EXHIBIT 10.91
AMENDED AND RESTATED
REVOLVING CONSTRUCTION AND DEVELOPMENT LOAN AGREEMENT
THIS AGREEMENT, made and entered into as of the __23__ day of
December, 1998, by and between XXXXXXXX BROS. CONSTRUCTION, INC., a Minnesota
corporation (hereinafter referred to as "Borrower"), whose address is 000 Xxxx
Xxxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxxx 00000; and U.S. BANK NATIONAL ASSOCIATION
(formerly known as First Bank National Association), a national banking
association (hereinafter referred to as "Lender"), whose address is 000 Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000.
PRELIMINARY RECITALS:
A. Borrower and Lender entered into a Revolving and Construction
Loan Agreement dated as of April 18, 1997 (the "Original Loan Agreement"),
pursuant to which Lender agreed to lend to Borrower up to Five Million and
00/100 Dollars ($5,000,000.00) under the terms and conditions of the Loan
Agreement (the "Loan").
B. The Loan was evidenced by the Original Note (as defined below).
C. The Original Note was secured by the Original Mortgage (as
defined below).
D. The Original Note was further secured by a Guaranty (as defined
below) and other collateral security agreements given by Borrower or the
Guarantors to Lender, all dated April 18, 1997.
E. The Borrower has requested an increase in the maximum amount of
the Loan from $5,000,000.00 to $7,500,000.00, and amendments to certain other
provisions of the Loan Agreement, to which Lender is agreeable subject to the
terms of this Agreement.
F. The parties hereto desire to amend and fully restate the terms of
the Original Loan Agreement in its entirety.
NOW, THEREFORE, in consideration of the above recitals and other
good and valuable consideration, the receipt of which is hereby acknowledged,
Borrower and Lender do hereby amend and fully restate the terms of the Original
Loan Agreement as follows:
DEFINITIONS
For the purposes of this Agreement, the following terms shall have
the following meanings:
Acquisition Costs: All costs of acquiring Project Land, including
the purchase price and reasonable and customary closing costs; provided,
however, that Acquisition Costs with respect to any Project Land shall be deemed
never to exceed the lesser of (a) the actual cost of the Project Land, or (b)
the value of the unimproved Project Land in "as-is" condition as shown by
an Appraisal (to the extent that an Appraisal is required by this Agreement with
respect to such Project Land).
Advance: Any portion of the Loan advanced by Lender to or for the
benefit of Borrower in accordance with the terms hereof.
Advance Date: The date on which an Advance of Loan proceeds
requested by Borrower hereunder is funded.
Affiliate: When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns or
holds, directly or indirectly, five percent (5%) or more of any class of voting
stock of the Person referred to (or if the Person referred to is not a
corporation, five percent (5%) or more of the equity interest therein), (c) each
Person, five percent (5%) or more of the voting stock (or if such Person is not
a corporation, five percent (5%) or more of the equity interest therein) of
which is beneficially owned or held, directly or indirectly, by the Person
referred to, and (d) each of such Person's officers, directors, joint venturers
and partners. The term control (including the terms "controlled by" and "under
common control with") means the possession directly or indirectly, of the power
to direct or cause the direction of the management and policies of the Person in
question.
Agreement: This Amended and Restated Revolving Construction and
Development Loan Agreement including all Project Addenda and any other
amendments hereof and supplements hereto executed by Borrower and Lender.
Amendment of Mortgage: The Amendment of Mortgage to be executed at
the time that an additional Project is approved by Lender for the purpose of
subjecting such Project to the lien of the Mortgage. The form of the Amendment
of Mortgage shall be as set forth in Exhibit "A" attached hereto with the
insertion of the applicable legal description being added for such Project.
Amendment of Mortgage to Increase Loan Amount: The Amendment of
Mortgage to be executed with the execution of this Agreement for the purpose of
increasing the Loan amount and extending the Maturity Date of the Mortgage. The
form of the Amendment of Mortgage to Increase Loan Amount shall be as set forth
in Exhibit "D" attached hereto with the insertion of the applicable legal
description as of the date of the execution of this Agreement.
Applicable Margin: One and one-quarter percent (1.25%).
Application and Certificate For Payment: The Application and
Certificate for Payment in the form of that attached hereto as Exhibit "B" which
shall be used in connection with all Advances for Development Loans.
Appraisal: A third-party appraisal of the value of a Project setting
forth the value of the unimproved Project Land in an "as is" condition and the
value of the improved Project Land based on the retail sales value of the
finished lots in the case of a Development Project and the retail sales value of
the finished lot and the home to be constructed thereon in the case of a
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Construction Project commissioned and/or approved by, and addressed to, Lender,
and prepared at the expense of Borrower by a qualified and licensed MAI
appraiser acceptable to Lender, which complies with all applicable Governmental
Requirements and the requirements of Lender and its chief review appraiser.
Board: The Board of Governors of the Federal Reserve System or any
successor thereto.
Borrowing Base Certificate: The Borrowing Base Certificate in the
form of that attached hereto as Exhibit "C".
Budget: An itemized, certified statement of actual and estimated
Costs, including all Acquisition Costs, Construction Costs and Soft Costs, of a
Project, in Lender's form, signed and sworn to by Borrower, as the same may be
amended or supplemented with approval of Lender from time to time.
Business Day: Any day (other than a Saturday, a Sunday or a legal
holiday in the State of Minnesota) on which national banks are permitted to be
open.
City: The municipality, village, township or other applicable
governmental entity in which the Project is located and from which governmental
approvals or permits are required.
Closing Date: The date of this Agreement.
Code: The Internal Revenue Code of 1986, as amended.
Completion Date: The date on which Completion of a Project occurs,
but in no event later than (a) the date specified therefor on the Project
Addendum relating to a Development Project, and (b) the date specified in Column
I of the Borrowing Base Certificate.
Consolidated Indebtedness: All Indebtedness of Borrower and its
Consolidated Subsidiaries (excluding intercompany items and all Shareholders
Subordinated Debt), after making appropriate deductions for any minority
interests.
Consolidated Net Income: For any period shall mean the amount of
consolidated net income (or loss) of Borrower and its Consolidated Subsidiaries
for such period determined on a consolidated basis in accordance with generally
accepted accounting principles, after eliminating all intercompany items and
portions of earnings properly attributable to minority interests, if any, in the
Consolidated Subsidiaries; provided, however, that there shall not be included
in Consolidated Net Income any net income (or net loss) of a Consolidated
Subsidiary for any period during which it was not a Consolidated Subsidiary, or
any net income (or net loss) of any business, properties or assets acquired (by
way of merger, consolidation, purchase or otherwise) by Borrower or any
Consolidated Subsidiary for any period prior to the acquisition thereof.
Consolidated Subsidiary: A Subsidiary of Borrower whose financial
statements are included in the most recent annual consolidated financial
statements of Borrower and its Subsidiaries.
Consolidated Tangible Net Worth: The dollar amount of:
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(a) the tangible assets of Borrower and its Consolidated
Subsidiaries (excluding intercompany items) after
deducting for minority interests and adequate reserves
in each case where, in accordance with generally
accepted accounting principles, a reserve is proper, in
excess of
(b) the aggregate amount of Consolidated Indebtedness and
Shareholders Subordinated Debt;
provided, however, that (i) inventory shall be taken into account on the basis
of the cost or current market value, whichever is lower, (ii) in no event shall
there be included as such tangible assets (a) any assets typically classified as
intangible assets, including but not limited to patents, trademarks, trade
names, copyrights, licenses, goodwill and debt issuance costs, or (b) treasury
stock or any securities or Indebtedness of Borrower or a Consolidated
Subsidiary, or any other equity, convertible or unsecured debt securities unless
the same are readily marketable in the United States of America or entitled to
be used as a credit against Federal income tax liabilities, and (iii) securities
included as such tangible assets shall be taken into account at their current
market price or cost, whichever is lower, and (iv) any write-up in the book
value of any assets subsequent to December 31, 1995, shall not be taken into
account. The Consolidated Tangible Net Worth as of September 30, 1998 was
$5,586,000.
Construction Costs: All hard costs of constructing Project
Improvements, including site preparation costs and the costs of all materials,
labor and equipment.
Construction Project: The construction of a single-family home or a
two to eight-unit multifamily structure on Construction Project Land, all as
approved by Lender in accordance with Section 2.4 hereof.
Construction Project Completion: All Construction Project
Improvements included within a Construction Project are completed in accordance
with the Plans therefor and paid for in full, free of all mechanics', laborers',
materialmen's and other similar lien claims; a certificate of substantial
completion for the Project Improvements has been signed by Borrower and Borrower
has received a certificate of occupancy from the City and has otherwise complied
with all Governmental Requirements with respect to completion of construction of
the Construction Project.
Construction Project Improvements: New single-family homes or two to
eight-unit multifamily structures and related improvements to be constructed
upon Construction Project Land and owned by Borrower.
Construction Project Land: Land owned in fee simple by Borrower to
be used for a Construction Project and upon which Construction Improvements are
located or are to be constructed.
Construction Project Loan. A Construction Project Loan made pursuant
to Section 2.4.
Consultants: Third party experts retained by Lender to assist it in
connection with approving, closing, advancing or administering the Project
Loans.
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Contingency Reserve: A reserve of Development Project Loan proceeds
to pay Costs which are in excess of the amounts thereof anticipated on the date
of approval of the Development Project, whether as a result of price increases,
changes in the Plans or otherwise, in an amount equal to a percentage of all
Construction Costs of a Development Project as mutually agreed to by Borrower
and Lender.
Contractor: Any Person, party or entity which has a contract or
subcontract under which payment may be required for any work done, material
supplied or services furnished in connection with acquiring, constructing,
financing, equipping and/or developing a Project.
Costs: All Acquisition Costs, Construction Costs and Soft Costs of a
Project.
Debt Restricted Cash: The unborrowed portion of any land development
loans to Borrower held in restricted bank accounts under financing arrangements
substantially similar to such loans made to Borrower in the past.
Default Rate: The Default Rate of interest specified in Section
1.2(b) hereof.
Development Project: The acquisition and development of Development
Project Land into (a) single family housing subdivisions, or (b) two to eight
unit multi-family housing subdivisions, all as approved by Lender in accordance
with Section 2.2 hereof.
Development Project Completion: All Development Project Improvements
included within a Development Project (except for final paving or other similar
items, the completion of which is secured by a Letter of Credit deposited with
the City) are completed in accordance with the Plans therefor, as approved by
Lender, and paid for in full, free of all mechanics', laborers', materialmen's
and other similar lien claims; said completion has been approved and certified
by the General Contractors and by the Inspecting Architect; a certificate of
substantial completion for the Project Improvements has been signed by Borrower
and the General Contractors and delivered to Lender, and no punch-list items
remain to be completed; Lender has received acceptable evidence that all
Governmental Requirements and all private restrictions and covenants relating to
the Project have been complied with or satisfied; Lender has received copies of
all warranties, if any, from suppliers covering materials included within the
Development Project; Lender has received an as-built survey of the Project which
conforms with Lender's requirements.
Development Project Improvements: All improvements, including all
improvements required by the City, which are necessary for the completion of a
Development Project including, but not limited to, the construction of roads,
utilities, curbs, gutters, signage, grading and landscaping, all in accordance
with Plans approved by Lender and Inspecting Architect.
Development Project Land: Land owned or acquired in fee simple by
Borrower to be used for a Development Project and upon which Development Project
Improvements are located or are to be constructed.
Development Project Loan: A Project Loan made pursuant to Sections
2.2 and 2.3.
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Draw Request: A written request by Borrower for an Advance of
Construction Project Loan proceeds under this Agreement, in the form Exhibit "E"
attached hereto and with the certifications set forth therein, including the
Borrowing Base Certificate.
Environmental Audit: A written Phase I environmental review, audit,
assessment or report commissioned and/or approved by, and currently addressed
and certified to, Lender, or accompanied by a reliance letter addressed which
complies with ASTM Practice E 1527 and which is otherwise acceptable to Lender,
setting forth the results of an investigation of a Development Project,
including an historical investigation of the uses and ownership of the
Development Project Land included therein, contacts with appropriate
governmental agencies and any Tests which may be requested by Lender, prepared
by a competent, qualified environmental engineer or consultant which is
acceptable to Lender and is licensed, bonded and insured in accordance with all
applicable statutes, and all supplements, updates and recertifications thereof
required by Lender.
Funded Debt: The sum of Senior Indebtedness, the Senior Subordinated
Debentures, Parity Indebtedness and Subordinated Indebtedness (except
Shareholders Subordinated Debt) less Debt Restricted Cash.
GAAP: Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of any date of
determination.
General Contractor: The general contractor or construction manager
(whether one or more) retained by Borrower and approved by Lender, which
approval shall not be unreasonably withheld with respect to any Project, if
different from Borrower. Borrower may act as its own general contractor with
respect to any Construction Project.
Governmental Requirements: All laws, statutes, codes, ordinances and
governmental rules, regulations and requirements applicable to Borrower, Lender,
Guarantors and/or the Projects.
Guarantors: Xxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxx Xxxxxx,
Xxxxxxx Xxxxx and Xxxxxx X. Xxxxxxxx (each of whom is herein sometimes called a
"Guarantor").
Guaranty: The joint and several Guaranty of full payment and
performance of the obligations of Borrower under all of the other Loan
Documents, dated April 18, 1997, executed by Guarantors, including any
amendments thereof and supplements thereto executed by Guarantors and Lender.
Immediately Available Funds: Funds with good value on the day and in
the city in which payment is received.
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Improvements: The buildings and other improvements which are to be
placed or constructed upon the Project Land as a part of any Project, all of
which shall be owned by Borrower.
Indebtedness: With respect to any Person at any date means and
includes all items of indebtedness which, in accordance with generally accepted
accounting principles, would be included in determining total liabilities as
shown on the liabilities side of a balance sheet of such Person at such date,
and in addition shall include (i) all indebtedness guaranteed or endorsed (other
than for purposes of collection in the ordinary course of business), directly or
indirectly, in any manner by such Person, and contingent obligations of such
Person in respect of, or to purchase or otherwise acquire, indebtedness of
others, (ii) all lease obligations of such Person required under generally
accepted accounting principles to be capitalized and reflected as a liability on
the balance sheet of such Person, and (iii) all indebtedness secured by any
mortgage, lien, pledge, charge or encumbrance upon property owned by such
Person, whether or not the indebtedness so secured has been assumed by such
Person.
Indemnification Agreement: Lender's form of joint and several
indemnification agreement relating to environmental matters and executed by
Borrower and Guarantors, dated April 18, 1997, in favor of Lender, including any
amendments thereof and supplements thereto executed by Borrower and Guarantors,
and including the Reaffirmation of Indemnification Agreement executed by the
Borrower of even date herewith which agreement as amended will cover all Project
Land.
Inspecting Architect: The independent architect, engineer or
consultant (whether one or more) selected by Lender to advise Lender with
respect to any Project.
Lender Debt: Any indebtedness of Borrower, of any Guarantor or of
any Affiliate of Borrower or of any Guarantor to the Lender or to any Affiliate
of Lender, whether recourse or nonrecourse, except the Loan.
Letter of Credit: A performance letter of credit required to be
issued by a City or a public utility in connection with a Development Project.
Letter of Instructions: The Letter of Instructions in the form of
that attached hereto as Exhibit "F".
Loan: The aggregate of all Project Loans made by Lender to Borrower
pursuant to the terms of this Agreement in an amount of up to Seven Million Five
Hundred Thousand and 00/100 Dollars ($7,500,000.00) outstanding at any given
time (subject to the limitations set forth in Section 1.1).
Loan Documents: The documents which evidence, secure or otherwise
relate to the Loan including, but not limited to, the Note, this Agreement, the
Mortgage, the Amendment to Mortgage to Increase Loan Amount, all Amendments to
Mortgage, the Indemnification Agreement and the Reaffirmation thereof, and
including any amendments thereof and supplements thereto executed by Lender and
Borrower (and/or any other party thereto).
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Loan to Value Ratio: The ratio calculated by dividing the maximum
principal amount of a Project Loan by the market value less special assessments
of the related Project, said market value determined (a) as set forth in the
most recent Appraisal thereof, or (b) as set forth in the purchase agreement
less special assessments in the case of Construction Project Loans of less than
Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) which are secured by
Pre-Sold Homes.
Loan Year: A period consisting of twelve (12) consecutive months
commencing on the first calendar month subsequent to the date hereof or on any
anniversary thereof, the first Loan Year being a Loan Year commencing on the
first day of May, 1997.
Management Bonuses: Management Bonuses shall have the meaning set
forth in Section 10.12 of that certain Indenture dated as of October 18, 1996 by
and between Borrower and National City Bank of Minneapolis, National Association
as Trustee.
Maturity Date: May 31, 2001 unless extended as set forth in Section
1.8 herein.
Model Home: A Construction Project which (a) is a single family home
or a unit in a two to eight unit multifamily structure, (b) not a Pre-Sold Home,
and (c) will be used as a model home by Borrower.
Mortgage: The first Mortgage and Security Agreement and Fixture
Financing Statement, dated April 18, 1997, executed and delivered by Borrower in
favor of Lender to secure the Loan, including all amendments thereof and
supplements thereto, which Mortgage shall be a first lien on all Project Land,
and was filed on _____________________________ in the office of the (COUNTY
RECORDER) (REGISTRAR OF TITLES), _____________________________ County,
Minnesota, as Document No. ___________, and which Mortgage has been amended by
the Amendments to Mortgage dated _____________________________, and filed on
__________________ in the office of the (COUNTY RECORDER) (REGISTRAR OF TITLES),
_____________________________, County, Minnesota, as Document Nos.
_______________, and which Mortgage is amended by the Amendment to Mortgage to
Increase Loan Amount (hereinafter the Mortgage and Security Agreement and
Fixture Financing Statement and all amendments thereto shall be referred to as
the "Mortgage")
Note: The Amended and Restated Revolving Credit Note, dated of even
date herewith, executed and delivered by Borrower to Lender in the face
principal amount of Seven Million Five Hundred Thousand and 00/l00 Dollars
($7,500,000.00), to evidence the Loan, as the same may be amended, modified or
replaced from time to time, which Note amends and replaces that certain
Revolving Credit Note dated April 18, 1997, from Borrower to Lender in the
original principal amount of Five Million and 00/100 Dollars ($5,000,000.00)
(the "Original Note")
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Parity Indebtedness: Any and all Indebtedness of Borrower created,
incurred, assumed, or guaranteed by Borrower before, at, or after the date of
execution of this Agreement which (a) matures by its terms, or is renewable at
the option of Borrower to a date, more than one year after the date of the
original creation, incurrence, assumption, or guaranty of such Indebtedness by
Borrower, (b) contain covenants, conditions and restrictions on Borrower which
are not inconsistent with nor violate any of the covenants, conditions and
restrictions in this Agreement, and (c) is neither Senior Indebtedness nor
Subordinated Indebtedness. Parity Indebtedness shall include, without
limitation, the Senior Subordinated Debentures.
Permitted Encumbrances: The liens, charges and encumbrances on title
to a Project approved as such by Lender prior to any Advance of proceeds of the
Project Loan therefor.
Person: Any natural person, corporation, limited liability company,
partnership (general or limited), limited liability partnership, joint venture,
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting
in an individual, fiduciary or other capacity.
Plans: The final working plans for Project Improvements, including
drawings, specifications, details and manuals (which in the case of Development
Projects shall have been approved by Lender).
Pollutant: Any hazardous or toxic substance, waste or material, or
other pollutant or contaminant (including, but not limited to, radioactive
materials, gasoline, asbestos, dioxin, methane, radon, urea-formaldehyde and
polychlorinated biphenyls), as those terms are defined or used in any
Governmental Requirement.
Pre-Sold Home: A Construction Project that is subject to a
non-cancelable and non-contingent purchase agreement with a bona fide third
party buyer.
Project: The Project Land and the Project Improvements which
collectively make up either a Development Project or a Construction Project.
Project Addendum: An addendum to this Agreement between Borrower and
Lender for each Development Project approved by Lender pursuant to Section 2.2,
identifying and describing the approved Development Project in detail,
supplementing this Agreement as it applies to said Development Project, setting
forth the amount of the Development Project Loan allocated thereto, setting
forth the date by which construction of the Development Project must begin
("Commencement Date") and the outside Completion Date therefor, setting forth
the estimated Costs of the Development Project and adding to this Agreement any
requirements, representations and covenants which are required by Lender as a
condition to its approval of said Development Project.
Project Improvements: All Construction Project Improvements and
Development Project Improvements.
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Project Land: All Development Project Land and Construction Project
Land.
Project Loan: The portion of the Loan set aside to fund an approved
Development Project pursuant to Section 2.2 or an approved Construction Project
pursuant to Section 2.4.
Project Loan Maturity Date: The earlier of (a) the Maturity Date, or
(b) one of the following dates depending upon the type of Project: (i) thirty
(30) months after the date on which the first Advance of the proceeds of a
Development Project Loan is made, (ii) twelve (12) months after the date on
which the first Advance of proceeds of a Construction Project Loan is made if
the Project Improvement is a Pre-Sold Home (or, if earlier, the closing date
stipulated in the Purchase Agreement), (iii) thirty (30) months after the date
on which the first Advance of proceeds of a Construction Project Loan is made if
the Project Improvement is a Model Home, or (iv) fifteen (15) months after the
date on which the first Advance of proceeds of a Construction Project Loan is
made if the Project Improvement is a Speculative Home.
Purchase Agreement: A purchase agreement for the purchase of the
Project Land to be acquired for a Development Project or a Construction Project.
Reference Rate: The rate of interest from time to time publicly
announced by Lender as its "reference rate". Lender may lend to its customers at
rates that are at, above or below the Reference Rate. For purposes of
determining any interest rate hereunder or under any Loan Document which is
based on the Reference Rate, such interest rate shall change as and when the
Reference Rate shall change.
Regulatory Change: Any change after the date hereof in federal,
state or foreign laws or regulations or the adoption or making after such date
of any interpretations, directives or requirements applying to a class of banks
including Lender under any federal, state or foreign laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
Reimbursement Agreement: A reimbursement agreement in form and
content acceptable to Lender which governs the terms upon which a letter of
credit will be issued to a City in connection with a Development Loan.
Release Price: With respect to (a) a lot which is part of a
Development Project and which is being sold to a third party buyer or which
Borrower requests be released, unless such lot is being transferred to, and will
become part of a Construction Project pursuant to Section 3.6 hereof, the
Release Price shall equal one hundred twenty-five percent (125%) of the Transfer
Price for such lot as established by the terms of this Agreement, and (b) a lot
which is a Construction Project but which was originally part of a Development
Project, the Release Price shall equal one hundred eight percent (108%) of the
amount of the maximum approved Construction Project Loan, whether funded or not,
(with the excess proceeds, i.e., the eight percent (8%) being applied as a
prepayment of the Development Loan from which such lot was transferred), and (c)
a lot which is a Construction Project, but which was not originally part of a
Development Project, the Release Price shall equal one hundred percent (100%) of
the amount of the Construction Project Loan.
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Revolving Commitment: The obligation of Lender to make Project Loans
to Borrower in an aggregate principal amount outstanding at any time not to
exceed the Revolving Loan Amount upon the terms and subject to the conditions
and limitations set forth in this Agreement.
Revolving Commitment Ending Date: November 30, 2000 unless extended
pursuant to the terms of Section 1.8 hereof.
Revolving Loan Amount: Seven Million Five Hundred Thousand and
00/100 Dollars ($7,500,000.00).
Senior Indebtedness: The principal of, premium (if any) and interest
on any and all Indebtedness of Borrower (other than the Senior Subordinated
Debentures, Parity Indebtedness and Subordinated Indebtedness) incurred in
connection with (i) the borrowing of money (whether secured or unsecured) from
or guaranteed to banks, trust companies, insurance companies and other financial
institutions, (ii) all Indebtedness to specialized industry lenders to the
extent it is secured by real estate and/or assets of Borrower (including the
cash value of life insurance) evidenced by bonds, debentures, mortgages, notes
or other securities or other instruments, (iii) obligations under capitalized
leases as determined by GAAP, and (iv) other non-recourse obligations to third
parties in connection with the acquisition of land (but excluding option
agreements or contingent purchase agreements which Borrower has the right to
terminate unilaterally) incurred, assumed or guaranteed by Borrower before, at
or after the date of execution of this Agreement, and all renewals, extensions
and refundings thereof, unless in the instrument creating or evidencing any such
Indebtedness or pursuant to which such Indebtedness is outstanding, it is
provided that such Indebtedness, or such renewal, extension or refunding
thereof, is junior or is not superior in right of payment to the Senior
Subordinated Debentures.
Senior Subordinated Debentures: Both (a) the Senior Subordinated
Debentures, Series Ten Percent, in the amount of $3,000,000.00 and due in the
year 2003 as described in and governed by that certain Indenture dated May 14,
1993, by and between Borrower and National City Bank of Minneapolis, National
Association as Trustee, and (b) the Senior Subordinated Debentures, Series
Eleven Percent, in the amount of $3,000,000.00 and due 2004 as described in and
governed by that certain Indenture dated as of October 18, 1996, by and between
Xxxxxxxx Brothers Construction, Inc., and National City Bank of Minneapolis,
National Association as Trustee.
Shareholders Subordinated Debt: Any borrowing by Borrower from its
shareholders which is evidenced by a note or other instrument and expressly made
Subordinated Indebtedness as required by Section 10.11 of that certain Indenture
dated as of October 18, 1996 by and between Borrower and National City Bank of
Minneapolis, National Association, as Trustee, and which has a stated maturity
which is later than the stated maturity of the Senior Subordinated Debentures
described in such Indenture.
Soft Costs: Costs of a Project not attributable to Acquisition Costs
or Construction Costs, including interest on the Project Loan, fees payable to
Lender pursuant hereto, fees of Borrower's and Lender's counsel, fees of outside
accountants, costs of feasibility studies, environmental studies, permit fees,
inspection fees, fees of the Inspecting Architect and other Consultants, ad
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valorem taxes, insurance premiums, recording and filing fees and taxes, title
insurance premiums and fees, surveyor's fees and costs of internal and outside
appraisals.
Speculative Home: A Construction Project which is a single family
home, or a unit in a two to eight multifamily structure, not a Pre-Sold Home and
not anticipated to be used as a Model Home.
Subdivision. Any Development Project Land or all of the land,
whether unplatted, platted or replatted, which is being developed by Borrower or
any other Person, for the construction of single-family homes or two to
eight-unit multifamily structures as part of any subdivision authorized under
any applicable sections of Minnesota Statutes or local zoning codes or
ordinances, including any prior plats or replats thereof, shall be considered
one Subdivision (i.e., Xxx 0, Xxxxx 0, Xxxxx'x Xxxxx Addition, and Xxx 0, Xxxxx
0, Xxxxx'x Xxxxxxxx, xxxxx xx considered one Subdivision if Xxxxx'x Third
Addition is a replat of any portion of Xxxxx'x Addition or is unplatted land
that was contemplated to be added to Xxxxx'x Addition in any development
agreement relating to the development of Xxxxx'x Addition).
Subordinated Indebtedness: Any and all Consolidated Indebtedness of
Borrower created, incurred, assumed, or guaranteed by Borrower before, at, or
after the date of execution of this Agreement in which, by the terms of the
instrument (or any supplemental instrument) creating or evidencing such
Consolidated Indebtedness or pursuant to which such Indebtedness is outstanding
(a) it is provided that such Consolidated Indebtedness, or any renewal,
extension, or refunding thereof, is expressly subordinate and junior in right of
payment to the Senior Subordinated Debentures (whether or not subordinated to
any other Indebtedness of Borrower), or (b) it is not, by its terms, Senior
Indebtedness or Parity Indebtedness.
Subsidiary: Any corporation of which at least a majority of the
outstanding voting stock is owned, at the time, directly or indirectly, by
Borrower, or by one or more Subsidiaries of Borrower. For purposes of this
definition, "voting stock" means stock which ordinarily has voting power for the
election of directors, whether at all times or only so long as no senior class
of stock has such voting power by reason of any contingency.
Sworn Construction Cost Statement: An itemized, certified statement
of actual and estimated Construction Costs of a Project, in Lender's form,
signed and sworn to by Borrower and the General Contractor (if any), as the same
may be amended or supplemented with the approval of Lender from time to time.
Termination Date: The earlier of (a) the Maturity Date, or (b) the
date on which the Note is declared to be immediately due and payable pursuant to
the terms hereof or of the Note.
Tests: Such soil tests, water tests, chemical tests, materials tests
and other tests and analyses as are appropriately required to confirm, with
relative certainty, the absence of Pollutants from a Project.
Title Company: Chicago Title Insurance Company, a Missouri
corporation.
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Title Policy: A loan policy of title insurance in favor of Lender
issued by the Title Company together with such endorsements as are necessary to
evidence the addition of Projects, as approved, as additional security for the
Loan and complying with Lender's standard requirements therefor.
Total Revolving Outstandings: As of any date of determination, the
sum of the aggregate unpaid principal balance of Advances on Development Project
Loans outstanding on such date plus any amounts not yet funded for an approved
Development Project Loan.
Transfer Price: The price designated for each lot within a
Development Project which will be used as the Acquisition Cost for such lot when
transferring such lot to a Construction Project. The transfer price for each
such lot shall be established by Borrower and Lender in the Project Addendum
provided that in determining such Transfer Prices the total of all Transfer
Prices for all lots with a Development Project shall equal the amount of the
applicable Development Loan.
Unused Revolving Commitment: As of any date of determination, the
amount by which the Revolving Loan Amount exceeds the Total Revolving
Outstandings.
1. LOAN
1.1 Principal Advances
Upon the terms and subject to the conditions set forth in this
Agreement, Lender agrees to make Project Loans to Borrower on a revolving basis,
in Advances, at any time and from time to time, in accordance with the terms
hereof, from the Closing Date to the Termination Date, during which period
Borrower may borrow, repay and reborrow in accordance with the terms hereof, for
the purpose of acquiring, developing and constructing Projects; provided,
however, that (a) at no time shall Lender be obligated to lend to Borrower more
than the total amount of proceeds of the Loan which Borrower has then qualified
to receive hereunder, (b) the aggregate unpaid principal balance of all Total
Revolving Outstandings plus the aggregate unpaid principal balance of all
Construction Project Loans shall never exceed the Revolving Loan Amount, (c) the
maximum aggregate amount that may be set aside for all Development Project Loans
at any time shall be Four Million Five Hundred Thousand and 00/100 Dollars
($4,500,000.00), and the maximum number of proposed or approved Development
Project Loans at any time shall be three (3), and (d) the maximum aggregate
amount of all Construction Project Loans at any one time shall be the Revolving
Loan Amount less the Total Revolving Outstandings less the total of all Letters
of Credit on Development Projects not yet approved. All Advances shall be
evidenced by the Note. Lender shall enter in its ledgers and records the amount
of each such Advance and of each payment made upon such Advances, and Lender is
authorized by Borrower to enter on a schedule attached to the Note a record of
Advances and payments; provided, however, that the failure by Lender to make any
such entry or any error by Lender in making such entry shall not limit or
otherwise affect the obligations of Borrower hereunder and under the Note.
Notwithstanding the expressed principal amount of the Note, Borrower shall not
at any time be obligated to repay more or less than the total of all Advances
made by Lender pursuant hereto, together with interest thereon at the rates
specified below and in the Note, computed on each Advance from the date it is so
made by Lender, and all other advances made by Lender pursuant
13
to the terms of the Loan Documents, with interest thereon as therein provided,
less all payments of principal of and interest on the Note, and of such advances
and interest thereon, made by Borrower. The entire unpaid principal amount of
the Loan shall be due and payable on the Termination Date, and the entire unpaid
principal amount of each Project Loan shall be due and payable on the Project
Loan Maturity Date therefor.
1.2 Interest Rate, Interest Payments and Default Interest
Interest shall accrue and be payable on the Advances from the date
made as follows:
(a) Each Advance shall bear interest on the unpaid principal
amount thereof at a varying rate per annum equal to the sum of
(i) the Reference Rate, plus (ii) the Applicable Margin.
(b) Any Advance not paid when due, whether at the date scheduled
therefor or earlier upon acceleration, shall bear interest
until paid in full at a rate per annum equal to the sum of
(A) the Reference Rate, plus (B) the Applicable Margin, plus
(C) five percent (5%) (herein called the "Default Rate").
(c) Interest shall be payable (i) with respect to each Advance, on
the first Business Day of each calendar month, commencing on
the first Business Day of the next calendar month after the
calendar month in which the first Advance is made and
continuing on the first Business Day of each month thereafter
until the Termination Date; (ii) with respect to any portion
of an Advance which is prepaid in accordance with the terms
hereof, on the date of such prepayment; and (iii) with respect
to interest at the Default Rate, on demand at Lender's option.
Interest on the Loan shall be computed on the basis of actual days elapsed and a
year of three hundred sixty (360) days.
1.3 Prepayments
Borrower may prepay Advances, in whole or in part, at any time after
three (3) Business Days' prior written notice of said prepayment from Borrower
to Lender, without premium or penalty. Any such prepayment must be accompanied
by payment, in full, of all unpaid, accrued interest on the amount prepaid.
Amounts so prepaid shall be applied to such Project Loan or Project Loans as
designated by Borrower unless a default or event of default then exists
hereunder, in which event said amounts shall be applied as Lender may elect. If
no default or event of default exists hereunder, amounts so prepaid may be
reborrowed from time to time as parts of other Project Loans (but not the same
Project Loan) in accordance with the terms of this Agreement.
1.4 Optional Termination of Revolving Commitment
Borrower may, at any time, upon not less than three (3) Business
Days' prior written notice to Lender, terminate the Revolving Commitment in its
entirety. Upon termination of the Revolving Commitment pursuant to this Section,
Borrower shall pay to Lender the full amount
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of all outstanding Advances, all accrued and unpaid interest thereon, and all
other amounts then owing from Borrower to Lender pursuant to the Loan Documents,
and Lender shall have no further obligation to make Advances hereunder.
1.5 Fees
Borrower shall pay to Lender the following fees as and when
hereinafter provided: (a) a commitment fee in the amount of Nineteen Thousand
and 00/100 Dollars ($19,000.00), payable on the Closing Date; (b) a collateral
fee in the amount of one percent (1%) of the amount set aside from the Revolving
Commitment to fund each Development Project Loan, payable with respect to each
Development Project within forty-eight (48) hours after Lender gives Borrower
written notice that Lender has accepted and approved said Development Project
("Collateral Fee"); (c) an annual Letter of Credit fee for each Letter of Credit
issued pursuant to Section 2.2 hereof in an amount equal to two percent (2%) per
annum of the outstanding amount of such Letter of Credit payable quarterly, in
advance, commencing on the date of issuance of the Letter of Credit and (d) an
annual fee in the amount of one-half of one percent (1/2%) per annum of the
Revolving Loan Amount minus (i) the outstanding principal balances of all
Development Project Loans, and (ii) the aggregate amount that Lender remains
obligated to fund with respect to each such Development Project Loan as of the
first day of each Loan Year which fee shall be due and payable on the first day
of each Loan Year beginning May 1, 1998.
1.6 Payments
Payments and prepayments of principal of, and interest on, the Note
and all fees, expenses and other obligations under this Agreement payable to
Lender shall be made without setoff or counterclaim in Immediately Available
Funds not later than 1:00 P.M. (Minneapolis time) on the dates called for under
this Agreement and the Note to the Lender at its main office in Minneapolis,
Minnesota. Funds received after such time shall be deemed to have been received
on the next Business Day. Whenever any payment to be made hereunder or on the
Note shall be stated to be due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time, in the case of a payment of principal, shall be included in the
computation of any interest on such principal payment.
1.7 Capital Adequacy
In the event that any Regulatory Change reduces or shall have the
effect of reducing the rate of return on Lender's capital or the capital of its
parent corporation (by an amount Lender deems material) as a consequence of the
Loan to a level below that which Lender or its parent corporation could have
achieved but for such Regulatory Change (taking into account Lender's policies
and the policies of its parent corporation with respect to capital adequacy),
then Borrower shall, within ten (10) days after written notice and demand from
Lender, pay to Lender additional amounts sufficient to compensate Lender, or its
parent corporation, for such reduction. Any determination by Lender under this
Section and any certificate as to the amount of such reduction given to Borrower
by Lender shall be final, conclusive and binding for all purposes, absent error.
1.8 Extensions
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Not more than ninety (90) days and not less than sixty (60) days
prior to (a) a date two (2) years after the Closing Date, and (b) each
subsequent annual anniversary of the Closing Date (if all previous extension
options available under this Section 1.8 have been exercised by Borrower), and
if no default or event of default then exists hereunder, Borrower may, at its
option, request that Lender extend the Revolving Commitment Ending Date and the
Maturity Date for an additional period of one (1) year. Any such request shall
be accompanied by an extension fee in the amount of Thirty-seven Thousand Five
Hundred and 00/100 Dollars ($37,500.00) ("Extension Fee"). Lender may grant or
deny said request, in its sole and absolute discretion, or may condition its
granting of said request upon such matters as it may, in its sole discretion,
elect. Borrower shall have fifteen (15) days after receipt of a written list of
said conditions from Lender to agree thereto, in writing. If Borrower does not
so agree to the same within said fifteen (15) day period, Borrower's request for
said extension shall be deemed to have been denied. If Lender denies said
request for an extension, or said request is deemed to be denied pursuant to the
terms hereof, Lender shall return the Extension Fee, less any reasonable
out-of-pocket costs incurred by Lender in reviewing and evaluating Borrower's
request therefor including, but not limited to, any appraiser's fees (including
the fees of Lender's own internal review appraiser). Otherwise Lender shall
retain the Extension Fee as consideration for extending the Revolving Commitment
Ending Date and the Maturity Date.
1.9 Term Out
Notwithstanding anything to the contrary herein set forth, if Lender
ever does not extend the Revolving Commitment Ending Date (and the Maturity
Date) pursuant to Section 1.8 hereof, (i) the Revolving Loan Amount shall be
reduced to an amount equal to the amount of the sum of the Total Revolving
Outstandings plus the aggregate unpaid principal balance of all Construction
Project Loans as of the Revolving Commitment Ending Date, and (ii) the Total
Revolving Outstandings plus the aggregate unpaid principal balance of all
Construction Project Loans shall be repaid or reduced by Borrower on the last
day of each month after the Revolving Commitment Ending Date in six (6) equal
installments, so that the Total Revolving Outstandings plus the aggregate unpaid
principal balance of all Construction Project Loans shall be zero (0) on the
Maturity Date.
During the period between the Revolving Commitment Ending Date and
the Maturity Date, (a) no new Project shall be approved by Lender, (b) Lender
will continue to make Advances with respect to existing approved Project
Development Loans subject to the reduced Total Revolving Outstandings set forth
above, and (c) the Revolving Loan Amount shall be reduced simultaneously with
any reduction in the amount of the Total Revolving Outstandings and the
aggregate unpaid principal balance of all Construction Project Loans to an
amount equal to the reduced amount of the Total Revolving Outstandings plus the
aggregate unpaid principal balance of all Construction Project Loans.
2. CONDITIONS OF BORROWING
Lender shall not be required to make any Advances hereunder until
the pre-closing requirements, conditions and other requirements set forth below
have been completed and fulfilled to the satisfaction of Lender, with respect to
said Advance, at Borrower's sole cost and
16
expense. It is agreed, however, that Lender may, in its discretion, make such
Advances prior to completion and fulfillment of any or all of such pre-closing
requirements, conditions and other requirements, without waiving its right to
require such completion and fulfillment before any additional Advances are made.
2.1 Prerequisites to Effectiveness of Agreement
The obligations of Lender to make Advances and the effectiveness of
this Agreement are subject to delivery by Lender of the following documents,
certificates and opinions, each in form and substance acceptable to Lender:
(a) This Agreement duly executed by Borrower and Lender; the Note,
Amendment of Mortgage to Increase Loan Amount and
Reaffirmation of Indemnity Agreement duly executed by
Borrower;
(b) A Certificate of Good Standing for Borrower currently
certified by the Secretary of State of Minnesota, a
Certificate by Borrower's corporate secretary that there have
been no amendments to the Articles of Incorporation and the
By-Laws of the Borrower since April 18, 1997, or if there have
been amendments thereto, then a copy of the Articles of
Incorporation of Borrower together with all amendments thereto
currently certified by the Secretary of State of Minnesota; or
Borrower's amended By-Laws, and Resolutions of Borrower's
Board of Directors authorizing the transactions described
herein, and an incumbency certificate for Borrower (including
the names, titles and specimen signatures of officers thereof
authorized to execute Loan Documents), all currently certified
by Borrower's corporate secretary and upon which Lender may
rely until revoked by written notice to Lender;
(c) A Certificate from a duly authorized officer of Borrower
setting forth the names, titles, specimen signatures and
telephone numbers of all Persons authorized to (i) sign Draw
Requests and/or other documents, instruments, certificates and
agreements to be delivered by Borrower to Lender hereunder,
and/or (ii) give instructions to Lender hereunder, which
Certificate shall be deemed to be in full force and effect
until receipt by Lender of an amendment thereof duly executed
by said duly authorized officer of Borrower;
(d) A signed, written opinion from Borrower's counsel, addressed
to Lender and currently dated, as to the due organization,
existence, qualification and good standing of Borrower; as to
the due authorization, validity, legality, binding nature and
enforceability of the Loan Documents listed in Section 2.1(a);
that, to such counsel's knowledge, the execution, delivery and
performance by Borrower of the Loan Documents will not violate
any contracts or agreements of Borrower or any applicable
Governmental Requirements; as to the absence, to such
counsel's knowledge, of litigation or governmental proceedings
which could adversely affect Borrower; and such other matters
as may be required by Lender;
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(e) The most current available annual audited financial statements
for Borrower, as well as financial statements for each of the
three (3) full fiscal years of Borrower immediately preceding
the time period covered by said current financial statements,
and Borrower shall also certify that there has been no
material adverse change in the financial condition of Borrower
since the dates of such financial statements.
(f) Lender shall have issued the Letter of Instructions to the
Title Company which shall include instructions to record the
Amendment to Mortgage to Increase Loan Amount and to issue an
endorsement to the Title Policy, covering all of the
Development Projects and Construction Projects approved as of
the date hereof as part of the insured land under the Title
Policy, increasing the amount of such policy to the Revolving
Loan Amount, and subject only to such Permitted Exceptions as
are acceptable to the Lender, Title shall have given its
agreement to issue such an endorsement in form and content
acceptable to Lender, and Borrower shall have paid all costs
related to this Agreement and the recording of the Amendment
to Mortgage to Increase Loan Amount and the issuance of the
endorsement in regards thereto, all as required by Section 5.5
below.
Lender may advance to itself, pursuant to the provisions of Sections
3.1 and 5.5, proceeds of the Loan sufficient to pay all reasonable costs and
expenses incurred by Lender in connection with preparation, negotiation and
extension of the Loan Documents and the review of the foregoing.
2.2 Conditions Precedent to Approval of a Development Project
If and when Borrower wishes to have Lender approve a Development
Project, so that it will be eligible for a Development Project Loan, Borrower
shall submit to Lender a written request for such approval, which request shall
be accompanied by the following documentation (the "Development Project Approval
Prerequisites"), all of which shall be acceptable in form and content to Lender:
(a) A written description of the Development Project, including
the size, legal description and location of the Development
Project Land and the proposed Development Project Improvements
to be constructed.
(b) A copy of the signed Purchase Agreement covering the
Development Project Land pursuant to which Borrower has
acquired or is acquiring the same.
(c) A Sworn Construction Cost Statement setting forth in detail
all Construction Costs of the Development Project.
(d) A Budget setting forth in detail all Costs of the Development
Project, including all Acquisition Costs, Construction Costs
and Soft Costs associated with the Development Project.
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(e) Lender has obtained an Appraisal of the Development Project at
the cost of Borrower.
(f) A commitment for a Title Policy from the Title Company
covering the Development Project, together with copies of each
document referred to therein and together with searches for
state and federal tax liens, bankruptcies and judgments
against the Borrower and any other Person or entity which may
have an interest in the Development Project.
(g) A current, certified ALTA/ACSM Land Title Survey of the
Development Project Land, which shall also be prepared in
accordance with Lender's standard requirements therefor.
(h) Two (2) complete sets of the Plans for the Development
Project, approved by the City and including a copy of the site
plan with respect to the Development Project.
(i) Soil reports on the Development Project Land, showing that the
soil will adequately support the Development Project
Improvements when constructed in accordance with the Plans.
(j) The construction contract for each General Contractor, a
schedule listing all contracts and subcontracts relating to
the Development Project, and copies of such subcontract as
Lender may require, specifically identifying those which are
with Borrower or Guarantors (or Affiliates thereof). In
addition, Borrower will obtain a conditional assignment of the
construction contract and an agreement from the general
contractor to honor and perform the same for Lender in the
event of default under the Loan Documents.
(k) Lender has obtained an Environmental Audit which indicates
that no Pollutant is present above, on, in or under the
Development Project, together with all reports, data and other
information produced in connection with the Tests at the cost
of Borrower.
(l) Insurance policies and/or certificates of insurance written by
insurers satisfactory to Lender and in amounts satisfactory to
Lender and which comply with the requirements of this
Agreement.
(m) A flood zone certification from Flood Data Services, Inc. (or
another Consultant acceptable to Lender), indicating that the
Development Project is not located in a flood plain or any
other flood prone area, as designated by any governmental
agency; provided, however, that if the Development Project is
so located, Borrower shall provide evidence of flood insurance
acceptable to Lender.
(n) Borrower's estimated time schedules for construction of the
Development Project Improvements and for disbursement of the
Development Project Loan proceeds.
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(o) A current letter, prepared in accordance with Lender's
standard form therefor, addressed to Lender from an
appropriate City officer regarding the zoning status and
classification of the Development Project, certifying that the
Development Project Land may be used for construction and
operation of the Development Project Improvements without
violation of any applicable Governmental Requirements.
(p) Letters addressed to Lender from the utility companies
confirming the availability of water, storm and sanitary
sewer, gas, electric and telephone utilities for the
Development Project, prepared in accordance with Lender's
standard requirements therefor.
(q) UCC chattel lien searches from the appropriate office(s) in
the jurisdictions in which the Development Project is located,
covering the Borrower and of each other owner of the
Development Project Land during the previous five (5) years
(if Lender determines that the same are required).
(r) Information concerning current ad valorem property taxes and
special assessments to which the Development Project is
subject, including copies of tax statements, tax parcel
number(s) and payment dates.
(s) A preliminary plat of the Development Project Land with a copy
of the proposed final plat prepared in accordance with the
Development Agreement, and resulting in the creation of the
individual lots contemplated in the Development Agreement to
be fully executed and in recordable form. The Plats shall be
recorded immediately prior to the recording of the Mortgage or
the Amendment of Mortgage, as the case may be, and certified
copies of the same provided to Lender.
(t) Evidence that construction will commence within sixty (60)
days of the execution of the Project Addendum for the
Development Project.
(u) Any other documents and items which Lender, in its sole
discretion, reasonably requires to evaluate a proposed
Development Project.
Upon receipt of the above-mentioned written request and the Development
Project Approval Prerequisites, Lender may engage an Inspecting Architect to
work on the Development Project, and legal counsel and/or a Consultant to review
the Environmental Audit, title commitment and related documents, all at
Borrower's sole cost and expense. If all of the Development Approval
Prerequisites are acceptable to Lender, in its sole discretion, and if the
proposed Development Project complies with all of the terms, provisions,
requirements and conditions of this Agreement, Lender may, in its sole
discretion, approve the proposed Development Project. In the event Lender
approves the Development Project, an amount equal to the lesser of (a) seventy
percent (70%) of the Costs of the Development Project, or (b) sixty-five percent
(65%) of the market value of the Development Project, as shown by the Appraisal
prepared for the benefit of the Lender, and subject to the limitations set forth
in Section 1.1 hereof, shall be set aside from the Revolving Commitment to fund
the Development Project Loan
20
for said Development Project. Once so set aside, said amount may be used only to
fund said Development Project Loan, until said Development Project Loan has been
repaid in full. Development Project Loans are term loans, each of which shall
mature on its respective Project Loan Maturity Date, and are not themselves
revolving loans, i.e., sums prepaid upon a Development Project Loan may not be
reborrowed as a part of the same Development Project Loan, but may be reborrowed
only as part of another Project Loan in accordance with the terms of this
Agreement.
Upon approval of a Development Loan, Borrower and Lender shall enter
into a Project Addendum which shall describe the Development Project, set forth
the amount of the Development Project Loan, set forth the commencement date, the
Completion Date and the Project Loan Maturity Date for the Development Project
Loan, and the Release Price and the Transfer Price for each lot within the
Development Project.
A portion of each Development Project Loan may be used for the issuance
by Lender of Letters of Credit required by the City or any public utility in
connection with a Development Loan provided that no more than Seven Hundred
Fifty Thousand and 00/100 Dollars ($750,000.00) may be reserved for such
purpose, in the aggregate, for each Development Project. The amount of a Letter
of Credit shall be added to and constitute a part of the applicable Development
Project Loan and the Total Revolving Outstandings. Any such Letter of Credit
shall be evidenced by a Reimbursement Agreement, in form and content acceptable
to the Lender, and Borrower shall pay an annual Letter of Credit Fee as forth in
Section 1.5 hereof. Notwithstanding anything to the contrary contained herein,
Borrower may obtain such Letters of Credit for any proposed Development Project
prior to the approval of such Development Project for a Development Project Loan
as specified herein, but otherwise subject to the above requirements, provided
that: (i) no more than Five Hundred Thousand and 00/100 Dollars ($500,000.00),
in the aggregate for each Development Project, may be reserved for Letters of
Credit for Development Projects that have not yet been approved, (ii) Borrower
must have sufficient capacity in its Borrowing Base Certificate for the
Construction Project portion of the Loan to cover the amount of such Letter of
Credit, and (iii) Borrower must submit and obtain Lender's approval of such
proposed Development Project on which a Letter of Credit is issued within three
(3) months after the issuance of such Letter of Credit. A Letter of Credit
issued prior to the approval of a Development Project will be entered on the
Borrowing Base Certificate and count as an outstanding Construction Project Loan
reducing the amount of the Loan available as Construction Project Loans until
such time as the Development Project for which it was issued is approved, at
which time the total of such Letters of Credit will be removed from the
Borrowing Base Certificate and no longer counted as an outstanding Construction
Project Loan, and instead will be counted as a portion of such approved
Development Project Loan. In the event Borrower has not received approval for
the Development Project Loan for which a Letter of Credit was issued within
three (3) months after the issuance of the first Letter of Credit for such
proposed Development Project, Borrower may not request any additional Letters of
Credit for that Development Project or submit any additional Development
Projects for approval until such time as that Development Project Loan is
approved or all the Letters of Credit for that Development Project are
surrendered and terminated. In the event that Borrower does not obtain Lender's
approval for such proposed Development Project or all the Letters of Credit for
that Development Project are not surrendered and terminated within six (6)
months after the issuance
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of the first Letter of Credit for such proposed Development Project, it shall be
an event of default under this Agreement.
2.3 Development Project Loan Pre-Funding Requirements
(a) In order to qualify for the first Advance of proceeds with
respect to an approved Development Project Loan, the following
conditions shall be satisfied:
(i) Borrower shall have delivered to Lender an Amendment
of Mortgage which shall have been fully executed and
notarized.
(ii) Borrower has paid the Collateral Fee as set forth in
Section 1.5 hereof.
(iii) Lender shall have delivered a fully executed copy of
the Amendment to Mortgage to the Title Company.
(iv) Lender shall have issued the Letter of Instructions
to the Title Company which shall include instructions
to record the Amendment to Mortgage and to issue an
endorsement to the Title Policy whereby the
Development Project is added as part of the insured
property under the Title Policy, subject only to such
Permitted Exceptions as are acceptable to the Lender.
(v) Upon recording of the Amendment to Mortgage,
execution of the Letter of Instructions and issuance
to Lender of an acceptable endorsement to the Title
Policy and submission to Lender of all items
referenced in Section 2.2 above, in form and content
acceptable to Lender, and upon receipt and approval
of the items set forth in Section 2.3(b) and 2.3(c)
herein Borrower shall be entitled to obtain Advances
with respect to the Development Project Loan.
(vi) Lender has received evidence that Borrower has paid
in cash at least thirty percent (30%) of all Costs of
the Project.
(b) At least five (5) days prior to the first Advance of funds
from each Development Project Loan or such later date as is
approved by Lender, Borrower shall provide to Lender each of
the following, in form and substance acceptable to Lender, not
previously supplied to and approved by Lender:
(i) An Application and Certificate for Payment.
(ii) Copies of all grading and building permits required
to complete construction of the Development Project
Improvements.
(iii) Copies of all insurance policies and certificates
required under Section 5.10 below.
(iv) If applicable an Assignment of General Contract in
the form attached hereto as Exhibit "G".
22
(v) A copy of the Development Agreement duly executed by
Borrower and the City.
(vi) Evidence of access to the Development Project by
publicly dedicated streets.
(vii) A certified copy of the final plat of the Development
Project Land ("Final Plat") showing recording
information or if not yet recorded, a copy of the
Final Plat as approved by the City which plat is to
be recorded immediately after the first Advance of
Funds.
(viii) A certified copy of the resolutions adopted by the
city council of the City indicating the City's
approval of the plats, the Development Agreement, the
plans and the construction of the Development Project
Improvements.
(c) At least ten (10) days prior to any additional Advances with
respect to each Development Loan, Borrower shall provide to
Lender the following, in form and substance acceptable to
Lender:
(i) An Application and Certificate for Payment.
(ii) A certificate signed by Borrower and the General
Contractor, if applicable, certifying as to the
Development Project Improvements completed at the
time; that Borrower or the General Contractor and any
subcontractor specified in the relevant Application
and Certificate for Payment has satisfactorily
completed the work or furnished the materials for
which payment is requested in accordance with the
applicable contracts; that all work for which an
Application and Certificate for Payment is made
conforms to the applicable contracts and any approved
changes and is in place and sufficient Development
Project Loan proceeds remain undisbursed to complete
the Development Project and that all Development Loan
Project proceeds previously disbursed have been
applied as per the previously submitted applications
for payment.
(iii) A certificate by the Inspecting Architect stating
that all work done as specified in the Application
and Certificate for Payment conforms to the contract
documents, the amount requested for the work done and
the materials furnished reasonably approximates the
value of such work or materials and is in place and
that the undisbursed Development Project Loan
proceeds hereunder are then, in its opinion,
sufficient to complete the Development Project.
(iv) Waivers of mechanics' liens and materialmen's liens
executed by Borrower and General Contractor, if
applicable and all subcontractors for all work done
and all materials furnished to the Development
Project and included in the previous Application and
Certificate for Payment.
23
(v) Such other supporting evidence, including invoices
and receipts as may be requested by Lender to
substantiate all payments which are to be made out of
the disbursement of Development Loan Project proceeds
or to substantiate all payments then made in respect
to the Development Project.
2.4 Conditions Precedent to Approval of a Construction Project
If and when Borrower wishes to have Lender approve a Construction
Project, so that it will be eligible for a Construction Project Loan, Borrower
shall submit to Lender a written request for such approval, accompanied by the
following documentation (the "Construction Project Approval Prerequisitions"),
all of which shall be acceptable in form and content to Lender:
(a) An Amendment of Mortgage completed with respect to the
Construction Project.
(b) A written description of the Construction Project, including
the size, legal description and location of the Construction
Project Land and the Construction Project Improvements to be
constructed.
(c) In the case of a Pre-Sold Home, a copy of the signed
non-cancelable and non-contingent purchase agreement covering
the Construction Project pursuant to which Borrower is selling
the same.
(d) A commitment for a Title Policy covering the Construction
Project, together with copies of each document referred to
therein.
(e) Insurance policies and/or certificates of insurance written by
insurers satisfactory to Lender and in amounts satisfactory to
Lender and which comply with the requirements of this
Agreement.
(f) A flood zone certification from Flood Data Services, Inc. (or
another Consultant acceptable to Lender), indicating that the
Construction Project is not located in a flood plain or any
other flood prone area, as designated by any governmental
agency; provided, however, that if the Construction Project is
so located, Borrower shall provide evidence of flood insurance
acceptable to Lender.
(g) Lender will obtain at Borrower's cost an Appraisal with
respect to all Construction Projects except those involving a
Pre-Sold Home with a Construction Project Loan of $250,000.00
or less. If a Construction Project Loan of $250,000.00 or less
is secured by a Pre-Sold Home, then no Appraisal will be
required. In this event, Lender will lend an amount equal to
seventy-five percent (75%) of the amount of the purchase
agreement described in subsection 2.4(b) above but not to
exceed $250,000.00. In the event the Pre-Sold Home sale does
not close by the date specified in such purchase agreement,
then Lender will require that the home be appraised and that
the Loan to Value Ratio be reduced by Borrower to seventy
percent (70%) of the appraised value. It is anticipated that
the standard units for each home style built by Borrower will
be appraised. In addition, a value will be
24
assigned to pre-approved options and upgrades. It is the
Lender's intent, on a project by project basis, that Borrower
will not have to obtain a separate Appraisal for each single
family home financed as a Construction Project. Rather, it is
anticipated that a single Appraisal will be used for all homes
of the same style in a particular project. Lender may, in its
sole discretion, deny approval for any Construction Project
which is not a Pre-Sold Home, which has an appraised value in
excess of $450,000.00.
(h) A Sworn Construction Cost Statement setting forth in detail
all Construction Costs of the Construction Project.
(i) A Budget setting forth all Costs of the Construction Project,
including all Acquisition Costs, Construction Costs and Soft
Costs associated with the Construction Project, together with
evidence that Borrower has paid, in cash, all Costs of the
Construction Project in excess of the Construction Project
Loan unless the Construction Project Improvement to be
constructed is a Pre-Sold Home. In such event Borrower shall
not be required to pay such costs until the Construction
Project Loan has been fully disbursed.
(j) If so requested by Lender, a copy of the Plans for the
Construction Project.
(k) Any other documents and items which Lender, in its sole
discretion, reasonably requires to evaluate a proposed
Construction Project.
If all of the Construction Project Approval Prerequisites are
acceptable to Lender, in its sole discretion, and if the proposed Construction
Project complies with all of the terms, provisions, requirements and conditions
of this Agreement, Lender may, in its sole discretion, approve the proposed
Construction Project, in writing. In the event Lender approves the Construction
Project, the Borrower may, subject to Borrower's compliance with all of the
requirements of Section 2.5 hereof, and subject to the limitations in Section
1.1 hereof and until the applicable Project Maturity Date, obtain Advances
against such Construction Project up to amount equal to (a) seventy-five percent
(75%) of the appraised value if a Pre-Sold Home (or seventy-five percent (75%)
of the amount of the non-cancelable and non-contingent purchase agreement for
such Pre-Sold Home if the applicable Construction Project Loan is $250,000.00 or
less), or (b) seventy percent (70%) of the appraised value if a Model Home or a
Speculative Home, as shown by the Appraisal, but in no event shall the total of
all Advances on any Construction Project Loan be greater than one hundred
percent (100%) of the cost of the Construction Project as set forth in the
budget. Construction Project Loans are term loans, each of which shall mature on
its respective Project Loan Maturity Date, and are not themselves revolving
loans, i.e., sums prepaid upon a Construction Project Loan may not be reborrowed
as a part of the same Construction Project Loan, but may be reborrowed only as
part of another Project Loan in accordance with the terms of this Agreement.
Approved Construction Projects may be shown on the Borrowing Base Certificate
only until the applicable Project Loan Maturity Date. Approved Construction
Projects for Model Homes will be limited to a maximum of ten (10), with a
maximum of two (2) at each Subdivision, and approved Construction Projects for
Speculative Homes will be limited to a maximum of fifteen (15), with a maximum
of three (3) at each Subdivision.
25
2.5 Construction Project Loan Pre-Funding Requirements
(a) In order to qualify for the first Advance of proceeds with
respect to a Construction Project Loan, the following
conditions shall be satisfied:
(i) Lender has received evidence that Borrower has paid,
in cash, all Costs of the Construction Project in
excess of the Construction Project Loan for any Model
Home or Speculative Home. Such equity contribution
shall not be required with respect to Pre-Sold Homes
until the Construction Project Loan is fully
advanced.
(ii) Lender shall deliver the Amendment to Mortgage to the
Title Company which shall have been executed and
notarized by Borrower and Lender.
(iii) Lender shall issue a Letter of Instructions to the
Title Company which shall include instructions to
record the Amendment to Mortgage and to issue an
endorsement to the Title Policy whereby the
Construction Project is added as part of the insured
property under the Title Policy, subject only to such
Permitted Exceptions as are acceptable to the Lender.
(iv) Upon recording of the Amendment to Mortgage,
execution of the Letter of Instructions and issuance
to Lender of an acceptable endorsement to the Title
Policy and submission to Lender of all items
referenced in Section 2.4 above, in form and content
acceptable to Lender, the Construction Project shall
be entered by Borrower on the Borrowing Base
Certificate as an approved Construction Project Loan.
(b) Upon submission to Lender of the revised Borrowing Base
Certificate in which all of the requirements set forth in
subsections 2.5(a)(i), (ii), (iii) and (iv) above have been
complied with, the Borrower shall be entitled to obtain
Advances with respect to such Construction Project Loan in
accordance with the provisions of this Agreement.
3. ADVANCES OF PROJECT LOAN PROCEEDS
3.1 Procedure for Advances
(a) Each Advance shall be made pursuant to (i) a Draw Request with
respect to Construction Project Loans, and (ii) an Application
and Certificate for Payment with respect to Development
Project Loans, which shall be submitted by Borrower to Lender
and to the Inspecting Architect. With respect to each
Development Project, Borrower shall not submit more than one
(1) Application and Certificate for Payment during any thirty
(30) day period. With respect to Construction Projects,
Borrower shall be entitled to make unlimited Draw Requests
during any thirty (30) day period.
26
(b) Borrower shall deliver to Lender an updated Borrowing Base
Certificate on the first (1st) day of each month. Borrower
shall also deliver to Lender a revised Borrowing Base
Certificate with each request for an Advance with respect to
each Construction Project Loan.
(c) On each Advance Date, if all the terms and conditions of this
Agreement have been complied with by Borrower to the
satisfaction of Lender, if no default or event of default
exists hereunder, and if Lender has approved (i) each Draw
Request for each Construction Project for which Borrower has
submitted a Draw Request, and (ii) each Application and
Certificate for Payment for each Development Project for which
Borrower has submitted an Application and Certificate for
Payment, Lender shall advance to Borrower the principal amount
of each requested Advance by wire transfer of funds for the
amount set forth in the applicable Draw Request or Application
and Certificate of Payment (less any required retainage, which
retainage shall not be deemed to be advanced hereunder and
shall not bear interest until actually advanced, and less any
amounts so advanced by Lender to itself). All Advances
actually so made shall be deemed to be loans to Borrower,
shall reduce the available amount of the Revolving Loan and of
the Project Loan for the related Project (if any), and shall
bear interest at the rates provided herein from the date so
advanced.
(d) Lender may take such steps as it may deem appropriate, at its
option, to verify the application of Project Loan proceeds to
Costs of the related Project, and to vary the advancement
procedures herein set forth if the same becomes necessary or
desirable to assure the proper application of Project Loan
proceeds and/or to preserve the first lien status of the
Mortgage covering the Project with respect to Advances made
pursuant hereto including, but not limited to, making Advances
directly to the General Contractors and/or subcontractors, and
the amount of Advances to be made to the Borrower hereunder
shall be correspondingly reduced. However, Lender shall not be
obligated to conduct any such verification or to so vary said
procedures.
(e) In the event that Lender shall determine, in its reasonable
judgment, that proper documentation to support a given
Advance, as required by this Agreement, has not been
furnished, it may withhold payment of such Advance, or of such
portion of such Advance as shall not be so supported by proper
documentation, and shall promptly notify Borrower of the
discrepancy in or omission of such documentation. Until such
time as such discrepancy or omission is corrected to the
satisfaction of Lender, it may withhold such funds.
(f) At the time of each Advance, there shall exist no default or
event of default hereunder, and all representations and
warranties made herein shall be true and correct on and as of
each Advance Date with the same effect as if made on that
date.
27
3.2 Inspections
Lender, Inspecting Architects, Consultants and their representatives
shall have access to each Project at all reasonable times and shall have the
right to enter each Project and to conduct such inspections thereof as they
shall deem necessary or desirable for the protection of Lender's interests.
However, Lender shall not be obligated to conduct any inspection of any Project.
With respect to Construction Projects, Lender shall retain an
Inspecting Architect at Borrower's expense to make inspections of all existing
Projects prior to the first draw and then every sixty (60) days, commencing on
January 1, 1999, and to review all Draw Requests relating to such Projects for
the purpose of confirming that (a) each Project has been completed to date in a
good and workerlike manner, and (b) that the percentages of completion certified
to by the Borrower in the most recent Draw Request are accurate. The Inspecting
Architect shall issue a written report to Lender with respect to such matters
for approved Construction Projects on a bi-monthly basis.
With respect to Development Projects, Lender shall also retain an
Inspecting Architect and any other Consultants deemed necessary or desirable by
Lender, at Borrower's expense, to inspect the Development Project and review the
Plans, Contracts and Sworn Construction Cost Statements for each Development
Project and to review all change orders relating to said Development Project.
Such inspection and reviews shall be completed prior to approval of each
Application and Certificate for Payment made with respect to a Development
Project Loan.
Neither Borrower nor any third party shall have the right to use or
rely upon the reports of the Inspecting Architect or any other reports generated
by Lender or its Consultants for any purpose whatsoever, whether made prior to
or after commencement of construction. Borrower shall be responsible for making
its own inspections of each Project during the course of construction,
renovation or expansion and shall determine to its own satisfaction that the
work done and materials supplied are in accordance with applicable contracts
with its Contractors. By advancing funds after any inspection of any Project by
Lender or an Inspecting Architect, Lender shall not be deemed to waive any event
of default, waive any right to require construction defects to be corrected, or
acknowledge that all construction conforms with the Plans.
Notwithstanding any provision of this Agreement to the contrary, in the
event that Lender should determine that (a) the actual quality or value of the
work performed or the materials furnished does not correspond with the quality
or value of the work required by the Plans for any Project, or (b) the
percentage of completion certified to in any Draw Request is inaccurate, or (c)
any Project Loan is not in balance, Lender shall notify Borrower of its
objections thereto, and, upon demand, Borrower shall correct the conditions to
which Lender objects.
3.3 Project Loans In Balance
Lender shall not be obligated to make any Advance of any Project Loan
proceeds unless and until Borrower has certified that the Project Loan is in
Balance: i.e., (a) Borrower has paid, in cash, Costs of a Development Project
equal to at least thirty percent (30%) of the total Costs of the Development
Project or all Costs of Construction Project, in excess of the Construction
Project Loan as shown on the most current Budget and Sworn Construction Cost
Statement for
28
the Project approved by Lender (provided, however, that Borrower, for the
purposes of this clause, if a Construction Project consists of a Pre-Sold Home,
Borrower shall not be obligated to pay such costs until the Project Loan has
been fully advanced); and (b) all remaining unpaid Costs, as determined by
Lender, including the Contingency Reserve, with respect to a Development Loan,
where applicable, do not exceed the amount of the Loan proceeds not yet advanced
by Lender. The amount of the Contingency Reserve for any Development Project
Loan shall be designated in the Sworn Construction Cost Statement, and shall be
included in the Development Project Addendum, for the Development Project. The
required amount of the Contingency Reserve shall decline as Construction Costs
for which it is maintained are paid therefrom; provided, however, that the
amount of the Contingency Reserve shall never decline below an amount sufficient
to pay all costs and payments for which it is maintained which then remain
unpaid, as determined by Lender, and shall equal a mutually agreed upon
percentage of all Construction Costs of the Development Project. If the
Contingency Reserve becomes depleted, such depletion shall not limit Borrower's
obligation hereunder to pay all sums which otherwise would have been payable
from the Contingency Reserve.
Notwithstanding any provision of this Agreement to the contrary, in the
event that Lender or Borrower determines that the unadvanced balance of any
Project Loan proceeds is insufficient to cover any category of Costs set forth
on the Budget and the Sworn Construction Cost Statement for the Project and/or
to complete the Project, and to pay all costs and expenses of completion and to
pay interest on the Project Loan, through the Project Loan Maturity Date, it
shall notify the other party hereto of such determination, and Borrower shall,
at Lender's option, either (a) be ineligible for further Advances of the
proceeds of said Project Loan until Borrower has directly paid (without any
right to reimbursement therefor hereunder) sufficient Costs, or (b), within
three (3) Business Days, deposit with Lender funds equal to said insufficiency,
in order to bring the Project Loan back into balance. All sums so deposited may
be advanced by Lender to pay Costs in the same manner as, and prior to, Advances
of Project Loan proceeds hereunder.
3.4 General
The Project Loan proceeds shall be advanced by Lender, to or for the
benefit of Borrower, in accordance with the terms and conditions set forth in
this Article 3. All monies advanced by Lender (including amounts payable to
Lender and advanced by Lender to itself pursuant to the terms hereof) shall
constitute loans made to Borrower under this Agreement, evidenced by the Note
and secured by the other Loan Documents, and interest shall be computed thereon
as prescribed by this Agreement and the Note, from the date advanced to or for
the benefit of Borrower.
Borrower may not reallocate Project Loan proceeds to payment of
different items in the Sworn Construction Cost Statement for the Project in
question without the prior written consent of Lender. Lender reserves the right
to make Advances for payment of amounts which are allocated to any of the
designated items in any Sworn Construction Cost Statement for such other
purposes or in such different proportions as Lender may, in its sole discretion,
deem necessary or advisable.
No Advance shall constitute a waiver of any condition precedent to the
obligation of Lender to make any further Advance or preclude Lender from
thereafter requiring Borrower to
29
satisfy any such condition precedent with respect to any prior or further
Advance. No Advance shall constitute a waiver of any default or event of default
hereunder which may exist at the time of said Advance, whether or not the same
is known to Lender. All conditions precedent to the obligation of Lender to make
any Advance are imposed hereby solely for the benefit of Lender, and no other
party may require satisfaction of any such condition precedent or shall be
entitled to assume that Lender will make or refuse to make any Advance in the
absence of strict compliance with such condition precedent. All requirements of
this Agreement may be waived by Lender, in whole or in part, at any time.
Lender may, but shall not be obligated to, advance to itself, when due,
from the proceeds of the Loan, without further order or request from Borrower,
all interest payable to Lender under the terms hereof or of the Note, and may,
at Lender's option, without any obligation to do so, advance to itself all other
sums due or to become due to Lender under this Agreement or under any of the
other Loan Documents including, but not limited to, its reasonable fees,
administration fees, attorneys' fees, appraisal fees, internal appraisal review
fees, engineer's and Inspecting Architect's fees, Consultant's fees and all
out-of-pocket expenses incurred by Lender in connection with this Agreement and
with the Loan, whether or not any Project Loan has yet been approved by Lender
pursuant to Section 2.2 or 2.4. Lender shall also have the right, but not the
obligation, after the occurrence of an event of default, to advance and directly
apply the proceeds of the Loan to the satisfaction of any of Borrower's other
obligations hereunder or under any of the other Loan Documents. Borrower hereby
assigns and pledges the proceeds of each Project Loan and funds deposited by
Borrower pursuant to Section 3.3 hereof (if any) to Lender for such purposes.
Lender may advance such funds and incur such expenses as Lender deems necessary
for the completion of construction of all Project Improvements and to preserve
the Projects and any security for the Project Loans, and such expenses, even
though causing the amount of the Loan to exceed the Revolving Commitment Amount
or the amount of any Project Loan to exceed the amount of the Project Loan
Commitment therefor, shall be secured by any and all documents securing the
Loan, shall be evidenced by the Note and shall be payable to Lender upon demand.
In the event that the total amount of any Project Loan exceeds the
amount needed to fully pay all Costs set forth on the Sworn Construction Cost
Statement for the Project approved by Lender (after subtracting Borrower's
equity contribution required by Section 3.3), Lender shall not be required to
advance, and Borrower shall not be entitled to receive, the excess.
3.5 Releases of Projects
If no event of default exists hereunder, Lender agrees to release the
Mortgage from any lot located within a Project upon payment to the Lender of the
Release Price designated for such lot in either the Project Addendum, with
respect to a Development Project Loan, or the Borrowing Base Certificate, with
respect to a Construction Project Loan.
3.6 Transfers of Projects
If no event of default exists hereunder, Lender agrees that lots
contained within an approved Development Project may be transferred from the
Development Project Loan to a Construction Project Loan at such time as the
Borrower desires to construct Construction Project
30
Improvements on such lot. The Borrower shall follow the procedure for approval
of a Construction Project Loan with respect to such lot. At such time as
approval has been obtained in accordance with the terms of Section 2.4 of this
Agreement, the amount of the Development Project Loan shall be reduced by an
amount equal to the Transfer Price designated for such lot in the applicable
Project Addendum.
3.7 Lender Responsibility
It is expressly understood and agreed that Lender assumes no liability
or responsibility for the sufficiency of Project Loan proceeds to complete the
related Project, for protection of any Project, for the satisfactory completion
of any Project, for inspection during construction, for the adequacy of the
Contingency Reserve, for the adequacy or accuracy of any Sworn Construction Cost
Statement, for any representations made by Borrower, or for any acts on the part
of Borrower or its Contractors to be performed in the construction of any
Project.
4. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants to Lender that:
4.1 Legal Status of Borrower
Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota, and has all power, authority,
permits, consents, authorizations and licenses necessary to carry on its
business, to acquire, develop, construct, equip, own and operate each Project
and to execute, deliver and perform this Agreement and the other Loan Documents;
and this Agreement and the other Loan Documents executed to date by Borrower
have been duly authorized, executed and delivered by and on behalf of Borrower
so as to constitute this Agreement and said other Loan Documents the valid and
binding obligations of Borrower, enforceable in accordance with their terms.
4.2 No Breach of Applicable Agreements or Laws
The consummation of the transactions contemplated hereby and the
execution, delivery and/or performance of this Agreement and the other Loan
Documents will not result in any breach of or constitute a default under any
mortgage, deed of trust, lease, bank loan, credit agreement, guaranty or other
instrument or violate any Governmental Requirements, to which Borrower or any
Guarantor is a party, or by which Borrower or any Guarantor may be bound or
affected.
4.3 No Litigation or Defaults
There are no actions, suits or proceedings pending or, to the knowledge
of Borrower, threatened against or affecting Borrower or any Guarantor, in which
an adverse result would have a material adverse impact upon Borrower or any
Guarantor or involving the validity or enforceability of the Loan Documents or
the priority of the lien thereof, at law or in equity; and neither Borrower nor
any Guarantor is in default under any order, writ, injunction, decree or
31
demand of any court or any administrative body having jurisdiction over Borrower
or any Guarantor.
4.4 Financial and Other Information
The financial statements of, and other financial and cash flow
information for Borrower previously or hereafter delivered to Lender fairly and
accurately present, or will fairly and accurately present, the financial
condition of Borrower as of the dates of such statements and information, and
the cash flows of Borrower for the periods covered by such information, and
neither this Agreement nor any document, financial statement, financial, cash
flow or credit information, certificate or statement referred to herein or
furnished to Lender by Borrower contains, or will contain, any untrue statement
of a material fact or omits, or will omit, a material fact, or is or will be
misleading in any material respect. There has been no material adverse change in
the financial condition of Borrower since the most recent financial statements
heretofore delivered to Lender.
4.5 No Defaults under Loan Documents or Other Agreements
There is, and, until Lender has been fully repaid the entire
indebtedness evidenced or to be evidenced by the Note, there will be, no default
or event of default on the part of Borrower under the Loan Documents or under
any other document to which Borrower is a party and which relates to the
acquisition, ownership, occupancy, use, development, construction or management
of a Project; and Borrower is not and will not be in default in the payment of
the principal of or interest on any of its indebtedness for borrowed money,
including any Lender Debt, and Borrower is not and will not be in default under
any instrument or agreement under and subject to which any indebtedness for
borrowed money, including any Lender Debt, has been issued or is secured, and no
event has occurred, or will occur, which, with the lapse of time or the giving
of notice or both, would constitute an event of default thereunder.
4.6 Fiscal Years
The fiscal year of Borrower ends on December 31.
4.7 Intentionally Omitted
4.8 Miscellaneous
Borrower is not:
(a) Engaged principally or as one of its important activities in
the business of extending credit for the purpose of purchasing
or carrying margin stock (as defined in Regulation U of the
Board), and the value of all margin stock owned by Borrower
does not constitute more than twenty-five percent (25%) of the
value of the assets of Borrower.
(b) An "investment company" or a company "controlled" by an
investment company within the meaning of the Investment
Company Act of 1940, as amended.
32
(c) A "holding company" or a "subsidiary company" of a holding
company or an "affiliate" of a holding company or a subsidiary
company of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
THE WARRANTIES AND REPRESENTATIONS IN THIS ARTICLE 4, AND ANY
ADDITIONAL WARRANTIES AND REPRESENTATIONS CONTAINED HEREIN AND IN THE OTHER LOAN
DOCUMENTS, SHALL BE DEEMED TO HAVE BEEN RENEWED AND RESTATED BY BORROWER AT THE
TIME OF EACH REQUEST BY BORROWER FOR AN ADVANCE.
5. COVENANTS OF BORROWER
While this Agreement is in effect, and until Lender has been paid in
full the principal of and interest on all Advances made by Lender hereunder and
under the other Loan Documents:
5.1 Completing Construction
Borrower shall commence construction of each Project on or before the
Commencement Date specified in the Project Addendum with respect to Development
Projects and the Borrowing Base Certificate with respect to Construction
Projects, and shall expeditiously complete and fully pay for the development and
construction of each Project in a good and workmanlike manner and in accordance
with the contracts, subcontracts and Plans (which in the case of Development
Contracts shall be submitted to and approved by Lender), and in compliance with
all applicable Governmental Requirements, and any covenants, conditions,
restrictions and reservations applicable thereto, so that Completion of the
Project Improvements occurs on or before the Completion Date specified for said
Project in the Project Addendum with respect to Development Projects and the
Borrowing Base Certificate with respect to Construction Projects. Borrower
assumes full responsibility for the compliance of the Plans for each Project and
of each Project itself with all applicable Governmental Requirements, and with
sound building and engineering practices, and, notwithstanding any approvals by
Lender, Lender shall have no obligation or responsibility whatsoever for such
Plans or any other matter incident to any Project or the construction of the
Project Improvements. In the case of a Development Contract, Borrower shall
become a party to no General Contractor's contract, for the performance of any
work on any Development Project except upon such terms and with such parties as
shall be approved, in writing, by Lender. No approval by Lender of any contract
relating to any Project or of any change order shall make Lender responsible for
the adequacy, form or content of such contract or change order. Borrower shall
correct or cause to be corrected (a) any defect in the Project Improvements, (b)
any departure in the construction of the Project Improvements from the Plans
therefor or applicable Governmental Requirements, and (c) any encroachment by
any part of the Project Improvements or any other structure located on the
Project Land on or over any building setback line, easement, property line or
restricted area, unless expressly permitted by appropriate easements, licenses
or other instruments. Borrower shall cause all roads necessary for the
utilization of each Project for its intended purposes to be completed and
dedicated, the bearing capacity of the soil on all Project Land to be made
sufficient to support the Project Improvements situated or to be situated
thereon, and sufficient local utilities to be made
33
available to each Project and installed at Costs (if any) set out in the Sworn
Construction Cost Statement therefor, on or before the Completion Date therefor.
5.2 Borrowing Base Certificate.
Borrower shall deliver to Lender a completed fully executed Borrowing
Base Certificate on the first day of each month during the term of the Loan.
Borrower shall also deliver to Lender a fully executed Borrowing Base
Certificate at the time of submitting each Draw Request.
5.3 Changing Costs, Scope or Timing of Work
Borrower shall deliver to Lender revised Budgets and/or Sworn
Construction Cost Statements for each Construction Project, showing changes in
or variations from the current Budget and/or Sworn Construction Cost Statement
therefor which involve changes in the costs of five percent (5%) or more for any
single change, or if the aggregate amount of all changes exceeds five percent
(5%) or more, as soon as such changes are known to Borrower. Borrower shall
deliver to Lender a revised construction schedule for any Construction Project,
if and when any target date set forth therein has been delayed by ten (10)
consecutive days or more, or when the aggregate of all such delays equals thirty
(30) days or more.
Borrower shall promptly furnish Lender with two (2) copies of each new
change or modification in the design or style of the Construction Project or
change or modification in the Plans, contracts or subcontracts for any
Construction Project, as approved by Lender, prior to incorporation of any such
change or modification into the Construction Project, whether or not Lender's
consent to such change or modification is required hereby. Borrower shall not
make or consent to any change or modification in the Plans, contracts or
subcontracts, and no work shall be performed with respect to any such change or
modification, without the prior written consent of Lender, if such change or
modification would in any way alter the design or structure of the Construction
Project or increase or decrease Costs of said Construction Project by five
percent (5%) or more for any single change or modification, or if the aggregate
amount of all changes and modifications in Costs of said Construction Project
exceeds five percent (5%) of such Costs.
Borrower shall deliver to Lender revised Budgets and/or Sworn
Construction Cost Statements for each Development Project, showing changes in or
variations from the current Budget and/or Sworn Construction Cost Statement
therefor which involve amounts of $20,000 or more for any single change, or if
the aggregate amount of all changes exceeds $50,000, as soon as such changes are
known to Borrower. Borrower shall deliver to Lender a revised construction
schedule for any Development Project, if and when any target date set forth
therein has been delayed by ten (10) consecutive days or more, or when the
aggregate of all such delays equals thirty (30) days or more.
Borrower shall promptly furnish Lender with two (2) copies of each new
change or modification in the Plans, contracts or subcontracts for any
Development Project, as approved by Lender, prior to incorporation of any such
change or modification into the Development Project, whether or not Lender's
consent to such change or modification is required hereby. Borrower shall not
make or consent to any change or modification in the Plans, contracts or
subcontracts, and no work shall be performed with respect to any such change or
modification, without the
34
prior written consent of Lender, if such change or modification would in any way
alter the design or structure of the Development Project or increase or decrease
Costs of said Development Project by $20,000 or more for any single change or
modification, or if the aggregate amount of all changes and modifications in
Costs of said Development Project exceeds $50,000.
5.4 Balancing Project Loans
Borrower shall furnish to Lender, as and when requested by Lender, at
Lender's option (a) satisfactory evidence of Borrower's ability to pay all
unpaid Costs of completing and operating the Project through the Project
Maturity Date, and/or (b) cash equal to any difference between such unpaid Costs
and the proceeds of the Project Loan which have not yet been advanced hereunder,
which shall be held and advanced by Lender pursuant to the terms hereof.
5.5 Paying Costs of Loan, Projects and Project Loans
Borrower shall pay and discharge, as and when required by the Mortgage,
all taxes, assessments and other governmental charges upon a Project, as well as
all claims for labor and materials which, if unpaid, might become a lien or
charge upon said Project; provided, however, that Borrower shall have the right
to bond off, to remove or to contest the amount, validity and/or applicability
of any of the foregoing in strict accordance with the terms of the Mortgage.
Borrower shall also pay all reasonable costs and expenses of Lender and
all costs and expenses of Borrower in connection with the Project, the
preparation and review of the Loan Documents and the evaluation, making,
closing, administration, transfer and/or repayment of the Loan and of each
Project Loan including, but not limited to, the fees of Lender's attorneys, the
Inspecting Architect and Consultants (including preliminary cost review,
construction progress inspection reports, engineers' fees and environmental
Consultants' fees), costs of Environmental Audits, appraisal fees, internal
appraisal review fees, administration fees, title insurance costs, filing and
recording fees, mortgage registration or similar taxes, and all other costs and
expenses payable to third parties incurred by Lender or Borrower in connection
with the Loan. Such costs and expenses shall be so paid by Borrower whether or
not the Loan or any particular Project Loan is fully advanced.
5.6 Using Project Loan Proceeds
Borrower shall use the Project Loan proceeds solely to pay, or to
reimburse Borrower for paying, Costs shown on the Budget and the Sworn
Construction Cost Statement for the relevant Project. Borrower shall take all
steps necessary to assure similar use of Project Loan proceeds by its
Contractors and subcontractors.
5.7 Keeping of Records
Borrower shall set up and maintain accurate and complete books,
accounts and records pertaining to each Project and the development and
construction thereof in a manner reasonably acceptable to Lender. Borrower will
permit representatives of Lender and the Inspecting Architect to have free
access to and to inspect and copy all books, records and contracts of Borrower
relating to each Project and the acquisition, development and construction
thereof, and
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will permit representatives of Lender to have free access to and to inspect and
copy all other books, records and contracts of Borrower. Any such inspection
shall be for the sole benefit and protection of Lender, and Lender shall have no
obligation to disclose the results thereof to Borrower or to any third party.
5.8 Providing Financial Information
Borrower shall furnish to the Lender at the times set forth below the
following financial statements, reports and certificates:
(a) As soon as available, but in any event within ninety (90) days
after each fiscal year end, an audited financial statement of the
Borrower consisting of a balance sheet, profit and loss statement
and sources of cash flow prepared and certified to by an
independent certified public accountant satisfactory to the
Lender together with a copy of Borrower's applicable 10K Report;
(b) As soon as available, but in any event within sixty (60) days
after the last day of each fiscal quarter, a balance sheet and
profit and loss statement of the Borrower dated as of the last
business day of such fiscal quarter in form and detail as
required by the Lender certified by the Chief Financial Officer
of the Borrower together with a copy of Borrower's applicable 10Q
Report;
(c) On the first (1st) Business Day of each month, a copy of the
updated Borrowing Base Certificate, together with a report
regarding sales of all lots located within any Development
Project for which a Development Project Loan has been made; and
(d) Such other information concerning the business, operations and
condition (financial or otherwise) of the Borrower as the Lender
may reasonably request.
All financial statements shall be prepared in reasonable detail, shall
be prepared for partnerships and corporations in accordance with GAAP and for
individuals in accordance with accounting principles consistently applied and
shall be signed and certified by the party to which they apply as true, correct
and complete. In the event the Borrower fails to furnish any of the above
statements or information or upon the occurrence of an event of default
hereunder, the Lender may cause an audit to be made of the books and records of
the Borrower at the sole cost and expense of the Borrower. The Lender also shall
have the right to examine at their place of safekeeping all books, accounts and
records relating to the operation of the Projects and make copies thereof or
extracts therefrom and to discuss the affairs, finances or accounts with the
employees and officers of the Borrower and the Borrower's independent
accountants. Said examinations shall be at the Lender's expense unless the
Borrower's statements are found to contain significant discrepancies, in which
case the examination shall be at the Borrower's expense.
5.9 Providing Evidence of Completion
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Upon Completion of each of the Project Improvements included within
each Project, and, unless the Project Improvement is a Construction Project
Improvement which is a Pre-Sold Home, prior to the final advance of Project Loan
proceeds to pay for Construction Costs thereof including, but not limited to,
any retainage therefor, and as a condition of the same, Borrower shall furnish
Lender with all items required to evidence either Development Project Completion
or Construction Project Completion as set forth herein in the definition of
those terms.
5.10 Maintaining Insurance Coverage; Collection and Application of
Insurance Proceeds
Borrower shall, at all times until Lender has been fully repaid all
indebtedness evidenced by the Note, maintain, or cause to be maintained, in
effect, the following insurance with respect to each Project for the benefit of
Lender:
(a) Builder's risk insurance, written on an "all-risk", completed
value, nonreporting basis, covering one hundred percent (100%) of
the replacement cost of all Project Improvements under
construction at any time upon the Project Land;
(b) Insurance upon all completed Project Improvements against loss or
damage by fire, lightning and other risks customarily covered by
standard "all risk" (or special form cause of loss) and extended
coverage endorsements, together with theft, vandalism, malicious
mischief, collapse, earthquake, replacement cost, agreed amount
(if there is co-insurance), and restoration in conformance with
applicable laws and ordinances endorsements, all in such amounts
as may be from time to time required by Lender, but in no event
less than the full replacement cost of the completed Project
Improvements at any time erected or placed upon the Project Land,
including the cost of debris removal, including the value of all
Project Improvements which cannot be replaced due to changes in
applicable laws, codes, ordinances and/or regulations since the
original construction thereof, and, in any event, in an amount
not less than the unpaid principal balance of the Project Loan;
(c) Comprehensive commercial general public liability insurance
against claims for bodily injury, personal injury, death and/or
property damage occurring in, on or about the Project, with
coverage limits satisfactory to Lender (which shall initially be
at least equal to $1,000,000.00 with respect to any one (1)
Person, accident or occurrence, with at least $10,000,000.00 in
umbrella excess-liability coverage), and including contractual
liability coverage for the tort liability with respect to the
Project assumed by Borrower hereunder and under any other Loan
Document;
(d) Flood insurance upon any Project in such form and amount as may
from time to time be required by Lender, if such Project or any
portion thereof is located in a designated flood zone, flood
plain or other flood hazard or danger area; and
(e) Insurance upon the Project against such other casualties and
contingencies as Lender may from time to time require including,
but not limited to, workers'
37
compensation in amounts acceptable to Lender, all in such manner
and form as may be satisfactory to Lender.
Borrower shall, at its sole cost and expense, from time to time and at
any time when Lender shall so request, provide Lender with evidence of the full
replacement cost of a Project in a form acceptable to Lender. Borrower shall
promptly notify Lender and the appropriate insurer in writing of any loss
covered by any of the insurance required hereby.
All insurance provided for in this Section 5.10 shall be in effect
under a valid and enforceable policy or policies of insurance in form and
substance approved by Lender, shall be issued by insurers of recognized
responsibility, which are licensed to do business in the state in which the
Project is located, and which are acceptable to Lender, and shall be
satisfactory to Lender in all other respects.
All hazard and casualty insurance policies maintained by Borrower
pursuant to the foregoing provisions of this Section 5.10 shall (i) provide that
any losses payable thereunder shall (pursuant to a standard first mortgagee
clause in favor of, and acceptable to, Lender, to be attached to each such
policy) be payable to Lender and assigns, (ii) include effective waivers by the
insurer of all claims for insurance premiums against Lender, (iii) provide that
any losses shall be payable notwithstanding (A) any act of negligence by
Borrower or Lender, (B) any foreclosure or other proceedings or notice of sale
relating to the Project, (C) any waiver of subrogation rights by the insured, or
(D) any change in the title to or ownership of the Project or any portion
thereof, and (iv) be written in amounts sufficient to prevent Borrower from
becoming a co-insurer under said policies. All liability insurance policies
maintained by Borrower pursuant to this Section 5.10 shall name Lender as an
additional insured and shall waive contribution from any other insurance carried
by Lender in the event of loss. Borrower shall furnish Lender with evidence that
each Project is insured without interruption as required hereunder and, upon
request, Borrower shall cause the originals or certified copies of the policies
of all such insurance to be deposited with Lender or to be otherwise held as
directed by Lender. At least fifteen (15) days prior to the date on which the
premiums on each such policy shall become due and payable, Borrower shall
furnish Lender with proof reasonably satisfactory to Lender of payment thereof.
Each of such policies shall contain an agreement by the insurer that the same
shall not be amended, modified, canceled, reduced or terminated for any reason
including, but not limited to, a failure to pay premiums and/or expiration by
its terms, without at least thirty (30) days' prior written notice to Lender. If
the Mortgage covering any Project is foreclosed, the purchaser at the
foreclosure sale shall, after the expiration of any statutory period of
redemption become the sole and absolute owner of any and all such policies, with
the sole right to collect and retain all unearned premiums thereon, and, for
this purpose, Borrower hereby assigns and grants a security interest in said
policies and unearned premiums to Lender.
In the event of loss, Borrower shall immediately give written notice
thereof to Lender, and Borrower shall promptly make proof of loss and shall in
good faith and with due diligence file, prosecute, settle, adjust or compromise
any claims for insurance proceeds and cause the same to be paid to Lender;
provided, however, that Borrower agrees not to finally settle, adjust or
compromise any such claims without the prior written consent of Lender. If
Borrower does not itself promptly do so, or if any event of default exists
hereunder, Lender is authorized and
38
empowered (but not obligated or required) to make proof of loss, to settle,
adjust or compromise any claims for loss, damage or destruction under, to appear
in, prosecute, settle and compromise any suit or proceeding relating to, and to
collect and receive all proceeds of, any policies of hazard and casualty
insurance maintained pursuant hereto. Borrower shall reimburse Lender, on
demand, for all reasonable costs and expenses including, but not limited to,
court costs and attorneys fees, incurred by Lender in connection therewith, plus
interest thereon from the date incurred at the Default Rate. All proceeds of
such insurance are hereby absolutely and unconditionally assigned, and shall be
paid, to Lender. Such proceeds shall, at Lender's option, be applied first to
the payment of all costs and expenses incurred by Lender in obtaining such
proceeds, and the remainder ("Net Insurance Proceeds") shall be applied, at
Lender's option, either to the reduction of the indebtedness secured by the
Mortgage covering the damaged or destroyed Project in such order as Lender may
elect, whether then due and payable or not, or to the restoration or repair of
said Project, without affecting the lien of said Mortgage or the obligations of
Borrower hereunder or thereunder. Interest upon the entire indebtedness secured
thereby shall continue until any such proceeds are received and applied to such
indebtedness by Lender. Pending a decision as to the proper use and application
of any insurance proceeds, and during any such restoration or repair, Lender
shall not be liable for interest on such proceeds. If Lender elects to apply any
such insurance proceeds to the restoration or repair of a Project, such
disbursement shall proceed in accordance with the procedures set forth in this
Agreement governing disbursement of the proceeds of Project Loans. In such
event, Borrower shall, prior to commencing any such restoration or repair,
deposit with Lender the amount, if any, by which the cost of such restoration or
repair, as determined by Lender, exceeds the amount of the Net Insurance
Proceeds, which amount shall be disbursed to pay costs of such restoration and
repair prior to, and in the same manner as, such Net Insurance Proceeds. Any
surplus which may remain after payment of all costs of restoration or repair
and/or all indebtedness evidenced hereby shall be paid to Borrower, its
successors, transferees or assigns, as their interests may appear.
Notwithstanding any provision contained in this Section to the
contrary, in the event that no event of default then exists hereunder, Lender
shall, at Borrower's written request, permit the Net Insurance Proceeds to be
deposited in an interest bearing escrow account at Lender or at another
financial institution acceptable to Lender, or to be otherwise invested in
liquid, secure investments acceptable and pledged to Lender, with Borrower
bearing all risk of loss thereof, and Lender shall further permit such proceeds
and all interest accrued thereon ("Insurance Interest") to be drawn upon to pay
the costs of restoration, rebuilding or repair of the Project in accordance with
all of the terms of this Agreement applicable to the original construction of
the Project Improvements; provided that (i) the Project Improvements can be
restored, rebuilt or repaired substantially to the condition, and can then
continue to be operated for the purposes, required by this Agreement; (ii) the
restoration, rebuilding or repair of the Project Improvements shall be in strict
accordance with the Plans there for approved by Lender, pursuant to which such
Project Improvements were originally constructed, or Borrower has obtained the
prior written approval by Lender of any other plans and specifications for such
restoration, rebuilding and repair; (iii) the restoration, rebuilding or repair
shall be commenced within sixty (60) days after the date of the loss; (iv) all
restoration, rebuilding and repair shall be performed in a good and workmanlike
manner and in accordance with all applicable Plans, Governmental Requirements
and private restrictions; (v) Borrower has, prior to the commencement of any
restoration, rebuilding or
39
repair, deposited with Lender the amount by which the Net Insurance Proceeds and
Insurance Interest will be insufficient to cover the total Costs of the planned
restoration, rebuilding or repair, as evidenced by a Sworn Construction Cost
Statement acceptable to Lender, which shall be submitted by Borrower to Lender
and shall be signed and sworn to by Borrower and by the General Contractor for
the planned restoration, rebuilding or repair, who must both be acceptable to
Lender; (vi) there is sufficient time for Borrower to complete said restoration,
rebuilding or repair and repay the Project Loan prior to the Project Loan
Maturity Date for said Project, and (vii) Borrower proceeds diligently to
complete said restoration, rebuilding or repair prior to said Project Loan
Maturity Date. If at any time during the course of any such restoration,
rebuilding or repair, the amount so deposited is not sufficient, in Lender's
judgment, to pay the cost of said restoration, rebuilding or repair, Borrower
shall deposit additional funds in an amount equal to the amount of such
insufficiency. Borrower hereby grants to Lender a security interest in all Net
Insurance Proceeds, in all Insurance Interest and in all sums deposited pursuant
to this Section 5.10, to secure payment and performance by Borrower of all of
its obligations hereunder and under the other Loan Documents. In the event that
the Net Insurance Proceeds, plus the Insurance Interest, exceed the cost of said
restoration, rebuilding or repair, and if no event of default exists hereunder,
said excess shall be paid to Borrower.
5.11 Transferring Conveying or Encumbering Projects
Borrower shall not voluntarily or involuntarily agree to, cause, suffer
or permit (a) any sale, transfer or conveyance of any interest of Borrower,
legal or equitable, in any Project (as defined on page 8 herein) or any part or
portion thereof; (b) any transfer of stock in Borrower; or (c) any mortgage,
pledge, encumbrance or lien to be imposed or remain outstanding against any
Project, or any security interest to exist therein, except as created by the
Loan Documents, without, in each instance, the prior written consent of Lender.
Borrower shall maintain its existence as a duly organized and qualified
corporation, in good standing under the laws of the State of Minnesota and the
laws of each state in which any Project is located, and shall not be dissolved,
merged, wound up or terminated. Notwithstanding the above restrictions and
provided no default or Event of Default has occurred and is continuing
hereunder, stock in Borrower may be transferred so long as such Transfer is not
a Change in Control as defined in that certain Indenture dated as of October 18,
1996 by and between Borrower and National City Bank of Minneapolis, National
Association as Trustee and so long as Xxxxx Xxxxxx shall, at all times, own at
least a fifty (50%) voting and controlling interest in Borrower and so long as
Xxxxx Xxxxxx shall continue to be the President of Borrower and shall continue
to be in control of the day-to-day operations of Borrower.
5.12 Complying with the Loan Documents and Contracts
Borrower shall comply with and perform all of its agreements and
obligations under the Loan Documents, and under all other contracts and
agreements to which Borrower is a party relating to the ownership, occupancy,
use, development or construction of the Projects and shall comply with all
requests by Lender which are consistent with the terms thereof. No contract or
other agreement which has been or is required hereby to be assigned by Borrower
to Lender as security for the Loan, shall be changed, modified, amended, revoked
or terminated without the prior written consent of Lender.
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5.13 Agreements with Affiliates
Any development, management, leasing or other agreement relating to any
Project between Borrower or any Guarantor (or any Affiliate of Borrower or of
any Guarantor), relating to the Project, which requires Borrower to pay any fee,
commission or other compensation of any kind to Borrower, any Guarantor or any
such Affiliate, must be approved by Lender, in writing, and all such agreements
shall be subordinate to the Mortgage covering the Project as to lien and time of
payment.
5.14 Updated Appraisals
Borrower agrees that Lender shall have the right to obtain, once during
the term of each Development Project Loan and each Construction Project Loan, at
Borrower's expense, an updated Appraisal of any Project for which an Appraisal
is required under the terms hereof, acceptable to Lender's internal appraisal
group, in the event that (a) an event of default shall have occurred hereunder,
(b) Lender determines in its reasonable opinion that the security for the
Project Loan for said Project has been physically or financially impaired in any
material respect, or (c) such Appraisal is required by then current Governmental
Requirements applicable to Lender. In the event that Lender shall elect to
obtain such an Appraisal, Lender may immediately commission an appraiser
acceptable to Lender, at Borrower's cost and expense, to prepare the Appraisal,
and Borrower shall fully cooperate with Lender and the appraiser in obtaining
the necessary information to prepare such an Appraisal. In the event that
Borrower fails to cooperate with Lender in obtaining such an Appraisal, or in
the event that Borrower shall fail to pay for the cost of such an Appraisal,
within ten (10) days following demand, such event shall constitute an event of
default hereunder, and Lender shall be entitled to exercise all remedies
therefor available to it hereunder. In the event that any such Appraisal shall
conclude that the Loan to Value Ratio for any Project is greater than that
required hereunder for a particular Project, and Borrower fails to prepay,
within thirty (30) days after written notice from Lender to Borrower, the
outstanding principal balance of the Project Loan, including any amounts which
Lender is obligated to Fund, to the extent necessary to reduce the Loan to Value
Ratio down to that required hereunder, such event shall constitute an event of
default hereunder, and Lender shall be entitled to exercise all remedies
therefor available to it hereunder.
5.15 Limitation on Additional Indebtedness
Borrower shall not, nor shall it permit its Subsidiaries to, create,
incur, assume or issue other Indebtedness if, immediately after the incurrance
thereof, the ratio of Funded Debt to Consolidated Tangible Net Worth, plus
Shareholder Subordinated Debt of the Borrower, would exceed 7 to 1. Compliance
with this covenant shall be measured on the last day of March, June, September
and December of each year, and Borrower shall provide Lender with a detailed
calculation with accompanying Certificate in the form attached hereto as Exhibit
H of the Funded Debt to Consolidated Tangible Net Worth as of each quarter
within forty-five (45) days of each calendar quarter except December 31 for
which Borrower shall have seventy-five (75) days to provide the calculation.
Borrower shall have thirty (30) days to cure any default in this Funded Debt
covenant, and Borrower shall be prohibited from incurring any additional Funded
Debt from the date of measurement until such default is cured. In the event of
any non-compliance
41
with this covenant, Borrower shall deliver to Lender a certificate from
Borrower's independent public accountants as to subsequent compliance to cure
any such default.
5.16 Minimum Consolidated Tangible Net Worth
Borrower will maintain, at all times until the maturity of all Project
Loans, a Consolidated Tangible Net Worth, determined as of December 31 of each
year, based upon the annual audited financial statements, of at least Five
Million and 00/100 Dollars ($5,000,000.00) plus fifty percent (50%) of the
Consolidated Net Income earned after December 31, 1995, assuming for purposes of
this Consolidated Tangible Net Worth calculation only that the maximum
Management Bonuses permitted pursuant to Section 10.12 of that certain Indenture
dated as of October 18, 1996 by and between Borrower and National City Bank of
Minneapolis, National Association, as Trustee, are paid as of December 31 of
each year and taxes are then determined based upon the assumed Consolidated Net
Income level. Compliance with this covenant shall be determined quarterly but
the net worth utilized each calendar quarter in March, June and September shall
be the Consolidated Tangible Net Worth amount as determined on the previous
December 31.
Compliance with this covenant shall be measured on the last day of
March, June, September and December of each year, and Borrower shall provide
Lender with a detailed calculation of the Consolidated Tangible Net Worth as of
each quarter within forty-five (45) days of each calendar quarter except
December 31 for which Borrower shall have seventy-five (75) days to provide the
calculation. Borrower shall have thirty (30) days to cure any default in this
Consolidated Tangible Net Worth covenant. In the event of any non-compliance
with this covenant, Borrower shall deliver to Lender a certificate from
Borrower's independent public accountants as to subsequent compliance to cure
any such default.
5.17 Miscellaneous
Borrower shall also:
(a) Maintain its qualification to transact business in its state of
incorporation, in each state in which a Project is located, and
in each jurisdiction where failure so to qualify would
permanently preclude Borrower from enforcing its rights with
respect to any material asset or would expose Borrower to any
material liability.
(b) File all tax returns and reports which are required by law to be
filed by it and pay before they become delinquent all taxes,
assessments and governmental charges and levies imposed upon it
and all claims or demands of any kind which, if unpaid, might
result in the creation of a lien upon its property; provided that
the foregoing items need not be paid if they are being contested
in good faith by appropriate proceedings in accordance with
applicable terms of the Mortgage covering said property, and as
long as the Borrower's title to its property is not materially
adversely affected, its use of such property in the ordinary
course of its business is not materially interfered with, and
adequate reserves with respect thereto have been set aside on the
Borrower's books in accordance with GAAP.
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(c) Give prompt written notice to Lender of the commencement of any
action, suit or proceeding before any court or arbitrator or any
governmental department, board, agency or other instrumentality
affecting Borrower or any property of Borrower or to which
Borrower is a party in which an adverse determination or result
could have a material adverse effect on the business, operations,
property or condition (financial or otherwise) of Borrower or on
the ability of any of them to perform its obligations under this
Agreement and the other Loan Documents, stating the nature and
status of such action, suit or proceeding.
6. DEFAULTS
6.1 Events of Default
Any of the following events shall constitute an event of default under
this Agreement:
(a) Borrower shall default in the payment of principal due according
to the terms hereof or of the Note.
(b) Borrower shall default in the payment of interest on Advances
made by Lender, or in the payment of fees or any other amounts
payable hereunder, under the Note or under any of the other Loan
Documents.
(c) Borrower shall default in the performance or observance of any
other agreement, covenant or condition required to be performed
or observed by Borrower under the terms of this Agreement, which
default, if curable, is not cured within thirty (30) days after
Lender gives Borrower written notice thereof; provided, however,
that if said curable default cannot reasonably be cured within
said thirty (30) day period, but Borrower commences the cure
thereof within said thirty (30) day period and thereafter
prosecutes such cure diligently, continuously and in good faith,
said thirty (30) day period shall be extended by the period of
time reasonably required to cure the same, not to exceed an
additional sixty (60) days.
(d) Any representation or warranty made by Borrower or any Guarantor
in this Agreement or in any of the other Loan Documents, or in
any certificate or document furnished under the terms of this
Agreement or in connection with the Loan, shall be untrue or
incomplete in any material respect.
(e) An event of default shall exist under the terms of any other Loan
Document.
(f) Work on any Project shall be substantially abandoned, or shall,
by reason of Borrower's fault, be delayed or discontinued for an
unreasonably long period or for no valid, good faith business
reason, or such construction shall be delayed for any reason to
the extent that Completion of the Project cannot, in the
reasonable judgment of Lender, be accomplished prior to the
Completion Date for the Project.
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(g) Borrower, or any Affiliate of Borrower, shall become insolvent or
shall commit an act of bankruptcy; or shall apply for, consent to
or permit the appointment of a receiver, custodian, trustee or
liquidator for it or any of its property or assets; or shall fail
to, or admit in writing its inability to, pay its debts as they
mature; or shall make a general assignment for the benefit of
creditors or shall be adjudicated bankrupt or insolvent; or shall
take other similar action for the benefit or protection of its
creditors; or shall give notice to any governmental body of
insolvency or pending insolvency or suspension of operations; or
shall file a voluntary petition in bankruptcy or a petition or an
answer seeking reorganization or an arrangement with creditors,
or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, rearrangement, dissolution,
liquidation or other similar debtor relief law or statute; or
shall file an answer admitting the material allegations of a
petition filed against it in any proceeding under any such law or
statute; or shall be dissolved, liquidated, terminated or merged
without Lender's prior written consent; or shall effect a plan or
other arrangement with creditors; or a trustee, receiver,
liquidator or custodian shall be appointed for it or for any of
its property or assets and shall not be discharged within sixty
(60) days after the date of his appointment; or a petition in
involuntary bankruptcy or similar proceedings is filed against it
and is not dismissed within sixty (60) days after the date of its
filing.
(h) A judgment or judgments for the payment of money in excess of the
sum of $25,000.00 in the aggregate shall be rendered against
Borrower, and said party shall not (i) discharge the same or
provide for the discharge thereof in accordance with the terms
thereof, or (ii) procure a stay of execution thereof, prior to
any execution on such judgment by the judgment creditor, within
sixty (60) days from the date of entry thereof, and within said
period of sixty (60) days, or such longer period during which
execution of such judgment shall be stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal.
(i) The maturity of any Lender Debt of Borrower, or any Affiliate of
Borrower (other than indebtedness under this Agreement), shall be
accelerated, or Borrower, or any such Affiliate, shall fail to
pay any such Lender Debt when due (after the lapse of any
applicable grace period) or, in the case of such indebtedness
payable on demand, when demanded (after the lapse of any
applicable grace period), or any event shall occur or condition
shall exist and shall continue for more than the period of grace,
if any, applicable thereto and shall have the effect of causing,
or permitting the holder of any such indebtedness or any trustee
or other Person, party or entity acting on behalf of such holder
to cause, such or Lender Debt to become due prior to its stated
maturity or to realize upon any collateral given as security
therefor.
(j) An Event of Default occurs under the terms of the Senior
Subordinated Debentures.
(k) Borrower shall be terminated, dissolved, liquidated or wound-up.
44
(l) Xxxxx Xxxxxx shall die or shall become legally incompetent. The
default described in this Section 6.1(m) may be cured by the
immediate implementation of the Term-Out provisions set forth in
Section 1.9 hereof, with the then Total Revolving Outstandings
plus the aggregate unpaid principal balance of all Construction
Project Loans reduced to zero (0) within six (6) months from the
date of such death or legal incompetence.
(m) Borrower shall fail to comply with the convenants set forth in
Section 5.15 and 5.16 hereof.
6.2 Rights and Remedies
Upon the occurrence of an event of default, unless such event of
default is subsequently waived in writing by Lender, Lender shall be entitled,
at the option of Lender, to exercise any or all of the following rights and
remedies, consecutively or simultaneously, and in any order:
(a) Lender may make one (1) or more further Advances, without
liability to make any subsequent Advances.
(b) Lender may suspend its obligation to make Advances under this
Agreement, without notice to Borrower.
(c) Lender may terminate its obligation to make Advances under this
Agreement, and may declare the entire unpaid principal balance of
the Advances made under this Agreement to be immediately due and
payable, together with accrued and unpaid interest on such
Advances, without notice to or demand on Borrower.
(d) Lender may exercise any or all remedies specified herein and/or
in the other Loan Documents, including (without limiting the
generality of the foregoing) the right to foreclose the Mortgage
or to sell the property covered thereby pursuant to the terms
thereof, and/or any other remedies which it may have therefor at
law, in equity or under statute.
(e) Lender may cure the event of default on behalf of Borrower, and,
in doing so, may enter upon any Project, and may expend such sums
as it may deem desirable, including attorneys' fees, all of which
shall be deemed to be Advances hereunder, even though causing the
Loan to exceed the face amount of the Note, shall bear interest
at the Default Rate and shall be payable by Borrower on demand.
(f) Borrower hereby irrevocably authorizes Lender to set off any sum
due to or incurred by Lender against all deposits and credits of
Borrower with, and any and all claims of Borrower against,
Lender. Such right shall exist whether or not Lender shall have
made any demand hereunder or under any other Loan Document,
whether or not said sums, or any part thereof, or deposits and
credits held for the account of Borrower is or are matured or
unmatured, and regardless of the existence or adequacy of any
collateral, guaranty or any other security, right or remedy
available to Lender. Lender agrees that, as promptly as is
reasonably
45
possible after the exercise of any such setoff right, it shall
notify Borrower of its exercise of such setoff right; provided,
however, that the failure of Lender to provide such notice shall
not affect the validity of the exercise of such setoff rights.
Nothing in this Agreement shall be deemed a waiver or prohibition
of or restriction on Lender to all rights of banker's lien,
setoff and counterclaim available pursuant to law.
In addition, upon the occurrence of any event described in Section
6.1(g) hereof which will not become an event of default prior to the expiration
of some period of time, Lender may suspend its obligations to fund Advances
hereunder immediately upon the occurrence of said event.
6.3 Completion of a Project by Lender
In addition, in case of the occurrence of an event of default specified
in Section 6.1(f) hereof, or any event of default caused by, or which results
in, Borrower's failure, for any reason, to continue with construction of a
Project as required by this Agreement, then Lender may (but shall not be
obligated to), in addition to, or in concert with, the other remedies referred
to above, take over and complete construction of the Project in accordance with
the Plans, with such changes therein as Lender may, in its discretion, deem
appropriate, all at the risk, cost and expense of Borrower. Lender may assume or
reject any contracts entered into by Borrower in connection with the Project,
may enter into additional or different contracts for work, services, labor and
materials required, in the judgment of Lender, to complete the Project, and may
pay, compromise and settle all claims in connection with the Project. All sums,
including reasonable attorneys' fees, and charges or fees for supervision and
inspection of the construction and for any other necessary or desirable purpose
in the discretion of Lender expended by Lender in completing or attempting to
complete the Project (whether aggregating more, or less, than the face amount of
the Note), shall be deemed Advances made by Lender to Borrower hereunder, and
Borrower shall be liable to Lender, on demand, for the repayment of such sums,
together with interest on such sums from the date of their expenditure at the
Default Rate. Lender may, in its discretion, at any time abandon work on the
Project, after having commenced such work, and may recommence such work at any
time, it being understood that nothing in this Section shall impose any
obligation on Lender either to complete or not to complete the Project. For the
purpose of carrying out the provisions of this Section, Borrower irrevocably
appoints Lender its attorney-in-fact, with full power of substitution, to
execute and deliver all such documents, to pay and receive such funds, and to
take such action as may be necessary, in the judgment of Lender, to complete the
Project. This power of attorney is coupled with an interest and is irrevocable.
Lender, however, shall have no obligation to undertake any of the foregoing,
and, if Lender does undertake any of the same, it shall have no liability for
the adequacy, sufficiency or completion thereof.
7. MISCELLANEOUS
7.1 Binding Effect; Waivers; Cumulative Rights and Remedies
The provisions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, personal representatives, legal
46
representatives, successors and assigns, subject to the provisions of Section
5.11; provided, however, that neither this Agreement nor the proceeds of the
Loan may be assigned by Borrower voluntarily, by operation of law or otherwise,
without the prior written consent of Lender. No delay on the part of Lender in
exercising any right, remedy, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder constitute such a waiver or exhaust the same, all
of which shall be continuing. The rights and remedies of Lender specified in
this Agreement shall be in addition to, and not exclusive of, any other rights
and remedies which Lender would otherwise have at law, in equity or by statute,
and all such rights and remedies, together with Lender's rights and remedies
under the other Loan Documents, are cumulative and may be exercised
individually, concurrently, successively and in any order.
7.2 Survival
All agreements, representations and warranties made in this Agreement
shall survive the execution of this Agreement, the making of the Advances by
Lender, and the execution of the other Loan Documents, and shall continue until
Lender receives payment in full of all indebtedness of Borrower incurred under
this Agreement, under the Indemnification Agreements and under the other Loan
Documents and Lender has no obligation to make any further Advances hereunder.
7.3 Governing Law; Waiver of Jury Trial; Venue
THIS AGREEMENT, THE RIGHTS OF THE PARTIES HEREUNDER, AND THE
CONSTRUCTION, INTERPRETATION, VALIDITY AND ENFORCEABILITY HEREOF SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT
GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES RELATING TO NATIONAL BANKS.
BORROWER AND LENDER HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING RELATING TO THE LOAN, THE LOAN DOCUMENTS AND/OR THE TRANSACTIONS
CONTEMPLATED THEREBY. AT THE OPTION OF LENDER, THIS AGREEMENT MAY BE ENFORCED IN
ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN OR XXXXXX COUNTY,
MINNESOTA; AND BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT
AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE
EVENT BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY
TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, LENDER, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE
CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF
SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
47
7.4 Counterparts
This Agreement may be executed in any number of counterparts, all of
which shall constitute a single Agreement.
7.5 Notices
Any notice required or permitted to be given by any party hereto to the
other under the terms of this Agreement, or documents related hereto, shall be
in writing and shall be sent by manual delivery, telegram, facsimile
transmission, overnight courier, or United States registered or certified mail,
return receipt requested (postage prepaid), addressed to such party at the
address specified on the signature page(s) hereof, or at such other address in
the United States of America as such party shall have specified to the other
party hereto in writing, at least ten (10) days prior to the effective date of
said change of address. All periods of notice shall be measured from the date of
delivery thereof if manually delivered, from the date of sending thereof if sent
by telegram or facsimile transmission, from the first Business Day after the
date of sending if sent by overnight courier, or from four (4) days after the
date of mailing if so mailed.
7.6 Lender's Signs
Lender may, if it so desires, at Borrower's cost and expense, place a
sign of reasonable size on any Project Land, indicating that Lender is providing
financing for the Project to be constructed thereon, and/or may otherwise
publicize its involvement with said Project including, but not limited to,
issuing press releases.
7.7 No Third Party Reliance
No third party shall be entitled to rely upon this Agreement or to have
any of the benefits of Lender's interest hereunder, unless such third party is
an express assignee of all or a portion of Lender's interest hereunder.
7.8 Time of the Essence
Time is of the essence hereof with respect to the dates, terms and
conditions of this Agreement.
7.9 Entire Agreement: No Oral Modifications
This Agreement, the Guaranty, the other Loan Documents and the other
documents mentioned herein set forth the entire agreement of the parties with
respect to the Loan and supersede all prior written or oral understandings and
agreements between them with respect thereto. No modification or waiver of any
provision of this Agreement shall be effective unless set forth in writing and
signed by the parties hereto.
48
7.10 Captions
The headings or captions of the Articles and Sections set forth herein
are for convenience only, are not a part of this Agreement and are not to be
considered in interpreting this Agreement.
7.11 Borrower-Lender Relationship
The relationship between Borrower and Lender created hereby and by the
other Loan Documents shall be that of a borrower and a lender only, and in no
event shall Lender be deemed to be a partner of, or a joint venturer with,
Borrower.
7.12 Release of Guarantors
Upon the execution and delivery of the Loan Documents and compliance
with the requirements of Section 2.1 hereof, Guarantors shall be released from
all liability under the Guaranty and Indemnification Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Address: XXXXXXXX BROS. CONSTRUCTION, INC.,
a Minnesota corporation
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxx 00000 By:
---------------------------------
Xxxxx Xxxxxx
Its: President
Address: U.S. BANK NATIONAL ASSOCIATION
U.S. Bank Place - MPFPO8O2
000 Xxxxxx Xxxxxx Xxxxx By:
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000 ---------------------------------
Attention: Real Estate Banking Its:
Division Head ----------------------------
49
EXHIBIT "A"
AMENDMENT TO MORTGAGE
1
AMENDMENT OF MORTGAGE AND SECURITY AGREEMENT
AND FIXTURE FINANCING STATEMENT
This Amendment to Mortgage and Security Agreement and Fixture Financing
Statement is made and entered into as of the ______ day of ________________,
19____, by and between U.S. BANK NATIONAL ASSOCIATION (formerly known as First
Bank National Association), a national banking association ("Mortgagee"), ,
whose post office address is 601 Second Avenue South, MPFP0802, Xxxxxxxxxxx,
Xxxxxxxxx 00000-0000, Attn: Real Estate Banking Group and XXXXXXXX BROS.
CONSTRUCTION, INC., a Minnesota corporation (hereinafter referred to as the
"Mortgagor"), whose post office address is 000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxxxx,
Xxxxxxxxx 00000.
R E C I T A L S
7.1 Mortgagee has made a revolving construction and development loan
("Loan") to Mortgagor in the sum of Five Million and No/100 Dollars
($7,500,000.00).
7.2 To evidence the Loan, the Mortgagor executed and delivered to
Mortgagee an Amended and Restated Revolving Credit Note dated December ______,
1998, in the original sum of Seven Million Five Hundred Thousand and No/100
Dollars ($7,500,000.00) ("Note") payable to the order of Lender.
7.3 The Note was secured by a Mortgage and Security Agreement and
Fixture Financing Statement dated April _____, 1997, filed in the office of the
Hennepin County Recorder on April ______, 1997, as Document No. ______________
and in the office of the Hennepin County Registrar of Titles on April __, 1997
as Document No. _______ and in the offices of the Dakota County Recorder on
April __, 1997 as Document No. _______ , as amended by the Amendment to Mortgage
dated December __, 1998, recorded on _________________, 19__, in the office of
the Hennepin County Recorder/Registrar of Titles, as Document No.
____________________, and on ____________________, 19__, in the office of the
Xxxxxx County Recorder/Registrar of Titles (collectively as amended the
"Mortgage"), on certain property located in Hennepin, Dakota, Xxxxxx and
______________________ Counties, Minnesota, and legally described therein.
2
7.4 Mortgagor has requested that the Mortgagee agree to amend and
modify the Note. Mortgagee has agreed to such amendment and modification upon
the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the above recitals and other
good and valuable consideration, the receipt of which is hereby acknowledged,
Mortgagor and Mortgagee do hereby amend the terms of the Mortgage as follows:
(a) Exhibit "A" attached to the Mortgage and the real property
conveyed therein, is hereby amended and supplemented and the
real property described in Exhibit "A" attached hereto shall
become a part thereof. All references in the Mortgage to
Exhibit "A" and/or the Premises shall refer to Exhibit "A" and
the Premises as amended hereby.
(b) All references in the Mortgage to the county wherein the
Premises shall is located shall be amended to include the
County of _________________.
(c) Except as amended hereby, all provisions of the Mortgage shall
remain in full force and effect and are not further modified,
and the liens securing the Note are continued and carried
forward in full force and effect in accordance with their
terms.
IN WITNESS WHEREOF, the parties hereto have executed the foregoing
instrument as of the date first above written.
U.S. BANK NATIONAL
ASSOCIATION, a national banking
association
By:
------------------------------
Its:
------------------------------
XXXXXXXX BROS. CONSTRUCTION,
INC., a Minnesota corporation
By:
------------------------------
Its:
------------------------------
3
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _______ day of
__________, 199___, by ________________________________, the
_______________________ of U.S. Bank National Association, a national banking
association, on behalf of said association.
-------------------------------------
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _______ day of
__________, 199 , by ________________________________, the
_______________________ of Xxxxxxxx Bros. Construction, Inc., a Minnesota
corporation, on behalf of said corporation.
-------------------------------------
Notary Public
THIS DOCUMENT DRAFTED BY
Xxxxxxxxxxx Xxxxx & Xxxxxxxx (DRS)
3400 Plaza VII
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
4
EXHIBIT "A"
LEGAL DESCRIPTION
EXHIBIT "B"
APPLICATION AND CERTIFICATE FOR PAYMENT
EXHIBIT "C"
BORROWING BASE CERTIFICATE
XXXXXXXX BROS. CONSTRUCTION, INC. -- U.S. BANK NATIONAL ASSOCIATION
BORROWING BASE CERTIFICATE _____________, 199___
The undersigned hereby certifies to U.S. Bank National Association ("Bank") that
(a) all information set forth on this Borrowing Base Certificate and the
attached Borrowing Base Certificate Exhibit A is true, correct, complete and
accurate on the date set forth below; (b) no uncured Event of Default (as that
term is defined in the Amended and Restated Revolving Construction and
Development Loan Agreement ("Loan Agreement"), dated ________, 1998, between the
Bank and Xxxxxxxx Bros. Construction, Inc.) exists on the date set forth below,
except as set forth below or in previous notices sent, or certificates delivered
to the Bank as set forth below; and (c) this Certificate complies with all of
the terms and provisions of the Loan Agreement.
Unit Summary
Number of Units Amount of
Construction
Project Loans
--------------- -------------
Total Housing Units Under Construction
--------------- -------------
Presold Units
--------------- -------------
Models
--------------- -------------
Spec Units
--------------- -------------
Models and Specs Maximum = (10 Models and
15 Specs)
--------------- -------------
Notices The following notices have been provided to U.S. Bank
------- National Association and remain effective as of the date
hereof:
None.
Certified: Xxxxxxxx Bros. Construction, Inc.
By: Date:
------------------------------ ---------------------
Its:
------------------------------
EXHIBIT "D"
AMENDMENT TO MORTGAGE
1
AMENDMENT OF MORTGAGE AND SECURITY AGREEMENT
AND FIXTURE FINANCING STATEMENT
This Amendment to Mortgage and Security Agreement and Fixture Financing
Statement is made and entered into as of the ______ day of ________________,
1998 by and between U.S. BANK NATIONAL ASSOCIATION (formerly known as First Bank
National Association), a national banking association ("Mortgagee"), whose post
office address is 601 Second Avenue South, MPFP0802, Xxxxxxxxxxx, Xxxxxxxxx
00000-0000, Attn: Real Estate Banking Group and XXXXXXXX BROS. CONSTRUCTION,
INC., a Minnesota corporation (hereinafter referred to as the "Mortgagor"),
whose post office address is 000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxxx
00000.
R E C I T A L S
7.1 Mortgagee has made a revolving construction and development loan
("Loan") to Mortgagor in the sum of Five Million and No/100 Dollars
($5,000,000.00).
7.2 To evidence the Loan, the Mortgagor executed and delivered to
Mortgagee a Revolving Credit Note dated April 18, 1997, in the original sum of
Five Million and No/100 Dollars ($5,000,000.00) ("Original Note") payable to the
order of Lender.
7.3 The Original Note was secured by a Mortgage and Security Agreement
and Fixture Financing Statement dated April 18, 1997, executed and delivered by
Mortgagor in favor of Mortgagee to secure the Original Note, including all
amendments thereof and supplements thereto, which Mortgage was filed on
_________________ in the office of the (COUNTY RECORDER) (REGISTRAR OF TITLES),
______________________ County, Minnesota, as Document No. ____________________,
and which Mortgage has been amended by the Amendments to Mortgage dated
______________________, and filed on _____________________ in the office of the
(COUNTY RECORDER) (REGISTRAR OF TITLES), ______________________, County,
Minnesota, as Document Nos. _____________________ (collectively the "Mortgage"),
on certain property located in Hennepin and Dakota and ______________________
Counties, Minnesota, and legally described therein, and upon which Mortgage
Registry tax in the amount of $ _____ was paid as evidenced by receipt no.
______________________.
2
7.4 Mortgagor has requested that the Mortgagee agree to amend and
modify the Note to increase the amount of the loan to Seven Million Five Hundred
Thousand and 00/100 Dollars ($7,500,000.00). Mortgagee has agreed to such
amendment and modification upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the above recitals and other good
and valuable consideration, the receipt of which is hereby acknowledged,
Mortgagor and Mortgagee do hereby amend the terms of the Mortgage as follows:
(a) The Original Note has been replaced by the Amended and Restated
Revolving Credit Note of even dated herewith from Mortgagor to
Mortgagee in the principal amount of Seven Million Five Hundred
Thousand and 00/100 Dollars ($7,500,000.00) (hereinafter referred
to as the "Note"). The maximum principal amount secured by the
Mortgage is hereby increased to Seven Million Five Hundred
Thousand and 00/100 Dollars ($7,500,000.00), and Mortgagee shall
pay such additional Mortgage Registry tax as required for the
recording of this Amendment.
(b) All references in the Mortgage to the Original Note shall
hereafter mean the Note as defined herein.
(c) Section 10.9 of the Mortgage is deleted in its entirety and
replaced with the following:
10.9 REVOLVING LINE OF CREDIT MORTGAGE. THIS MORTGAGE
SECURES A REVOLVING LINE OF CREDIT UNDER WHICH ADVANCES,
PAYMENTS AND READVANCES MAY BE MADE FROM TIME TO TIME. THE
MAXIMUM AMOUNT OF THE LINE OF CREDIT WHICH MAY BE SECURED
AT ANY ONE TIME UNDER THIS MORTGAGE IS SEVEN MILLION FIVE
HUNDRED THOUSAND AND 00/100 DOLLARS ($7,500,000.00). THE
PROVISIONS OF MINN. STATS. SECTION 507.325 SHALL
ACCORDINGLY APPLY TO THIS MORTGAGE.
(d) Notwithstanding anything to the contrary contained in the
Mortgage, the unpaid balance of the principal together with
interest thereon payable under the Note or any amounts payable
under the Mortgage shall be due and payable in any event on May
31, 2001.
(e) Except as amended hereby, all provisions of the Mortgage shall
remain in full force and effect and are not further modified, and
the liens securing the Note are continued and carried forward in
full force and effect in accordance with their terms.
3
IN WITNESS WHEREOF, the parties hereto have executed the foregoing
instrument as of the date first above written.
U.S. BANK NATIONAL
ASSOCIATION, a national banking
association
By:
--------------------------
Its:
--------------------------
XXXXXXXX BROS. CONSTRUCTION,
INC., a Minnesota corporation
By:
--------------------------
Its:
--------------------------
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _______ day of
__________, 1998, by ________________________________, the ____________________
of U.S. Bank National Association, a national banking association, on behalf of
said association.
------------------------------
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _______ day of
__________, 1998, by ________________________________, the ____________________
of Xxxxxxxx Bros. Construction, Inc., a Minnesota corporation, on behalf of said
corporation.
------------------------------
Notary Public
THIS DOCUMENT DRAFTED BY
Xxxxxxxxxxx Xxxxx & Xxxxxxxx (DRS)
3400 Plaza VII
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
4
EXHIBIT "A"
LEGAL DESCRIPTION
Parcel I:
Xxx 0, Xxxxx 0, Xxx Xxxxx xx Xxxxxxxxx 0xx Addition, according to the recorded
plat thereof, Xxxxxx County, Minnesota.
Parcel II:
Xxx 00, Xxxxx 0, Xxxxxxxxx xx Xxxx Xx. Xxx, according to the recorded plat
thereof, Xxxxxx County, Minnesota.
Parcel III:
Xxx 00, Xxxxx 0, Xxxxx Xxxxxx, according to the recorded plat thereof, Hennepin
County, Minnesota.
Parcel IV
Xxx 0, Xxxxx 0, Xxxx Xxxx 0xx Addition, according to the recorded plat thereof,
Hennepin County, Minnesota.
1
EXHIBIT "E"
DRAW REQUEST CERTIFICATION
1
DRAW REQUEST
In accordance with the attached Collateral Certificate and Borrowing Base
Certificate, Borrower has requested a draw in the amount of $_______________ as
of ________________, 199__.
BORROWER
XXXXXXXX BROS. CONSTRUCTION, INC.,
a Minnesota corporation
By:
---------------------------------------
Its:
---------------------------------------
2
EXHIBIT "F"
LETTER OF INSTRUCTIONS
1
__________________, 1998
BY OVERNIGHT COURIER
Chicago Title Insurance Company
0000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: _________________
Re: $7,500,000.00 Revolving Single Family Residential
Development Loan from U.S. Bank National Association
("Bank") to Xxxxxxxx Bros. Construction, Inc., (Borrower")
Mortgage and Security Agreement and Fixture Financing
Statement by and between Bank and Borrower dated April 18,
1997, as amended _________________________ ("Mortgage")
Your Mortgagee's Policy of Title Insurance No. _____ ("Policy)
Dear _______________:
Enclosed please find a fully completed, dated, executed and acknowledged
Amendment of Mortgage and Security Agreement and Fixture Financing Statement
("Amendment of Mortgage"), covering real property located in ____________
County, Minnesota ("Subject Property").
Please record the Amendment of Mortgage in the office of the County Recorder
(Registrar of Titles) in and for said County, at the sole cost and expense of
the Borrower named therein at such time as you are prepared to issue to the Bank
an Endorsement under the Policy in the same form and amount as, including the
same endorsements as are attached to, and with the same deletions from the
Standard Printed Exceptions and Standard Exclusions from Coverage as are made
in, the Policy, covering the Subject Property and insuring that the Mortgage, as
amended and supplemented by the Amendment of Mortgage, is a first lien on the
Subject Property, free and clear of all mortgages, liens, exceptions,
encumbrances or objections to title except (a) the liens of unpaid taxes which
are not yet delinquent and (b) the items numbered _____, ______, and _______ of
Schedule B of your Commitment to Insure covering the Order Number _____________;
Effective Date: _____________, 1997, a copy of which is attached hereto and is
hereby made a part hereof. Please have an appropriate, authorized officer of
Chicago Title Insurance Company date, sign and return to the undersigned by
facsimile transmission (at 612/973-0830) and by overnight air courier, the
enclosed copy of this letter. Notwithstanding
2
our failure to receive a copy of this letter executed by an authorized agent of
Chicago Title Insurance Company, your recordation of the Mortgage and issuance
of the Endorsement shall constitute evidence of your agreement with these
instructions.
All premiums and other costs associated with the issuance of the Endorsement and
compliance with these instructions must be paid by the Borrower.
If you have any questions concerning any of these instructions, please contact
the undersigned before acting thereon.
Sincerely,
Xxxxx Xxxxx
Senior Loan Administrator
KO:
Attachment
cc: Xxxxxxx Xxxxxx
ACKNOWLEDGMENT AND ACCEPTANCE
The undersigned hereby acknowledges receipt of the foregoing letter of
instructions, agrees to comply therewith and agrees to issue the Endorsement in
accordance with the terms thereof.
CHICAGO TITLE INSURANCE COMPANY
By:
--------------------------------
Its:
-------------------------------
3
EXHIBIT "G"
ASSIGNMENT OF GENERAL CONTRACT
-1-
ASSIGNMENT OF GENERAL CONTRACT
THIS ASSIGNMENT is made this _____ day of ____________, 199_, by
XXXXXXXX BROS. CONSTRUCTION, INC., a Minnesota corporation (hereinafter
collectively referred to as the "Borrower"), whose address is c/o Xxxxx Xxxxxx,
000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxxx 00000, to U.S. BANK NATIONAL
ASSOCIATION, a national banking association (hereinafter referred to as the
"Lender"), whose address is U.S. Bank Place, 000 Xxxxxx Xxxxxx Xxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000.
RECITALS
A. The Borrower is the owner of certain real property and the
improvements thereon located in the City of ______________,
County of ____________, State of Minnesota (hereinafter
referred to as the "Premises").
B. The Borrower has executed and delivered to and with
______________ ______________________, a _____________________
(hereinafter referred to as the "Contractor") a certain
agreement dated as of _____________, 19 ____ (hereinafter
referred to as the "Contract") providing that Contractor will
act as general contractor in connection with the construction
of certain improvements upon the Premises (hereinafter
referred to as the "Improvements").
C. The Lender has made to the Borrower a $7,500,000.00 revolving
and development construction loan (hereinafter referred to as
the "Loan") pursuant to a certain Revolving Construction and
Development Loan Agreement of even date herewith (hereinafter
referred to as the "Loan Agreement") for the purpose of
financing a portion of the costs of the construction of the
Improvements, and as a condition of making certain advances
under the Loan, the Lender requires the assignment to it of
the Contract and certain subcontracts and the consent of the
Contractor and certain subcontractors thereto as herein set
forth.
D. The Loan is evidenced by an Amended and Restated Revolving
Credit Note dated as of _________________, 1998 (hereinafter
referred to as the "Note") and secured by a Mortgage and
Security Agreement and Fixture Financing Statement
(hereinafter referred to as the "Mortgage"), dated April 18,
1997, as amended by the Amendments to Mortgage dated
______________________ and _________________ (the Note, the
Mortgage and all other documents securing the Loan are
hereinafter collectively referred to as the "Loan Documents").
NOW, THEREFORE, to secure the Loan and all advances to and obligations
of the Borrower under the Loan Agreement and the Loan Documents for the
Improvements, the Borrower hereby sells, assigns and transfers and sets over
unto the Lender and its successors and assigns, and grants a security interest
in all of the right, title and interest of the Borrower in and to the Contract
and in and to any and all subcontracts (hereinafter referred to as the
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"Subcontracts") now or hereafter entered into by Contractor in connection with
the construction of the Improvements, and the Borrower hereby represents,
warrants and agrees as follows:
1. The copy of the Contract attached hereto as Exhibit "A" is a
true, correct and complete copy of the Contract; there have
been no prior assignments of the Contract; the Contract is
valid, enforceable and in full force and effect and has not
been amended or modified in any manner; neither party to the
Contract is in default under the terms of the Contract; and
all covenants, conditions and agreements contained in the
Contract have been performed as required therein, except those
not due to be performed until after the date hereof.
2. The Borrower agrees not to further assign, sell, pledge,
mortgage or otherwise transfer or encumber its interest in the
Contract so long as this Assignment is in effect. The Borrower
agrees that it shall not amend or modify the terms of the
Contract without the prior written approval of the Lender.
3. This Assignment shall constitute a perfected, absolute and
present assignment provided that the Lender shall have no
right under this Assignment to enforce the provisions of the
Contract until an Event of Default shall have occurred under
the terms of the Construction Loan Agreement. Upon the
occurrence of such an Event of Default, the Lender may,
without affecting any of its rights or remedies against the
Borrower under any other instrument, document or agreement,
exercise its rights under this Assignment as the Borrower's
attorney-in-fact in any manner permitted by law, and in
addition, the Lender shall have the right to exercise and
enforce any or all rights and remedies available to a secured
party under the Uniform Commercial Code.
4. The Borrower hereby irrevocably constitutes and appoints the
Lender as its attorney-in-fact upon the occurrence of an Event
of Default under the Construction Loan Agreement to demand,
receive and enforce the Borrower's rights with respect to the
Contract, to make payments under the Contract and to give
appropriate receipts, releases and satisfactions for and on
behalf of and in the name of the Borrower or, at the option of
the Lender, in the name of the Lender, with the same force and
effect as if the Lender had originally executed the Contract.
5. The Lender does not assume any of the obligations or duties of
the Borrower under or with respect to the Contract unless and
until the Lender shall have given the Contractor written
notice that it is exercising its right to complete or cause
the completion of the construction of the Improvements
following the occurrence of an Event of Default under the
Construction Loan Agreement. If the Lender does not undertake
to complete or cause the completion of the construction of the
Improvements, the Lender shall have no liability whatsoever
for the performance of any of the obligations or duties under
the Contract. The Lender may reassign, in its sole discretion,
and for the purpose of completing the Improvements, its
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right, title and interest in the Contract and Subcontracts
upon notice to the Contractor and Subcontractors, but without
any requirement for the consent of the Borrower.
6. The Borrower agrees to pay all costs and expenses, including
attorney's fees, which the Lender may incur by exercising any
of its rights under this Assignment.
7. Neither this Assignment nor any provision hereof may be
changed, waived, discharged or terminated, except by an
instrument in writing signed by the Borrower and the Lender.
IN WITNESS WHEREOF, the Borrower has executed this Assignment as of the
day and year first written above.
XXXXXXXX BROS. CONSTRUCTION,
INC., a Minnesota corporation
By:
--------------------------------
Xxxxx Xxxxxx
Its: President
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CONTRACTOR'S CONSENT
The undersigned, ___________________________, a __________________
(hereinafter referred to as the "Contractor"), does hereby consent to the above
Assignment and acknowledges and agrees with U.S. BANK NATIONAL ASSOCIATION, a
national banking association (hereinafter referred to as the "Lender") as
follows:
1. The Contractor acknowledges that it has entered into a certain
construction and development contract with the Borrower
(hereinafter referred to as the "Contract") dated
_____________, 19 ____, a true and correct copy of which is
attached hereto as Exhibit "A", and that it is the Contractor
under the Contract referred to in the foregoing Assignment.
The Contract is valid, enforceable and in full force and
effect and has not been amended or modified in any respect.
2. The Contractor acknowledges that the rights of the Borrower
under the Contract have been collaterally assigned by the
Borrower to the Lender.
3. Upon the occurrence of an Event of Default under the terms of
the Loan Agreement, the Contractor shall, at the Lender's
written request, continue performance on the Lender's behalf
under the Contract in accordance with the terms thereof,
conditioned only upon receipt by the Contractor of payment on
account of its compensation in accordance with the terms and
provisions of the Contract.
4. The disbursement provisions contained in the Loan Agreement
shall control the disbursement of Loan proceeds to the
Borrower notwithstanding any conflicting provisions contained
in the Contract.
5. The Lender may enforce the obligations of the Contractor under
the Contract with the same force and effect as if enforced by
the Borrower and may perform the obligations of the Borrower.
The Contractor will accept such performance in lieu of
performance by the Borrower in satisfaction of the Borrower's
obligations thereunder.
6. The Contractor will give the Lender prompt written notice of
any default by the Borrower under the Contract. The Contractor
will not terminate the Contract on account of any default of
the Borrower thereunder without written notice of such default
to the Lender and will give the Lender thirty (30) days to
cure the default. In the event the Lender elects to cure the
default and does, in fact, cure such default within the time
period set forth herein, the Contractor agrees not to
terminate the Contract. If, however, the Lender elects not to
enforce the Contract against the Contractor, the Lender shall
have no obligation to cure any default of the Borrower under
the Contract.
7. The Contractor has full authority under all state and local
laws and regulations to perform all of its obligations under
the Contract in accordance with the terms thereof and the
Contractor will comply with all applicable local, state and
federal laws and regulations. Upon completion of the
Improvements, the Contractor will certify to the Lender or its
successors or assigns that the Improvements have been
completed in substantial accordance with the Plans and
Specifications as prepared by _________________________, a
______________________ and all applicable building, fire,
health, zoning, environmental and energy legislation,
ordinances, rules and regulations.
8. The Contractor hereby collectively assigns to the Lender as
collateral security for the Loan all of Contractor's right,
title and interest under the Subcontracts under the same terms
and conditions as contained herein with reference to the
Contract which assignment shall become operative upon the
occurrence of an event of default by the Contractor under the
terms of the Contract or the Subcontracts and the written
assumption by Lender of the Contractor's obligations under the
Subcontracts.
9. The Contractor agrees not to modify or amend the Contract or
any Subcontracts or give effect to any change order without
the Lender's specific written consent.
10. All terms defined in the foregoing Assignment shall have the
same meanings when used in this Consent.
Dated: _______, 199_
CONTRACTOR:
-------------------------------,
a
--------------------------------
By:
--------------------------------
Its:
--------------------------------
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EXHIBIT "A"
CONTRACT
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EXHIBIT "H"
CERTIFICATE REGARDING CONSOLIDATED
NET WORTH AND LEVERAGE RATIO
The undersigned, being the Borrower or an authorized representative of the
Borrower, delivers this certificate pursuant to the terms of Sections 5.15 and
5.16 of the Amended and Restated Revolving Construction and Development Loan
Agreement dated as of ___________, 1998, and hereby certifies that for the
quarter immediately preceding the date of this Certificate:
(1) Consolidated Tangible Net Worth $______________ *
(2) Leverage Ratio _________ *
BORROWER
XXXXXXXX BROS. CONSTRUCTION,
INC., a Minnesota corporation
By:
-------------------------------------
Its:
------------------------------------
Date:
-----------------------------------
*Calculations attached
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