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SUPPLEMENT TO LOAN AGREEMENT
Dated as of August 21, 1996
Between
UNITED HOMES, INC.,
an Illinois corporation,
UNITED HOMES, INC.
an Arizona corporation,
UNITED HOMES OF ILLINOIS, INC.,
an Illinois corporation
and
UNITED HOMES OF MICHIGAN, INC.,
a Michigan corporation
collectively, "Borrower"
and
RESIDENTIAL FUNDING CORPORATION
a Delaware corporation
"Lender"
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................3
Section 1.1 Certain Defined Terms......................................3
Section 1.2 Other Definitional Provisions.............................13
ARTICLE II ADDITIONAL REPRESENTATIONS AND WARRANTIES.................14
Section 2.1 Consideration.............................................14
Section 2.2 Authorization.............................................14
Section 2.3 Governmental Consents.....................................14
Section 2.4 Validity..................................................14
Section 2.5 Financial Position........................................14
Section 2.6 No Material Adverse Change................................14
Section 2.7 Litigation................................................15
Section 2.8 Environmental Matters.....................................15
Section 2.9 Full Disclosure...........................................15
Section 2.10 FIRPTA Certification......................................15
ARTICLE III CONDITIONS PRECEDENT TO CLOSING...........................16
Section 3.1 Conditions Precedent......................................16
Section 3.2 Project Underwriting Documents and Other Documents........16
Section 3.3 Mortgage Recordation......................................16
Section 3.4 Perfection of Security Interest in Personal Property......16
Section 3.5 Taxes.....................................................16
Section 3.6 Insurance With Respect to Project.........................16
ARTICLE IV DISBURSEMENTS.............................................17
Section 4.1 Processes Relating to Disbursements.......................17
Section 4.2 Conditions Precedent to Disbursements
For Qualified Project Expenditures........................18
Section 4.3 Conditions Precedent to Final Disbursement................19
Section 4.4 Application of Disbursements..............................21
Section 4.5 Lender May Make Disbursement
Notwithstanding Noncompliance.............................21
ARTICLE V THE PROJECT...............................................22
Section 5.1 Consideration.............................................22
Section 5.2 Title to Project..........................................22
Section 5.3 No Prior Liens or Claims..................................22
Section 5.4 Access to the Project.....................................22
Section 5.5 Compliance with Project Requirements and
Laws and Regulations......................................22
Section 5.6 Covenants, Zoning, Codes, Permits and Consents............23
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Section 5.7 Utilities.................................................23
Section 5.8 Map, Permits, Licenses and Approvals......................23
Section 5.9 Approval of Plans and Specifications and
Approval of Budget........................................23
Section 5.10 Adequacy of Project Amount................................24
Section 5.11 Construction Start and Completion.........................24
Section 5.12 Personal Property Incorporation...........................24
Section 5.13 Contractors and Contracts.................................24
Section 5.14 Evidence of Ownership of Materials........................25
Section 5.15 Changes to Plans and Specifications and Budget............25
Section 5.16 Lender Inspections, Appraisal and Information.............26
Section 5.17 Correction of Defects.....................................27
Section 5.18 Protection Against Lien Claims............................27
Section 5.19 Conveyance, Lease or Encumbrance..........................28
Section 5.20 Security Instruments......................................28
Section 5.21 Further Assurances; Cooperation...........................28
Section 5.22 Negative Convenants.......................................28
Section 5.23 Signs.....................................................29
ARTICLE VI SALES OF LOTS AND UNITS
AND RELEASES FROM MORTGAGE................................30
Section 6.1 Sales Agreements..........................................30
Section 6.2 Sales and Closings........................................30
Section 6.3 Sales Operations and Seller's Obligations.................30
Section 6.4 Releases from Lien of Mortgage............................30
Section 6.5 Project Model Homes.......................................31
ARTICLE VII DEFAULT AND REMEDIES......................................33
Section 7.1 Events of Default.........................................33
Section 7.2 Remedies..................................................35
Section 7.3 Authorization to Apply Assets to Payment of Loan..........39
ARTICLE VIII MISCELLANEOUS.............................................40
Section 8.1 Successors and Assigns; No Assignment by Borrower.........40
Section 8.2 Notices...................................................40
Section 8.3 Changes, Waivers, Discharge and Modifications in Writing..41
Section 8.4 No Waiver; Remedies Cumulative............................42
Section 8.5 Costs, Expenses and Taxes.................................42
Section 8.6 Disclaimer by Lender; No Joint Venture....................42
Section 8.7 Indemnification...........................................43
Section 8.8 Consultants...............................................44
Section 8.9 Governing Law.............................................44
Section 8.10 Titles and Headings.......................................44
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Section 8.11 Counterparts..............................................44
Section 8.12 Time is of the Essence....................................44
Section 8.13 No Third Parties Benefitted...............................44
Section 8.14 Severability..............................................44
Section 8.15 Jurisdiction..............................................45
Section 8.16 Waiver of Jury Trial......................................45
Section 8.17 Interpretation............................................45
Section 8.18 Entire Agreement..........................................45
Section 8.19 Joint and Several Liability...............................46
Section 8.20 Relationships With Other Customers........................46
Section 8.21 Survival of Warranties....................................46
Section 8.22 Authority to File Notices.................................46
Section 8.23 Purpose and Effect of Lender Approval.....................46
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EXHIBIT A
LEGAL DESCRIPTION OF THE LAND..........................................A-1
EXHIBIT B
PROJECT REQUIREMENTS...................................................B-1
EXHIBIT C
PROJECT UNDERWRITING DOCUMENTS.........................................C-1
EXHIBIT D
PROJECT COMMITMENT.....................................................D-1
EXHIBIT E
CONDITIONS TO OBLIGATION
OF LENDER TO ENTER INTO LOAN AGREEMENT SUPPLEMENT......................E-1
EXHIBIT F
FORM OF DRAW REQUEST CERTIFICATION.....................................F-1
EXHIBIT G
ADDITIONAL PERMITTED EXCEPTIONS........................................G-1
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SUPPLEMENT TO LOAN AGREEMENT
THIS SUPPLEMENT TO LOAN AGREEMENT (the "Loan Agreement Supplement")
dated as of August 21, 1996, is entered into by and between UNITED HOMES,
INC., an Illinois corporation, ("United Homes"), UNITED HOMES, INC., an
Arizona corporation ("United Arizona"), UNITED HOMES OF ILLINOIS, INC., an
Illinois corporation ("United Illinois") and UNITED HOMES OF MICHIGAN, INC.,
a Michigan corporation ("United Michigan") (United Homes, United Arizona,
United Illinois and United Michigan are collectively referred to herein as
the "Borrower") and RESIDENTIAL FUNDING CORPORATION, a Delaware corporation
(the "Lender") and supplements the terms and provisions of the Loan Agreement
dated as of May 28, 1996 by and between Borrower and Lender. Capitalized
terms used herein are defined in ARTICLE I..
RECITALS
This Loan Agreement Supplement is entered into upon the basis of the
following facts and circumstances:
A. Lender has previously made the Loan to Borrower, the proceeds of
which Loan are available with respect to acquisition, development and
construction projects to be acquired, developed and constructed by the
Borrower.
B. Borrower owns, or is about to become the owner of the Land, upon
which Land the Borrower will perform the Development Work and construct the
Construction Improvements in accordance with the Plans and Specifications.
C. Lender has agreed to designate certain of the proceeds of the Loan
in a sum not to exceed the Project Amount, for payment of the costs which
have been itemized in the Budget. This Loan Agreement Supplement sets forth
certain terms and conditions with respect to the Project Amount and the
Project.
D. The Loan shall be secured by the Mortgage and such other security
instruments and additional documents as Lender may require as hereinafter
described.
E. Lender is willing to make certain of the proceeds of the Loan
available to Borrower for the purposes set forth above, all upon the terms
and conditions as set forth in this Loan Agreement Supplement.
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AGREEMENT
NOW THEREFORE, in consideration of the foregoing Recitals and the
covenants and conditions, representations and warranties contained herein,
the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.1 CERTAIN DEFINED TERMS. As used herein (including any
Exhibits attached hereto), the following terms shall have the meanings set
forth below (unless expressly stated to the contrary):
"ADDITIONAL LOAN FEE" shall mean the additional fee the Borrower will be
required to pay to Lender as a condition precedent to the Lender's release of
its lien on any Lot or Unit located in the Project, which amount shall equal
two percent (2%) of the gross base selling price of such Lot or Unit.
"ADVANCE RATE" shall mean, with respect to disbursements of the Loan for
the Project, (i) ninety percent (90%) of the Qualified Project Expenditures
which relate to the acquisition of Land and (ii) one hundred percent (100%)
of the Qualified Project Expenditures of a Project which relate to
Development Work or Construction Improvements.
"AFFILIATE" shall mean a Person that, directly or indirectly, controls,
is controlled by, or is under common control with, a referenced Person.
"APPRAISAL REPORT" shall mean a real estate appraisal report which (i)
has been prepared by an Appraiser, (ii) at the time it is submitted to the
Lender is not more than three (3) months old, or was updated by letter not
more than three (3) months prior to the date of submission to the Lender,
(iii) states that it is prepared in accordance with the applicable standards
of the American Institute of Real Estate Appraisers for such reports, (iv)
provides an appraisal of the Value of the Project or portion thereof required
to be appraised thereunder, and (v) employs a customary methodology and
provides limiting conditions satisfactory to the Lender.
"APPRAISER" shall mean a Person who is qualified to appraise property
similar in size and scope to the Project which such Person is acceptable to
the Lender in its sole and absolute discretion.
"ASSIGNMENT" shall mean the Assignment of Construction Agreements and
Development Items dated of even date herewith executed by the Borrower in
favor of Lender, as the same may be amended or otherwise modified from time
to time.
"BORROWER" shall mean, collectively, United Homes, United Arizona,
United Illinois and United Michigan.
"BUDGET" shall mean the itemized budget for such Project submitted to
and approved by the Lender and included as a schedule to the Project
Commitment, as such budget may be amended in accordance with the provisions
of SECTION 5.15.
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"BUSINESS DAY" shall mean a day other than Saturday, Sunday or a day
on which national banks are legally closed for business in the States of
Arizona, Illinois, Michigan or Minnesota.
"CHANGE" shall mean any material extra work not contemplated by the
Plans and Specifications, the installation of materially additional or
different materials from that set forth in the Plans and Specifications, or
any other material change in the Plans and Specifications, or any other
material change in the Plans and Specifications.
"CONSTRUCTION AGREEMENTS" shall mean all agreements (including,
without limitation, construction contracts) entered into between the Borrower
and any contractor, architect, engineer, supplier or other Person with
respect to the development or construction of the Project, as such agreements
may be amended or otherwise modified from time to time in accordance with
this Loan Agreement Supplement.
"CONSTRUCTION IMPROVEMENTS" shall mean the Homes which are to be
constructed on or with respect to the Land by or on behalf of the Borrower in
accordance with the Plans and Specifications, which improvements shall
include two hundred ninety one (291) single-family detached homes in a
subdivision commonly known as Bayberry located in Lake County, State of
Illinois, but shall not include the Development Work.
"CONSTRUCTION PROGRESS SCHEDULE" shall mean the schedule for the
Development Work and the Construction Improvements prepared by the Borrower,
as such schedule may be amended in accordance with the provisions of SECTION
5.11.
"DEBT" shall mean, for any Person, without duplication, the sum of all
(i) indebtedness for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations to pay the
deferred purchase price of property or services, (iv) obligations as lessee
under leases which shall have been or should be, in accordance with GAAP,
recorded as capital leases, (v) obligations of such Person to purchase
securities (or other property) which arise out of or in connection with the
sale of the same or substantially similar securities or property, (vi)
obligations of such Person to reimburse any bank or other Person in respect
of amounts actually paid under a letter of credit or similar instrument,
(vii) indebtedness or obligations of other secured by a lien on any asset of
such Person, whether or not such indebtedness or obligations are assumed by
such Person (to the extent of the value of the asset), (viii) obligations
under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in CLAUSES (i) through (vii) above, and (ix)
liabilities in respect of unfunded vested benefits under plans covered by
Title IV of ERISA.
"DEVELOPMENT WORK" shall mean the work of development to be performed
on or with respect to the Land (including, without limitation, the
installation of utilities, roads and all related on-site and off-site
improvements) in connection with the development of the Land for the
subsequent construction thereon of Homes, all of which work and construction
thereon of Homes, all of which work and construction shall be completed
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by or on behalf of the Borrower in accordance with the Plans and
Specifications, but shall not include the Construction Improvements.
"DRAW REQUEST CERTIFICATION" shall mean, with respect to a requested
disbursement of the Loan to fund Qualified Project Expenditures, a
certification of the Borrower in the form of EXHIBIT F.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and rulings issued
thereunder.
"ENVIRONMENTAL INDEMNITY" shall mean the Hazardous Substances
Remediation and Indemnification Agreement dated of even date herewith
executed by the Borrower in favor of the Lender, as the same may be amended
or otherwise modified from time to time.
"EVENT OF DEFAULT" shall mean the occurrence of any of the events
listed in SECTION 7.1 or an event of default (however described) under the
Loan Agreement or any other of the Project Documents.
"FORCE MAJEURE EVENT" shall mean fire, flood, labor dispute, weather,
governmental action or other cause beyond the reasonable control of Borrower
that shall delay the Development Work or the completion of the Construction
Improvements.
"GAAP" shall mean procedures consistent with 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 prevalent in
the United States of America.
"HAZARDOUS MATERIALS" shall mean the following:
(a) any oil, flammable substances, explosives, radioactive
materials, hazardous wastes or substances, toxic wastes or substances or
any other materials or pollutants, exposure to which is prohibited,
limited or regulated by any governmental authority pursuant to any
Hazardous Materials Law;
(b) asbestos in any form which is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty (50) parts per million, exposure to which is prohibited,
limited or regulated by any governmental authority pursuant to any
Hazardous Materials Law;
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(c) any chemical, material or substance defined as or included
in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", extremely hazardous waste", "restricted hazardous
waste", or "toxic substances" or words of similar import under any
Hazardous Material Laws; and
(d) any other chemical, material or substance, exposure to which
is prohibited, limited or regulated by any governmental authority
pursuant to any Hazardous Materials Law.
"HAZARDOUS MATERIALS CLAIMS" shall mean any and enforcement, clean-up,
removal or other governmental or regulatory actions or orders threatened,
instituted or completed pursuant to any Hazardous Materials Laws, together
with claims made or threatened by any third party relating to damage,
contribution, cost recovery compensation, loss or injury resulting from any
Hazardous Materials.
"HAZARDOUS MATERIALS LAWS" shall mean any federal, state or local laws,
ordinances and the regulations, policies or publications promulgated pursuant
thereto relating to (i) the environment, (ii) health and safety, (iii) any
Hazardous Materials (including, without limitation, the use, handling,
transportation, production, disposal, discharge or storage thereof), (iv)
industrial hygiene or (v) environmental conditions on, under or about
property, including, without limitation, soil and groundwater conditions;
including, but not limited to, the following, as now or hereafter amended:
the Clean Air Act, 42 U.S.C. Sec. 9401, ET SEQ.; the Clean Water Act, 33
U.S.C. Sec. 7401, ET SEQ.; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Sec. 9601, ET SEQ., as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. Sec. 11001, ET SEQ.; the Federal Water Pollution Control Act, 33
U.S.C. Sec. 1251, ET SEQ.; the Hazardous Materials Transportation Act, 49
U.S.C. Sec. 1801, ET SEQ.; the Resource Conservation and Recovery Act, 42
U.S.C. Sec. 6901, ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Secs. 300f
to 300j; the Solid Waste Disposal Act, 42 U.S.C. Sec. 3251, ET SEQ.; and the
Toxic Substances Control Act, 15 U.S.C. Sec. 2601, ET SEQ.
"HOMES" shall mean the single family residences, condominium homes
and/or attached townhouses that will be constructed by the Borrower with the
proceeds of the Loan, which Homes the Borrower shall construct on the Land
and offer for sale to individuals and families.
"INDEMNIFIED PARTY" shall mean the Lender and any Participants and each
of their officers, directors, employees, agents, attorneys, consultants,
advisors and Affiliates.
"INSPECTOR" shall mean the inspector for the Project to be selected by
the Lender, as set forth in the Project Commitment.
"INTEREST RESERVE" shall mean the amount within the Budget which has
been designated as available to pay interest on the Project Amount for a
period of time not to exceed the lesser of (i) six
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(6) months from the date of the first disbursement of proceeds of the Loan
for the Project or (ii) the time period between the date of the first
disbursement of proceeds of the Loan for the Project and the date on which
the first Unit in the Project is sold and closed.
"LAND" shall mean that certain real property which is suitable for and
substantially entitled for the development of Homes thereon and related on
and off-site improvements and upon which the Borrower will perform the
Development Work and construct the Construction Improvements, which such real
property is located in Lake County, in the State of Illinois and described in
EXHIBIT A.
"LAWS AND REGULATIONS" shall mean (i) all laws, regulations, orders,
codes, ordinances, rules, statutes and policies of all local, regional,
county, state and federal governmental authorities having jurisdiction over
the Project and (ii) all restrictive covenants and other title encumbrances,
permits and approvals, leases and other rental agreements which in any case
relate to the development, occupancy, ownership, management, use, and/or
operation of the Project.
"LENDER" shall mean Residential Funding Corporation, a Delaware
corporation.
"LENDER'S RELEASE PRICE" shall mean, with respect to any parcel of the
Land which the Borrower requests the Lender to release from the lien of the
Mortgage, the amount required to be paid to the Lender prior to such release,
which amount shall equal, for each Lot and/or Unit located in the Project,
(i) the amount specified in SECTION 2.6(a), (b) OR (c), as applicable, of the
Loan Agreement, plus (ii) the Additional Loan Fee for such Lot and/or Unit.
"LOAN" shall mean the revolving loan described in the Loan Agreement in
a principal amount not to exceed the Loan Amount.
"LOAN AGREEMENT" shall mean the Loan Agreement dated as of May 28, 1996
between the Lender and the Borrower, as such Loan Agreement may be amended or
otherwise modified from time to time in accordance with the terms thereof.
"LOAN AGREEMENT SUPPLEMENT" shall mean this Loan Agreement Supplement
dated as of August 21, 1996 between the Borrower and the Lender, as the same
may be amended or otherwise modified from time to time.
"LOAN AMOUNT" shall mean Twenty-Five Million Dollars ($25,000,000).
"LOAN DOCUMENTS" shall mean, as to the Loan, all documents,
instruments, agreements, assignments and certificates relating thereto,
including, without limitation, any and all loan or credit agreements,
promissory notes, deeds of trust, mortgages, security agreements, assignments
of rents, assignments of leases, assignments of contracts, environmental
indemnities, guaranties, contractor's consent agreements, lender's title
insurance policies, opinions of counsel, evidences of authorization
7
or incumbency, escrow instructions, architect's consent agreements, and UCC-1
financing statements to be executed (and acknowledged where applicable) by
Borrower, Project Owner and/or Lender (where applicable) in connection with
Lender making the Loan to Borrower, as the same may be amended or otherwise
modified from time to time in accordance with the Loan Agreement. The Loan
Documents shall include, but not be limited to, the following:
(a) the Loan Agreement;
(b) the Note;
(c) the Project Documents; and
(d) any Related Loan Documents.
"LOAN TO VALUE RATIO" shall mean, with respect to the Project or any
part thereof as to which a Loan to Value Ratio is being determined, the ratio
of the Project Amount to the Value.
"LOTS" shall mean the tracts of real property within the Land that
have been or will be developed for the subsequent construction thereon of
Homes.
"MAP" shall mean a final subdivision or parcel map consistent with the
Plans and Specifications and with the Laws and Regulations.
"MATERIAL ADVERSE CHANGE" shall mean any material and adverse change in,
or a material adverse effect upon, any of:
(a) the business, properties, operations or condition (financial
or otherwise) of Borrower since either or both of (i) August 14, 1996,
or (ii) the date of the most recent financial statements delivered to
Lender in connection with the Loan;
(b) the legal or financial ability of Borrower to perform its
obligations under the Borrower Documents and to avoid any Potential
Default or Event of Default; or
(c) the legality, validity, binding effect or enforceability,
against Borrower, of any Loan Document.
"MATURITY DATE" shall mean the first to occur of (i) the date which is
forty two (42) months from the date of the Loan Agreement (as such date may
be extended in writing by Lender and Borrower from time to time), or (ii) the
date on which the Loan is required to be repaid pursuant to SECTION 6.2 of
the Loan Agreement.
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"MORTGAGE" shall mean the Construction Mortgage, Security Agreement and
Fixture Filing With Assignment of Rents, Proceeds and Agreements dated of
even date herewith executed by Project Owner, as mortgagor, for the benefit
of the Lender, as the same may be amended or otherwise modified from time to
time.
"NOTE" shall mean the Promissory Note dated May 28, 1996 executed by
Borrower, as maker and made payable, to the order of Lender, as holder, in
the amount of Twenty-Five Million Dollars ($25,000,000) and maturing on the
Maturity Date, to evidence the Loan, as such Promissory Note may be amended
or otherwise modified from time to time.
"PARTICIPANT" shall mean any financial institution to whom the Lender,
in accordance with and subject to SECTION 7.12 of the Loan Agreement, at any
time sells, assigns, grants or otherwise transfers a participation interest
in all or part of the obligations of the Borrower under the Loan Documents.
"PERMITTED EXCEPTIONS" shall mean (i) real estate taxes and assessments
not yet due and payable and possible supplemental assessments for
improvements constructed on the Land, (ii) unfiled mechanics' and
materialmen's liens (to the extent applicable), but only if affirmative
mechanics' lien coverage is provided by the Title Policy, (iii) exceptions to
title which are approved by the Lender and which do not adversely affect the
value of the Land, the marketability of title to the Land or the use to which
the Land is intended to be put, (iv) easements for the installation and
maintenance of utilities servicing the Project which do not adversely affect
the value of the Land, the marketability of title to the Land or the use to
which the Land is intended to be part and (v) the additional permitted
exceptions in EXHIBIT G.
"PERSON" shall mean an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"PLANNING COSTS" shall mean the fees and planning costs, such as
engineering and architectural fees, incurred in connection with the planning
for the Development Work and Construction Improvements, to the extent
reflected in the Budget.
"PLANS AND SPECIFICATIONS" shall mean the final set of architectural,
structural, mechanical, electrical, grading, sewer, water, street and utility
plans and specifications for the Development Work and the Construction
Improvements to be included within the Project, including all supplements,
amendments and modifications thereto signed and affixed with the architect's
registration stamp or seal, all in form and substance reasonably satisfactory
to the Lender and the Inspector.
"POTENTIAL DEFAULT" shall mean the existence of any event which with the
giving of notice, the passage of time, or both, would constitute an Event of
Default.
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"PROJECT" shall mean (i) the Land and (ii) the Development Work and
Construction Improvements to be completed on the Land, for which the Lender
has issued the Project Commitment.
"PROJECT AMOUNT" shall mean Four Million Seven Hundred Fifty Thousand
Dollars ($4,750,000).
"PROJECT COMMITMENT" shall mean the Project Commitment dated August 14,
1996 and attached as EXHIBIT D.
"PROJECT DOCUMENTS" shall mean, with respect to the Project, all
documents, instruments, agreements, assignments and certificates relating
thereto, including, without limitation, any and all loan or credit
agreements, promissory notes, deeds of trust, mortgages, security agreements,
assignments of rents, assignments of leases, assignments of contracts,
environmental indemnities, guaranties, contractor's consent agreements,
lender's title insurance policies, opinions of counsel, evidences of
authorization or incumbency, escrow instructions, instructions, architect's
consent agreements, and UCC-I financing statements to be executed (and
acknowledged where applicable) by Borrower, Project Owner and/or Lender
(where applicable) in connection with Lender making proceeds of the Loan
available to the Borrower for the Project, as the same may be amended or
otherwise modified from time to time in accordance with the Loan Agreement
and this Loan Agreement Supplement. The Project Documents shall include, but
not be limited to, the following:
(a) the Project Commitment;
(b) this Loan Agreement Supplement;
(c) the Mortgage;
(d) the Environmental Indemnity;
(e) the UCC-1 Financing Statement;
(f) the Assignment;
(g) the Title Policy; and
(h) the Plans and Specifications.
"PROJECT MATURITY DATE" shall mean the first to occur of (i) the date
which is thirty (30) months from the date of this Loan Agreement Supplement
(as such date may be extended in writing by the Lender and the Borrower from
time to time), or (ii) the date on which the Loan is required to be repaid
pursuant to SECTION 7.2 of the Loan Agreement.
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"PROJECT MODEL HOME" shall mean any Home which is not subject to a Sales
Agreement and which the Borrower has designated as a model home to be used in
marketing the Project, the number of which such model homes shall be limited
as set forth in the Project Commitment.
"PROJECT OWNER" shall mean, United Homes, Inc., a an Illinois
corporation.
"PROJECT REQUIREMENTS" shall mean the requirements listed in EXHIBIT B.
"PROJECT SECURITY INSTRUMENTS" shall mean, with respect to the Project,
all pledge agreements, guaranties, deeds of trust, mortgages, security
agreements, assignments and other agreements or instruments executed by
Borrower and/or Project Owner granting in favor of Lender a lien or
encumbrance on or a security interest in any property or right or interest of
Borrower and or Project Owner as security for the Loan, as the same may be
amended or otherwise modified from time to time in accordance with the Loan
Agreement and this Loan Agreement Supplement, including but not limited to
the following:
(a) the Mortgage;
(b) the UCC-1 Financing Statement; and
(c) The Assignment.
"PROJECT UNDERWRITING DOCUMENTS" shall mean the documents listed in
EXHIBIT C and any other documents relating to the Project which Lender
reasonably requests, all in form and substance reasonably satisfactory to the
Lender and, as to items A5, A8, B1, B3 and B6 in form and substance
reasonably satisfactory to the Inspector.
"QUALIFIED PROJECT EXPENDITURES" shall mean the costs for which proceeds
of the Loan may be disbursed, which such costs shall be limited to the
following:
(a) the cost of acquiring the Land or the Lots;
(b) Planning Costs;
(c) the cost of materials and labor for Development Work and
Construction Improvements in place for the Project, but excluding any
costs for materials delivered to the Land which have not yet been put
in place;
(d) the Interest Reserve; and
(e) Soft Costs.
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The particular amounts which may be disbursed for each of the categories set
forth in PARAGRAPHS (a) through (e) above are set forth in the Budget for the
Project. Amounts in the Budget which are not listed in any of the categories
set forth in PARAGRAPHS (a) through (e) above shall not be Qualified Project
Expenditures and proceeds of the Loan may not be disbursed for any such costs.
"RELATED LOAN DOCUMENTS" shall mean and includes any and all loan
documents which have been or may be executed by Borrower in connection with
the Lender making proceeds of the Loan available for another project,
together with any and all modifications, extensions and renewals thereof.
"SALES AGREEMENT" shall mean a written agreement for the sale of a Lot
or a Unit between the Borrower and a Person who is not an Affiliate of the
Borrower, which agreement (i) shall be binding upon such Person, (ii) shall
require such Person to deposit with the Borrower xx "xx xxxx" xxxxxxx, (xxx)
shall conform to all applicable laws, regulations, codes and ordinances,
including those requiring disclosures to prospective and actual buyers and
(iv) shall not contain any contingencies, except that such agreement may be
contingent on such Person's ability to obtain financing for the purchase, but
only if such Person has been pre-approved for financing prior to entering
into such agreement.
"SOFT COSTS" shall mean the Borrower's overhead, general and
administrative expenses and other "soft costs" incurred in the development,
construction, marketing and sale of the Project, to the extent reflected in
the Budget.
"SPEC HOMES" shall mean Homes which are not subject to a Sales Agreement.
"STAGE" shall mean the various stages of the Construction Improvements
which such stages, and the components of the Construction Improvements which
fit within each stage, are specified in the Project Commitment.
"TITLE POLICY" shall mean the ALTA loan form (1970 form, unrevised or
the equivalent thereof) of title insurance policy in the amount of the
Project Amount and issued by Chicago Title Insurance Company, insuring the
Lender that the Mortgage is an enforceable first lien against marketable fee
simple title to the Project, subject only to Permitted Exceptions, which such
title insurance policy will provide mechanics' lien coverage, will have all
standard exceptions deleted therefrom and will have appended thereto a usury
endorsement and such other endorsements as are generally required by lenders
in the area in which the Project is located.
"TOTAL PROJECT COSTS" shall mean, with respect to a Project, the sum of
(i) the Qualified Project Expenditures plus (ii) all other costs necessary to
acquire the Land, construct the Development Work and the Construction
Improvements in accordance with the Plans and Specifications and complete the
Project.
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"UCC-1 FINANCING STATEMENT" shall mean a UCC-1 financing statement dated
of even date herewith executed by Project Owner, as debtor, in favor of
Lender, as secured party, in connection with Lender making proceeds of the
Loan available to the Borrower for the Project, as such UCC-1 financing
statement may be amended or otherwise modified from time to time.
"UNIT" shall mean a Lot and the Home constructed on such Lot.
"UNITED ARIZONA" shall mean United Homes, Inc., an Arizona corporation.
"UNITED HOMES" shall mean United Homes, Inc., an Illinois corporation.
"UNITED ILLINOIS" shall mean United Homes of Illinois, Inc., an Illinois
corporation.
"UNITED MICHIGAN" shall mean United Homes of Michigan, Inc., a Michigan
corporation.
"VALUE" shall mean, for purposes of determining whether or not the Loan
to Value Ratio complies with the Project Requirements, the lower of (i) the
value which an Appraiser assigns to the Project, as set forth in an Appraisal
Report, which Appraisal Report shall determine the values of each Unit,
whether or not the Construction Improvements have been completed, based on
the "as completed" appraised value of such Unit and (ii) the sales prices for
the Units as set forth in Sales Agreements.
Section 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Accounting terms not defined herein shall have the respective
meanings given to them under GAAP. To the extent that the definitions of
accounting terms herein are inconsistent with the meanings of such terms
under GAAP, the definitions contained herein shall control.
(b) The words "hereof", "herein" and "hereunder" are words of similar
import when used in this Loan Agreement Supplement shall refer to this Loan
Agreement Supplement as a whole and not to any particular provision of this
Loan Agreement Supplement.
(c) In this Loan Agreement Supplement in the computation of periods of
time from a specified date to a later specified date, the word "from" shall
mean "from and including" and the words "to" and "until" each shall mean "to
but excluding".
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ARTICLE II
ADDITIONAL REPRESENTATIONS AND WARRANTIES
Section 2.1 CONSIDERATION. As an inducement to Lender to execute this
Loan Agreement Supplement and to disburse the proceeds of the Loan for the
Project, and in addition to the representations and warranties in the Loan
Agreement, Borrower represents and warrants the truth and accuracy of the
matters set forth in this ARTICLE II.
Section 2.2 AUTHORIZATION. The execution, delivery and performance by
Borrower of the Project Documents have been duly authorized by all necessary
action and do not and will not (i) contravene the charter documents of any of
United Homes, United Arizona, United Illinois or United Michigan, (ii)
contravene any law, rule or regulation or any order, writ, judgment,
injunction or decree of any contractual restriction binding on or affecting
Borrower, (iii) require any approval or consent of any partner, shareholder
or any other Person other than approvals or consents which have been
previously obtained and disclosed in writing to Lender, (iv) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which Borrower is a
party or by which Borrower or its properties may be bound or affected, or (v)
result in, or require the creation or imposition of, any lien of any nature
(other than the liens contemplated hereby) upon or with respect to any of the
properties now owned or hereafter acquired by Borrower; and Borrower is not in
default under any such law, rule, regulation, order, writ, judgment,
injunction, decree or contractual restriction or any such indenture,
agreement, lease or instrument.
Section 2.3 GOVERNMENTAL CONSENTS. No authorization or approval or
other action by, and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution, delivery and
performance by Borrower of the Project Documents or any other document
executed pursuant thereto or in connection therewith.
Section 2.4 VALIDITY. The Project Documents have been duly executed
and delivered and constitute the legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective terms.
Section 2.5 FINANCIAL POSITION. As of the dates prepared, the financial
statements and all financial data heretofore delivered to Lender in
connection with the Project and/or relating to Borrower are true, correct and
complete in all material respects and were prepared in accordance with GAAP
consistently applied. Such financial statements fairly present the financial
position of the Persons who are the subject thereof as of the dates thereof.
Section 2.6 NO MATERIAL ADVERSE CHANGE. No Material Adverse Change has
occurred since August 14, 1996.
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Section 2.7 LITIGATION. There is no pending or, to Borrower's
knowledge, threatened action, suit, proceeding or arbitration against or
affecting Borrower before any court, governmental agency or arbitrator,
which may result in a Material Adverse Change.
Section 2.8 ENVIRONMENTAL MATTERS. The operations of Borrower comply
in all respects with all Hazardous Materials Laws except such noncompliance
which would not (if enforced in accordance with applicable law) reasonably be
expected to result, individually or in the aggregate, in a Material Adverse
Change. As of the date of this Loan Agreement Supplement, (i) neither
Borrower nor its present properties or operations is subject to any
outstanding written order from or settlement or consent agreement with any
governmental authority or other Person, nor is any of the foregoing subject
to any judicial or docketed administrative proceeding respecting any Hazardous
Materials Law, Hazardous Materials Claim or Hazardous Material, and (ii)
there are no other conditions or circumstances known to Borrower which may
give rise to any Hazardous Materials Claim arising from the operations of
Borrower.
Section 2.9 FULL DISCLOSURE. None of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of
Borrower in connection with the Project contains any untrue statement of a
material fact, or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading; provided, however, that it is
recognized by Lender that projections and forecasts provided by Borrower,
while reflecting Borrower's good faith projections or forecasts based upon
methods and data Borrower believes to be reasonable and accurate, are not to
be viewed as facts and that actual results during the period or periods
covered by any such projections and forecasts may differ from the projected
or forecasted results.
Section 2.10 FIRPTA CERTIFICATION. Borrower declares and certifies,
under penalty of perjury, that: (i) the U.S. Taxpayer I.D. Number of United
Homes is 00-0000000, of United Arizona is 00-0000000, of United Illinois is
00-0000000 and of United Michigan is 00-0000000; (ii) the business address of
Borrower is United Homes, Inc., 0000 Xxxx Xxxx, Xxxxx 000, Xxxxxxx Xxxxxxx,
Xxxxxxxx 00000-0000; (iii) Borrower is not a "foreign person" within the
meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as
amended; and (iv) Borrower understands that the information and certification
contained in this SECTION 2.10 may be disclosed to the Internal Revenue
Service and that any false statement contained herein could be punished by
fine, imprisonment or both. Borrower agrees to provide Lender and Lender
with a new certification containing the provisions of this SECTION 2.10
immediately upon any change in such information.
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ARTICLE III
CONDITIONS PRECEDENT TO CLOSING
Section 3.1 CONDITIONS PRECEDENT. Lender's obligation to enter into and
perform its duties under this Loan Agreement Supplement shall be subject to
the full and complete satisfaction of the conditions precedent set forth in
this ARTICLE III and in EXHIBIT E.
Section 3.2 PROJECT UNDERWRITING DOCUMENTS AND OTHER DOCUMENTS. The
Borrower shall have delivered to the Lender the Project Underwriting
Documents and all the documents described in the Project Commitment.
Section 3.3 MORTGAGE RECORDATION. The Mortgage must be duly recorded
and in a first-priority lien position, which first-priority lien positions
shall be evidenced and insured by the Title Policy.
Section 3.4 PERFECTION OF SECURITY INTEREST IN PERSONAL PROPERTY.
Lender's security interests in all personal property and any fixtures covered
by the Mortgage must be duly perfected and in a first-priority lien position.
Section 3.5 TAXES. All taxes, fees and other charges in connection with
the execution, delivery and recording of the Project Documents shall have
been paid, and all delinquent taxes, assessments or other governmental
charges or liens affecting the Project, if any, shall have been paid.
Section 3.6 INSURANCE WITH RESPECT TO PROJECT. In addition to the
insurance required by SECTION 5.5 of the Loan Agreement, Borrower shall
maintain with respect to the Project the insurance required by the terms of
this SECTION 3.6 and shall deposit with Lender, original, duplicate original
or certified copies of insurance policies for such insurance issued by
insurance companies with current Best's Key Ratings of not less than A/IX and
written in form and content acceptable to Lender. Such insurance with respect
to the Project shall consist of all-risk course of construction insurance
(non-reporting form) in the minimum amount specified in the Project
Commitment, on a replacement cost basis, insuring against loss or damage by
hazards customarily included within "extended coverage" policies, and any
other risks or hazards which in Lender's reasonable judgment should be
insured against, with a Lender's Loss Payable Endorsement naming Lender as an
additional insured together with a full replacement cost endorsement (without
provisions for co-insurance). The insurance policies required by this SECTION
3.6 shall be subject to the requirements and restrictions set forth in
SECTION 5.5 of the Loan Agreement.
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ARTICLE IV
DISBURSEMENTS
Section 4.1 PROCESSES RELATING TO DISBURSEMENTS.
(a) Borrower may request disbursements of the Loan for Qualified
Project Expenditures related to the Project, subject to the limitation on the
number of allowable disbursements per month set forth in SECTION 2.2(c) of
the Loan Agreement. All requests for disbursements of proceeds of the Loan
shall comply with the terms of this ARTICLE IV and any additional limitations
set forth in the Project Commitment.
(b) Each disbursement request shall be evidenced by a Draw Request
Certification and shall be accompanied by, or the Lender shall have received
from another source, the following:
(1) an "Application and Certificate for Payment" on AIA forms G702
and G703 or such other form as the Lender approves;
(2) with respect to requested disbursements for costs of
Development Work, supporting xxxxxxxx of each subcontractor or vendor
with respect to the Development Work of such subcontractor or vendor as
to which a disbursement is being requested;
(3) with respect to requested disbursements for costs of
Construction Improvements, the Draw Request Certification, or another
document satisfactory to the Lender, shall specify the Stage of the
Construction Improvements for which the disbursement is being requested
and the Lender shall not be obligated to disburse funds with respect to
a Stage unless and until all the components of the Construction
Improvements which comprise such Stage have been completed, as evidenced
by the written certificate of the Inspector required to be delivered
pursuant to the terms of SUBPARAGRAPH (4) below;
(4) a written certification from the Inspector to Lender, in a
form satisfactory to Lender, that (i) the Development Work for which
payment is being sought has been completed, or the Construction
Improvements for which payment is being sought are being constructed, in
accordance with the Plans and Specifications and (ii) all work done for
which payment is being sought shall have been completed with sound new
materials and fixtures, or refurbished materials and fixtures that meet
the requirements of the Plans and Specifications, and in a good and
workmanlike manner;
(5) at Borrower's expense, evidence satisfactory to Lender that
the issuer of the Title Policy is prepared to issue to Lender an
endorsement to the Title Policy insuring that the lien granted to Lender
by the Mortgage remains a first lien upon the Project, subject only to
Permitted Exceptions, and insuring the full amount of the disbursement,
provided that any such endorsement may show mechanics' liens resulting
from the Development Work or the
17
Construction Improvements if and only if the issuer of the Title Policy
shall issue an endorsement which insures Lender against any loss by
reason of such mechanics' liens and Borrower shall have complied in all
respects with the requirements of SECTION 5.18; and
(6) such other documents specified in the Project Commitment.
The foregoing submissions shall reflect the cost of all Development Work
and Construction Improvements for which payment is to be made, and the Draw
Request Certification shall specify the portion of such costs which shall be
paid by Borrower and the portion thereof which will be paid out of the
requested disbursement of Loan proceeds.
(c) Provided that no Event of Default of Potential Default exists, and
subject to the terms and conditions set forth herein, the Lender will use its
reasonable best efforts to disburse to the Borrower the amount requested,
within five (5) Business Days after receipt of a Draw Request Certification
meeting the requirements of this Loan Agreement Supplement, provided that in
the event the Lender is unable to make the disbursement within such time
period, the Lender will disburse the proceeds of the Loan as soon thereafter
as possible. All disbursements shall be delivered to Borrower by federal
funds wire transfer as instructed by Borrower.
Section 4.2 CONDITIONS PRECEDENT TO DISBURSEMENTS FOR QUALIFIED PROJECT
EXPENDITURES. The obligation of Lender to make disbursements of the Loan to
fund Qualified Project Expenditures (including the initial disbursements for
the Project) is subject to fulfillment of the following conditions precedent:
(a) If all or a portion of the requested disbursement is to be
used to fund the initial disbursement related to the Project, then as a
condition precedent to Lender's obligation to fund such initial
disbursement, Borrower must deliver to the Lender evidence that the
Borrower has contributed to the Project equity equal to
[ten percent (10%) thirty-five percent (35%)] of the total cost to
acquire the Land.
(b) Lender shall not be obligated to make any disbursements of the
Loan to the extent that the requested disbursement relates to costs
which are not Qualified Project Expenditures. Qualified Project
Expenditures not paid with Loan proceeds disbursed hereunder and other
costs which are not Qualified Project Expenditures shall be paid from
additional funds provided by Borrower.
(c) Lender shall not be obligated to make any disbursements if:
(1) the outstanding balance of the Loan exceeds, or would
following the contemplated disbursement exceed, the face amount of
the Note:
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(2) the outstanding balance of the Loan attributable to the
Project exceeds, or would following the contemplated disbursement
exceed, the Project Amount; or
(3) the proceeds of the Loan which, pursuant to the Project
Commitment, are available for disbursement will not be sufficient
to complete the acquisition of the Land, the Development Work and
Construction Improvements related to the Project, including the
construction of any Homes within the Project to be constructed on
the Land as scheduled; provided however, that the Lender shall be
obligated to make disbursements notwithstanding such a deficiency
in the event that (i) the Budget and the amount of the Loan
allocated to the Project have been increased by an amount at least
equal to such deficiency in accordance with the terms of
SECTION 5.15(d), or (ii) the Borrower provides to the Lender
evidence that it has paid from its own funds, in addition to any
Borrower funds which the Budget requires, an amount at least equal
to the amount of the deficiency.
(d) Lender shall not be obligated to disburse any Loan proceeds
for the Project to the extent that the Project does not then satisfy the
requirements set forth in the Project Commitment.
(e) Lender shall not be obligated to disburse any Loan proceeds
unless all statements made in the applicable Draw Request Certification
are true and correct on and as of the date of the requested
disbursement, before and after giving effect thereto and to the
application of the proceeds therefrom.
(f) The representations and warranties of Borrower contained in
the Loan Documents are true and correct in all material respects on and
as of the date of the requested disbursements, before and after giving
effect thereto and to the application of the proceeds therefrom, as
though made on and as of such date.
(g) No Event of Default or Potential Default has occurred and is
continuing, or would result from such disbursement or from the
application of the proceeds therefrom.
Section 4.3 CONDITIONS PRECEDENT TO FINAL DISBURSEMENT. Lender's
obligation to make the final disbursement of Loan funds for construction
purposes shall be subject to the satisfaction of the following conditions
precedent, each of which Borrower shall furnish as promptly as is reasonably
possible:
(a) Completion of construction of the Development Work and the
Construction Improvements in accordance with the Plans and
Specifications, and if required by Lender, its receipt of a certificate
of completion from the project architect that the Development
19
Work and the Construction Improvements have been completed substantially
in accordance with the Plans and Specifications.
(b) If applicable, receipt by Lender of a copy of a valid,
recorded notice of completion sufficient to effect the purpose of such
notices as contemplated by the laws of the State of Illinois relative to
mechanics' liens.
(c) Receipt by Lender of the final certificate(s) of occupancy for
the Construction Improvements issued by the appropriate governmental
authorities having jurisdiction.
(d) Receipt by Lender of such endorsements to the Title Policy as
it may require insuring that a notice of completion was properly filed,
that the Development Work and the Construction Improvements have been
completed free of mechanics' and materialmen's liens and that all
applicable filing periods have expired, or, at Lender's election, an
ALTA rewrite of the Title Policy together with such endorsements thereto
as Lender may require, and insuring the first-lien priority of the final
disbursement.
(e) If required by Lender, its receipt of an "as-built" survey
prepared by a licensed engineer or surveyor locating all Project lines,
building setback lines, easements, the Development Work and the
Construction Improvements.
(f) There shall be no statutory liens on record for labor or
material arising out of the construction of the Development Work and the
Construction Improvements; provided, however, that if there are any such
liens Borrower shall have complied with the terms of SECTION 5.18.
(g) Upon completion of the Development Work and the Construction
Improvements, Borrower shall deliver to Lender a completion certificate
containing the following: (i) Borrower's statement of the aggregate
amount of costs incurred in connection with the Project but not paid by
the Borrower before the completion date and (ii) Borrower's
certification that all of the proceeds of the Loan disbursed with
respect to the Project have been applied to pay or reimburse costs
incurred in connection with the construction of the Development Work
and the Construction Improvements and the acquisition of the Land, and
that none of the proceeds of the Loan disbursed with respect to the
Project have been applied to pay or reimburse any costs or expenses
other than such costs of construction and acquisition, together with
interest and servicing and fees incurred in connection with the Loan.
Lender's right to require satisfaction of each of the foregoing
conditions and to receive and review the materials listed above shall not
impose upon Lender any obligation whatsoever to the Borrower, the general
contractor, architect, any purchasers of the Lots and/or Units or any other
party whatsoever, with respect to any of the subject matter constituting
such conditions, nor shall
20
it operate to release Borrower from liability for any misrepresentations or
breaches hereunder (notwithstanding any opportunity of Lender to discover
such misrepresentation or breach from materials provided to Lender as a
condition of closing). Borrower understands and agrees that such conditions
are for the sole purpose of protecting Lender's Loan advances and providing
security for the Loan, and are made solely for the Lender's benefit. No
waiver of a condition in one or more instances shall establish a course of
dealing or other agreement that will bind Lender or prohibit Lender from
enforcing such condition or any other term or condition of this Loan
Agreement Supplement in the same or any other instance.
Section 4.4 APPLICATION OF DISBURSEMENTS. All Loan proceeds disbursed
to Borrower pursuant to this Loan Agreement Supplement will be used only for
payment of those items specified in the Draw Request Certification for which
the particular disbursement was made. Borrower will not use all or any portion
of such disbursement to pay or reimburse itself, directly or indirectly, for
any amounts paid by Borrower or any other Person but not included in the
Budget.
Section 4.5 LENDER MAY MAKE DISBURSEMENT NOTWITHSTANDING NONCOMPLIANCE.
Notwithstanding the failure of any condition precedent to Lender's obligation
to make any disbursement hereunder, Lender may make such disbursement if
Lender, in its sole discretion, determines the making of the same to be
advisable. The making of any disbursement, either before or after the
satisfaction of all conditions precedent with respect to Lender's obligation
to make the same, shall not be deemed to constitute an approval or acceptance
by Lender of the Development Work or the Construction Improvements
theretofore completed or a waiver of such condition with respect to a
subsequent disbursement.
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ARTICLE V
THE PROJECT
Section 5.1 CONSIDERATION. As an inducement to Lender to execute this
Loan Agreement Supplement and to make each disbursement of the Loan for the
Project, Borrower represents and warrants to the truth and accuracy of the
matters regarding the Project set forth in this ARTICLE V and hereby
covenants regarding the Project as set forth in this ARTICLE V.
Section 5.2 TITLE TO PROJECT. Project Owner is, or will be upon
acquisition of the Land and Construction Improvements as contemplated by this
Loan Agreement Supplement, the sole legal and beneficial owner of the Land
and Construction Improvements, free and clear of all claims, liens and
encumbrances other than Permitted Exceptions. All of the personal property
which forms a part of the Construction Improvements is or will be vested
solely in Project Owner, free and clear of all claims, liens and
encumbrances, other than Permitted Exceptions, and the security interest of
Lender in such personal property is a first lien thereon, subject only to
Permitted Exceptions.
Section 5.3 NO PRIOR LIENS OR CLAIMS. Except as otherwise may have
been approved in writing by Lender and as to which Lender shall have received
such endorsements (including mechanics lien coverage) to the Title Policy as
Lender may require to assure the priority of the Mortgage as a valid first
lien on the Project, subject only to Permitted Exceptions, Borrower
represents that, prior to recordation of the Mortgage, neither it, nor anyone
acting on Borrower's behalf has (i) commenced construction of the Development
Work or the Construction Improvements, or any grading or site clearance
related thereto, (ii) purchased, contracted for or otherwise brought upon the
Land any materials, specially fabricated or otherwise, to be incorporated
into the Development Work or the Construction Improvements, or (iii) entered
into any contract or arrangement, the performance of which by any other party
thereto could give rise to a lien or claim on the Project or any portion
thereof.
Section 5.4 ACCESS TO THE PROJECT. All roads, streets, traffic turn
lanes, and access ways necessary for the full utilization of the Project for
its intended purpose have either been completed or the necessary rights of
way have either been acquired by the appropriate governmental authority or
have been dedicated to public use and accepted by the appropriate
governmental authority, and all necessary steps have been taken by Borrower
and the appropriate governmental authority to assure the complete
construction and installation thereof by the time needed for construction
and/or occupancy and operation of the Project.
Section 5.5 COMPLIANCE WITH PROJECT REQUIREMENTS AND LAWS AND
REGULATIONS. The Project, the proposed and actual use thereof, the
Development Work and the Construction Improvements when completed will comply
with the Project Requirements and with the Laws and Regulations, and there is
no action or proceeding pending or, to the knowledge of Borrower (after due
inquiry), threatened before any court, quasi-judicial body or administrative
agency at the time
22
of any disbursement by Lender relating to the validity of the Loan or the
proposed or actual use of the Project.
Section 5.6 COVENANTS, ZONING, CODES, PERMITS AND CONSENTS. Borrower
is familiar and has complied, or will comply on a timely basis, with all of
the Laws and Regulations to be complied with in connection with the
construction of the Development Work and the Construction Improvements.
Except as set forth in the Project Commitment, all permits, licenses,
consents, approvals or authorizations by, or registrations, declarations,
withholding of objections or filings with any governmental body necessary in
connection with the valid execution, delivery and performance of this Loan
Agreement Supplement, the Project Documents, and any and all other documents
executed in connection with any of the foregoing, necessary for the
subdivision of the Land, necessary for the construction of the Development
Work and the Construction Improvements, and necessary for the marketing and
sale of the Construction Improvements, have been obtained or will be obtained
on a timely basis and are and will be valid, adequate and in full force and
effect. Construction of the Development Work and the Construction
Improvements and the intended use thereof will in all respects conform to and
comply with all Laws and Regulations, including without limitation all
applicable zoning, subdivision, environmental protection, use and building
codes, laws, regulations and ordinances.
Section 5.7 UTILITIES. All utility services and facilities necessary
for the construction, sale and occupancy of the Project and the operation
thereof for its intended purpose are either available at the boundaries of
the Land or, if not, all necessary steps have been, or will be, taken by
Borrower and the local authority or public utility company which provides
such services to assure the complete installation and availability thereof
when needed for construction, sale, occupancy and operation of the Project.
Section 5.8 MAP, PERMITS, LICENSES AND APPROVALS. Borrower has
obtained or will, in a timely manner, obtain the Map. Borrower shall properly
comply with and keep in effect the Map and all permits, licenses and
approvals which are required to be obtained from governmental bodies in order
to construct, occupy, operate, market and sell the Project. Borrower shall
promptly deliver copies of the Map and all such permits, licenses and
approvals to Lender.
Section 5.9 APPROVAL OF PLANS AND SPECIFICATIONS AND APPROVAL OF BUDGET.
(a) The Plans and Specifications are a true, complete and accurate
reflection of the Development Work and the Construction Improvements that
Borrower will construct. The Plans and Specifications are satisfactory to
Borrower and have been reviewed and approved by Borrower and the general
contractor for the Project (if different from the Borrower), and have also
been approved as required by all governmental bodies or agencies having
jurisdiction (including, without limitation, any local design review boards)
and by the beneficiary of any restrictive covenant affecting the Project.
There are no structural defects in the Development Work or the Construction
Improvements
23
as shown in the Plans and Specifications, and no violation of any of the Laws
and Regulations exists with respect to the Plans and Specifications.
(b) After diligent investigation of all relevant conditions and due
consultation with such parties as Borrower deems appropriate, Borrower
represents that the Budget identifies, on a line item basis, the Total
Project Costs and all costs for which proceeds of the Loan are to be
disbursed. The Budget reflects Borrower's best, true, accurate and complete
estimate of the costs shown therein and of the Total Project Costs.
Section 5.10 ADEQUACY OF PROJECT AMOUNT. The Project Amount, together
with the equity funds of the Borrower in the amount set forth in the Budget,
is sufficient to pay all costs of the acquisition of the Land, all costs of
the Development Work and the construction of the Construction Improvements in
accordance with the Plans and Specifications and all remaining costs related
thereto, except as has been specifically disclosed to and approved in writing
by Lender.
Section 5.11 CONSTRUCTION START AND COMPLETION. Borrower shall
commence construction of the Development Work and the Construction
Improvements no later than the date set forth in the Project Commitment and
shall thereafter diligently proceed with construction and completion of the
Development Work and the Construction Improvements in a good and workmanlike
manner in accordance with the Plans and Specifications and the Construction
Progress Schedule; provided however that in the event construction of the
Project is subject to delays caused by any Force Majeure Event, the Borrower
shall provide to the Lender written notice of such delay, and if such delay
will not exceed one hundred twenty (120) days in the aggregate or is
otherwise reasonable in length, the Borrower shall not be deemed in default
of its obligations assumed pursuant to this Loan Agreement Supplement solely
by reason of such delay. The Borrower shall cause the Development Work and
the Construction Improvements at all times to materially conform to the Laws
and Regulations and shall accomplish completion of the Development Work and
the Construction Improvements in accordance with the Construction Progress
Schedule. Borrower shall cooperate at all times with Lender in bringing about
the timely completion of each element of the Development Work and the
Construction Improvements, and Borrower shall resolve all disputes arising
during the work of construction in a manner which shall allow work to proceed
expeditiously.
Section 5.12 PERSONAL PROPERTY INCORPORATION. All personal property
for which Lender advances Loan proceeds for the Project is to be stored on
the Land and in Lender's judgment must be reasonably secure from damage and
theft and fully insured at all times.
Section 5.13 CONTRACTORS AND CONTRACTS. Upon demand by Lender, the
Borrower shall furnish to Lender, from time to time, correct lists of all
contractors and subcontractors employed in connection with the Development
Work and the Construction Improvements. Each such list shall show the name,
address and telephone number of each such contractor or subcontractor, 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, work and materials with
24
respect to each. Upon an Event of Default, Lender shall have the right, and
at any time the Inspector shall have the right (in both cases without either
the obligation or the duty), to contact directly each contractor,
subcontractor and materialman to verify the facts disclosed by said list or
for any other purpose.
Section 5.14 EVIDENCE OF OWNERSHIP OF MATERIALS. If requested by Lender,
Borrower shall promptly deliver to Lender any bills of sale, statements,
receipts, contracts or agreements under which Borrower claims title to any
materials, fixtures or articles incorporated into the Development Work and
the Construction Improvements.
Section 5.15 CHANGES TO PLANS AND SPECIFICATIONS AND BUDGET.
(a) There shall be no Change of any of the Plans and Specifications or
working drawings relating to the Development Work which, together with all
prior changes, exceeds, in aggregate amount, five percent (5%) of the portion
of the Budget allocable to the Development Work, whether by change order or
otherwise, without the prior written approval of Lender, and, to the extent
that such approvals may be required, the appropriate governmental
authorities. There shall be no Change to the Plan and Specifications relating
to the Construction Improvements which increases the portion of the Budget
allocable to each Home by five percent (5%) or more, without the prior
written approval of Lender; provided that the foregoing shall not apply to
upgrades. As a condition to its approval of any Change described in either of
the preceding sentences, Lender may require verification that such Change:
(1) is a Change as to which the Borrower has complied with the
terms of SUBPARAGRAPH (d) of this SECTION 5.15;
(2) will not adversely affect the value of Lender's security;
(3) is not a material change in structure, design, exterior
appearance, square footage, or function;
(4) would not cause an increase in any line item or category of the
Budget in excess of the contingencies (if any) specifically
contained in the Budget for that line item or category; and
(5) would be consistent with the Laws and Regulations.
Lender is under no duty to review or inform Borrower of the quality or
suitability of the Plans and Specifications, any contract or subcontract or
any changes thereto. Without limitation of the foregoing, Borrower shall
obtain Lender's prior written approval of any alteration in the Plans and
Specifications which might adversely affect the value of Lender's security or
which, regardless of cost, is a material change in structure, design,
function or exterior appearance.
25
(b) Borrower shall obtain from the appropriate persons or entities
approvals of any alterations in the Map, the Plans and Specifications or any
work, materials or contracts that are required by any of the Laws and
Regulations or under the terms of the Project Commitment or other Borrower
Project Document.
(c) Borrower agrees to provide Lender with copies of all change orders,
together with all additional documents that Lender may require in order to
evaluate a request for approval of a Change of a type described in CLAUSE (a)
above. These documents may include the following: (i) a written description
of the Change and related working drawings and (ii) a written estimate of the
cost of the Change and the time necessary to complete it. Lender may take a
reasonable time to evaluate any requests for approval of a Change, and may
require that all other approvals required from other parties be obtained
before it reviews any requested Change. Lender may approve or disapprove
Changes in the exercise of its reasonable judgment. Borrower acknowledges
that delays may result, and agrees that so long as any delays caused by
Lender are not unreasonable in duration, they shall not affect Borrower's
obligation to complete each element of the Development Work and the
Construction Improvements in accordance with the Construction Progress
Schedule.
(d) In the event that neither:
(1) the proceeds of the Loan which are available for disbursement
will not be sufficient to complete the Development Work or the
Construction Improvements, including the construction of any Homes
within the Project to be constructed on the Land as scheduled; or
(2) the costs of the Project have increased over the amount set
forth in the Budget by an amount in excess of (i) with respect to the
Development Work, and including all prior changes, in aggregate amount,
five percent (5%) of the portion of the Budget allocable to the
Development Work, or (ii) with respect to the Construction Improvements,
five percent (5%) or more of the portion of the Budget allocable to each
Home,
then the Borrower shall submit to the Lender a revised budget for the
Project, together with (i) a request that the Lender approve an increase in
the Project Amount, which request the Lender may approve or disapprove in its
absolute and sole discretion, or (ii) evidence that the Borrower has
sufficient funds to pay the increased costs, in which event the Lender shall
not be obligated to disburse additional amounts of the Loan pursuant to the
provisions of SECTION 4.1 until such time as the Borrower provides to the
Lender evidence that it has paid from its own funds, in addition to any
Borrower funds which the Budget requires, an amount at least equal to the
increase. Any such revised Budget for the Project submitted to the Lender
shall be accompanied by a written report from the Inspector stating that the
Inspector has reviewed and approved the revised Budget.
Section 5.16 LENDER INSPECTIONS, APPRAISAL AND INFORMATION. During
normal business hours, the Borrower shall arrange for the Lender, the
Inspector or any other authorized representative
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of Lender, at the expense of Borrower, to visit, inspect or appraise the
Project, the materials to be used thereon or therein, contracts, records,
plans, specifications and shop drawings relating thereto, whether kept at
Borrower's offices or at the Project construction site or elsewhere, and the
books, records, accounts and other financial and accounting records of
Borrower wherever kept, and to make copies and take extracts thereof and
therefrom as often as may be requested at Borrower's cost and expense.
Borrower will cooperate with Lender to enable Lender and Inspector to conduct
such visits, inspections and appraisals. The cost of the Inspector and of
such inspections shall be borne by Borrower and shall be paid within thirty
(30) days of Borrower's receipt of any invoice with respect thereto.
Section 5.17 CORRECTION OF DEFECTS. If Lender in its reasonable judgment
determines that any Development Work, Construction Improvements or materials
fail to conform to the Map, any Laws and Regulations, the Plans and
Specifications or sound building practices, or that they otherwise depart
from any of the requirements of this Loan Agreement Supplement, Lender may
require the work to be stopped and withhold disbursements until the matter is
corrected. If this occurs, Borrower shall promptly correct the work to
Lender's satisfaction, and pending completion of such corrective work shall
not allow any other work which is dependent upon or directly related to the
work requiring correction to proceed. No such action by Lender shall affect
Borrower's obligation to complete each element of the Development Work and
the Construction Improvements within the times required by this Loan
Agreement Supplement. The advance of any Loan proceeds shall not constitute a
waiver of Lender's right to require compliance with this covenant.
Section 5.18 PROTECTION AGAINST LIEN CLAIMS.
(a) Borrower shall pay and discharge, or cause to be paid and
discharged, promptly and fully all claims for labor done and materials
and services furnished in connection with the Development Work and
Construction Improvements, and take or cause to be taken all reasonable
steps to forestall the assertion of claims of lien against the Project
or any part thereof. Borrower shall obtain a lien waiver with respect to
each payment by or to the Borrower and each of the various
subcontractors and materialmen (and the major subcontractors and
submaterialmen under them), and Lender, at any time, at its option, may
require that Borrower make any payments for which disbursements are
made hereunder by joint check made payable to the Borrower and the
subcontractor or sub-subcontractor for whose account such payment is to
be made, as joint payees.
(b) Nothing herein contained shall require Borrower to pay any claims
for labor, materials, or services which Borrower in good faith disputes
and which Borrower, at its own expense, currently and diligently
contest, provided that Borrower shall, for each such case where a claim
of lien in excess of Twenty-Five Thousand Dollars ($25,000), has been
filed, within thirty (30) days after the Borrower's actual receipt of
notice of filing of any such claim of lien, (i) record or cause to be
recorded in the office of the recorder of Lake County a surety bond
sufficient to release said claim of lien, or (ii) make or cause to be
made a
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deposit of cash in the amount of 150% of the claim of lien with Lender,
or (iii) deliver or cause to be delivered to Lender a specific
endorsement to the Title Policy which insures Lender against any loss by
reason of such claim of lien, or (iv) deliver or cause to be delivered
to Lender such other assurance as may be acceptable to Lender; provided
however, that in the event the aggregate amount of claims filed with
respect to the Project exceeds Fifty Thousand Dollars ($50,000),
Borrower shall be required to take one of the actions specified in (i)
through (iv) above with respect to subsequent claims.
Section 5.19 CONVEYANCE, LEASE OR ENCUMBRANCE. Borrower shall not sell,
agree to sell, convey, transfer, dispose of or further encumber the Project
or any portion thereof or interest therein (other than the sale of Units), or
enter into a lease covering all or any portion thereof or interest therein,
either voluntarily, involuntarily or otherwise, or enter into an agreement to
do so, without the prior written consent of Lender being first had and
obtained. All easements, declarations, covenants, conditions, restrictions
and dedications affecting the Project shall be submitted to Lender for its
approval, accompanied by a drawing or survey showing the precise location
thereof, and such approval shall be obtained prior to the execution or
granting of any thereof by Borrower. Borrower shall not execute any lease of
any portion of the Project without the prior written consent of Lender.
Borrower shall promptly notify Lender of any event of default or cancellation
under any lease now or hereafter in effect.
Section 5.20 SECURITY INSTRUMENTS. From time to time, upon the request of
Lender, Borrower shall execute and deliver to Lender a security instrument or
instruments naming Lender as secured party covering all contracts of any kind
entered into in connection with the Development Work or the Construction
Improvements and all other property of any kind whatsoever owned by the
Borrower and used, or to be used, in the use and enjoyment of the Project and
concerning which Lender may have any doubt as to its being subject to the
lien of the Project Security Instruments.
Section 5.21 FURTHER ASSURANCES: COOPERATION. Borrower will at any time
and from time to time upon request of Lender take or cause to be taken any
action, execute, acknowledge, deliver or record any further documents,
opinions, mortgages, security agreements, financing statements or other
instruments or obtain such additional insurance as Lender in its discretion
deems necessary or appropriate to carry out the purposes of this Loan
Agreement Supplement and to preserve, protect and perfect the security
interest intended to be created and preserved in the Project, the Development
Work and the Construction Improvements.
Section 5.22 NEGATIVE COVENANTS. So long as any amount payable under any
Loan Document still remains unpaid or Lender shall have any commitment to
disburse the Loan hereunder, Borrower shall not, unless Lender shall
otherwise consent in writing (i) create, assume or suffer to exist any lien,
security interest or other charge or encumbrance, or any other type of
preferential arrangement, upon the collateral for the Loan assigned to Lender
by Borrower pursuant to Project Security Instruments, or (ii) sell, lease,
transfer or otherwise dispose of (A) all or
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substantially all of its assets (in a single transaction or a series of
related transactions), or (B) any of the collateral for the Loan assigned to
Lender by Borrower.
Section 5.23 SIGNS. Upon the request of Lender, Borrower shall erect and
place on or in the vicinity of the Project a sign or signs indicating that
Lender has provided construction financing for the Project. Said sign(s)
shall remain the property of Lender and shall be required to be removed only
after the Development Work and the Construction Improvements have been
completed.
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ARTICLE VI
SALES OF LOTS AND UNITS
AND RELEASES FROM MORTGAGE
Section 6.1 SALES AGREEMENTS. Each Lot and Unit shall be sold under a
Sales Agreement. Each Sales Agreement must require full payment in cash to
Borrower at closing. No Lot or Home may be leased, sold or conveyed under any
lease, conditional sales contract or other arrangement where Borrower retains
a deferred portion of the purchase price or any residual or contingent
interest in the Lot or Unit, including any purchase money security interest,
without the express prior written consent of Lender in each instance.
Section 6.2 SALES AND CLOSINGS. Borrower may enter into sales in the
ordinary course of business with bona fide third party buyers without
Lender's prior written consent if:
(a) a Sales Agreement is executed with the buyer which conforms to
the requirements of this Loan Agreement Supplement; and
(b) Borrower, acting in good faith following exercise of due
diligence, has determined that the buyer is financially capable of
performing all of its obligations under the Sales Agreement.
The Borrower shall furnish to the Lender copies of all Sales Agreements
immediately after execution of such Sales Agreements by all Persons who are
parties thereto. Lender in the exercise of its sole discretion may consider
any sale to be unsatisfactory if the sale fails to meet any of the
requirements of this Loan Agreement Supplement. If this happens, or if any
Event of Default has occurred and is continuing, Lender may make written
demand on Borrower to submit future Sales Agreements for Lender's approval
prior to execution, together in each instance with accompanying financial
statements and other information that Borrower may have pertaining to the
prospective buyer. Until such time as the earlier of (i) the Lender's
notification to Borrower that the Sales Agreements need no longer be
submitted prior to execution or (ii) the Event of Default is cured or Lender
has waived such Event of Default, Borrower shall comply with any such demand
by Lender.
Section 6.3 SALES OPERATIONS AND SELLER'S OBLIGATIONS. Borrower shall at
all times maintain adequate marketing capability for the sale of the Units,
and shall perform all obligations required to be performed by it under each
Sales Agreement.
Section 6.4 RELEASES FROM LIEN OF MORTGAGE. Borrower may from time to
time request that Lender release one or more Lots and/or Units from the lien
of the Mortgage and the other Project Security Instruments encumbering such
Lots and/or Units. Lender agrees that it will execute a partial release that
releases Lender's lien on such Lot and/or Unit pursuant to the Mortgage and
the documents executed pursuant thereto, provided that in all instances the
following conditions precedent shall have been satisfied.
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(a) Lender shall have received a written notice requesting the
partial release no fewer than five (5) Business Days prior to the date
on which the partial release is to be effective, which notice shall
specify (i) the Project, (ii) the specific Lots and/or Units to be
released, (iii) if such release is being requested in connection with a
sale of the Lots and/or Units, the Persons to whom such Lots and/or
Units are being sold, which Person shall not be an Affiliate of the
Borrower, and (iv) the Lender's Release Prices therefor;
(b) Lender shall have received evidence satisfactory to Lender
that (i) the closing of the sale and/or release of such Lot and/or Unit
shall be conducted through an escrow with a title company satisfactory
to Lender, and (ii) such title company shall have been instructed, which
instructions shall have been acknowledged and agreed to by such title
company and which cannot be changed or supplemented without Lender's
written concurrence, not to record Lender's partial release until such
title company receives in respect of such release an amount equal to
Lender's Release Price for such Lot and/or Unit and is irrevocably
committed to disburse such amount to Lender;
(c) Lender shall have received executed originals of all
instruments, agreements and other documents, if any, in form and
substance satisfactory to Lender, which Lender determines are necessary
to appropriate, to evidence and/or effectuate the partial release and to
modify the Project Documents as a result thereof; and
(d) Lender shall have received evidence satisfactory to Lender
that Borrower has satisfied all conditions precedent in the Project
Documents relating to the release of the Lots and/or Units.
If the title insurance company that is selected by Borrower to insure
title to the Lots and/or Units sold by Borrower elects to have Lender and/or
Borrower enter into a master release agreement that provides for the release
of the Lots and Units once all of the Lots and Units in the Project are sold
instead of being released one at a time, then Lender agrees to enter into
such a master release agreement in form and substance satisfactory to Lender.
In connection with each release of a Lot and/or Unit, provided all
conditions to such release have been met, Lender agrees to provide to the
title insurance company an estoppel letter, in form and substance
satisfactory to Lender, specifying the Lender's Release Price.
Section 6.5 PROJECT MODEL HOMES.
(a) So long as any proceeds of the Loan remain outstanding with
respect to the Project, the Borrower shall construct and if necessary,
modify, Homes in such a manner as to accommodate their use as Project Model
Homes, and at least one of such Project Model Homes shall include therein a
sales office. The Borrower shall insure that sufficient adjacent parking for
customers exists within the vicinity of the Project Model Homes. Each Project
Model Home shall be used solely as
31
a model display (including landscaping and walkways), as a sales office and
for parking, all in connection with the marketing and sale of Units. Borrower
shall maintain the interiors and exteriors of the Project Model Homes in good
condition, repair and order, except for ordinary wear and tear. Regardless of
any other provision of this Loan Agreement Supplement, Lender shall not be
required to release the Project Model Homes or any of them from the lien of
the Mortgage unless the Project Amount has been paid in full or Borrower has
provided, and Lender has accepted, a substituted Project Model Home which
lender in its reasonable judgment considers to be comparable to the Project
Model Home to be released and suitable for the purposes and uses described
above. Borrower shall maintain insurance coverage regarding the Project Model
Homes as Lender shall reasonably require.
(b) Borrower may sell a Project Model Home to a Person approved by
Lender in its reasonable discretion, subject to the requirements that (i) the
Borrower leases the Project Model Home back from such Person pursuant to a
lease agreement, the form and terms of which are approved by the Lender in
its reasonable discretion and (ii) upon the request of the Lender, Borrower
executes such documents as Lender requires to assign to Lender the Borrower's
interest in such lease.
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ARTICLE VII
DEFAULT AND REMEDIES
Section 7.1 EVENTS OF DEFAULT. In addition to the Events of Default
set forth in the Loan Agreement, the occurrence of any one or more of the
following events shall constitute an Event of Default:
(a) any representation or warranty made by Borrower herein or
in any other Project Document shall at any time be incorrect in any
material respect; or
(b) Borrower shall fail to perform or observe any term,
covenant or agreement contained in this Loan Agreement Supplement or any
other Project Document, and such failure shall remain unremedied for
thirty (30) days after notice thereof from Lender to Borrower; provided
that in the event Borrower commences and is diligently pursuing to
completion action to cure the failure, such thirty (30) day period may
be extended for such period of time as is necessary to cure the failure,
but in no event longer than one hundred twenty (120) days from the date
of the Lender's notice; provided further however that in the event (i)
Lender determines that the failure to immediately declare an Event of
Default could result in irreparable harm to the rights of the Lender
hereunder, under any other Project Document, or the rights of the Lender
with respect to the collateral pledged to secure the Loan, or (ii)
Lender determines that the failure to perform or observe the terms of
this Loan Agreement Supplement or any other Project Document cannot be
remedied with the passage of one hundred twenty (120) days, then Lender
may declare an immediate Event of Default in its notice given pursuant
to this SECTION 7.1(b); or
(c) Borrower fails to meet or comply with any of the projections
or other provisions of the Construction Progress Schedule (which failure
Lender reasonably believes may result in impairment of the value of its
security for the Loan or in the ability of the Borrower to repay the
Loan in full by the Project Maturity Date), and does not cure that
failure within thirty (30) days after written notice from Lender;
provided that such cure period shall not be applicable (i.e., there
shall be no cure period) if Lender has reasonably determined that such
failure is not susceptible to cure within thirty (30) days; or
(d) Borrower shall assert the invalidity or unenforceability of
any Project Document or any Project Document shall be adjudicated to be
invalid or unenforceable in any material respect; or
(e) any event of default (however described) under any other
Project Document shall occur and not be cured within the applicable
grace period; or
33
(f) any Project Security Instrument, for any reason, cease to
create a valid and perfected first priority lien on or in the Land and
the other collateral relating thereto described in the Project Security
Instrument, or Borrower shall so state in writing; or
(g) an event of default (however described) shall occur and not be
cured within any applicable grace period under any Related Loan
Document; or
(h) the assignment by the Borrower of the rents or the income of
the Project, or any part thereof or of any other revenues or sales
proceeds relating to the Project (other than to Lender); or
(i) there shall occur substantial deviations in the Development
Work or the Construction Improvements from the Plans and Specifications
without the prior approval of Lender, or the existence of materially
adverse defective workmanship or materials incorporated into the
Development Work or the Construction Improvements which deviations or
defects are not corrected within thirty (30) days after written notice
thereof to Borrower, such deviations and defects to be conclusively
determined by Lender after consultation with the Inspector; or
(j) cessation of the Development Work prior to completion of the
Construction Improvements for a continuous period of (i) one hundred
twenty (120) days or more if such cessation is by a Force Majeure Event,
or (ii) thirty (30) days or more if such cessation is not caused by a
Force Majeure Event; or
(k) the Development Work or the Construction Improvements are not,
in Lender's judgment, being carried out in accordance with the
Construction Progress Schedule (subject to delays not to exceed thirty
(30) days or to delays not to exceed one hundred twenty (120) days in
the aggregate which are caused by Force Majeure Events of which Lender
has been properly notified in accordance with the provisions of SECTION
5.11);
(l) Borrower fails to commence construction of the Development Work
or the Construction Improvements or fails to satisfy all of the
conditions of this Loan Agreement Supplement with respect to
disbursement of Loan proceeds for costs of such construction on or
before the expiration of three (3) months after date of this Loan
Agreement Supplement; or
(m) a court of competent jurisdiction enters an order enjoining
construction of the Development Work or the Construction Improvements,
or such a court or an authorized governmental agency orders that sales
of the Lots and/or Units be suspended or halted, or any required
approval, license or permit is withdrawn or suspended, and the order,
withdrawal or suspension remains in effect for a period of fifteen (15)
days; or
34
(n) there occurs any attachment, levy, execution or other judicial
seizure of any portion of the Project, any other collateral provided by
Borrower under any of the Project Documents, or any substantial portion
of the other assets of Borrower, which is not released, expunged,
discharged or dismissed prior to the earlier of (i) twenty (20) days
after such attachment, levy execution or seizure, or (ii) the sale of
the assets affected thereby; or
(o) any surety obligated for any Development Work or Construction
Improvements is called upon to perform its obligations and/or any person
demands funds pursuant to any "set-aside" letter or "cash in lieu of
bond agreement" issued by Lender with respect to the Project; or
(p) there occurs, in Lender's reasonable judgment, a materially
detrimental change in the operations or value of the Project, including
without limitation, a reduction in the sales prices from the projected
offering prices for the Homes to such an extent that existing sales to
date or continued sales at such price reductions, together with actual
and anticipated disbursements of Loan funds, cause or will cause an
Budget shortfall.
The Event of Default specified in subsection (g) above is for purpose of
cross default (and cross-collateralization pursuant to the Mortgage) only;
nothing contained herein shall be construed as imposing an obligation upon
Lender, or as evidencing Lender's intention, to make proceeds of the Loan
available to Borrower for any other project. In addition, Borrower
acknowledges and agrees that any Related Loan Documents shall provide or be
amended to provide that a default under each such Related Loan Document shall
be a default hereunder, and that a default under the Project Documents shall
be a default under Related Loan Documents.
Borrower acknowledges and agrees that all material non-monetary defaults
are conclusively deemed to be and are defaults which impair the security of
the Mortgage, and that Lender shall be entitled to exercise any appropriate
remedy, including without limitation, foreclosure of the Mortgage upon the
occurrence of any such material non-monetary default.
Section 7.2 REMEDIES. Upon the occurrence of an Event of Default, Lender
may, in addition to any other remedies which Lender may have hereunder or
under the Project Documents or the Loan Agreement or by law or in equity, at
its option and without prior demand or notice take any or all of the
following actions:
(a) Immediately terminate any further advance of Loan funds
hereunder, and from time to time apply all or any portion of the
undisbursed Loan funds to payment of accrued interest under the Note
and/or upon any other obligations of Borrower hereunder or under the
Project Documents. Lender may also withhold any one or more
disbursements after an event or condition occurs that with notice or the
passage of time could become an Event of Default, unless Borrower cures
or corrects the event or condition to the reasonable satisfaction of
Lender prior to the occurrence of an Event of Default.
35
(b) Declare the Note to be immediately due and payable and record a
notice of default under the Mortgage and under the mortgages or deeds of
trust, as applicable, which form a part of the Related Loan Documents.
(c) Make any disbursements after the happening of any one or more
Events of Default, without thereby waiving its right to demand payment
of the Note and all other sums owing to Lender with respect to the
Project Documents or any other rights or remedies described herein, and
without liability to make any other or further disbursements,
notwithstanding Lender's previous exercise of any such rights and
remedies.
(d) Enter upon the Project and with or without legal process take
possession of the Project, remove Borrower and all employees,
contractors and agents of Borrower therefrom, and complete or attempt to
complete construction of the Development Work and/or the Construction
Improvements in accordance with the Plans and Specifications with such
changes, additions or corrections therein as Lender may from time to
time and in its judgment deem appropriate, and market, sell or lease the
Project, at the risk and expense of Borrower. Lender shall have the
right at any time to discontinue any work commenced by it in respect to
the Development Work and/or the Construction Improvements or to change
any course of action undertaken by it and not be bound by any
limitations or requirements of time whether set forth herein or
otherwise. Lender shall have the right and power (but shall not be
obligated) to assume any construction contract made by or on behalf of
Borrower in any way relating to the Construction Improvements and to
take over and use all or any part of the labor, materials, supplies and
equipment contracted for, by or on behalf of Borrower whether or not
previously incorporated into the Development Work and/or the
Construction Improvements, in the discretion of Lender. Lender may also
modify or terminate any contractual arrangements, subject to its right
at any time to discontinue any work without liability. If Lender chooses
to complete the Development Work and/or the Construction Improvements,
Lender shall not assume any liability to Borrower or any other person
for completing them, or for the manner or quality of their construction,
and Borrower expressly waives any such liability. In connection with any
work of construction undertaken by Lender pursuant to the provisions of
this SUBSECTION (d), Lender may do any of the following:
(1) engage builders, contractors, subcontractors, architects,
engineers, suppliers, inspectors, consultants and others for the
purpose of furnishing labor, materials, equipment and other
services in connection with the work of construction, for the
protection or clearance of title to the Project, or for the
protection of Lender's interests with respect thereto;
(2) pay, settle or compromise all bills or claims which may
become liens against the Project or which have been or may be
incurred in any manner in connection with completing construction of
the Development Work and/or the
36
Construction Improvements or for the protection or clearance of
title to the Project, or for the protection of Lender's interests with
respect thereto;
(3) prosecute and defend all actions and proceedings in connection
with the Project;
(4) execute, acknowledge and deliver all other instruments and
documents in the name of Borrower that are necessary or desirable, to
exercise Borrower's rights under contracts concerning the Project; and
(5) take such other action, including the employment of security
personnel to protect the Development Work and the Construction
Improvements, or refrain from taking action under this Loan Agreement
Supplement as Lender may in its discretion determine from time to time.
Borrower shall be liable to Lender for sums paid or incurred for
completing construction of the Development Work and the Construction
Improvements whether the same shall be paid or incurred pursuant to the
provisions of this Section or otherwise, and all payments made or
liabilities incurred by Lender hereunder of any kind whatsoever shall be paid
by Borrower to Lender upon demand with interest at the rate set forth in
the Note, and all the foregoing shall be deemed and shall constitute
disbursements under this Loan Agreement Supplement and be secured by the
Project Documents. For the purpose of carrying out the provisions and
exercising the rights, powers and privileges granted by this SUBSECTION
(d), Borrower hereby unconditionally and irrevocably constitutes and
appoints Lender its true and lawful attorney-in-fact to enter into such
contracts, perform such acts and incur such liabilities as are referred
to in said Section in the name and on behalf of Borrower. This power of
attorney is coupled with an interest.
(e) Where substantial deviations from the Plans and Specifications
appear which have not been approved as set forth herein, or where
defective or unworkmanlike labor or materials are being used in the
construction of the Development Work and/or the Construction Improvements,
or upon receipt of knowledge of encroachments to which there has been no
consent, or if Lender determines that the Development Work and/or the
Construction Improvements are not being constructed in accordance with any
governmental requirements or any covenants, conditions, restrictions,
agreements or other matters, whether or not of record, affecting the
condition of title to the Project, Lender shall have the right to
immediately order stoppage of the construction and demand that such
conditions be corrected. After issuance of such an order in writing, no
further work shall be done on that portion of the Development Work and/or
the Construction Improvements where there is a substantial deviation from
the Plans and Specifications which has not been approved as set forth
herein, where there is defective or unworkmanlike labor or materials, or
which does not comply with governmental requirements or matters affecting
title to the Project, without the
37
prior written consent of Lender, which consent shall not be unreasonably
withheld, unless and until said condition has been fully corrected.
(f) Foreclose on any security for the Loan without waiving its rights
to proceed against any other security or other entities or individuals
directly or indirectly responsible for repayment of the Loan, or waive any
and all security for the Loan as Lender may in its discretion so
determine, and pursue any such other remedy or remedies as Lender may so
determine to be in its best interest.
(g) If Lender spends their funds in exercising or enforcing any of its
rights or remedies under the Project Documents, the amount of funds spent
shall be payable to Lender upon demand, together with interest at the
rate applicable to the principal balance of the Note, from the date such
funds were spent until repaid. Such amounts shall be deemed secured by
the Mortgage and other applicable Project Documents.
Whether or not Lender elects to employ any or all of the remedies
available to it in connection with an Event of Default, Lender shall not be
liable for (i) the construction of or failure to construct, complete or
protect the Development Work and/or the Construction Improvements, (ii) the
payment of any expense incurred in connection with the exercise of any remedy
available to Lender or the construction or completion of the Development Work
and/or the Construction Improvements, or (iii) the performance or
non-performance of any other obligation of Borrower.
All remedies of Lender provided for herein, in the Loan Agreement and in
any other Project Document and in any of the Related Loan Documents are
cumulative and shall be in addition to all other rights and remedies provided
by law or in equity. The exercise of any right or remedy by Lender hereunder
shall not in any way constitute a cure or waiver of default hereunder, under
any Project Document, under the Loan Agreement or under any of the Related
Loan Documents or invalidate any act done pursuant to any notice of default,
or prejudice Lender in the exercise of any of its rights hereunder, under any
other Project Document, under the Loan Agreement or under any of the Related
Loan Documents unless, in the exercise of its rights, Lender realizes amounts
owed to it under such Project Documents, Loan Agreements and the Related Loan
Documents. If Lender exercises any of the rights or remedies provided in this
ARTICLE VII, that exercise shall not make Lender, or cause Lender to be
deemed to be, a partner or joint venturer of Borrower. No disbursement of
Loan funds by Lender shall cure any default of Borrower, unless Lender agrees
otherwise in writing in each instance.
Upon the occurrence of any Event of Default, all of Borrower's
obligations under the Project Documents may become immediately due and
payable without notice of default, presentment or demand for payment, protest
or notice of nonpayment or dishonor, or other notices or demands of any kind
or character, at Lender's option, exercisable in its sole discretion. If such
acceleration occurs, Lender may apply the undisbursed Loan funds to the
obligations of Borrower under the Project Documents, in any order and
proportions that Lender in its sole discretion may choose.
38
Section 7.3 AUTHORIZATION TO APPLY ASSETS TO PAYMENT OF LOAN. The
Borrower hereby authorizes the Lender, following the occurrence of an Event
of Default, without notice or demand, to apply any property, balances,
credits, accounts or moneys of the Borrower then in the possession of Lender,
or standing to the credit of the Borrower, to the payment of the Loan.
39
ARTICLE VIII
MISCELLANEOUS
Section 8.1 SUCCESSORS AND ASSIGNS: NO ASSIGNMENT BY BORROWER. The
provisions of this Loan Agreement Supplement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns; provided that Borrower may not assign or transfer any of its rights
or obligations under this Loan Agreement Supplement or any of the other
Project Documents without the prior written consent of Lender.
Section 8.2 NOTICES. All notices, requests and demands to be made
hereunder to the parties hereto shall be in writing (at the addresses set
forth below) and shall be given by any of the following means:
(a) personal delivery;
(b) reputable overnight courier service;
(c) electronic communication, whether by telex, telegram or
telecopying (if confirmed in writing sent by registered or certified,
first class mail, return receipt requested); or
(d) registered or certified, first class mail, return receipt
requested. Any notice, demand or request sent pursuant to SUBSECTION (a)
OR (c) hereof shall be deemed received upon such personal delivery or
upon dispatch by electronic means, and if sent pursuant to SUBSECTION (d)
shall be deemed received three (3) days following deposit in the mail,
and if sent pursuant to SUBSECTION (b) shall be deemed received on the
next Business Day following delivery to the courier service.
The addresses for notices are as follows:
To Lender: Residential Funding Corporation
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Managing Director
Construction Finance
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
40
With a copy to: Residential Funding Corporation
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
To Borrower: United Homes, Inc.
0000 Xxxx Xxxx, Xxxxx 000
Xxxxxxx Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, President
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
With copies to: United Homes, Inc.
0000 Xxxx Xxxx, Xxxxx 000
Xxxxxxx Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Xx., Vice-President
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
Xxxxxxx, Xxxxxxxx & Divine, LTD
000 Xxxxx Xxxxxxxx Xxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
Such addresses may be changed by notice to the other parties given in the
same manner as provided above.
Notwithstanding the foregoing, requests for disbursements of the Loan
pursuant to ARTICLE IV above shall be deemed received only upon actual
receipt, and such requests for disbursement shall be given only to Lender's
primary addressee.
Section 8.3 CHANGES, WAIVERS, DISCHARGE AND MODIFICATIONS IN WRITING.
No provision of this Loan Agreement Supplement or any of the other Project
Documents may be changed, waived, discharged or modified except by an
instrument in writing signed by the Lender and the party against whom
enforcement of the change, waiver, discharge or modification is sought.
41
Section 8.4 NO WAIVER; REMEDIES CUMULATIVE. No disbursement of
proceeds of the Loan shall constitute a waiver of any conditions to Lender's
obligation to make further disbursements nor, in the event is unable to
satisfy any such conditions, shall any such waiver have the effect of
precluding Lender from thereafter declaring such inability to constitute an
Event of Default (however described) under this Loan Agreement Supplement,
the Note or any other Project Document. No failure or delay on the part of
Lender in the exercise of any power, right or privilege hereunder or under
the Note or any other Project Document shall impair such power, right or
privilege or be construed to be a waiver of any Event of Default (however
described) or acquiescence therein, nor shall any single or partial exercise
of any such power, right or privilege preclude any other or further exercise
thereof, or of any other right, power or privilege. Except as specifically
provided herein, rights and remedies existing under this Loan Agreement
Supplement, the Note or any other Project Document are cumulative to and not
exclusive of any rights or remedies otherwise available.
Section 8.5 COSTS, EXPENSES AND TAXES. Borrower agrees to pay on
demand all costs and expenses incurred by Lender in connection with the
preparation, execution, delivery, administration, modification and amendment
of this Loan Agreement Supplement, the other Project Documents, and any other
documents to be delivered hereunder or pursuant to the terms of any Project
Document, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for Lender with respect thereto and with
respect to advising Lender as to its rights and responsibilities under this
Loan Agreement Supplement and the other Project Documents.
Borrower further agrees to pay on demand all costs and expenses of
Lender (including, without limitation, reasonable counsel fees and expenses,
court costs and all other litigation expenses, including, but not limited to,
expert witness fees, document copying expenses, exhibit preparation, courier
expenses, postage expenses and communication expenses) in connection with the
enforcement of this Loan Agreement Supplement, the other Project Documents
and any other documents delivered hereunder, including, without limitation,
costs and expenses incurred in connection with any bankruptcy, insolvency,
liquidation, reorganization, moratorium or other similar proceeding, or any
refinancing or restructuring in the nature of a "workout" of the Project
Documents and any other documents delivered by Borrower related thereto. In
addition, Borrower shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of
this Loan Agreement Supplement, the other Project Documents and the other
documents to be delivered hereunder, and agrees to hold Lender harmless from
and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes.
Whenever Borrower is obligated to pay or reimburse Lender for any
attorneys' fees, those fees shall include the allocated costs for services of
Lender's in-house counsel.
Section 8.6 DISCLAIMER BY LENDER: NO JOINT VENTURE. Borrower
acknowledges, understands and agrees as follows:
42
(a) the relationship between Borrower and Lender is, and shall at
all times remain, solely that of borrower and lender, and Lender neither
undertakes nor assumes any responsibility for or duty to Borrower to
select, review, inspect, supervise, pass judgment upon or inform
Borrower of the quality, adequacy or suitability of any matter or thing
submitted to Lender for its approval;
(b) Lender owes no duty of care to protect Borrower or any other
Person against negligent, faulty, inadequate or defective building or
construction; and
(c) Borrower is not and shall not be an agent of Lender for any
purpose. Lender is not a joint venture partner with Borrower in any
manner whatsoever.
Any approvals granted by Lender for any matters covered under this Loan
Agreement Supplement shall be narrowly construed to cover only the parties
and facts identified in any such approval.
Section 8.7 INDEMNIFICATION. Borrower agrees to protect, indemnify,
defend and hold harmless each Indemnified Party from and against any and
claims (including, without limitation, Hazardous Materials Claims), damages,
losses, liabilities, obligations, penalties, actions, judgments, suits,
costs, disbursements and expenses (including, without limitation, reasonable
fees and expenses of counsel and consultants and allocated costs of internal
counsel) that may be incurred by or asserted against any Indemnified Party,
in each case arising out of or in connection with or related to any of the
following:
(a) the Loan, this Loan Agreement Supplement or any other Project
Document,
(b) the use of funds advanced under the Project Documents,
(c) the failure of Borrower or any other party to comply fully with
any and laws applicable to it (including, without limitation, Hazardous
Materials Laws), or
(d) any use, handling, production, transportation, disposal or
storage of any Hazardous Materials in, under or on the Land by any
Person, including, without limitation,
(i) foreseeable and unforeseeable consequential damages
directly or indirectly arising out of (A) the use, generation,
storage, discharge or disposal of Hazardous Materials by any owner
or operator of said property or any Person on or about said
property, or (B) any residual contamination affecting any natural
resource or the environment, and
(ii) the costs of any required or necessary repair, cleanup,
or detoxification of said property and the preparation of any
closure or other required plans,
43
whether or not an Indemnified Party is a party thereto and whether or not the
transactions contemplated hereby are consummated, except to the extent such
claims, damages, losses, liabilities, obligations, penalties, actions,
judgments, suits, costs, obligations, penalties, disbursements and expenses
are found in a final non-appealable judgment by a court of competent
jurisdiction to have resulted from the negligence or willful misconduct of
the Indemnified Party.
Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this
SECTION 8.7 shall survive the termination of this Loan Agreement Supplement
and the other Project Loan Documents and the payment in full of the Loan.
Section 8.8 CONSULTANTS. Borrower shall pay any and all valid claims of
any consultants, advisors, brokers or agents whom it has retained or with
whom it has initiated contact with respect to the Loan who claims a right to
any fees in connection with the Loan, and shall indemnify, defend and hold
Lender harmless from such claims, whether or not they are valid.
Section 8.9 GOVERNING LAW. This Loan Agreement Supplement shall be
governed by and construed in accordance with the laws of the State of
Illinois.
Section 8.10 TITLES AND HEADINGS. The titles and headings of sections of
this Loan Agreement Supplement are intended for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Loan Agreement Supplement.
Section 8.11 COUNTERPARTS. This Loan Agreement Supplement, each other
Project Document and any attached consents or exhibits requiring signatures
may be executed in counterparts, and all counterparts shall constitute but
one and the same document.
Section 8.12 TIME IS OF THE ESSENCE. Time is of the essence of this Loan
Agreement Supplement.
Section 8.13 NO THIRD PARTIES BENEFITTED. This Loan Agreement Supplement
is made and entered into for the sole protection and legal benefit of
Borrower and Lender and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct
or indirect cause of action or claim in connection with, this Loan Agreement
Supplement or any of the other Project Documents. Lender shall not have any
obligation to any Person not a party to this Construction Agreement or the
other Project Documents.
Section 8.14 SEVERABILITY. The illegality or unenforceability of any
provision of this Loan Agreement Supplement or any instrument or agreement
required hereunder shall not in any way affect or impair the legality or
enforceability of the remaining provisions of this Loan Agreement Supplement
or any instrument or agreement required hereunder.
44
Section 8.15 JURISDICTION. Any legal action or proceeding with respect
to this Loan Agreement Supplement or any of the other Project Documents may be
brought in the Courts of the State of Illinois or of the United States for
the Northern District of Illinois and by execution and delivery of this Loan
Agreement Supplement, each of Borrower and Lender consents, for itself and in
respect of its property, to the jurisdiction of those Courts. Each of
Borrower and Lender irrevocably waives any objection, including any objection
to the laying of venue or based on the grounds of forum non conveniens which
it may now or hereafter have to the bringing of any action or proceeding in
such jurisdiction in respect of this Loan Agreement Supplement or any
document related hereto. Borrower and Lender each waive any personal service
of any summons, complaint or other process, which may be made by any other
means permitted by the State of Illinois. Nothing in this SECTION 8.15 shall
affect the right of Lender to serve legal process in any other manner
permitted by law or limit the right of Lender to bring any action or
proceeding against Borrower or its property in the Courts of any other
jurisdiction.
Section 8.16 WAIVER OF JURY TRIAL. BORROWER AND LENDER WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OR ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS LOAN AGREEMENT SUPPLEMENT, THE
OTHER PROJECT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY PARTY
AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. BORROWER AND LENDER AGREE THAT ANY SUCH CLAIM OR CAUSE
OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING
THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A
TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS LOAN AGREEMENT SUPPLEMENT OR
THE OTHER PROJECT DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS LOAN AGREEMENT SUPPLEMENT AND THE OTHER PROJECT
DOCUMENTS.
Section 8.17 INTERPRETATION. This Loan Agreement Supplement and the
other Project Documents shall not be construed against Lender merely because
of the involvement of the Lender in the preparation of such documents and
agreements.
Section 8.18 ENTIRE AGREEMENT. This Loan Agreement Supplement, together
with the other Project Documents and the Loan Agreement, embodies the entire
agreement and understanding among Borrower and Lender with respect to the
Project and supersedes all prior or contemporaneous agreements and
understandings of such persons, verbal or written, relating to the subject
matter hereof and thereof except for any prior arrangements made with respect
to the payment by Lender
45
or Borrower of (or any indemnification for) any fees, costs or expenses
payable to or incurred (or to be incurred) by or on behalf of Lender.
Section 8.19 JOINT AND SEVERAL LIABILITY. Borrower consists of United
Homes, United Arizona, United Illinois and United Michigan, each of which
shall be jointly and severally liable to Lender for the faithful performance
of this Loan Agreement and the other Loan Documents.
Section 8.20 RELATIONSHIPS WITH OTHER CUST0MERS. From time to time,
Lender and Lender's Affiliates may have business relationships with
Borrower's customers, suppliers, contractors, tenants, partners,
shareholders, officers or directors, or with businesses offering products or
services similar to those of Borrower, or with persons seeking to invest in,
borrow from or lend to Borrower. Borrower agrees that Lender and Lender's
Affiliates may extend credit to such parties and may take any action it may
deem necessary to collect the credit, regardless of the effect that such
extension or collection of credit may have on Borrower's financial condition
or operations. Borrower further agrees that in no event shall Lender or its
Affiliates be obligated to disclose to Borrower any information concerning any
other customer of Lender or its Affiliates.
Section 8.21 SURVIVAL OF WARRANTIES. All agreements, representations and
warranties made herein shall survive the execution and delivery of this Loan
Agreement Supplement and of the other Project Documents and the disbursement
of the Loan hereunder and continue in full force and effect until the
obligations of Borrower hereunder and the indebtedness evidenced by the Note
have been fully paid and satisfied.
Section 8.22 AUTHORITY TO FILE NOTICES. Borrower irrevocably appoints,
designates and authorizes Lender as its agent (said agency being coupled with
an interest) and attorney-in-fact, with full power of substitution, to file
for record any Notices of Completion, Cessation of Labor, or file or send to
any third party any other notice or documents or take any other action that
Lender deems necessary or desirable to protect its interest hereunder, or
under the Project Documents, and will upon request by Lender, execute such
additional documents as Lender may require to further evidence the grant of
the aforesaid right to Lender.
Section 8.23 PURPOSE AND EFFECT OF LENDER APPROVAL. Lender's approval of
any matter in connection with the Loan shall be for the sole purpose of
protecting Lender's security and rights. No such approval shall result in a
waiver of any default of Borrower. In no event shall Lender's approval be a
representation of any kind with regard to the matter being approved.
From time to time, Lender may approve changes to the Plans and
Specifications at Borrower's request, and may also require Borrower to make
corrections to the work of construction, on and subject to the terms and
conditions of this Loan Agreement Supplement. Borrower acknowledges that no
such action, approval or other action by Lender or Borrower shall in any
manner commit or obligate Lender to increase the Project Amount.
46
IN WITNESS WHEREOF, Lender and Borrower have executed this Loan Agreement
Supplement as of the date first written above by and through their duly
authorized representatives.
LENDER:
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
BORROWER:
UNITED HOMES, INC.,
an Illinois corporation
By: /s/ [Illegible]
-----------------------------------
Printed Name: /s/ [Illegible]
-------------------------
Title: Secretary
--------------------------------
UNITED HOMES, INC.,
an Arizona corporation
By: /s/ [Illegible]
-----------------------------------
Printed Name: /s/ [Illegible]
-------------------------
Title:
--------------------------------
47
UNITED HOMES OF ILLINOIS, INC.,
an Illinois corporation
By: /s/ [Illegible]
-----------------------------------
Printed Name: /s/ [Illegible]
-------------------------
Title: Secretary
--------------------------------
UNITED HOMES OF MICHIGAN, INC.,
a Michigan corporation
By: /s/ [Illegible]
-----------------------------------
Printed Name: /s/ [Illegible]
-------------------------
Title: Vice President
--------------------------------
48
EXHIBIT A
TO SUPPLEMENT TO LOAN AGREEMENT
LEGAL DESCRIPTION OF THE LAND
THE SOUTHWEST 1/4 OF THE SOUTHWEST 1/4 OF THE SOUTH EAST 1/4 OF SECTION 26,
TOWNSHIP 45 NORTH, RANGE 11, EAST OF THE THIRD PRINCIPAL MERIDIAN, IN LAKE
COUNTY, ILLINOIS.
A-1
EXHIBIT B
TO SUPPLEMENT TO LOAN AGREEMENT
PROJECT REQUIREMENTS
ENTITLEMENT RISK Land must be through all discretionary zoning and
approvals.
BY GEOGRAPHICAL REGION The Projects must be located in the Chicago land
area, the Phoenix suburbs or western Michigan.
FINAL PRICE POINT Entry-Level 50% - 100%
First move-up 0% - 50%
Second move-up 0% - 30%
Other 0% - 10%
Maximum value per Unit of $300,000
DEVELOPMENT LIFE CYCLE The maximum proforma lifetime of a Project shall
not exceed thirty (30) months from the date of the
first disbursement of proceeds of the Loan for the
Project to full repayment, with all outstanding
borrowings due and payable on the Project Maturity
Date. The Development Work and/or the Construction
Improvements must commence within four (4) months
of the date of the first disbursement of proceeds
of the Loan for the Project. Development of raw,
but entitled land, is anticipated only for the
construction of residential "for sale" Units by the
Borrower. The sale of lots to third party builders
or developers must be approved by the Lender.
MAXIMUM PER PROJECT No more than Five Million Dollars ($5,000,000) of
the Loan may be committed to any Project.
PROJECT SIZE LIMITATIONS Based on the absorption rate projected in the
Appraisal Report, the size of the Project shall not
exceed the number of Units which can be absorbed
prior to the Project Maturity Date, with an
absolute cap of 125 Lots per Project.
START LIMITATIONS Construction of the Units will be limited to (i) an
agreed upon number of Project Model Homes as set
forth in the Project Commitment, plus (ii) 100% of
Units for which there exists a Sales Agreement,
plus (iii) an amount of Spec Homes equaling up to
three (3) months of Unit absorption, based on the
B-1
absorption rate projected in the Appraisal Report.
(Exceptions to the above start limitations will be
considered for attached dwelling Projects
containing numerous Units in one building and for
winter construction which requires pouring of slabs
to enable spring production). Phasing of the
Development Work will be determined based upon the
economics of the Project and its physical
requirements.
STALE UNITS Any Unit, exclusive of Project Model Homes, which
has not been repaid within twelve (12) months of
the commencement of construction on said Unit, must
be repaid.
LOAN TO VALUE RATIO: The Project Amount shall be an amount which results
in the Loan to Value Ratio being equal to or less
than eighty percent (80%).
B-2
EXHIBIT C
TO SUPPLEMENT TO LOAN AGREEMENT
PROJECT UNDERWRITING DOCUMENTS
A. GENERAL PROJECT INFORMATION:
1. Summary description of proposed project.
2. Purchase contract for Land or Lots.
3. Project profitability summary.
4. Source and use of funds statement.
5. Cash flow analysis, which shall include the proposed Budget
(including a line item cost breakdown and breakdown between costs of
acquisition of the Land or Lots, costs related to Development Work
and costs related to Construction Improvements) and the proposed
Construction Progress Schedule.
6. Market report supporting absorption rates and information on the
various model types of the Homes.
7. Appraisal Report(s) setting forth (i) a Value for the proposed
project equal to or greater than that required by the Project
Requirements and (ii) a value for each model type of Home included
within the proposed project.
8. The plat relating to such project.
9. Commitment for the Title Policy, including copies of all documents
relating to exceptions, which Title Policy will provide mechanics'
lien coverage, will have all standard exceptions deleted therefrom
and will have appended thereto such endorsements as are generally
required by lenders in the area in which the Project is located.
10. Certificates of insurance.
B. CONSTRUCTION INFORMATION AND DOCUMENTS:
1. Site plan.
2. Evidence of site plan approval and proper zoning.
3. Plans and Specifications and renderings/elevations of Plans and
Specifications.
4. ALTA survey.
5. Phase I environmental report.
6. Soils report.
7. Letters regarding utility availability.
8. Proof of entitlement.
9. Building permits.
C-1
C. PROJECT LEGAL DOCUMENTS
1. Proposed or recorded covenants, conditions and restrictions.
2. If a condominium, a copy of the homeowner's association articles of
incorporation, by-laws and budget.
D. BORROWER LEGAL DOCUMENTS
1. A resolution of the Borrower authorizing the Borrower to obligate
itself with respect to the Project Documents and authorizing
certain officers to execute and deliver the Project Documents.
C-2
EXHIBIT D
TO SUPPLEMENT TO LOAN AGREEMENT
PROJECT COMMITMENT
D-1
EXHIBIT E
TO SUPPLEMENT TO LOAN AGREEMENT
CONDITIONS TO OBLIGATION
OF LENDER TO ENTER INTO LOAN AGREEMENT SUPPLEMENT
The obligation of the Lender to enter into Loan Agreement Supplement is
conditioned upon the Lender having received, in form and substance
satisfactory to Lender, each of the following:
1. Executed originals of the Loan Agreement Supplement, the other
Project Documents and such other agreements, instruments, certificates and
other documents as Lender shall require.
2. Such financial statements, budgets, reports, studies, data and
information concerning Project as Lender shall require.
3. A favorable opinion from counsel for Borrower with respect to
the following:
(a) Borrower has the power and authority to execute and deliver,
and perform its obligations under, the Project Documents.
(b) The execution, delivery and performance by Borrower of the
Project Documents have been duly authorized by necessary action and
do not and will not (i) contravene the charter documents of United
Homes, United Arizona, United Illinois or United Michigan; (ii)
contravene any law, rule or regulation or, to such counsel's
knowledge, any order, writ, judgment, injunction or decree or any
contractual restriction binding on or affecting Borrower; (iii)
require any approval or consent of any partner or any other Person
other than approvals or consents which have been previously obtained
and disclosed in writing to Lender; (iv) to such counsel's actual
knowledge, result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease
or instrument to which Borrower is a party or by which Borrower or
its properties may be bound or affected; or (v) to such counsel's
actual knowledge, result in, or require the creation or imposition
of, any lien of any nature (other than the liens contemplated
hereby) upon or with respect to any of the properties now owned or
hereafter acquired by Borrower; and, to such counsel's knowledge,
Borrower is not in default under any such law, rule, regulation,
order, writ, judgment, injunction, decree or contractual
restriction or any such indenture, agreement, lease or instrument.
(c) The Project Documents have been duly executed and delivered
and constitute the legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms.
E-1
(d) To such counsel's knowledge, no authorization or approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution,
delivery and performance by Borrower of the Project Documents or any
other document executed pursuant thereto or in connection therewith.
(e) To such counsel's actual knowledge, there is no pending or
threatened action, suit, proceeding or arbitration against or
affecting Borrower or any of its Affiliates before any court,
governmental agency or arbitrator which, if adversely determined,
would result in a Material Adverse Change.
(f) The steps necessary to perfect the security interests
granted pursuant to the Project Security Instruments under
applicable law.
(g) Such other opinions as Lender shall request.
4. A copy of the resolutions adopted by United Homes, United Arizona,
United Illinois and United Michigan authorizing the Borrower to incur the
debt related to the Project and authorizing certain officers of the Borrower
to execute and deliver the Project Documents.
5. Payment of costs and expenses incurred by Lender, including, without
limitation, the fees and costs of its legal counsel, in connection with the
preparation, execution, delivery and recordation/filing of the Project
Documents.
E-2
EXHIBIT F
TO SUPPLEMENT TO LOAN AGREEMENT
FORM OF DRAW REQUEST CERTIFICATION
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DRAW REQUEST NUMBER ____
[DATE]
LENDER: RESIDENTIAL FUNDING CORPORATION
BORROWER: UNITED HOMES, INC.
UNITED HOMES, INC.
UNITED HOMES OF ILLINOIS, INC.
and
UNITED HOMES OF MICHIGAN, INC.
PROJECT: Bayberry
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Reference is made to that certain Loan Agreement dated as of May 28,
1996 between Lender and Borrower as amended by the Supplement to Loan
Agreement dated as of August 21, 1996 relating to the above referenced
Project (as amended or otherwise modified from time to time, the "Loan
Agreement"). Capitalized terms used herein without definition shall have the
meanings set forth in the Loan Agreement Supplement, unless the context shall
require otherwise.
Borrower requests Lender to disburse to the Borrower the proceeds of the
Loan in the amounts and for the purposes stated in the attached SCHEDULE 1.
In connection with such requested disbursement, Borrower hereby
represents, warrants and certifies to Lender as follows:
(a) No Event of Default or Potential Default presently exists
under the Loan Agreement or any other Loan Document.
(b) All of the representations and warranties of Borrower under
the Loan Agreement and the other Loan Documents are hereby remade and
restated.
F-1
(c) With respect to the Loan:
(i) the Borrower has satisfied all conditions precedent
to the funding of the Project as set forth in the Loan Documents;
(ii) the Loan Documents are in full force and effect;
(iii) the Loan is secured by a first priority lien on the
Project and the other collateral described in the Loan Documents;
(iv) the sum of all amounts expended in respect of the
development and construction of the Project does not exceed the
Budget, or if such amounts do exceed the Budget, attached hereto is
a listing of the amounts over budget and an explanation of such
budget overrun(s); and
(v) all contractors, subcontractors, vendors,
materialmen and other Persons entitled to payment with respect to
the Project have been paid or will be paid, subject to retainage,
with the proceeds of the requested disbursement.
(d) All insurance required to be maintained by Borrower remains
in full force in effect, of the types, in the amounts and issued by
insurers as previously approved by Lender.
(e) All Development Work and Construction Improvements covered
by this Draw Request have been completed in accordance with the
applicable contracts and should now be paid, and all costs incurred in
connection with the Development Work and the Construction Improvements
either have been paid or will be paid out of the proceeds of this
disbursement.
BORROWER:
UNITED HOMES, INC.,
an Illinois corporation
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
F-2
UNITED HOMES, INC.,
an Arizona corporation
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
UNITED HOMES OF ILLINOIS, INC.,
an Illinois corporation
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
UNITED HOMES OF MICHIGAN, INC.,
a Michigan corporation
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
F-3
BAYBERRY
SCHEDULE 1 TO DRAW REQUEST NUMBER ___
[Borrower to attach its schedule setting forth the amounts
requested to be disbursed.]
F-4
EXHIBIT G
TO SUPPLEMENT TO LOAN AGREEMENT
ADDITIONAL PERMITTED EXCEPTIONS
1. RIGHTS OF THE ILLINOIS XXXX TELEPHONE COMPANY, A CORPORATION OF
ILLINOIS, ITS SUCCESSORS AND ASSIGNS, TO CONSTRUCT, LAY, MAINTAIN, ETC.,
CONDUITS, CABLES, ETC., WITH RIGHT OF ACCESS THERETO FOR THE MAINTENANCE
THEREOF, IN, UPON, UNDER AND ALONG THE EAST 1/2 OF COUNTY HIGHWAY NO. 38
(O'PLAINE ROAD) AS GRANTED BY INSTRUMENT DATED OCTOBER 17, 1969 AND
RECORDED NOVEMBER 10, 1969 AS DOCUMENT 1442162.
(AFFECTS THE WEST 40 FEET)
2. RIGHTS OF THE PUBLIC AND OF THE STATE OF ILLINOIS IN AND TO SO MUCH OF
THE LAND HEREIN AS DEDICATED FOR ROAD PURPOSES BY INSTRUMENT DATED MAY
26, 1952 AND RECORDED JUNE 4, 1952 AS DOCUMENT 759451 AND SHOWN ON PLAT
OF SURVEY RECORDED OCTOBER 10, 1956 AS DOCUMENT 926375.
(AFFECTS THE WEST 40 FEET OF THE LAND HEREIN)
3. CITY OF WAUKEGAN ORDINANCE 91-0-87 DATED AUGUST 19, 1991 AND RECORDED
SEPTEMBER 12, 1991 AS DOCUMENT 3061466, WHICH REQUIRES PAYMENT OF LIFT
STATION RECAPTURE FEES, INTEREST AND CITY FEES FOR ADMINISTERING SUCH
COLLECTIONS, TO BE PAID TO THE CITY OF WAUKEGAN.
4. PRE-ANNEXATION AGREEMENT DATED MARCH 12, 1995 AND RECORDED APRIL 19,
1995 AS DOCUMENT 3665647, BETWEEN THE NORTH SHORE SANITARY DISTRICT AND
BANK OF WAUKEGAN, AS TRUSTEE UNDER TRUST NUMBER 3410, AND THE TERMS AND
PROVISIONS CONTAINED THEREIN.
5. ANNEXATION ORDINANCE BY THE NORTH SHORE SANITARY DISTRICT DATED APRIL
27, 1995 AND RECORDED MAY 3, 1995 AS DOCUMENT 3670310.
G-1
