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EXHIBIT 10(n)
LOAN AGREEMENT
BY THIS AGREEMENT made and entered into as of the 22nd day of March, 1996,
MONTEREY MANAGEMENT, INC., an Arizona corporation, dba MONTEREY HOMES, whose
address is 0000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxx 00000 (hereinafter
called "Borrower"), and BANK ONE, ARIZONA, NA, a national banking association,
whose address is Xxxx Xxxxxx Xxx 00000, Xxxxxxx, Xxxxxxx 00000, Attention:
Western Region Real Estate, Department A387 (hereinafter called "Lender"), for
and in consideration of the recitals and mutual promises contained herein,
confirm and agree as follows:
SECTION 1. RECITALS; DEFINITIONS
1.1 Loan. Borrower has applied to Lender for a loan in the amount of FIVE
MILLION THREE HUNDRED SIXTY THOUSAND AND NO/100 DOLLARS ($5,360,000.00) (the
'Loan") for the purpose of acquiring or completing acquisition of the real
property described on Schedule "A" attached hereto and by this reference
incorporated herein (the "Real Property"), and constructing thereon certain
offsite improvements (the "Improvements") according to final plans and
specifications approved by Lender (the "Plans and Specifications"). The
Improvements are to consist of paving, curbs, sidewalks, landscaping, water,
sewer and other utilities, entry features and other infrastructure improvements.
The Real Property is to be developed into a 56 lot subdivision to be known as
Lincoln Place, located on approximately 19.4 acres north of Lincoln Drive
between 74th and 75th Streets in Scottsdale, Arizona.
1.2 Definitions. For the purposes of this Agreement, unless the context
otherwise requires, the following terms shall have the respective meanings
assigned to them in this Paragraph 1.2 or in the paragraph hereof referred to
below:
"Advance" and "Advances": See Paragraph 2.3.
"Agreement" means this Loan Agreement.
"Appraisal": See Paragraph 5.3(c).
"Borrower" means Monterey Management, Inc., an Arizona corporation, dba
Monterey Homes.
"Borrower's Funds Account": See Paragraph 7.18.
"Closing Date" means the earlier of the date of the initial Advance or the
recording of the Deed of Trust.
"Cost and Equity Breakdown": See Paragraph 2.3.
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"Deed of Trust": See Paragraph 4.1 (a).
"Disbursement Request": See Paragraph 2.4(a).
"Event of Default": See Paragraph 11.1.
"Guarantors" means Xxxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx and Xxxxx X.
Xxxxxx.
"Improvements": See Paragraph 1.1.
"Lander" means Bank One, Arizona, NA, a national banking association.
"Loan": See Paragraph 1.1.
"Lot Release Price": See Paragraph 4.3.
"Maximum Loan Amount": See Paragraph 2.1.
"Note": See Paragraph 2.2.
"Plans and Specifications": See Paragraph 1.1.
"Prime Rate" means the interest rate per annum designated by Bank One,
Arizona, NA, a national banking association, or its successors, as its "Prime
Rate," as publicly announced by that bank from time to time as a means of
pricing credit extensions to some customers and is neither tied to any external
interest rate or index nor necessarily the lowest rate of interest charged by
that bank at any given time for any particular class of customer or credit
extension.
"Real Property": See Paragraph 1.1.
"Retention Funds": See Paragraph 2.3(c).
"Security Documents": See Paragraph 4.2.
"Title Policy": See Paragraph 5.3(e).
SECTION 2. COMMITMENT; ADVANCES
2.1 Commitment. Subject to the conditions herein set forth, Lender agrees
to make the Loan available to or for the benefit of Borrower, and Borrower
agrees to draw upon the Loan, in the manner and upon the terms and conditions
herein expressed, an amount (the "Maximum Loan Amount") not to exceed the lesser
of the following:
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(a) $5,360,000.00.
(b) An amount not to exceed eighty percent (80%) of the bulk
wholesale value of the Real Property and Improvements as evidenced by the
Appraisal, as it may be updated.
2.2 Note. The Loan shall be evidenced by a Promissory Note (the "Note") of
Borrower, executed and delivered simultaneously with the execution of this
Agreement, in the amount of $5,360,000.00, payable to Lender upon the terms and
conditions contained therein which may include, but need not be limited to, the
following:
(a) Interest Rate. Interest shall accrue at the rate of one-half
percent (0.5%) per annum in excess of the Prime Rate. The interest rate
shall change from time to time on the effective date of, and in conformity
with, changes in the Prime Rate.
(b) Interest Payments. All accrued interest shall be due and payable
on the first day of each and every month commencing with the first month
after the date of the Note.
(c) Maturity. The entire unpaid principal balance, all accrued and
unpaid interest and all other amounts payable under the Note shall be due
and payable in full on March 22, 1998.
(d) Extension Option. At the option of Borrower, the maturity date
of the Note may be extended an additional six (6) months to September 22,
1998, subject to the following terms and conditions:
(i) Borrower (A) at least thirty (30) days prior to the
commencement of the extension period shall have given Lender written
notice that Borrower desires such extension, and (B) shall have paid
to Lender in cash or immediately available funds on or before the
commencement of the extension period an extension fee in an amount
equal to one-half percent (0.5%) of the sum of the then outstanding
principal amount of the Loan plus all amounts that are committed but
not yet advanced under the Loan;
(ii) Lender, in its reasonable discretion, shall have
determined that there has been no material adverse change in the
financial condition of Borrower;
(iii) No Event of Default and no event, that with the giving
of notice or the passage of time, or both, would be an
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Event of Default, shall have occurred and be continuing on the date
of Borrower's notice of extension to Lender or on the commencement
of the extension period;
(iv) Borrower shall be in compliance with the Lot Release
Price payment requirements of Paragraph 4.4 hereof; and
(v) If required by Lender, an update of the Appraisal; the
amount of the Loan shall not exceed eighty percent (80%) of the bulk
wholesale value of the Real Property and Improvements as shown by
such update. If for any reason the loan-to-value percentage exceeds
said percentage, then Borrower shall upon Lender's demand,
immediately reduce the unpaid principal balance of the Loan to
reduce the loan-to-value percentage to, at or below said percentage.
2.3 Advances. Disbursements under the Loan are referred to herein
individually as an "Advance" and collectively as "Advances." Lender shall make
Advances, subject to all of the terms and conditions provided herein, in the
following manner, only in the amounts and for the cost item set forth in the
Cost and Equity Breakdown attached hereto as Schedule "B" and by this reference
incorporated herein (the "Cost and Equity Breakdown"):
(a) Initially, Lender shall make an Advance in an amount not to
exceed the amounts set forth on the Cost and Equity Breakdown for the
costs items identified thereon as Land Acquisition Cost, Title/Close Fee,
Legal Fee, Appraisal/Review Fee and Loan Fee.
(b) The portion of the Loan allocated on the Cost and Equity
Breakdown for interest reserve shall be held by Lender as an interest
reserve, and Lender shall make Advances thereof to pay interest when due
under the Loan. If funds are not available from the interest reserve to
pay interest due under the Loan, Borrower shall pay such interest from its
own funds.
(c) Lender shall make Advances of the remaining portion of the Loan,
allocated on the Cost and Equity Breakdown for direct and indirect costs
and expenses for construction of the Improvements, in accordance with one
or more of the options described below; upon the occurrence of any event
described in Option Two below, Lender may cease Advances under Option One
and thereafter make Advances under Option Two:
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Option One
Upon receipt by Lender of a Disbursement Request described below,
together with all of the items described in Paragraph 2.4 hereof that are
required by Lender in connection with that Advance, Lender shall make
Advances no more frequently than monthly, as construction progresses, in
amounts equal to: (i) expenditures for labor performed and material
supplied under the construction contract for construction of the
Improvements in accordance with the Plans and Specifications during the
period immediately preceding that Advance plus (ii) indirect construction
costs actually paid or incurred by Borrower that have not been covered by
previous Advances. Indirect construction costs shall mean those costs
related to the construction of the Improvements or development of the Real
Property, other than the cost of labor and materials, and include, but
are not limited to, title insurance premiums, permit fees, architect and
engineering fees, legal fees, loan fees, taxes and interest during
construction, but do not include any profit to Borrower or any affiliate
of Borrower. Notwithstanding the foregoing, at Lender's option, Lender may
hold back ten percent (10%) of the costs of construction (hereinafter
called the "Retention Funds") related to the major scopes of work
generally described as "Grading," "Sewer," "Water," "Concrete," and
"Paving." Subject to the provisions for Advances contained herein, and so
long as there is no Event of Default hereunder, Lender may disburse a
portion of the Retention Funds for the scopes of work described above.
Subject to the provisions of this Agreement, and so long as there is no
Event of Default hereunder, any remaining Retention Funds shall be
disbursed upon a date to be determined at Lender's discretion but not
later than forty-five (45) days after receipt by Lender of the items
specified above and receipt and approval by Lender of the items described
in Paragraph 2.5 hereof.
Option Two
Upon the occurrence of any Event of Default, or at any time that
Lender determines from its own inspection that the Improvements are not
being constructed according to the Plans and Specifications or in
conformity with cost estimates approved by Lender or that requisite and
acceptable standards of workmanship are not being met, Lender shall have
the right, but not the obligation, to take over and complete construction
of the Improvements by or through any agent, contractor or subcontractor
of its selection and may make Advances and disburse any funds deposited
with Lender by Borrower in payment of the costs, expenses, fees,
attorneys' fees and other charges, together with reasonable allowances for
supervision, incurred in connection with such taking over and completion.
In the event proceeds of the Loan and amounts deposited by Borrower are
insufficient to pay all of the same, the unpaid amount thereof shall be an
indebtedness of Borrower to Lender, payable immediately without
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demand or notice, shall bear interest at the highest rate payable under
the Note, and shall be secured by all of the Security Documents.
(d) Until a final plat is recorded satisfactory to Lender, legally
subdividing the Real Property into not less than 56 lots, Borrower shall
only be entitled to Advances under Paragraphs 2.3(a) and (b) above.
2.4 Disbursement Request. When Borrower believes it is entitled to an
Advance, Borrower shall furnish Lender with the following, all in form and
content satisfactory to Lender:
(a) A Disbursement Request, together with AIA Forms G702 and G703
(and such other forms as may from time to time be approved or required by
Lender), setting forth such details concerning the construction of the
Improvements as Lender may require, including the amounts expended to the
date of the Disbursement Request for the Improvements, the amounts then
due and unpaid for construction of the Improvements and an itemized
estimate of the amount necessary to complete the Improvements. Any
materials covered by a Disbursement Request must be suitably stored at the
construction site, inventoried, and safeguarded and insured against loss,
damage, and theft.
(b) The certification by Borrower, the supervising architect, if
any, the contractor, and at Lender's option an independent architect or
engineer of Lender's selection, that: (i) all work performed is in
substantial accordance with the Plans and Specifications; (ii) all
governmental licenses and permits required for the Improvements as then
completed have been obtained and will be exhibited to Lender upon request;
(iii) the Improvements as then completed do not violate, and, if further
completed in accordance with the Plans and Specifications, will not
violate, any law, ordinance, rule or regulation; and (iv) the remaining
undisbursed proceeds of the Loan plus the then existing balance of any
Borrower's Funds Account held by Lender are sufficient to pay for the
completion of the Improvements.
(c) The certification by Borrower that no Event of Default exists,
and no event has occurred and no condition exists that, after notice or
lapse of time, or both, would constitute an Event of Default.
(d) Paid invoices and lien waivers relating to the construction of
the Improvements for all work through the date of the previous
Disbursement Request and invoices for all work covered by the current
Disbursement Request.
(e) Evidence that any inspection required by any master developer,
state, city or other governmental authority has been completed with
results satisfactory to that authority.
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(f) Such other information and documents as Lender may reasonably
require.
2.5 Completion of Improvements. Upon completion of the Improvements,
Borrower shall furnish Lender with the following, all in form and content
satisfactory to Lender, as a condition precedent to disbursement of any
remaining Retention Funds:
(a) Such additional endorsements to the Title Policy or such
additional policies of title insurance with endorsements thereto as Lender
may require, with a liability limit not less than the Title Policy amount,
issued by the title company issuing the Title Policy with coverage and in
form satisfactory to Lender, insuring Lender's interest under the Deed of
Trust as a valid lien on the Real Property, excepting only such items as
shall have been approved in writing by Lender and providing affirmative
insurance therein against mechanics' liens, materialmen's liens or claims
or liens in the nature thereof on account of any construction of the
Improvements;
(b) If requested by Lender, the execution of AIA Form G704 or other
document satisfactory to Lender by Borrower's engineer, contractor (if
any) and Borrower;
(c) If requested by Lender, a notice of completion on Lender's
approved form executed by Borrower and duly recorded in the county
recorder's office where the Real Property is located;
(d) If requested by Lender, an "as-built" ALTA survey of the Real
Property or other satisfactory evidence, showing the location of the
completed Improvements, the location of all points of access to the Real
Property and the Improvements and the location of all easements affecting
the Real Property and certifying that there are no encroachments of the
Improvements onto any easements affecting the Real Property or onto any
adjoining property and that all applicable setback requirements and other
restrictions have been complied with;
(e) "As-built" plans and specifications of the Improvements, showing
the final specifications of all Improvements;
(f) If requested by Lender, the execution of AIA Form G706
(Contractor's Affidavit of Payment of Debts), AIA Form G706A (Contractor's
Affidavit of Release of Liens), and AIA Form G707 (Consent of Surety of
Final Payment);
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(g) Unconditional lien waivers on Lender's approved form from any
party that has recorded a preliminary notice of lien against the Real
Property and Improvements; and
(h) Final offsite acceptance letter from the applicable governmental
authority as may be necessary to evidence completion of the Improvements.
2.6 Inspections. Borrower shall pay for all inspections, whether made by
an independent architect, engineer, or other inspector, or by Lender made
pursuant to this Agreement, which amounts shall be deducted by Lender from the
Loan to the extent funds allocated for such purpose remain available. Borrower
shall pay to Lender $100.00 per inspection to defray the cost of such
inspection, whether such inspection is performed by an independent contractor or
by Lender. To the extent not otherwise provided for in the Cost and Equity
Breakdown, Borrower shall pay such costs from funds other than the proceeds of
the Loan.
2.7 Method of Advance. Any Advance made by Lender under any option for
disbursement, or so much thereof as Lender may consider proper, may be disbursed
to Borrower or its order or, at Lender's election, directly to the persons
furnishing labor and/or materials, or to both. Lender shall have no obligation
to see that the disbursements made by it to Borrower or any designee of Borrower
are actually used by that party to pay for labor and materials furnished for
construction of the Improvements. Borrower acknowledges that this is its
responsibility, and Borrower assumes all risks in connection with any
disbursement to any such designee.
2.8 Protection of Lender. Lender may withhold from any Advance or, on
account of subsequently discovered evidence, withhold from a later Advance, or
require Borrower to repay to Lender any earlier Advance, as Lender in its sole
discretion considers necessary to protect Lender from loss on account of (i)
defective work on the Improvements that has not been remedied, (ii) any
obligation required by this Agreement to have been performed that has not been
performed, (iii) liens filed against the Real Property and Improvements or
reasonable evidence that such liens will be filed (other than in connection with
work the cost of which is being properly contested in accordance with the
provisions hereof), (iv) failure of Borrower to make payments to contractors or
subcontractors for material or labor (other than in connection with work the
cost of which is being properly contested in accordance with the provisions
hereof), or (v) a reasonable doubt by Lender that construction of the
Improvements can be completed with the undisbursed proceeds of the Loan, plus
any amounts deposited by Borrower with Lender. Subject to the other provisions
of this Agreement, any amount so withheld shall be disbursed after the basis for
such withholding has been cured or removed.
2.9 Withholding Advances. Under any option for Advances, Lender, in its
discretion, may withhold any payment or portion thereof until Lender has
received releases of lien, waivers of lien or paid bills in form satisfactory to
it for work through the date of the previous
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Disbursement Request. Lender shall have no obligation to require and/or obtain
lien waivers or receipts, and, although Lender requires presentation to it of
lien waivers and/or receipts, Lender shall have no responsibility for the
validity thereof nor for the correctness of the amounts indicated thereon. No
Advance by Lender shall constitute approval of any certification or relieve any
person making such certification of responsibility therefor.
2.10 Advances for Insurance, Taxes, Assessments and Liens. Lender, from
time to time, may, but shall not be obligated to, make Advances in payment of
insurance premiums, taxes, assessments, liens or encumbrances existing against
the Real Property and Improvements, interest accrued and payable upon the Loan,
and any charges and expenses that are the obligation of Borrower under this
Agreement or any Security Document and any charges or matters necessary to
preserve the Real Property and the Improvements or to cure any Event of Default.
2.11 Satisfaction of Conditions. Although Lender shall have no obligation
to make any Advance unless and until all of the conditions and prior
performances set forth herein have been kept, fulfilled or performed, and until
all inspections, certifications, releases, waivers, or paid bills or other
requirements set forth in Section 2 have been made, delivered and complied with,
Lender, at its sole discretion, may make Advances prior to that time without
waiving or releasing any of the requirements or conditions of this Agreement;
but Borrower shall continue to be strictly obligated and subject thereto, and
all such conditions, prior performances and other requirements shall
nevertheless be strictly and punctually complied with, fulfilled and performed;
and, notwithstanding any such disbursement, Lender, at its sole discretion, may
discontinue any further Advances at any time until all of the conditions, prior
performances and other requirements of this Agreement have been strictly
fulfilled, performed and complied with.
2.12 Disputes. In the event of any dispute that, in the good faith opinion
of Lender; may endanger the timely completion of the Improvements or the
fulfillment of any condition precedent or covenant herein, Lender may agree to
make Advances for the account of Borrower without prejudice to Borrower's
rights, if any, to recover such funds from the party to whom paid. Such
agreement or agreements may take any form that Lender in its reasonable
discretion deems proper, including, without limitation, agreements to indemnify
a title insurer against possible assertion of lien claims and agreements to pay
disputed amounts to contractors in the event Borrower is unable or unwilling to
pay the same. All sums paid or agreed to be paid pursuant to such agreement
shall be for the account of Borrower and shall be charged as an Advance.
2.13 Right to Advances. Borrower shall have no right to any Advance other
than to have the same disbursed by Lender in accordance with one or more of the
disbursement provisions contained in this Agreement. Any assignment or transfer,
voluntary or involuntary, of this Agreement or any right hereunder shall not be
binding upon or in any way affect Lender without its written consent; Lender may
make Advances under one or more of the disbursement provisions herein,
notwithstanding any such assignment or transfer.
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2.14 Excess Advances. Borrower shall immediately repay any Advance
received by Borrower in excess of the amount Borrower is entitled to under the
provisions of this Agreement.
2.15 Disbursement Request Date. Borrower shall provide Lender with
Disbursement Requests each month on or before a date agreed upon by Borrower and
Lender, and Lender shall be obligated to make Advances no more frequently than
once per month.
SECTION 3. LOAN FEES
3.1 Loan Fee. Lender has earned and Borrower has paid or shall pay to
Lender prior to or at the time of recording of the Deed of Trust, a
non-refundable Loan fee in the amount of $26,800.00. In the event Borrower shall
exercise the six-month extension option in accordance with the terms of the
Note, Borrower shall pay to Lender the non-refundable extension fee set forth in
Paragraph 2.2(d)(i) above, in an amount equal to one-half percent (0.5%) of the
then outstanding principal balance of the Loan plus all amounts that are
committed but not yet advanced under the Loan.
SECTION 4. SECURITY; RELEASES; REQUIRED LOT RELEASE PRICE PAYMENTS
4.1 Security. Borrower shall cause the Loan and Borrower's obligations
under this Agreement to be secured by the following:
(a) A Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing (severally and collectively, the "Deed of Trust")
constituting:
(i) A first and prior lien on the Real Property and
Improvements, subject only to such matters as specifically approved
by Lender therein;
(ii) A valid and effectual assignment of rents and leases
covering the Real Property and Improvements;
(iii) A valid and effectual security agreement granting Lender
a first and prior security interest in all of the property described
below in, to, or under which Borrower now has or hereafter acquires
any right, title or interest, whether present, future, or contingent
(but excluding all personal property used in connection with, or
arising from, any business of Borrower other than the ownership,
development, maintenance, leasing, management, operation, sale or
other disposition of the Real Property): all equipment, inventory,
accounts, general intangibles, instruments, documents, and chattel
paper, as those terms are
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defined in the Uniform Commercial Code, and all other personal
property of any kind (including without limitation money and rights
to the payment of money), whether now existing or hereafter created,
that are now or at any time hereafter (A) in the possession or
control of Lender in any capacity; (B) erected upon, attached to, or
appurtenant to, the Real Property; (C) located or used solely on the
Real Property or identified for use solely on the Real Property
(whether stored on the Real Property or elsewhere); or (D) used in
connection with, arising from, related to, or associated with the
Real Property or any of the personal property described herein, the
construction of any improvements on the Real Property, the
ownership, development, maintenance, leasing, management, or
operation of the Real Property, the use or enjoyment of the Real
Property, or the operation of any business conducted on the Real
Property; together with all products and proceeds of all of the
foregoing, in any form;
(b) Valid and effectual assignments of Borrower's interest in the
Plans and Specifications, all construction, architects' and engineers'
contracts, all operating, management and supervision agreements relating
to the ownership, development, construction and maintenance of the Real
Property and Improvements;
together with any UCC financing statements for filing and/or recording and any
other items required by Lender to fully perfect the liens and security interests
of Lender.
4.2 Security Documents. All of the documents required by Lender to grant
and perfect the liens and security interests required herein shall be in form
satisfactory to Lender and may be referred to herein as the "Security
Documents."
4.3 Releases. The Deed of Trust provides for the partial release of
subdivided lots constituting the Real Property upon the terms and conditions
contained herein and in the Deed of Trust, including the payment of a lot
release price in the amount of $121,500.00 for each lot (each such release price
hereinafter called, the "Lot Release Price"). Each Lot Release Price received in
connection with the Loan shall be applied as a prepayment of the outstanding
principal balance under the Note in the manner provided therein for prepayments
of principal. Regular payments of interest due under the Note shall not apply
toward any release price.
4.4 Required Lot Release Price Payments. Commencing with the 3-month
period beginning on November 1, 1996, and ending on January 31, 1997, and
continuing each and every 3-month period thereafter, Borrower shall satisfy the
conditions set forth in Paragraph 4.3 hereof and shall pay to Lender the Lot
Release Price on not less than six (6) of the subdivided lots constituting the
Real Property during each and every such 3-month period. Lot Release
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Price payments received in excess of the requirements of this Paragraph during
any 3-month period shall be credited to the satisfaction of the requirements
hereof in future 3-month periods.
4.5 Release of Common Areas. Notwithstanding any other provision contained
in this Agreement or the Security Documents, after the recordation of a final
plat subdividing the Real Property into fifty-six (56) lots and certain common
area tracts and concurrently with Borrower's conveyance of the common area
tracts to the Lincoln Place Community Association to be formed by Borrower,
Lender shall execute any and all documents necessary to release the lien of the
Security Documents from all common area tracts so that after such event the lien
of the Security Documents shall affect only the lots shown in the final plat.
SECTION 5. CONDITIONS PRECEDENT FOR CLOSING
The obligation of Lender to make the Loan and each and every Advance is
subject to the following express conditions precedent, all of which, unless
otherwise provided below, shall have been satisfied prior to the recording of
the Deed of Trust:
5.1 Loan Documents. Borrower shall have executed (or obtained the
execution or issuing of) and delivered to Lender the following documents, all in
form satisfactory to Lender:
(a) The Note;
(b) The Security Documents:
(i) Deed of Trust;
(ii) Assignment of Plans and Specifications and Rights under
Engineering Contract;
(iii) UCC-l Financing Statement(s).
(c) Unconditional Guarantees of Payment executed by Guarantors;
(d) Guarantees of Completion and Performance executed by Guarantors;
(e) Environmental Indemnity Agreement executed by Borrower and
Guarantors; and
(f) Arbitration Resolution executed by Borrower and Guarantors.
5.2 Fees. Lender shall have received the Loan fee required in Paragraph
3.1 hereof.
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5.3 Other Conditions. Borrower, at its expense, shall have obtained and
delivered to Lender (except that the appraisal required below shall be ordered
by Lender at Borrower's expense) the following items, all of which shall be in
form and content satisfactory to Lender and shall be subject to approval in
writing by Lender:
(a) The Plans and Specifications approved by any required
governmental entity.
(b) A cost breakdown itemizing the gross costs, including direct and
indirect costs, for the Improvements, certified to be correct to the best
knowledge and belief of Borrower.
(c) A current appraisal (the "Appraisal") of the Real Property and
Improvements by an appraiser acceptable to Lender, reviewed and found to
be satisfactory by Lender and showing a bulk wholesale value for the Real
Property and completed Improvements such that the amount of the Loan shall
not exceed an amount equal to eighty percent (80%) of said bulk wholesale
value. Lender may require reappraisals at Borrower's expense.
(d) A copy of the proposed plat for the Real Property and a current
survey of the Real Property by a licensed surveyor acceptable to Lender
describing the boundaries of the Real Property and showing all means of
ingress and egress, rights-of-way, easements (each of which shall be
identified by docket and page or recording number where recorded) and all
other customary and relevant information pursuant to ALTA standards and
any title company requirements. If required by Lender, following
completion of the Improvements, Borrower shall furnish to Lender an ALTA
"as built" survey showing the location of the Improvements upon the Real
Property and showing all easements and other matters affecting the site.
All surveys shall be certified to Lender and the title company issuing the
Title Policy.
(e) An ALTA extended coverage mortgagee's title insurance policy
[ALTA Loan Policy - 1970 (Rev. 10-17-70)] or similar policy acceptable to
Lender (the "Title Policy"), with such endorsements as Lender may require,
issued by a title insurance company satisfactory to Lender in the amount
of the Loan insuring the lien of the Deed of Trust to be a first and
prior lien upon the Real Property as security for all Advances pursuant
to the terms of this Agreement, subject only to such exceptions as Lender
may expressly approve in writing, and insuring against any lien claims
that could arise out of the construction of the Improvements on the Real
Property. During the course of construction of the Improvements, Borrower
shall provide Lender with such title insurance endorsements as Lender may
require, including any endorsements Lender may require to insure that the
Improvements shall have been constructed
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within the boundaries of the Real Property and in accordance with all
applicable laws, covenants and restrictions. Upon completion of the
Improvements, Borrower shall deliver to Lender such further endorsements
to the title insurance policy as Lender may require.
(f) A soils report, including drainage, boring and compacting data,
together with such hydrology and other engineering reports that Lender may
require, all of which shall be acceptable to Lender, shall be by engineers
acceptable to Lender and shall indicate that the condition of the Real
Property is suitable for construction of the Improvements without
extraordinary land preparation. Any recommendations in the approved soils,
hydrology and other engineering reports must be complied with and
incorporated into the Plans and Specifications.
(g) An environmental questionnaire and disclosure statement
completed and signed by Borrower covering the current and former condition
and uses of the Real Property and adjacent property, and, if required by
Lender, followed by a current preliminary environmental assessment (Phase
I assessment) of the Real Property and adjacent property, plus any
sampling and analysis (Phase II assessment) or special limited assessment
that Lender may require after review of the Phase I assessment, together
with any other environmental investigations and reports that Lender may
require, all of which shall be by an environmental consulting firm
acceptable to Lender and none of which shall reveal any existing or
potential environmental condition adversely affecting the use or value of
the Real Property.
(h) Evidence that the Real Property is properly zoned for the
Improvements and their intended use and that such zoning is final and not
subject to challenge.
(i) Policies of insurance providing the following:
(i) Liability. Commercial general liability insurance
protecting Borrower and Lender against loss or losses from liability
imposed by law or assumed in any agreement, document, or instrument
and arising from bodily injury, death, or property damage with a
limit of liability of not less than $1,000,000.00 per occurrence and
$2,000,000.00 general aggregate. Also, "umbrella" excess liability
insurance in an amount not less than $5,000,000.00. Such policies
must be written on an occurrence basis so as to provide blanket
contractual liability, broad form property damage coverage, and
coverage for products and completed operations. In addition, there
shall be obtained and
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maintained business motor vehicle liability insurance protecting
Borrower and Lender against loss or losses from liability relating
to motor vehicles owned, non-owned, or hired used by Borrower, any
contractor, any subcontractor, or any other person in any manner
related to the Real Property with a limit of liability of not less
than $2,000,000.00 (combined single limit for personal injury
(including bodily injury and death) and property damage).
(ii) Property. Fire and extended coverage insurance on the
Improvements in an amount not less than the full insurable value on
a replacement cost basis of the insured Improvements and personal
property related thereto. During the construction period, such
policy shall be written in the so-called "Builder's Risk Completed
Value Non-Reporting Form" with no coinsurance requirement and shall
contain a provision granting the insured permission to complete.
(iii) Flood. A policy or policies of flood insurance in the
maximum amount of flood insurance available with respect to the Real
Property under the Flood Disaster Protection Act of 1973, as
amended. This requirement will be waived upon presentation of
evidence satisfactory to the Lender that no portion of the Real
Property is located within an area identified by the U.S. Department
of Housing and Urban Development as having special flood hazards.
(iv) Xxxxxxx'x Compensation. Xxxxxxx'x compensation insurance,
disability benefits insurance, and such other forms of insurance as
required by law covering loss resulting from injury, sickness,
disability, or death of employees of Borrower, any contractor, and
any subcontractor located on or assigned to the Real Property.
Borrower shall cause each contractor and each subcontractor having
employees located on or assigned to the Real Property to obtain and
maintain this same coverage for all eligible employees.
(v) Engineer. If required by Lender, each engineer, each soils
engineer, and each environmental contractor employed by Borrower in
connection with the Real Property shall maintain engineer's
professional liability insurance with a limit of liability of not
less than the amount approved by Lender.
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(vi) Architect. If required by Lender, each architect employed
by Borrower in connection with the Project shall maintain
architect's professional liability insurance with a limit of
liability of not less than the amount approved by Lender.
(vii) Other. Such other insurance as Lender may require, which
may include, without limitation, errors and omissions insurance with
respect to the contractors, architects and engineers, insurance
covering vandalism and malicious mischief, sprinkler leakage, rent
abatement and/or business loss.
All insurance policies (i) shall be issued by an insurance company
acceptable to Lender, (ii) name Lender as an additional insured on all
liability insurance and first mortgagee on all casualty insurance, (iii)
provide that Lender is to receive thirty (30) days written notice prior to
cancellation, and (iv) be in an original form to be held by Lender.
(j) Evidence whether the Real Property, or any part thereof, lies
within a "special flood hazard area" as designated on maps prepared by the
Department of Housing and Urban Development.
(k) Evidence that all utilities and services to the Real Property
and Improvements, including without limitation water, sewer, gas, electric
and telephone, are available, or will be available as required, and will
be provided in amounts that are sufficient to service future onsite
improvements for their intended use.
(1) Upon issuance, copies of all grading permits and all building
permits issued by the municipality having jurisdiction over the Real
Property and Improvements and permitting construction of the Improvements
in accordance with the Plans and Specifications.
(m) Copies of all lease agreements, if any, affecting the Real
Property and Improvements.
(n) Copies of all other agreements between Borrower and any
architects, engineers, managers or supervisors related to the construction
and maintenance of the Real Property and Improvements, together with
written agreements by such persons or entities that they will perform for
Lender the services contracted to Borrower, notwithstanding the occurrence
of any Event of Default and any trustee's sale or foreclosure of the Deed
of Trust (provided that such persons or entities continue to receive
payments under their respective
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contracts), and the consent of such persons or entities to the collateral
assignment by Borrower to Lender of their respective contracts.
(o) If required by Lender, a list of the contractor, all
subcontractors, suppliers and materialmen employed or retained to be
employed in connection with the construction of the Improvements, together
with, if required by Lender, copies of each such contract. Such list shall
show the name, address and telephone number of each such person, a general
statement of the nature of the work to be done, the labor and material to
be supplied, the names of materialmen if known, and the approximate dollar
value of such labor or work with respect to each.
(p) Copies of any Declaration of Covenants, Conditions and
Restrictions and related documents pertaining to the Real Property and the
Improvements.
(q) Evidence that all taxes and assessments levied against or
affecting the Real Property have been paid current, together with, if
required by Lender, a Type B tax service contract for the Real Property.
(r) If Borrower, any partner or member in Borrower or any guarantor
of the Loan is other than a natural person: (i) a copy of the
organizational documents for that entity; (ii) evidence of the proper
formation and good standing of that entity in the state of its
organization, (iii) evidence of qualification or registration of that
entity in the State of Arizona, if Arizona is not the state of its
organization, and (iv) proper resolutions, authorizations, certificates,
and such other documents as Lender may require, relating to the existence
and good standing of that entity and the authority of any person executing
documents on behalf of that entity. No change shall be made to any
organizational documents previously submitted to Lender without Lender's
prior written approval.
(s) A Job Progress Schedule showing the planned timing, progress of
construction and completion date for the Improvements.
(t) Such other information and documents as Lender may reasonably
require.
5.4 Legal Opinion. If required by Lender, Borrower, at its expense, shall
have provided Lender with a written opinion by counsel in form and substance
reasonably acceptable to Lender.
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5.5 Representations True. All representations and warranties by Borrower
shall remain true and correct and all agreements that Borrower is to have
performed or complied with by the date hereof shall have been performed or
complied with.
5.6 No Event of Default. No Event of Default exists, and no event has
occurred and no condition exists that, after notice or lapse of time, or both,
would constitute an Event of Default.
SECTION 6. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lander as follows:
6.1 Recitals and Statements. The recitals and statements of intent
appearing in this Agreement are true and correct.
6.2 Organization and Good Standing. If Borrower is a corporation, limited
liability company, partnership or trust, Borrower (and, if applicable, each
partner or member of Borrower) is duly organized, validly existing and in good
standing under the laws of the state of its organization and is, to the extent
required by law, qualified to do business and is in good standing in the State
of Arizona and in each state in which it is doing business.
6.3 Power. Borrower has full power and authority to own its properties and
assets and to carry on its business as now being conducted. The execution,
delivery and performance of this Agreement, the Note and each of the Security
Documents have been duly authorized by all requisite action on the part of
Borrower.
6.4 Authority. Borrower is fully authorized and permitted to enter into
this Agreement, to execute any and all documentation required herein, to borrow
the amounts contemplated herein upon the terms set forth herein and to perform
the terms of this Agreement, none of which conflicts with any provision of any
law, rule or regulation applicable to Borrower. This Agreement, the Note and
each Security Document are valid and binding legal obligations of Borrower, and
each is enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to the
rights of creditors generally and general principles of equity.
6.5 Enforceable Liens. The liens, security interests and assignments
created by the Security Documents will, when granted and recorded or filed, be
valid, effective, properly perfected and enforceable liens, security interests
and assignments.
6.6 Enforceable Guarantees. Each Guarantee of Payment and each Guarantee
of Performance and Completion referred to in Paragraph 5.1 hereof constitutes a
legal, valid and binding obligation of each guarantor named therein according to
the terms thereof.
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6.7 No Breach. The execution, delivery and performance by Borrower of this
Agreement, the Note, the Security Documents and all other documents and
instruments relating to the Loan will not result in any breach of the terms,
conditions or provisions of, or constitute a default under, any agreement or
instrument under which Borrower is a party or is obligated. Borrower is not in
default in the performance or observance of any covenants, conditions or
provisions of any such agreement or instrument.
6.8 No Actions. No actions, suits or proceedings are pending or threatened
against Borrower that might materially and adversely affect the repayment of the
Loan, the performance by Borrower under this Agreement or the financial
condition, business or operations of Borrower.
6.9 Licenses. Borrower has obtained or shall obtain prior to commencement
of construction of the Improvements, and there shall thereafter remain in full
force and effect all licenses, permits, consents, approvals and authorizations
necessary or appropriate for the construction of the Improvements.
6.10 Financial Statements True. All financial statements, profit and loss
statements, statements as to ownership and other statements or reports
previously or hereafter given to Lender by or on behalf of Borrower are and
shall be true, complete and correct as of the date thereof. There has been no
material adverse change in the financial condition or the results of the
operation of Borrower since the latest financial statements of Borrower given to
Lender.
6.11 Filing of Taxes. Borrower has filed all federal, state and local tax
returns and has paid all of its current obligations before delinquent, including
all federal, state and local taxes and all other payments required under
federal, state or local law.
6.12 Affirmation of Representations and Warranties. Each request by
Borrower for an Advance shall constitute an affirmation on the part of Borrower
that the representations and warranties contained herein are true and correct as
of the time of such request and that the conditions precedent set forth in
Section 5 hereof have been fully satisfied. All representations and warranties
made herein shall survive the execution of this Agreement, all Advances and the
execution and delivery of all other documents and instruments in connection with
the Loan, so long as Lender has any commitment to lend to Borrower hereunder and
until the Loan and all indebtedness hereunder have been paid in full and all of
Borrower's obligations hereunder have been fully discharged.
SECTION 7. AFFIRMATIVE COVENANTS
So long as Lender has any commitment to lend to Borrower hereunder and
until the Loan and all other indebtedness hereunder have been paid in full and
all of Borrower's obligations hereunder have been fully discharged:
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7.1 Payment of Construction Costs. Borrower shall promptly pay for all
labor, materials, equipment and fixtures used in connection with the
construction of the Improvements and all other costs relating to the
Improvements except that Borrower may contest in good faith the validity or
amount thereof provided that Borrower shall have furnished to Lender a cash
deposit or other appropriate security in an amount and form satisfactory to
Lender to protect Lender against the creation of any lien on, or any sale or
forfeiture of, any property encumbered by the Security Documents. Upon the final
determination of Borrower's contest, Borrower shall promptly pay all sums, if
any, determined to be due. Any deposit or security provided by Borrower shall be
returned to Borrower upon the final determination of Borrower's contest and the
payment by Borrower of the sums, if any, determined to be due.
7.2 Completion of Improvements. Borrower shall commence construction of
the Improvements within a reasonable time (not more than one hundred twenty
(120) days) after the recording of the Deed of Trust, proceed without
interruption and promptly complete the Improvements not later than one (1) year
from the date of the recording of the Deed of Trust in a good and workmanlike
manner according to the Plans and Specifications, free from all liens and
encumbrances, and in accordance with all applicable ordinances and statutes,
including zoning laws, all covenants and restrictions running with the land, and
all regulations and building codes of any governmental or municipal agency
having jurisdiction over the Improvements.
7.3 Broken Priority. Borrower warrants that no labor or material has been
or will be furnished for construction of the Improvements until the Deed of
Trust has been recorded and the title company has committed to issue the Title
Policy; or, if construction has commenced, Borrower shall assure that all
necessary indemnification or other agreements are made, in form satisfactory to
the title company, so that Lender receives the Title Policy without exception
for mechanics' or materialmen's liens, as required herein.
7.4 Enforcement of Contracts. Borrower shall strictly enforce the
contracts for the construction of the Improvements to ensure that the
contractors are required to promptly and diligently perform all of their
obligations thereunder and in such a manner as to preserve Lender's security in
the Real Property and Improvements. No change, amendment or modification shall
be made to such contracts without the prior written consent of Lender except
changes, amendments or modifications that are to implement changes to the Plans
and Specifications permitted hereby.
7.5 Additional Contractor Lists. Borrower, promptly upon request of Lender
from time to time, shall furnish to Lender correct lists of the contractor, all
subcontractors, suppliers and materialmen employed or retained in connection
with the construction of the Improvements, together with, if required by Lender,
copies of each such contract. Each such list shall show the name, address and
telephone number of each such person, a general statement of the nature of the
work to be done, the labor and materials to be supplied, the names of
materialmen if known. and the approximate dollar value of such labor or work
with respect to each. Lender shall have the right to telephone or otherwise
communicate with the contractor, each
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subcontractor and materialman to verify the facts disclosed by said list or by
any disbursement request, or for any other purpose.
7.6 No Other Security Interests. No materials, equipment, fixtures or any
other part of the Improvements shall be purchased or installed under any
security agreement or other arrangements wherein the seller reserves or purports
to reserve the right to remove or to repossess any such items or to consider
them personal property after their incorporation into the Improvements.
7.7 Maintenance of Licenses and Permits. Borrower shall maintain in full
force and effect all rights and licenses necessary to carry on its business, and
all permits, licenses, consents and approvals necessary for the construction
and maintenance of the Improvements. Borrower shall maintain its present
existence and shall maintain executive personnel and management at a level of
experience and ability equivalent to present personnel and management.
7.8 Maintenance of Insurance. Borrower shall maintain in full force and
effect at all times all insurance coverages required to be provided as a
condition of any Advance.
7.9 Compliance with Loan Documents. Borrower shall make all payments of
interest and principal on the Loan and shall keep and comply with all terms,
conditions and provisions of the Security Documents.
7.10 Publicity. After the execution of this Agreement, any and all
publicity releases to newspapers of general or limited circulation or trade
publications announcing any of the financing by Lender provided for herein shall
be issued by or subject to prior approval by Lender. Lender, at its option and
at Borrower's expense, may erect a sign upon the Real Property indicating that
Lender is the source of the financing of the construction of the Improvements.
7.11 Notice of Completion. Upon completion of the Improvements, as
"completion" is defined in A.R.S. Section 33-993(B), Borrower shall promptly
record a "Notice of Completion" pursuant to A.R.S. Section 33-993.
7.12 Payment of Taxes. Borrower shall pay all of its current obligations
before delinquent, including all federal, state and local taxes and all other
payments required under federal, state or local law.
7.13 Books and Records; Access. Borrower shall maintain, in a safe place,
proper and accurate books and records relating to its operations and its
business affairs. Lender shall have the right from time to time to examine, and
to make abstracts from and photocopies of, Borrower's books and records.
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7.14 Financial Reports. Borrower shall maintain a standard, modem system
of accounting that reflects the application of generally accepted accounting
principles, consistently applied. Borrower shall furnish to Lender or cause to
be furnished to Lender the following in form satisfactory to Lender:
(a) Within ninety (90) days after the close of each fiscal year and
within sixty (60) days after the close of each interim quarterly
accounting period, financial statements of Borrower, including a balance
sheet, statement of income and expenses and statement of cash flows that
include the results of the financial operation of the Real Property, all
in reasonable detail and prepared according to generally accepted
accounting principles, consistently applied. Year end statements shall be
audited by an independent certified public accountant and interim
statements shall be certified by the chief financial officer of Borrower.
(b) Within ninety (90) days after the close of each calendar year,
personal financial statements of each individual Guarantor in form and
level of detail satisfactory to Lender. Annually, when filed, a complete
copy, including all Schedules, of the Federal Income Tax Returns for each
individual Guarantor.
(c) When requested by Lender, such further information as Lender may
reasonably request relating to any such financial statements and/or the
operation of the Real Property and Improvements.
7.15 Subsequent Actions. Borrower shall immediately inform Lender of any
actions, suits or proceedings involving Borrower that could materially and
adversely affect the repayment of the Loan, the performance by Borrower under
this Agreement, or the financial condition, business or operations of Borrower.
7.16 Compliance with HUD, FHA or VA. If applicable, Borrower shall obtain
or assure compliance with all requirements of any HUD regulations, any FHA or VA
loan insurance or loan guaranty commitment or any conventional loan commitment
applicable to any individual lots or units included in this development.
7.17 Further Assurances. Borrower shall execute and deliver such
additional documents and do such other acts as Lender may reasonably require in
connection with the Loan.
7.18 Borrower's Funds Account. If at any time or from time to time Lender,
in the exercise of its reasonable business judgment, determines that the
remaining undisbursed proceeds of the Loan plus the then existing balance of any
funds deposited with Lender pursuant to this Paragraph 7.18 (the "Borrower's
Funds Account") are insufficient to pay the total cost for the completion of the
Improvements, Lender may demand that an amount equal to such deficiency be
deposited with Lender to insure such completion and payment. All funds deposited
by
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Borrower pursuant to this Paragraph 7.18 shall be: (i) held in a
non-interest-bearing account selected by Lender in its sole and absolute
discretion, and (ii) disbursed by Lender in the manner provided herein for
Advances prior to, in conjunction with or after any or all Advances. All funds
at any time in the Borrower's funds account are hereby assigned to Lender as
additional security for the Loan and all other indebtedness of Borrower arising
hereunder.
7.19 Borrower Notices. Borrower shall promptly give notice in writing to
Lender of (i) the occurrence of any Event of Default, (ii) any change in the
name of Borrower, and in the case of a reorganization, any change in name,
identity or corporate structure, or (iii) any uninsured or partially insured
loss through fire, theft, liability or property damage.
7.20 Cross-Collateralization. At Lender's request, Borrower agrees to
provide cross-collateralization for all projects of Borrower then financed by
Lender, in form and substance acceptable to Lender.
7.21 Public Report. Borrower shall provide Lender with a copy of the
Arizona State Real Estate Commissioner's Public Report relating to the sale of
any individual lots or units included in this development as soon as that report
is issued.
7.22 Notice of Community Facilities District. Borrower shall immediately
give notice to Lender of any notification or advice that Borrower may receive
from any municipality or other third party of any intent or proposal to include
all or any part of the Real Property in a Community Facilities District. Lender
shall have the right to file a written objection to the inclusion of all or any
part of the Real Property in a Community Facilities District, either in its own
name or in the name of Borrower, and to appear at, and participate in, any
hearing with respect to the formation of any such district.
SECTION 8. NEGATIVE COVENANTS
So long as Lender has any commitment to lend to Borrower hereunder and
until the Loan and all other indebtedness hereunder have been paid in full and
all of Borrower's obligations hereunder have been fully discharged, Borrower
shall not, without receiving the prior written consent of Lender:
8.1 Dissolution or Liquidation. Dissolve or liquidate, or merge or
consolidate with or into any other entity, or turn over the management or
operation of its property, assets or business to any other person, firm or
corporation. Notwithstanding the previous sentence, Borrower may merge or
consolidate with or into any other entity where the creditworthiness of the
resulting entity is at least equal to that of Borrower prior to the merger or
consolidation, determined by Lender in its reasonable discretion.
8.2 Due on Sale or Encumbrance. Except as provided in Section 4, assign,
transfer or convey any of its right, title and interest in any property whether
real or personal encumbered
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by the Security Documents; create or suffer to be created any mortgage, pledge,
security interest, encumbrance or other lien on any property encumbered by the
Security Documents (other than liens arising from work the cost of which is
being properly contested in accordance with the terms hereof); or create or
suffer to be created any mortgage, pledge, security interest, encumbrance or
other lien on any other property or assets which it now owns or hereafter
acquires except in consideration of the contemporaneous receipt by it of
benefits equal or greater in value to the lien created.
8.3 Changes to Plans and Specifications. Make or permit any material
change in the Plans and Specifications. Any requested changes shall be submitted
on a form acceptable to Lender and accompanied by a copy of the portion of the
Plans and Specifications applicable to the changes. Prior to implementing any
change order, Borrower shall deposit with Lender sufficient cash to cover the
cost of all change orders that increase the cost of the Improvements. All such
funds shall be held by Lender and disbursed in the manner provided herein for
the Borrower's Funds Account and are hereby assigned to Lender as additional
security for the Loan and all other indebtedness of Borrower arising hereunder.
8.4 Change in Accounting Period. Change the times of commencement or
termination of its fiscal year or other accounting periods; or change its
methods of accounting other than to conform to generally accepted accounting
principles applied on a consistent basis.
8.5 Inclusion in Community Facilities District. Consent to, or vote in
favor of, the inclusion of all or any part of the Real Property in any Community
Facilities District formed pursuant to the Community Facilities District Act,
A.R.S. Section 48-701, et seq., as amended from time to time.
8.6 Loan to Value. Permit the unpaid principal balance of the Loan plus
all amounts committed and not yet advanced thereunder to exceed eighty percent
(80%) of the bulk wholesale value of the Real Property and the Improvements, as
if completed, as determined by Lender in its sole and absolute discretion. If
for any reason the loan-to-value percentage exceeds said percentage, then
Borrower shall upon Lender's demand, immediately reduce the unpaid principal
balance of the Loan to reduce the loan-to-value percentage to, at or below said
percentage.
8.7 Junior Encumbrance. Permit a second lien to be placed against the Real
Property in a principal amount that exceeds Seven Hundred Thousand And No/100
Dollars ($700,000.00).
SECTION 9. INSPECTION BY LENDER; STOPPAGE OF CONSTRUCTION
9.1 Entry on Real Property. Lender shall have the right, but not the
obligation, to enter at any reasonable times upon the Real Property and
Improvements to determine if the construction of the Improvements is in
conformity with the Plans and Specifications and all other requirements hereof
and to examine and make copies and extracts of any books, records, accounting
data and other documents, including without limitation all permits, licenses,
consents
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and approvals of governmental authorities having jurisdiction over Borrower, the
Improvements and the contractor and all subcontractors supplying labor and/or
materials in connection with the Improvements.
9.2 No Duty to Inspect. Lender shall have no duty to supervise or inspect
any construction or to inspect any books and records; any inspection by Lender
shall be for the sole purpose of protecting Lender's security and preserving
Lender's rights hereunder. Failure by Lender to inspect any work shall not
constitute a waiver of any of Lender's rights hereunder. Inspection not followed
by notice of an Event of Default shall not constitute a waiver of any Event of
Default then existing. Any inspection by Lender shall not be a representation by
Lender that there has been or will be compliance with the Plans and
Specifications or that the construction is free from defective materials or
workmanship, nor shall any inspection by Lender constitute approval of any
certification given to Lender or relieve any person making such certification of
responsibility therefor.
9.3 Stoppage of Construction. Upon discovery by Lender of any material
deviation from the Plans and Specifications or of defective or unworkmanlike
labor or materials being used in the construction of the Improvements, Lender
may immediately order stoppage of construction and demand that any
unsatisfactory work be replaced and that the condition be corrected, whether or
not any unsatisfactory work has already been incorporated into the Improvements.
After issuance of such an order in writing, the condition shall be corrected
within fifteen (15) days from the date of stoppage by Lender. Lender shall have
the right to withhold all further Advances until the condition is corrected and
no other work shall be done on the Improvements without the prior written
consent of Lender unless, and until, such condition has been fully corrected.
9.4 Appointment of Agent. Borrower irrevocably appoints, designates, and
authorizes Lender as its agent (said agency being coupled with an interest) to
file for record any notices of completion or any other notice that Lender deems
necessary or desirable to protect its interest hereunder or under the Security
Documents. This power of attorney is solely for the benefit and protection of
Lender, and its successors and assigns, and Lender shall have no obligation to
exercise this power in any event. This power of attorney is a power coupled with
an interest and shall be irrevocable so long as any part of the Loan or any
indebtedness or obligations of Borrower to Lender arising in connection with the
Loan remain unpaid or unperformed.
SECTION 10. WAIVER
10.1 Waiver. Borrower waives presentment, demand, protest and notices of
protest, nonpayment, partial payment and all other notices and formalities
except as expressly called for in this Agreement. Borrower consents to and
waives notice of: (i) the granting of indulgences or extensions of time of
payment, (ii) the taking or releasing of security, and (iii) the addition or
release of persons who may be or become primarily or secondarily liable for the
Loan or any
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other indebtedness arising in connection with the Loan, or any part thereof, and
all in such manner and at such time as Lender may deem advisable.
10.2 Delay or Omission. No delay or omission by Lender in exercising any
right, power or remedy hereunder, and no indulgence given to Borrower, with
respect to any term, condition or provision set forth herein, shall impair any
right, power or remedy of Lender under this Agreement, or be construed as a
waiver by Lender of, or acquiescence in, any Event of Default. Likewise, no such
delay, omission or indulgence by Lender shall be construed as a variation or
waiver of any of the terms, conditions or provisions of this Agreement. Any
actual waiver by Lender of any Event of Default shall not be a waiver of any
other prior or subsequent Event of Default or of the same Event of Default after
notice to Borrower demanding strict performance.
SECTION 11. DEFAULT
11.1 Event of Default. The occurrence of any of the following events or
conditions shall constitute an "Event of Default" under this Agreement:
(a) Any failure to pay any principal or interest under the Note when
the same shall become due and payable and such failure continues for ten
(10) days after notice thereof to Borrower, or the failure to pay any
other sum due under the Note, this Agreement or any Security Document when
the same shall become due and payable and such failure continues for ten
(10) days after notice thereof to Borrower. No notice, however, shall be
required after maturity of the Note.
(b) Any failure or neglect to perform or observe any of the
covenants, conditions or provisions of this Agreement, the Note, any
Security Document or any other document or instrument executed or
delivered in connection with the Loan (other than a failure or neglect
described in one or more of the other provisions of this Paragraph 11.1)
and such failure or neglect either cannot be remedied or, if it can be
remedied, it continues unremedied for a period of thirty (30) days after
notice thereof to Borrower.
(c) Any warranty, representation or statement contained in this
Agreement, in the Note or in any Security Document or any other document
or instrument executed or delivered in connection with the Loan, or made
or furnished to Lender by or on behalf of Borrower, that shall be or shall
prove to have been false when made or furnished.
(d) The filing by Borrower or any guarantor of the Loan (or against
Borrower or such guarantor to which Borrower or such guarantor acquiesces
or that is not dismissed within forty-five (45) days after the filing
thereof) of any
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proceeding under the federal bankruptcy laws now or hereafter existing or
any other similar statute now or hereafter in effect; the entry of an
order for relief under such laws with respect to Borrower or such
guarantor; or the appointment of a receiver, trustee, custodian or
conservator of all or any part of the assets of Borrower or such
guarantor.
(e) The insolvency of Borrower or any guarantor of the Loan; or the
execution by Borrower or such guarantor of an assignment for the benefit
of creditors; or the convening by Borrower or such guarantor of a meeting
of its creditors, or any class thereof, for purposes of effecting a
moratorium upon or extension or composition of its debts; or the failure
of Borrower or such guarantor to pay its debts as they mature; or if
Borrower or such guarantor is generally not paying its debts as they
mature.
(f) The admission in writing by Borrower or any guarantor of the
Loan that it is unable to pay its debts as they mature or that it is
generally not paying its debts as they mature.
(g) The death or incapacity of Borrower or, unless the estate of the
guarantor assumes the obligations of any such guarantor within ninety (90)
days of said guarantor's death, any guarantor of the Loan, if an
individual, or the liquidation, termination or dissolution of Borrower or
any such guarantor, if a corporation, limited liability company,
partnership or joint venture.
(h) Any levy or execution upon, or judicial seizure of, any portion
of any collateral or security for the Loan.
(i) Any attachment or garnishment of, or the existence or filing of
any lien or encumbrance, other than any lien or encumbrance permitted by
this Agreement or the Deed of Trust, against any portion of any collateral
or security for the Loan, that is not removed or released within fifteen
(15) days after its creation.
(j) The institution of any legal action or proceedings to enforce
any lien or encumbrance upon any portion of any collateral or security for
the Loan, that is not dismissed within fifteen (15) days after its
institution.
(k) The occurrence of any event of default under the Note, any of
the Security Documents or any other document or instrument executed or
delivered in connection with the Loan and the expiration of any applicable
notice and cure period.
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(l) The occurrence of any event of default under any document or
instrument given by Borrower, by any entity owned by Borrower or, if
Borrower is a corporation, limited liability company, partnership or
trust, by any entity owned by the same persons or entities that own
Borrower, in connection with any other indebtedness or obligation of
Borrower or such entity to Lender.
(m) The occurrence of any adverse change in the financial condition
of Borrower that Lender, in its reasonable discretion, deems material, or
if Lender in good faith shall believe that the prospect of payment or
performance of the Loan is impaired.
(n) Failure to record a final plat satisfactory to Lender, legally
subdividing the Real Property into not less than 56 lots within one
hundred twenty (120) days of the Closing Date.
11.2 Remedies. Upon the occurrence of any Event of Default and at any time
while such Event of Default is continuing, Lender may do one or more of the
following:
(a) Cease making Advances and declare the Loan and all other
indebtedness of Borrower hereunder immediately due and payable, without
notice or demand;
(b) Proceed to protect and enforce its rights and remedies under
this Agreement, the Note, and all Security Documents;
(c) Take over and complete construction of the Improvements by or
through any agent, contractor or subcontractor of its selection, and make
Advances in payment of the costs, expenses, fees, attorneys' fees and
other charges incurred in connection with such taking over and completion,
together with reasonable allowances for supervision; and
(d) Avail itself of any other relief to which Lender may be legally
or equitably entitled.
11.3 Enforcement Costs. Borrower shall pay all costs and expenses,
including without limitation costs of title searches and title policy
commitments, Uniform Commercial Code searches, court costs and reasonable
in-house and outside attorneys' fees, incurred by Lender in enforcing payment
and performance of the Loan and the other indebtedness and obligations of
Borrower hereunder or in exercising the rights and remedies of Lender hereunder.
All such costs and expenses shall be secured by all Security Documents. In the
event of any court proceedings, court costs and attorneys' fees shall be set by
the court and not by jury and shall be included in any judgment obtained by
Lender.
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SECTION 12. ACTION UPON AGREEMENT
12.1 No Third Parry Beneficiaries. This Agreement is made for the
sole protection and benefit of the parties hereto and no other person or
organization shall have any right of action hereon.
12.2 Integration. This Agreement embodies the entire Agreement of the
parties with regard to the subject matter hereof. There are no representations,
promises, warranties, understandings or agreements expressed or implied, oral or
otherwise, in relation thereto, except those expressly referred to or set forth
herein. Borrower acknowledges that the execution and delivery of this Agreement
is its free and voluntary act and deed, and that said execution and delivery
have not been induced by, nor done in reliance upon, any representations,
promises, warranties, understandings or agreements made by Lender, its agents,
officers, employees or representatives.
12.3 Modifications. No promise, representation, warranty or agreement
made subsequent to the execution and delivery of this Agreement by either party
hereto, and no revocation, partial or otherwise, or change, amendment or
addition to, or alteration or modification of, this Agreement shall be valid
unless the same shall be in writing signed by all parties hereto.
12.4 No Joint Venture. Lender and Borrower each have separate and
independent rights and obligations under this Agreement. Nothing contained
herein shall be construed as creating, forming or constituting any partnership,
joint venture, merger or consolidation of Borrower and Lender for any purpose or
in any respect.
SECTION 13. GENERAL
13.1 Survival. This Agreement shall survive the making of the Loan
and shall continue so long as any part of the Loan, or any extension or renewal
thereof, remains outstanding.
13.2 Discretionary Rights. All rights, powers and remedies granted
Lender herein, or otherwise available to Lender, are for the sole benefit and
protection of Lender, and Lender may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if, under the terms hereof, Lender is given two or more
alternative courses of action, Lender may elect any alternative or combination
of alternatives, at its option and in its sole and absolute discretion. All
monies advanced by Lender under the terms hereof and all amounts paid, suffered
or incurred by Lender in exercising any authority granted herein, including
reasonable attorneys' fees, shall be secured by the Security Documents, shall
bear interest at the highest rate payable on the Loan until paid, and shall be
due and payable by Borrower to Lender immediately without demand.
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13.3 Indemnity. Borrower shall indemnify and hold Lender harmless from
and against all claims, costs, expenses, actions, suits, proceedings, losses,
damages and liabilities of any kind whatsoever, including but not limited to
attorneys' fees and expenses, arising out of any matter relating, directly or
indirectly, to the Loan, to the ownership, development, construction, or sale of
the Real Property and Improvements, whether resulting from internal disputes of
Borrower, disputes between Borrower and any guarantor, or whether involving
other third persons or entities, or out of any other matter whatsoever related
to this Agreement, the Security Documents, or any property encumbered thereby,
but excluding any claim or liability which arises as the direct result of the
gross negligence or willful misconduct of Lender. This indemnity provision shall
continue in full force and effect and shall survive not only the making of the
Loan and the Advances but shall also survive the repayment of the Loan and the
performance of all of Borrower's other obligations hereunder.
13.4 Joint and Several. If Borrower consists of more than one person or
entity their liability shall be joint and several. The provisions hereof shall
apply to the parties according to the context thereof and without regard to the
number or gender of words or expressions used.
13.5 Time of Essence. Time is expressly made of the essence of this
Agreement.
13.6 Notices. All notices required or permitted to be given hereunder
shall be in writing and may be given in person or by United States mail, by
delivery service or by electronic transmission. Any notice directed to a party
to this Agreement shall become effective upon the earliest of the following: (i)
actual receipt by that party; (ii) delivery to the designated address of that
party, addressed to that party; or (iii) if given by certified or registered
United States mail, twenty-four (24) hours after deposit with the United States
Postal Service, postage prepaid, addressed to that party at its designated
address. The designated address of a party shall be the address of that party
shown at the beginning of this Agreement or such other address as that party,
from time to time, may specify by notice to the other parties.
13.7 Payment of Costs. Borrower shall pay all costs and expenses
arising from the preparation of this Agreement, the closing of the Loan, the
making of Advances and the monitoring and administration of the Loan, including
but not limited to title insurance premiums, other title company charges,
recording and filing fees, costs of Uniform Commercial Code searches, Lender's
in-house and outside attorneys' fees, Lender's processing and closing fees,
Lender's inspection fees, appraisal and appraisal review fees, any intangible or
recording taxes and any other charges that may be imposed on Lender as a direct
result of this transaction.
13.8 Choice of Law. This Agreement shall be governed by and construed
according to the laws of the State of Arizona, without giving effect to conflict
of laws principles.
13.9 Successors. Except as otherwise provided herein, this Agreement
shall be binding upon, and shall inure to the benefit of, the parties hereto and
their successors and assigns.
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13.10 Headings. The headings or captions of sections and paragraphs
in this Agreement are for reference only, do not define or limit the provisions
of such sections or paragraphs, and shall not affect the interpretation of this
Agreement.
13.11 Participations. Lender, at any time, shall have the right to
sell, assign, transfer, negotiate or grant participation interests in the Loan
and in any documents and instruments executed in connection herewith. Borrower
hereby acknowledges and agrees that any such disposition shall give rise to a
direct obligation of Borrower to each such assignee or participant. Lender is
authorized to furnish to any participant or prospective participant any
information or document that Lender may have or obtain regarding the Loan,
Borrower or any guarantor of the Loan.
IN WITNESS WHEREOF, these presents are executed as of the date first
indicated above.
MONTEREY MANAGEMENT, INC., an Arizona
corporation, dba MONTEREY HOMES
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
--------------------------------------
Title: Secretary
-------------------------------------
BORROWER
BANK ONE, ARIZONA, NA, a national banking
association
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
--------------------------------------
Title: Vice President
-------------------------------------
LENDER
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SCHEDULE "A"
Legal Description
All that real property situate in the County of Maricopa, State of Arizona, more
particularly described as follows:
PARCEL NO. 1:
The West half of the Southwest quarter of the Southeast quarter of the
Northwest quarter of Section 11, Township 2 North, Range 4 East of the Gila
and Salt River Base and Meridian, Maricopa County, Arizona.
EXCEPT the South 33 feet thereof.
PARCEL NO. 2:
The West half of the Northwest quarter of the Southeast quarter of the
Northwest quarter of Section 11, Township 2 North, Range 4 East of the Gila
and Salt River Base and Meridian, Maricopa County, Arizona.
PARCEL NO. 3:
The East half of the Northwest quarter of the Southeast quarter of the
Northwest quarter of Section 11, Township 2 North, Range 4 East of the Gila
and Salt River Base and Meridian, Maricopa County, Arizona.
PARCEL NO. 4:
The South 290 feet of the East half of the Southwest quarter of the Southeast
quarter of the Northwest quarter of Section 11, Township 2 North, Range 4 East
of the Gila and Salt River Base and Meridian, Maricopa County, Arizona;
EXCEPT the South 40 feet thereof; and
EXCEPT the East 20 feet thereof.
PARCEL NO. 5:
The North 300 feet of the East half of the Southwest quarter of the Southeast
quarter of the Northwest quarter of Section 11, Township 2 North, Range 4 East
of the Gila and Salt River Base and Meridian, Maricopa County, Arizona.
PARCEL NO. 6:
Being a portion of the Southeast quarter of the Northwest quarter of Section
11, Township 2 North, Range 4 East of the Gila and Salt River Base and
Meridian, Maricopa County, Arizona, being more particularly described as
follows:
