accepted auditing standards.
All financial statements of Borrower required pursuant hereto shall be certified
to by the chief financial officer of the subject of such statements. If the
statement is an annual statement, such statement shall be audited by a
recognized firm of accountants satisfactory to Lender. Together with such
financial statements, Borrower will deliver to Lender: (a) if such financial
statements have been audited, a certificate from the auditors stating that in
making the examination necessary for the audit they obtained no knowledge of any
default by Borrower or Guarantor, as applicable, in the performance of any
obligation in connection with the Loan or, if they shall have obtained knowledge
of any such default, specifying the same; and (b) Borrower's or Guarantor's, as
applicable, certificate, certified by the chief financial officer thereof (as
applicable) stating that (i) there exists no Event of Default and no act or
event which with notice and/or lapse of time would become an Event of Default,
and (ii) FDC (in the case of the chief financial officer of FDC) is complying
with the financial covenants set forth in SECTION 10.21, or, if any such
condition exists, specifying the nature and period of existence thereof and what
action Borrower proposes to take with respect thereto.
Financial Statements of Borrower may reflect an internal charge to Melody
with respect to overhead expenses incurred by FDC; provided, however, such
internal charge for overhead expenses must be approved by Lender and Melody's
Financial Statements shall otherwise reflect general and administrative expenses
that are unaffected by FDC ownership.
10.12 [INTENTIONALLY DELETED.]
10.13 REPRESENTATIONS AND WARRANTIES. Until repayment of the Note and
all other obligations secured by the Mortgage, the representations and
warranties of ARTICLE IX shall remain true and complete.
10.14 TRADE NAMES. Borrower shall immediately notify Lender in writing
of any change in the legal, trade or fictitious business names used by Borrower
and shall, upon Lender's request, execute any additional financing statements
and other certificates necessary to reflect the change in trade names or
fictitious business names.
10.15 FURTHER ASSURANCES. Borrower shall execute and deliver from time
to time, promptly after any request therefor by Lender, any and all instruments,
agreements and documents and shall take such other action as may be necessary or
desirable in the opinion of Lender to maintain, perfect or insure Lender's
security provided for herein and in the other Loan Documents, including, without
limitation, the execution of UCC-1 renewal statements, the execution of such
amendments to the Mortgage and the other Loan Documents and the delivery of such
endorsements to the Title Company, all as Lender shall reasonably require, and
Borrower shall pay all fees and expenses (including reasonable attorneys' fees)
related thereto. Promptly upon the request of Lender, Borrower shall execute and
deliver a Certification of Non-Foreign Status.
10.16 NOTICE OF LITIGATION. Borrower shall give, or cause to be given,
prompt written notice to Lender of (a) any action or proceeding which is
instituted by or against it in any Federal or state court or before any
commission or other regulatory body, Federal, state or local, foreign or
domestic, or any such proceedings which are threatened against it, which, if
adversely determined, could have a material and adverse effect upon its
business, operations, properties, assets, management, ownership or condition
(financial or otherwise), (b) any other action, event or condition of any nature
which may have a material and adverse effect upon its business, operations,
management, assets, properties, ownership or condition (financial or otherwise),
or which, with notice or lapse of time or both, would constitute an Event of
Default or a default under any other contract, instrument or agreement to which
it is a party to by or
to which it or any of its properties or assets may be bound or subject, and (c)
any actions, proceedings or notices adversely affecting the Project or Lender's
interest therein by any zoning, building or other municipal officers, offices or
departments having jurisdiction with respect to the Project.
10.17 MAINTENANCE OF EXISTENCE. Borrower shall maintain and preserve
its existence and all rights and franchises material to its business.
10.18 CONSTRUCTION MATERIALS. Borrower will not use, and will not
permit the use of, any Hazardous Materials (as defined in the Environmental
Indemnity) in the construction of the Improvements.
10.19 CROSS-COLLATERALIZATION. Subject to Section 2.20, at Lender's
request, Borrower agrees to provide cross-collateralization for all Projects
then financed by Lender, in form and substance acceptable to Lender.
10.20 VERIFICATION OF COSTS. At Lender's request, Borrower agrees to
provide Lender with copies of all contracts, subcontracts and other agreements
relating to the Project so that Lender can verify all costs set forth in the
A & D Budget, which contracts, subcontracts and other agreements shall be
subject to Lender's review and approval. Based on its review and verification
of costs set forth in the A & D Budget, Lender shall have the right to reduce
the dollar amount of any line items in the A & D Budget or reallocate between
line items in the A & D Budget.
10.21 FINANCIAL COVENANTS.
(a) On a quarterly basis, FDC shall achieve Tangible Net Worth in an
amount not less than Fifteen Million and No/100 Dollars ($15,000,000.00).
(b) On a quarterly basis, FDC shall achieve Liquidity of not less
than seven percent (7%) of Total Liabilities.
(c) On a quarterly basis, FDC, on a consolidated basis and excluding
affiliates, all in a manner consistent with financial statements previously
provided by Borrower to Lender, shall maintain a Debt Ratio of not more
than 3.0 to 1.0.
(d) On a rolling four quarter basis, FDC shall maintain a Constant
Interest Only Coverage of no less than 1.5 to 1.0 until September 30, 1996,
and Melody shall maintain a Constant Interest Only Coverage of no less than
3.0:1.00.
(e) At all times during the term of the Loan, the number of Spec
Homes and Model Homes, in the aggregate, under construction and completed,
shall not exceed the number of units delivered in the preceding twelve (12)
months multiplied by 10%.
As used in this Agreement and this Section, the following are defined terms:
"CONSTANT INTEREST ONLY COVERAGE" shall mean an amount, expressed as a
percentage, calculated by Lender, and equal to (i) the earnings before interest
and taxes for the period in question divided by (ii) interest expense, including
all capitalized interest, interest paid on subordinated debt.
"DEBT" shall be defined in accordance with generally accepted accounting
principles (GAAP) and will exclude subordinated debt.
"DEBT RATIO" means, with respect to any person, the ratio of (i) such
person's Debt to (ii) such person's Tangible Net Worth.
"INTANGIBLE ASSETS" means all intangible assets under GAAP, including,
without limitation, copyrights, franchises, goodwill, licenses, non-competition
covenants, organization or formation expenses, patents, service marks, service
names, trademarks, tradenames, write-up in the book value of any asset in excess
of the acquisition cost of the asset to such Person, any amount, however
designated on the balance sheet, representing the excess of the purchase price
paid for assets or stock acquired over the value assigned thereto on the books
of such person, unamortized leasehold improvements expense not recoverable at
the end of the lease term, unamortized debt discount, and all deferred taxes.
"LIQUIDITY" means the amount of such person's unencumbered cash and
unencumbered cash equivalents as determined in accordance with GAAP, plus
availability under Lender's lines of credit.
"TANGIBLE NET WORTH" is defined in accordance with GAAP and includes
minority shareholder interests and subordinated debt, less the value of all
Intangible Assets.
"TOTAL LIABILITIES" shall be defined in accordance with generally accepted
accounting principles (GAAP) and will exclude subordinated debt.
10.22 CHANGE IN CONTROL. At no time shall the Guarantors own less than
a controlling interest of the issued and outstanding common stock of FDC. At no
time shall FDC own less than one hundred percent (100%) of the issued and
outstanding common stock of Melody.
10.23 OPERATING ACCOUNTS. All of Borrower's operating accounts shall
be maintained with Lender or with Bank One, Colorado.
10.24 LAND ACQUISITIONS. FDC shall not, without the prior written
consent of Lender, which may be granted or withheld in Lender's sole and
absolute discretion, acquire raw land prior to repayment in full of the Loan (i)
with an aggregate fair market value of $12,000,000.00 or more on a consolidated
basis, or (ii) with an aggregate fair market value of $2,000,000.00 or more on
real property located in the Las Vegas, Nevada, area.
10.25 EXECUTIVE COMPENSATION. In the event FDC is not in compliance
with the financial covenants set forth in SECTION 10.21, Borrower shall not pay
any executive level bonuses to any executive of Borrower.
ARTICLE XI
EVENTS OF DEFAULT AND REMEDIES
11.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
shall constitute an Event of Default under this Agreement:
(a) Failure by Borrower to pay any monetary amount when due under any
Loan Document and the expiration of ten (10) days after written notice of
such failure by Lender to Borrower.
(b) Failure by Borrower to perform any obligation not involving the
payment of money (including, without limitation, FDC's failure to comply
with the financial covenants set forth in SECTION 10.21), or to comply with
any other term or condition applicable to Borrower under any Loan Document
and the expiration of thirty (30) days after written notice of such failure
by Lender to Borrower.
(c) Any representation or warranty by Borrower in any Loan Document
is materially false, incorrect, or misleading as of the date made.
(d) The occurrence of any event (including, without limitation, a
change in the financial condition, business, or operations of Borrower for
any reason whatsoever) that materially and adversely affects the ability of
Borrower to perform any of its obligations under the Loan Documents.
(e) Borrower or Guarantor (i) is unable or admits in writing
Borrower's or Guarantor's inability to pay their respective monetary
obligations as they become due, (ii) fails to pay when due any monetary
obligation, whether such obligation be direct or contingent, to any person
in excess of Ten Thousand and No/100 Dollars ($10,000.00), (iii) makes a
general assignment for the benefit of creditors, or (iv) applies for,
consents to, or acquiesces in, the appointment of a trustee, receiver, or
other custodian for Borrower or Guarantor or the property of Borrower or
Guarantor or any part thereof, or in the absence of such application,
consent, or acquiescence a trustee, receiver, or other custodian is
appointed for Borrower or Guarantor or the property of Borrower or
Guarantor or any part thereof, and such appointment is not discharged
within sixty (60) days.
(f) Commencement of any case under the Bankruptcy Code, Title 11 of
the United State Code, or commencement of any other bankruptcy arrangement,
reorganization, receivership, custodianship, or similar proceeding under
any federal, state, or foreign law by or against Borrower or Guarantor and
with respect to any such case or proceeding that is involuntary, such case
or proceeding is not dismissed within sixty (60) days of the filing
thereof.
(g) Any litigation or proceeding is commenced before any Governmental
Authority against or affecting Borrower or the property of Borrower or any
part thereof and such litigation or proceeding is not defended diligently
and in good faith by Borrower.
(h) A final judgment or decree for monetary damages or a monetary
fine or penalty (not subject to appeal or as to which the time for appeal
has expired) is entered against Borrower by any Government Authority, which
together with the aggregate amount of all other such judgments and decrees
against Borrower that remain unpaid or that have not been discharged or
stayed, exceeds Five Thousand and No/100 Dollars ($5,000.00), is not paid
and discharged or stayed within thirty (30) days after the entry thereof.
(i) Commencement of any action or proceeding which seeks as one of
its remedies the dissolution of Borrower.
(j) All or any part of the property of Borrower is attached, levied
upon, or otherwise seized by legal process, and such attachment, levy, or
seizure is not quashed, stayed, or released within twenty (20) days of the
date thereof.
(k) The occurrence of any Transfer (as defined in the Mortgage),
unless prior to such Transfer the holder of the Note has delivered to
Borrower the written consent of such holder to such Transfer.
(l) The occurrence of any Event of Default, as such term is defined
in any other Loan Document.
(m) If Borrower, at any time, ceases to manage the Project.
(n) Inability of Borrower to satisfy any condition for the receipt of
a disbursement hereunder, or to resolve the situation to the satisfaction
of Lender, for a period in excess of thirty (30) days after written notice
from Lender.
(o) Failure to deposit with Lender in cash or cash equivalents the
amount necessary to put the A & D Loan and/or the Construction Loan "IN
BALANCE" within five (5) days of Lender's notice that the A & D Loan and/or
the Construction Loan is not "IN BALANCE" or the failure to deposit the
amount(s) necessary as required in Article IV hereof.
(p) an Event of Default as described in SECTION 2.21 of this Agreement.
Notwithstanding anything to the contrary contained herein, an Event of Default
under a Melody Loan or FDC Loan shall not constitute an Event of Default under a
LLC Loan, it being the intent and agreement of the parties to not cross default
the Melody Loan or the FDC Loan with any LLC Loan. However, any Event of
Default under either a
Melody Loan or FDC Loan shall constitute an Event of Default under each and
every Melody Loan and FDC Loan, and any Event of Default under a LLC Loan shall
also constitute an Event of Default under each and every Melody Loan and FDC
Loan.
11.2 REMEDIES.
(a) Notwithstanding any provision to the contrary herein or any of
the other Loan Documents, upon the happening of any Event of Default under
this Agreement, or upon an Event of Default under any of the other Loan
Documents: (i) Lender's obligation to make further disbursements of the
Loan shall xxxxx, and (ii) if the Event of Default shall not be cured
within the applicable notice and cure periods, then Lender shall, at its
option, have the remedies provided in the Loan Document breached by
Borrower, including, without limitation, the option to declare all
outstanding indebtedness to be immediately due and payable without
presentment, demand, protest or notice of any kind, and the following
remedies: Lender's obligation to make further disbursements to Borrower
shall terminate; Lender may, at its option, apply any of Borrower's funds
in its possession to the outstanding indebtedness whether or not such
indebtedness is then due; Lender may exercise all rights and remedies
available to it under any or all of the Loan Documents; and Lender shall
have the right to cause an independent contractor selected by Lender to
enter into possession of the Premises and to perform any and all work and
labor necessary for the completion of the Project substantially in
accordance with the Plans and Specifications and to perform Borrower's
obligations under this Agreement. All sums expended by Lender for such
purposes shall be deemed to have been disbursed to and borrowed by Borrower
and shall be secured by the Mortgage on the Premises.
(b) Borrower hereby constitutes and appoints Lender, or an
independent contractor selected by Lender, as its true and lawful
attorney-in-fact with full power of substitution for the purposes of
completion of the Project and performance of Borrower's obligations under
this Agreement in the name of the Borrower, and hereby empower said
attorney-in-fact to do any or all of the following upon the occurrence of
an Event of Default:
(i) to use any of the funds of Borrower, including any balance
of the Loan, as applicable, and any funds which may be held by Lender
for Borrower, for the purpose of effecting completion of the
Improvements in the manner called for by the Plans and Specifications;
(ii) to make such additions, changes and corrections in the
Plans and Specifications as shall be necessary or desirable to
complete the Improvements in substantially the manner contemplated by
the Plans and Specifications;
(iii) to employ any contractors, subcontractors, agents,
architects and inspectors required for said purposes;
(iv) to employ attorneys to defend against attempts to interfere
with the exercise of power granted hereby;
(v) to pay, settle or compromise all existing bills and claims
which are or may be liens against the Premises, the Improvements or
the Project or may be necessary or desirable for the completion of the
Improvements or clearance of objections to or encumbrances on title;
(vi) to execute all applications and certificates in the name of
Borrower, which may be required by any other construction contract;
(vii) to prosecute and defend all actions or proceedings in
connection with the Project and to take such action, require such
performance and do any and every other act as is deemed necessary with
respect to the completion of the Improvements which Borrower might do
on its own behalf;
(viii)to let new or additional contracts to the extent not
prohibited by their existing contracts;
(ix) to employ watchmen and erect security fences to protect the
Project from injury; and
(x) to take such action and require such performance as it
deems necessary under any of the bonds or insurance policies to be
furnished hereunder, to make settlements and compromises with the
sureties or insurers thereunder, and in connection therewith to
execute instruments of release and satisfaction.
It is understood and agreed that the foregoing power of attorney shall be
deemed to be a power coupled with an interest which cannot be revoked until
repayment of the Loan.
ARTICLE XII
MISCELLANEOUS
12.1 ASSIGNMENT. Borrower shall not assign any of its rights under this
Agreement.
12.2 NOTICES. All notices, requests, demands and consents to be made
hereunder to the parties hereto shall be in writing and shall be delivered by
hand or sent by registered mail or certified mail, postage prepaid, return
receipt requested, through the United States Postal Service to the addresses
shown below or such other address which the parties may provide to one another
in accordance herewith. Such notices, requests, demands and consents, if sent
by mail shall be deemed given two (2) Business Days after deposit in the United
States mail, and if delivered by hand, shall be deemed given when delivered.
To Lender: Western Region Real Estate
P. O. Xxx 00000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxxx
Borrower: 0000 Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Attn: Xxxxx Xxxxxx
Attn: Xxxxx X. Xxxx
00000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxx
12.3 AUTHORITY TO FILE NOTICES. Borrower irrevocably appoints Lender at
its attorney-in-fact, with full power of substitution, to file for record, at
the Borrower's cost and expense and in Borrower's name, any notices of
completion, notices of cessation of labor, or any other notices that Lender
considers necessary or desirable to protect its security.
12.4 INCONSISTENCIES WITH THE LOAN DOCUMENTS. In the event of any
inconsistencies between the terms of this Agreement and any terms of any of the
Loan Documents, the terms of this Agreement shall govern and prevail.
12.5 NO WAIVER. No disbursement of proceeds of the Loan shall constitute a
waiver of any conditions to Lender's obligation to make further disbursements
nor, in the event Borrower is unable to satisfy any such conditions, shall any
such waiver have the effect of precluding Lender from thereafter declaring such
inability to constitute a default under this Agreement.
12.6 LENDER APPROVAL OF INSTRUMENTS AND PARTIES. All proceedings taken in
accordance with transactions provided for herein; all surveys, appraisals and
documents required or contemplated by this Agreement and the persons responsible
for the execution and preparation thereof; shall be satisfactory to and subject
to approval by Lender. Lender's counsel shall be provided with copies of all
documents which they may reasonably request in connection with the Agreement.
12.7 LENDER DETERMINATION OF FACTS. Lender shall at all times be free to
establish independently, to its satisfaction, the existence or nonexistence of
any fact or facts, the existence or nonexistence of which is a condition of this
Agreement.
12.8 INCORPORATION OF PREAMBLE, RECITALS AND EXHIBITS. The preamble,
recitals and exhibits hereto are hereby incorporated in to this Agreement.
12.9 THIRD-PARTY CONSULTANTS. Lender may hire such third-party consultants
as it deems necessary, the costs of which shall be paid by Borrower, to provide
the following services: (a) review final Plans and Specifications and final
construction cost
breakdown and the construction schedule; (b) conduct compliance inspections with
respect to the progress of construction of the Project and approve each element
of a request for disbursement relating to construction costs; and (c) perform
such other services as may, from time to time, be required by Lender. This
obligation on the part of Borrower shall survive the closing of the Loan and the
repayment thereof. Borrower hereby authorizes Lender, in its discretion, to pay
such expenses, charges, costs and fees at any time by a disbursement of the
Loan.
12.10 PAYMENT OF EXPENSES. Borrower shall pay all taxes and
assessments and all expenses, charges, costs and fees provided for in this
Agreement or relating to the Loan or construction of the Improvements,
including, without limitation, any fees incurred for recording or filing any of
the Loan Documents, title insurance premiums and charges, tax service contract
fees, fees of any consultants, Lender's processing and closing fees, reasonable
fees and expenses of Lender's counsel, printing, photostating and duplicating
expenses, air freight charges, escrow fees, costs of surveys, premiums of hazard
insurance policies and surety bonds and fees for any appraisal, appraisal
review, market or feasibility study required by Lender. Borrower hereby
authorizes Lender to disburse the proceeds of the Loan to pay such expenses,
charges, costs and fees notwithstanding that Borrower may not have requested a
disbursement of such amount; provided that Borrower acknowledges that Lender has
no obligation to disburse amounts listed under "BORROWER'S EQUITY" on the A & D
Budget. Such disbursement shall be added to the outstanding principal balance
of the Note. The authorization hereby granted shall be irrevocable, and no
further direction or authorization from Borrower shall be necessary for Lender
to make such disbursements. However, the provision of this SECTION 12.10 shall
not prevent Borrower from paying such expense, charges, costs and fees from its
own funds. All such expenses, charges, costs and fees shall be Borrower's
obligation regardless of whether or not Borrower has requested and met the
conditions for a disbursement of the Loan. The obligations on the part of
Borrower under this SECTION 12.10 shall survive the closing of the Loan and the
repayment thereof.
12.11 DISCLAIMER BY LENDER. Lender shall not be liable to any
contractor, subcontractor, supplier, laborer, architect, engineer or any other
party for services performed or materials supplied in connection with the
Project. Lender shall not be liable for any debts or claims accruing in favor
of any such parties against Borrowers or others or against the Premises or the
Project. Borrower is not and shall not be an agent of Lender for any purpose.
Lender is not a joint venture partner with Borrower in any manner whatsoever.
Prior to default by Borrower under this Agreement and the exercise of remedies
granted herein, Lender shall not be deemed to be in privity of contract with any
contractor or provider of services to the Project, nor shall any payment of
funds directly to a contractor, subcontractor, or provider of services be deemed
to create any third party beneficiary status or recognition of same by Lender.
Approvals granted by Lender for any matters covered under this Agreement shall
be narrowly construed to cover only the parties and facts identified in any
written approval or, if not in writing, such approvals shall be solely for the
benefit of Borrower.
12.12 INDEMNIFICATION. To the fullest extent permitted by law,
Borrower agrees to protect, indemnify, defend and hold harmless Lender, its
directors, officers, agents and employees from and against any and all
liability, expense or damage of any kind or nature and from any suits, claims or
demands, including reasonable legal fees and expenses on account of any matter
or thing or action or failure to act by Lender, whether in suit or not, arising
out of this Agreement or in connection herewith, other than such claims and
liabilities as arise solely from the gross negligence or intentional misconduct
of Lender. Upon receiving knowledge of any suit, claim or demand asserted by a
third party that Lender believes is covered by this indemnity, Lender shall give
Borrower notice of the matter and an opportunity to defend it, at Borrower's
sole cost and expense, with legal counsel satisfactory to Lender. Lender may
also require Borrower to so defend the matter. The obligations on the part of
Borrower under this SECTION 12.12 shall survive the closing of the Loan and the
repayment thereof.
12.13 TITLES AND HEADINGS. The titles and headings of sections of this
Agreement are intended for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
12.14 BROKERS. Borrower and Lender represent to each other that
neither of them knows of any brokerage commissions or finders' fee due or
claimed with respect to the transaction contemplated hereby. Borrower and
Lender shall indemnify and hold harmless the other party from and against any
and all loss, damage, liability, or expense, including costs and reasonable
attorney fees, which such other party may incur or sustain by reason of or in
connection with any misrepresentation by the indemnifying party with respect to
the foregoing.
12.15 CHANGE, DISCHARGE, TERMINATION, OR WAIVER. No provision of this
Agreement may be changed, discharged, terminated, or waived except in writing
signed by the party against whom enforcement of the change, discharge,
termination, or waiver is sought. No failure on the part of Lender to exercise
and no delay by Lender in exercising any right or remedy under the Loan
Documents or under the law shall operate as a waiver thereof.
12.16 CHOICE OF LAW. This Agreement and the transaction contemplated
hereunder shall be governed by and construed in accordance with the laws of the
State of Arizona, without giving effect to conflict of laws principles.
12.17 DISBURSEMENTS IN EXCESS OF LOAN AMOUNT. In the event the total
disbursements by Lender exceed the amount of the Loan, the total of all
disbursements shall be secured by the Mortgage. All other sums expended by
Lender pursuant to this Agreement or any other Loan Documents shall be deemed to
have been paid to Borrower and shall be secured by, among other things, the
Mortgage.
12.18 PARTICIPATIONS. Lender shall have the right at any time to sell,
assign, transfer, negotiate or grant participations in all or any part of the
Loan or the Note to one or more participants. Borrower hereby acknowledges and
agrees that any such
disposition will give rise to a direct obligation of Borrower to each such
participant. Any successor in interest to the Note shall be entitled to the
benefits of this Agreement.
12.19 COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original, but all such
counterparts together shall constitute but one agreement.
12.20 TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement.
12.21 ATTORNEYS' FEES. Borrower shall promptly pay to Lender, upon
demand, with interest thereon from the date of demand at the default interest
rate, reasonable attorneys' fees and all costs and other expenses paid or
incurred by Lender in enforcing or exercising its rights or remedies created by,
connected with or provided for in this Agreement or any of the other Loan
Documents, and payment thereof shall be secured by the Mortgage. If at any time
Borrower fails, refuses or neglects to do any of the things herein provided to
be done by Borrower, Lender shall have the right, but not the obligation, to do
the same but at the expense and for the account of Borrower. The amount of any
monies so expended or obligations so incurred by Lender, together with interest
thereon at the default interest rate, shall be repaid to Lender forthwith upon
written demand therefor and payment thereof shall be secured by the Mortgage.
12.22 SIGNS. Throughout the term of the Loan, Lender shall have the
right to erect one or more signs on the Project indicating its provision of
financing for the Project, and Lender shall also have the right to publicize its
financing of the Project as Lender may deem appropriate.
12.23 ARBITRATION.
(a) BINDING ARBITRATION. Lender and Borrower hereby agree that
all controversies and claims arising directly or indirectly out of
this Agreement and the Loan Documents, shall at the written request of
any party be arbitrated pursuant to the applicable rules of the
American Arbitration Association. The arbitration shall occur in the
State of Arizona. Judgment upon any award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. The
Federal Arbitration Act shall apply to the construction and
interpretation of this arbitration agreement.
(b) ARBITRATION PANEL. A single arbitrator shall have the power
to render a maximum award of one hundred thousand dollars. When any
party files a claim in excess of this amount, the arbitration decision
shall be made by the majority vote of three arbitrators. No
arbitrator shall have the power to restrain any act of any party.
(c) PROVISIONAL REMEDIES; SELF HELP AND FORECLOSURE. No
provision of subparagraph (a) shall limit the right of any party to
exercise self help remedies, to foreclose against any real or personal
property collateral, or to obtain any provisional or ancillary
remedies (including but not limited to injunctive relief or
the appointment of a receiver) from a court of competent jurisdiction.
At Lender's option, it may enforce its right under a mortgage by
judicial foreclosure, and under a deed of trust either by exercise of
power of sale or by judicial foreclosure. The institution and
maintenance of any remedy permitted above shall not constitute a
waiver of the rights to submit any controversy or claim to
arbitration. The statute of limitations, estoppel, waiver, laches,
and similar doctrines which would otherwise be applicable in an action
brought by a party shall be applicable in any arbitration proceeding.
ARTICLE XIII
RELEASE OF HOMES
13.1 FULL PAYMENT. Except as provided in SUBSECTION 13.2 below,
unless Lender otherwise consents in writing, the Property or any part thereof
shall not be released until all indebtedness and obligations of Borrower under
the Loan Documents have been paid and performed in full.
13.2 PARTIAL RELEASE. At the written request of Borrower, Lender
shall release a Home from the lien of the Mortgage upon the sale thereof to a
Non-Related Party, and the satisfaction of all the following conditions
precedent with respect to each Home being released:
(a) at the time of the release no Event of Default shall have
occurred and be continuing;
(b) the Home (together with its underlying lot) constitutes a
legally subdivided interest in real property, and the release of such
Home will not violate any requirements of any document of record
covering the Premises or such Home or any applicable law regarding
subdivisions, parcel maps and the division of land into lots or
parcels or condominiums;
(c) Borrower shall have paid all fees and costs in connection
with the release, including Lender's release fee, recording and
reconveyance fees and costs, and any fees and costs reasonably
incurred by Lender;
(d) the applicable Home has been completed in accordance with
the applicable Home Plans and in accordance with all applicable
permits, laws, ordinances, regulations and other requirements of all
Governmental Authorities and public utility companies, and all
necessary inspections and consents and approvals for the sale and
occupancy thereof have been completed or obtained; and
(e) Borrower shall have paid to Lender in cash, from Borrower's
own funds and not from the proceeds of the Loan, for application to
principal owing under the Note, all unpaid principal, accrued and
unpaid interest, and any other sums due and owing Lender under the
applicable Home Loan PLUS the deferred portion of the A & D Loan Lot
Release Price (as described in the definition of such term)(the
"RELEASE PRICE"); provided, however, in the event Lender is obligated
to honor any draft drawn under a Letter of Credit then the Release
Price shall be equal to the greater of (i) the Release Price, or (ii)
100% of all net sale proceeds from the sale of the subject Home. As
used in this paragraph, "net sale proceeds" shall mean gross sale
proceeds from the sale of any Home less all reasonable and customary
closing costs and expenses as approved by Lender.
ARTICLE XIV
EXHIBITS
The following exhibits to this Agreement are fully incorporated herein as
if set forth at length:
Exhibit A - Property Description
Exhibits B-1 and B-2 - Forms of Mortgage
Exhibit C - Closing Conditions
Exhibit D - ARDI Draw System
Exhibit E - Required Consents
Exhibit F - Joinder and Agreement to be Bound
Exhibit G - Term Sheet
IN WITNESS WHEREOF, Lender and Borrower have caused this Agreement to be
duly executed and delivered as of the date first above written.
MELODY HOMES, INC., a
Delaware corporation
By /s/ XXXXX X. XXXX
---------------------
Name
-------------------
Title SECRETARY
------------------
FALCON DEVELOPMENT
CORPORATION, a Nevada
corporation
By /s/ XXXXX X. XXXX
---------------------
Name
-------------------
Title SECRETARY
------------------
"Borrower"
BANK ONE, ARIZONA, NA, a
national banking association
By /s/ XXXXXXXX X. XXXXXXXX
---------------------
Xxxxxxxx X. Xxxxxxxx,
Vice President
"Lender"
