BUILDING LOAN AGREEMENT
(Revolving)
(Residential Tract Construction)
Dated as of June 26, 1997
XXXXXXXX BROS. CONSTRUCTION, INC., a Minnesota corporation ("Borrower")
and CWM MORTGAGE HOLDINGS, INC., a Delaware Corporation, d/b/a CONSTRUCTION
LENDING CORPORATION OF AMERICA (the "Lender"), agree as follows:
1 Preliminary Statement. The Borrower desires to finance with the
Lender from time-to-time, certain developed lots in various subdivisions which
are being developed or acquired by Borrower and to construct on such lots
detached and attached single family homes in accordance with Improvement Plans
submitted by Borrower to Lender and approved by Lender. In order to finance the
acquisition of such developed lots and the construction of the Improvements and
the payment of various costs and expenses relating to the Project, the Borrower
has applied to the Lender for a revolving Loan in the amount of EIGHT MILLION
AND NO/100 DOLLARS ($8,000,000.00) the repayment of which will be secured by the
Borrower's interest in the Lots and the Improvements and the other Collateral
covered by the Mortgage and amendments thereto to be executed by the Borrower in
favor of the Lender. The Lender is willing to make the Loan to the Borrower to
acquire the Lots and to develop the Units and other Improvements on the Lots
pursuant to the Improvement Plans all on the terms and conditions set forth in
this Agreement.
Capitalized terms used in this Agreement and not otherwise defined are
used with the meanings set forth in Exhibit "A".
2 Initial Documentation. Upon execution of this Agreement the Borrower
shall deliver or cause to be delivered to the Lender, in form and substance
satisfactory to the Lender, the documents specified in Exhibit "B", together
with such other documents and information relating to any Loan Party, the
Project or the transactions contemplated by the Loan Documents as the Lender may
reasonably request.
3 Additions to Collateral. When Borrower has identified one or more
Lots for which it desires the acquisition or refinance and the construction of
Improvements thereon to be financed by Lender hereunder it shall furnish to
Lender for its approval the documents listed in Paragraph 1 of Exhibit "C"
attached hereto. Among other things, the documents so furnished shall
demonstrate to Lender's satisfaction (a) the location, (b) product type, (c)
profitability, (d) success of prior phases, and (e) that the sales price of each
of the Units to be constructed does not exceed
$750,000.00. Units which are to be located within Subdivisions listed on Exhibit
"E" attached hereto shall be acceptable additions to the Collateral provided
such Units are similar to other Units in such Subdivisions. Any new product not
previously developed by Borrower will require a new appraisal to be commissioned
by Lender at Borrower's sole cost and expense. If Lender approves in writing the
additions of such Lots as Collateral hereunder, and prior to the first
Disbursement of the proceeds of the Loan requested by Borrower with respect to
such Lots, Borrower shall deliver or cause to be delivered to Lender, each in
form and substance satisfactory to Lender, the documents specified in Paragraph
2 of Exhibit "C", together with such other documents and information relating to
any Loan Party, the Collateral, the Project or the transaction contemplated by
the Loan Documents as the Lender may reasonably require. No Lots will be added
as Collateral during the 90-day period preceding the Maturity Date.
4 Disbursements and Additions to the Collateral.
.1 Disbursements. Subject to the terms, conditions and procedures set
forth in this Agreement and in the "Disbursement Schedule" attached hereto as
Exhibit "D", the Lender shall make Disbursements to or for the account of the
Borrower on a Lot by Lot basis from time to time from the date of this Agreement
to the last Banking Day which is on or preceding the Final Funding Date, but in
no event shall more than two Disbursements be made during any calendar month.
Subject to such limitations, the proceeds of the Loan may be borrowed, repaid
and reborrowed in accordance with this Agreement. All Disbursements of the
proceeds of the Loan shall be evidenced by and repayable in accordance with the
terms of the Notes.
.2 Uses For Which Disbursements May Be Made.
(a) Disbursements of the Loan shall be used solely to finance
the acquisition or refinance of the Lots, the payment of hard
construction costs for the construction of Improvements, the payment of
interest on the Loan and the payment of Financing Costs, in amounts not
to exceed amounts set forth therefor in each applicable Unit Budget.
(b) At the time of the initial Disbursement for any Lot, a
Mortgage or an amendment thereto shall be recorded with respect to such
Lot or Lots and, subject to the terms and conditions of this Agreement,
the initial Disbursement shall include the portion of the applicable
Unit Budget to which Borrower may be entitled pursuant to such Lots.
(c) No Disbursements shall be made with respect to any Unit
which is not one of the Units encumbered by the Mortgage.
(d) Except for Model Units approved by Lender no Disbursements
shall be made for more than seven (7) Spec Units (excluding any Model
Units approved by Lender) in any Unit of which no more than three (3)
Units may have a base sales price exceeding $400,000.00 nor for more
than a total of twenty-five (25) Spec Units (excluding Model Units
approved by Lender) with respect to all Lots in all subdivisions.
The failure by Lender to insist upon any such limitations with
respect to any Disbursement shall not be deemed to be a waiver by
Lender of its rights to thereafter adhere to such limitations with
respect to that or any other Disbursement.
.3 Limitation on Amount of Disbursements.
(a) Lender shall be under no obligation to make any
Disbursement if, following such Disbursement, the aggregate amount of
all Disbursements then outstanding would exceed the Loan Amount;
(b) Lender shall be under no obligation to make any
Disbursement to finance the acquisition of any Lot in excess of 70% of
the retail value of such Lot as determined by Lender or by an appraisal
performed for Lender.
(c) Lender shall be under no obligation to make any
Disbursement for any Unit the Improvements on which were not financed
by Lender under this Agreement. No completed Unit shall be accepted as
Collateral.
(d) Disbursements on account of interest on the Loan shall be
limited to and be disbursed only from the Interest Reserve Line Item
contained in each Unit Budget in an aggregate amount not to exceed
$960,000.00.
(e) No disbursements shall be made with respect to (a) more
than 100 Lots at any time or (b) more than 30 Lots in any Subdivision
at any time.
(f) Lender shall be under no obligation to make any
Disbursement for hard construction costs for any Unit if, following
such Disbursement, the aggregate amount of all Disbursements for such
Unit would exceed 100% of the hard construction costs of such Unit.
(g) Lender shall be under no obligation to make any
Disbursement for any Unit if, following such Disbursement, the
aggregate amount of all Disbursements for such Unit would exceed 75% of
the value of the completed Unit as determined by Lender based upon (i)
a valid sales contract, or if (i) does not apply, then (ii) the Average
Residual Value of units in prior phases of the Subdivision in which
such Unit is being constructed, or, if neither (i) or (ii) applies,
then (iii) if a new Subdivision of Borrower, by an appraisal of such
completed Unit performed for Lender.
(h) Lender shall be under no obligation to make any
Disbursement for the acquisition of Lots and the construction of Units
which are not Pre-Sold Units if, following such Disbursement, the
aggregate amount of all Disbursements for the acquisition of Lots and
the construction of Units which are not Pre-Sold Units would exceed
$4,000,000.00.
(i) If any completed Unit is not sold within six (6) months
after the initial Disbursement for such Unit, Borrower must repay that
portion of the Loan relating to such Unit to the extent necessary to
reduce the amount of the Loan disbursed and outstanding with respect to
such Unit to sixty-five (65%) percent of the value of such Unit (as
determined in accordance with Section 4.3(g) above).
(j) If any completed Unit is not sold within twelve (12)
months after the initial Disbursement for such Unit, Borrower must
repay Lender an amount equal to the Release Price (as defined in
Paragraph 5(d) herein) applicable to such Unit.
5 Partial Releases. From time to time on or prior to the Maturity Date
of the Loan, Lender shall, at Borrower's request, issue a payoff letter
acceptable to the title company for a partial release of a Unit from the lien of
the applicable Mortgage provided all of the following conditions are satisfied
at the time of, and with respect to, each such partial release, but the failure
by Lender to insist upon the satisfaction of any of the following prior to any
such partial release shall not be deemed to be a waiver by Lender of its rights
to thereafter require satisfaction of the same with respect to that or any other
partial release:
(a) Not less than ten (10) days prior to the date of such
partial release, Lender shall have received from Borrower written
notice identifying, by Lot, the Unit to be released and the date for
recordation of such partial release;
(b) There shall exist no Event of Default, or event, omission
or failure of condition which would constitute such an Event of Default
after notice or passage of time, or both;
(c) Borrower shall pay all escrow, closing and recording
costs, the costs of preparing and delivering such partial release and
any other sums then due and payable under the Loan Documents;
(d) For each Unit to be partially released, Lender shall have
been paid, in immediately available funds, an amount equal to 100% of
all amounts disbursed by Lender to Borrower with respect to such Unit,
including, without limitation, cost of acquisition of the Lot,
construction cost for such Unit, and an allocable share of interest and
other financing costs associated with such Unit ("Release Price").
Borrower shall have complied with all applicable Laws, including
without limitation ordinances, rules and regulations governing the
subdivision and transfer of real property, with respect to the Unit to
be released;
(e) Borrower shall have reserved such easements over the
applicable Unit being released appurtenant to the Units remaining
subject to the applicable Mortgage and other Loan Documents as Lender
deems necessary or desirable for the efficient and orderly development
and operation of the Units remaining; and
(f) Unit partial releases issued pursuant to payoff letters
shall be processed and issued not more frequently than once each month
per Unit unless special circumstances require more frequent processing.
Neither the acceptance of any payment nor the issuance of any partial release by
Lender shall affect Borrower's obligation to repay all amounts owing under the
Loan Documents or under the lien of the Mortgage on the remainder of the Units
not released.
6 Covenants of the Borrower. Unless the Lender otherwise consents in
writing:
.1 Construction of Improvements. Borrower shall cause construction of
the Improvements to be promptly commenced and diligently and continuously
prosecuted to completion, subject in each case to the following requirements:
(a) the Improvements shall be constructed in substantial conformity with the
Improvement Plans and in compliance in all material respects with all applicable
Laws and Other Requirements, and in a good and workmanlike manner with new
materials of good quality; (b) each Unit shall be constructed entirely on its
applicable Lot and shall
not encroach upon or overhang any lot line, boundary, set-back, easement,
right-of-way or other land.
If at any time the Lender notifies the Borrower that construction of
the Improvements does not conform to the requirements of this Section 6.1 or any
such nonconformity is otherwise discovered by the Borrower, the Borrower shall
immediately cause such nonconforming construction to be stopped and all
necessary corrective work to be commenced and diligently and continuously
prosecuted to completion.
.2 Change Orders. The Borrower shall not permit any Change Order to the
Improvement Plans to be implemented without the prior approval of the Lender,
provided that this Section 6.2 shall not prevent routine changes in construction
which would not cause the Improvements to fail to be in substantial conformity
with the approved Improvement Plans and which individually or in the aggregate
would not require disclosure pursuant to Section 6.11; and provided further,
however, that Lender shall not unreasonably withhold approval of any such Change
Order.
.3 Compliance with Laws and Other Requirements. The Borrower shall (a)
designate the Lender as "construction lender" in all applications for building
permits and in the Construction Contract, if any, and provide the Lender's name
and address to all Lien Claimants; (b) comply in all material respects with all
applicable Laws and Other Requirements relating to the Collateral or the
Project, and (c) obtain and maintain all Authorizations required in connection
with the Collateral or the Project.
.4 Project Agreements. The Borrower shall (a) take all action
reasonably necessary or appropriate to maintain and enforce its rights and
interests under each of the Project Agreements (including the Architect
Agreement, if any, the Construction Contract, if any, and any Financing
Commitment), (b) comply in all material respects with its obligations under each
of the Project Agreements, (c) not permit or agree to any supplement,
modification, amendment or termination of, or consent or agree to any waiver of
or departure from the terms of, any of the Project Agreements, and (d) not
transfer, encumber (except for Permitted Exceptions) or release any interest in,
or commit or permit any material breach or default on the part of the Borrower
under, any of the Project Agreements, except that so long as no Event of Default
has occurred and is continuing, this Section 6.4 shall not apply (i) with
respect to any Project Agreements, other than any required Financing Commitment,
to any failure of the Borrower to comply with such requirements which in the
aggregate does not, and in the reasonable judgment of the Borrower and the
Lender will not, materially impair the Borrower's ability to perform its
Obligations under the Loan Documents, (ii) to any amendment of the Architect
Agreement or the Construction Contract, if any, to
incorporate any Change Orders which are permitted to be implemented by Section
6.2, or (iii) to the termination of any Project Agreement as a result of a
material breach or default by the other party.
.5 Collateral. The Borrower shall take all action necessary or
appropriate from time to time to maintain a Mortgage as indefeasible first
priority perfected Liens in the Collateral, and shall not at any time part with
possession of or abandon any of the Collateral or cause or permit any interest
in any of the Collateral to be sold, transferred, leased, encumbered (except for
Permitted Exceptions), released, relinquished or otherwise disposed of (whether
voluntarily, by operation of law or otherwise), provided that: (a) so long as
Borrower complies with Section 5, (i) the Borrower may sell Units in the
ordinary course of business and transfer common areas, if any, to a homeowners
association if and when required by applicable Laws or Other Requirements, (ii)
the Lender shall release Units and common areas or interests in common areas so
sold or transferred from the Lien of the applicable Mortgage, and (iii) the
Borrower may, in the ordinary course of business, receive, hold and dispose of
any excess proceeds resulting from the sale of any Unit after payment of the
applicable "Release Price"; and (b) the requirements of this sentence shall not
prohibit (1) the creation or existence of any Permitted Exceptions or other
Permitted Transfers, or (2) any action with respect to any Project Agreements to
the extent permitted by Section 6.4.
The amount of any "Release Price" received by the Lender shall be
applied to the principal of the Notes, provided that if such amount exceeds the
principal of the Notes then outstanding, the excess shall be held by the Lender
in a Cash Collateral Account and thereafter applied by the Lender (A) so long as
no Event of Default has occurred and is continuing, to future advances of
principal under the Notes as and when made, or (B) if an Event of Default has
occurred and is continuing, to any Obligations of the Borrower under the Loan
Documents at such time or times and in such manner as the Lender deems
appropriate. Upon payment in full of all Obligations of the Borrower and
termination of all obligations of the Lender under the Loan Documents, the
Lender shall release its interest in any amounts then held in any such Cash
Collateral Account.
The Borrower shall at all times use its best efforts to market and sell
Units in compliance with the terms of this Agreement.
.6 Personal Property. The Borrower shall not (a) install or otherwise
use or acquire for use in connection with the Collateral or the Project any
Personal Property (including replacement Personal Property pursuant to clause
(iii) below)
which is not owned by the Borrower free and clear of all Liens (including
conditional sale contracts) and Rights of Others (other than Permitted
Exceptions) or which is not a part of the Collateral, or (b) cause or permit the
removal from the Lots of any Personal Property which is installed or otherwise
used or acquired for use in connection with the Collateral or the Project,
except that so long as no Event of Default has occurred and is continuing, this
clause (b) shall not prohibit (i) the temporary removal of Personal Property for
repairs in the ordinary course of business, (ii) the removal of Personal
Property of insignificant value which is not reasonably necessary or appropriate
to the completion of the Project, or (iii) the removal of defective or worn out
Personal Property which has been replaced by other Personal Property of equal or
greater suitability and value which is intended for the same purpose. Upon
removal of any Personal Property in compliance with clauses (ii) and (iii)
above, the Borrower shall be permitted to transfer or otherwise dispose of such
Personal Property as the Borrower may determine.
.7 Liens and Taxes. The Borrower shall (a) pay, prior to delinquency,
all Taxes which are or may become a Lien affecting any of the Collateral, and
not consent to any Special Taxes which affect or may affect any of the
Collateral, (b) keep the Collateral free and clear of all Liens and Rights of
Others, subject only to Permitted Exceptions and Permitted Transfers, (c)
promptly pay or cause to be paid, and obtain valid and enforceable lien releases
or waivers (together with invoices or receipts identifying the nature of each
payment) from, all Lien Claimants, (d) to the extent permitted by applicable
Laws, diligently file or procure the filing of valid notices of completion upon
completion of construction of any Improvements and a notice of cessation of
labor upon cessation of construction for a continuous period of 30 days or more,
and take all other steps necessary to forestall the assertion of Lien Claims,
and (e) pay and perform when due all other obligations secured by or
constituting a Lien affecting any of the Collateral, except that the Borrower
shall not be required to pay or perform any such Taxes, Lien Claims or other
obligations which are being actively contested in good faith by appropriate
proceedings, provided that the Borrower has posted such security for the payment
or performance of such Taxes, Lien Claims or other obligations as the Lender may
reasonably require and, by reason of nonpayment, none of the Collateral or any
Lien or other interest of the Lender under the Loan Documents is prejudiced or
in danger of being sold, foreclosed or otherwise lost or forfeited.
In the event that a mechanic's lien is filed or any action or other
proceeding is instituted to enforce any Lien (including any mechanic's lien, and
whether or not such Lien constitutes a Permitted Exception) against any of the
Collateral, the Borrower shall immediately make such payments, obtain such
surety bonds and/or take such other action as the Lender may reasonably require
in order to release the Lien. Upon failure of the Borrower to release any such
Lien, the Lender may, at its option, file an interpleader action to resolve any
pending claims.
The Borrower irrevocably appoints the Lender as its agent (such agency
being coupled with an interest) to file any notices (including notices of
completion and cessation of labor) that the Lender deems appropriate in order to
protect its interests under the Loan Documents.
.8 Property and Liability Insurance. The Borrower shall at all times
maintain the following policies of insurance:
(a) with respect to any Improvements as to which construction
has commenced but has not been completed and any Personal Property used
or to be used in connection with such Improvements, builder's "all
risk" insurance ("completed value" form), including "course of
construction" coverage;
(b) with respect to any Improvements as to which construction
has been completed and any other improvements now or in the future
located on the Lots and any Personal Property used or to be used in
connection with such Improvements, property "all risk" insurance;
(c) with respect to any Personal Property used or to be used
in connection with such Units, fire and extended coverage insurance
(including coverage for vandalism and malicious mischief);
(d) commercial general liability insurance in favor of the
Borrower (and naming the Lender and its Affiliates as additional
insureds) in an aggregate amount not less than $2,000,000 (or such
greater amount as may be specified by the Lender from time to time)
combined single limit, plus an umbrella policy in the amount of not
less than $10,000,000.00; and
(e) such other insurance as may be required by applicable Laws
(including worker's compensation and employer's liability insurance) or
as the Lender may reasonably require from time to time (including
comprehensive form boiler and machinery insurance, if applicable).
The Borrower shall also cause the Contractor, if any, and each
subcontractor to maintain a policy of commercial general liability insurance
and, upon request by the Lender, shall cause the Architect and any engineer
engaged in connection with the Project, if any, to maintain a policy of
professional liability insurance, in each case for such periods and in such
amounts as the Lender may reasonably require from time to time.
Each policy of property insurance required by this Section 6.8 shall be
in an amount not less than the full replacement cost of the property covered by
such policy, shall contain a "full replacement cost" indorsement, shall insure
against flood loss risk if the Lots are located in a Flood Hazard Area, and
shall name the Lender and its Affiliates as "loss payee" pursuant to form BFU
438 or other form approved by the Lender. Each policy of commercial general
liability insurance required by this Section 6.8 shall cover personal injury,
property damage, blanket contractual liability and (where applicable) completed
operations, with x, c and u exclusions deleted. All insurance policies shall be
in form and substance and issued by insurers reasonably satisfactory to the
Lender, and shall contain such deductibles and such endorsements as the Lender
may reasonably require. Upon request by the Lender from time to time, the
Borrower shall deliver to the Lender originals or copies of all such insurance
policies and certificates evidencing such policies.
.9 Title Insurance and Searches. The Borrower shall deliver to the
Lender, in form and substance satisfactory to the Lender, such endorsements to
the Title Policy and such preliminary title insurance commitments and other
title or lien searches (including UCC searches) and tax service contracts as the
Lender may reasonably require from time to time.
.10 Books, Records and Inspections. The Borrower shall at all times
maintain (a) full and complete books of account and other records with respect
to the Collateral and the Project and its business and operations, (b) complete
copies of the Improvement Plans, all Project Agreements and all Authorizations
issued in connection with the Collateral or the Project, and (c) a complete file
of all invoices, receipts and lien releases and waivers obtained by the Borrower
with respect to amounts paid for Project Costs, and shall permit the Lender and
its agents, upon request from time to time, to inspect and copy any of such
books, records and other Documents and to enter and inspect the Real Property
and any other Collateral and all work and materials furnished in connection with
the Project.
.11 Construction Information and Reporting Requirements. The Borrower
shall cause to be delivered to the Lender, in form and detail satisfactory to
the Lender:
(a) promptly after discovery by the Borrower, notice of (i)
any fact or circumstance that may or will cause the Project Costs
associated with any Line Item to exceed or be less than the
corresponding amount set forth in the Unit Budget by more than 7%
(excluding standard upgrades or nonstandard upgrades for which the home
purchaser has deposited at least 50% of the cost hereof), (ii) any
failure of the Project or the Improvements to be in substantial
conformity with the Improvement Plans and in compliance in
all material respects with all applicable Laws and Other Requirements,
(iii) any actual or anticipated material delays in construction, (iv)
any serious threat or the commencement of any action or other
proceeding (including any action to foreclose or otherwise enforce any
Lien Claim or other Lien and any proceedings in condemnation or eminent
domain) affecting or relating to any of the Collateral or the Project,
(v) the occurrence or allegation of any termination, material breach or
default, or failure of any material condition or other requirement
under the Architect Agreement, if any, the Construction Contract, if
any, or any Financing Commitment, (vi) any dispute between the Borrower
and any Governmental Agency relating to any of the Collateral or the
Project, the adverse determination of which could adversely affect the
Collateral or the Project in any material respect, (vii) any injury or
damage to or loss or destruction of any of the Collateral if the cost
of repair, restoration or replacement exceeds $25,000, (viii) any
imposition of or proposal for any Special Taxes which affect or may
affect any of the Collateral, (ix) any material adverse change in the
financial condition, operations, properties or prospects of any Loan
Party, (x) any event which has or may have a material adverse impact on
the Collateral or the Project, and (xi) the occurrence of any Event of
Default or event which, with the giving of notice and/or the passage of
time, could become an Event of Default;
(b) promptly after receipt by the Borrower, copies of all
notices or other communications delivered to the Borrower or the Real
Property which are addressed to the Lender or to "construction lender";
(c) on or before the 5th day of each month, a report on a form
approved by the Lender describing sales activities for the Project as
of the end of the prior month;
(d) within 90 days after the end of each fiscal year of each
Loan Party, Financial Statements for such Loan Party for and as at the
end of such fiscal year, and copies of any audited Financial Statements
prepared for Borrower, in each case certified in a manner acceptable to
the Lender; and
(e) such other Documents or information relating to any Loan
Party, the Collateral, the Project or the transactions contemplated by
the Loan Documents as the Lender may reasonably request from time to
time.
The Lender is authorized at any time and from time to time to directly
contact the Contractor, if any, or any subcontractor or other Lien Claimant or
potential Lien Claimant or other Person to
verify any information provided by the Borrower or for any other
reasonable purpose.
.12 Costs, Fees and Expenses.
(a) The Borrower shall bear sole responsibility for and
promptly pay or cause to be paid all costs and expenses relating to the
performance by the Borrower of its Obligations or the delivery to the
Lender of any Documents or other items or information under or in
connection with any of the Loan Documents, and any Taxes (other than
income taxes of the Lender), costs, expenses, fees or charges payable
or determined to be payable in connection with the preparation,
execution, delivery, filing or recording of, or otherwise with respect
to, any Loan Document or any other Document delivered under or in
connection with any Loan Document.
(b) Upon execution of this Agreement, the Borrower shall pay a
Loan Fee to the Lender in the amount of $80,000.00 and an additional
$80,000.00 on the anniversary of the date of the execution of this
Agreement.
(c) Each Unit Budget shall include an allocation for an
administration fee to compensate Lender for time expended to monitor
the Loan and for legal fees incurred in connection with loan
documentation for such Unit.
(d) Borrower shall also pay to the Lender on demand all
reasonable costs, expenses and charges of the Lender in connection with
the approval of the Loan by the Lender and the negotiation,
preparation, execution, delivery, administration, supplementation,
modification, amendment, waiver and enforcement of, and any other
action taken by the Lender under or otherwise to protect its rights and
interests in respect of, any Loan Document, and any litigation,
dispute, action or other proceeding (including bankruptcy proceedings)
relating thereto, including recording fees, filing fees, search fees,
reconveyance fees, title insurance premiums, appraisal, engineering,
inspection and consulting fees, the reasonable fees and disbursements
of the Lender's legal counsel and other out-of-pocket expenses, the
reasonable charges of the Lender's internal legal counsel, and any fees
or other charges of the Lender for appraisals or inspections or for
review of appraisals, budgets, plans and specifications or other
matters relating to the Project or the Collateral.
(e) Any amount payable to the Lender under any of the Loan
Documents (including any amount payable under this Section 6.12) which
is not paid on the date when due shall, from and after such date, bear
interest at the Alternate Rate
until paid. Such interest shall be payable by the Borrower
to the Lender immediately and without demand.
.13 Indemnification by the Borrower. The Borrower shall indemnify,
defend and save and hold harmless the Lender and its Affiliates, and the
respective directors, officers, agents, attorneys and employees of each
(collectively the "Indemnitees") from and against, and shall pay on demand, any
and all losses, liabilities, damages, costs, expenses and charges (including the
reasonable fees, charges and disbursements of internal and external legal
counsel) suffered or incurred by any Indemnitee as a result of (a) any failure
of the Borrower to perform any of its Obligations under any Loan Document, (b)
any failure of any Representation by the Borrower to be correct in all respects
when made, (c) injury or death to persons or damage to property or other loss
occurring on or in connection with the Collateral or the Project, whether caused
by the negligence or any other act or omission of the Borrower or any Lien
Claimant or any other Person or by negligent, faulty, inadequate or defective
design, building, construction or maintenance or any other condition or
otherwise, (d) any claim of any surety in connection with any bond relating to
construction of any Improvements or offsite improvements, and (e) any claim,
demand or cause of action, or any action or other proceeding, whether
meritorious or not, brought or asserted against any Indemnitee which relates to
or arises out of the Loan Documents, the Loan, the Collateral, the Project or
any transaction contemplated by, or the relationship between the Borrower and
the Lender or any action or inaction by the Lender under, the Loan Documents,
provided that no Indemnitee shall be entitled to indemnification under this
Section 6.13 for matters caused solely by such Indemnitee's gross negligence,
willful misconduct or breach of the Loan Documents. Any obligation of the
Borrower under this Section 6.13 shall survive the making and repayment of the
Loan and the expiration or termination of this Agreement and shall not be
secured by the Mortgage.
.14 Actions and Further Assurances. The Borrower shall appear in and
defend all actions and other proceedings purporting to affect any of the
Collateral or the Project or the rights or interests of the Lender under the
Loan Documents (and the Lender may, at the Borrower's expense, appear in and
defend any such action or other proceeding as the Lender may determine), and the
Borrower shall take or cause to be taken such further action and execute and
deliver or cause to be executed and delivered such further Documents as the
Lender from time to time may reasonably require to maintain, perfect, protect,
assure and confirm the Lender's rights and interests (including rights and
interests in the Collateral), the Borrower's Obligations and the intention of
the parties under the Loan Documents.
.15 Performance by Lender. If the Borrower fails to perform any of its
Obligations under any Loan Document and the Lender reasonably determines that
remedial action is necessary to protect the rights or interests of the Lender,
the Lender may perform, after providing Borrower with ten (10) days advance
written notice, any such Obligations in such manner and to such extent and take
such other action as the Lender may deem appropriate, and all costs, expenses
and charges of the Lender relating to any such action shall be payable by the
Borrower to the Lender in accordance with Section 6.12.
.16 Loan to Value Ratio. At any time, Lender may elect to reappraise
the Real Property in accordance with Lender's then applicable appraisal and
underwriting guidelines. The Borrower shall reimburse Lender for the reasonable
cost of any such appraisal. If, based upon such appraisal, the actual ratio
established (a) of the outstanding principal balance of the Loan less the total
of all Borrower's Funds previously deposited by Borrower with Lender pursuant to
this provision, (b) to the value of the Real Property then encumbered by the
Mortgage, exceeds the Loan to Value Ratio, then the Borrower shall deposit with
the Lender, on demand, additional Borrower's Funds in an amount deemed necessary
by the Lender to reduce the ratio of the amount described in (a) to the amount
described in (b) of this provision to the Loan to Value Ratio. Any Borrower's
Funds deposited with Lender pursuant to this provision shall be held in a Cash
Collateral Account in which Lender has a valid perfected first priority security
interest and, at Lender's sole discretion may be applied to reduce the principal
amount of the Loan, or shall be disbursed by the Lender to pay Project Costs
which would have been paid out of the Loan prior to further Disbursements of the
Loan. In no event shall Lender be obligated to make Disbursements of the Loan
which, in the aggregate, would exceed the Lender's then most recent
determination of the value of the Real Property then encumbered by the Mortgage
as calculated as provided in Section 4.3(g) herein multiplied by the Loan to
Value Ratio (expressed in decimal form).
.17 Financial Covenants.
(a) Borrower shall maintain a minimum Net Worth (as defined
herein) of $5,000,000.00.
(b) Borrower shall maintain a maximum ratio of Debt to Net
Worth of 7.0 to 1 "Debt" shall mean "Funded Debt" as that term is
defined in the prospectus dated October 18, 1996 for the issuance of
Senior Subordinated Debentures Series 11% by Borrower (as defined
herein).
7 Representations of the Borrower. The Borrower represents and warrants
to the Lender that:
.1 Formation and Qualification. Each Loan Party which is a corporation
is duly incorporated, validly existing and in good standing under the Laws of
the jurisdiction of its incorporation and is duly qualified in each and every
jurisdiction where its activities require it to be so qualified; each Loan Party
which is a partnership, trust or other entity is duly formed and validly
existing under the Laws of the jurisdiction of its formation and, is duly
qualified to do business in each and every jurisdiction where its activities
require it to be so qualified; and each Loan Party has all requisite power and
authority to conduct its business and to own, sell and lease its properties.
.2 Loan Documents. The execution, delivery and performance of the Loan
Documents by each Loan Party are within such Loan Party's power and authority,
have been duly authorized by all necessary action and do not and will not (a)
require any Authorization which has not been obtained (except to the extent
indicated in Section 7.4(b) with respect to Authorizations required in
connection with the Collateral or the Project), (b) contravene the Charter
Documents of any Loan Party, any applicable Laws or Other Requirements or any
agreement or restriction binding on or affecting any Loan Party or its property,
or (c) result in or require the creation or imposition of any Lien or Right of
Others upon or with respect to any property now or in the future owned by any
Loan Party (other than Liens in favor of the Lender). No Authorization which has
not been obtained is required for the creation of the Liens or the enforcement
by the Lender of its Remedies under the Loan Documents. Each Loan Document, when
executed and delivered, will constitute the legal, valid and binding obligations
of each Loan Party which is a party to or bound by such Loan Document,
enforceable against such party in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar Laws
affecting the rights of creditors generally.
.3 Collateral. The Borrower has and will continue to have (or upon
recordation of the Mortgage applicable to such Collateral will have and from and
after such recordation will continue to have) good and marketable title to the
Collateral, free and clear of all Liens and Rights of Others, subject only to
Permitted Exceptions and Permitted Transfers. Upon recordation of each Mortgage
and filing of the Financing Statement executed by the Borrower, each Mortgage
will create a valid and indefeasible first priority perfected Lien in the
Collateral so encumbered securing the payment and performance of all
Obligations, subject only to Permitted Prior Exceptions and Permitted Transfers.
No financing statements covering any of the Collateral are on file in any public
office, except Financing Statements in favor of the Lender and any other
financing statements approved by the Lender in writing.
.4 Project Information. (a) The Borrower and, to the best knowledge of
the Borrower, any Governmental Agency having jurisdiction over the Project have
complied in all material respects with all applicable Laws and Other
Requirements relating to the division and development of the Real Property, and
the Borrower is, and the construction of the Improvements in accordance with the
terms of this Agreement will be, in compliance in all material respects with all
applicable Laws and Other Requirements relating to the Collateral or the Project
(b) except as otherwise agreed to in writing by Lender, (i) all Authorizations
required in connection with the Collateral or the Project have been regularly
and finally received (other than routine building permits for work which has not
yet commenced and any required certificates of occupancy or other approvals of
construction by any Governmental Agency which (in each case) are to be issued on
a ministerial basis as required from time to time during the course of
construction and after completion), and (ii) the development and use of the Real
Property for its intended purpose do not require the payment of extraordinary
fees or assessments or the construction of other improvements, will not
contravene any applicable Laws or Other Requirements, and are not subject to any
other legal, contractual or practical impediments which are material in the
aggregate. (c) The Unit Budgets are based on information deemed reliable by the
Borrower and represent the Borrower's best estimate of all Project Costs that
will be required in connection with the Project, and all Project Costs shown in
the Unit Budgets as "Previously Paid By Borrower" have been paid in full. (d)
All Utility Services, streets, walks and other offsite improvements relating to
or adjoining the Lots or necessary for the development of the Project and the
occupancy of the Real Property for its intended purpose have been or will be
promptly completed and/or otherwise made available at no further expense to the
Borrower and are not and will not be subject to any conditions or restrictions
which may adversely affect the Collateral or the Project in any material
respect. (e) Except as otherwise agreed to in writing by Lender, (i) the Lots
are not located in a Flood Hazard Area, nor are the Lots subject to or affected
by any existing or proposed Special Taxes (other than Special Taxes approved in
writing by the Lender after the date of this Agreement), and (ii) each Unit
(together with any undivided interests in common areas to be transferred to the
purchaser of such Unit) and any common areas to be transferred to a homeowners
association are separately transferable in compliance with all applicable
subdivision Laws and Other Requirements. (f) Except as otherwise disclosed in
writing to the Lender, the Architect Agreement and the Construction Contract, if
any, are in full force and effect, and free from any material breach or default
by any party.
.5 Financial Information. (a) The Financial Statements of each Loan
Party which have been furnished to the
Lender fairly present such Loan Party's financial condition as at the dates of
such Financial Statements and the results of operations for the periods covered
by such Financial Statements in accordance with generally accepted accounting
principles consistently applied (or such other method of preparation approved by
the Lender in writing), and since the respective dates of such Financial
Statements, there has been no material adverse change in the financial
condition, operations, properties or prospects of such Loan Parties. (b) Each
Loan Party has filed all tax returns required to be filed by it, and has paid
all Taxes due pursuant to such returns or in respect of any of its properties
(except for any such Taxes which are being actively contested in good faith by
appropriate proceedings), and to the best knowledge of each Loan Party, no basis
exists for additional assessments which have not been adequately reserved
against in the Financial Statements referred to above or otherwise disclosed in
writing to the Lender.
.6 Litigation and Other Matters. Except as otherwise disclosed in
writing to the Lender: (a) no actions or other proceedings affecting or relating
to the Collateral or the Project are pending or, to the best knowledge of each
Loan Party, threatened, (b) no actions or other proceedings are pending or, to
the best knowledge of each Loan Party, threatened against or affecting any Loan
Party or any property of any Loan Party which, if determined adversely to such
Loan Party, could materially impair the financial condition, operations,
properties or prospects of such Loan Party or the ability of such Loan Party to
perform its obligations under the Loan Documents, and (c) the Borrower has given
notice to the Lender of any other matters which the Borrower is required to
disclose to the Lender under Section 6.11(a).
.7 Documents and Other Information. All Documents and other information
delivered to the Lender pursuant to any of the Loan Documents are and will be
complete and correct in all material respects at the time of delivery to the
Lender.
8 Events of Default and Remedies of the Lender.
.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default:
(a) the Borrower shall fail to pay all or any portion of the
principal of the Notes when due; or
(b) the Borrower shall fail to pay any installment of interest
on the Notes within 10 days after the date when due; or Borrower shall
fail to pay any other amount payable by the Borrower to the Lender
under the Loan Documents (including any deposit of Borrower's Funds
required by any Disbursement Schedule) within ten (10) days after
written demand therefor;
or the Borrower shall fail to pay all accrued interest and all other
amounts then payable by the Borrower to the Lender under the Loan
Documents on the Maturity Date or the date of final payment of the
principal of the Notes in full; or
(c) any Loan Party shall fail to perform or observe any other
term, covenant or agreement contained in any Loan Document on its part
to be performed or observed and either (i) such failure shall continue
for more than 30 days after notice of such failure is given by the
Lender to such Loan Party, unless such failure is not reasonably
capable of being cured within such 30-day period (but is reasonably
capable of being cured within 60 days after such notice) and such Loan
Party commences action to cure such failure within such 30- day period
and diligently and continuously prosecutes such action to completion
and causes such failure to be cured within 60 days after such notice,
or (ii) such failure is not reasonably capable of being cured within 60
days after notice of such failure is given by the Lender to such Loan
Party; or
(d) any Representation proves to have been incorrect in any
material respect when made; or
(e) work relating to construction of the Improvements ceases
for 30 consecutive days for any reason other than acts of God or other
causes beyond the reasonable control of the Borrower, or such work
ceases for 60 consecutive days for any reason; or
(f) the Borrower is enjoined by any court or other
Governmental Agency from constructing any of the Improvements or
selling any of the Units or performing any of the Obligations and such
injunction continues unreleased and unstayed for 60 days; or
(g) any Loan Party is dissolved or liquidated or merged with
or into any other Person; or for any period of more than 30 days any
Loan Party which is a corporation, partnership, trust or other entity
ceases to exist in its present form and (where applicable) in good
standing and duly qualified under the Laws of the jurisdiction of its
incorporation or formation and each jurisdiction where its activities
require it to be so qualified; or any Loan Party who is an individual
dies or becomes incapacitated; or all or substantially all of the
assets of any Loan Party are sold or otherwise transferred; or
(h) any Loan Party ceases to be managed and controlled by
Xxxxx Xxxxxx, or any Loan Party assigns or attempts to assign any
rights or interests under any Loan Document without the prior written
consent of the Lender; or any Loan
Document becomes or is claimed by any Loan Party to be unenforceable
against any Loan Party; or any of the Mortgage shall cease to
constitute a valid and indefeasible first priority perfected Lien in
the Collateral, subject only to Permitted Prior Exceptions and
Permitted Transfers; or
(i) any Loan Party is subject to an order for relief by the
bankruptcy court, or is unable or admits in writing its inability to
pay its debts as they mature or makes an assignment for the benefit of
creditors; or any Loan Party applies for or consents to the appointment
of any receiver, trustee or similar official for it or for all or any
part of its property (or any such appointment is made without its
consent and the appointment continues undischarged and unstayed for 60
days); or any Loan Party institutes or consents to any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt,
dissolution, custodianship, conservatorship, liquidation,
rehabilitation or similar proceeding relating to it or to all or any
part of its property under the Laws of any jurisdiction (or any such
proceeding is instituted without its consent and continues undismissed
and unstayed for 60 days); or any judgment, writ, warrant of attachment
or execution or similar process is issued or levied against any of the
Collateral or any other property of any Loan Party and is not released,
vacated or fully bonded within 60 days after its issue or levy; or
(j) any material adverse change shall occur in the financial
condition, operations, properties or prospects of any Loan Party, or
any event shall occur which has a material adverse impact on the
Collateral or the Project.
.2 Remedies of the Lender. Upon the occurrence of any Event of Default,
the Lender may, without notice to or demand upon the Borrower, which are
expressly waived by the Borrower (except for notices or demands otherwise
required by applicable Laws to the extent not effectively waived by the Borrower
and any notices or demands specified in the Loan Documents), exercise any one or
more of the following Remedies as the Lender may determine:
(a) the Lender may, at its option, terminate all commitments
to make Disbursements, or to release any Collateral from the Mortgage,
or the Lender may waive the Event of Default or, without waiving,
determine, upon terms and conditions satisfactory to the Lender, to
make further Disbursements, or to release any Collateral from the
Mortgage;
(b) the Lender may declare the unpaid principal of the Notes
and all accrued interest and other amounts payable under the Loan
Documents to be immediately due and payable,
in which event all such amounts shall immediately be due and payable
without protest, notice of dishonor, demand or further notice of any
kind, all of which are expressly waived by the Borrower;
(c) the Lender may perform any of the Borrower's Obligations
in such manner as the Lender may determine;
(d) the Lender may, either directly or through an agent or
court-appointed receiver, take possession of the Collateral and enter
into such contracts and take such other action as the Lender deems
appropriate to complete or partially construct all or any part of the
Improvements, subject to such modifications and changes in the Project
or the plan of development as the Lender may deem appropriate; and
(e) the Lender may proceed to protect, exercise and enforce
any and all other Remedies provided under the Loan Documents or by
applicable Laws.
All reasonable costs, expenses, charges and advances of the Lender in
exercising any such Remedies (including any such amounts which cause the
obligations of the Borrower to exceed the face amount of the Note) shall be
payable by the Borrower to the Lender in accordance with Section 6.12.
Each of the Remedies of the Lender provided in the Loan Documents is
cumulative and not exclusive of, and shall not prejudice, any other Remedy
provided in the Loan Documents or by applicable Laws. To the maximum extent
allowed by law, each Remedy may be exercised from time to time as often as
deemed necessary by the Lender, and in such order and manner as the Lender may
determine. No failure or delay on the part of the Lender in exercising any
Remedy shall operate as a waiver of such Remedy; nor shall any single or partial
exercise of any Remedy preclude any other or further exercise of such Remedy or
of any other Remedy. No application of payments, or any advances or other action
by the Lender, will cure or waive any Event of Default or prevent acceleration,
or continued acceleration, of amounts payable under the Loan Documents or
prevent the exercise, or continued exercise, of any Remedies of the Lender.
9 Miscellaneous.
.1 Waivers and Amendments. No supplement to, modification or amendment
of, or waiver, consent or approval under, any of the Loan Documents shall be
effective unless in writing and signed by the Lender and Borrower, and any
waiver, consent or approval shall be effective only in the specific instance and
for the specific purpose for which given.
.2 Survival of Representations. All Representations shall survive the
making and repayment of the Loan and the expiration or termination of this
Agreement and have been or will be relied upon by the Lender, notwithstanding
any investigation made by the Lender or on its behalf.
.3 Notices. All notices and other communications provided under any
Loan Document shall be in writing and mailed or personally delivered to the
appropriate party at the address set forth on the signature page of this
Agreement or any other Loan Document or, as to any party, at any other address
as shall be designated by it in a written notice sent to the other party. All
notices and other communications by the Borrower which are expressly subject to
receipt by the Lender under the terms of the Loan Documents will be effective
when received by an officer or other representative of the Lender having direct
responsibility for administration of the Loan. In all other cases, any notice or
other communication will be effective (a) if given by mail, on the earlier of
receipt or the third day after deposit in the United States mails as registered
or certified mail postage prepaid, (b) if given by personal delivery, when
delivered, or (c) on the day on which the party to whom notice is addressed
refuses delivery by mail or by personal delivery provided that the requirements
of this sentence shall not impair or delay the effectiveness of any notice or
other communication given by the Lender under any Mortgage or any Loan Documents
when such notice or other communication is given in compliance with and would
otherwise be effective under applicable Laws.
.4 Relationship of Parties. The relationship between the Borrower and
the Lender is, and at all times shall remain, solely that of debtor and
creditor, and shall not be, or be construed to be, a joint venture, equity
venture, partnership or other relationship of any nature.
.5 Nonliability of the Lender. The Borrower acknowledges and agrees
that:
(a) the Borrower shall be solely responsible for and shall
rely solely on its own judgment with respect to all matters relating to
the Collateral or the Project, including the conduct of the Borrower
and its agents and employees, the quality, adequacy and suitability of
the Improvement Plans and any Change Orders and any work or materials
furnished or to be furnished in connection with the Project, the skill,
qualifications and performance of architects, contractors,
subcontractors and suppliers, the feasibility of the Project and the
sufficiency of budgets, cost projections and insurance, the
supervision, status and progress of construction and compliance by the
Borrower with the
requirements of this Agreement with respect to such construction and
the accuracy and completeness of all Disbursement Requests, and the
Lender does not assume any responsibility to the Borrower or any other
Person to review, inspect, supervise or approve, or to provide any
advice or information with respect to, any such matters;
(b) inspections of construction made by or on behalf of the
Lender, and acceptance, approval or review by the Lender of any
Documents, information, conditions or performance or any other action
by the Lender under any of the Loan Documents, are for purposes of
administration of the Loan only and for the sole protection of the
Lender, and shall not constitute a representation or warranty by the
Lender to the Borrower or any other Person or be relied upon by the
Borrower or any other Person for any other purpose;
(c) the Lender shall have no responsibility or liability for
any delays in funding or construction caused by any inspection of
construction or review of Documents, information, conditions or
performance or any other action by the Lender in connection with any
Disbursement or Change Order so long as Lender acts reasonably and
without intentional delay; and
(d) the Lender does not owe any duty of care to protect the
Borrower or any other Person against or to inform the Borrower or any
other Person of, and the Lender shall not be responsible or liable to
the Borrower or any other Person for any loss, damage, liability or
claim of any kind relating to injury or death to persons or damage to
property or other loss resulting from, the negligence or any other act
or omission of the Borrower or any Lien Claimant or any other Person or
any negligent, faulty, inadequate or defective design, building,
construction or maintenance or any other condition or the improper
application of any Disbursements.
.6 Benefits and Assignment. The Loan Documents are made for the purpose
of defining the rights and obligations of the Loan Parties and the Lender in
connection with the Loan and are intended for the sole protection of the Loan
Parties and the Lender and their respective permitted successors and assigns,
and no other Person shall have any rights of any nature under or by reason of
the Loan Documents. The Loan Documents shall be binding on and inure to the
benefit of each of the Loan Parties and the Lender and their respective
successors and assigns, except that no Loan Party shall have the right to assign
any rights or interests under any Loan Document without the prior written
consent of the Lender. The Lender may from time to time sell participations in
the Loan to any Person (including Affiliates of the Lender) without notice to or
the consent of any Loan Party.
.7 Payments and Computations. All payments by any Loan Party under the
Loan Documents shall be made in lawful money of the United States free and clear
of, and without reduction by reason of, any Taxes. Any payment which is stated
to be due on a day which is not a Banking Day shall be made on the next
succeeding Banking Day, and any such extension shall be included in the
computation of the payment of interest. Whenever any interest or other amount
payable under the Loan Documents is to be computed on the basis of a year of a
specified number of days, the amount shall be calculated on the basis of a year
of such specified number of days for the actual number of days (including the
first, but excluding the last) occurring in the period for which such
calculation is made. For purposes of calculating amounts paid or payable under
the Loan Documents, credit for payments shall be given upon receipt of same day
funds by the Lender at its office located at 000 Xxxxx Xxxx Xxxxxx, Mail Stop
#C-CLCAB, Xxxxxxxx, Xxxxxxxxxx 00000, Attention: Construction Lending Division
(or such other location specified by the Lender from time to time in writing) at
or before the close of business, Los Angeles time, on any Banking Day. Except as
otherwise expressly provided in the Loan Documents, all payments on the
Obligations received by the Lender shall be applied to the Obligations in such
order and manner as the Lender may determine.
.8 Publicity. During the course of construction of the Improvements and
until the Loan is repaid in full, the Lender may place signs on the Lots
(subject to Borrower's approval of such signs and their location) and issue or
publish releases or announcements stating that construction financing is being
provided by the Lender to the Borrower.
.9 Rules of Construction. (a) For purposes of this Agreement and the
other Loan Documents: (i) any reference to "days" or "months" shall mean
calendar days or months, (ii) the word "including" shall mean "including without
limitation", (iii) any reference in any of the Loan Documents to any Loan
Document or other Document or exhibit shall mean such Loan Document or other
Document or exhibit as it may from time to time be supplemented, modified,
amended and extended in accordance with the terms of this Agreement, (iv)
defined terms shall be equally applicable to the singular and plural forms, and
(v) all existing and future exhibits to this Agreement are incorporated in this
Agreement by this reference. (b) Time is of the essence of the Loan Documents,
and the provisions of the Loan Documents are declared to be severable. (c) All
accounting terms used and not otherwise defined in any Loan Document shall be
construed in conformity with, and all financial information maintained or
submitted by any Loan Party or other Person under any Loan Document shall be
prepared in accordance with, generally accepted accounting principles
consistently applied (or such other principles approved
by the Lender in writing). (d) If more than one Loan Party signs or is otherwise
bound by any Loan Document, the liability of each shall be joint and several.
(e) Except as expressly set forth therein, the Loan Documents shall be governed
by, and construed and enforced in accordance with, the Laws of Minnesota.
.10 Counterparts; Facsimile Signatures. This Agreement may be executed
in any number of counterparts each of which shall be deemed an original and all
of which shall constitute one and the same agreement with the same effect as if
all parties had signed the same signature page. Any signature page of this
Agreement may be detached from any counterpart of this Agreement and reattached
to any other counterpart of this Agreement identical in form hereto but having
attached to it one or more additional signature pages. This Agreement shall be
deemed executed and delivered upon both partys' delivery of executed signature
pages of this Agreement, which signature pages may be delivered by facsimile
with the same effect as delivery of the originals.
.11 Waiver of Jury Trial. Each of the Lender and the Borrower waive
trial by jury in any action or other proceeding (including counterclaims),
whether at law or equity, brought by the Lender or the Borrower against the
other on matters arising out of or in any way related to or connected with this
Agreement, the other Loan Documents, the Loan or any transaction contemplated
by, or the relationship between the Lender and the Borrower or any action or
inaction by either party under, any of the Loan Documents.
.12 Commissions. Borrower and Lender represent and warrant to each
other that no real estate broker or agent has been authorized to act on their
behalf. Borrower hereby agrees to indemnify and hold Lender harmless from any
and all demands, claims and liabilities which now have or hereafter may be
asserted against Lender for any brokerage or finder's fees, commissions or
similar types of compensation from brokers or finders claiming to have been
engaged by Borrower. Lender hereby agrees to indemnify and hold Borrower
harmless from any and all demands, claims and liabilities which now have or
hereafter may be asserted against Borrower for any brokerage or finders' fees,
commissions or similar types of compensation from brokers or finders claiming to
have been engaged by Lender.
.13 Minnesota Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be duly executed as of the date first written above.
"LENDER"
CWM MORTGAGE HOLDINGS, INC., a Delaware
Corporation, d/b/a CONSTRUCTION LENDING
CORPORATION OF AMERICA
By:_____________________________
Its:____________________________
[Printed Name and Title)
Lender's Address:
Construction Lending Corporation
of America
000 Xxxxx Xxxx Xxxxxx
Mail Stop #6-CLCAB
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Construction Lending Division
"BORROWER"
XXXXXXXX BROS. CONSTRUCTION, INC., a
Minnesota corporation
By:_____________________________
Its:____________________________
ADDRESS:
000 Xxxx Xxxxxxx Xxxx.
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxx
SML4766
06/26/97
LIST OF EXHIBITS
Exhibit A - Definitions
Exhibit B - Loan Requirements - Initial Documentation
Exhibit C - Requirements for Adding Lots as Collateral
under the Building Loan Agreement
Exhibit D - Disbursement Schedule
Exhibit E - Approved Projects
EXHIBIT "A"
DEFINITIONS
(Residential Tract Construction)
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" means, as to any Person, any other Person that directly or
indirectly controls or is controlled by or under common control with the Person
specified.
"Agreement" means this Building Loan Agreement, including all
exhibits.
"Alternate Rate" means the "Alternate Rate" set forth in the Note.
"Architect" means any Person engaged by the Borrower from time to time
as an architect or to perform similar functions in connection with the Project.
"Architect Agreement" means, as to any Architect, the agreement between
the Borrower and the Architect relating to services to be provided by the
Architect in connection with the Project.
"Authorization" means any authorization, consent, approval, order,
license, permit, exemption or other action by or from, or any filing,
registration or qualification with, any Governmental Agency or other Person.
"Authorizing Resolutions" means (a) in the case of a corporation, a
certified copy of resolutions adopted by its board of directors, (b) in the case
of a partnership (whether general or limited), a certificate signed by all of
its general partners, and (c) in the case of a trust or any other entity,
evidence of such other action as the Lender may require, in each case
authorizing the execution, delivery and performance of all Loan Documents to
which it is a party or by which it is bound.
"Average Residual Value" means the average base sales price over the
preceding six month period of comparable Units sold in current or prior phases
of the subdivision in which such Units are located.
"Banking Day" means any day (excluding Saturdays and Sundays) on which
banks located in Illinois are not authorized or required by law to close.
"Borrower's Funds" means funds of the Borrower deposited with the
Lender pursuant to the Disbursement Schedule.
"Cash Collateral Account" means a cash collateral account maintained by
the Lender for the account of the Borrower for purposes of this Agreement or any
of the other Loan Documents which shall be subject to a security interest in
favor of the Lender for the purpose of securing the Borrower's Obligations and
over which the Lender shall have sole and exclusive control and right of
withdrawal.
"Certificate of Reasonable Value" means a Master Certificate of
Reasonable Value issued by the United States Veterans Administration with
respect to Units constructed or to be constructed.
"Change Order" means a change in, or supplement to, the Unit Plans.
"Charter Documents" means (a) in the case of a corporation, its
articles of incorporation and bylaws, (b) in the case of a partnership, its
partnership agreement and any certificate or statement of partnership, and (c)
in the case of a limited liability company, a trust or any other entity, its
formation documents, in each case as amended from time to time.
"Collateral" means all property in which from time to time the Lender
is granted or purportedly granted a Lien by Borrower pursuant to the Mortgage.
"Conditional Commitment" means a HUD Conditional Commitment issued by
the Federal Housing Administration or the United States Veterans Administration
with respect to Units constructed or to be constructed.
"Construction Contract" means, as to any Contractor, the agreement
between the Borrower and the Contractor relating to services to be provided by
the Contractor in connection with the Project.
"Contractor" means any Person engaged by the Borrower from time to time
as a general contractor in connection with the Project.
"Cost Savings" means the excess, if any, of any Line Item over the
actual Project Costs incurred in connection with the work associated with such
Line Item, as determined by the Lender after such work has been completed and
all such Project Costs have been paid in full and all Lien Claims and potential
Lien Claims relating to such work have been released or otherwise discharged to
the satisfaction of the Lender.
"Disbursement" means each disbursement of the proceeds of the Loan and
each disbursement of any Borrower's Funds in accordance with the Disbursement
Schedule.
"Disbursement Account" has the meaning set forth in paragraph 1 of the
Disbursement Schedule.
"Disbursement Request" means an Owner's Sworn Statement and request for
a Disbursement in a form approved by the Lender.
"Disbursement Schedule" means the "Disbursement Schedule" attached
hereto as Exhibit "D".
"Documents" means written documents and materials, including
agreements, approvals, certificates, consents, instruments, financing
statements, reports, budgets, forecasts and opinions.
"Environmental Indemnity" means the Environmental Indemnity Agreements
to be executed by the Borrower in favor of the Lender.
"Events of Default" means the events set forth in Section 8.1.
"Final Funding Date" means the date which is thirty (30) days prior to
the Maturity Date.
"Financial Statements" means balance sheets and income statements.
"Financing Commitment" means any Certificate of Reasonable Value,
Conditional Commitment or Takeout Commitment.
"Financing Costs" means all reasonable costs incurred by Lender in
connection with the Loan which Borrower is obligated to pay under Section 6.12
of this Agreement including, without limitation, the Loan Fee, appraisal fees,
Lender's attorneys' fee and Lender's construction consultant fees.
"Financing Statement" means individually and collectively any and all
financing statements executed by the Borrower to evidence the security for the
Loan.
"Flood Hazard Area" means an area which has been designated as a
special flood hazard area or subject to comparable risks by the Federal
Emergency Management Agency or any successor to such Agency.
"Governmental Agency" means (a) any government or municipality or
political subdivision of any government or municipality, (b) any assessment,
improvement, community
facilities or other special taxing district, (c) any governmental or
quasi-governmental agency, authority, board, bureau, commission, corporation,
department, instrumentality or public body, (d) any court, administrative
tribunal, arbitrator, public utility or regulatory body, or (e) any central bank
or comparable authority.
"Improvements" means the Units and other improvements, including site
development work (if any), constructed or to be constructed pursuant to the Unit
Plans.
"Interest Reserve" means an aggregate interest reserve of $960,000
which will be allocated to Unit Budgets sufficient to carry interest for twelve
(12) months.
"Laws" means all federal, state and local laws, rules, regulations,
ordinances and codes.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest or other charge or encumbrance.
"Lien Claim" means (a) any mechanic's lien affecting any of the
Collateral, (b) any right of any Person to assert or maintain any such
mechanic's lien, and (d) any other claim to payment by any Lien Claimant.
"Lien Claimant" means the Contractor, if any, and any other Person who
has furnished labor, service, equipment or material in connection with the
Project or who is otherwise entitled to payment for any Project Costs.
"Line Item" means each of the separate items set forth in the Unit
Budget.
"Loan" means the loan to be made by the Lender to the Borrower pursuant
to this Agreement in an amount not to exceed the Loan Amount.
"Loan Amount" means the amount of the Loan set forth in Section 1.
"Loan Documents" means this Agreement, the Note, the Mortgage, the
Environmental Indemnity, and any other documents which evidence, secure or are
otherwise given by any Loan Party to Lender in connection with the Loan,
including without limitation, the Modification Documents.
"Loan Fee" means the nonrefundable loan fees to be paid by the Borrower
to the Lender in the amount and as provided in Section 6.12(b).
"Loan Party" means (a) the Borrower or (b) any guarantor which at the
time has or may have any obligation or liability (whether fixed, contingent or
otherwise) under any guaranty executed or to be executed by it.
"Loan to Value Ratio" means (1) with respect to acquiring Lots, seventy
percent (70%) of the appraised value of the land and (2) as to the Units,
seventy-five percent (75%) of the appraised value of such completed Units;
provided, however, that if a completed Unit does not sell within six (6) months
after the first Disbursement for such Unit, "Loan to Value Ratio" shall mean
sixty-five percent (65%) of the appraised value of such completed Unit, and,
provided further, that if a completed Unit does not sell within twelve (12)
months after the first Disbursement for the Unit, "Loan to Value Ratio" shall
mean zero for such Unit.
"Lot" means any one of the Lots which from time to time are encumbered
by the Mortgage. Each Lot shall be fully developed prior to being encumbered by
the Mortgage.
"Maturity Date" means the maturity date of the Note, as such maturity
date may be extended from time to time.
"Modification Documents" means those documents executed by Borrower and
any other Loan Party which, in Lender's sole judgment are necessary or desirable
to modify this Agreement, Mortgage or other Loan Documents in connection with
adding Lots as Collateral hereunder.
"Model Units" means Units to be constructed on Lots in accordance with
the Unit Plans to be used by Borrower as models for the marketing of Units.
"Mortgage" means the Construction Mortgage with Assignments of Rents,
Security Agreements and Fixture Filings which will be executed by the Borrower
and delivered to Lender and amended from time to time when Lots are added as
Collateral which shall secure the Loan.
"Net Worth" means the "Consolidated Tangible Net Worth" as that term is
defined in the prospectus dated October 18, 1996 for the issuance of Senior
Subordinated Debentures Series 11% of Borrower.
"Note" means the Promissory Note executed by the Borrower in favor of
the Lender to evidence the Loan.
"Obligations" means all obligations of the Borrower of every nature
under the Loan Documents.
"Other Requirements" means (a) the terms, conditions and requirements
of all Project Agreements, Authorizations and Rights of Others relating to the
Collateral or the Project and all other Documents, agreements and restrictions
relating to, binding on or affecting the Collateral or the Project, including
covenants, conditions and restrictions, leases, easements, reservations, rights
and rights-of-way, (b) requirements relating to the sale or transfer of
individual Units or common areas or portions of common areas or the supply of
Utility Services to the Real Property, (c) requirements and recommendations of
the soils report and any environmental impact report or negative declaration,
(d) all building, zoning, land use, planning and subdivision requirements, and
(e) requirements relating to construction of any offsite improvements.
"Permitted Exceptions" means (a) Liens in favor of the Lender, (b)
Permitted Prior Exceptions, and (c) other matters expressly approved by the
Lender in writing which are subject and subordinate to the Lien of the Mortgage.
No subordinated debt shall be secured by the Collateral.
"Permitted Prior Exceptions" means (a) general ad valorem real property
taxes which are not delinquent, (b) Special Taxes approved in writing by the
Lender which in each case are not delinquent, (c) mechanics liens affecting the
Real Property and arising from the construction of the Improvements, over which
the Title Policy has insured the priority of the Lien of the Mortgage, and (d)
such other matters as the Lender shall expressly approve in writing as
"Permitted Prior Exceptions" for purposes of this Agreement.
"Permitted Transfer" means (a) any sale or other transfer of Units and
common areas (or undivided interests in common areas) and the disposition of any
excess proceeds of sale, in each case to the extent permitted by Section 6.5,
and (b) any transfer or other disposition of Personal Property permitted by
Section 6.6.
"Person" means any person or entity, whether an individual, trustee,
corporation, partnership, joint stock company, trust, unincorporated
organization, bank, business association or firm, joint venture, Governmental
Agency or otherwise.
"Personal Property" means tangible personal property and fixtures,
including building materials and supplies, appliances, furnishings owned by
Borrower, equipment and other "Goods" (as defined in the Mortgage), but
excluding construction equipment of a type intended for use in connection with
other projects.
"Pre-Sold" means Units for which there are approved sales contracts to
sell the Units to an ultimate bona fide third-party purchaser with an xxxxxxx
money deposit in an amount which is customary in the market where such Unit is
located, and no financing contingency exceeding thirty (30) days in the sales
contract.
"Project" means the acquisition of the Lots, the construction of the
Improvements and the acquisition and installation of certain Personal Property
in accordance with the Unit Plans, and the marketing and sale of Units.
"Project Agreements" means (a) the Architect Agreement, if any, the
Construction Contract, if any, any Financing Commitment and any other takeout,
refinancing or permanent loan commitment issued or assigned to the Borrower with
respect to the Real Property, and (b) all leases, rental agreements, service and
maintenance agreements, purchase and sale agreements, purchase options and other
agreements of any nature relating to the Collateral or the Project, including
agreements with contractors, subcontractors, suppliers, project managers and
supervisors, designers, architects, engineers, sales agents and consultants.
"Project Costs" means all costs and expenses of any nature relating to
the Project or the financing of the Project.
"Real Property" means the Lots and the Improvements and all other
buildings, structures and improvements now or in the future located on the Lots.
"Remedy" means any right, power or remedy.
"Representations" means the representations and warranties of the
Borrower set forth in Section 7 and all other representations, warranties and
certifications to the Lender in the Loan Documents or in any other Document
delivered under or in connection with the Loan Documents.
"Right of Others" means, as to any property in which a Person has an
interest, any legal or equitable claim or other interest (other than a Lien but
including a leasehold interest, a right of first refusal or a right of
repossession or removal) in or with respect to such property held by any other
Person, and any option or right held by any other Person to acquire any such
claim or other interest or any Lien in or with respect to such property.
"Special Tax" means, as to any property, (a) any special assessment or
other Tax which is or may become a Lien affecting such property, other than
general ad valorem real property taxes, and (b) any assessment, improvement,
community facilities or other special taxing district in or into which such
property is or may
be located or incorporated or under which any special assessment or other Tax
which is or may become a Lien affecting such property is or may be imposed.
"Spec Units" means the Units which are not Pre-Sold Units.
"Subdivision" means a group of Lots to be financed hereunder which are
part of the same plat of subdivision.
"Takeout Commitment" means a commitment issued by an institutional
lender to make permanent loans to purchasers of Units.
"Taxes" means all taxes, assessments, charges, fees and levies
(including interest and penalties) imposed, assessed or collected by any
Governmental Agency.
"Title Policy(ies)" means an ALTA extended coverage lender's
policy(ies) of title insurance in form and substance satisfactory to the Lender,
issued by an insurer selected by the Borrower and satisfactory to the Lender,
together with such endorsements and policies of coinsurance and/or reinsurance
as may be required by the Lender, in a policy amount as determined by Lender,
insuring the Mortgage to be valid first priority Lien on the Lots and showing
the Lots to be subject only to Permitted Prior Exceptions.
"Unit" means a Lot together with a single-family residential housing
unit constructed or to be constructed thereon in accordance with the applicable
Unit Plans.
"Unit Budget" means the individual budget for a Unit which shall be
agreed to by Lender and Borrower in connection with adding a Lot as Collateral.
"Unit Plan" means the particular type or plan of the Unit to be
constructed.
"Utility Services" means all utility services, including water, gas,
electricity, telephone, garbage removal and sewer services.
EXHIBIT "B"
LOAN REQUIREMENTS - INITIAL DOCUMENTATION
The following documents must be furnished by Borrower to Lender upon
execution of the Agreement:
(a) Promissory Note in the face amount of $8,000,000.00
executed by Borrower in favor of Lender to evidence the Loan;
(b) Authorizing Resolutions for each Loan Party authorizing
execution and delivery of the Note and the Building Loan Agreement and
the performance of each Loan Party's obligations thereunder;
(c) Charter Documents for each Loan Party;
(d) Current Financial Statements for all Loan Parties;
(e) Certificate of Good Standing for Borrower in the state of
formation of Borrower and in the state where Borrower's activities
require its qualification;
(f) an opinion of Borrower's counsel stating (a) that the Note
and Building Loan Agreement have been duly authorized, executed and
delivered by Borrower, and are valid and enforceable in accordance with
their terms, subject to bankruptcy and equitable principles; (b) that
Borrower is qualified to do business and in good standing under the
laws of state where the Lots are located; and (c) such other opinions
as Lender may require;
(g) payment of all transaction costs and other expenses
incurred by Lender including reasonable counsel fees and disbursements
in connection with the preparation of the Note and Building Loan
Agreement;
(h) UCC Searches with respect to Borrower and Guarantors;
(i) Payment of the Loan Fee; and
(j) Such other certificates, opinions, documents and
instruments relating to the addition of Lots as Collateral reasonably
requested by Lender.
EXHIBIT "C"
REQUIREMENTS FOR ADDING LOTS AS COLLATERAL
UNDER THE BUILDING LOAN AGREEMENT
10 The following documents must be furnished by Borrower to Lender
together with each of Borrower's request to add additional Lots as Collateral
under the Building Loan Agreement:
.1 Unit Budgets for such Lots;
.2 a construction and disbursement schedule for such Lots;
.3 at Lender's request, Unit Plans for such Lots;
.4 at Lender's request, copies of soil reports for such Lots;
.5 at Lender's request, evidence of adequate utility service
for such Lots;
.6 at Lender's request, copy of budget for any homeowner's
association applicable to such Lots, if any; and
.7 statement of conditions for transfer of common areas to be
located in such Lots to homeowner's associations, if any.
11 The following documents must be furnished by Borrower to Lender
prior to the initial Disbursement of the Loan for the acquisition or development
of any Lot added as Collateral under the Building Loan Agreement:
.1 An amendment to the Construction Mortgage with Assignments
of Rents, Security Agreements and Fixture Filings executed by the
Borrower in favor of the Lender to secure the Loan and other
Obligations of the Borrower, which shall cover the Lots being added as
Collateral, any Units to be constructed thereon, certain Personal
Property pertaining to such Lots and Units, the Project Agreements
pertaining to such Lots, the Unit Plans pertaining to such Lots and
such other rights, properties and interests relating to the Lots and
Units to be constructed thereon as the Lender may require.
.2 The Financing Statements executed by the Borrower in favor
of the Lender with respect to such Lot as the Lender may require.
.3 Environmental Indemnity executed by the Borrower and
Guarantor with respect to such Lots.
.4 Assignment of Plans and Specifications pertaining to such
Lots.
.5 Authorizing Resolutions for each Loan Party authorizing
execution and delivery of the Mortgage, Loan Documents and Modification
Documents pertaining to the Lots and the performance of each Loan
Party's obligations thereunder.
.6 General Collateral Assignment pertaining to such Lots.
.7 Evidence of insurance required by Section 6.8.
.8 Copy of title insurance commitment and recorded exceptions,
together with extended coverage, 3.0 zoning endorsement, variable rate
endorsement, comprehensive endorsement, contiguity endorsement,
revolving credit endorsement, access endorsement, deletion of
creditor's rights endorsement, and other endorsements requested by
Lender.
.9 Copy of final plat.
.10 Evidence of compliance with zoning and other land use
restrictions.
.11 Environmental investigative reports concerning the
Subdivision in form and content and prepared by a consultant
satisfactory to Lender.
.12 List of bonds, security deposits or letters of credit
required in connection with the Lots.
.13 Evidence of recording/filing of the required Mortgage and
the Financing Statements.
.14 Confirmation that an endorsement to the Title Policy has
been or will be issued with respect to the Lots at or prior to first
Disbursement.
.15 original Loan Documents and Modifications Documents
pertaining to such Lots;
.16 copies of all documents which are title exceptions,
including, without limitation, any applicable CC&R's or easements for
such Lots;
.17 payment of all transaction costs and other expenses
incurred by Lender including reasonable counsel fees
and disbursements in connection with the addition of such
Lots as Collateral;
.18 payment of all recording charges, filing fees, taxes, or
other expenses, including but not limited to intangibles taxes and
documentary stamp taxes in connection with the recording of the
Mortgage, or modification of Mortgage, and other Loan Documents and the
lien necessary to grant and perfect in favor of Lender a first priority
lien on and security interest in such Lots as Collateral;
.19 evidence, as Lender may deem necessary or appropriate, to
indicate complete compliance with all requirements of applicable laws;
.20 a certification by a duly authorized officer of Borrower
certifying that all of the representations and warranties contained in
the Mortgage, in the other Loan Documents and Modification Documents,
after giving effect to the addition of such Lots, are true and correct
with respect to such Lots and that there is no Event of Default
hereunder; and
.21 Such other certificates, opinions, documents and
instruments relating to the addition of such Lots as Collateral
reasonably requested by Lender.
EXHIBIT "D"
DISBURSEMENT SCHEDULE
All Disbursements shall be made or issued in accordance with the
following terms, conditions and procedures:
12. Disbursement Account. A demand deposit account (the "Disbursement
Account") shall be identified at an financial institution acceptable to Lender.
13. Method of Disbursement. Subject to fulfillment of all applicable
conditions and the terms and procedures set forth in the Agreement and this
Disbursement Schedule: (i) each Disbursement shall be made on the basis of a
Disbursement Request submitted (in duplicate) by the Borrower to the Lender,
which shall certify that the Project Costs covered by the Disbursement Request
have been paid or incurred by the Borrower, and (ii) upon the Lender's approval
of the Disbursement Request, the proceeds of the Disbursement shall be deposited
into the Disbursement Account, except that (A) the proceeds of any Disbursement
to pay interest or other amounts owing to the Lender shall be made by book
entry, and (B) at the Lender's option, Disbursements may otherwise be made by
the Lender directly to the Borrower, to the Contractor, if any, or to any other
Lien Claimant, or jointly to one or more of such Persons or to other Persons
designated by the Borrower, or in such other manner as the Lender may approve or
require.
14. Disbursement Draws.
.1 Unit Budgets. Except for interest, disbursements will be provided on
a staged draw basis for each Unit in accordance with the construction and
disbursement draw schedule for each Unit as agreed to by Lender and Borrower
when the Lot on which such Unit is to be located was added as Collateral based
upon a sworn owner's and contractor's statement approved by Lender and Lender's
construction consultant.
.2 Interest. Accrued interest shall be disbursed on a monthly basis on
account of the applicable Line Item in each Unit Budget.
15. Budgets; Use of Proceeds. When a Lot is added as Collateral under
the Agreement, Lender and Borrower shall agree to a Unit Budget for such Lot.
Unless the Lender otherwise consents: (i) each Disbursement shall be made and
used solely to pay or reimburse the Borrower for payment of Project Costs
associated with specific Line Items set forth in the applicable Unit Budget, and
(ii) the total amount disbursed for Project Costs associated with any Line Item
shall not exceed the corresponding amount set forth in the applicable Unit
Budget less the total of all amounts previously disbursed for such Line Item.
Unless the Lender otherwise consents, no modifications shall be made to
the Unit Budget at any time, except that the Unit Budget and any applicable
shall be appropriately modified by the Lender from time to time to reflect any
increase in Project Costs for which additional Borrower's Funds have been
deposited by the Borrower with the Lender in accordance with paragraph 6 below.
16. Disbursement Procedures. Each Disbursement (other than
Disbursements to pay interest or other amounts owing to the Lender) shall be
subject to prior receipt by the Lender, in form and substance satisfactory to
the Lender, of each of the following items: (i) a Disbursement Request submitted
(in duplicate) by the Borrower, certifying the status of construction of the
Improvements and the amount requested (and the total of all amounts previously
requested) with respect to each Line Item in each Unit Budget, and also
certifying that no Event of Default has occurred and is continuing and that all
Representations made by the Borrower in any of the Loan Documents are correct in
all material respects as of the date of the Disbursement Request (ii) a
Contractor's Application for Payment and Sworn Contractor's Statement with
respect to each Unit under construction in form acceptable to Lender, a
certificate or statement from the Contractor, if any, and/or the Architect with
respect to the status of construction or the amount requested, (iii) at the
request of Lender, originals or copies of such bills, invoices, receipts, lien
releases or waivers or other evidence of payment or information as the Lender
may reasonably require with respect to any Lien Claims or potential Lien Claims
or the status of construction or amounts paid or payable for any Project Costs,
(iv) to the extent that any Disbursement relates to costs for building
materials, equipment or other Personal Property, evidence that such building
materials, equipment or other Personal Property have been incorporated into the
Improvements or have been delivered to the Borrower and stored and insured in a
manner satisfactory to the Lender, (v) a certificate from Lender's construction
consultant in form satisfactory to Lender (provided such certificate shall not
be required to be obtained more than once during each thirty (30) day period),
(vi) evidence of any insurance required by Section 6.8 (if not previously
furnished to the Lender) and, if requested by the Lender, evidence that any
required Financing Commitment is in full force and effect, (vii) a date down
endorsement, interim mechanic's lien endorsement and such endorsements to the
Title Policy and such other Documents and information relating to the Collateral
or the Project as the Lender may reasonably request, and (viii) in the case of
the initial Disbursement for any Lot, the documents described in Exhibit "C" and
(ix) in the case of the initial disbursement with respect to a particular Unit
(a) a copy of the fully executed sales contract relating to the Unit (except in
the case of a Spec Unit) along with evidence of the deposit of xxxxxxx money;
and (b) a building permit with respect to such Unit. Subject to all of
the terms and conditions of this Agreement, Lender agrees to use diligent
efforts to make each Disbursement within five (5) business days of Lender's
receipt of the foregoing items with respect thereto.
Unless the Lender otherwise consents, not more than two Disbursements
(other than Disbursements to pay interest or other amounts owing to the Lender)
shall be made during any month. Unless otherwise paid by the Borrower, and
notwithstanding paragraph 2 above, Disbursements for interest and other amounts
owing to the Lender may be made by the Lender without further authorization from
the Borrower.
Unless the Lender otherwise consents, the Lender shall not be obligated
to make any Disbursement if (A) the Lender has determined that an Event of
Default has occurred and is continuing or that any Representation made by the
Borrower in any of the Loan Documents would not be correct in all material
respects if made on and as of the date of the Disbursement or (B) the Lender has
determined, based on inspections by or on behalf of the Lender or such other
information as the Lender deems appropriate, that the construction of the
Improvements is not substantially as represented by the Borrower or is not in
compliance with the requirements of the Agreement, or (C) the Borrower has
failed to deposit with the Lender any Borrower's Funds required by paragraph 6
below, or (D) the Lender is required under applicable Laws to withhold the
Disbursement or a stop notice has been asserted against the Lender and has not
been fully released, or (E) the Lender has determined that any Liens or Rights
of Others, other than Permitted Prior Exceptions, may have priority over any of
the Mortgage with respect to the Disbursement.
17. Deposit of Borrower's Funds. The Borrower may from time to time
deposit additional Borrower's Funds with the Lender as the Borrower deems
appropriate to cover any increase in Project Costs. In addition, if the Lender
at any time determines that any actual or estimated Project Costs, including
without limitation interest, have exceeded or can reasonably be expected to
exceed the corresponding amount set forth in the Unit Budgets (whether as a
result of Change Orders or otherwise), or that Project Costs for any matters not
covered by specific Line Items have been or may be incurred by the Borrower, or
that the undisbursed portion of the Loan (together with the undisbursed portion
of all Borrower's Funds deposited with the Lender under this paragraph 6) is or
may be insufficient to pay all Project Costs that may be payable under the Loan
Documents or otherwise required in connection with the Project (including a
reasonable reserve for contingency, interest and other costs and expenses), then
the Borrower shall deposit with the Lender, on demand, additional Borrower's
Funds in an amount deemed reasonably necessary by the Lender to pay such Project
Costs or to cover such insufficiency. Any Borrower's
Funds deposited with the Lender under this paragraph 6 shall be held in a Cash
Collateral Account and shall be disbursed by the Lender prior to further
Disbursements of the Loan.
EXHIBIT "E"
APPROVED SUBDIVISIONS
