Exhibit 10.22
CONSTRUCTION LOAN AGREEMENT
BETWEEN
CMC HEARTLAND PARTNERS VII, LLC,
a Delaware limited liability company, as Borrower
AND
BANK ONE, ILLINOIS, NA, a national
banking association, as Lender
TABLE OF CONTENTS
Section Page No.
1. RECITALS..........................................................1
--------
2. DEFINITIONS.......................................................1
-----------
3. COMMITMENTS TO LEND; COMMITMENT FEE...............................7
-----------------------------------
3.1 Maximum Amount of the Loan...............................7
--------------------------
3.2 Reborrowing..............................................8
-----------
3.3 Voluntary Prepayment; Mandatory Prepayment...............8
------------------------------------------
3.4 Loan Advances Evidenced by the Note......................8
-----------------------------------
3.5 Interest Rate and Payment of Interest. .................8
-------------------------------------
3.6 Mandatory Principal Payments.............................9
----------------------------
3.7 Default Rate.............................................9
------------
3.8 Late Charge..............................................9
-----------
3.9 Fees. ..................................................9
----
3.10 Loan Extension Option....................................9
---------------------
4. LOAN DOCUMENTS...................................................10
--------------
5. DISBURSEMENT OF THE LOAN.........................................14
------------------------
5.1 Conditions Precedent....................................14
--------------------
5.2 Conditions Precedents for Disbursements after the
Initial Loan Advance....................................14
--------------------------------------------------
5.3 Use of Loan Proceeds; Inspections of the Work...........15
---------------------------------------------
5.4 Disbursement Requests...................................16
---------------------
5.5 Certifications, Representations and Warranties..........17
----------------------------------------------
5.6 Amount of Disbursements; Retainage......................18
----------------------------------
5.7 Costs...................................................18
-----
5.8 Reserves................................................18
--------
5.9 Loan In Balance.........................................19
---------------
5.10 Application of Disbursements............................19
----------------------------
5.11 Release of Retainage....................................20
--------------------
5.12 Additional Loan Limitations.............................21
---------------------------
6. REPRESENTATIONS AND WARRANTIES...................................22
------------------------------
6.1 Borrower................................................22
--------
6.2 Sole Member.............................................22
-----------
6.3 Heartland...............................................22
---------
6.4 Title...................................................22
-----
6.5 Improvements............................................23
------------
6.6 Validity and Enforceability of Documents................23
----------------------------------------
6.7 Litigation..............................................23
----------
6.8 Utilities; Authorities..................................23
----------------------
6.9 Solvency................................................23
--------
6.10 Financial Statements....................................24
--------------------
6.11 Compliance with Laws....................................24
--------------------
6.12 Construction Contract...................................24
---------------------
6.13 Subcontracts............................................24
------------
6.14 Plans and Specifications................................24
------------------------
6.15 Budget..................................................24
------
6.16 Financing Statements....................................25
--------------------
6.17 Event of Default........................................25
----------------
6.18 Responsible Property Transfer Act.......................25
---------------------------------
6.19 Additional Agreements...................................25
---------------------
7. BORROWER'S COVENANTS.............................................25
--------------------
7.1 Manner of Construction..................................25
----------------------
7.2 Compliance with Laws....................................25
--------------------
7.3 Inspection..............................................25
----------
7.4 Mechanics' Liens........................................26
----------------
7.5 Release by Lender.......................................26
-----------------
7.6 Financial Statements; Reports...........................27
-----------------------------
7.7 Affirmation of Representations and Warranties...........27
---------------------------------------------
7.8 Title...................................................27
-----
7.9 Proceedings Affecting Property..........................28
------------------------------
7.10 Disposal and Encumbrance of Property....................28
------------------------------------
7.11 Insurance...............................................28
---------
7.12 Performance of Obligations; Notice of Default...........28
---------------------------------------------
7.13 Subcontracts............................................29
------------
7.14 Restrictions Affecting Borrower.........................29
-------------------------------
7.15 Use of Receipts.........................................29
---------------
7.16 Management and Leasing Agreements; Subordination........29
------------------------------------------------
7.17 Additional Documents....................................29
--------------------
7.18 Sale to Investors.......................................30
-----------------
7.19 Survey..................................................30
------
8. LOAN EXPENSES....................................................30
-------------
9. LENDER'S REPRESENTATIVES.........................................30
------------------------
10. EVENTS OF DEFAULT................................................30
-----------------
11. REMEDIES........................................................32
--------
12. SALES OF UNITS; PARTIAL RELEASES.................................34
--------------------------------
12.1 Sales Prices............................................34
------------
ii
12.2 Release Prices..........................................34
--------------
13. MISCELLANEOUS....................................................34
-------------
13.1 Additional Indebtedness.................................34
-----------------------
13.2 Additional Acts.........................................34
---------------
13.3 Loan Agreement Governs..................................34
----------------------
13.4 Additional Advances.....................................34
-------------------
13.5 Amendment; Waiver; Approval.............................35
---------------------------
13.6 Notice..................................................35
------
13.7 Benefit; Assignment.....................................36
-------------------
13.8 Governing Law...........................................36
-------------
13.9 Indemnity...............................................36
---------
13.10 Headings................................................36
--------
13.11 No Partnership or Joint Venture.........................37
-------------------------------
13.12 Time is of the Essence..................................37
----------------------
13.13 Invalid Provisions......................................37
------------------
13.14 Offset..................................................37
------
13.15 Acts by Lender..........................................37
--------------
13.16 Binding Provisions......................................37
------------------
13.17 Counterparts............................................37
------------
13.18 No Third Party Beneficiary..............................37
---------------------------
13.19 Publicity...............................................38
---------
13.20 JURISDICTION AND VENUE..................................38
----------------------
13.21 JURY WAIVER.............................................39
-----------
iii
CONSTRUCTION LOAN AGREEMENT
---------------------------
This Construction Loan Agreement ("Agreement") is dated as of December
9, 1999, by and between CMC HEARTLAND PARTNERS VII, LLC, a Delaware limited
liability company ("Borrower"), and BANK ONE, ILLINOIS, NA, a national banking
association ("Lender").
1. RECITALS.
--------
1.1 Seller is the fee owner of the Land (this and all other
capitalized terms used in this Article 1 and not otherwise defined
shall have the meanings ascribed thereto in Article 2 below).
1.2 Borrower has certain rights to purchase the Land pursuant
to the terms of the Option Agreement.
1.3 Borrower has requested that Lender make available to
Borrower a construction loan (the "Loan") in the maximum outstanding
principal amount of $5,000,000 to pay a portion of the amounts needed
to pay certain Project Costs associated with the construction of Units
(hereinafter defined) on the Land. Lender has agreed to make the Loan
subject to the terms and conditions set forth herein.
1.4 In consideration of the mutual agreements set forth herein
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender agree
as follows:
2. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
2.1 "Acceptable Unit Sale Contract" shall mean a binding,
unconditional sale contract for a Unit (with any financing and other
contingencies having been satisfied or expired) (i) with a third party
unrelated to and unaffiliated with Borrower or Seller, (ii) with
xxxxxxx money paid in cash in the amount of 5% of the sales price
thereof, but not less than $1,000, and (iii) on a form of contract
approved in writing by Lender (with only such changes thereto as may be
requested by the purchaser and agreed to by Borrower exercising
commercially reasonable judgment).
2.2 "Additional Agreements" shall be all contracts, options,
leases, management, leasing, development, sales or other agreements in
existence that affect the Property (written or oral) as set forth in
Exhibit E attached hereto.
2.3 "Applicable Laws" shall mean all laws, statutes,
ordinances, rules, regulations, judgments, decrees or orders of any
state, federal or local government or agency which are applicable to
Borrower, Seller and/or the Property.
2.4 "Assignment of Option Agreement" shall mean the Collateral
Assignment of Option Agreement made by Borrower to Lender and consented
to by Seller to secure the Loan. 2.5 "Assignment of Plans" shall mean
the collateral assignment of all licenses, permits, plans,
specifications and contracts relating to the construction, use or
operation of the Project to be made by Borrower to Lender to secure the
Loan.
2.6 "Assignment of Rents" shall mean the Assignment of Rents
and Leases dated as of the date hereof made by Borrower to Lender, as
the same is amended, restated, modified or supplemented from time to
time.
2.7 "Assignment of Sales Contracts" shall mean the assignment
of all sales contracts with respect to any Unit to be made by Borrower
to Lender to secure the Loan.
2.8 "Borrower Mortgage Title Policy" shall mean the title
insurance policy described in Section 4.5 below.
2.9 "Budget" shall mean the detailed budget of all costs to be
incurred in connection with the Work, including both hard costs and
soft costs, as set forth in Exhibit B attached hereto.
2.10 "Business Day" shall mean each day excluding Saturdays,
Sundays and any other day on which Lender is closed for business to the
public.
2.11 "Construction Contract" shall mean that certain contract
dated February 10, 1999 between Borrower and the Contractor regarding
the general contracting and construction management services to be
performed in connection with the construction of the Improvements.
2.12 "Consultant" shall mean an independent architect or
engineer selected by Lender.
2.13 "Contractor" shall mean Lifestyle Construction Company,
Inc., a Delaware corporation.
2.14 "Default Rate" shall mean the Loan Rate plus 3.0% per
annum.
2.15 "Event of Default" shall have the meaning ascribed to it
in Section 10 of this Agreement.
2.16 "Existing Lender" shall mean Bank of America.
2.17 "Heartland" shall mean Heartland Technology, Inc., a
Delaware corporation, a general partner of Sole Member.
2
2.18 "Hazardous Materials" shall mean and include any and all
hazardous, toxic or dangerous substances, wastes and materials and
other pollutants and contaminants as defined or described in any or all
applicable federal, state or local statutes, laws, ordinances, codes,
rules, regulations, orders or decrees now or hereafter regulating,
relating to or imposing liability or standards of conduct with respect
to environmental matters, including, without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended by the Superfund Amendments and Reauthorization Act
of 1986 (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act
of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984
(42 U.S.C. Section 6901 et seq.), the Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977 and the Water Quality
Act of 1987 (33 U.S.C. Section 1251 et seq.), the Toxic Substances
Control Act of 1976 (15 U.S.C. Section 2601 et seq.), the Emergency
Planning and Community Right-to-Know Act of 1986 (42 U.S.C. Section
11001 et seq.), the Clear Air Act of 1966, as amended (42 U.S.C.
Section 7401 et seq.), the National Environmental Policy Act of 1970
(42 U.S.C. Section 4321 et seq.), the Rivers and Harbours Act of 1899
(33 U.S.C. Section 401 et seq.), the Endangered Species Act of 1973, as
amended (16 U.S.C. Section 1531 et seq.), the Safe Drinking Water Act
of 1974, as amended (42 U.S.C. Section 300(f) et seq.), and the
Occupational Safety and Health Act of 1970, as amended (29 U.S.C.
Section 651 et seq.) and all rules, regulations and guidance documents
promulgated or published thereunder, all as amended or hereinafter
amended. Without intending to limit the scope or breadth of the
foregoing definition, the term Hazardous Materials shall include
asbestos, urea formaldehyde, polychlorinated biphenyls, crude oil,
radioactive materials and underground storage tanks.
2.19 "Improvements" shall mean the Units.
2.20 "Indemnity Agreement" shall mean the Environmental
Indemnity Agreement dated as of the date hereof, made by Borrower in
favor of Lender, as the same may be hereafter amended or otherwise
modified from time to time.
2.21 "Initial Disbursement Date" shall mean the date on which
the first disbursement of the Loan occurs.
2.22 "Land"shall mean the real property legally described on
Exhibit A attached hereto and known as the Longleaf developments in
Southern Pines, North Carolina.
2.23 "Loan Advance" shall mean a disbursement of all or any
portion of the Loan.
2.24 "Loan Documents" shall mean this Agreement, the
Assignment of Option Agreement, the Assignment of Plans, the Assignment
of Sales Contracts, the Assignment of Rents, the Mortgage, the Note,
the Security Agreement, the Seller Mortgage, the
3
Indemnity Agreement and every other document now or hereafter
evidencing, securing or otherwise executed in conjunction with the
Loan, together with all amendments and modifications thereof.
2.25 "Loan Expenses" shall mean the expenses, charges, costs
(including both hard costs and soft costs) and fees relating to the
making, administration, negotiation, documentation or any other aspect
of the Loan or relating to the performance of the Work, including,
without limitation, Lender's reasonable attorneys' fees and costs in
connection with the negotiation, documentation and enforcement of the
Loan, the fees of the Consultant, all recording fees and charges, title
insurance charges and premiums, escrow fees, fees of insurance
consultants, costs of surveys and of other bonds required by the Title
Company in connection with clearing title to the Real Property or the
issuance of title reports, binders, policies and the like, and all
other costs, expenses, charges and fees referred to in or necessitated
by the terms of this Agreement or any of the other Loan Documents.
2.26 "Loan Rate" shall mean the Prime Rate.
2.27 "Maturity Date" shall mean December 8, 2000, unless
otherwise extended pursuant to the terms of Section 3.12 below.
2.28 "Model Unit" shall mean a model Unit which is open for
viewing by prospective purchasers and which is not a Sold Unit.
2.29 "Mortgage" shall mean the Deed of Trust dated as of the
date hereof made by Borrower to Lender, as the same is amended,
restated, modified or supplemented from time to time, to secure the
Loan.
2.30 "Note" shall mean that certain Note of even date herewith
made by Borrower to Lender in the original principal amount of
$5,000,000 to evidence the Loan.
2.31 "Option Agreement" shall mean that certain Option,
Management and Marketing Agreement dated as of September 9, 1998, by
and between Borrower and Seller, as the same is amended, restated,
modified or supplemented from time to time.
2.32 "Parcel" shall mean, individually, a portion of the Land
upon which an individual Unit shall be constructed and collectively,
the portions of the Land upon which the Units shall be constructed.
2.33 "Permitted Exceptions" shall mean the exceptions to the
title of the Real Property listed as "Permitted Exceptions" on Exhibit
C attached hereto.
4
2.34 "Person" shall mean any individual, firm, corporation,
business enterprise, trust, association, joint venture, partnership,
governmental body or other entity, whether acting in an individual,
fiduciary or other capacity.
2.35 "Personal Property" shall mean and include any and all
furniture, furnishings, appliances, equipment and all fixtures (to the
extent such fixtures are attached in a manner so as not to be deemed to
be part of the Real Property) to be located in the Homes or otherwise
at the Land which will be used or usable in connection with the
ownership, development, construction or operation of the Project and
which will be owned or otherwise possessed by Borrower or any of its
affiliates, including all of such personal property contemplated under
the Plans and Specifications.
2.36 "Plans and Specifications" shall mean, collectively, the
architectural and engineering plans and specifications relating to the
Work or any portion thereof, all of which must be acceptable to Lender
in its sole and absolute discretion.
2.37 "Prime Rate" shall mean an annual rate of interest equal
to the prime rate as publicly announced by Lender to be in effect from
time to time, adjusted and changing when and as said prime rate changes
(but such rate may not be the lowest, best or most favorable rate of
interest which Lender may charge on loans to its customers).
2.38 "Project" shall mean the residential development to be
constructed on the Land, together with certain other related on-site
improvements.
2.39 "Project Cost" shall mean each of the following items,
but only to the extent specifically set forth in the Budget and only to
the extent specifically required to complete the Project:
(a) The actual hard costs of completing
construction of the Improvements, including demolition and
environmental remediation costs;
(b) The actual costs of acquiring and installing
the Personal Property;
(c) Premiums for title, casualty, liability and
other insurance required by Lender;
(d) The cost of recording and filing the Loan
Documents;
(e) Real estate taxes and other assessments
which Borrower is obligated to pay during the term of the
Loan;
(f) Interest, fees and similar charges payable
by Borrower to Lender hereunder or under the Note;
5
(g) Legal and other closing costs;
(h) Architectural, engineering and consulting
fees;
(i) Such other soft costs as may be set forth in
the Budget or as may be hereafter approved in writing by
Lender; and
(j) All other Loan Expenses.
2.40 "Property" shall mean the Real Property, the Units and
the Personal Property (whether before or after completion of the Work)
and all other tangible and intangible assets benefitting or otherwise
appertaining to the Project, including, without limitation, all of the
collateral for the Loan described in the Loan Documents.
2.41 "Real Property" shall mean the Land, the Improvements and
all easements and appurtenants thereto.
2.42 "Reserves" shall mean the reserves described in Section
5.8 below.
2.43 "Retainage" shall mean the portion of each Loan Advance
retained by Lender in accordance with Section 5.6 below.
2.44 "Security Agreement" shall mean the security agreement
encumbering the Personal Property dated as of the date hereof, made by
Borrower to, as the same may be hereafter amended, restated, modified
or supplemented from time to time.
2.45 "Seller" shall mean Longleaf Associates Limited
Partnership, a North Carolina limited partnership.
2.46 "Seller Mortgage" shall mean the Deed of Trust executed
and delivered by Seller and Borrower to secure the Loan, as described
in Section 5.2(a) below.
2.47 "Seller Mortgage Title Policy" shall mean the title
insurance policy described in Section 5.2(b) below.
2.48 "Sold Unit" means a Unit that is subject to an Acceptable
Unit Sale Contract.
2.49 "Sole Member" shall mean CMC Heartland Partners, a
Delaware general partnership, the sole member of Borrower.
2.50 "Spec Unit" means any Unit for which construction has
commenced (including construction of foundations) and which is not a
Model Unit or a Sold Unit.
6
2.51 "Subcontracts" shall mean all subcontracts now or
hereafter entered into by the Contractor for the construction of any of
the Improvements or the installation of any of the Personal Property or
the performance of any other aspect of the Work, together with all
sub-subcontracts, material or equipment purchase orders, equipment
leases and other agreements entered into by the Contractor, any
subcontractor or any other party supplying labor or materials in
connection with the Work.
2.52 "Title Company" shall mean Chicago Title Insurance
Company.
2.53 "Title Policies" shall mean the Borrower Mortgage Title
Policy and the Seller Mortgage Title Policy.
2.54 "Town" shall mean the town of Southern Pines, North
Carolina.
2.55 "Town Assessments" shall mean the payments to the Town
for each Unit.
2.56 "Unit" shall mean a detached single family home or an
attached town home on the Land.
2.57 "Unmatured Default" shall mean an event or circumstance
that with the giving of notice, the passage of time, or both, would
constitute an Event of Default.
2.58 "Work" shall mean the performance of all work to be
performed and the supplying of all materials to be supplied in
connection with the building, furnishing, fixturing and equipping of
the Units, all in accordance with the provisions of this Agreement and
with the Plans and Specifications, the Budget and other documentation
approved by Lender.
3. COMMITMENTS TO LEND; COMMITMENT FEE.
-----------------------------------
3.1 Maximum Amount of the Loan. Lender agrees to lend to
Borrower, and Borrower agrees to borrow from Lender $5,000,000 for the
Loan, upon the terms and subject to the conditions contained in this
Agreement. Notwithstanding anything contained in this Article to the
contrary, Loan Advances shall be limited to such amounts as Borrower is
eligible to receive pursuant to, and upon compliance with, the
conditions of Article 5 hereof. Additionally, the aggregate amount of
the Loan that may be advanced for any Unit at any time (the "Advance
Rate") shall not exceed the lesser of the following:
(a) the lesser of 100% of the cost of such Unit or
80% of the appraised value of such Unit, if such Unit at such
time is a Sold Unit, or
7
(b) subject to Section 3.10(b), the lesser of 90% of
the cost of such Unit or 75% of the appraised value of such
Unit, if such Unit at such time is a Model Unit or Spec Unit.
Notwithstanding anything to the contrary contained herein, (i) for
Units which are currently under construction and financed with the
Existing Lender, the cost of such Unit shall be deemed to include
Borrower's acquisition cost of the Parcel for such Unit pursuant to the
Option Agreement, and (ii) for those Units which are not currently
under construction or financed with the Existing Lender, the cost of
such Unit shall not include any amounts payable to Seller pursuant to
the Option Agreement. Furthermore, there shall be no more than seven
Spec Units or more than two Model Units financed by Lender at any time.
3.2 Reborrowing. Borrower shall be entitled to reborrow
portions of the Loan that are repaid or prepaid.
3.3 Voluntary Prepayment; Mandatory Prepayment.
(a) Borrower may prepay all or any part of the Loan
at any time and from time to time upon five days prior written
notice to Lender without cost or penalty.
(b) If the outstanding principal balance of the Loan
at any time exceeds the maximum permitted amount set forth in
Section 3.1 above, Borrower shall immediately repay the amount
of such excess.
(c) Borrower must make a mandatory principal payment
on the Loan equal to the aggregate amount of the Loan
previously disbursed by Lender with respect to each Sold Unit
nine months after the date on which the first draw of proceeds
of the Loan for such Sold Unit was made. Borrower must make a
mandatory principal payment on the Loan equal to the aggregate
amount of the Loan previously disbursed by Lender with respect
to each Spec Unit twelve months after the date on which the
first draw of proceeds of the Loan for such Spec Unit was
made. Borrower must make a mandatory principal payment on the
Loan equal to the aggregate amount of the Loan previously
disbursed by Lender with respect to each Model Unit eighteen
months after the date on which the first draw of proceeds of
the Loan for such Model Unit was made.
3.4 Loan Advances Evidenced by the Note. All advances of
the Loan shall be evidenced by the Note.
3.5 Interest Rate and Payment of Interest. Interest shall
accrue on the unpaid principal balance of the Loan during each calendar
month (whether full or partial) at the Prime Rate. Interest shall be
computed on the basis of a year consisting of 360 days and
8
shall be based on the actual number of days during the period for which
interest is being charged. Accrued and unpaid interest on the Loan
shall be due and payable to Lender on the first day of each month
commencing on the first day of the month following the month in which
the Initial Disbursement Date occurs. Borrower hereby authorizes Lender
during the term of the Loan to disburse to itself from the undisbursed
proceeds of the Loan all then accrued and unpaid interest on the Loan
which is then due and payable; provided, however, that such
authorization shall not be deemed to limit, reduce or otherwise affect
Borrower's obligation to pay interest if (a) there are no remaining
amounts in the Budget for the Loan allocated for the payment of such
interest (including Reserves specifically allocated to pay such
interest), or (b) Lender is entitled to withhold disbursement of the
Loan for any reason. Any amounts disbursed from the interest reserve
shall become part of the outstanding principal balance of the Loan and
interest thereon shall accrue and be payable as provided herein.
3.6 Mandatory Principal Payments. Concurrently with the
closing of the sale of each Unit, Borrower shall make a principal
payment on the Loan equal to the aggregate amount of the Loan
previously disbursed by Lender with respect to such Unit.
3.7 Default Rate. At any time when an Event of Default exists
under this Agreement or any of the other Loan Documents and after the
Maturity Date (or the First Extended Maturity Date or the Second
Extended Maturity Date, if applicable), (a) the aggregate outstanding
principal balance of the Loan and any other amounts then owing by
Borrower to Lender shall bear interest at the Default Rate until paid
in full and (b) subject to the maximum rate permitted by Applicable
Law, all accrued but unpaid interest shall bear interest at the Default
Rate therefrom until paid in full.
3.8 Late Charge. If any payment of interest or principal due
under the Note is not made within ten days after such payment is due,
then, in addition to the payment of the amount so due, Borrower shall
pay to Lender a "late charge" equal to five percent (5.0%) of the
amount of that payment or $25.00, whichever is greater, up to the
maximum amount of $1,500.00 per late charge to compensate Lender for
the cost of collecting and handling such late payment. This late charge
may be assessed without notice, shall be immediately due and payable
and shall be in addition to all other rights and remedies available to
Lender.
3.9 Fees. Concurrently with the initial disbursement of the
Loan, Lender shall be deemed to have fully earned a non-refundable loan
and administration fee in the amount of $50,000 (the "Loan Fee"), which
fee shall be due and payable by Borrower on the Initial Disbursement
Date.
3.10 Loan Extension Option. If on the Maturity Date (a) any
Units are then under construction, or (b) there are any Units then
deemed to be Spec Units or Model Units, Borrower shall have the right
to extend the maturity date of the Loan for an additional six months
(the last day of said six month period being referred to herein as the
9
"First Extended Maturity Date"), upon and subject to the following
terms, provisions and conditions:
(i) Borrower shall give written notice (the
"Extension Notice") to Lender of Borrower's election to
exercise the aforementioned extension right not less than 60
days prior to the Maturity Date;
(ii) No Event of Default or Unmatured Default exists
under any of the Loan Documents on the date Borrower delivers
the Extension Notice or on the Maturity Date;
(iii) Concurrently with the delivery of the Extension
Notice, Borrower shall pay to Lender $25,000 for the six month
extension period;
(iv) The Advance Rate for each Spec Unit shall be
reduced from 75% to 70% of the appraised value on the date
that is twelve months after the date on which the first draw
of proceeds of the Loan for such Spec Unit was made;
(v) The Advance Rate for each Spec Unit shall be
reduced from 70% to 65% of the appraised value on the date
that is eighteen months after the date on which the first draw
of proceeds of the Loan for such Spec Unit was made;
(vi) Borrower makes mandatory principal payments on
the Loan equal to the amount of the Loan previously disbursed
by Lender with respect to each Spec Unit twenty-four months
after the date on which the first draw of proceeds of the Loan
for such Spec Unit was made; and
(vii) Borrower may not commence construction of any
Units;
(viii) Except as expressly provided to the contrary
in this Section 3.10, all of the other terms, provisions and
conditions of the Loan Documents shall remain in full force
and effect in accordance with their respective terms during
the additional extension period, including without limitation,
the obligation to make monthly payments of interest.
4. LOAN DOCUMENTS. Prior to the Initial Disbursement Date, Borrower
shall execute and/or deliver to Lender those of the following documents and
other items required to be executed and/or delivered by Borrower (and Seller),
and shall cause to be executed and/or delivered to Lender those of the following
documents and other items required to be executed and/or delivered by others,
all of which documents and other items shall contain such provisions as shall be
required to conform to this Agreement and otherwise shall be satisfactory in
form and substance to Lender:
4.1 The Loan Documents.
10
4.2 UCC financing statements perfecting the security
interests created by the Security Agreement.
4.3 Copies of surveys reasonably acceptable to Lender.
4.4 Borrower, at its expense, shall obtain and deliver to
Lender policies of insurance providing the following:
(a) Policies of insurance evidencing bodily injury,
death or property damage liability coverages in amounts not
less than $1,000,000 (combined single limit), and an
excess/umbrella liability coverage in an amount not less than
$1,000,000 shall be in effect with respect to Borrower. Such
policies must be written on an occurrence basis so as to
provide blanket contractual liability, broad form property
damage coverage, and coverage for products and completed
operations.
(b) "Special Cause of Loss" insurance on the
Improvements in an amount not less than the full insurable
value on replacement cost basis of the insured Improvements
and personal property related thereto. During the construction
period, such policy shall be written in the so-called
"Builder's Risk Completed Value Non-Reporting Form" (or
"Reporting Form" if the Improvements are a single family
residential development) with no coinsurance requirement and
shall contain a provision granting the insured permission to
complete.
(c) Evidence of worker's compensation insurance
coverage satisfactory to Lender.
(d) If the Real Property, or any part thereof, lies
within a "special flood hazard area" as designated on maps
prepared by the Department of Housing and Urban Development, a
National Flood Insurance Association standard flood insurance
policy, plus insurance from a private insurance carrier if
necessary, for the duration of the Loan in the amount of the
full insurable value of the Improvements.
(e) Such other insurance as Lender may require, which
may include, without limitation, errors and omissions,
insurance with respect to the contractors, architects and
engineers, earthquake insurance, rent abatement and/or
business loss.
All insurance policies shall (i) be issued by an insurance company
having a rating of "A" VII or better by A.M. Best Co., in Best's Rating
Guide, (ii) name Lender as additional insured on all liability
insurance and as mortgagee and loss payee on all casualty insurance,
(iii) provide that Lender is to receive thirty (30) days written notice
prior to
11
non-renewal or cancellation, (iv) be evidenced by a certificate of
insurance to be held by Lender, and (v) be in form and amounts
acceptable to Lender.
4.5 An ALTA Construction Loan Policy of Title Insurance
("Borrower Mortgage Title Policy") issued by the Title Company in the
full amount of the Note insuring that the Mortgage will be a first
priority lien upon the fee simple title to the Land to the extent of
advances made by Lender from time to time under this Agreement, subject
to no liens, claims, exceptions or encumbrances except the Permitted
Exceptions and containing endorsements reasonably required by Lender
from time to time (the Borrower Mortgage Title Policy, Permitted
Exceptions and required endorsements are more fully described on
Exhibit C attached hereto).
4.6 Copies of all recorded documents described in the
Borrower Mortgage Title Policy.
4.7 Current Uniform Commercial Code, federal and state tax
lien and judgment searches, pending suit and litigation searches and
bankruptcy court filings searches covering Borrower, Sole Member,
Contractor and Seller and disclosing no matters objectionable to
Lender.
4.8 Copies of the form of Subcontract to be used by the
Contractor.
4.9 The Plans and Specifications, which have been approved by
Borrower and the Contractor and approved and stamped by the appropriate
governmental authorities, including detailed descriptions (with
drawings and specifications).
4.10 Certified copies of the Construction Contract, all
licenses, permits and governmental approvals necessary for the
construction, use or operation of the Project and all other documents
and instruments relating to performance of the Work.
4.11 Opinion letter from Xxxxxxx, May & Rich, LLP, legal
counsel for Borrower opining to the authority of such party to execute,
deliver and perform its obligations under the Loan Documents, to the
validity and binding effect of the Loan Documents and to such other
matters as Lender and its counsel shall require.
4.12 Evidence that (i) no portion of the Real Property is
located in an area designated by the Secretary of Housing and Urban
Development as having special flood hazards, or if any portion of the
Real Property is so located, evidence that flood insurance is in
effect; and (ii) no portion of the Real Property is located in a
federally, state or locally designated wetland or other type of
government protected area.
4.13 Certified copies of the Limited Liability Company
Operating Agreement of Borrower, together with all amendments thereto,
and such resolutions and other documents as Lender deems appropriate
evidencing the authority of Borrower to execute
12
and deliver the Loan Documents to which such Persons are a party and to
perform the obligations contemplated hereby and thereby.
4.14 Certified copies of all service contracts, development
agreements and other agreements affecting the use, development or
operation of the Project, if any.
4.15 Evidence that the environmental condition of the Property
is satisfactory to Lender. Such testing and investigation shall be
performed by an environmental professional acceptable to Lender in a
manner satisfactory to Lender.
4.16 Evidence that, as of the date of the Initial Loan
Advance, there has been no material adverse change in the financial or
other projections for the Project, the physical condition of the
Property or the financial condition of Borrower since the date of the
most recent financial statements or projections delivered to Lender or
the most recent inspections of the condition of the Property made by
the Consultant, as the case may be.
4.17 Form of proposed sales contracts and other documents to
be used in connection with the sale of the Units, together with a
schedule of minimum sales prices therefor.
4.18 An appraisal satisfactory to Lender indicating the
aggregate fair market value of the Project, as completed that is
acceptable to Lender.
4.19 Certified copies of any sale contracts, letters of intent
and other agreements relating to the sale of the Units that have been
executed as of the date of the Initial Loan Advance.
4.20 A detailed marketing and sales projection, including a
projection of the amount of time required to close sales of the Units.
4.21 Evidence that the Property is, and upon completion the
Project will be, in compliance with all Applicable Laws.
4.22 A reasonably detailed Project development and
construction schedule specifying all of the projected start and
completion dates (or delivery dates) for each component of development
of the Project, including each separate component of performance of the
Work and each required license, permit or other public or private
approval.
4.23 A certified copy of the Option Agreement.
4.24 An Consent Agreement from Seller regarding the Option
Agreement in form and substance acceptable to Lender in its sole and
absolute discretion.
13
4.25 Copies of all agreement, declarations, by laws,
certificates, plans, opinions and other documents regarding or
affecting the Land, the Project or the Option Agreement.
4.26 Such other assignments, certificates, opinions and other
documents, instruments and information affecting or relating to
Lender's interest in the Project or the use, operation, development or
construction of the Project as Lender may reasonably require.
50 DISBURSEMENT OF THE LOAN.
------------------------
5.1 Conditions Precedent. In addition to the other conditions
set forth herein, the obligation of Lender to make the initial and each
subsequent disbursement of the Loan under this Agreement shall be
conditioned upon and subject to the payment to Lender of all loan fees
then owing from Borrower to Lender and to satisfaction of all of the
following conditions:
(a) All representations and warranties contained in
this Agreement and in the other Loan Documents shall be true
in all material respects on and as of the date of such
disbursement.
(b) Borrower shall have performed all of its
obligations under all Loan Documents which are required to be
performed on or prior to the date of such disbursement.
(c) The Loan shall not be "out of balance" as
determined under Section 5.9 below, and the disbursement shall
not cause the Loan to be "out of balance."
(d) There shall be no material adverse change in the
financial condition of Borrower as reasonably determined by
Lender.
(e) No Event of Default shall have occurred that has
not been waived in writing by Lender, and no Unmatured Default
shall then exist.
5.2 Conditions Precedents for Disbursements after the Initial
Loan Advance. In addition to all of the other conditions set forth
herein, the obligation of Lender to make each subsequent disbursement
of the Loan under this Agreement shall be conditioned upon and subject
to the satisfaction of all of the following conditions:
(a) Borrower and Seller shall execute and deliver to
the Title Company a Deed of Trust for the benefit of Lender
(the "Seller Mortgage"), in form and substance reasonably
acceptable to Lender for each Parcel that Seller is the fee
simple title holder and which Borrower has exercised its right
to purchase
14
pursuant to the Option Agreement. Notwithstanding anything to
the contrary, after the Seller Mortgage is recorded with the
Register of Deeds for Xxxxx County, North Carolina, Borrower
and Seller may execute and deliver to the Title Company,
amendments to the Seller Mortgage, in form and substance
reasonably acceptable to Lender adding each new Parcel to the
legal description of the Seller Mortgage.
(b) An ALTA Construction Loan Policy of Title
Insurance ("Seller Mortgage Title Policy") issued by the Title
Company in the full amount of the Note insuring that the
Seller Mortgage will be a first priority lien upon the fee
simple title to each new Parcel to the extent of advances made
by Lender from time to time under this Agreement, subject to
no liens, claims, exceptions or encumbrances except the
Permitted Exceptions and containing endorsements reasonably
required by Lender from time to time (the Seller Mortgage
Title Policy, Permitted Exceptions and required endorsements
are more fully described on Exhibit C attached hereto).
(c) Prior to any second disbursement for any Unit,
Borrower shall deliver to Lender and the Title Company a
boundary survey for such Unit's Parcel.
(d) Copies of all recorded documents described in the
Seller Mortgage Title Policy pertaining to each new Parcel.
(e) Opinion letter from Xxxxxxx, May & Rich, LLP,
legal counsel for Borrower and Seller opining to the authority
of each party to execute, deliver and perform its obligations
under the Seller Mortgage, to the validity and binding effect
of the Seller Mortgage and to such other matters as Lender and
its counsel shall reasonably require.
(f) Such other assignments, certificates, opinions
and other documents, instruments and information affecting or
relating to Lender's interest in the Project or the use,
operation, development or construction of the Project as
Lender may reasonably require.
5.3 Use of Loan Proceeds; Inspections of the Work. The
proceeds of the Loan disbursed to Borrower shall be used by Borrower
solely for the purpose of paying (or reimbursement to others for
payment of) items of Project Cost actually incurred by Borrower, and,
in connection therewith, no Project Cost shall include expenses
relating to any development, construction, operating or other cost
attributable to any project other than the Project specifically
described in this Agreement. Notwithstanding anything contained in this
Agreement to the contrary, all inspections of the Work made by Lender,
the Consultant or their respective agents, employees and designees
shall be solely for Lender's own information and shall not be deemed to
have been made for or on account
15
of Borrower or any other party. Borrower hereby specifically relieves
Lender of any and all liability or responsibility relating in any way
whatsoever to the construction of the Project, including but not
limited to, the work thereat, the material or labor supplied in
connection therewith, and any errors, inconsistencies or other defects
in the Project or the Plans and Specifications.
5.4 Disbursement Requests.
---------------------
(a) Borrower shall request and Lender shall be
required to make disbursements of the Loan not more frequently
than once each calendar month per Loan. Lender shall not be
required to make more than five disbursements in connection
with the construction of any one Unit. Lender may at any time
take such action as it deems appropriate to verify that the
conditions precedent to each disbursement have been satisfied,
including, without limitation, verification of any amounts due
under the Construction Contract or any Subcontract. Borrower
agrees to cooperate with Lender in any such action. If in the
course of any such verification, any amount shown on any
contract or subcontract entered into for the performance of
any portion of the Work, or any application for payment, sworn
statement or waiver of lien is subject to a possible
discrepancy, such discrepancy shall be eliminated by Borrower
to Lender's satisfaction. Each request for disbursement shall
be made by a letter from the chief financial officer of
Borrower, addressed to Lender, specifying in detail the amount
and mode of each disbursement, and accompanied by the
following, all in form and substance satisfactory to Lender:
(i) An Owner's Sworn Statement and
disbursement request;
(ii) A Contractor's Application for Payment
and Sworn Contractor's Statement from Contractor, and
a statement of a duly authorized officer of
Contractor that all items of construction cost have
been incorporated into the Project in accordance with
the Plans and Specifications, together with waivers
of lien with respect to the current disbursement and
all previous disbursements from Contractor and all
subcontractors and materialmen to whom payment is to
be made, as are required by the Title Company as a
condition to issuing the date-down endorsements
described in subparagraph (b) below;
(iii) An inspection report of the Consultant
certifying the percentages of completion of the
components of the Work and setting forth the amount
authorized for disbursement and such other matters as
Lender may require (including compliance with the
Plans and Specifications). It is understood and
agreed by Borrower that any and all inspections of
the Work made by Lender, the Consultant or their
respective agents, employees and/or designees shall
be solely for Lender's
16
own information and shall not be deemed to have been
made for or on account of Borrower or any other
party, and that Lender shall have no liability or
responsibility relating in any way whatsoever to the
construction of the Project, including, but not
limited to, the work thereon, the material or labor
supplied in connection therewith, and any errors,
inconsistencies or other defects in the Plans and
Specifications.
(iv) Such other documents, assignments,
certificates and opinions as are required by the
Title Company, or as may be reasonably required by
Lender.
(b) Notwithstanding anything contained in this
Agreement to the contrary, Lender shall not be required to
make any disbursement of the Loan pursuant to this Agreement
until the Title Company is unconditionally prepared to issue
endorsements to the Title Policies, updating the same to the
date of such disbursement and increasing the amount of
coverage (including mechanic lien coverage) thereunder to the
aggregate outstanding principal balance of the Loan (taking
into account the then current disbursement), and insuring the
lien of the Mortgage and the Seller Mortgage to be superior to
all defects in title other than the Permitted Exceptions and
other exceptions hereafter approved by Lender in writing.
(c) No disbursement of any amount shown in a Budget
as a contingency reserve shall by made without Lender's
approval with respect to the type and amount of the requested
expenditure, which approval shall not be unreasonably
withheld.
5.5 Certifications, Representations and Warranties. Each
request for disbursement by Borrower shall constitute (a) Borrower's
certification that the representations and warranties contained in
Article 6 below are true and correct in all material respects as of the
date of such request, (b) Borrower's certification that Borrower is in
compliance with the conditions contained in this Article 5, and (c)
Borrower's representation and warranty to Lender, with respect to the
Work, materials and other items for which payment is requested that (i)
such Work and materials have been incorporated into the Project, free
and clear of liens and encumbrances, (ii) the value thereof is as
estimated therein, (iii) such Work and materials substantially conform
to the Plans and Specifications, this Agreement and all Applicable
Laws, and (iv) the requisitioned value of such Work and materials and
the amounts of all other items of cost for which payment is requested
by Borrower have theretofore been in fact paid for in cash by Borrower
or the same are then due and owing by Borrower and (unless Lender
disburses funds directly to the parties performing the Work or to the
Title Company) will in fact be paid in cash by Borrower within five
days after Borrower's receipt of the requested disbursement. Neither
review nor approval by Lender of requests for disbursement or any
information contained therein or any other information provided to
17
Lender in accordance with the other provisions of this Article 5 shall
constitute the acceptance or approval by Lender of any portion of the
Work.
5.6 Amount of Disbursements; Retainage. Subject to the other
conditions and limitations set forth herein, the amount of each
disbursement shall be the amount requested by Borrower; provided,
however, that (a) Lender shall have the right to retain 10% of each
"hard cost" item of Project Cost (other than amounts requested for
payment to suppliers of materials who have either fully delivered all
materials or delivered such portion thereof whereby it is reasonable
and necessary to fully pay for such materials)(the "Retainage"), which
Retainage shall be disbursed in accordance with the provisions of
Section 5.11 below, and (b) in no event shall Lender be obligated to
disburse for any item an amount in excess of the amount allocated for
such item pursuant to the Budget, including any Reserve set aside
specifically for such item as provided in Section 5.8 below.
5.7 Costs. For purposes of this Agreement, including without
limitation, Section 5.3 hereof, (a) the cost of labor and material
furnished for the Work shall be deemed to be incurred by Borrower when
the labor and material have been incorporated into the Project and the
payment therefor is due and payable, (b) the cost of services (other
than labor included in the Work) shall be deemed to be incurred by
Borrower when the services are actually rendered and the payment
therefor is due and payable, (c) real estate taxes, interest and
insurance premiums shall be deemed to be incurred by Borrower when such
items become due and payable, and (d) any other costs shall be deemed
to be incurred by Borrower when the payment therefor is due and
payable, but not before the value to be received in return for such
cost has been received by Borrower.
5.8 Reserves. In addition to any reserves for specific line
items that are already established in the Budget, Lender may establish
and set aside out of the undisbursed proceeds of the Loan, reserves
(collectively, the "Reserves") in such amounts as may be reasonably
estimated by Lender from time to time to provide for payment of the
items of Project Cost as the same may accrue or become payable prior to
the repayment in full of the Loan. Amounts set aside as Reserves shall
not be available for disbursement to Borrower for any purpose other
than payment of the item or group or items for which the Reserve was
established. Based upon the facts then available to Lender, Lender may
adjust and reallocate the amount of any Reserve from time to time.
Items for which Reserves may be established shall include (i) Loan
Expenses, (ii) interest on the Loan, (iii) real estate taxes and
assessments, (iv) premiums on insurance policies and bonds (if any)
required to be furnished by Borrower hereunder (v) professional fees
and (vi) promotion and sale costs.
18
5.9 Loan In Balance.
---------------
(a) At all times prior to repayment of the Loan in full, (i)
the undisbursed proceeds from the Loan allocated to each line item in
the Budget (the aggregate amount of such proceeds being hereinafter
referred to as the "Available Proceeds") must be sufficient, in
Lender's reasonable determination, to pay the unpaid costs and expenses
that will be incurred to complete such item, and (ii) the aggregate
Available Proceeds must be sufficient, in Lender's reasonable
determination, to pay all Project Costs remaining unpaid and all
operating, management and other expenses of the Project through the
projected date on which all of the Units for which construction of
Improvements have commenced will be sold, as such date is determined by
Lender from time to time.
(b) If Lender determines that (i) the costs and expenses to
complete a Unit exceeds the amount allocated therefor, or (ii) the
Project Costs remaining unpaid and all estimated operating, management
and other expenses of the Project through the projected date on which
all of the Units for which construction of Improvements have commenced
will be sold, as such date is determined by Lender from time to time,
exceed the sum of the Available Proceeds, then the Loan shall be deemed
"out of balance" to the extent of such excess.
(c) If Lender deems the Loan to be out of balance as
aforesaid, Borrower shall, within five days after written request by
Lender, deposit with Lender an amount equal to the excess amount or
amounts determined pursuant to subparagraph (b) above of this Section.
The sums thus deposited with Lender will be disbursed by Lender to
complete the Work prior to any further disbursement of Loan proceeds
(or, if the Work has been completed, to the repayment of the
outstanding principal balance of the Loan). If such deposit is not made
within such time, an Event of Default shall be deemed to have occurred.
No interest shall be payable to Borrower on the amounts so deposited.
5.10 Application of Disbursements.
----------------------------
(a) Lender shall make each requested disbursement of the Loan
within ten days after all of the conditions precedent to such
disbursement set forth in this Article have been satisfied (including
delivery of all documentation required under Sections 5.2 and 5.4
above), except that Lender, in its discretion, may make payments of
Project Cost directly to the person or entity Lender determines is
entitled to such payment or jointly to Borrower and such person or
entity.
(b) Notwithstanding the foregoing, Lender shall not be
responsible, liable or obligated to the contractors, subcontractors,
suppliers, materialmen, laborers, architects, engineers, or any other
parties, for services or work performed, or for goods delivered by them
or any of them, in and upon the Land or employed directly or indirectly
in the performance of the Work, or for any debts or claims whatsoever
accruing in favor of any
19
such parties and against Borrower or others, or against the Project. It
is expressly understood and agreed that Borrower is not and shall not
be an agent of Lender for any purpose whatsoever. Without limiting the
generality of the foregoing, advances made at Lender's option, directly
to any contractor, subcontractor or supplier of labor or materials, or
any other party, shall not be deemed a recognition by Lender of any
third party beneficiary status of any such person or entity.
(c) Borrower covenants and agrees that it shall receive all
advances of Loan proceeds to be made hereunder by Lender as a trust
fund and that Borrower shall withdraw and use said funds solely for the
payment of the bills for the labor and materials used in the
performance of the Work for which such Loan funds were requested by
Borrower, and for the payment of the other items of Project Cost for
which such Loan proceeds were requested by Borrower, and for no other
purpose whatsoever; however, nothing herein shall impose upon Lender
any obligation whatsoever to see to the proper application of any such
monies by Borrower.
(d) Whenever so requested by Lender, Borrower shall promptly
furnish Lender written evidence reasonably satisfactory to Lender that
all monies theretofore advanced by Lender pursuant to this Agreement
have actually been paid or applied in payment of the cost of
performance of the Work and in payment of the other items of Project
Cost for which such funds were advanced by Lender, and until such
evidence is produced, at the option of Lender, no future or additional
payments or advances of a Loan funds need be made hereunder.
5.11 Release of Retainage. Retainage(s) shall be released as
follows:
(a) Retainage on any Subcontract shall be released within
thirty days after such Subcontract has been fully performed and the
following conditions have been satisfied:
(i) Borrower has delivered final and unconditional
waivers of lien from the subcontractor whose individual
Subcontract has been fully performed to the Title Company with
copies to Lender;
(ii) All conditions precedent to disbursement of
proceeds of the Loan as set forth in this Agreement have been
fully satisfied; and
(iii) Lender has received a certificate in writing
signed by a duly authorized officer of Contractor certifying
that the Work provided for in the Subcontract has been fully
and satisfactorily completed in accordance with the Plans and
Specifications, and in compliance with all Applicable Laws,
and the Consultant has approved all such Work.
20
(b) Final disbursement of construction retainages to the
Contractor for the Work not previously released shall be made upon
satisfaction of the following conditions in addition to satisfaction of
the other conditions precedent for disbursement of proceeds of the Loan
by Lender:
(i) Borrower has delivered to Lender a certificate in
writing signed by a duly authorized officer of the Contractor
certifying that all obligations of the Contractor under the
Construction Contract and all obligations of the
subcontractors under the Subcontracts have been fully
performed, and that the construction of the Work has been
completed in all respects in accordance with the Plans and
Specifications and the use and occupancy of the Project is
permitted under all Applicable Laws;
(ii) If requested by Lender, Lender shall have
received a certificate in writing signed by the Consultant
certifying that the construction of the Work has been
completed in all respects in accordance with the Plans and
Specifications and the use and occupancy of the Project is
permitted under all Applicable Laws;
(iii) Borrower has delivered to Lender all applicable
licenses or permits necessary for the use of the Project,
including without limitation, a final, unconditional
certificate of occupancy for each Unit as final disbursement
of retainage is made for such Units;
(iv) Borrower has delivered to Lender original
policies of fire and extended coverage insurance as herein
required, with Lender named as mortgagee and as an additional
insured party and loss payee;
(v) The Title Company is unconditionally prepared to
issue its final updated Title Policies, subject only to the
Permitted Exceptions and other exceptions approved by Lender
in writing, and containing full coverage against all
mechanics' liens and such other endorsements as are required
under Section 4.5 above, as modified by the requirements under
Section 5.2 above;
(vi) Borrower has delivered to the Title Company and
Lender final and unconditional waivers of lien from the
Contractor and all subcontractors and materialmen who have
supplied labor or material in connection with the Work and who
have not previously submitted such final waivers.
5.12 Additional Loan Limitations.
(a) At no time shall more than seven Spec Units be
under construction. At no time shall more than two Model Units
be under construction.
21
(b) Borrower shall not commence construction of a
Unit if the then unpaid hard and soft costs that will be
incurred to complete the construction and sale of such Unit,
as determined by Lender in its sole and absolute discretion,
exceeds the undisbursed portion of the Loan allocated to such
construction and sale.
6. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to
execute this Agreement and to make the Loan, Borrower represents and warrants to
Lender as follows:
6.1 Borrower. Borrower is a duly formed limited liability
company under the laws of the State of Delaware, validly existing, in
good standing and fully qualified to do business in the State of North
Carolina. The Limited Liability Company Operating Agreement dated as of
December 12, 1997, creating Borrower and the Certificate of Formation
of Borrower, copies of which have been furnished to Lender, are in
effect, unamended and is the true, correct and complete documents
relating to Borrower's creation and governance. Borrower, Sole Member
and their affiliates have fully complied with all applicable securities
and other laws and regulations in connection with the formation of
Borrower and the sale and offer for sale of interests therein.
6.2 Sole Member. Sole Member is a duly formed general
partnership validly existing and in good standing in the State of North
Carolina and has full power and authority to execute and deliver the
Loan Documents and to perform its obligations hereunder and thereunder.
Heartland Partners, L.P., a Delaware limited partnership and Heartland
are the sole general partners of Member. The Amended and Restated
Partnership Agreement dated as of June 27, 1990 creating Sole Member, a
copy of which has been furnished to Lender, is in effect, unamended and
is the true, correct and complete documents relating to Sole Member's
creation and governance. Sole Member has fully complied with all
applicable securities and other laws and regulations in connection with
the formation of Sole Member and the sale and offer for sale of
interests therein.
6.3 Heartland. Heartland is a duly formed corporation under
the laws of the State of Delaware, validly existing, in good standing
and fully qualified to do business in the State of Illinois. The
articles of incorporation and by-laws of Heartland, copies of which
have been furnished to Lender, are in effect, unamended, and are the
true, correct and complete documents relating to Heartland's creation
and governance.
6.4 Title. Seller owns good and marketable fee simple title to
the Real Property, subject to Borrower's interest in the Real Property
pursuant to the Option Agreement. Borrower owns all of the Personal
Property. The Real Property and the Personal Property are owned free
and clear of all liens, claims and encumbrances, except the Permitted
Exceptions.
22
6.5 Improvements. Subject to the terms and conditions
contained in this Agreement, Borrower intends to improve the Land with
the Improvements. The Work will be performed in accordance with the
provisions of the Plans and Specifications and the Budget and all of
the other requirements of this Agreement.
6.6 Validity and Enforceability of Documents. Upon the
execution and delivery of the Loan Documents, the Loan Documents shall
be valid and binding upon the parties that have executed the same in
accordance with the respective provisions thereof, and enforceable in
accordance with the respective provisions thereof, subject only to
applicable bankruptcy, reorganization, insolvency, moratorium and other
similar laws affecting the enforcement of creditor's rights. Execution,
delivery and performance of the Loan Documents do not and will not
contravene, conflict with, violate or constitute a default under any
Applicable Law or any agreement, indenture or instrument to which the
Borrower, Sole Member, Contractor or Seller is a party or is bound or
which is binding upon or applicable to the Property or any portion
thereof.
6.7 Litigation. There is not any condition, event or
circumstance existing, or any litigation, arbitration, governmental or
administrative proceeding, action, examination, claims or demand
pending or, to the best of Borrower's knowledge after due inquiry,
threatened affecting Borrower, Sole Member, Contractor or Seller or the
Property, or involving the validity or enforceability of the Loan
Documents or involving any risk of a judgment or liability which, if
satisfied, would have an adverse effect on the financial condition,
business or properties of Borrower, Sole Member, Contractor or Seller
or the priority of the lien of the Mortgage or Seller Mortgage, or
which would prevent Borrower, Contractor or Seller from complying with
or performing its obligations under this Agreement, the Note or any of
the other Loan Documents within the time limits set forth therein for
such compliance or performance and no basis for any such matter exists.
6.8 Utilities; Authorities. All utilities necessary for use,
operation and occupancy of the Property (including, without limitation,
water, storm sewer, sanitary sewer and drainage, electric, gas and
telephone facilities) are available at the boundaries of the Land (or
in the streets adjoining the Land), and all requirements for the use of
such utilities have been fulfilled. All building, zoning, safety,
disabled persons, health, fire, water district, sewerage and
environmental protection agency permits and other licenses and permits
which are required by any governmental authority for the use, occupancy
and operation of the Property have been obtained by or furnished to
Borrower and are in full force and effect or will be obtained by and
maintained in full force and effect by Borrower when and as required by
any governmental authority.
6.9 Solvency. Borrower is solvent and able to pay its debts as
such debts become due, and has capital sufficient to carry on its
present business transactions. The value of Borrower's property, at a
fair valuation, is greater than the sum of its debts. Borrower is not
bankrupt or insolvent. Borrower has not made an assignment for the
23
benefit of its creditors. There has been no trustee or receiver
appointed for the benefit of Borrower's creditors and there has been no
bankruptcy, reorganization or insolvency proceedings instituted by or
against Borrower. Borrower will not be rendered insolvent by its
execution, delivery or performance of the Loan Documents or by the
transactions contemplated thereunder.
6.10 Financial Statements. All financial statements submitted
to Lender relating to Borrower, its affiliates, and the Property are
true, complete and correct, and have been prepared in accordance with
sound accounting principles consistently applied and fairly present the
financial condition of the Person to which they pertain and the other
information therein described and do not contain any untrue statement
of a material fact or omit to state a fact material to the financial
statement submitted or this Agreement. No material adverse change has
occurred in the financial condition of Borrower, any of its affiliates,
or the Property since the dates of each such financial statements.
6.11 Compliance with Laws. The use, occupancy and operation of
the Property for its intended purposes is not in violation any
Applicable Laws, any contractual arrangements with third parties or any
covenants, conditions, easements, rights of way or restrictions of
record. Neither Borrower nor any agent thereof has received any notice,
written or otherwise, alleging any such violation, which violation has
not previously been cured. The Property is in full compliance and
conformity with all zoning requirements, and will not be a
non-conforming or special use. No right to any off-site facilities will
be necessary to insure compliance by the Property with all Applicable
Laws.
6.12 Construction Contract. Pursuant to the Construction
Contract, the Contractor has agreed to construct the Work. The
Construction Contract is in full force and effect, unamended, and no
default exists thereunder by either party thereto. In the event of any
conflict between the terms of the Construction Contract, other
Subcontracts and this Agreement or any other Loan Document, Borrower
shall abide by and shall cause the Contractor to act in accordance with
the provisions of the Loan Documents.
6.13 Subcontracts. Borrower has delivered to Lender true,
complete and correct copies of all Subcontracts that have been entered
into prior to the date hereof. The Subcontracts that have been entered
into prior to the date hereof are in full force and effect, unamended,
and no default exists thereunder by any party thereto.
6.14 Plans and Specifications. Borrower has delivered to
Lender true, complete and correct copies of all of the plans and
specifications listed in Exhibit D attached hereto and the plans and
specifications listed in Exhibit D are the Plans and Specifications
which have been approved by Lender.
6.15 Budget. The Budget is a true, complete and correct budget
with respect to the costs of the Work (including both hard costs and
soft costs associated therewith).
24
6.16 Financing Statements. There are no UCC financing
statements in effect other than those to be filed and/or recorded by
Lender which name Borrower as debtor and pertaining to any rights in
any of the Personal Property.
6.17 Event of Default. No Event of Default has occurred, and
no Unmatured Default exists.
6.18 Responsible Property Transfer Act. To the best of
Borrower's knowledge, there are no facilities on the Real Estate that
are subject to reporting under Section 312 of the federal Emergency
Planning and Community Right-To-Know Act of 1986, 43 U.S.C. Section
11022, and federal regulations promulgated thereunder. To the best of
Borrower's knowledge, the Real Estate does not contain any underground
storage tanks.
6.19 Additional Agreements. Except for the Additional
Agreements listed in Exhibit F attached hereto, true and correct copies
of which have been furnished to Lender, there are no leases,
management, leasing, development or other agreements in existence that
affect the Property.
All representations and warranties which have been made by Borrower in
this Agreement or the other Loan Documents shall be true in all
respects at the time of each disbursement of the Loan, and in the event
of any material breach, misrepresentation or omission, Lender shall
have the absolute right to terminate its obligations under this
Agreement (without any obligation to refund any loan or other fees
previously paid), and upon demand by Lender, Borrower shall reimburse
Lender for the Loan Expenses, and Lender shall be entitled to recover
from Borrower all losses and damages resulting therefrom.
7. BORROWER'S COVENANTS.
--------------------
7.1 Manner of Construction. Borrower shall, at its sole cost
and expense, cause the construction of the Project to be diligently and
expeditiously carried out, in a good and workmanlike manner, in
accordance with the Plans and Specifications and all Applicable Laws.
All materials, fixtures, equipment or articles used in the renovation,
construction or equipping of the Project shall comply with the Plans
and Specifications.
7.2 Compliance with Laws. Borrower shall comply or cause
compliance with all Applicable Laws governing the construction,
development, use and operation of the Project and the development,
operation and sale of the Units. Evidence of such compliance shall be
submitted to Lender on request.
7.3 Inspection. Upon reasonable prior written or oral notice
(which shall not be required in the event of an emergency), Borrower
shall permit inspection of the Property by Lender, the Consultant and
any other agent or designee of Lender. In addition, upon reasonable
prior written or oral notice (which shall not be required in the event
of an emergency), Borrower shall permit Lender and/or its agents and
designees
25
access to and the right to inspect, audit and copy all books, records,
contracts and other documents and information relating to Borrower or
the Property. Lender shall use reasonable efforts to keep confidential
all information and documentation obtained by Lender in connection with
such audits and inspections, except to the extent that Lender
determines, in its reasonable discretion, a need to disclose same;
provided, however, under no circumstances shall Lender have any
liability to Borrower in the event of an unintentional disclosure or
disclosure deemed necessary by Lender. All such books, records and
accounts of operations relating to the Property shall be kept in
accordance with sound accounting practices consistently applied.
Borrower shall promptly respond to any inquiry from Lender for
information with respect to the Property, which information may be
verified by Lender at Borrower's expense; provided, however, that
Lender shall at all times be entitled to rely upon any statements or
representations made by Borrower or any agent thereof.
7.4 Mechanics' Liens. Borrower shall not permit any mechanics'
lien claims to be filed or otherwise asserted against the Property or
against any funds due any contractor or subcontractor, and Borrower
shall promptly (and in any event within fifteen days after Borrower has
received notice of such filing) discharge or cause to be discharged the
same in case of the filing of any claims for lien or proceedings for
the enforcement thereof; provided that in connection with any such lien
or claim which Borrower may in good faith desire to contest, Borrower
may contest the same by appropriate legal proceedings diligently
prosecuted, but only if Borrower shall furnish to the Title Company
such security or indemnity as the Title Company requires to induce the
Title Company to issue endorsements to the Title Policies insuring over
the exception created by such lien, and provided further, that Lender
shall not be required to make any further disbursements of a Loan until
any mechanics' lien claims have been so insured against by the Title
Company.
7.5 Release by Lender. With respect to the matters set forth
in Section 7.4 above, if Borrower shall (a) fail promptly to discharge
any asserted liens or claims, or (b) fail promptly to contest asserted
liens or claims or to give security or indemnity in the manner provided
in Section 7.4 above, or (c) having commenced to contest the same, and
having given such security or indemnity, fail to prosecute such contest
with diligence, or to maintain such indemnity or security so required
by the Title Company for its full amount, or (d) upon adverse
conclusion of any such contest, fail promptly to cause any judgment or
decree to be satisfied and lien to be released, then Lender may, but
shall not be required to, procure the release and discharge of any such
claim and any judgment or decree thereon and, further, may, in its sole
discretion, effect any settlement or compromise of the same, or may
furnish such security or indemnity to the Title Company, and any
amounts so expended by Lender, including premiums paid or security
furnished in connection with the issuance of any surety company bonds,
shall be deemed to constitute disbursements of the proceeds of the Loan
hereunder and shall bear interest from the date so disbursed until paid
at the Default Rate. In settling, compromising or
26
discharging any claims for lien, Lender shall not be required to
inquire into the validity or amount of any such claim.
7.6 Financial Statements; Reports. Borrower shall deliver or
cause to be delivered to Lender each month, a detailed report showing
the progress of the Work, the number of reservation deposits for Units
made, if any, and the number of sales contracts for Units entered into
by Borrower during the immediately preceding month, if any, and the
status of all reservation deposits and sales contracts entered into
prior thereto, if any. In addition to such progress reports and any
other financial statements required to be delivered to Lender pursuant
to the provisions of any of the other Loan Documents, Borrower will
from time to time furnish to Lender such information and reports,
financial and otherwise, concerning Borrower, the performance of the
Work and the operation of the Project as Lender reasonably requires,
including, without limitation, the following:
(a) Within ninety days after the end of each calendar
year, compiled financial statements of the Property on a form
acceptable to Lender, setting forth the information therein
required as of December 31 of the immediately preceding year,
containing income and expense statements and a balance sheet.
The financial statements shall be prepared by Borrower in
accordance with generally accepted accounting principles
consistently applied and shall be certified by the chief
financial officer of Borrower as fairly and accurately
presenting the information contained therein.
(b) Within ninety days after the end of each calendar
year, financial statements and the federal and state income
tax returns for Borrower, such financial statements to be on
Lender's standard form or another form acceptable to Lender,
setting forth the information therein required as of December
31 of the immediately preceding year, and certified by
Borrower as fairly and accurately presenting the information
contained therein.
(c) Within ninety days after the end of each calendar
year, detailed cash flow statements for the preceding calendar
year, on a form acceptable to Lender, for all income producing
properties listed on the financial statements of Borrower,
certified by the chief financial officer of Borrower, as
applicable, as fairly and accurately presenting the
information contained therein.
7.7 Affirmation of Representations and Warranties. Borrower
agrees that all representations and warranties of Borrower contained in
Article 6 hereof shall remain true in all material respects at all
times until the Loan is repaid in full.
7.8 Title. Except for (i) the Mortgage, the Seller Mortgage
and other security for the Loan, (ii) the lien of general real estate
taxes payment of which is not yet due, (iii) mechanics' liens which are
contested in the manner permitted in Paragraph 7.4 above, and (iv) any
other Permitted Exceptions, Borrower shall keep its fee simple title to
the
27
Project and shall cause Seller to keep its fee simple title to the
Project free and clear of all liens, claims and encumbrances, whether
senior or junior to or at parity with the Mortgage and Seller Mortgage.
7.9 Proceedings Affecting Property. If any proceedings are
filed seeking to enjoin or otherwise prevent or declare invalid or
unlawful the occupancy, use, maintenance or operation of the Property,
or any portion thereof, Borrower shall cause such proceedings to be
vigorously contested in good faith, and in the event of an adverse
ruling or decision, prosecute all allowable appeals therefrom, and
shall, without limiting the generality of the foregoing, resist the
entry or seek the stay of any temporary or permanent injunction that
may be entered, and use its best efforts to bring about a favorable and
speedy disposition of all such proceedings. All such proceedings,
including without limitation, all of Lender's costs, and fees and
disbursements of Lender's counsel in connection with any such
proceedings, whether or not Lender is a party thereto, shall be at
Borrower's expense. To the extent that Lender incurs any such expenses,
including attorneys' fees and fees and charges for court costs, bonds
and the like, Borrower shall reimburse Lender for such expenses and the
amount due Lender shall bear interest from the date so incurred by
Lender until repaid to Lender at the Default Rate and shall be payable
to Lender on demand.
7.10 Disposal and Encumbrance of Property. Except as expressly
permitted pursuant to Article 12 below, Borrower shall not and shall
cause Seller not to, without Lender's prior written consent, suffer,
permit or enter into any agreement for any sale, lease, transfer, or in
any way encumber or dispose of or grant or suffer any security or other
assignment (collateral or otherwise) of or in all or any portion of the
Project. Any consent given by Lender or any waiver of default under
this Section, shall not constitute a consent to, or waiver of any
right, remedy or power of Lender under any subsequent default
hereunder.
7.11 Insurance. Borrower shall pay all premiums on all
insurance policies required from time to time under this Agreement, and
thirty days prior to expiration of any such policies, Borrower shall
furnish to Lender, with premiums prepaid, additional and renewal
policies in form, and with companies, coverage, deductibles and amounts
satisfactory to Lender. In the event of failure by Borrower to provide
such insurance, Lender may, but shall not be required to, place
insurance and treat the amounts expended therefor as disbursements of
Loan proceeds and such amounts from the date so expended by Lender
until repaid to Lender shall bear interest at the Default Rate.
7.12 Performance of Obligations; Notice of Default. Borrower
shall promptly and fully perform and comply in all respects with the
obligations, terms, agreements, provisions and requirements of this
Agreement and the other Loan Documents and all other documents and
instruments relating thereto and will not permit to occur any default
or breach hereunder or thereunder. Borrower shall promptly give to
Lender notice of the occurrence of any Unmatured Default or of any
event that could have a material adverse
28
effect on any security for the Loan or on Borrower's ability to perform
its obligations under this Agreement or any of the other Loan
Documents.
7.13 Subcontracts. Within ten days after being executed,
Borrower shall deliver to Lender a copy of each Subcontract entered
into by the Contractor.
7.14 Restrictions Affecting Borrower. Borrower covenants and
agrees that, without the prior written consent of Lender, there shall
not occur: (i) any amendment or modification of the Borrower's
operating agreement or the certificate of formation of Borrower, and
(ii) the admission of any new members to Borrower. At all times prior
to the repayment of the Loan, (A) the Sole Member shall be the sole
member of Borrower; (B) Borrower shall not make or permit any
distributions of cash flow or cash proceeds to Sole Member or any
partner, subpartner, member, shareholder, officer, director or
affiliate of Borrower or Sole Member and all positive cash flow from
the Project shall be paid to Lender and applied to the repayment of the
Principal Balance; (C) Borrower shall not enter into any contract or
agreement for the provision of services or otherwise with respect to
the Project with any partner, subpartner, member, shareholder, officer,
director or affiliate of any partner of Borrower or Sole Member unless
such contract or agreement is an arms-length, market rate agreement and
is cancelable upon thirty days written notice from any owner of the
Project; (D) neither Borrower nor Sole Member shall be dissolved or its
existence terminated; and (E) Borrower shall not own any other real
property other than the Project.
7.15 Use of Receipts. Borrower shall cause all rents and other
income and receipts realized and received by Borrower, if any, from and
in connection with the Project to be used for the purpose of paying the
actual costs and expenses incurred by Borrower in connection with the
ownership, operation, management and repair of the Project, including
without limitation, operating expenses, real estate taxes, insurance
premiums and interest and principal owing on the Loan.
7.16 Management and Leasing Agreements; Subordination.
Borrower shall not amend, extend, substitute or enter into any new
management or leasing agreement covering all or any portion of the
Property without Lender's prior written consent. In the event that
Lender grants such consent, Borrower shall cause the tenant, property
manager or leasing broker under said agreement to enter into an
agreement with Lender, acceptable in form and substance to Lender,
pursuant to which said tenant, property manager or broker subordinates
its liens for unpaid fees to the liens of the Mortgage and the other
Loan Documents.
7.17 Additional Documents. Borrower shall not execute or
record any document pertaining to, affecting or running with all or any
portion of the Property without the prior written approval of Lender of
the form and substance of such documents, which approval shall not be
unreasonably withheld.
29
7.18 Sale to Investors. Without the prior written consent of
Lender, which consent may be granted or denied at Lender's sole
discretion, Borrower shall not knowingly sell any Units to investors or
syndicators who are acquiring such Units with the intent to resell
them.
7.19 Survey. Within thirty days subsequent to the completion
of the foundation of each Unit and as a condition to any subsequent
disbursement by Lender, the Survey shall be updated to show the
location of such foundation; that such foundation is within all
applicable lot, side, rear and set-back lines; and that there are no
encroachments by the improvements over easements or adjoining property.
Within thirty days subsequent to the completion of the exterior walls
and roof of each Unit and as a condition to any subsequent disbursement
by Lender, the Survey shall be updated to show such Unit "as built" and
to show the location of all utilities and any additional easements or
other matters of record affecting the Project.
8. LOAN EXPENSES. Borrower agrees to pay all of the Loan Expenses. Any
Loan Expenses paid by Lender shall bear interest commencing on the date demand
for repayment thereof is made by Lender until repaid to Lender at the Default
Rate and shall be paid by Borrower upon demand, or may be paid by Lender at any
time and shall be deemed a disbursement of proceeds of the Loan. Any Loan
Expenses paid by Lender shall be reimbursed to Lender by Borrower regardless of
whether there shall be any disbursements of the Loan.
9. LENDER'S REPRESENTATIVES. Lender, at Borrower's expense, shall have
the right to engage personnel in connection with negotiation, documentation,
administration and servicing of the Loan, including without limitation, the
Consultant, to (i) review and approve the Plans and Specifications, (ii) review
and approve Borrower's final construction budgets, (iii) conduct monthly
inspections of the Work and report on the progress of construction thereof, (iv)
review and approve all change orders, (v) review and approve applications for
disbursements and accompanying documents, (vi) issue reports and certificates to
Lender, (vii) determine whether the Work has been completed in accordance with
the Plans and Specifications, and (viii) provide other services as requested by
Lender, and Borrower shall fully cooperate with the Consultant and other
personnel in all reasonable respects in connection therewith.
10. EVENTS OF DEFAULT. The occurrence of any one or more of the
following shall constitute an "Event of Default":
(a) Failure by Borrower or any other obligor to pay on or
before the fifth day following the date when due any installment of
principal or interest or any other amount payable pursuant to the Note,
this Agreement or any of the other Loan Documents.
(b) Failure by Borrower to promptly perform or cause to be
performed any non-monetary obligation or observe any non-monetary
condition, covenant, term, agreement or provision required to be
performed or observed by Borrower under this Agreement, the Note or any
of the other Loan Documents; provided, however, that if
30
such failure by its nature can be cured, then so long as the continued
operation and safety of the Property, and the priority, validity and
enforceability of the lien created by the Mortgage or any of the other
Loan Documents and the value of the Property are not imminently
impaired, threatened or jeopardized, then Borrower shall have a period
(the "Cure Period") of thirty days after written notice from Lender of
any such failure of performance or observance to cure or cause the cure
of the same, and an Event of Default shall not be deemed to exist
during the Cure Period, provided further that if Borrower commences to
cure such failure during the Cure Period and is diligently and in good
faith attempting to effect such cure, the Cure Period shall be extended
until such failure is cured, but in no event shall the Cure Period be
longer than 90 days in the aggregate.
(c) Failure by Borrower to promptly perform or cause to be
performed any obligation, or observe any condition, covenant, term,
agreement or provision required to be performed or observed by Borrower
under the Option Agreement beyond any applicable cure period for
Borrower.
(d) The existence of any material inaccuracy or untruth in any
representation, or warranty contained in this Agreement or any other
Loan Documents, or of any statement or certification as to facts
delivered to Lender by or on behalf of Borrower.
(e) At any time Borrower or Seller files a voluntary petition
in bankruptcy, or is adjudicated a bankrupt or insolvent, or institutes
(by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, composition,
readjustment, dissolution, liquidation or similar proceedings under any
present or future federal, state or other statute or law, or admits in
writing to its inability to pay its debts as they mature, or makes an
assignment for the benefit of its creditors, or seeks or consents to
the appointment of any receiver, trustee or similar officer for all or
any substantial part of its property.
(f) The commencement of any involuntary petition in bankruptcy
against either Borrower, Seller or the institution against either
Borrower or Seller of any reorganization, arrangement, composition,
readjustment, dissolution, liquidation or similar proceedings under any
present or future federal, state or other statute or law, or the
appointment of a receiver, trustee or other officer for all or any
substantial part of the property of Borrower or Seller which remains
undismissed or undischarged for a period of sixty days.
(g) Any sale, transfer, lease, assignment, conveyance,
financing, lien, encumbrance or other transaction made in violation of
Section 7.8 or 7.10 above.
(h) Failure of Borrower for a period of thirty days after
Lender's demand to procure the reversal, dismissal or disposition to
Lender's satisfaction of any order enjoining or otherwise preventing or
declaring invalid or unlawful the occupancy, maintenance, operation or
use of the Property, or any portion thereof, in the manner
31
required by the terms of this Agreement, or of any proceedings which
could or might affect the validity or priority of the lien of the
Mortgage or any of the other security for the Loan, or which could
materially affect Borrower's ability to perform its obligations under
this Agreement or the other Loan Documents, except that Borrower shall
have the right to contest by appropriate proceedings the validity of
such order if and only if Borrower shall, within thirty days after
Lender's demand aforesaid, (i) places a bond with Lender in an amount,
form, content and issued by a surety reasonably acceptable to Lender
for adequate security from such order, or, if acceptable to Lender (ii)
cause the Title Company to issue an endorsement to the Loan Policy
insuring against loss or damage on account of any such order.
(i) The attachment, seizure, levy upon or taking of possession
by any receiver, custodian or assignee for the benefit of creditors of
all or a substantial part of the property of Borrower which is not
stayed or dismissed within thirty days after the occurrence thereof.
(j) the assignment or attempted assignment of this Agreement
by Borrower without Lender's prior written consent.
(k) The filing of formal charges under any federal, state or
local law, statute or ordinance for which Seller's or Borrower's
forfeiture of all or any portion of the Property is a potential
penalty.
(l) The occurrence of an Event of Default under any of the
other Loan Documents.
(m) A discontinuance of the construction of the Work for a
period of fifteen consecutive days (unless otherwise approved by
Lender), other than a discontinuance resulting from strikes, acts of
God, adverse weather conditions or other occurrences beyond the
reasonable control of Borrower (it being understood that a delay caused
by an insufficiency of funds shall not be deemed to be beyond the
control of Borrower), or any delay in the Work, regardless of cause,
the result of which may be, in Lender's sole judgment, that the Work
will not be substantially completed prior to the date that is two
months prior to Maturity Date, as the same may be extended pursuant to
the terms of this Agreement.
(n) Borrower intentionally causes or knowingly permits any of
the Work to be performed in a manner which is materially contrary to
the Plans and Specifications or any provisions of this Agreement or the
other Loan Documents.
11. REMEDIES. Upon the occurrence of any Event of Default, Lender, in
addition to availing itself of any remedies conferred upon it at law or in
equity and by the terms of the Note, the Mortgage and the other Loan Documents,
may pursue any one or more of the following remedies first, concurrently or
successively with each other and with any other available
32
remedies, it being the intent hereof that none of such remedies shall be to the
exclusion of any others:
(a) Take possession of the Project and complete the Work and
do anything necessary or desirable in Lender's sole judgment to fulfill
the obligations of Borrower hereunder, including either the right to
avail itself of and procure performance of the Construction Contract,
any Subcontracts or any other contract entered into for the performance
of all or any portion of the Work (or any substitute therefor), or to
let new or additional contracts with the same contractors or
subcontractors or others, and to employ watchmen to protect the Project
from injury. Without restricting the generality of the foregoing and
for the purposes aforesaid, Borrower hereby appoints and constitutes
Lender its lawful attorney-in-fact with full power of substitution (i)
to complete the Work in the name of Borrower upon an Event of Default;
(ii) to, upon an Event of Default, use portions of the Loan or other
funds which may be reserved, escrowed or set aside for any purposes
hereunder at any time to complete the Work; (iii) to, upon an Event of
Default, make changes in the Plans and Specifications which shall be
reasonably necessary or reasonably desirable to complete the Work; (iv)
to, upon an Event of Default, retain or employ new general contractors,
subcontractors, architects, engineers and inspectors as shall be
required for such purposes; (v) to, upon an Event of Default, pay,
settle or compromise all existing bills and claims, which may be liens
or security interests or to avoid such bills and claims becoming liens
or security interests against the Project, or as may be necessary or
desirable for the completion of the Work or for the clearance of title;
(vi) to, upon an Event of Default, execute all applications and
certificates in the name of Borrower which may be required by any of
the Loan Documents; (vii) to, upon an Event of Default, prosecute and
defend all actions or proceedings in connection with the Work; (viii)
to, upon an Event of Default, take such action and require such
performance as it deems necessary under any of the bonds to be
furnished pursuant to the provisions hereof and to make settlements and
compromises with the surety or sureties thereunder, and in connection
therewith, to execute instruments of release and satisfaction; it being
understood that the foregoing power of attorney is coupled with an
interest and cannot be revoked. All sums expended by Lender pursuant to
this Article 11 shall be deemed to have been paid to Borrower and
secured by the Mortgage and the other Loan Documents, and shall bear
interest at the Default Rate until repaid to Lender.
(b) Declare the unpaid indebtedness evidenced by the Note to
be immediately due and payable.
(c) Apply the balance of any deposits made with Lender toward
the repayment of the Loan.
(d) Withhold further disbursements of proceeds of the Loan.
33
12. SALES OF UNITS; PARTIAL RELEASES.
--------------------------------
12.1 Sales Prices. Provided that no Event of Default or
Unmatured Default then exists under the Note, this Agreement or any of
the other Loan Documents, Borrower shall have the right to enter into
and perform sales contracts with creditworthy third party purchasers of
the Units on the form contract submitted to Lender pursuant to Section
4.19 above, provided that (a) Lender has approved all sales materials
relating to the Units, (b) the consideration for any such sale consists
solely of cash, and (c) the gross sales price for any such Unit is not
less than the budgeted amount for the construction of Improvements plus
the cost paid or to be paid to Seller for the underlying Parcel for
such Unit.
12.2 Release Prices. Provided that all of the conditions
described in Section 12.1 above have been satisfied in form and
substance acceptable to Lender and no Event of Default or Unmatured
Default then exists, Lender will issue a partial release of the lien of
its Loan Documents covering any Unit upon the payment to Lender of an
amount equal to the amount of the Loan previously disbursed by Lender
with respect to such Unit.
13. MISCELLANEOUS.
-------------
13.1 Additional Indebtedness. All advances or payments made by
Lender pursuant to this Agreement or any other Loan Document shall
constitute indebtedness secured by the Mortgage and all other security
for the Loan, and all advances or payments made by Lender, except for
normal disbursements on the Loan, shall bear interest at the Default
Rate from the date advanced or paid until repaid to Lender by Borrower.
13.2 Additional Acts. Borrower shall, upon request, execute
and deliver such further instruments and documents and do such further
acts and things as may be reasonably required to provide to Lender the
evidence of and security for the Loan contemplated by this Agreement.
13.3 Loan Agreement Governs. In the event of any inconsistency
between any provision of this Agreement and any provision of any other
Loan Document, the provision of this Agreement shall govern; provided,
however, that the provisions of all of the Loan Documents shall be
construed as an integrated set of provisions governing the Loan and,
accordingly, shall be interpreted and construed liberally to give the
maximum validity, enforceability and effect to all of such provisions.
13.4 Additional Advances. If an Event of Default shall occur,
Lender may, but shall not be obligated to, take any and all actions to
cure such default, and all amounts expended in so doing, all Loan
Expenses and all other amounts paid or advanced by Lender pursuant to
the Loan Documents, and all other amounts advanced by Lender in
connection with the performance of the Work or preserving any security
for the Loan,
34
shall constitute additional advances of the Loan, shall be secured by
the Mortgage and all other security for the Loan, and shall bear
interest at the Default Rate from the date advanced until paid.
13.5 Amendment; Waiver; Approval. This Agreement shall not be
amended, modified or supplemented without the written agreement of
Borrower and Lender at the time of such amendment, modification or
supplement. No waiver of any provision of this Agreement or any of the
other Loan Documents shall be effective unless set forth in writing
signed by the party making such waiver, and any such waiver shall be
effective only to the extent therein set forth. Failure by Lender to
insist upon full and prompt performance of any provisions of this
Agreement or any of the other Loan Documents, or to take action in the
event of any breach of any such provision or upon the occurrence of any
Event of Default, shall not constitute a waiver of any rights of
Lender, and Lender may at any time thereafter exercise all available
rights and remedies with respect to such breach or Event of Default.
Receipt by Lender of any instrument or document shall not constitute or
be deemed to be an approval thereof. Any approvals required under any
of the other Loan Documents must be in writing, signed by Lender and
directed to Borrower.
13.6 Notice. All notices, communications and waivers under
this Loan Agreement shall be in writing and shall be (i) delivered in
person or (ii) mailed, postage prepaid, either by registered or
certified mail, return receipt requested, or (iii) sent by overnight
express carrier, addressed in each case as follows:
To Lender: Bank One, Illinois, NA
0000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
and: Bank One, Illinois, NA
000 Xxxxx Xxxxxx Xxxxx - 0xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx Xxxxxxxxxxx
and Schwartz, Cooper, Xxxxxxxxxxx &
Xxxxxx, Chtd.
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxx, Esq.
To Borrower: CMC Heartland Partners VII, LLC
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx Xxxxxxx, Esq.
35
With copy to: CMC Heartland Partners I, Limited
Partnership
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxxxxx
or to any other address as to either of the parties hereto, as such
party shall designate in a written notice to the other party hereto.
All notices sent pursuant to the terms of this Section shall be deemed
received (i) if personally delivered, then on the date of delivery,
(ii) if sent by overnight, express carrier, then on the next Business
Day immediately following the day sent, or (iii) if sent by registered
or certified mail, then on the earlier of the third Business Day
following the day sent or when actually received.
13.7 Benefit; Assignment. The rights, powers and remedies of
Lender under this Agreement shall inure to the benefit of Lender and
its successors and assigns. The rights and obligations of Borrower
under this Agreement may not be assigned and any purported assignment
by Borrower shall be null and void.
13.8 Governing Law. Except with respect to the creation,
perfection and priority of the liens and security interests created by
the Loan Documents, which shall be construed in accordance with and
governed by the laws of the State of North Carolina, the validity and
interpretation of the Loan Documents shall be construed in accordance
with the laws and decisions of the State of Illinois.
13.9 Indemnity. Borrower agrees to indemnify, defend and hold
Lender harmless from and against any and all liabilities, obligations,
losses, damages, claims, costs and expenses (including reasonable
attorneys' fees and court costs) of whatever kind or nature which may
be imposed on, incurred by or asserted against Lender at any time which
relate to or arise from the performance of the Work, the offer for sale
or sale of any membership interest in Borrower, the acquisition or sale
or offer for sale of all or any portion of the Property or any Unit
and/or the ownership, use, operation or maintenance of the Property,
including, without limitation, (a) any brokerage commissions or
finder's fees asserted against Lender with respect to the making of the
Loan, the acquisition of the Property or the sale of any Unit and (b)
claims by purchasers of a Unit with respect to defects in the Property
or other matters; provided, however, that the foregoing indemnity shall
not extend to any liabilities, obligations, claims, losses, costs,
damages or expenses resulting from the gross negligence or willful
misconduct of Lender.
13.10 Headings. The titles and headings of the articles,
sections and paragraphs of this Agreement have been inserted as a
matter of convenience of reference only and shall not control or affect
the meaning or construction of any of the terms or provisions of this
Agreement.
36
13.11 No Partnership or Joint Venture. Lender, by executing
and performing this Agreement shall not become a partner, member or
joint venturer with Borrower or any partner or member of Borrower, or
any of their respective associates or affiliates, and all inspections
of the Property herein provided for are for the sole benefit of Lender.
13.12 Time is of the Essence. Time is of the essence of the
payment of all amounts due Lender under the Loan Documents and
performance and observance by Borrower of each covenant, agreement,
provision and term of this Agreement and the other Loan Documents.
13.13 Invalid Provisions. In the event that any provision of
this Agreement is deemed to be invalid by reason of the operation of
law, or by reason of the interpretation placed thereon by any
administrative agency or any court, Borrower and Lender shall negotiate
an equitable adjustment in the provisions of the same in order to
effect, to the maximum extent permitted by law, the purpose of this
Agreement and the validity and enforceability of the remaining
provisions, or portions or applications thereof, shall not be affected
thereby and shall remain in full force and effect.
13.14 Offset. Without limitation of any other right or remedy
of Lender hereunder or provided by law, any indebtedness relating to
the Property or its operation and now or hereafter owing to Borrower by
Lender (including, without limitation, any amounts on deposit in any
demand, time, savings, passbook or like account maintained by Borrower
with Lender) may be offset and applied by Lender hereunder, or under
the Note, the Mortgage or any of the other Loan Documents.
13.15 Acts by Lender. Notwithstanding anything herein
contained to the contrary, Lender will not be required to make any
disbursement or perform any other act under this Agreement if, as a
result thereof, Lender will violate any law, statute, ordinance, rule,
regulation or judicial decision applicable thereto.
13.16 Binding Provisions. The covenants, warranties,
agreements, obligations, liabilities and responsibilities of Borrower
under this Agreement shall be binding upon and enforceable against
Borrower and its legal representatives, administrators, successors and
permitted assigns.
13.17 Counterparts. This Agreement may be executed in
counterparts, and all said counterparts when taken together shall
constitute one and the same Agreement.
13.18 No Third Party Beneficiary. This Agreement is only for
the benefit of the parties hereto and their permitted successors and
assigns. No other person or entity shall be entitled to rely on any
matter set forth herein without the prior written consent of such
parties.
37
13.19 Publicity. Subject to compliance with Applicable Laws,
Lender reserves the right to publicize the making of the Loan in any
manner it deems appropriate, including, without limitation,
advertisements in trade journals and newspapers. In addition, Borrower
agrees that Lender shall have the right to erect and maintain a sign at
the Project in a prominent location for the duration of the term of the
Loan stating that Lender is providing the financing for construction of
the Project. The sign shall be furnished by Lender and the sign shall
be located in a place selected by Lender, provided that such location
does not interfere with performance of the Work.
13.20 JURISDICTION AND VENUE. BORROWER HEREBY AGREES THAT ALL
ACTIONS OR PROCEEDINGS INITIATED BY BORROWER AND ARISING DIRECTLY OR
INDIRECTLY OUT OF THIS AGREEMENT SHALL BE LITIGATED IN THE CIRCUIT
COURT OF XXXX COUNTY, ILLINOIS, OR THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF ILLINOIS OR, IF LENDER INITIATES SUCH ACTION,
ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION AND WHICH HAS
JURISDICTION. BORROWER HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN
ANY OF SUCH COURTS, AND HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS
AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREES
THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT
THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO THIS AGREEMENT.
BORROWER WAIVES ANY CLAIM THAT CHICAGO, ILLINOIS OR THE NORTHERN
DISTRICT OF ILLINOIS IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM
BASED ON LACK OF VENUE. SHOULD BORROWER, AFTER BEING SO SERVED, FAIL TO
APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED
WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF,
BORROWER SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE
ENTERED BY LENDER AGAINST BORROWER AS DEMANDED OR PRAYED FOR IN SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM
FOR BORROWER SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE
THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM
OR THE TAKING BY LENDER OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER
APPROPRIATE JURISDICTION, AND BORROWER HEREBY WAIVES THE RIGHT, IF ANY,
TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.
38
13.21 JURY WAIVER. BORROWER AND LENDER HEREBY VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) BETWEEN OR AMONG BORROWER AND LENDER ARISING OUT OF
OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR
ANY RELATIONSHIP BETWEEN BORROWER AND LENDER. THIS PROVISION IS A
MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE LOAN DESCRIBED HEREIN AND
IN THE OTHER LOAN DOCUMENTS.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
CMC HEARTLAND PARTNERS VII, BANK ONE, ILLINOIS, NA, a national
LLC, a Delaware limited liability company banking association
By: ________________________ By: ___________________________
Title: ________________________ Title: ___________________________
39
Schedule of Exhibits
--------------------
A - Legal Description of the Land
B - Budget
C - Required Title Insurance - Endorsements
D - List of Plans and Specifications
E - Additional Agreements
EXHIBIT A
Legal Description
EXHIBIT B
Budget
EXHIBIT C
Required Title Insurance - Endorsements
EXHIBIT D
List of Plans and Specifications
EXHIBIT E
Additional Agreements
