MASTER CONSTRUCTION LOAN AGREEMENT

EXHIBIT 10.4

MASTER CONSTRUCTION LOAN AGREEMENT

This Master Construction Loan Agreement (“Loan Agreement”), dated September 28, 2005, is made by and between Borrower and Lender, whose names and addresses are set forth below, in connection with the Loan described below.

 

Borrower:

Wilson Family Communities, Inc.

 

 

Borrower’s Address:

2700 Fortuna, Suite 400 Austin, Texas 78746

 

 

Lender:

PlainsCapital Bank

 

 

Lender’s Address:

919 Congress, Suite 100 Austin, Texas 78701

 

 

Loan:

$2,000,000.00

 

 

ARTICLE 1

 

Definitions

 

Section 1.1            Definitions.  In addition to other defined terms herein, as used in this Loan Agreement, and unless the context otherwise requires, the following terms shall have the respective meanings set forth below:

(a)           Applicable Law.   The term “Applicable Law” shall mean all laws, rules and regulations applicable to the Person, conduct, transaction, covenant or Loan Documents in question, including all applicable common law and equitable principles; all provisions of all applicable state and federal constitutions, statutes, rules, regulations and orders of governmental bodies; and orders, judgments and decrees of all courts and arbitrators.

 

(b)           Affidavit of Borrower.  The term “Affidavit of Borrower” shall mean a sworn affidavit of an authorized representative of Borrower (and such other parties as Lender may require) to the effect that all statements, invoices, bills, and other expenses incident to the acquisition of the Property and the construction of the Improvements incurred to a specified date, whether or not specified in the Approved Budget, have been paid in full, except for (a) amounts retained pursuant to the Construction Contract, and (b) items to be paid from the proceeds of a Draw then being requested or in another manner satisfactory to Lender.

 

(c)           Appraisal.  The term “Appraisal” means, for each house to be built under this Credit Facility, an “as built” appraisal addressed to Lender and prepared by an independent appraiser engaged by Lender. Such Appraisal shall be in form and content satisfactory to Lender. Lender shall select the appraiser and order all Appraisals required herein; that cost of the Appraisal shall be the responsibility of Borrower, and Borrower shall pay the costs thereof promptly upon receipt of the invoice for the Appraisal.

 

 

 

If requested by Lender, Borrower deposit with Lender the estimated cost of the Appraisals prior to Lender engaging the services of the appraiser.

 

(d)           Approved Budget.  The term “Approved Budget” shall mean a budget or cost itemization prepared by Borrower specifying, for each Unit, the cost by item of (a) all labor, materials, and services necessary for the construction of the Improvements in accordance with the Plans and all Governmental Requirements, and (b) all other expenses anticipated by Borrower incident to the Loan, including, if applicable, the amount of the Lot Draw.

 

(e)           Best Knowledge.   The term “Best Knowledge” shall men acts that are within the actual knowledge of any partner, officer, director, or shareholder of Borrower or Borrower’s General Partner after due inquiry of Persons reasonably likely to possess information of the nature described.

 

(f)           Borrower.   The term “Borrower” shall mean the party named as Borrower on page 1 of this Loan Agreement.

 

(g)           Builder.   The term “Builder” shall mean Green Builders, Inc., a Texas corporation. It is contemplated that Builder may take title to the Lots for the purpose of constructing Improvements on the Lots. Whenever in this Agreement there is a reference to liens to be granted on Lots by Borrower, it shall be construed to mean, if applicable, liens granted by Builder if Builder takes title to such Lots.

 

(h)           Code.   The term “Code” shall mean the Uniform Commercial Code as in force in the state in which the Property is located and, if different, the state of the Borrower’s formation.

 

(i)            Collateral.   The term “Collateral” shall mean all of the Property, and all other real or personal property and interests in same that now or hereafter secure the payment and performance of the Credit Facility.

 

(j)            Construction Contract.   The term “Construction Contract” shall mean all construction contracts executed by Borrower for the construction of the Improvements, including, without limitation, contracts between Borrower and Contractor.

 

(k)           Contractor.   The term “Contractor” shall mean the contractors, whether one or more, with whom Borrower or Builder contracts for the construction of any of the Improvements or any other work with respect to the Property.

 

(l)            Credit Facility.   The term “Credit Facility” shall mean the credit facility in the aggregate amount of $2,000,000.00 being provided by Lender to Borrower under this Loan Agreement and evidenced by the Note.

 

(m)          Debt.   The term “Debt” shall mean, as of any applicable date of determination, all items of indebtedness, obligation or liability of a person, whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, joint or several, that should be classified as liabilities in accordance with GAAP.

 

(n)           Debtor Relief Laws.  The term “Debtor Relief Laws” shall mean any applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar laws affecting the rights or remedies of creditors generally, as in effect from time to time.

 

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(o)           Deed of Trust.  The term “Deed of Trust” shall mean a Deed of Trust executed by Borrower or Builder for each Lot and recorded with the County Clerk of the County in which the Lot is located, which shall be in the form required by Lender.

 

(p)           Draw.   The term “Draw” shall mean a disbursement by Lender of any of the proceeds under the Credit Facility.

 

(q)           Drawn Amount.   The term “Drawn Amount” shall mean, with respect to a particular Unit, the outstanding principal amount applicable to such Unit at any time hereunder and, with respect to the Credit Facility, the outstanding principal amount applicable to all of the Units at any time hereunder.

 

(r)            Draw Request.   The term “Draw Request” shall mean a written application by Borrower (and such other parties as Lender may require) to Lender using such form(s) as may be acceptable to Lender specifying by name, current address, and amount all parties to whom Borrower is obligated for labor, materials, or services supplied for the construction of the Improvements and all other expenses incident to the Credit Facility, the Property, and the construction of the Improvements, whether or not specified in the Approved Budget, requesting a Draw for the payment of such items, containing, if requested by Lender, an Affidavit of Borrower, accompanied by such schedules, certificates, affidavits, releases, waivers, statements, invoices, bills, and other documents as Lender may reasonably request.

 

(s)

(not used)

 

(t)            Environmental Laws.  All laws relating to environmental matters, including, without limitation, those relating to fines, orders, injunctions, penalties, damages, contribution, cost recovery compensation, losses or injuries resulting from the release or threatened release of Hazardous Substances and the generation, use, storage, transportation, or disposal of Hazardous Substances, in any manner applicable to Borrower or the Property, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. §9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. §1801 et M.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. §6901 et set.), the Federal Water Pollution Control Act (33 U.S.C §1251 et seq.), the Clean Air Act (42 U.S.C. §7401 et seq.), the Toxic Substances Control Act of 1976 (15 U.S.C. §2601 et seq.), the Safe Drinking Water Act (42 U.S.C. §300f-§300j-11 et seq.), the Occupational Safety and Health Act of 1970 (29 U.S.C. §651 et mg.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. §11001 et seq.), and such environmental laws, statutes, ordinances and regulations as may be referenced in the Deed of Trust, each as heretofore and hereafter amended or supplemented, and any future or present local, state or federal statutes, rules and regulations promulgated thereunder or pursuant thereto, and any other present or future law, ordinance, rule, regulation, permit or permit condition, order or directive addressing environmental, health or safety issues of or by the federal government, any state or any political subdivision thereof, or any agency, court or body of the federal government, any state or any political subdivision thereof, exercising executive, legislative, judicial, regulatory or administrative functions which are applicable to the Property.

 

(u)           Event of Default.  The term “Event of Default” (or any reference to a default) shall have the meanings set forth in Article 9 hereto.

 

(v)           Fair Market Value.  The term “Fair Market Value” shall mean the fair market value thereof determined by the most recent Appraisal for the applicable Property. For Lots on which no Improvements have been constructed, the Fair Market Value shall be the value of the unimproved Lot. For Lots on which the Improvements have been completed, the Fair Market Value shall be the value

 

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of  the completed residence (with the Lot). For Improvements under construction, the actual costs of goods and services incorporated into the construction shall be deemed to add value on a dollar for dollar basis; such costs, added to the Fair Market Value of the Lot, shall be deemed to be the Fair Market Value for such Units for purposes of this Loan Agreement.

 

(w)          Financial Statements.  The term “Financial Statements” shall mean such balance sheets, profit and loss statements, reconciliations of capital and surplus, changes in financial condition, schedules of sources and uses of funds, operating statements with respect to the Property, pro forma schedules of sources and uses of funds for ensuing twelve-month periods, and other financial information of Borrower and, if required, of Guarantor, as shall be required by Lender, from time to time, which statements shall be certified as true and correct by the party submitting such statements or, if required by Lender, shall be certified by an independent certified public accountant.

 

(x)           Financing Statements.  The term “Financing Statements” shall mean the nonstandard and/or form UCC-1 Code financing statements perfecting the security interests securing the Credit Facility, to be filed with the appropriate offices for the perfection of a security interest in any of the Property, as may be required by Lender.

 

(y)           Force Majeure.  The term “Force Majeure” shall mean an occurrence beyond the control of the party affected, including, but not limited to, acts of God or of the public enemy; expropriation or confiscation of facilities or property; compliance with any order or request of any governmental authority or person purporting to act therefor, adversely affecting the supply, availability or use of materials or labor; acts of war, public disorders, rebellion, sabotage, fires, explosions, floods, storms, or breakdowns; riots, strikes or other concerted acts of workmen, whether direct or indirect, or any other causes, whether or not of the class or kind specifically named above, not within the reasonable control of the party affected and which, by the exercise of reasonable diligence, said party is unable to prevent or avoid; provided, however, that any claim by Borrower for an extension of time or excused non-performance as a result of such occurrence shall be made by written notice to Lender claiming such extension or excused non-performance and delivered not more than 5 days after the commencement of such occurrence.

 

(z)

GAAP.  The term “GAAP” shall mean generally accepted accounting principles.

 

(aa)         Governmental Authority.  The term “Governmental Authority” shall mean the United States of America, the State, the County, the City, or any other political subdivision in which the Property is located, and any other political subdivision, agency, or instrumentality exercising jurisdiction over Borrower, Guarantor, or the Property, including, without limitation, entities with jurisdiction over building, health, safety, fire, water, use, zoning and environmental laws, codes, ordinances, rules and regulations.

 

(bb)         Governmental Requirements.  The term “Governmental Requirements” shall mean all laws, ordinances, rules, and regulations of any Governmental Authority applicable to Borrower, Guarantor, or the Property.

 

(cc)         Guarantor.  The term “Guarantor” shall mean the Guarantors (whether one or more) named on Exhibit A attached hereto and any other individuals or entities guaranteeing prompt payment at maturity of the Note, or any portion thereof and any and all other indebtedness or obligations arising under the Loan Documents.

 

(dd)         Guaranty.  The term “Guaranty” shall collectively mean a guaranty of payment and performance of the Credit Facility and any and all other indebtedness or obligations arising under the Loan Documents executed by each Guarantor.

 

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(ee)         Hazardous Materials.  The term “Hazardous Materials” shall mean (a) any chemical, material or substance defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous waste,” “restricted hazardous waste,” “toxic pollutants,” “pollutants,” “toxic substances” or words of similar import under any applicable local, state or federal law or under the regulations adopted or publications promulgated pursuant thereto, including, without limitation, Environmental Laws; (b) any oil, petroleum or petroleum derived substance, any drilling fluids, produced waters or other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, any hazardous wastes or substances, any toxic wastes or substances or any other materials or pollutants which (i) pose a hazard to the Property or to persons on or about the Property, or (ii) cause the Property to be in violation of any Environmental Laws; (c) asbestos in any form which is or could become friable, radon gas, urea formaldehyde foam insulation, polychlorinated bipherryls; (d) any other chemical, material or substance, exposure to which is prohibited, limited or regulated under any Environmental Law; and (e) any Hazardous Materials referred to in a Deed of Trust.

 

(ff)          Hazardous Materials Contamination.  The term “Hazardous Materials Contamination” shall mean the contamination (whether presently existing or hereafter occurring) of the Improvements, facilities, soil, groundwater, air or other elements on or of the Property by Hazardous Materials; or the contamination of the buildings, facilities, soil, groundwater, air or other elements on or of any other property as a result of Hazardous Materials at any time (whether before or after the date of this Loan Agreement) emanating from the Property.

 

(gg)         Improvements.   The term “Improvements” shall mean the single family residences and related improvements constructed or to be constructed on a Lot.

 

(hh)         Indebtedness.  The term “Indebtedness” shall mean all principal, interest and other sums owed by Borrower to Lender under the Credit Facility or otherwise under this Loan Agreement.

 

(ii)           Inspector.  The term “Inspector” shall mean an architect, engineer or other third party Person selected and retained by Lender at Borrower’s expense.

 

(jj)           Insurance Policies.  The term “Insurance Policies” shall mean insurance policies (or a blanket policy endorsed in a manner satisfactory to Lender) issued by companies acceptable to Lender which have an A.M. Best’s rating of at least Class A covering loss by perils, hazards, liabilities and other risks and casualties and in such amounts as required by Lender. All physical damage policies and renewals shall contain a standard mortgage clause naming Lender as mortgagee, which clause shall expressly state that any breach of any condition or warranty by Borrower shall not prejudice the rights of Lender under such insurance, and a loss payable clause in favor of the Lender for personal property, contents, inventory, equipment, loss of rents and business interruption. All liability policies and renewals shall name Lender as an additional insured. All policies shall include a provision requiring that the insurer give Lender 60 days prior written notice of non-renewal, cancellation or modification. No additional parties shall appear in the mortgagee loss payable clause without Lender’s prior written consent, except as such may be required by a blanket policy. All deductibles shall be in amounts reasonably acceptable to Lender. In the event of the foreclosure of one or more of the Deeds of Trust or any other transfer of title to the Property in full or partial satisfaction of the Credit Facility, all right, title and interest of Borrower in and to all casualty insurance policies and renewals thereof then in force shall, to the extent such interest is transferable, pass to the purchaser or grantee. Without limiting the generality of the foregoing, the term “Insurance Policies” shall also mean: (a) during the period of any construction as to any part of the Property, (i) all-risks form of builder’s risk insurance (on a completed value, non-reporting form), (ii) contractor’s liability, worker’s compensation and employer’s liability insurance, (iii) professional liability insurance for architects and engineers, (iv) 

 

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commercial general liability insurance and excess umbrella liability insurance, (v) contractual liability insurance, (vi) flood insurance and (vii) all-risks form of property insurance on personal property (including personal property stored offsite); and (b) after all the construction of the Property is complete, (i) all-risks form of property insurance covering real and personal property, (ii) commercial general liability insurance, (iii) worker’s compensation and employer’s liability insurance, (iv) contractual liability insurance, and (v) flood insurance; and (c) such other insurance, if any, as Lender may require from time to time, or which is required by the Deed of Trust.

 

(kk)         Inventory Status Report.  The term “Inventory Status Report” shall mean a monthly report with respect to all Lots acquired and the completion status of each Unit under construction by Borrower (whether or not financed by Lender) in form and substance satisfactory to Lender. In addition to the Lots and Units covered by this Loan Agreement, the Inventory Status Report shall include similar information for lots and homes under construction that are not financed by Lender under this Loan Agreement.

 

(ll)           Lender.  The term “Lender” shall mean the Lender named in the first paragraph of this Loan Agreement.

 

(mm)       Loan.  The term “Loan” shall mean the loan to be made by Lender to Borrower for a particular Unit. This will include, as applicable, the Lot Draw and the Draws for the construction of the Improvements to that particular Lot.

 

(nn)         Loan Documents.  The term “Loan Documents” shall mean this Loan Agreement, the Note, Deeds of Trust, the Guaranty (whether one or more), the Financing Statements, and such other instruments evidencing, securing, or pertaining to the Loan as shall, from time to time, be executed and delivered by Borrower, Guarantor, Builder or any other party to Lender pursuant to this Loan Agreement, including, without limitation, each Affidavit of Borrower, each Draw Request, and the Approved Budget. “Loan Documents” shall include the “Security Instruments” referenced below.

 

(oo)         Lot. The term “Lot” shall refer to each of the single-family, fully developed, platted and subdivided lots, each within a single family residential subdivision, purchased with the proceeds of Lot Draws under this Loan Agreement.

 

(pp)         Lot Draws.  The term “Lot Draws” shall mean those certain Draws approved by Lender and made hereunder for which the proceeds are used to purchase single-family, fully developed Lots. Borrower may not make a Lot Draw to purchase a Lot to be held as inventory (either by Borrower or Builder); Lot Draws are only allowed in connection with the construction of Improvements on that Lot immediately after purchase of the Lot.

 

(qq)         Material Adverse Effect.  The term “Material Adverse Effect” shall mean the effect of any event or condition which, alone or when taken together with other events or conditions occurring or existing concurrently therewith, (i) has a material adverse effect upon the business, operations, Property, condition (financial or otherwise) or business prospects of Borrower; (ii) has any material adverse effect whatsoever upon the validity or enforceability of this Loan Agreement or any of the other Loan Documents; (iii) has or may be reasonably expected to have any material adverse effect upon the value of the whole or any material part of the Property, the liens of Lender with respect to the Property or any material part thereof or the priority of such Liens; (iv) materially impairs the ability of Borrower to perform its obligations under this Loan Agreement, any Guaranty or any of the other Loan Documents, including repayment of the Credit Facility when due; or (v) materially impairs the ability of Lender to enforce or collect the Indebtedness or realize upon any of the Collateral in accordance with the Loan Documents and Applicable Law.

 

 

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(rr)

(not used)

 

(ss)          Note.  The term “Note” shall mean the Promissory Note in the amount of the Credit Facility from Borrower to Lender executed in connection herewith, such Note in form and substance as required by Lender, as such may be subsequently modified, amended and extended.

 

(tt)           Origination Fee.  The term “Origination Fee” shall mean that certain fee payable by Borrower to Lender pursuant to Section 2.7 below.

 

(uu)         Percentage of Completion.  The term “Percentage of Completion” shall mean the percentage applicable to the Stage at which a particular Unit has been developed at the time of determination (which determination shall be made by Lender in its sole discretion). Lender and Borrower hereby agree that the Percentage of Completion applicable to each Stage of construction of a Unit shall be as provided in Exhibit A attached hereto and made a part hereof.

 

(vv)

(not used)

 

(ww)       Permitted Exceptions.  Those restrictive covenants, easements and other matters to which Borrower’s interest in the Property may be subject to that Lender may approve.

 

(xx)         Person.  The term “Person” shall mean an individual, partnership, limited liability company, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, or other entity of whatever nature.

 

(yy)         Plans.  The term “Plans” shall mean the final working drawings and specifications for the construction of the Improvements.

 

(zz)         Property.  The term “Property” shall mean any and all tracts or parcels of land, subdivision lots, and improvements constituting the property described in each Deed of Trust and the other Security Instruments executed in connection with each Loan.

 

(aaa)        Security Agreement.  The term “Security Agreement” shall mean a Security Agreement granting to Lender a security interest in Collateral for the Credit Facility in addition to any Collateral which is described in a Deed of Trust and covered by the security agreement included therein.

 

(bbb)       Security Instruments.  The term “Security Instruments” shall mean this Loan Agreement, the Deeds of Trust, the Note, the Guaranty (whether one or more), the Financing Statements, and such other instruments evidencing, securing, or pertaining to the Credit Facility as shall, from time to time, be executed and delivered by Borrower, the Guarantor, or any other party to Lender pursuant to this Loan Agreement, including, without limitation, each Affidavit of Borrower, each Draw Request, and the Approved Budget.

 

(ccc)

(not used)

 

(ddd)       Stage.  The term “Stage” shall mean the defined stages in the development of a Unit for purposes of determining the Percentage of Completion of that Unit.

 

 

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(eee)        Survey.  The term “Survey” shall mean a current, on-the-ground survey of a Lot prepared by a registered public surveyor satisfying the standard underwriting requirements of Lender and/or, at Lender’s sole option, a recorded plat or map of the Property, which such survey, plat or map shall be approved and accepted by all Governmental Authorities having jurisdiction of the Property.

 

(fff)

(not used)

 

(ggg)       Termination Date.  The term “Termination Date” shall mean September _____, 2006, provided however if Borrower has not submitted at least one proposed Unit to Lender for financing hereunder, together with the Approved Budget applicable to such Unit and any other documents required hereunder with respect to such Unit, on or before 60 days after the date of this Loan Agreement, then the Termination Date may, at Lender’s sole option, after written notice to Borrower, be 90 days after the date of this Loan Agreement. Upon the Termination Date, Borrower may not submit any further Unit Requests; the only Draws that will be made on or after the Termination Date will be those to complete construction of houses for which Unit Requests were made and approved by Lender prior to the Termination Date.

 

(hhh)       Title Company.  The term “Title Company” shall mean the Title Company issuing the Title Insurance for the applicable Property in connection with each Loan.

 

(iii)          Title Insurance.  The term “Title Insurance” shall mean a Mortgagee Policy of Title Insurance, or Mortgagee Title Policy Binder on Interim Construction Loan, as Lender may require, issued by the Title Company acceptable to Lender, naming Lender as the insured party, in the amount of the applicable Maximum Unit Amount (as hereinafter defined) (which may include a rider or endorsement limiting the policy to the aggregate amounts actually advanced thereunder) insuring that the Deed of Trust applicable to each Loan constitutes a valid first lien covering the Property and, subject only to the Permitted Exceptions, issued by the Title Company.

 

(jjj)          Unit.  The term “Unit” shall mean an improved subdivision Lot in a platted subdivision together with the proposed single family residential dwelling to be constructed thereon, the acquisition of which Lot and/or construction of which dwelling is submitted to Lender for financing pursuant to the terms of this Loan Agreement, and against which Lender holds a lien pursuant to a Deed of Trust.

 

(kkk)       Unit Approval Period.   The term “Unit Approval Period” shall mean a period of ten (10) business days after Lender’s receipt of a Unit Request and all documents and information required to be submitted with that Unit Request.

 

(lll)          Unit Request.  The term “Unit Request” shall mean a request for inclusion of the acquisition or development of a Unit, such request to be duly and properly executed by an authorized officer of Borrower, in the form and content approved by Lender and otherwise in accordance with this Loan Agreement.

 

ARTICLE 2

Establishment of Credit Facility, Limitations

Section 2.1            Credit Facility.  Subject to the terms and conditions of this Loan Agreement, including the limitations on Draws set forth below, Lender hereby establishes a revolving line of credit for Borrower for an amount not to exceed the lesser of:

	(a)	$2,000,000.00, or
	(b)	The legal lending limits of Lender for loans to Borrower and Guarantor.

 

 

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Section 2.2            Draws.   Lender agrees to fund Draws to the Borrower from time to time during the period beginning on the date of this Loan Agreement (except that no Draws will be made for the acquisition of Lots or commencement of construction of Improvements on or after the Termination Date). Within the limitations set forth herein, Borrower may borrow, repay, and re-borrow upon Lender’s approval of each Unit Request and Draw Request thereunder. To evidence the Credit Facility and the Draws to be made thereunder, Borrower simultaneously herewith executes and delivers to Lender the Note. As Borrower requests that Lender qualify certain Units for Loans hereunder, Borrower will execute and deliver to Lender a Deed of Trust covering the Unit or Units to be included under the Credit Facility and such other Security Instruments as Lender shall reasonably require. Particular Units will be applied to the Credit Facility through Unit Requests submitted to and approved by Lender. Draws will be made pursuant to Draw Requests submitted to and approved by Lender. Draws applicable to Units which are not Lots shall be used by Borrower solely to pay for costs of the Units and the labor performed and materials furnished in connection with the building, construction and completion of the Improvements thereon.

Section 2.3            Unit Approval.   In each instance in which the Borrower desires to apply a Unit to the Credit Facility, Borrower shall submit a Unit Request to Lender. Each Unit Request must be submitted by Borrower to Lender prior to the Termination Date in the form approved by Lender. Lender shall have the Unit Approval Period in which to review the Unit Request and to determine whether or not to apply the Unit to the Credit Facility, at which point, if the Unit Request is granted, the applicable Unit or Units shall be included in the Credit Facility. With respect to each Unit Request, Lender’s approval of the Unit Request shall be a condition precedent to making any Draws applicable to such Unit(s), and the approval of a Unit Request shall be evidenced only by Lender’s written statement specifying the Maximum Unit Amount for such approved Unit Request and stating that the Unit Request has been approved under this Loan Agreement. If Lender does not deliver oral or written notice of Lender’s disapproval of a Unit Request within the Unit Approval Period, that Unit Request will be deemed to have been approved. If the Unit Request relates to more than one Unit, Lender may approve that Unit Request with respect to one (1) or more Units and disapprove that Unit Request with respect to other Units.

Section 2.4            Approval of Draws.   Each individual Draw Request submitted by Borrower must be approved by Lender and shall be subject to such underwriting and other requirements as either Lender or any applicable Governmental Authority may heretofore or hereafter from time to time establish.

Section 2.5            Limitations on Draws.  In addition to any other limitations set forth in this Loan Agreement, the following provisions shall apply, a breach or violation of any of which shall constitute an Event of Default hereunder and under the Security Instruments:

(a)

(not used)

 

(b)

(not used)

 

(c)

(not used)

 

(d)           Aggregate Fair Market Value for All Units.  In no event shall the total amount of Draws outstanding (i.e., which are included in the Indebtedness) exceed 80% of the Fair Market Value of all Units.

 

(e)

(not used)

 

(f)            Speculative Unit.  In no event shall Draws be made which result in more than 6 speculative Units (i.e., Units which are being built for which there is no contract to sell to a third party buyer) being in existence at any given time.

 

(g)

(not used)

 

 

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(h)

(not used)

 

(i)            Individual Unit.  In no event shall the portion of the Credit Facility applied to any single Unit hereunder exceed $650,000.00.

 

(j)            Maximum Unit Amount.   Lender shall establish the maximum amount of the Drawn Amount for each particular Unit, referred to herein as the Maximum Unit Amount.

 

Section 2.6            Aggregate Fair Market Value.  The total Drawn Amount with respect to the Credit Facility shall in no event at any time exceed 80% of the cumulative Fair Market Value of all Units relating to the outstanding amount of the Credit Facility.

Section 2.7            Origination Fee.  The Origination Fee shall be an annual, non-refundable fee in the amount of 0.50% of the maximum amount of the Credit Facility, to be paid by Borrower upon the execution of this Loan Agreement. This Origination Fee is consideration for the commitment by Lender to provide the Credit Facility hereunder.

Section 2.8            Interest on the Credit Facility.  Interest provided in the Note shall be calculated on sums actually advanced to Borrower pursuant to the terms thereof and only from the date or dates of such Draws. The unpaid principal amount of the Note outstanding from time to time shall bear interest as set forth therein. All accrued and unpaid interest shall be due and payable monthly in accordance with the Note. The Indebtedness shall be evidenced by the Note, and the respective Loans shall be secured by the Deeds of Trust and such other Security Instruments as Lender may require.

ARTICLE 3

Draws

Section 3.1            Draws for Purchase of Lots.  Draws for the purchase of a Lot will be made by Lender upon compliance by Borrower with this Loan Agreement, but only before actual commencement of construction of any Improvements on that Lot. As noted above, Borrower may not make a Lot Draw to purchase a Lot to be held as inventory (either by Borrower or Builder); Lot Draws are only allowed in connection with the construction of Improvements on that Lot immediately after purchase of the Lot.

 

Section 3.2

Draws for Improvements.

(a)           Draws for the payment of costs of labor, materials, and services supplied for the construction of the Improvements will be made by Lender upon compliance by Borrower with this Loan Agreement, subject to the following conditions:

(i)            the Deed of Trust must have been executed and recorded prior to actual commencement of construction of any Improvements, and

 

(ii)           Draws for Improvements will only be made only after actual commencement of construction of the Improvements for work actually done during the preceding period.

 

From time to time, Borrower shall submit a Draw Request to Lender requesting a Draw for the payment of costs of labor, materials, and services supplied for the construction of the Improvements as specified in the Approved Budget, or for the payment of other costs and expenses incident to the Credit Facility. Lender may require an inspection of and favorable report on the Improvements and review of the Draw Request by the Inspector prior to making any Draw. Draws for payment of costs of construction of the Improvements shall not exceed the costs of labor, materials, and services already incorporated into the Improvements in a manner acceptable to Lender, less

 

 

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           (i)            the sum of all prior Draws for payment of costs of labor, materials, and services for the construction of the Improvements, and

(ii)

any retainage amounts required by Lender.

(b)           No Draws for a particular Unit shall be made until after Borrower has paid, out of its own funds, the costs equal to the difference between:

(i)            the lesser of (x) the estimated cost of construction of the Improvements per the Approved Budget (together with the cost of the Lot, if applicable) or (y) the Fair Market Value for that Unit, and

(ii)

the amount of the Loan for that Unit.

Borrower will provide to Lender such evidence as Lender may request to evidence that Borrower has paid, out of its own funds, the costs referenced above.

 

(c)           Each Draw Request shall be submitted by Borrower to Lender within a reasonable time (but not less than 3 days) prior to the date on which a Draw is desired by Borrower, and Lender shall make such Draw no later than 5 days after receipt of a complete Draw Request, subject to Lender’s determination that the Draw Request is complete and acceptable; provided that Lender shall in no event be obligated to make more than 1 Draw per week, and no more than 4 Draws within a 4 week period. Each Draw Request shall be accompanied by the Affidavit of Borrower.

(d)           Lender shall have no obligation to fund a Draw while there exists an Event of Default hereunder or under any of the Loan Documents.

Section 3.3            Conditions to Each Initial Draw.  Lender shall have no obligation to advance any funds to Borrower for either the purchase of a Lot or for construction of Improvements on a particular Lot unless or until each of the following conditions are satisfied:

(a)

There exists no Event of Default hereunder or under any of the Loan Documents.

 

(b)

A Unit Request has been submitted by Borrower and approved by Lender.

 

(c)

Borrower has provided Lender the following for each Unit:

 

(i)

Plans, if requested by Lender

 

(ii)

Approved Budget

 

(iii)

Appraisal

 

(iv)

Sales Contract, if applicable

 

(v)

Title Insurance

 

(vi)

Deed of Trust

 

(vii)

Survey

 

 

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(viii)        Soils analysis and environmental reports covering the Lot, if requested by Lender