EXHIBIT 10.9
REVOLVING CONSTRUCTION AND DEVELOPMENT LOAN AGREEMENT
THIS AGREEMENT, made and entered into as of the 13th day of July, 1998,
by and between XXXXXXXX BROS. CONSTRUCTION, INC., a Minnesota corporation
(hereinafter referred to as "Borrower"), whose address is 000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx, Xxxxxxxxx 00000, and U.S. BANK NATIONAL ASSOCIATION, a
national banking association (hereinafter referred to as "Lender"), whose
address is 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000.
WITNESSETH THAT, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
following meanings:
Acquisition Costs: The total costs of acquiring Development Project
Land as set forth in the Budget for the Development Project as approved by the
Lender.
Advance: Any portion of the Loan advanced by Lender to or for the
benefit of Borrower in accordance with the terms hereof.
Advance Date: The date on which an Advance of Loan proceeds requested
by Borrower hereunder is funded.
Affiliate: When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns or
holds, directly or indirectly, five percent (5%) or more of any class of voting
stock of the Person referred to (or if the Person referred to is not a
corporation, five percent (5%) or more of the equity interest therein), (c) each
Person, five percent (5%) or more of the voting stock (or if such Person is not
a corporation, five percent (5%) or more of the equity interest therein) of
which is beneficially owned or held, directly or indirectly, by the Person
referred to, and (d) each of such Person's officers, directors, joint venturers
and partners. The term control (including the terms "controlled by" and "under
common control with") means the possession directly or indirectly, of the power
to direct or cause the direction of the management and policies of the Person in
question.
Agreement: This Revolving Construction and Development Loan Agreement
including all Project Addenda and any other amendments hereof and supplements
hereto executed by Borrower and Lender.
Applicable Margin: As to the Development Note, at any time that the
Loan to Cost Ratio on the outstanding principal balance of such note is over
seventy percent (70%), the Applicable Margin is two and one-half percent (2.5%),
and at any time that the Loan to Cost Ratio on the outstanding principal balance
of such note is equal to or less than seventy percent (70%), the
Applicable Margin is one and one-quarter percent (1.25%). As to the Revolving
Note, the Applicable Margin at all times is one percent (1.0%).
Application and Certificate For Payment: The Application and
Certificate for Payment in the form of that attached hereto as Exhibit "B" which
shall be used in connection with all Advances for Development Loans.
Appraisal: As to the Development Project, the appraisal by Xxxxx Real
Estate Company dated March 11, 1998, and as to a Construction Project, a
third-party appraisal of the retail sales value of the finished lot and the home
to be constructed thereon commissioned and/or approved by, and addressed to,
Lender, and prepared at the expense of Borrower by a qualified and licensed MAI
appraiser acceptable to Lender, which complies with all applicable Governmental
Requirements and the requirements of Lender and its chief review appraiser.
Back-end Equity: The total amount of the Costs shown under the column
"Back-end Equity" in the schedule of Total Development Costs for Stonecliffe
attached hereto as Exhibit J.
Board: The Board of Governors of the Federal Reserve System or any
successor thereto.
Bond Financial Covenants: The financial covenants as contained in
Sections 10.15 and 10.16 of that certain Indenture dated as of October 18, 1996,
by and between Xxxxxxxx Bros. Construction, Inc., and National City Bank of
Minneapolis, National Association as Trustee, regarding the Senior Subordinated
Debentures, Series Eleven Percent, in the amount of $3,000,000.00 and due 2004.
Borrowing Base Certificate: The Borrowing Base Certificate in the form
of that attached hereto as Exhibit "C".
Budget:
(a) As to a Development Project loan, an itemized, certified statement
of actual and estimated Costs, including all Acquisition Costs, Construction
Costs, Soft Costs and special assessments, of a Project, in Lender's form,
signed and sworn to by Borrower, as the same may be amended or supplemented with
approval of Lender from time to time.
(b) As to a Construction Project loan, an itemized, certified statement
of actual and estimated Costs of the Construction Project Improvements but
excluding Soft Costs, in Lender's form, signed and sworn to by Borrower, as the
same may be amended or supplemented with approval of Lender from time to time.
Business Day: Any day (other than a Saturday, a Sunday or a legal
holiday in the State of Minnesota) on which national banks are permitted to be
open.
City: The City of Xxxxx, a municipal corporation.
Closing Date: The date of this Agreement.
Code: The Internal Revenue Code of 1986, as amended.
Completion: Either Development Project Completion or Construction
Project Completion as applicable.
Completion Date: The date on which Completion of a Project occurs, but
in no event later than (a) the date specified therefor on the Phase Addendum
relating to a Development Project, and (b) the date specified in Column I of the
Borrowing Base Certificate.
Consolidated Subsidiary: A Subsidiary of Borrower whose financial
statements are included in the most recent annual consolidated financial
statements of Borrower and its Subsidiaries.
Consolidated Tangible Net Worth: The dollar amount of:
(a) the tangible assets of Borrower and its Consolidated
Subsidiaries (excluding intercompany items) after deducting
for minority interests and adequate reserves in each case
where, in accordance with GAAP, a reserve is proper, in excess
of
(b) the aggregate amount of all Indebtedness of Borrower and its
Consolidated Subsidiaries (excluding intercompany items),
after making appropriate deductions for any minority
interests;
provided, however, that (i) inventory shall be taken into account on the basis
of the cost or current market value, whichever is lower, (ii) in no event shall
there be included as such tangible assets (a) any assets typically classified as
intangible assets, including but not limited to patents, trademarks, trade
names, copyrights, licenses, goodwill and debt issuance costs, or (b) treasury
stock or any securities or Indebtedness of Borrower or a Consolidated
Subsidiary, or any other equity, convertible or unsecured debt securities unless
the same are readily marketable in the United States of America or entitled to
be used as a credit against Federal income tax liabilities, and (iii) securities
included as such tangible assets shall be taken into account at their current
market price or cost, whichever is lower.
Construction Costs: All hard costs of constructing Project
Improvements, including site preparation costs and the costs of all materials,
labor and equipment.
Construction Project: The construction of a single-family home on
Construction Project Land, all as approved by Lender in accordance with Section
2.4 hereof.
Construction Project Completion: All Construction Project Improvements
included within a Construction Project are completed in accordance with the
Plans therefor and paid for in full, free of all mechanics', laborers',
materialmen's and other similar lien claims; a certificate of substantial
completion for the Construction Project Improvements has been signed by Borrower
and Borrower has received a certificate of occupancy from the City and has
otherwise complied with all Governmental Requirements with respect to completion
of construction of the Construction Project.
Construction Project Improvements: New single-family homes and related
improvements to be constructed upon Construction Project Land and owned by
Borrower.
Construction Project Land: That portion of Development Project Land
owned in fee simple by Borrower to be used for a Construction Project and upon
which Construction Improvements are located or are to be constructed.
Construction Project Loan. A Construction Project Loan made pursuant to
Section 2.4.
Consultants: Third party experts retained by Lender to assist it in
connection with approving, closing, advancing or administering the Project
Loans.
Contingency Reserve: A reserve of Development Project Loan proceeds to
pay Costs which are in excess of the amounts thereof anticipated on the date of
approval of the Development Project, whether as a result of price increases,
changes in the Plans or otherwise, in an amount equal to a percentage of all
Construction Costs of a Development Project as mutually agreed to by Borrower
and Lender.
Contractor: Any Person, party or entity which has a contract or
subcontract under which payment may be required for any work done, material
supplied or services furnished in connection with acquiring, constructing,
financing, equipping and/or developing a Project.
Costs: All Acquisition Costs, Construction Costs and Soft Costs of a
Project.
Default Rate: The Default Rate of interest specified in Section 1.2(b)
hereof.
Development Agreement: Collectively the City of Xxxxx Pinetree Pass
Development Contract between Borrower and the City of Xxxxx, Minnesota, dated
April 7, 1998, the City of Xxxxx Pinetree Pass 2nd Addition Development Contract
between Borrower and the City of Xxxxx, Minnesota, dated June 9, 1998, the City
of Xxxxx Pinetree Pass 3rd Addition Development Contract between Borrower and
the City of Xxxxx, Minnesota, dated June 9, 1998, and all amendments, additions
or supplements thereto.
Development Contract. Any contract entered into between Borrower for
the construction of the Development Project.
Development Note: The Development Note, dated of even date herewith,
executed and delivered by Borrower to Lender, in the face principal amount of
Six Million One Hundred Thousand and 00/100 Dollars ($6,100,000.00), to evidence
the Development Project Loan, as the same may be amended, modified or replaced
from time to time.
Development Project: The acquisition and development of Development
Project Land into single family housing subdivisions, as approved by Lender in
accordance with Section 2.2 hereof.
Development Project Completion: All Development Project Improvements
included within the entire Development Project or any Phase thereof as
applicable (except for final paving or other similar items, the completion of
which is secured by a Letter of Credit deposited with the City) are completed in
accordance with the Plans therefor, as approved by Lender, and paid for in full,
free of all mechanics', laborers', materialmen's and other similar lien claims;
said completion has been approved and certified by the General Contractors and
by the Inspecting Architect; a
certificate of substantial completion for the Development Project Improvements
has been signed by Borrower and the General Contractors and delivered to Lender,
and no punch-list items remain to be completed; Lender has received acceptable
evidence that all Governmental Requirements and all private restrictions and
covenants relating to the Development Project have been complied with or
satisfied; Lender has received copies of all warranties, if any, from suppliers
covering materials included within the Development Project (or Phase thereof as
applicable); Lender has received an as-built survey of the Development Project
which conforms with Lender's requirements.
Development Project Improvements: All improvements, including all
improvements required by the City, which are necessary for the completion of a
Development Project including, but not limited to, the construction of roads,
utilities, curbs, gutters, signage, grading and landscaping, all in accordance
with Plans approved by Lender and Inspecting Architect.
Development Project Land: Land owned or to be acquired in fee simple by
Borrower pursuant to the Option Agreement to be used for the Development Project
and upon which Development Project Improvements are located or are to be
constructed, and legally described in Exhibit "A" attached hereto.
Development Project Loan: A Project Loan made pursuant to Sections 2.2
and 2.3.
Draw Request: A written request by Borrower for an Advance of
Construction Project Loan proceeds under this Agreement, in the form Exhibit "E"
attached hereto and with the certifications set forth therein, including the
Borrowing Base Certificate.
Environmental Audit: A written Phase I environmental review, audit,
assessment or report commissioned and/or approved by, and currently addressed
and certified to, Lender, or accompanied by a reliance letter addressed which
complies with ASTM Practice E 1527 and which is otherwise acceptable to Lender,
setting forth the results of an investigation of a Development Project,
including an historical investigation of the uses and ownership of the
Development Project Land included therein, contacts with appropriate
governmental agencies and any Tests which may be requested by Lender, prepared
by a competent, qualified environmental engineer or consultant which is
acceptable to Lender and is licensed, bonded and insured in accordance with all
applicable statutes, and all supplements, updates and recertifications thereof
required by Lender.
GAAP: Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of any date of
determination.
General Contractor: The general contractor or construction manager
(whether one or more) retained by Borrower and approved by Lender, which
approval shall not be unreasonably withheld with respect to any Project, if
different from Borrower. Borrower may act as its own general contractor with
respect to any Project.
Governmental Requirements: All laws, statutes, codes, ordinances and
governmental rules, regulations and requirements applicable to Borrower, Lender
and/or the Projects.
Immediately Available Funds: Funds with good value on the day and in
the city in which payment is received.
Improvements: The buildings and other improvements which are to be
placed or constructed upon the Project Land as a part of any Project, all of
which shall be owned by Borrower.
Indebtedness: With respect to any Person at any date, the
"Indebtedness" means and includes all items of indebtedness which, in accordance
with GAAP, would be included in determining total liabilities as shown on the
liabilities side of a balance sheet of such Person at such date, and in addition
shall include (i) all indebtedness guaranteed or endorsed (other than for
purposes of collection in the ordinary course of business), directly or
indirectly, in any manner by such Person, and contingent obligations of such
Person in respect of, or to purchase or otherwise acquire, indebtedness of
others, (ii) all lease obligations of such Person required under GAAP to be
capitalized and reflected as a liability on the balance sheet of such Person,
and (iii) all indebtedness secured by any mortgage, lien, pledge, charge or
encumbrance upon property owned by such Person, whether or not the indebtedness
so secured has been assumed by such Person.
Indemnification Agreement: Lender's form of joint and several
indemnification agreement relating to environmental matters and executed by
Borrower, in favor of Lender, including any amendments thereof and supplements
thereto executed by Borrower which agreement as amended will cover all Project
Land.
Inspecting Architect: The independent architect, engineer or consultant
(whether one or more) selected by Lender to advise Lender with respect to any
Project.
Lender Debt: Any recourse indebtedness or any guaranty of Borrower or
of any Affiliate of Borrower to the Lender or to any Affiliate of Lender, except
the Loan.
Letter of Credit: A performance letter of credit required to be issued
by a City or a public utility in connection with a Development Project.
Letter of Instructions: The Letter of Instructions in the form of that
attached hereto as Exhibit "F".
Loan: The aggregate of all Project Loans made by Lender to Borrower
pursuant to the terms of this Agreement in an amount of up to Ten Million One
Hundred Thousand and 00/100 Dollars ($10,100,000.00) outstanding at any given
time (subject to the limitations set forth in Section 1.1).
Lot: Any platted lot within the Project which is designated for a
single family residence.
Loan Documents: The documents which evidence, secure or otherwise
relate to the Loan including, but not limited to, the Note, this Agreement, the
Mortgage (all Amendments to
Mortgage) and the Indemnification Agreement, and including any amendments
thereof and supplements thereto executed by Lender and Borrower (and/or any
other party thereto).
Loan to Cost Ratio: The ratio calculated by taking the sum on any date
of the amounts on such date of (i) the outstanding principal balance on the
Development Note, plus (ii) the remaining amount available to be funded under
the Development Note, plus (iii) the amounts of outstanding Letters of Credit
(to the extent not previously included), plus (iv) the amount of Back-end Equity
(as defined in Section 2.3(e) below) which Borrower has not yet paid for and
given Lender evidence of such payment as of such date, and dividing that total
by the product of the total number of lots remaining in the Project (whether
they are owned in fee by Borrower or are yet to be acquired pursuant to the
Option Agreement) multiplied by the average per lot cost as shown on the most
recent Budget approved by Lender.
Maturity Date: The third anniversary of the date of this Agreement,
unless extended as set forth in Section 1.8 herein.
Maximum Construction Project Advance: The Maximum Construction Project
Advance as defined in Section 2.4 hereof.
Model Home: A Construction Project which (a) is a single family home,
(b) not a Pre-Sold Home, and (c) will be used as a model home by Borrower.
Mortgage: A first Mortgage and Security Agreement and Fixture Financing
Statement and Assignment of Leases and Rents, dated of even date herewith,
executed and delivered by Borrower in favor of Lender to secure the Loan,
including all amendments thereof and supplements thereto, which Mortgage shall
be a first lien Borrower's interest on all Project Land to which Borrower owns
fee title or on which Borrower has an option to purchase.
Note or Notes: Collectively, the Development Note and the Revolving
Note.
Option Agreement: The Rolling Option Agreement dated April 22, 1997,
between J. Xxxxx Xxxxx, Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxx and Borrower for the
purchase of the Project Land to be acquired for the Development Project and the
Construction Projects, as amended by the Amendment to Rolling Option Agreement
dated April 8, 1998, and the Second Amendment to Rolling Option Agreement dated
May 22, 1998, and any other amendments, additions or other supplements thereto.
Permitted Encumbrances: The liens, charges and encumbrances on title to
a Project approved as such by Lender prior to any Advance of proceeds of the
Project Loan therefor.
Person: Any natural person, corporation, limited liability company,
partnership (general or limited), limited liability partnership, joint venture,
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting
in an individual, fiduciary or other capacity.
Phase: Any phase of the Development Project as defined in the Phase
Addendum, or the corresponding Development Project Land as the context may
require.
Plans: The final working plans for Project Improvements, including
drawings, specifications, details and manuals (which in the case of Development
Projects shall have been approved by Lender).
Phase Addendum: An addendum to this Agreement between Borrower and
Lender for each Phase of the Development Project approved by Lender pursuant to
Section 2.2, identifying and describing the next Phase of the Development
Project in detail, supplementing this Agreement as it applies to said
Development Project, setting forth the amount of the Development Project Loan
allocated thereto, setting forth the date by which construction of the
Development Project must begin ("Commencement Date") and the outside Completion
Date therefor, setting forth the estimated Costs of the Development Project and
adding to this Agreement any requirements, representations and covenants which
are required by Lender as a condition to its approval of said Phase of the
Development Project.
Pollutant: Any hazardous or toxic substance, waste or material, or
other pollutant or contaminant (including, but not limited to, radioactive
materials, gasoline, asbestos, dioxin, methane, radon, urea-formaldehyde and
polychlorinated biphenyls), as those terms are defined or used in any
Governmental Requirement.
Pre-Sold Home: A Construction Project that is subject to a
non-cancelable and non-contingent purchase agreement between Borrower as seller
and a bona fide third party buyer.
Project: The Project Land and the Project Improvements which
collectively make up either a Development Project or a Construction Project.
Project Improvements: All Construction Project Improvements and
Development Project Improvements.
Project Land: All Development Project Land and Construction Project
Land.
Project Loan: The portion of the Loan set aside to fund an approved
Development Project pursuant to Section 2.2 or the amount Advanced on a
Construction Project pursuant to Section 2.4.
Reference Rate: The rate of interest from time to time publicly
announced by Lender as its "reference rate". Lender may lend to its customers at
rates that are at, above or below the Reference Rate. For purposes of
determining any interest rate hereunder or under any Loan Document which is
based on the Reference Rate, such interest rate shall change as and when the
Reference Rate shall change.
Regulatory Change: Any change after the date hereof in federal, state
or foreign laws or regulations or the adoption or making after such date of any
interpretations, directives or requirements applying to a class of banks
including Lender under any federal, state or foreign laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
Release Price: See Exhibit "D" attached hereto.
Revolving Commitment: The obligation of Lender to make Construction
Project Loans to Borrower on a revolving basis in an aggregate principal amount
outstanding at any time not to exceed the Revolving Loan Amount upon the terms
and subject to the conditions and limitations set forth in this Agreement.
Revolving Loan Amount: Four Million and 00/100 Dollars ($4,000,000.00).
Revolving Note: The Revolving Note, dated of even date herewith,
executed and delivered by Borrower to Lender in the face principal amount of
Four Million and 00/l00 Dollars ($4,000,000.00), to evidence the Construction
Project Loan, as the same may be amended, modified or replaced from time to
time.
Senior Subordinated Debentures: Both (a) the Senior Subordinated
Debentures, Series Ten Percent, in the amount of $3,000,000.00 and due in the
year 2003 as described in and governed by that certain Indenture dated May 14,
1993, by and between Borrower and National City Bank of Minneapolis, National
Association as Trustee, and (b) the Senior Subordinated Debentures, Series
Eleven Percent, in the amount of $3,000,000.00 and due 2004 as described in and
governed by that certain Indenture dated as of October 18, 1996, by and between
Xxxxxxxx Brothers Construction, Inc., and National City Bank of Minneapolis,
National Association as Trustee.
Soft Costs: Costs of a Project not attributable to Acquisition Costs or
Construction Costs, including interest on the Project Loan, fees payable to
Lender pursuant hereto, fees of Borrower's and Lender's counsel, fees of outside
accountants, costs of feasibility studies, environmental studies, permit fees,
inspection fees, fees of the Inspecting Architect and other Consultants, ad
valorem taxes, insurance premiums, recording and filing fees and taxes, title
insurance premiums and fees, surveyor's fees and costs of internal and outside
appraisals.
Speculative Home: A Construction Project which is a single family home,
not a Pre-Sold Home and not anticipated to be used as a Model Home.
Subsidiary: Any corporation of which at least a majority of the
outstanding voting stock is owned, at the time, directly or indirectly, by
Borrower, or by one or more Subsidiaries of Borrower. For purposes of this
definition, "voting stock" means stock which ordinarily has voting power for the
election of directors, whether at all times or only so long as no senior class
of stock has such voting power by reason of any contingency.
Sworn Construction Cost Statement: An itemized, certified statement of
actual and estimated Construction Costs of a Project, in Lender's form, signed
and sworn to by Borrower and the General Contractor (if any), as the same may be
amended or supplemented with the approval of Lender from time to time.
Termination Date: The earlier of (a) the Maturity Date, or (b) the date
on which the Note is declared to be immediately due and payable pursuant to
the terms hereof or of the Note.
Tests: Such soil tests, water tests, chemical tests, materials tests
and other tests and analyses as are appropriately required to confirm, with
relative certainty, the absence of Pollutants from a Project.
Title Company: Chicago Title Insurance Company, a Missouri corporation.
Title Policy: A loan policy of title insurance in favor of Lender
issued by the Title Company together with such endorsements and otherwise
complying with Lender's standard requirements therefor.
Total Revolving Outstandings: As of any date of determination, the sum
of the aggregate unpaid principal balance of Advances on the Construction
Project Loan outstanding on such date.
Transfer Price: The price designated for each lot when it is
transferred from the Development Project Loan to the Construction Project Loan
shall be $48,800.00 per lot.
Unused Revolving Commitment: As of any date of determination, the
amount by which the Revolving Loan Amount exceeds the Total Revolving
Outstandings.
0.XXXX
1.1 Principal Advances
Upon the terms and subject to the conditions set forth in this
Agreement, Lender agrees to make Project Loans, for the purpose of acquiring,
developing and constructing Projects. The Construction Project Loan only shall
be on a revolving basis, in Advances, at any time and from time to time, in
accordance with the terms hereof, from the Closing Date to the Termination Date,
during which period Borrower may borrow, repay and reborrow as to the
Construction Project Loan. The Development Project Loan shall be made on a term
basis in accordance with the terms hereof. Such loans are subject to the
provision, however, that (a) at no time shall Lender be obligated to lend to
Borrower more than the total amount of proceeds of the Loan which Borrower has
then qualified to receive hereunder; (b) the aggregate unpaid principal balance
of all Total Revolving Outstandings shall never exceed the Revolving Loan
Amount; and (c) the aggregate unpaid principal balance of the Development
Project Loan, plus all outstanding Letters of Credit, shall never exceed Six
Million One Hundred Thousand and 00/100 Dollars ($6,100,000.00). All Advances
shall be evidenced by the Notes. Lender shall enter in its ledgers and records
under which Note the Advance is made, the amount of each such Advance and of
each payment made upon such Advances, and Lender is authorized by Borrower to
enter on a schedule attached to the Note under which the Advance is made a
record of Advances and payments; provided, however, that the failure by Lender
to make any such entry or any error by Lender in making such entry shall not
limit or otherwise affect the obligations of Borrower hereunder and under the
Note. Notwithstanding the expressed principal amount of the Note, Borrower shall
not at any time be obligated to repay more or less than the total of all
Advances made by Lender pursuant hereto, together with interest thereon at the
rates specified below and in the Note, computed on each Advance from the date it
is so made by Lender, and all other advances made by Lender pursuant to the
terms of the Loan Documents, with interest thereon as therein provided, less all
payments of principal of and interest on the Note, and of such advances and
interest thereon, made by Borrower. The entire unpaid principal amount of the
Loan shall be due and payable on the Termination Date.
1.2 Interest Rate, Interest Payments and Default Interest
Interest shall accrue and be payable on the Advances from the date made
as follows:
(a) Each Advance shall bear interest on the unpaid principal
amount thereof at a varying rate per annum equal to the sum of
(i) the Reference Rate, plus (ii) the Applicable Margin.
(b) Any Advance not paid when due, whether at the date scheduled
therefor or earlier upon acceleration, shall bear interest
until paid in full at a rate per annum equal to the sum of (A)
the Reference Rate, plus (B) the Applicable Margin, plus (C)
five percent (5%) (herein called the "Default Rate").
(c) Interest shall be payable (i) with respect to each Advance, on
the first Business Day of each calendar month, commencing on
the first Business Day of the next calendar month after the
calendar month in which the first Advance is made and on the
Termination Date; (ii) with respect to any portion of an
Advance which is prepaid in accordance with the terms hereof,
on the date of such prepayment; and (iii) with respect to
interest at the Default Rate, on demand at Lender's option.
Interest on the Loan shall be computed on the basis of actual days elapsed and a
year of three hundred sixty (360) days.
1.3 Prepayments
Borrower may prepay Advances, in whole or in part, at any time after
three (3) Business Days' prior written notice of said prepayment from Borrower
to Lender, without premium or penalty. Any such prepayment must be accompanied
by payment, in full, of all unpaid, accrued interest on the amount prepaid.
Except as otherwise provided in Section 3.5 herein, amounts so prepaid shall be
applied to such Project Loan or Project Loans as designated by Borrower unless a
default or event of default then exists hereunder, in which event said amounts
shall be applied as Lender may elect. If no default or event of default exists
hereunder, amounts so prepaid on the Construction Project Loan may be reborrowed
from time to time as parts of other Construction Project Loans (but not the same
Construction Project on the Construction Project Loan) in accordance with the
terms of this Agreement.
1.4 Optional Termination of Revolving Commitment
Borrower may, at any time, upon not less than three (3) Business Days'
prior written notice to Lender, terminate the Revolving Commitment in its
entirety. Upon termination of the Revolving Commitment pursuant to this Section,
Borrower shall pay to Lender the full amount of all Loan Advances, all accrued
and unpaid interest thereon, and all other amounts then owing from Borrower to
Lender pursuant to the Loan Documents, and Lender shall have no further
obligation to make Advances on the Loan hereunder.
1.5 Fees
Borrower shall pay to Lender the following fees as and when hereinafter
provided: (a) a commitment fee in the amount of One Hundred Five Thousand and
00/100 Dollars ($105,000.00), payable on the Closing Date; and (b) an annual
Letter of Credit fee for each Letter
of Credit issued pursuant to Section 2.2 hereof in an amount equal to one and
one-quarter percent (1.25%) per annum of the outstanding amount of such Letter
of Credit payable quarterly, in advance, commencing on the date of issuance of
the Letter of Credit.
1.6 Payments
Payments and prepayments of principal of, and interest on, the Note and
all fees, expenses and other obligations under this Agreement payable to Lender
shall be made without setoff or counterclaim in Immediately Available Funds not
later than 1:00 P.M. (Minneapolis time) on the dates called for under this
Agreement and the Note to the Lender at its main office in Minneapolis,
Minnesota. Funds received after such time shall be deemed to have been received
on the next Business Day. Whenever any payment to be made hereunder or on the
Note shall be stated to be due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time, in the case of a payment of principal, shall be included in the
computation of any interest on such principal payment.
1.7 Capital Adequacy
In the event that any Regulatory Change reduces or shall have the
effect of reducing the rate of return on Lender's capital or the capital of its
parent corporation (by an amount Lender deems material) as a consequence of the
Loan to a level below that which Lender or its parent corporation could have
achieved but for such Regulatory Change (taking into account Lender's policies
and the policies of its parent corporation with respect to capital adequacy),
then Borrower shall, within ten (10) days after written notice and demand from
Lender, pay to Lender additional amounts sufficient to compensate Lender, or its
parent corporation, for such reduction. Any determination by Lender under this
Section and any certificate as to the amount of such reduction given to Borrower
by Lender shall be final, conclusive and binding for all purposes, absent error.
1.8 Extensions
Not more than ninety (90) days and not less than sixty (60) days prior
to the Maturity Date, and if no default or event of default then exists
hereunder, Borrower may, at its option, request that Lender extend the Maturity
Date for an additional period of one (1) year. Any such request shall be
accompanied by an extension fee in the amount of Thirty-five Thousand and 00/100
Dollars ($35,000.00) ("Extension Fee").
2. CONDITIONS OF BORROWING
Lender shall not be required to make any Advances hereunder until the
pre-closing requirements, conditions and other requirements set forth below have
been completed and fulfilled to the satisfaction of Lender, with respect to said
Advance, at Borrower's sole cost and expense. It is agreed, however, that Lender
may, in its discretion, make such Advances prior to completion and fulfillment
of any or all of such pre-closing requirements, conditions and other
requirements, without waiving its right to require such completion and
fulfillment before any additional Advances are made.
2.1 Prerequisites to Effectiveness of Agreement
The obligations of Lender to make Advances and the effectiveness of
this Agreement are subject to delivery to Lender by Borrower the following
documents, certificates and opinions, each in form and substance acceptable to
Lender:
(a) This Agreement duly executed by Borrower and Lender; the Note,
Mortgage and Indemnity Agreement duly executed by Borrower;
(b) A copy of the Articles of Incorporation of Borrower, together
with all amendments thereto, and a Certificate of Good
Standing for Borrower, each currently certified by the
Secretary of State of Minnesota; Borrower's By-Laws and
Resolutions of Borrower's Board of Directors authorizing the
transactions described herein, and an incumbency certificate
for Borrower (including the names, titles and specimen
signatures of officers thereof authorized to execute Loan
Documents), all currently certified by Borrower's corporate
secretary and upon which Lender may rely until revoked by
written notice to Lender;
(c) A Certificate from a duly authorized officer of Borrower
setting forth the names, titles, specimen signatures and
telephone numbers of all Persons authorized to (i) sign Draw
Requests and/or other documents, instruments, certificates and
agreements to be delivered by Borrower to Lender hereunder,
and/or (ii) give instructions to Lender hereunder, which
Certificate shall be deemed to be in full force and effect
until receipt by Lender of an amendment thereof duly executed
by said duly authorized officer of Borrower;
(d) A signed, written opinion from Borrower's counsel, addressed
to Lender and currently dated, as to the due organization,
existence, qualification and good standing of Borrower; as to
the due authorization, validity, legality, binding nature and
enforceability of the Loan Documents listed in Section 2.1(a);
that, to such counsel's knowledge, the execution, delivery and
performance by Borrower of the Loan Documents to which each is
a party will not violate any contracts or agreements of
Borrower or any applicable Governmental Requirements; as to
the absence, to such counsel's knowledge, of litigation or
governmental proceedings which could materially adversely
affect Borrower; and such other matters as may be required by
Lender;
(e) The most current available annual audited financial statements
for Borrower, as well as financial statements for each of the
three (3) full fiscal years immediately preceding the time
period covered by said current financial statements, and
Borrower shall also certify that there has been no material
adverse change in the financial condition of Borrower since
the dates of such financial statements.
Lender may advance to itself, pursuant to the provisions of Sections
3.1 and 5.5, proceeds of the Loan sufficient to pay all reasonable costs and
expenses incurred by Lender in connection with preparation, negotiation and
extension of the Loan Documents and the review of the foregoing.
2.2 Conditions Precedent to Funding of the Development Project
Prior to the funding of any Advances on each Phase of the Development
Project, Borrower shall submit to Lender the following documentation for any
Phase for which funding is requested (the "Development Project Approval
Prerequisites"), all of which shall be acceptable in form and content to Lender:
(a) A copy of the signed Option Agreement and all amendments
thereto covering the Development Project Land pursuant to
which Borrower has acquired or is acquiring the same,
including a signed copy of the Second Amendment to Rolling
Option Agreement and any subsequent amendments, additions or
supplements to the Option Agreement.
(b) A memorandum of option agreement in recordable form setting
forth the Borrower's interest in the Development Project Land
under the Option Agreement.
(c) A Sworn Construction Cost Statement setting forth in detail
all Construction Costs of the Development Project.
(d) A Budget setting forth in detail all of the overall Costs of
the Development Project, including all Acquisition Costs,
Construction Costs and Soft Costs associated with the
Development Project, and for each Phase a Budget for such
Phase, together with a summary of the Costs of the Development
Project to date and a projected Budget for the completion of
the entire Development Project within the Budget approved for
the entire Development Project Budget as of the date of this
Agreement or as otherwise approved by the Lender in its sole
discretion.
(e) An Appraisal of the Development Project at the cost of
Borrower.
(f) A commitment for a Title Policy from the Title Company
covering the Development Project, together with copies of each
document referred to therein and together with searches for
state and federal tax liens, bankruptcies and judgments
against the Borrower and any other Person or entity which may
have an interest in the Development Project.
(g) A current, certified ALTA/ACSM Land Title Survey of the
Development Project Land, which shall also be prepared in
accordance with Lender's standard requirements therefor.
(h) Two (2) complete sets of the Plans for the Development
Project, approved by the City and including a copy of the site
plan with respect to the Development Project.
(i) Soil reports on the Development Project Land, showing that the
soil will adequately support the Development Project
Improvements when constructed in accordance with the Plans.
(j) The construction contract for each General Contractor, a
schedule listing all contracts and subcontracts relating to
the Development Project, and copies of such subcontract as
Lender may require, specifically identifying those which are
with Borrower or Affiliates thereof. In addition, Borrower
will obtain a conditional assignment of the construction
contract and an agreement from the general contractor to honor
and perform the same for Lender in the event of default under
the Loan Documents.
(k) Lender has obtained an Environmental Audit which indicates
that no Pollutant is present above, on, in or under the
Development Project, together with all reports, data and other
information produced in connection with the Tests at the cost
of Borrower.
(l) Insurance policies and/or certificates of insurance written by
insurers satisfactory to Lender and in amounts satisfactory to
Lender and which comply with the requirements of this
Agreement.
(m) A flood zone certification from Flood Data Services, Inc. (or
another Consultant acceptable to Lender), indicating that the
Development Project is not located in a flood plain or any
other flood prone area, as designated by any governmental
agency; provided, however, that if the Development Project is
so located, Borrower shall provide evidence of flood insurance
acceptable to Lender.
(n) Borrower's time schedules for commencement of construction and
completion of the Development Project Improvements for the
Phase for which the request is being made and for disbursement
of the Development Project Loan proceeds.
(o) A current letter, prepared in accordance with Lender's
standard form therefor, addressed to Lender from an
appropriate City officer regarding the zoning status and
classification of the Development Project, certifying that the
Development Project Land may be used for construction and
operation of the Development Project Improvements without
violation of any applicable Governmental Requirements.
(p) Letters addressed to Lender from the utility companies or
licensed surveyor confirming the availability of water, storm
and sanitary sewer, gas, electric and telephone utilities for
the Development Project, prepared in accordance with Lender's
standard requirements therefor.
(q) UCC chattel lien searches from the appropriate office(s) in
the jurisdictions in which the Development Project is located,
covering the Borrower and of each other owner of the
Development Project Land during the previous five (5) years
(if Lender determines that the same are required).
(r) Information concerning current ad valorem property taxes and
special assessments to which the Development Project is
subject, including copies of tax statements, tax parcel
number(s) and payment dates.
(s) A certified copy of the recorded plat of the Development
Project Land and for each Phase a copy of the proposed final
plat or plats for such Phase prepared in accordance with the
Development Agreement, and resulting in the creation of the
individual lots contemplated in the Development Agreement to
be fully executed and in recordable form. The Plats shall be
recorded immediately prior to the first Advance on any Phase
and certified copies of the same provided to Lender, provided,
however, the Borrower shall not be required to file the plats
of Pinetree Pass 2nd Addition and Pinetree Pass 3rd Addition
until the day the Mortgage is recorded.
(t) Any other documents and items which Lender, in its sole
discretion, reasonably requires to evaluate the Development
Project.
Upon receipt of the above-mentioned information regarding the
Development Project Approval Prerequisites, Lender may engage an Inspecting
Architect to review the Development Project, and legal counsel and/or a
Consultant to review the Environmental Audit, title commitment and related
documents, all at Borrower's sole cost and expense. If all of the Development
Approval Prerequisites are acceptable to Lender, in its sole discretion,
including but not limited to the Budget for any Phase of the Development
Project, and if the proposed Phase of the Development Project complies with all
of the terms, provisions, requirements and conditions of this Agreement, Lender
shall fund an amount equal up to eighty-five percent (85%) of the Costs as shown
in the Budget of the Development Project for the Phase for which the Advance was
requested pursuant to the provisions of Section 2.3 below. Any Advance of the
Development Project Loan is a term loan which shall mature on the Maturity Date
if not paid earlier pursuant to Section 3.5 hereof, and is not a revolving loan,
i.e., sums prepaid upon a Development Project Loan may not be reborrowed.
Upon approval of the requirements for an Advance on the Development
Project Loan on any Phase of the Development Project and prior to any Advance
thereon, Borrower and Lender shall enter into a Phase Addendum for such Phase of
the Development Project, which shall, among other things, set forth the amount
of the Development Project Loan allocated to such Phase, the Commencement Date
and Completion Date for such Phase.
A portion of the Development Project Loan may be used for the issuance
by Lender of Letters of Credit required by the City or the public telephone
company in connection with the Development Loan, provided that no more than One
Million and 00/100 Dollars ($1,000,000.00) may be reserved for such purpose, in
the aggregate, for the entire Development Project. The amount of any outstanding
Letter of Credit shall reduce the amount of the Development Project Loan
available to the Borrower, and any draw on such Letters of Credit which is not
immediately paid by Borrower shall be deemed to be an Advance under the
Development Note and shall be added to and constitute a part of the applicable
Development Project Loan. Borrower shall pay an annual Letter of Credit Fee as
forth in Section 1.5 hereof for any such Letter of Credit .
2.3 Development Project Loan Pre-Funding Requirements
(a) In order to qualify for the first Advance of proceeds with
respect to the first Phase of the Development Project, the
following conditions shall be satisfied:
(i) Borrower shall have paid the fees set forth in
Section 1.5 hereof.
(ii) Lender shall have delivered a fully executed copy of
the Mortgage to the Title Company.
(iii) Lender shall have issued the Letter of Instructions
to the Title Company which shall include instructions
to record the Mortgage and to issue the Title Policy
for the Development Project, subject only to such
Permitted Exceptions as are acceptable to the Lender.
(iv) Lender has received evidence that Borrower has paid
in cash at least Five Hundred Eighty-nine Thousand
Two Hundred and 00/100 Dollars ($589,200.00) of the
Costs of the Project.
(v) Upon recording of the Mortgage, execution of the
Letter of Instructions and issuance to Lender of the
Title Policy and submission to Lender of all items
referenced in Section 2.2 above, in form and content
acceptable to Lender, and upon receipt and approval
of the items set forth in Section 2.3(b) and 2.3(c)
herein Borrower shall be entitled to obtain Advances
with respect to the applicable Phase of the
Development Project Loan.
(b) At least five (5) days prior to the first Advance for each
Phase of the Development Project of funds from the Development
Project Loan or such later date as is approved by Lender,
Borrower shall provide to Lender each of the following as
applicable for the Phase for which the Advance is requested,
in form and substance acceptable to Lender, not previously
supplied to and approved by Lender:
(i) An Application and Certificate for Payment.
(ii) Copies of all grading and building permits required
to complete construction of the Development Project
Improvements applicable to such Phase.
(iii) Copies of all insurance policies and certificates
required under Section 5.10 below.
(iv) If applicable an Assignment of General Contract in
the form attached hereto as Exhibit "G".
(v) A copy of the Development Agreement duly executed by
Borrower and the City.
(vi) Evidence of access to the Phase for which the Advance
is requested by publicly dedicated streets.
(vii) A certified copy of the final plat of the Phase of
the Development Project Land ("Final Plat") for which
the Advance is requested showing recording
information or if not yet recorded, a copy of the
Final Plat as approved by
the City which plat is to be recorded immediately
prior the first Advance of Funds for such Phase.
(viii) A certified copy of the resolutions adopted by the
city council of the City indicating the City's
approval of the plats, the Development Agreement, the
plans and the construction of the Development Project
Improvements for the Phase for which the Advance is
requested.
(c) At least ten (10) days prior to any additional Advances for
any Phase with respect to the Development Loan, Borrower shall
provide to Lender the following, in form and substance
acceptable to Lender:
(i) An Application and Certificate for Payment.
(ii) A certificate signed by Borrower and the General
Contractor, if applicable, certifying as to the
Development Project Improvements completed at the
time that Borrower or the General Contractor and any
subcontractor specified in the relevant Application
and Certificate for Payment has satisfactorily
completed the work or furnished the materials for
which payment is requested in accordance with the
applicable contracts; that all work for which an
Application and Certificate for Payment is made
conforms to the applicable contracts and any approved
changes and is in place and sufficient Development
Project Loan proceeds remain undisbursed to complete
the Development Project and that all Development Loan
Project proceeds previously disbursed have been
applied as per the previously submitted applications
for payment.
(iii) Waivers of mechanics' liens and materialmen's liens
executed by Borrower and General Contractor, if
applicable and all subcontractors for all work done
and all materials furnished to the Development
Project and included in the previous Application and
Certificate for Payment.
(iv) Such other supporting evidence, including invoices
and receipts as may be requested by Lender to
substantiate all payments which are to be made out of
the disbursement of Development Project Loan proceeds
or to substantiate all payments then made in respect
to the Development Project.
Upon receipt of the Application and Certificate for Payment by
the Lender, Lender shall proceed to obtain a certificate by
the Inspecting Architect stating that all work done as
specified in the Application and Certificate for Payment
conforms to the contract documents, the amount requested for
the work done and the materials furnished reasonably
approximates the value of such work or materials and is in
place and that the undisbursed Development Project Loan
proceeds hereunder are then, in its opinion, sufficient to
complete the Development Project.
(d) Notwithstanding anything to the contrary contained herein,
(i) Lender shall not be required to fund any Development
Project Loan Advance on the first Phase or any Phase
thereafter, until after Borrower has obtained fee
simple title to such Phase as evidenced by the Title
Policy or an endorsement thereto from the Title
Company showing the same subject only to such matters
approved by Lender.
(ii) Lender shall not be required to fund any Development
Project Loan Advance on the second Phase or any Phase
thereafter for Development Project Improvements until
after at least fifty percent (50%) of the lots in the
Phase prior to the Phase for which the Advance is
requested have been sold, as evidenced by either the
release of such lots from the Mortgage as provided
for herein or delivery to Lender of copies
non-cancelable and non-contingent purchase agreements
selling such lots, provided, however, Lender may
Advance for first Phase such Costs as listed on
Exhibit "I" hereto for work which is necessary for
the Development Project and which must be performed
in conjunction with the first Phase even though
Borrower does not yet own fee simple title to the
successive Phases over which such work will be
performed.
(iii) Nothing herein shall be construed as limiting the
Borrower's right to complete the purchase of any of
the Project Land and obtaining fee simple title
thereto and obtaining Advances for such Acquisition
Costs whether or not Borrower is entitled to any
Advances hereunder for Development Project
Improvements at the time of the closing of such
purchase.
(e) Notwithstanding anything to the contrary contained herein,
Lender shall not be required to make the last Advance
hereunder of the Development Project Loan, or any further
Advances of the Construction Project Loan after the last
Advance of the Development Project Loan, until Borrower
provides evidence to Lender that it has paid (in addition to
the amount required in Section 2.3(a)(iv) hereof) all of the
Back-end Equity towards the Costs of the Development Project.
As to any item identified on Exhibit J as a Back-end Equity
item as well as a Loan Budget item, Borrower shall pay such
items up to the required Back-end Equity amount as shown on
Exhibit J prior to obtaining a disbursement of Loan proceeds
for such item.
2.4 Conditions Precedent to Approval of a Construction Project
To obtain any Advance of the Construction Project Loan, Borrower shall
submit to Lender a written request for such Advance, accompanied by the
following documentation (the "Construction Project Approval Prerequisites"), all
of which shall be acceptable in form and content to Lender:
(a) A written description of the Construction Project, including
the legal description of the Lot and the location of the
Construction Project Improvements to be constructed thereon,
the model of house to be constructed thereon, the total costs
of such Construction Project Improvements, and the
Commencement Date and Completion Date thereof.
(b) In the case of a Pre-Sold Home, a copy of the signed
non-cancelable and non-contingent purchase agreement covering
the Construction Project pursuant to which Borrower is selling
the same.
(c) Insurance policies and/or certificates of insurance (to the
extent not previously provided) written by insurers
satisfactory to Lender and in amounts satisfactory to Lender
and which comply with the requirements of this Agreement.
(d) Lender will obtain at Borrower's cost an Appraisal with
respect to all Construction Projects. It is anticipated that
the standard values for each home model built by Borrower will
be appraised. In addition, a value will be assigned to
pre-approved options and upgrades. It is the Lender's intent
that Borrower will not have to obtain a separate Appraisal for
each single family home financed as a Construction Project.
Rather, it is anticipated that a single Appraisal will be used
for all homes of the same model in the Project.
(e) A Construction Cost Statement, and at Lender's request a
statement setting forth in detail all Construction Costs of
the Construction Project.
(f) A Budget setting forth all Costs of the Construction Project,
together with evidence that Borrower has paid, in cash, all
Costs of the Construction Project in excess of the
Construction Project Loan unless the Construction Project
Improvement to be constructed is a Pre-Sold Home. In such
event Borrower shall not be required to pay such costs until
the Construction Project Loan has been fully disbursed.
(g) If so requested by Lender, a copy of the Plans for the
Construction Project.
(h) Any other documents and items which Lender, in its sole
discretion, reasonably requires to evaluate a proposed
Construction Project.
If all of the Construction Project Approval Prerequisites are
acceptable to Lender, in its sole discretion, and if the proposed Construction
Project complies with all of the terms, provisions, requirements and conditions
of this Agreement, and Borrower has provided to Lender the documentation
necessary to satisfy the requirements of Sections 2.2 and 2.3 hereof regarding
the Phase in which the Construction Project is located, Lender shall make an
Advance of the Construction Project Loan as follows.
(i) The Inspecting Architect shall determine the Costs to
complete said Construction Project (the "Completion
Costs"), by determining the items which remain to be
completed, assuming that all the work which is or has
been certified as completed in the current or any
previous Draw Request has been completed, and then
determining the total Costs as shown in the Budget to
complete such remaining items.
(ii) The "Eligible Advance Amount" shall be the result of
subtracting from the overall Budget for the
Construction Project the sum of the Completion Costs,
plus the sum total of all prior Advances for such
Construction Project.
(iii) The "Maximum Construction Project Advance" shall be
result determined as follows:
(1) For a Pre-Sold Home for which the sale price
is $312,500 or more, subtract from eighty
percent (80%) of the lesser of either the
appraised value or the sale price for such
Pre-Sold Home, the sum of the Transfer
Price, plus any special assessments levied
or pending or otherwise allocated by the
Borrower to Lot, plus the sum total of all
prior Advances for such Construction
Project.
(2) For a Pre-Sold Home for which the sale price
is less than $312,500, subtract from eighty
percent (80%) of the sale price for such
Pre-Sold Home the sum of the Transfer Price,
plus any special assessments levied or
pending or otherwise allocated by the
Borrower to Lot, plus the sum total of all
prior Advances for such Construction
Project.
(3) For any Model Home or Speculative Home,
subtract from seventy-five percent (75%) of
the appraised value for such Model Home or
Speculative Home, as shown by the Appraisal,
the sum of the Transfer Price, plus any
special assessments levied or pending or
otherwise allocated by the Borrower to Lot,
plus the sum total of all prior Advances for
such Construction Project.
(4) In no event shall the total amounts of all
Advances on any Construction Project exceed
one hundred percent (100%) of the Cost of
such Construction Project as set forth in
the Budget.
(iv) The Lender shall Advance to Borrower the amount
requested in the Draw Request up to the lesser of
either the Eligible Advance Amount or the Maximum
Construction Project Advance as defined above.
(v) Once funds are Advanced on any Construction Project,
said amount may be used only to fund said
Construction Project until said Construction Project
Loan has been repaid in full. Construction Project
Loans are term loans, each of which shall mature on
the Maturity Date applicable to such Construction
Project, and are not themselves revolving loans,
i.e., sums prepaid upon a Construction Project Loan
may not be reborrowed as a part of the same
Construction Project Loan, but may be reborrowed only
as part of another Construction Project Loan in
accordance with the terms of this Agreement.
(vi) Construction Project Loans for Model Homes and
Speculative Homes will be limited to a maximum of
three (3) Model Homes at any point in time during the
term of the Loan and five (5) Speculative Homes at
any point in time during the term of the Loan.
2.5 Construction Project Loan Pre-Funding Requirements
In order to qualify for the first Advance of proceeds with respect to a
Construction Project Loan, the following conditions shall be satisfied:
(a) Upon submission to Lender of all items referenced in Section
2.4 above, in form and content acceptable to Lender, the
Construction Project shall be entered by Borrower on the
Borrowing Base Certificate as an approved Construction Project
Loan, provided, however, no Pre-Sold Home shall be eligible to
be entered on the Borrowing Base Certificate, and no Advances
shall be made against such Pre-Sold Home, if the Draw Request
for an Advance on such Pre-Sold Home is made more than six (6)
months after the Completion Date specified for such Pre-Sold
Home, and no Speculative Home shall be eligible to be entered
on the Borrowing Base Certificate, and no Advances shall be
made against such Speculative Home, if the Draw Request for an
Advance on such Speculative Home is made more than twelve (12)
months after the Completion Date specified for such
Speculative Home.
(b) Upon submission to Lender of the revised Borrowing Base
Certificate in which all of the requirements set forth in
subsections 2.5(a) above have been complied with, the Borrower
shall be entitled to obtain Advances with respect to such
Construction Project Loan in accordance with the provisions of
this Agreement.
3. ADVANCES OF PROJECT LOAN PROCEEDS
3.1 Procedure for Advances
(a) Each Advance shall be made pursuant to (i) a Draw Request with
respect to Construction Project Loans, or (ii) an Application
and Certificate for Payment with respect to Development
Project Loans, both of which shall be submitted by Borrower to
Lender and to the Inspecting Architect. With respect to each
Development Project, Borrower shall not submit more than one
(1) Application and Certificate for Payment during any thirty
(30) day period. With respect to Construction Projects,
Borrower shall not submit more than two (2) Draw Requests
during any thirty (30) day period.
(b) Borrower shall deliver to Lender an updated Borrowing Base
Certificate on the first (1st) day of each month. Borrower
shall also deliver to Lender a revised Borrowing Base
Certificate with each request for an Advance with respect to
each Construction Project Loan.
(c) On each Advance Date, if all the terms and conditions of this
Agreement have been complied with by Borrower to the
satisfaction of Lender, if no default or event of
default exists hereunder, and if Lender has approved (i) each
Draw Request for each Construction Project for which Borrower
has submitted a Draw Request, and (ii) each Application and
Certificate for Payment for each Development Project for which
Borrower has submitted an Application and Certificate for
Payment, Lender shall advance to Borrower the principal amount
of each requested Advance by wire transfer of funds for the
amount set forth in the applicable Draw Request or Application
and Certificate of Payment (less any required retainage, which
retainage shall not be deemed to be advanced hereunder and
shall not bear interest until actually advanced, and less any
amounts so advanced by Lender to itself). All Advances
actually so made shall be deemed to be loans to Borrower, and
all Construction Project Loan Advances shall reduce the
available amount of the Revolving Loan and of the Construction
Project Loan for the related Project (if any), and shall bear
interest at the rates provided herein from the date so
advanced.
(d) Lender may take such steps as it may deem appropriate, at its
option, to verify the application of Project Loan proceeds to
Costs of the related Project, and to vary the advancement
procedures herein set forth if the same becomes necessary or
desirable to assure the proper application of Project Loan
proceeds and/or to preserve the first lien status of the
Mortgage covering the Project with respect to Advances made
pursuant hereto including, but not limited to, making Advances
directly to the General Contractors and/or subcontractors, and
the amount of Advances to be made to the Borrower hereunder
shall be correspondingly reduced. However, Lender shall not be
obligated to conduct any such verification or to so vary said
procedures.
(e) In the event that Lender shall determine, in its reasonable
judgment, that proper documentation to support a given
Advance, as required by this Agreement, has not been
furnished, it may withhold payment of such Advance, or of such
portion of such Advance as shall not be so supported by proper
documentation, and shall promptly notify Borrower of the
discrepancy in or omission of such documentation. Until such
time as such discrepancy or omission is corrected to the
satisfaction of Lender, it may withhold such funds.
(f) At the time of each Advance, there shall exist no default or
event of default hereunder, and all representations and
warranties made herein shall be true and correct on and as of
each Advance Date with the same effect as if made on that
date.
3.2 Inspections
Lender, Inspecting Architects, Consultants and their representatives
shall have access to each Project at all reasonable times and shall have the
right to enter each Project and to conduct such inspections thereof as they
shall deem necessary or desirable for the protection of Lender's interests.
However, Lender shall not be obligated to conduct any inspection of any Project.
With respect to Construction Projects, Lender shall retain an
Inspecting Architect at Borrower's expense to make inspections of all existing
Projects prior to the first draw and then
every thirty (30) days, commencing the first month after the commencement of the
first Construction Project, and to review all Draw Requests relating to such
Projects for the purpose of confirming that (a) each Project has been completed
to date in a good and workmanlike manner, and (b) that the percentages of
completion certified to by the Borrower in the most recent Draw Request are
accurate. The Inspecting Architect shall issue a written report to Lender with
respect to such matters for approved Construction Projects on a monthly basis.
With respect to Development Projects, Lender shall also retain an
Inspecting Architect and any other Consultants deemed necessary or desirable by
Lender, at Borrower's expense, to inspect the Development Project and review the
Plans, Contracts and Sworn Construction Cost Statements for each Phase of the
Development Project and to review all change orders relating to said Development
Project. Such inspection and reviews shall be completed prior to approval of
each Application and Certificate for Payment made with respect to a Development
Project Loan.
Neither Borrower nor any third party shall have the right to use or
rely upon the reports of the Inspecting Architect or any other reports generated
by Lender or its Consultants for any purpose whatsoever, whether made prior to
or after commencement of construction. Borrower shall be responsible for making
its own inspections of each Project during the course of construction,
renovation or expansion and shall determine to its own satisfaction that the
work done and materials supplied are in accordance with applicable contracts
with its Contractors. By advancing funds after any inspection of any Project by
Lender or an Inspecting Architect, Lender shall not be deemed to waive any event
of default, waive any right to require construction defects to be corrected, or
acknowledge that all construction conforms with the Plans.
Notwithstanding any provision of this Agreement to the contrary, in the
event that Lender should determine that (a) the actual quality or value of the
work performed or the materials furnished does not correspond with the quality
or value of the work required by the Plans for any Project, or (b) the
percentage of completion certified to in any Draw Request is inaccurate, or (c)
any Project Loan is not in balance, Lender shall notify Borrower of its
objections thereto, and, upon demand, Borrower shall correct the conditions to
which Lender objects.
3.3 Project Loans In Balance
(a) Lender shall not be obligated to make any Advance of any
Project Loan proceeds unless and until Borrower has certified
that the Development Project Loan is in Balance. Such Loan
shall be in balance if (a) Borrower has paid, in cash, the
amount required under Section 2.3(a)(iv) hereof towards the
Costs, and has paid the Costs identified as Back-end Equity,
to the extent such Costs are incurred at the time the Advance
is requested, which Back-end Equity Costs are shown as
Back-end Equity in the Total Development Costs for Stonecliffe
attached hereto as Exhibit J, both of the above shall be in
excess of the Development Project Loan and as shown on the
most current Budget and Sworn Construction Cost Statement for
the Development Project approved by Lender; and (b) all
remaining unpaid Costs, as determined by Lender, including the
Contingency Reserve, with respect to a Development Loan, where
applicable, do not exceed the amount of the Development
Project Loan proceeds not yet advanced by Lender plus the
Back-end Equity not yet paid by Borrower. The amount of the
Contingency Reserve for
any Development Project Loan shall be designated in the Sworn
Construction Cost Statement, and shall be included in the
Development Phase Addendum, for the Development Project. The
required amount of the Contingency Reserve shall decline as
Construction Costs for which it is maintained are paid
therefrom; provided, however, that the amount of the
Contingency Reserve shall never decline below an amount
sufficient to pay all costs and payments for which it is
maintained which then remain unpaid, as determined by Lender,
and shall equal a mutually agreed upon percentage of all
Construction Costs of the Development Project. If the
Contingency Reserve becomes depleted, such depletion shall not
limit Borrower's obligation hereunder to pay all sums which
otherwise would have been payable from the Contingency
Reserve.
(b) Notwithstanding any provision of this Agreement to the
contrary, in the event that Lender or Borrower determines that
the unadvanced balance of any Project Loan proceeds is
insufficient to cover any category of Costs set forth on the
Budget and the Sworn Construction Cost Statement for the
Project and/or to complete the Project, and to pay all costs
and expenses of completion and to pay interest on the Project
Loan, through the Maturity Date, it shall notify the other
party hereto of such determination, and Borrower shall, at
Lender's option, either (a) be ineligible for further Advances
of the proceeds of said Project Loan until Borrower has
directly paid (without any right to reimbursement therefor
hereunder) sufficient Costs, or (b), within three (3) Business
Days, deposit with Lender funds equal to said insufficiency,
in order to bring the Project Loan back into balance. All sums
so deposited may be advanced by Lender to pay Costs in the
same manner as, and prior to, Advances of Project Loan
proceeds hereunder.
3.4 General
The Project Loan proceeds shall be advanced by Lender, to or for the
benefit of Borrower, in accordance with the terms and conditions set forth in
this Article 3. All monies advanced by Lender (including amounts payable to
Lender and advanced by Lender to itself pursuant to the terms hereof) shall
constitute loans made to Borrower under this Agreement, evidenced by the Note
and secured by the other Loan Documents, and interest shall be computed thereon
as prescribed by this Agreement and the Note, from the date advanced to or for
the benefit of Borrower.
Borrower may not reallocate Project Loan proceeds to payment of
different items in the Sworn Construction Cost Statement for the Project in
question without the prior written consent of Lender, which consent shall not be
unreasonably withheld or delayed. Lender reserves the right to make Advances for
payment of amounts which are allocated to any of the designated items in any
Sworn Construction Cost Statement for such other purposes or in such different
proportions as Lender may, in its sole discretion, deem necessary or advisable.
No Advance shall constitute a waiver of any condition precedent to the
obligation of Lender to make any further Advance or preclude Lender from
thereafter requiring Borrower to satisfy any such condition precedent with
respect to any prior or further Advance. No Advance shall constitute a waiver of
any default or event of default hereunder which may exist at the time
of said Advance, whether or not the same is known to Lender. All conditions
precedent to the obligation of Lender to make any Advance are imposed hereby
solely for the benefit of Lender, and no other party may require satisfaction of
any such condition precedent or shall be entitled to assume that Lender will
make or refuse to make any Advance in the absence of strict compliance with such
condition precedent. All requirements of this Agreement may be waived by Lender,
in whole or in part, at any time.
Lender may, but shall not be obligated to, advance to itself, when due,
from the proceeds of the Loan, without further order or request from Borrower,
all interest payable to Lender under the terms hereof or of the Note, and may,
at Lender's option, without any obligation to do so, advance to itself all other
sums due or to become due to Lender under this Agreement or under any of the
other Loan Documents including, but not limited to, its reasonable fees,
administration fees, attorneys' fees, appraisal fees, internal appraisal review
fees, engineer's and Inspecting Architect's fees, Consultant's fees and all
out-of-pocket expenses incurred by Lender in connection with this Agreement and
with the Loan, whether or not any Project Loan has yet been approved by Lender
pursuant to Section 2.2 or 2.4. Lender shall also have the right, but not the
obligation, after the occurrence of an event of default, to advance and directly
apply the proceeds of the Loan to the satisfaction of any of Borrower's other
obligations hereunder or under any of the other Loan Documents. Borrower hereby
assigns and pledges the proceeds of each Project Loan and funds deposited by
Borrower pursuant to Section 3.3 hereof (if any) to Lender for such purposes.
Lender may advance such funds and incur such expenses as Lender deems necessary
for the completion of construction of all Project Improvements and to preserve
the Projects and any security for the Project Loans, and such expenses, even
though causing the amount of the Project Loans to exceed the amount of the Loan,
shall be secured by any and all documents securing the Loan, shall be evidenced
by the Note and shall be payable to Lender upon demand.
In the event that the total amount of the aggregate Development Project
Loans exceed the amount needed to fully pay all Costs set forth on the Sworn
Construction Cost Statement for the Development Project (after subtracting
Borrower's equity contribution required by Sections 2.3(a)(iv), 2.3(e) and 3.3),
Lender shall not be required to advance, and Borrower shall not be entitled to
receive, the excess.
3.5 Releases of Lots
If no event of default exists hereunder, Lender agrees to release any
Lot from the Mortgage upon payment to the Lender of the Release Price designated
for such Lot.
3.6 Transfers of Lots
If no event of default exists hereunder, Lender agrees that a Lot may
be transferred from the Development Project Loan to a Construction Project Loan
at such time as the Borrower desires to construct Construction Project
Improvements on such Lot. After the Borrower has followed the procedure for
approval of a Construction Project Loan with respect to such Lot and approval
has been obtained in accordance with the terms of Section 2.4 hereof, the amount
of the Development Project Loan shall be reduced by an amount equal to the
Transfer Price designated for such Lot and the Construction Project Loan shall
reflect an Advance of said Transfer Price effective as of the date of the first
Advance for such Construction Project.
3.7 Lender Responsibility
It is expressly understood and agreed that Lender assumes no liability or
responsibility for the sufficiency of Project Loan proceeds to complete the
related Project, for protection of any Project, for the satisfactory completion
of any Project, for inspection during construction, for the adequacy of the
Contingency Reserve, for the adequacy or accuracy of any Sworn Construction Cost
Statement, for any representations made by Borrower, or for any acts on the part
of Borrower or its Contractors to be performed in the construction of any
Project.
4. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants to Lender that:
4.1 Legal Status of Borrower
Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota, and has all power, authority,
permits, consents, authorizations and licenses necessary to carry on its
business, to acquire, develop, construct, equip, own and operate each Project
and to execute, deliver and perform this Agreement and the other Loan Documents;
and this Agreement and the other Loan Documents executed to date by Borrower
have been duly authorized, executed and delivered by and on behalf of Borrower
so as to constitute this Agreement and said other Loan Documents the valid and
binding obligations of Borrower, enforceable in accordance with their terms.
4.2 No Breach of Applicable Agreements or Laws
The consummation of the transactions contemplated hereby and the
execution, delivery and/or performance of this Agreement and the other Loan
Documents will not result in any breach of or constitute a default under any
mortgage, deed of trust, lease, bank loan, credit agreement, guaranty or other
instrument or violate any Governmental Requirements, to which Borrower is a
party, or by which Borrower may be bound or affected.
4.3 No Litigation or Defaults
There are no actions, suits or proceedings pending or, to the knowledge
of Borrower, threatened against or affecting Borrower in which an adverse result
would have a material adverse impact upon Borrower or involving the validity or
enforceability of the Loan Documents or the priority of the lien thereof, at law
or in equity; and Borrower is not in default under any order, writ, injunction,
decree or demand of any court or any administrative body having jurisdiction
over Borrower.
4.4 Financial and Other Information
The financial statements of, and other financial and cash flow
information for, Borrower previously or hereafter delivered to Lender fairly and
accurately present, or will fairly and accurately present, the financial
condition of Borrower as of the dates of such statements and information, and
the cash flow of Borrower for the periods covered by such information, and
neither this Agreement nor any document, financial statement, financial, cash
flow or credit
information, certificate or statement referred to herein or furnished to Lender
by Borrower contains, or will contain, any untrue statement of a material fact
or omits, or will omit, a material fact, or is or will be misleading in any
material respect. There has been no material adverse change in the financial
condition of Borrower since the most recent financial statements for each
heretofore delivered to Lender.
4.5 No Defaults under Loan Documents or Other Agreements
(a) There is no default or event of default on the part of
Borrower under the Loan Documents or under any other document
to which Borrower is a party and which relates to the
acquisition, ownership, occupancy, use, development,
construction or management of a Project.
(b) Borrower is not in default in the payment of the principal of
or interest on any of its indebtedness for borrowed money,
including any Lender Debt.
(c) Borrower is not in default under any instrument or agreement
under and subject to which any indebtedness for borrowed
money, including any Lender Debt, has been issued or is
secured, including but not limited to the Bond Financial
Covenants. Borrower's representations and warranties with
respect to the Bond Financial Covenants are made to the best
of Borrower's knowledge as of the date hereof for the period
up to June 30, 1998 and are based upon Borrower's projections
as of the date hereof.
(d) No event has occurred which, with the lapse of time or the
giving of notice or both, would constitute an event of default
under any of the above-referenced instruments or agreements.
4.6 Fiscal Years
The fiscal year of Borrower ends on December 31.
4.7 Intentionally Omitted
4.8 Miscellaneous
Borrower is not:
(a) Engaged principally or as one of its important activities in
the business of extending credit for the purpose of purchasing
or carrying margin stock (as defined in Regulation U of the
Board), and the value of all margin stock owned by Borrower
does not constitute more than twenty-five percent (25%) of the
value of the assets of Borrower.
(b) An "investment company" or a company "controlled" by an
investment company within the meaning of the Investment
Company Act of 1940, as amended.
(c) A "holding company" or a "subsidiary company" of a holding
company or an "affiliate" of a holding company or a subsidiary
company of a holding company
within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
THE WARRANTIES AND REPRESENTATIONS IN THIS ARTICLE 4, AND ANY
ADDITIONAL WARRANTIES AND REPRESENTATIONS CONTAINED HEREIN AND IN THE OTHER LOAN
DOCUMENTS, SHALL BE DEEMED TO HAVE BEEN RENEWED AND RESTATED BY BORROWER AT THE
TIME OF EACH REQUEST BY BORROWER FOR AN ADVANCE.
5. COVENANTS OF BORROWER
While this Agreement is in effect, and until Lender has been paid in
full the principal of and interest on all Advances made by Lender hereunder and
under the other Loan Documents, Borrower makes the following covenants to
Lender:
5.1 Completing Construction
(a) Borrower shall commence construction of the first Phase of the
Development Project within 60 days of the date of this
Agreement, and thereafter shall commence each Project on or
before the Commencement Date specified in the Phase Addendum
with respect to Development Projects and the Borrowing Base
Certificate with respect to Construction Projects, and shall
expeditiously complete and fully pay for the development and
construction of each Project in a good and workmanlike manner
and in accordance with the contracts, subcontracts and Plans
(which in the case of Development Contracts shall be submitted
to and approved by Lender), and in compliance with all
applicable Governmental Requirements, and any covenants,
conditions, restrictions and reservations applicable thereto,
so that Completion of the Project Improvements occurs on or
before the Completion Date specified for said Project in the
Phase Addendum with respect to Development Projects and the
Borrowing Base Certificate with respect to Construction
Projects. Borrower assumes full responsibility for the
compliance of the Plans for each Project and of each Project
itself with all applicable Governmental Requirements, and with
sound building and engineering practices, and, notwithstanding
any approvals by Lender, Lender shall have no obligation or
responsibility whatsoever for such Plans or any other matter
incident to any Project or the construction of the Project
Improvements.
(b) In the case of a Development Contract, Borrower shall become a
party to no General Contractor's contract, for the performance
of any work on any Development Project except upon such terms
and with such parties as shall be approved, in writing, by
Lender.
(c) No approval by Lender of any contract relating to any Project
or of any change order shall make Lender responsible for the
adequacy, form or content of such contract or change order.
(d) Borrower shall correct or cause to be corrected (a) any defect
in the Project Improvements, (b) any departure in the
construction of the Project Improvements
from the Plans therefor or applicable Governmental
Requirements, and (c) any encroachment by any part of the
Project Improvements or any other structure located on the
Project Land on or over any building setback line, easement,
property line or restricted area, unless expressly permitted
by appropriate easements, licenses or other instruments.
(e) Borrower shall cause all roads necessary for the utilization
of each Project for its intended purposes to be completed and
dedicated, the bearing capacity of the soil on all Project
Land to be made sufficient to support the Project Improvements
situated or to be situated thereon, and sufficient local
utilities to be made available to each Project and installed
at Costs (if any) set out in the Sworn Construction Cost
Statement therefor, on or before the Completion Date therefor.
5.2 Borrowing Base Certificate
Borrower shall deliver to Lender a completed fully executed Borrowing
Base Certificate on the first day of each month during the term of the Loan.
Borrower shall also deliver to Lender a fully executed Borrowing Base
Certificate at the time of submitting each Draw Request.
5.3 Changing Costs, Scope or Timing of Work
Borrower shall deliver to Lender revised Budgets and/or Construction
Cost Statements for each Construction Project, showing changes in or variations
from the current Budget and/or Construction Cost Statement therefor which
involve changes in the costs of five percent (5%) or more for any single change,
or if the aggregate amount of all changes exceeds five percent (5%) or more, as
soon as such changes are known to Borrower. Borrower shall deliver to Lender a
revised construction schedule for any Construction Project, if and when any
target date set forth therein has been delayed by ten (10) consecutive days or
more, or when the aggregate of all such delays equals thirty (30) days or more.
Borrower shall promptly furnish Lender with two (2) copies of each new
change or modification in the design or style of the Construction Project or
change or modification in the Plans, contracts or subcontracts for any
Construction Project, as approved by Lender, prior to incorporation of any such
change or modification into the Construction Project, whether or not Lender's
consent to such change or modification is required hereby. Borrower shall not
make or consent to any change or modification in the Plans, contracts or
subcontracts, and no work shall be performed with respect to any such change or
modification, without the prior written consent of Lender, if such change or
modification would in any way alter the design or structure of the Construction
Project or increase or decrease Costs of said Construction Project by five
percent (5%) or more for any single change or modification, or if the aggregate
amount of all changes and modifications in Costs of said Construction Project
exceeds ten percent (10%) of such Costs.
Borrower shall deliver to Lender revised Budgets and/or Sworn
Construction Cost Statements for each Phase of the Development Project, showing
changes in or variations from the current Budget and/or Sworn Construction Cost
Statement therefor which involve amounts of $50,000 or more for any single
change, or if the aggregate amount of all changes exceeds $100,000, as soon as
such changes are known to Borrower. Borrower shall deliver to Lender a revised
construction schedule for any Development Project, if and when any target date
set forth
therein has been delayed by ten (10) consecutive days or more, or when the
aggregate of all such delays equals thirty (30) days or more.
Borrower shall promptly furnish Lender with two (2) copies of each new
change or modification in the Plans, contracts or subcontracts for any Phase of
the Development Project, as approved by Lender, prior to incorporation of any
such change or modification into the Development Project, whether or not
Lender's consent to such change or modification is required hereby. Borrower
shall not make or consent to any change or modification in the Plans, contracts
or subcontracts, and no work shall be performed with respect to any such change
or modification, without the prior written consent of Lender, if such change or
modification would in any way alter the design or structure of the Development
Project or increase or decrease Costs of said Development Project by $50,000 or
more for any single change or modification, or if the aggregate amount of all
changes and modifications in Costs of said Development Project exceeds $100,000.
5.4 Balancing Project Loans
Borrower shall furnish to Lender, as and when requested by Lender, at
Lender's option (a) satisfactory evidence of Borrower's ability to pay all
unpaid Costs of completing and operating the Project through the Maturity Date,
and/or (b) cash equal to any difference between such unpaid Costs and the sum of
(i) Project Loan proceeds which have not yet been advanced, plus the Back-end
Equity in the Project required in Section 2.3(e) hereof which has not yet been
paid, which cash shall be held and advanced by Lender pursuant to the terms
hereof.
5.5 Paying Costs of Loan, Projects and Project Loans
Borrower shall pay and discharge, as and when required by the Mortgage,
all taxes, assessments and other governmental charges upon a Project, as well as
all claims for labor and materials which, if unpaid, might become a lien or
charge upon said Project; provided, however, that Borrower shall have the right
to bond off, to remove or to contest the amount, validity and/or applicability
of any of the foregoing in strict accordance with the terms of the Mortgage.
Borrower shall also pay all reasonable costs and expenses of Lender and
all costs and expenses of Borrower in connection with the Project, the
preparation and review of the Loan Documents and the evaluation, making,
closing, administration, transfer and/or repayment of the Loan and of each
Project Loan including, but not limited to, the fees of Lender's attorneys, the
Inspecting Architect and Consultants (including preliminary cost review,
construction progress inspection reports, engineers' fees and environmental
Consultants' fees), costs of Environmental Audits, appraisal fees, internal
appraisal review fees, administration fees, title insurance costs, filing and
recording fees, mortgage registration or similar taxes, and all other costs and
expenses payable to third parties incurred by Lender or Borrower in connection
with the Loan. Such costs and expenses shall be so paid by Borrower whether or
not the Loan or any particular Project Loan is fully advanced.
5.6 Using Project Loan Proceeds
Borrower shall use the Project Loan proceeds solely to pay, or to
reimburse Borrower for paying, Costs shown on the Budget and the Sworn
Construction Cost Statement for the relevant
Project. Borrower shall take all steps necessary to assure similar use of
Project Loan proceeds by its Contractors and subcontractors.
5.7 Keeping of Records
Borrower shall set up and maintain accurate and complete books,
accounts and records pertaining to each Project and the development and
construction thereof in a manner reasonably acceptable to Lender. Borrower will
permit representatives of Lender and the Inspecting Architect to have free
access to and to inspect and copy all books, records and contracts of Borrower
relating to each Project and the acquisition, development and construction
thereof, and will permit representatives of Lender to have free access to and to
inspect and copy all other books, records and contracts of Borrower. Any such
inspection shall be for the sole benefit and protection of Lender, and Lender
shall have no obligation to disclose the results thereof to Borrower or to any
third party.
5.8 Providing Financial Information
Borrower shall furnish to the Lender at the times set forth below the
following financial statements, reports and certificates:
(a) As soon as available, but in any event within ninety (90) days
after each fiscal year end, an audited financial statement of
the Borrower consisting of a balance sheet, profit and loss
statement and sources of cash flow prepared and certified to
by an independent certified public accountant satisfactory to
the Lender together with a copy of Borrower's applicable 10K
Report;
(b) As soon as available, but in any event within forty-five (45)
days after the last day of each fiscal quarter, a balance
sheet and profit and loss statement of the Borrower dated as
of the last business day of such fiscal quarter in form and
detail as required by the Lender certified by an officer of
the Borrower together with a copy of Borrower's applicable 10Q
Report;
(c) On the first (1st) Business Day of each month, a copy of the
updated Borrowing Base Certificate, together with a report
regarding sales of all lots located within the Development
Project, including any lots on hold, closings for the previous
month, year-to-date closings and closings since the start of
the Project;
(d) Forty-five (45) days after the end of each calendar quarter, a
certification from an officer of the Borrower that Borrower is
in compliance with all of the financial covenants contained
herein and is in compliance with the absorption requirement
specified in Section 6.1(o) hereof;
(e) Within ten (10) days after Borrower receives notice of any
non-monetary default on any recourse indebtedness of the
Borrower or any Affiliate, and immediately upon receipt of any
notice of any monetary default on any recourse indebtedness of
the Borrower or any Affiliate, Borrower shall give Lender
notice of such default notice and a written plan as to
Borrower's plan to cure such default; and
(f) Such other information concerning the business, operations and
condition (financial or otherwise) of the Borrower as the
Lender may reasonably request.
All financial statements shall be prepared in reasonable detail, shall
be prepared for partnerships and corporations in accordance with GAAP (except
with respect to quarterly or other interim financial statements, for the
requirements of footnotes and for annual audit adjustments) and for individuals
in accordance with accounting principles consistently applied and shall be
signed and certified by the party to which they apply as true, correct and
complete. In the event the Borrower fails to furnish any of the above statements
or information or upon the occurrence of an event of default hereunder, the
Lender may cause an audit to be made of the respective books and records of the
Borrower at the sole cost and expense of the Borrower. The Lender also shall
have the right to examine at their place of safekeeping all books, accounts and
records relating to the operation of the Projects and make copies thereof or
extracts therefrom and to discuss the affairs, finances or accounts with the
employees and officers of the Borrower and the Borrower's independent
accountants. Said examinations shall be at the Lender's expense unless the
Borrower's statements are found to contain significant discrepancies, in which
case the examination shall be at the Borrower's expense.
5.9 Providing Evidence of Completion
Upon Completion of each of the Project Improvements included within
each Project, and, unless the Project Improvement is a Construction Project
Improvement which is a Pre-Sold Home, prior to the final advance of Project Loan
proceeds to pay for Construction Costs thereof including, but not limited to,
any retainage therefor, and as a condition of the same, Borrower shall furnish
Lender with all items required to evidence Completion.
5.10 Maintaining Insurance Coverage; Collection and Application of
Insurance Proceeds
Borrower shall, at all times until Lender has been fully repaid all
indebtedness evidenced by the Note, maintain, or cause to be maintained, in
effect, the following insurance with respect to each Project for the benefit of
Lender:
(a) Builder's risk insurance, written on an "all-risk", completed
value, nonreporting basis, covering one hundred percent (100%)
of the replacement cost of all Project Improvements under
construction at any time upon the Project Land;
(b) Insurance upon all completed Project Improvements against loss
or damage by fire, lightning and other risks customarily
covered by standard "all risk" (or special form cause of loss)
and extended coverage endorsements, together with theft,
vandalism, malicious mischief, collapse, earthquake,
replacement cost, agreed amount (if there is co-insurance),
and restoration in conformance with applicable laws and
ordinances endorsements, all in such amounts as may be from
time to time required by Lender, but in no event less than the
full replacement cost of the completed Project Improvements at
any time erected or placed upon the Project Land, including
the cost of debris removal, including the value of all Project
Improvements which cannot be replaced due to changes in
applicable laws, codes,
ordinances and/or regulations since the original construction
thereof, and, in any event, in an amount not less than the
unpaid principal balance of the Project Loan;
(c) Comprehensive commercial general public liability insurance
against claims for bodily injury, personal injury, death
and/or property damage occurring in, on or about the Project,
with coverage limits satisfactory to Lender (which shall
initially be at least equal to $1,000,000.00 with respect to
any one (1) Person, accident or occurrence, with at least
$10,000,000.00 in umbrella excess-liability coverage), and
including contractual liability coverage for the tort
liability with respect to the Project assumed by Borrower
hereunder and under any other Loan Document;
(d) Flood insurance upon any Project in such form and amount as
may from time to time be required by Lender, if such Project
or any portion thereof is located in a designated flood zone,
flood plain or other flood hazard or danger area; and
(e) Insurance upon the Project against such other casualties and
contingencies as Lender may from time to time require
including, but not limited to, workers' compensation in
amounts acceptable to Lender, all in such manner and form as
may be satisfactory to Lender.
Borrower shall, at its sole cost and expense, from time to time and at
any time when Lender shall so request, provide Lender with evidence of the full
replacement cost of a Project in a form acceptable to Lender. Borrower shall
promptly notify Lender and the appropriate insurer in writing of any loss
covered by any of the insurance required hereby.
All insurance provided for in this Section 5.10 shall be in effect
under a valid and enforceable policy or policies of insurance in form and
substance approved by Lender, shall be issued by insurers of recognized
responsibility, which are licensed to do business in the state in which the
Project is located, and which are acceptable to Lender, and shall be
satisfactory to Lender in all other respects.
All hazard and casualty insurance policies maintained by Borrower
pursuant to the foregoing provisions of this Section 5.10 shall (i) provide that
any losses payable thereunder shall (pursuant to a standard first mortgagee
clause in favor of, and acceptable to, Lender, to be attached to each such
policy) be payable to Lender and assigns, (ii) include effective waivers by the
insurer of all claims for insurance premiums against Lender, (iii) provide that
any losses shall be payable notwithstanding (A) any act of negligence by
Borrower or Lender, (B) any foreclosure or other proceedings or notice of sale
relating to the Project, (C) any waiver of subrogation rights by the insured, or
(D) any change in the title to or ownership of the Project or any portion
thereof, and (iv) be written in amounts sufficient to prevent Borrower from
becoming a co-insurer under said policies. All liability insurance policies
maintained by Borrower pursuant to this Section 5.10 shall name Lender as an
additional insured and shall waive contribution from any other insurance carried
by Lender in the event of loss. Borrower shall furnish Lender with evidence that
each Project is insured without interruption as required hereunder and, upon
request, Borrower shall cause the originals or certified copies of the policies
of all such insurance to be deposited with Lender or to be otherwise held as
directed by Lender. At least fifteen (15) days prior to the date on which the
premiums on each such policy shall become due and payable, Borrower shall
furnish
Lender with proof reasonably satisfactory to Lender of payment thereof. Each of
such policies shall contain an agreement by the insurer that the same shall not
be amended, modified, canceled, reduced or terminated for any reason including,
but not limited to, a failure to pay premiums and/or expiration by its terms,
without at least thirty (30) days' prior written notice to Lender. If the
Mortgage covering any Project is foreclosed, the purchaser at the foreclosure
sale shall, after the expiration of any statutory period of redemption become
the sole and absolute owner of any and all such policies, with the sole right to
collect and retain all unearned premiums thereon, and, for this purpose,
Borrower hereby assigns and grants a security interest in said policies and
unearned premiums to Lender.
In the event of loss, Borrower shall immediately give written notice
thereof to Lender, and Borrower shall promptly make proof of loss and shall in
good faith and with due diligence file, prosecute, settle, adjust or compromise
any claims for insurance proceeds and cause the same to be paid to Lender;
provided, however, that Borrower agrees not to finally settle, adjust or
compromise any such claims without the prior written consent of Lender. If
Borrower does not itself promptly do so, or if any event of default exists
hereunder, Lender is authorized and empowered (but not obligated or required) to
make proof of loss, to settle, adjust or compromise any claims for loss, damage
or destruction under, to appear in, prosecute, settle and compromise any suit or
proceeding relating to, and to collect and receive all proceeds of, any policies
of hazard and casualty insurance maintained pursuant hereto. Borrower shall
reimburse Lender, on demand, for all reasonable costs and expenses including,
but not limited to, court costs and attorneys fees, incurred by Lender in
connection therewith, plus interest thereon from the date incurred at the
Default Rate. All proceeds of such insurance are hereby absolutely and
unconditionally assigned, and shall be paid, to Lender. Such proceeds shall, at
Lender's option, be applied first to the payment of all costs and expenses
incurred by Lender in obtaining such proceeds, and the remainder ("Net Insurance
Proceeds") shall be applied, at Lender's option, either to the reduction of the
indebtedness secured by the Mortgage covering the damaged or destroyed Project
in such order as Lender may elect, whether then due and payable or not, or to
the restoration or repair of said Project, without affecting the lien of said
Mortgage or the obligations of Borrower hereunder or thereunder. Interest upon
the entire indebtedness secured thereby shall continue until any such proceeds
are received and applied to such indebtedness by Lender. Pending a decision as
to the proper use and application of any insurance proceeds, and during any such
restoration or repair, Lender shall not be liable for interest on such proceeds.
If Lender elects to apply any such insurance proceeds to the restoration or
repair of a Project, such disbursement shall proceed in accordance with the
procedures set forth in this Agreement governing disbursement of the proceeds of
Project Loans. In such event, Borrower shall, prior to commencing any such
restoration or repair, deposit with Lender the amount, if any, by which the cost
of such restoration or repair, as determined by Lender, exceeds the amount of
the Net Insurance Proceeds, which amount shall be disbursed to pay costs of such
restoration and repair prior to, and in the same manner as, such Net Insurance
Proceeds. Any surplus which may remain after payment of all costs of restoration
or repair and/or all indebtedness evidenced hereby shall be paid to Borrower,
its successors, transferees or assigns, as their interests may appear.
Notwithstanding any provision contained in this Section to the
contrary, in the event that no event of default then exists hereunder, Lender
shall, at Borrower's written request, permit the Net Insurance Proceeds to be
deposited in an interest bearing escrow account at Lender or at another
financial institution acceptable to Lender, or to be otherwise invested in
liquid, secure
investments acceptable and pledged to Lender, with Borrower bearing all risk of
loss thereof, and Lender shall further permit such proceeds and all interest
accrued thereon ("Insurance Interest") to be drawn upon to pay the costs of
restoration, rebuilding or repair of the Project in accordance with all of the
terms of this Agreement applicable to the original construction of the Project
Improvements; provided that (i) the Project Improvements can be restored,
rebuilt or repaired substantially to the condition, and can then continue to be
operated for the purposes, required by this Agreement; (ii) the restoration,
rebuilding or repair of the Project Improvements shall be in strict accordance
with the Plans there for approved by Lender, pursuant to which such Project
Improvements were originally constructed, or Borrower has obtained the prior
written approval by Lender of any other plans and specifications for such
restoration, rebuilding and repair; (iii) the restoration, rebuilding or repair
shall be commenced within sixty (60) days after the date of the loss; (iv) all
restoration, rebuilding and repair shall be performed in a good and workmanlike
manner and in accordance with all applicable Plans, Governmental Requirements
and private restrictions; (v) Borrower has, prior to the commencement of any
restoration, rebuilding or repair, deposited with Lender the amount by which the
Net Insurance Proceeds and Insurance Interest will be insufficient to cover the
total Costs of the planned restoration, rebuilding or repair, as evidenced by a
Sworn Construction Cost Statement acceptable to Lender, which shall be submitted
by Borrower to Lender and shall be signed and sworn to by Borrower and by the
General Contractor for the planned restoration, rebuilding or repair, who must
both be acceptable to Lender; (vi) there is sufficient time for Borrower to
complete said restoration, rebuilding or repair and repay the Project Loan prior
to the Maturity Date for said Project, and (vii) Borrower proceeds diligently to
complete said restoration, rebuilding or repair prior to said Maturity Date. If
at any time during the course of any such restoration, rebuilding or repair, the
amount so deposited is not sufficient, in Lender's judgment, to pay the cost of
said restoration, rebuilding or repair, Borrower shall deposit additional funds
in an amount equal to the amount of such insufficiency. Borrower hereby grants
to Lender a security interest in all Net Insurance Proceeds, in all Insurance
Interest and in all sums deposited pursuant to this Section 5.10, to secure
payment and performance by Borrower of all of its obligations hereunder and
under the other Loan Documents. In the event that the Net Insurance Proceeds,
plus the Insurance Interest, exceed the cost of said restoration, rebuilding or
repair, and if no event of default exists hereunder, said excess shall be paid
to Borrower.
5.11 Transferring Conveying or Encumbering Projects
Borrower shall not voluntarily or involuntarily agree to, cause, suffer
or permit (a) any sale, transfer or conveyance of any interest of Borrower,
legal or equitable, in any Project (as defined on page 8 herein) or any part or
portion thereof; (b) any transfer of stock in Borrower; or (c) any mortgage,
pledge, encumbrance or lien to be imposed or remain outstanding against any
Project, or any security interest to exist therein, except as created by the
Loan Documents, without, in each instance, the prior written consent of Lender.
Borrower shall maintain its existence as a duly organized and qualified
corporation, in good standing under the laws of the State of Minnesota and the
laws of each state in which any Project is located, and shall not be dissolved,
merged, wound up or terminated. Notwithstanding the above restrictions and
provided no default or Event of Default has occurred and is continuing
hereunder, stock in Borrower may be transferred so long as such Transfer is not
a Change in Control as defined in that certain Indenture dated as of October 18,
1996 by and between Borrower and National City Bank of Minneapolis, National
Association as Trustee and so long as Xxxxx Xxxxxx shall, at all times, own
at least a fifty (50%) voting and controlling interest in Borrower and so long
as Xxxxx Xxxxxx shall continue to be the President of Borrower and shall
continue to be in control of the day-to-day operations of Borrower.
5.12 Complying with the Loan Documents and Contracts
Borrower shall comply with and perform all of its agreements and
obligations under the Loan Documents, and under all other contracts and
agreements to which Borrower is a party relating to the ownership, occupancy,
use, development or construction of the Projects and shall comply with all
requests by Lender which are consistent with the terms thereof. No contract or
other agreement which has been or is required hereby to be assigned by Borrower
to Lender as security for the Loan, shall be changed, modified, amended, revoked
or terminated without the prior written consent of Lender.
5.13 Agreements with Affiliates
Any development, management, leasing or other agreement relating to any
Project between Borrower (or any Affiliate of Borrower ), which requires
Borrower to pay any fee, commission or other compensation of any kind to
Borrower or any such Affiliate, must be approved by Lender, in writing, and all
such agreements shall be subordinate to the Mortgage covering the Project as to
lien and time of payment.
5.14 Updated Appraisals
Borrower agrees that Lender shall have the right to obtain, once during
the term of the Loan as to each Phase of the Development Project and as to each
Construction Project Loan, at Borrower's expense, an updated Appraisal of any
Project for which an Appraisal is required under the terms hereof, acceptable to
Lender's internal appraisal group, in the event that (a) an event of default
shall have occurred hereunder, (b) Lender determines in its reasonable opinion
that the security for the Project Loan for said Project has been physically or
financially impaired in any material respect, or (c) such Appraisal is required
by then current Governmental Requirements applicable to Lender. In the event
that Lender shall elect to obtain such an Appraisal, Lender may immediately
commission an appraiser acceptable to Lender, at Borrower's cost and expense, to
prepare the Appraisal, and Borrower shall fully cooperate with Lender and the
appraiser in obtaining the necessary information to prepare such an Appraisal.
In the event that Borrower fails to cooperate with Lender in obtaining such an
Appraisal, or in the event that Borrower shall fail to pay for the cost of such
an Appraisal, within ten (10) days following demand, such event shall constitute
an event of default hereunder, and Lender shall be entitled to exercise all
remedies therefor available to it hereunder.
5.15 Bond Financial Covenants
So long as the Bond Financial Covenants apply to the Borrower, Borrower
shall provide copies of all reporting certificates required to comply with the
Bond Financial Covenants as and when required by that certain Indenture dated as
of October 18, 1996 by and between Borrower and National City Bank of
Minneapolis, National Association, as Trustee. In the event of any
non-compliance with the Bond Financial Covenants, Borrower shall deliver to
Lender a certificate
from Borrower's independent public accountants as to subsequent compliance to
cure any such default.
5.16 Minimum Consolidated Tangible Net Worth
In the event that the Bond Financial Covenants no longer apply to the
Borrower or are otherwise amended, then the following covenants shall apply.
Borrower will maintain, at all times until the maturity of all Project Loans, a
Consolidated Tangible Net Worth, determined as of December 31 of each year,
based upon the annual audited financial statements, of the greater of (i) Four
Million Five Hundred Thousand and 00/100 Dollars ($4,500,000.00), or (ii) eighty
percent (80%) of the Consolidated Tangible Net Worth as of the previous fiscal
year end audited financial statements. Compliance with this covenant shall be
determined as of each fiscal year end. Borrower shall provide Lender with a
detailed calculation of the Consolidated Tangible Net Worth as of each fiscal
year end within seventy-five (75) days after such fiscal year end. Borrower
shall have thirty (30) days to cure any default in this Consolidated Tangible
Net Worth covenant. In the event of any non-compliance with this covenant,
Borrower shall deliver to Lender a certificate from Borrower's independent
public accountants as to subsequent compliance to cure any such default.
5.17 Miscellaneous
Borrower shall also:
(a) Maintain its qualification to transact business in Minnesota.
(b) File all tax returns and reports which are required by law to
be filed by it and pay before they become delinquent all
taxes, assessments and governmental charges and levies imposed
upon it and all claims or demands of any kind which, if
unpaid, might result in the creation of a lien upon its
property; provided that the foregoing items need not be paid
if they are being contested in good faith by appropriate
proceedings in accordance with applicable terms of the
Mortgage covering said property, and as long as the Borrower's
title to its property is not materially adversely affected,
its use of such property in the ordinary course of its
business is not materially interfered with, and adequate
reserves with respect thereto have been set aside on the
Borrower's books in accordance with GAAP.
(c) Give prompt written notice to Lender of the commencement of
any action, suit or proceeding before any court or arbitrator
or any governmental department, board, agency or other
instrumentality affecting Borrower or any property of Borrower
or to which Borrower is a party in which an adverse
determination or result could have a material adverse effect
on the business, operations, property or condition (financial
or otherwise) of Borrower or on the ability of any of them to
perform its obligations under this Agreement and the other
Loan Documents, stating the nature and status of such action,
suit or proceeding.
6. DEFAULTS
6.1 Events of Default
Any of the following events shall constitute an event of default under
this Agreement:
(a) Borrower shall default in the payment of principal due
according to the terms hereof or of the Note.
(b) Borrower shall default in the payment of interest on Advances
made by Lender, or in the payment of fees or any other amounts
payable hereunder, under the Note or under any of the other
Loan Documents.
(c) Borrower shall default in the performance or observance of any
other agreement, covenant or condition required to be
performed or observed by Borrower under the terms of this
Agreement, which default, if curable, is not cured within
thirty (30) days after Lender gives Borrower written notice
thereof; provided, however, that if said curable default
cannot reasonably be cured within said thirty (30) day period,
but Borrower commences the cure thereof within said thirty
(30) day period and thereafter prosecutes such cure
diligently, continuously and in good faith, said thirty (30)
day period shall be extended by the period of time reasonably
required to cure the same, not to exceed an additional ninety
(90) days.
(d) Any representation or warranty made by Borrower in this
Agreement or in any of the other Loan Documents, or in any
certificate or document furnished under the terms of this
Agreement or in connection with the Loan, shall be untrue or
incomplete in any material respect.
(e) An event of default shall exist under the terms of any other
Loan Document or under any other document to which Borrower is
a party and which relates to the acquisition, ownership,
occupancy, use, development, construction or management of a
Project, including but not limited to the Development
Agreement.
(f) Work on any Project shall be substantially abandoned, or
shall, by reason of Borrower's fault, be delayed or
discontinued for an unreasonably long period or for no valid,
good faith business reason, or such construction shall be
delayed for any reason to the extent that Completion of the
Project cannot, in the reasonable judgment of Lender, be
accomplished prior to the Completion Date for the Project.
(g) Borrower or any Affiliate of Borrower shall become insolvent
or shall commit an act of bankruptcy; or shall apply for,
consent to or permit the appointment of a receiver, custodian,
trustee or liquidator for it or any of its property or assets;
or shall fail to, or admit in writing its inability to, pay
its debts as they mature; or shall make a general assignment
for the benefit of creditors or shall be adjudicated bankrupt
or insolvent; or shall take other similar action for the
benefit or protection of its creditors; or shall give notice
to any governmental body of insolvency or pending insolvency
or suspension of operations; or shall file a voluntary
petition in bankruptcy or a petition or an answer seeking
reorganization or an arrangement with creditors, or to take
advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, rearrangement, dissolution, liquidation
or other similar debtor relief law or statute; or shall file
an answer admitting the material allegations of a petition
filed against it in any proceeding
under any such law or statute; or shall be dissolved,
liquidated, terminated or merged without Lender's prior
written consent; or shall effect a plan or other arrangement
with creditors; or a trustee, receiver, liquidator or
custodian shall be appointed for it or for any of its property
or assets and shall not be discharged within sixty (60) days
after the date of his appointment; or a petition in
involuntary bankruptcy or similar proceedings is filed against
it and is not dismissed within sixty (60) days after the date
of its filing.
(h) A judgment or judgments for the payment of money in excess of
the sum of $25,000.00 in the aggregate shall be rendered
against Borrower and Borrower shall not (i) discharge the same
or provide for the discharge thereof in accordance with the
terms thereof, or (ii) procure a stay of execution thereof,
prior to any execution on such judgment by the judgment
creditor, within sixty (60) days from the date of entry
thereof, and within said period of sixty (60) days, or such
longer period during which execution of such judgment shall be
stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal.
(i) The maturity of any Lender Debt of Borrower or any Affiliate
of Borrower (other than indebtedness under this Agreement)
shall be accelerated, or Borrower or any such Affiliate shall
fail to pay any such Lender Debt when due (after the lapse of
any applicable grace period) or, in the case of such
indebtedness payable on demand, when demanded (after the lapse
of any applicable grace period), or any event shall occur or
condition shall exist and shall continue for more than the
period of grace, if any, applicable thereto and shall have the
effect of causing, or permitting the holder of any such Lender
Debt any trustee or other Person, party or entity acting on
behalf of such holder to cause, such or Lender Debt to become
due prior to its stated maturity or to realize upon any
collateral given as security therefor.
(j) An Event of Default occurs under the terms of the Senior
Subordinated Debentures, whereby the maturity of any of such
debentures is accelerated or such debentures are not paid when
due (after the lapse of any applicable grace period)
(k) Borrower shall be terminated, dissolved, liquidated or
wound-up.
(l) Xxxxx Xxxxxx shall die or shall become legally incompetent.
(m) Borrower shall fail to comply with the covenants set forth in
Section 5.15 and 5.16 hereof.
(n) Any Letter of Credit is presented for payment and Borrower
does not pay the amount so demanded within three (3) business
days the payment so demanded .
(o) Borrower shall fail to close on the sale and obtain a release
of the Mortgage for three Lots per quarter, reported quarterly
beginning on the earlier of (i) the first calendar year
quarter end after the closing of the sale of the first lot, or
(ii) June 30, 1999, but measured cumulatively from the first
quarter from which such report is required.
(p) Borrower shall fail to exercise any of the options to purchase
the Project Land and close on the purchase thereof in the
times and manner as provided for in the Option Agreement, or
otherwise is in default under the Option Agreement.
(q) Borrower shall fail to file the plats of Pinetree Pass 2nd
Addition and Pinetree Pass 3rd Addition with the County
Recorder for Dakota County, Minnesota, before the Mortgage is
recorded.
6.2 Rights and Remedies
Upon the occurrence of an event of default, unless such event of
default is subsequently waived in writing by Lender, Lender shall be entitled,
at the option of Lender, to exercise any or all of the following rights and
remedies, consecutively or simultaneously, and in any order:
(a) Lender may make one (1) or more further Advances, without
liability to make any subsequent Advances.
(b) Lender may suspend its obligation to make Advances under this
Agreement, without notice to Borrower.
(c) Lender may terminate its obligation to make Advances under
this Agreement, and may declare the entire unpaid principal
balance of the Advances made under this Agreement to be
immediately due and payable, together with accrued and unpaid
interest on such Advances, without notice to or demand on
Borrower.
(d) Lender may exercise any or all remedies specified herein
and/or in the other Loan Documents, including (without
limiting the generality of the foregoing) the right to
foreclose the Mortgage or to sell the property covered thereby
pursuant to the terms thereof, and/or any other remedies which
it may have therefor at law, in equity or under statute.
(e) Lender may cure the event of default on behalf of Borrower,
including the cure of any default under the Option Agreement
or the failure of Borrower to exercise any option provided for
therein, and, in doing so, may enter upon any Project, and may
expend such sums as it may deem desirable, including
attorneys' fees, and including but not limited to such
Advances as necessary to cure any default under the Option
Agreement and to purchase all or any portion of the
Development Project Land not yet purchased by Borrower
pursuant to the Option Agreement, all of which shall be deemed
to be Advances hereunder, even though such Advances may cause
the Loan to exceed the face amount of the Note, and which
shall bear interest at the Default Rate and shall be payable
by Borrower on demand. Borrower by executing this Agreement
and accepting the terms of the Loan represents and
acknowledges that it is a sophisticated real estate developer
and has been fully advised by its legal counsel of the nature
and consequences of this remedy and agrees to the terms of the
Agreement, including specifically this Section 6.2(e).
(f) Borrower hereby irrevocably authorizes Lender to set off any
sum due to or incurred by Lender against all deposits and
credits of Borrower with, and any and all claims of Borrower
against, Lender. Such right shall exist whether or not Lender
shall have made any demand hereunder or under any other Loan
Document, whether or not said sums, or any part thereof, or
deposits and credits held for the account of Borrower is or
are matured or unmatured, and regardless of the existence or
adequacy of any collateral, guaranty or any other security,
right or remedy available to Lender. Lender agrees that, as
promptly as is reasonably possible after the exercise of any
such setoff right, it shall notify Borrower of its exercise of
such setoff right; provided, however, that the failure of
Lender to provide such notice shall not affect the validity of
the exercise of such setoff rights. Nothing in this Agreement
shall be deemed a waiver or prohibition of or restriction on
Lender to all rights of banker's lien, setoff and counterclaim
available pursuant to law.
In addition, upon the occurrence of any event described in Section
6.1(g) hereof which will not become an event of default prior to the expiration
of some period of time, Lender may suspend its obligations to fund Advances
hereunder immediately upon the occurrence of said event.
6.3 Completion of a Project by Lender
In addition, in case of the occurrence of an event of default specified
in Section 6.1(f) hereof, or any event of default caused by, or which results
in, Borrower's failure, for any reason, to continue with construction of a
Project as required by this Agreement, then Lender may (but shall not be
obligated to), in addition to, or in concert with, the other remedies referred
to above, take over and complete construction of the Project in accordance with
the Plans, with such changes therein as Lender may, in its discretion, deem
appropriate, all at the risk, cost and expense of Borrower. Lender may assume or
reject any contracts entered into by Borrower in connection with the Project,
may enter into additional or different contracts for work, services, labor and
materials required, in the judgment of Lender, to complete the Project, and may
pay, compromise and settle all claims in connection with the Project. All sums,
including reasonable attorneys' fees, and charges or fees for supervision and
inspection of the construction and for any other necessary or desirable purpose
in the discretion of Lender expended by Lender in completing or attempting to
complete the Project (whether aggregating more, or less, than the face amount of
the Note), shall be deemed Advances made by Lender to Borrower hereunder, and
Borrower shall be liable to Lender, on demand, for the repayment of such sums,
together with interest on such sums from the date of their expenditure at the
Default Rate. Lender may, in its discretion, at any time abandon work on the
Project, after having commenced such work, and may recommence such work at any
time, it being understood that nothing in this Section shall impose any
obligation on Lender either to complete or not to complete the Project. For the
purpose of carrying out the provisions of this Section, Borrower irrevocably
appoints Lender its attorney-in-fact, with full power of substitution, to
execute and deliver all such documents, to pay and receive such funds, and to
take such action as may be necessary, in the judgment of Lender, to complete the
Project. This power of attorney is coupled with an interest and is irrevocable.
Lender, however, shall have no obligation to undertake any of the foregoing,
and, if Lender does
undertake any of the same, it shall have no liability for the adequacy,
sufficiency or completion thereof.
7. MISCELLANEOUS
7.1 Binding Effect; Waivers; Cumulative Rights and Remedies
The provisions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, personal representatives, legal representatives, successors and
assigns, subject to the provisions of Section 5.11; provided, however, that
neither this Agreement nor the proceeds of the Loan may be assigned by Borrower
voluntarily, by operation of law or otherwise, without the prior written consent
of Lender. No delay on the part of Lender in exercising any right, remedy, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder
constitute such a waiver or exhaust the same, all of which shall be continuing.
The rights and remedies of Lender specified in this Agreement shall be in
addition to, and not exclusive of, any other rights and remedies which Lender
would otherwise have at law, in equity or by statute, and all such rights and
remedies, together with Lender's rights and remedies under the other Loan
Documents, are cumulative and may be exercised individually, concurrently,
successively and in any order.
7.2 Survival
All agreements, representations and warranties made in this Agreement
shall survive the execution of this Agreement, the making of the Advances by
Lender, and the execution of the other Loan Documents, and shall continue until
Lender receives payment in full of all indebtedness of Borrower incurred under
this Agreement, under the Indemnification Agreements and under the other Loan
Documents and Lender has no obligation to make any further Advances hereunder.
7.3 Governing Law; Waiver of Jury Trial; Venue
THIS AGREEMENT, THE RIGHTS OF THE PARTIES HEREUNDER, AND THE
CONSTRUCTION, INTERPRETATION, VALIDITY AND ENFORCEABILITY HEREOF SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT
GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES RELATING TO NATIONAL BANKS.
BORROWER AND LENDER HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING RELATING TO THE LOAN, THE LOAN DOCUMENTS AND/OR THE TRANSACTIONS
CONTEMPLATED THEREBY. AT THE OPTION OF LENDER, THIS AGREEMENT MAY BE ENFORCED IN
ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN OR XXXXXX COUNTY,
MINNESOTA; AND BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT
AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE
EVENT BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY
TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT,
LENDER, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF
THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
7.4 Counterparts
This Agreement may be executed in any number of counterparts, all of
which shall constitute a single Agreement.
7.5 Notices
Any notice required or permitted to be given by any party hereto to the
other under the terms of this Agreement, or documents related hereto, shall be
in writing and shall be sent by manual delivery, telegram, facsimile
transmission, overnight courier, or United States registered or certified mail,
return receipt requested (postage prepaid), addressed to such party at the
address specified on the signature page(s) hereof, or at such other address in
the United States of America as such party shall have specified to the other
party hereto in writing, at least ten (10) days prior to the effective date of
said change of address. All periods of notice shall be measured from the date of
delivery thereof if manually delivered, from the date of sending thereof if sent
by telegram or facsimile transmission, from the first Business Day after the
date of sending if sent by overnight courier, or from four (4) days after the
date of mailing if so mailed.
7.6 Lender's Signs
Lender may, if it so desires, at Borrower's cost and expense, place a
sign of reasonable size on any Project Land, indicating that Lender is providing
financing for the Project to be constructed thereon, and/or may otherwise
publicize its involvement with said Project including, but not limited to,
issuing press releases.
7.7 No Third Party Reliance
No third party shall be entitled to rely upon this Agreement or to have
any of the benefits of Lender's interest hereunder, unless such third party is
an express assignee of all or a portion of Lender's interest hereunder.
7.8 Time of the Essence
Time is of the essence hereof with respect to the dates, terms and
conditions of this Agreement.
7.9 Entire Agreement: No Oral Modifications
This Agreement, the other Loan Documents and the other documents
mentioned herein set forth the entire agreement of the parties with respect to
the Loan and supersede all prior written or oral understandings and agreements
between them with respect thereto. No
modification or waiver of any provision of this Agreement shall be effective
unless set forth in writing and signed by the parties hereto.
7.10 Captions
The headings or captions of the Articles and Sections set forth herein
are for convenience only, are not a part of this Agreement and are not to be
considered in interpreting this Agreement.
7.11 Borrower-Lender Relationship
The relationship between Borrower and Lender created hereby and by the
other Loan Documents shall be that of a borrower and a lender only, and in no
event shall Lender be deemed to be a partner of, or a joint venturer with,
Borrower.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Address: XXXXXXXX BROS. CONSTRUCTION, INC.,
a Minnesota corporation
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxx 00000 By:
-----------------------------------
Its:
----------------------------------
Address: U.S. BANK NATIONAL ASSOCIATION
U.S. Bank Place - MPFP0509
000 Xxxxxx Xxxxxx Xxxxx By:
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000 -----------------------------------
Attention: Real Estate Banking Its:
Division Head ----------------------------------
EXHIBIT "A"
LEGAL DESCRIPTION
LOTS OWNED IN FEE SIMPLE BY XXXXXXXX BROS. CONSTRUCTION, INC. AS OF THE DATE
HEREOF:
XXXX 0, 0 XXX 0, XXXXX 0;
XXX 0, XXXXX 2;
ALL IN PINETREE PASS, DAKOTA COUNTY, MINNESOTA.
LOTS 1 THROUGH 5, BLOCK 1;
LOTS 1 THROUGH 7, BLOCK 2;
XXX 0, XXXXX 0;
XXXX 0 XXXXXXX 0, XXXXX 4; AND
LOTS 1 THROUGH 8, BLOCK 5;
ALL IN PINETREE PASS 2ND ADDITION, DAKOTA COUNTY, MINNESOTA.
XXX 0, XXXXX 0;
XXXX 0 XXXXXXX 0, XXXXX 2;
LOTS 1 THROUGH 5, BLOCK 3;
ALL IN PINETREE PASS 3RD ADDITION, DAKOTA COUNTY, MINNESOTA.
OUTLOTS SUBJECT TO ROLLING OPTION AGREEMENT IN FAVOR OF XXXXXXXX BROS.
CONSTRUCTION, INC. AS OF THE DATE HEREOF:
OUTLOTS F, G AND H, PINETREE PASS 2ND ADDITION, DAKOTA COUNTY, MINNESOTA.
EXHIBIT "B"
APPLICATION AND CERTIFICATE FOR PAYMENT
(Use AIA form or such other form as specified by Lender)
EXHIBIT "C"
BORROWING BASE CERTIFICATE
XXXXXXXX BROS. CONSTRUCTION, INC. -- U.S. BANK NATIONAL ASSOCIATION
BORROWING BASE CERTIFICATE _____________, 199___
The undersigned hereby certifies to U.S. Bank National Association ("Bank") that
(a) all information set forth on this Borrowing Base Certificate and the
attached Borrowing Base Certificate Exhibit A is true, correct, complete and
accurate on the date set forth below; (b) no uncured Event of Default (as that
term is defined in the Revolving Construction and Development Loan Agreement
("Loan Agreement"), dated July ____, 1998, between the Bank and Xxxxxxxx Bros.
Construction, Inc.) exists on the date set forth below, except as set forth
below or in previous notices sent, or certificates delivered to the Bank as set
forth below; and (c) this Certificate complies with all of the terms and
provisions of the Loan Agreement.
Unit Summary
Number of Units Amount of
Construction
Project Loans
_____________ _____________
Total Housing Units Under Construction _____________ _____________
Presold Units _____________ _____________
Models (maximum of 3 units) _____________ _____________
Spec Units (maximum of 5 units eligible _____________ _____________
for funding)
Spec units above the funding limit _____________ _____________
Notices The following notices have been provided to U.S. Bank National
Association and remain effective as of the date hereof:
None.
Certified: Xxxxxxxx Bros. Construction, Inc.
By: Date:
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Its:
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EXHIBIT "D"
RELEASE PRICE
(1) If the Loan to Cost Ratio is greater than seventy percent (70%), the
Release Price for each Lot shall be (i) the outstanding debt under the
Construction Project Loan allocated hereunder to said lot (which
includes the Transfer Price of $48,800.00), plus (ii) the accelerated
Development Project Loan payment, plus (iii) the accrued and unpaid
interest on the foregoing. In calculating the above, the following
definitions shall apply:
a) The accelerated Development Project Loan payment shall be the
greater of:
i) the retail price of the lot as shown on Schedule 1
attached hereto, plus $10,000.00, minus $48,800.00;
or
ii) $21,200.00.
(2) If the Loan to Cost Ratio is equal to or less than seventy percent
(70%), then the Release Price shall be the outstanding debt under the
Construction Project Loan allocated hereunder to said lot (which
includes the Transfer Price of $48,800.00), plus $4,880.00.
(3) The Release Price for Model Homes which are sold on a sale-leaseback
program approved by Lender shall be the outstanding debt under the
Construction Project Loan allocated hereunder to said lot (which
includes the Transfer Price of $48,800.00).
The proceeds from releases under Sections 1-3 above shall be applied to the Loan
as follows: The proceeds shall first be applied accrued and unpaid interest on
such proceeds, then to the Construction Project Loan to reduce the principal
outstanding thereon by the amount of the outstanding debt under the Construction
Project Loan as described above, and the balance applied to the principal
outstanding on the Development Project Loan.
(4) Borrower may obtain releases for vacant lots which have not been
transferred to the Construction Project Loan only with the prior
consent of Lender. In the event Lender approves such a release, the
Release Price shall be the greater of (i) the actual sale price of the
lot plus $10,000.00, or (ii) the retail price of the lot as shown on
Schedule 1 attached hereto plus $10,000.00.
EXHIBIT "E"
DRAW REQUEST CERTIFICATION
DRAW REQUEST
In accordance with the attached Collateral Certificate and Borrowing Base
Certificate, Borrower has requested a draw in the amount of $_______________ as
of ________________, 1998.
BORROWER
XXXXXXXX BROS. CONSTRUCTION, INC.,
a Minnesota corporation
By:
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Its:
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EXHIBIT "F"
LETTER OF INSTRUCTIONS
July 13, 1998
HAND DELIVERED
Chicago Title Insurance Company
0000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Re: $10,100,000.00 Revolving Single Family Residential
Development Loan from U.S. Bank National
Association ("Bank") to Xxxxxxxx Bros. Construction, Inc., ("Borrower")
Mortgage and Security Agreement and Fixture Financing Statement by
and between Bank and Borrower dated July 13, 1998, ("Mortgage")
Your Mortgagee's Policy of Title Insurance No. ____________ ("Policy")
Dear Xxxxxx
Enclosed please find a fully completed, dated, executed and acknowledged
Mortgage and Security Agreement and Fixture Financing Statement ("Mortgage"),
covering real property located in Dakota County, Minnesota ("Subject Property").
Please record the Mortgage in the office of the County Recorder in and for said
County, at the sole cost and expense of the Borrower named therein at such time
as you are prepared to issue to the Bank a Policy covering the Subject Property
and insuring that the Mortgage is a first lien on then Borrower's interest in
the Subject Property, free and clear of all mortgages, liens, exceptions,
encumbrances or objections to title except (a) the liens of unpaid taxes which
are not yet delinquent and (b) the items numbered 10, 13, 16, 17, 18, 19 and 20
of Schedule B of your Commitment to Insure covering the Order Number 2495268
Effective Date: May 6, 1998, a copy of which is attached hereto and is hereby
made a part hereof. Please have an appropriate, authorized officer of Chicago
Title Insurance Company date, sign and return to the undersigned a copy of this
letter. Notwithstanding our failure to receive a copy of this letter executed by
an authorized agent of Chicago Title Insurance Company, your recordation of the
Mortgage and issuance of the Policy shall constitute evidence of your agreement
with these instructions.
All premiums and other costs associated with the issuance of the Policy and
compliance with these instructions must be paid by the Borrower.
If you have any questions concerning any of these instructions, please contact
the undersigned before acting thereon.
Sincerely,
Xxxx Xxxxxxxx
Loan Administrator
GF:
Attachment
cc: Xxxxxx Xxxxxx
ACKNOWLEDGMENT AND ACCEPTANCE
The undersigned hereby acknowledges receipt of the foregoing letter of
instructions, agrees to comply therewith and agrees to issue the Endorsement in
accordance with the terms thereof.
CHICAGO TITLE INSURANCE COMPANY
By:
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Its:
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EXHIBIT "G"
ASSIGNMENT OF GENERAL CONTRACT
ASSIGNMENT OF GENERAL CONTRACT
THIS ASSIGNMENT is made this _____ day of July, 1998, by XXXXXXXX BROS.
CONSTRUCTION, INC., a Minnesota corporation (hereinafter collectively referred
to as the "Borrower"), whose address is c/o Xxxxx Xxxxxx, 000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx, Xxxxxxxxx 00000, to U.S. BANK NATIONAL ASSOCIATION, a
national banking association (hereinafter referred to as the "Lender"), whose
address is U.S. Bank Place, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx
00000-0000.
RECITALS
A. The Borrower is the owner of certain real property and the
improvements thereon located in the City of ______________,
County of ____________, State of Minnesota (hereinafter
referred to as the "Premises").
B. The Borrower has executed and delivered to and with __________
_______________________, a _____________________ (hereinafter
referred to as the "Contractor") a certain agreement dated as
of _____________, 19 ____ (hereinafter referred to as the
"Contract") providing that Contractor will act as general
contractor in connection with the construction of certain
improvements upon the Premises (hereinafter referred to as the
"Improvements").
C. The Lender has made to the Borrower a $10,100,000.00 revolving
and development construction loan (hereinafter referred to as
the "Loan") pursuant to a certain Revolving Construction and
Development Loan Agreement of even date herewith (hereinafter
referred to as the "Loan Agreement") for the purpose of
financing a portion of the costs of the construction of the
Improvements, and as a condition of making certain advances
under the Loan, the Lender requires the assignment to it of
the Contract and certain subcontracts and the consent of the
Contractor and certain subcontractors thereto as herein set
forth.
D. The Loan is evidenced by a Development Note and a Revolving
Note (hereinafter collectively referred to as the "Note") and
secured by a Mortgage and Security Agreement and Fixture
Financing Statement (hereinafter referred to as the
"Mortgage"), both dated July ___, 1998 (the Note, the Mortgage
and all other documents securing the Loan are hereinafter
collectively referred to as the "Loan Documents").
NOW, THEREFORE, to secure the Loan and all advances to and obligations
of the Borrower under the Loan Agreement and the Loan Documents for the
Improvements, the Borrower hereby sells, assigns and transfers and sets over
unto the Lender and its successors and assigns, and grants a security interest
in all of the right, title and interest of the Borrower in and to the Contract
and in and to any and all subcontracts (hereinafter referred to as the
"Subcontracts") now or hereafter entered into by Contractor in connection with
the construction of the Improvements, and the Borrower hereby represents,
warrants and agrees as follows:
1. The copy of the Contract attached hereto as Exhibit "A" is a
true, correct and complete copy of the Contract; there have
been no prior assignments of the Contract; the Contract is
valid, enforceable and in full force and effect and has not
been amended or modified in any manner; neither party to the
Contract is in default under the terms of the Contract; and
all covenants, conditions and agreements contained in the
Contract have been performed as required therein, except those
not due to be performed until after the date hereof.
2. The Borrower agrees not to further assign, sell, pledge,
mortgage or otherwise transfer or encumber its interest in the
Contract so long as this Assignment is in effect. The Borrower
agrees that it shall not amend or modify the terms of the
Contract without the prior written approval of the Lender.
3. This Assignment shall constitute a perfected, absolute and
present assignment provided that the Lender shall have no
right under this Assignment to enforce the provisions of the
Contract until an Event of Default shall have occurred under
the terms of the Construction Loan Agreement. Upon the
occurrence of such an Event of Default, the Lender may,
without affecting any of its rights or remedies against the
Borrower under any other instrument, document or agreement,
exercise its rights under this Assignment as the Borrower's
attorney-in-fact in any manner permitted by law, and in
addition, the Lender shall have the right to exercise and
enforce any or all rights and remedies available to a secured
party under the Uniform Commercial Code.
4. The Borrower hereby irrevocably constitutes and appoints the
Lender as its attorney-in-fact upon the occurrence of an Event
of Default under the Construction Loan Agreement to demand,
receive and enforce the Borrower's rights with respect to the
Contract, to make payments under the Contract and to give
appropriate receipts, releases and satisfactions for and on
behalf of and in the name of the Borrower or, at the option of
the Lender, in the name of the Lender, with the same force and
effect as if the Lender had originally executed the Contract.
5. The Lender does not assume any of the obligations or duties of
the Borrower under or with respect to the Contract unless and
until the Lender shall have given the Contractor written
notice that it is exercising its right to complete or cause
the completion of the construction of the Improvements
following the occurrence of an Event of Default under the
Construction Loan Agreement. If the Lender does not undertake
to complete or cause the completion of the construction of the
Improvements, the Lender shall have no liability whatsoever
for the performance of any of the obligations or duties under
the Contract. The Lender may reassign, in its sole discretion,
and for the purpose of completing the Improvements, its right,
title and interest in the Contract and Subcontracts upon
notice to the Contractor and Subcontractors, but without any
requirement for the consent of the Borrower.
6. The Borrower agrees to pay all costs and expenses, including
attorney's fees, which the Lender may incur by exercising any
of its rights under this Assignment.
7. Neither this Assignment nor any provision hereof may be
changed, waived, discharged or terminated, except by an
instrument in writing signed by the Borrower and the Lender.
IN WITNESS WHEREOF, the Borrower has executed this Assignment as of the
day and year first written above.
XXXXXXXX BROS. CONSTRUCTION,
INC., a Minnesota corporation
By:
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Xxxxx Xxxxxx
Its: President
CONTRACTOR'S CONSENT
The undersigned, _____________________________, a ____________________
(hereinafter referred to as the "Contractor"), does hereby consent to the above
Assignment and acknowledges and agrees with U.S. BANK NATIONAL ASSOCIATION, a
national banking association (hereinafter referred to as the "Lender") as
follows:
1. The Contractor acknowledges that it has entered into a certain
construction and development contract with the Borrower
(hereinafter referred to as the "Contract") dated __________,
19 ____, a true and correct copy of which is attached hereto
as Exhibit "A", and that it is the Contractor under the
Contract referred to in the foregoing Assignment. The Contract
is valid, enforceable and in full force and effect and has not
been amended or modified in any respect.
2. The Contractor acknowledges that the rights of the Borrower
under the Contract have been collaterally assigned by the
Borrower to the Lender.
3. Upon the occurrence of an Event of Default under the terms of
the Loan Agreement, the Contractor shall, at the Lender's
written request, continue performance on the Lender's behalf
under the Contract in accordance with the terms thereof,
conditioned only upon receipt by the Contractor of payment on
account of its compensation in accordance with the terms and
provisions of the Contract.
4. The disbursement provisions contained in the Loan Agreement
shall control the disbursement of Loan proceeds to the
Borrower notwithstanding any conflicting provisions contained
in the Contract.
5. The Lender may enforce the obligations of the Contractor under
the Contract with the same force and effect as if enforced by
the Borrower and may perform the obligations of the Borrower.
The Contractor will accept such performance in lieu of
performance by the Borrower in satisfaction of the Borrower's
obligations thereunder.
6. The Contractor will give the Lender prompt written notice of
any default by the Borrower under the Contract. The Contractor
will not terminate the Contract on account of any default of
the Borrower thereunder without written notice of such default
to the Lender and will give the Lender thirty (30) days to
cure the default. In the event the Lender elects to cure the
default and does, in fact, cure such default within the time
period set forth herein, the Contractor agrees not to
terminate the Contract. If, however, the Lender elects not to
enforce the Contract against the Contractor, the Lender shall
have no obligation to cure any default of the Borrower under
the Contract.
7. The Contractor has full authority under all state and local
laws and regulations to perform all of its obligations under
the Contract in accordance with the terms thereof and the
Contractor will comply with all applicable local, state and
federal laws and regulations. Upon completion of the
Improvements, the Contractor will certify to the Lender or its
successors or assigns that the Improvements have been
completed in substantial accordance with the Plans and
Specifications as prepared by _________________________, a
______________________ and all applicable building, fire,
health, zoning, environmental and energy legislation,
ordinances, rules and regulations.
8. The Contractor hereby collectively assigns to the Lender as
collateral security for the Loan all of Contractor's right,
title and interest under the Subcontracts under the same terms
and conditions as contained herein with reference to the
Contract which assignment shall become operative upon the
occurrence of an event of default by the Contractor under the
terms of the Contract or the Subcontracts and the written
assumption by Lender of the Contractor's obligations under the
Subcontracts.
9. The Contractor agrees not to modify or amend the Contract or
any Subcontracts or give effect to any change order without
the Lender's specific written consent.
10. All terms defined in the foregoing Assignment shall have the
same meanings when used in this Consent.
Dated: July ____, 1998
CONTRACTOR:
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a
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By:
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Its:
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EXHIBIT "A"
CONTRACT
EXHIBIT "H"
CERTIFICATE REGARDING CONSOLIDATED
NET WORTH
The undersigned, being the Borrower or an authorized representative of the
Borrower, delivers this certificate pursuant to the terms of Section 5.16 of the
Revolving Construction and Development Loan Agreement dated as of ___________,
1998, and hereby certifies that for the fiscal year immediately preceding the
date of this Certificate:
(1) Consolidated Tangible Net Worth $______________ *
BORROWER
XXXXXXXX BROS. CONSTRUCTION,
INC., a Minnesota corporation
By:
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Its:
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Date:
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*Calculations attached
EXHIBIT "I"
DEVELOPMENT PROJECT
PHASE I SHARED COSTS
EXHIBIT "J"
TOTAL DEVELOPMENT COSTS FOR STONECLIFFE AND PHASE ONE
