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.
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Borrower:
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Wilson Family Communities, Inc.
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Borrower’s Address:
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2700 Fortuna, Suite 400
Austin, Texas 78746
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Lender:
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PlainsCapital Bank
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Lender’s Address:
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919 Congress, Suite 100
Austin, Texas 78701
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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.
(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.
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(z)
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GAAP. The term “GAAP” shall mean
generally accepted accounting principles.
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(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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(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.
(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.
(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.
(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:
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(a)
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$2,000,000.00, or
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(b)
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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:
(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.
(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.
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(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.
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Section 3.2
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Draws for Improvements.
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(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
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(ii)
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any retainage amounts required by
Lender.
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(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
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(ii)
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the amount of the Loan for that Unit.
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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:
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(a)
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There exists no Event of Default hereunder or
under any of the Loan Documents.
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(b)
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A Unit Request has been submitted by Borrower
and approved by Lender.
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(c)
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Borrower has provided Lender the following for
each Unit:
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(i)
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Plans, if requested by Lender
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(iv)
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Sales Contract, if applicable
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(viii) Soils
analysis and environmental reports covering the Lot, if requested
by Lender
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(viii)
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Insurance Policies
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(d) Such
other documents, instruments, and certificates as Lender may
reasonably require from time to time.
Section
3.4
Final Draw for Improvements. The final Draw for the
Improvements on a Lot will not be made until the Lender has
received the following:
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(e)
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There exists no Event of Default hereunder or
under any of the Loan Documents.
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(a)
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At Lender’s option, a final inspection
made by third party Inspectors.
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(b) At
Lender’s option, evidence that no mechanics’ or
materialmen’s liens or other encumbrances have been filed and
remain in effect against the Lot.
(c) At
Lender’s option, final lien releases or waivers by
Contractor, and all subcontractors, materialmen, and other parties
who have supplied labor, materials, or services for the
construction of the Improvements, or who otherwise might be
entitled to claim a contractual, statutory, or constitutional lien
against the Lot.
(d) At
Lender’s option, a Survey of the Lot showing the Improvements
thereon as completed in compliance with the Plans.
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(e)
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At Lender’s option, the Title Insurance
shall:
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(a)
(i) if issued as a mortgagee
policy, be endorsed removing any exception for pending
disbursements or
(b)
(ii) if issued as an interim
binder, either extended (if necessary) or converted to a mortgagee
policy.
At no time shall Borrower be
entitled to any Draw if, in the reasonable judgment of the Lender,
it appears that after such Draw the remaining undisbursed portion
of the Credit Facility applicable to the Unit related to such Draw
will be insufficient to complete the Improvements on such Unit in
accordance with the Plans therefor and to pay for all labor and
material, until such time as the Borrower shall have reduced the
principal balance of the Loan for that Unit to an amount which
leaves the then unfunded and available amount under that Loan
sufficient to complete the applicable Improvements.
ARTICLE 4
Repayment of Credit
Facility
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The Indebtedness shall be repaid in
accordance with the terms below:
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Section
4.1
Accrued Interest. Accrued interest shall be payable
monthly in accordance with the terms of the Note.
Section
4.2
Draws. Draws shall be repaid upon the earlier
to occur of (i) the sale of the Lot or Unit, as applicable, or (ii)
the dates set forth below. To obtain a release of a Deed of Trust
or other lien, Borrower shall pay in full the outstanding amount of
all Draws applicable to such Property.
(a)
Draws on Lots Without Commencement of Construction.
It is not the intent of this Loan Agreement that Lender fund a Lot
Draw unless Borrower actually constructs Improvements
on
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the Lot. If Borrower or Builder does
not commence construction within 5 days after the Lot Draw, Lender
shall have no obligation to fund Draws for Improvements to the Lot,
and the entire Lot Draw shall be repaid by Borrower to Lender on or
before 5 days following the date of the Lot Draw.
(b)
Principal Draws for Units. Draws for construction of Units
shall be due and payable on or before the 1st day of the month
following 12 months after the date of the initial Draw for such
Unit. For example, if the initial Draw occurred on April 15, the
entire amount of Draws shall be due on May 1 of the following
year.
Section
4.3
Release Price for Units . Provided there is no
Event of Default on the date on which Borrower requests a release
of the Deed of Trust on a particular Unit, Lender agrees to release
its Deed of Trust lien on a Unit upon the payment of (i) all
accrued unpaid interest on the Credit Facility allocable to the
outstanding Draws for that Unit, plus (ii) the outstanding Draws
applicable to that Unit.
ARTICLE 5
Affirmative Covenants and
Agreements of Borrower
Borrower covenants and agrees that,
as long as the Credit Facility or any part thereof is outstanding,
unless otherwise allowed by written instrument of
Lender:
Section
5.2
Commencement of Construction. Prior to the
recordation of the Deed of Trust for a Loan, no work of any kind
(inc
