LOAN AGREEMENT
between
Richmond American Homes, Inc.,
a Delaware corporation
Richmond American Homes of California, Inc.,
a Colorado corporation
Richmond Homes, Inc. I,
a Delaware corporation
Richmond Homes, Inc. II,
a Delaware corporation
Richmond American Homes of Nevada, Inc.,
a Colorado corporation
and
BANK ONE, ARIZONA, NA,
a national banking association
Dated June 13, 1994
TABLE OF CONTENTS
Page
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1. SCHEDULE OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. LETTER OF CREDIT AND LOAN FACILITY. . . . . . . . . . . . . . . . . . . 18
3.1 Loan Facility. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1.1 Commitment . . . . . . . . . . . . . . . . . . . . . . . 18
3.1.2 Conversion Period. . . . . . . . . . . . . . . . . . . . 19
3.1.2.1 Conversion Period Established by Bank . . . . . . . 19
3.1.2.2 Conversion Period Resulting from Operating Losses . 20
3.1.2.3 Conversion Period Resulting from Other Breaches by
Guarantor . . . . . . . . . . . . . . . . . . . . . 21
3.1.3 Voluntary Reductions in Commitment Amount. . . . . . . . 22
3.2 Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.2.1 Issuance of Letter of Credit . . . . . . . . . . . . . . 22
3.2.2 Issuance Procedure . . . . . . . . . . . . . . . . . . . 22
3.2.3 Reimbursement of Bank for Payment of Drafts Drawn or
Drawn and Accepted Under the Letter of Credit. . . . . . 23
3.3 A&D Subcommitment Facility . . . . . . . . . . . . . . . . . . . . 24
3.4 Request for Letters of Credit and Advances . . . . . . . . . . . . 24
3.5 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.5.1 Purpose of Facility and Use of Advances. . . . . . . . . 25
3.5.2 Determination of Amount of Advances and Limitations on
Advances . . . . . . . . . . . . . . . . . . . . . . . . 25
3.5.2.1 General Determination . . . . . . . . . . . . . . . 25
3.5.2.2 Percentage Limitations. . . . . . . . . . . . . . . 25
3.5.3 Term Period. . . . . . . . . . . . . . . . . . . . . . . 26
3.5.3.1 Presold Units . . . . . . . . . . . . . . . . . . . 26
3.5.3.2 Spec Units. . . . . . . . . . . . . . . . . . . . . 27
3.5.3.3 Model Units . . . . . . . . . . . . . . . . . . . . 27
3.5.3.4 A&D Projects. . . . . . . . . . . . . . . . . . . . 27
3.5.4 Limitation on Eligible Collateral. . . . . . . . . . . . 27
3.5.5 Classification and Reclassification of Units . . . . . . 28
3.5.6 Limitations Relating to Each Borrower. . . . . . . . . . 28
3.5.7 A&D Budget Limitations and Covenants . . . . . . . . . . 28
3.5.7.1 General Limitation. . . . . . . . . . . . . . . . . 28
3.5.7.2 Borrower Equity . . . . . . . . . . . . . . . . . . 29
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3.5.7.3 Specific Line Item Limitations. . . . . . . . . . . 29
3.5.8 Further Limitations on Advances. . . . . . . . . . . . . 30
3.5.8.1 Land Advance. . . . . . . . . . . . . . . . . . . . 30
3.5.8.2 Retainage . . . . . . . . . . . . . . . . . . . . . 30
3.5.8.3 Information Relating to A&D Budgets . . . . . . . . 31
3.5.8.4 Amount of Advances for Soft Costs . . . . . . . . . 31
3.5.9 Deficiencies . . . . . . . . . . . . . . . . . . . . . . 32
3.5.10 General. . . . . . . . . . . . . . . . . . . . . . . . . 32
3.5.11 Releases of Collateral . . . . . . . . . . . . . . . . . 32
3.5.11.1 Release of Certain Collateral at Request of
Borrower. . . . . . . . . . . . . . . . . . . . . . 32
3.5.11.2 Mandatory Releases by Borrower. . . . . . . . . . . 34
3.5.12 Extraordinary Events Affecting Collateral. . . . . . . . 35
3.5.12.1 Material Damage, Destruction, or Condemnation . . . 35
3.5.12.2 Default Regarding Title Insurance . . . . . . . . . 35
3.5.13 Advances During Conversion Period. . . . . . . . . . . . 35
3.6 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.6.1 Commitment Fees. . . . . . . . . . . . . . . . . . . . . 36
3.6.1.1 Quarterly Commitment Fee. . . . . . . . . . . . . . 36
3.6.1.2 Extension Fee . . . . . . . . . . . . . . . . . . . 36
3.6.2 Unused Commitment Fee. . . . . . . . . . . . . . . . . . 36
3.6.3 Processing Fee . . . . . . . . . . . . . . . . . . . . . 37
3.6.4 Attorneys' Costs, Expenses, and Fees . . . . . . . . . . 37
3.6.5 Appraisal Fees, Title Insurance Premium, and Other
Costs, Expenses, and Fees. . . . . . . . . . . . . . . . 37
3.7 Mandatory Prepayments. . . . . . . . . . . . . . . . . . . . . . . 37
4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.1 Conditions Precedent to Effectiveness of this Agreement and to
the Effectiveness of the Commitment. . . . . . . . . . . . . . . . 38
4.1.1 Representations and Warranties Accurate. . . . . . . . . 38
4.1.2 Defaults . . . . . . . . . . . . . . . . . . . . . . . . 38
4.1.3 Documents. . . . . . . . . . . . . . . . . . . . . . . . 38
4.1.3.1 Loan and Other Documents. . . . . . . . . . . . . . 38
4.1.3.2 Corporation, Limited Liability Company, or
Partnership Documents . . . . . . . . . . . . . . . 38
4.1.3.3 Insurance Policies. . . . . . . . . . . . . . . . . 39
4.1.3.4 Opinion Letter. . . . . . . . . . . . . . . . . . . 39
4.1.3.5 Financial Statements. . . . . . . . . . . . . . . . 39
4.1.3.6 Contracts . . . . . . . . . . . . . . . . . . . . . 39
4.1.4 Completion of Filings and Recordings . . . . . . . . . . 39
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4.1.5 Payment of Costs, Expenses, and Fees . . . . . . . . . . 40
4.1.6 Other Items or Actions . . . . . . . . . . . . . . . . . 40
4.1.7 Tri-Party Agreement. . . . . . . . . . . . . . . . . . . 40
4.2 Conditions Precedent to Approval of Subdivisions . . . . . . . . . 40
4.2.1 Plat and/or Survey . . . . . . . . . . . . . . . . . . . 40
4.2.2 CC&Rs. . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.2.3 Types of Units . . . . . . . . . . . . . . . . . . . . . 41
4.2.4 Unit Base Appraisals . . . . . . . . . . . . . . . . . . 41
4.2.5 Lot Information. . . . . . . . . . . . . . . . . . . . . 41
4.2.6 Completion . . . . . . . . . . . . . . . . . . . . . . . 41
4.2.7 Approvals. . . . . . . . . . . . . . . . . . . . . . . . 41
4.2.8 Soils Tests. . . . . . . . . . . . . . . . . . . . . . . 42
4.2.9 Environmental Assessment . . . . . . . . . . . . . . . . 42
4.2.10 Environmental Indemnity. . . . . . . . . . . . . . . . . 42
4.2.11 Utilities. . . . . . . . . . . . . . . . . . . . . . . . 42
4.2.12 Preliminary Title Report . . . . . . . . . . . . . . . . 42
4.2.13 Drainage; Flood Report . . . . . . . . . . . . . . . . . 42
4.2.14 Deed of Trust/Modification to Deed of Trust. . . . . . . 43
4.2.15 Title Insurance. . . . . . . . . . . . . . . . . . . . . 43
4.2.16 Assessments, Charges, and Taxes. . . . . . . . . . . . . 43
4.2.17 Assignments. . . . . . . . . . . . . . . . . . . . . . . 43
4.2.18 Other. . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.3 Additional Conditions Precedent to the Inclusion of Each Unit in
Eligible Collateral. . . . . . . . . . . . . . . . . . . . . . . . 43
4.3.1 Representations and Warranties Accurate. . . . . . . . . 44
4.3.2 Defaults . . . . . . . . . . . . . . . . . . . . . . . . 44
4.3.3 Satisfaction of Other Conditions . . . . . . . . . . . . 44
4.3.4 Documents. . . . . . . . . . . . . . . . . . . . . . . . 44
4.3.4.1 Unit Base Appraisal . . . . . . . . . . . . . . . . 44
4.3.4.2 Unit Budget . . . . . . . . . . . . . . . . . . . . 44
4.3.4.3 Unit Plans and Specifications . . . . . . . . . . . 44
4.3.4.4 Purchase Contract . . . . . . . . . . . . . . . . . 44
4.3.4.5 Deed of Trust/Modification to Deed of Trust . . . . 44
4.3.4.6 Assessments, Charges, and Taxes . . . . . . . . . . 45
4.3.4.7 Completion of Filings and Recordings. . . . . . . . 45
4.3.4.8 Contracts . . . . . . . . . . . . . . . . . . . . . 45
4.3.5 Limitations. . . . . . . . . . . . . . . . . . . . . . . 45
4.3.6 Start of Construction. . . . . . . . . . . . . . . . . . 45
4.3.7 Distressed Improvement Districts . . . . . . . . . . . . 45
4.3.8 Other Items. . . . . . . . . . . . . . . . . . . . . . . 46
4.3.9 Other Actions. . . . . . . . . . . . . . . . . . . . . . 46
4.4 Additional Conditions Precedent to All Advances Against Eligible
Collateral that Includes Units . . . . . . . . . . . . . . . . . . 46
4.4.1 Representations and Warranties Accurate. . . . . . . . . 46
4.4.2 Defaults . . . . . . . . . . . . . . . . . . . . . . . . 46
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4.4.3 Other Conditions Precedent . . . . . . . . . . . . . . . 46
4.4.4 Inspection Report. . . . . . . . . . . . . . . . . . . . 46
4.4.5 Lot Location Survey. . . . . . . . . . . . . . . . . . . 46
4.4.6 Approvals and Inspections by Governmental Authorities. . 46
4.4.7 Title Policy Endorsements. . . . . . . . . . . . . . . . 46
4.4.8 Payment of costs, Expenses, and Fees . . . . . . . . . . 47
4.5 Conditions Precedent to Approval of A&D Projects . . . . . . . . . 47
4.5.1 Appraisal. . . . . . . . . . . . . . . . . . . . . . . . 47
4.5.2 Plat or Survey . . . . . . . . . . . . . . . . . . . . . 47
4.5.3 Environmental Assessment . . . . . . . . . . . . . . . . 48
4.5.4 Environmental Indemnity. . . . . . . . . . . . . . . . . 48
4.5.5 Deed of Trust/Title Policy . . . . . . . . . . . . . . . 48
4.5.6 Drainage; Flood Zone . . . . . . . . . . . . . . . . . . 49
4.5.7 Services . . . . . . . . . . . . . . . . . . . . . . . . 49
4.5.8 Assessments, Charges, and Taxes. . . . . . . . . . . . . 49
4.5.9 Soils Tests. . . . . . . . . . . . . . . . . . . . . . . 49
4.5.10 Plans and Specifications . . . . . . . . . . . . . . . . 49
4.5.11 Budget . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.5.12 Construction Contracts . . . . . . . . . . . . . . . . . 49
4.5.13 Borrower's Equity. . . . . . . . . . . . . . . . . . . . 50
4.5.14 Zoning . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.5.15 Preliminary Title Report . . . . . . . . . . . . . . . . 50
4.5.16 Distressed Improvement Districts . . . . . . . . . . . . 50
4.5.17 Purchase Documents . . . . . . . . . . . . . . . . . . . 50
4.5.18 Construction Schedule. . . . . . . . . . . . . . . . . . 50
4.5.19 Marketing Information. . . . . . . . . . . . . . . . . . 50
4.5.20 Pro Forma Cash Flow. . . . . . . . . . . . . . . . . . . 51
4.5.21 Term Sheet . . . . . . . . . . . . . . . . . . . . . . . 51
4.5.22 Other Items. . . . . . . . . . . . . . . . . . . . . . . 51
4.5.23 Other Actions by Loan Parties. . . . . . . . . . . . . . 51
4.6 Additional Conditions Precedent to All Advances Against Eligible
Collateral Containing A&D Projects . . . . . . . . . . . . . . . . 51
4.6.1 Representations and Warranties Accurate. . . . . . . . . 51
4.6.2 Defaults . . . . . . . . . . . . . . . . . . . . . . . . 51
4.6.3 Other Conditions . . . . . . . . . . . . . . . . . . . . 51
4.6.4 Inspection Report. . . . . . . . . . . . . . . . . . . . 51
4.6.5 Approvals and Inspections by Governmental Authorities. . 51
4.6.6 Title Policy Endorsements. . . . . . . . . . . . . . . . 52
4.6.7 Payment of Costs, Expenses, and Fees . . . . . . . . . . 52
4.7 Right to Waive . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5. BORROWER REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 52
5.1 Closing Representations and Warranties . . . . . . . . . . . . . . 52
5.1.1 Corporate, Limited Liability Company, or Partnership
Existence and Authorization. . . . . . . . . . . . . . . 52
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5.1.2 No Approvals, etc. . . . . . . . . . . . . . . . . . . . 53
5.1.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . 53
5.1.4 Execution and Delivery and Binding Nature of Documents . 53
5.1.5 Accurate Information . . . . . . . . . . . . . . . . . . 53
5.1.6 Purpose of Advances . . . . . . . . . . . . . . . . . . 54
5.1.7 Legal Proceedings; Hearings, Inquiries, and
Investigations . . . . . . . . . . . . . . . . . . . . . 54
5.1.8 No Event of Default or Unmatured Event of Default. . . . 54
5.1.9 Approvals and Permits; Assets and Property . . . . . . . 54
5.1.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.1.11 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.1.12 Compliance with Law. . . . . . . . . . . . . . . . . . . 55
5.1.13 Unit Budgets and Plans and Specifications. . . . . . . . 55
5.1.14 Budgets, Plans and Specifications, and Construction
Contract(s). . . . . . . . . . . . . . . . . . . . . . . 55
5.1.15 Environmental Matters. . . . . . . . . . . . . . . . . . 55
5.2 Representations and Warranties Upon Requests for Advances. . . . . 56
5.3 Representations and Warranties Upon Delivery of Financial
Statements, Documents, and Other Information . . . . . . . . . . . 56
6. BORROWER AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 56
6.1 Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . 56
6.2 Books and Records; Access By Bank. . . . . . . . . . . . . . . . . 56
6.3 Information and Statements . . . . . . . . . . . . . . . . . . . . 57
6.3.1 Fiscal Period Financial Statements . . . . . . . . . . . 57
6.3.1.1 Statements. . . . . . . . . . . . . . . . . . . . . 57
6.3.1.2 Projection. . . . . . . . . . . . . . . . . . . . . 57
6.3.2 Annual Financial Statements. . . . . . . . . . . . . . . 57
6.3.3 Closing Report . . . . . . . . . . . . . . . . . . . . . 58
6.3.4 Compliance Certificates. . . . . . . . . . . . . . . . . 58
6.3.5 Sales and Inventory Reports. . . . . . . . . . . . . . . 58
6.3.6 Gross Profit Analysis. . . . . . . . . . . . . . . . . . 58
6.3.7 Backlog Report . . . . . . . . . . . . . . . . . . . . . 59
6.3.8 Borrowing Base Report. . . . . . . . . . . . . . . . . . 59
6.3.9 Collateral Certificate . . . . . . . . . . . . . . . . . 59
6.3.10 Land Holdings. . . . . . . . . . . . . . . . . . . . . . 60
6.3.11 Unit Budgets . . . . . . . . . . . . . . . . . . . . . . 60
6.3.12 Other Construction Information . . . . . . . . . . . . . 60
6.3.13 Other Items and Information. . . . . . . . . . . . . . . 61
6.4 Law; Judgments; Material Agreements; Approvals and Permits . . . . 61
6.5 Taxes and Other Indebtedness . . . . . . . . . . . . . . . . . . . 62
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6.6 Assets and Property. . . . . . . . . . . . . . . . . . . . . . . . 62
6.7 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.7.1 Property . . . . . . . . . . . . . . . . . . . . . . . . 62
6.7.2 Liability. . . . . . . . . . . . . . . . . . . . . . . . 62
6.7.3 Flood. . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.7.4 Worker's Compensation. . . . . . . . . . . . . . . . . . 63
6.7.5 Additional Insurance . . . . . . . . . . . . . . . . . . 63
6.7.6 Other. . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.7.7 Evidence . . . . . . . . . . . . . . . . . . . . . . . . 63
6.8 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.9 Unit Base Appraisals . . . . . . . . . . . . . . . . . . . . . . . 64
6.10 A&D Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.11 Commencement and Completion of A&D Improvements. . . . . . . . . . 65
6.12 Change Orders. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.13 Commencement and Completion of Units . . . . . . . . . . . . . . . 66
6.14 Tri-Party Agreement and Title Insurance. . . . . . . . . . . . . . 66
6.14.1 Tri-Party Agreement. . . . . . . . . . . . . . . . . . . 66
6.14.2 Title Insurance Claims . . . . . . . . . . . . . . . . . 67
6.15 Rights of Inspection; Correction of Defects; Agency. . . . . . . . 67
6.16 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.17 Verification of Costs. . . . . . . . . . . . . . . . . . . . . . . 68
6.18 Use of Proceeds of Advances. . . . . . . . . . . . . . . . . . . . 68
6.19 Cross-Collateralization. . . . . . . . . . . . . . . . . . . . . . 69
6.20 Bank's Inspector(s). . . . . . . . . . . . . . . . . . . . . . . . 69
6.21 Plat Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.22 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 70
6.23 Costs and Expenses of Borrower's Performance of Covenants and
Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . 70
6.24 Payment of Net Sales Proceeds. . . . . . . . . . . . . . . . . . . 70
6.25 Construction and Sales Records . . . . . . . . . . . . . . . . . . 70
7. BORROWER NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 70
7.1 Corporate Restrictions . . . . . . . . . . . . . . . . . . . . . . 70
7.2 Change in or Reacquisition of Ownership Interests. . . . . . . . . 71
8. ADDITIONAL RIGHTS OF BANK . . . . . . . . . . . . . . . . . . . . . . . 71
9. BANK'S OBLIGATIONS TO BORROWER ONLY AND DISCLAIMER BY BANK. . . . . . . 73
10. PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11. NO BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
12. PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT. . . . . . . . . . . . . . 73
13. CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
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14. COUNTERPART EXECUTION . . . . . . . . . . . . . . . . . . . . . . . . . 75
EXHIBITS
A Form of A&D Term Sheet
B Unit Collateral Values
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LOAN AGREEMENT
DATE: June 13, 1994
PARTIES: BORROWERS RICHMOND AMERICAN HOMES, INC.
NAMES AND a Delaware corporation
ADDRESSES:
4647 North 32nd Street, Suite 180
Phoenix, Arizona 85018
Attention: President
RICHMOND AMERICAN HOMES OF CALIFORNIA, INC., a Colorado
corporation
11000 White Rock Road, Suite 110
Rancho Cordova, California 95670
Attention: President
RICHMOND HOMES, INC. I
a Delaware corporation
4600 South Ulster Street, Suite 400
Denver, Colorado 80237
Attention: President
RICHMOND HOMES, INC. II
a Delaware corporation
4600 South Ulster Street, Suite 400
Denver, Colorado 80237
Attention: President
RICHMOND AMERICAN HOMES OF NEVADA, INC.
a Colorado corporation
1919 South Jones Boulevard, Suite A
Las Vegas, Nevada 89102
Attention: President
BANK: BANK ONE, ARIZONA, NA
a national banking association.
BANK ADDRESS: Real Estate Division
P.O. Box 29542
Phoenix, Arizona 85038
Attention: Dept. A-383
AGREEMENT: For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower and Bank agree as follows:
1. SCHEDULE OF TERMS.
Commitment Amount: $ 75,000,000.00, as the same may be reduced from
time to time pursuant to SECTION 3.1.2 and SECTION 3.1.3.
Guarantor: M.D.C. HOLDINGS, INC., a Delaware corporation
Unit Completion Date: Nine (9) Calendar Months after each such Unit
first constitutes Eligible Collateral.
3.5.11.1 Release Fee: $10.00 for each Lot or Unit to be released, if
releases are done by Title Company; $20.00 for each Lot or Unit
to be released, if releases are not done by Title Company.
3.6.1.1 Quarterly Commitment Fee: One-quarter of one percent (1%) per
annum payable per quarter of the Lower $50,000,000.00 of the
Commitment Amount, and one-quarter of one-half of one percent
(.5%) per annum payable per quarter of the Upper $25,000,000.00
of the Commitment Amount.
3.6.2 Unused Commitment Fee Rate: One-quarter of one percent (.25%)
per annum.
3.6.3 Processing Fee: $500.00 per state where the Eligible Collateral
is located per month payable for each month.
5.1.5, 6.2, 6.3.1, and 6.3.2. Financial statements and accounting system
requirements: accrual basis and GAAP
5.1.5 Fiscal year of Borrower: From January 1 to December 31.
6.3.1 Quarterly unaudited Borrower prepared financial statements for
each of the first three (3) calendar quarters (including cash
flow statements), due within forty-five (45) days after the end
of each quarter, and with respect to Guarantor, quarterly
unaudited Guarantor prepared financial statements for each of the
first three (3) calendar quarters, due within forty-five (45)
days after the end of each quarter.
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Person(s) to sign and certify financial statements on behalf of each
Borrower or Guarantor, as applicable: President, Chief Financial Officer,
or other executive officer reasonably acceptable to Bank.
6.3.2 Financial statements due within ninety (90) days after the end of
each fiscal year of each Borrower or Guarantor, as applicable.
Certification requirements:
Borrowers statements: Borrower prepared financial statements.
Guarantor statements: Independent certified public accountant
satisfactory to Bank to audit financial statements and deliver an
opinion on the financial statements.
6.7.1 Minimum property insurance amount: The full replacement value of
any and all Units constituting Eligible Collateral.
6.7.2 Minimum liability insurance amounts:
Per occurrence: $1,000,000.
General aggregate: $2,000,000.
Minimum umbrella excess liability insurance amount:
$25,000,000 for the first month after the date of this Agreement
and $50,000,000 thereafter.
Minimum motor vehicle liability insurance amount:
$1,000,000.
2. DEFINITIONS. In this Agreement, the following terms shall have the
following meanings:
"A&D APPRAISAL" means an appraisal of the A&D Land and the A&D Improvements as
they will exist upon completion of the A&D Improvements (or as they currently
exist, with respect to A&D Improved Lot Projects) (i) ordered by Bank, (ii)
prepared by an appraiser satisfactory to Bank, (iii) in compliance with all
federal and state standards for appraisals, (iv) reviewed by Bank, and (v) in
form and substance satisfactory to Bank in its absolute and sole discretion.
"A&D APPRAISAL REVIEW MARKET VALUE" means the market value for the A&D Land and
the A&D Improvements as they will exist upon completion of the A&D Improvements
(or as they currently exist, with respect to A&D Improved Lot Projects), which
shall be the
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value approved or determined by Bank in its absolute and sole discretion after
its review of an A&D Appraisal.
"A&D BUDGET" means the budget for the A&D Improvements and the acquisition cost
of the A&D Land approved by Bank in its reasonable discretion and as set forth
on the A&D Term Sheet, as amended and modified from time to time in accordance
with this Agreement. With respect to A&D Improved Lot Projects, the A&D Budget
shall set forth the actual costs for the A&D Improvements and the acquisition
cost of the A&D Land.
"A&D COLLATERAL VALUE" means the maximum Advances the applicable Borrower may
obtain against an A&D Project that constitutes Eligible Collateral based upon
the stage of construction of the A&D Improvements, determined by Bank on a
cumulative basis based on the Construction Report, the results of Bank's
inspections, and such other information available to Bank. If construction of
the A&D Improvements has not commenced, or if the applicable Borrower has not
recorded a final plat with respect to the A&D Project as provided in SECTION
6.21, then the A&D Collateral Value shall be the maximum Advance that the
applicable Borrower may obtain against the A&D Land, as set forth on the A&D
Term Sheet.
"A&D COMMENCEMENT DATE" means the date by which construction of the A&D
Improvements shall be commenced, but in any event not later than ninety (90)
days after the A&D Eligibility Date.
"A&D COMPLETION DATE" means the date that is fifteen (15) Calendar Months after
the A&D Eligibility Date.
"A&D CONTRACTOR" means the licensed contractor (if any) retained by the
applicable Borrower to construct some or all the A&D Improvements.
"A&D DEFICIENCY AMOUNT" means the Estimated A&D Aggregate Costs, Expenses, and
Fees (as defined below), less the undisbursed amount of the applicable A&D
Subcommitment. "ESTIMATED A&D AGGREGATE COSTS, EXPENSES, AND FEES" means the
amount that (in the absolute and sole discretion of Bank) is necessary to pay
(A) any then unpaid, previously incurred costs, expenses, and fees for services,
work, and materials previously used in construction of the A&D Improvements, (B)
the remainder of the services, work, and materials to fully complete
construction of the A&D Improvements, and (C) any other costs, expenses, and
fees incurred or to be incurred in connection with the A&D Improvements.
"A&D DEFICIENCY DETERMINATION" means a determination by Bank (in its absolute
and sole discretion) from time to time that the Estimated A&D Aggregate Costs,
Expenses, and Fees exceeds by more than $50,000.00 the total undisbursed amount
of the applicable A&D Subcommitment.
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"A&D ELIGIBILITY DATE" means the date the A&D Project is deemed to be Eligible
Collateral, as set forth on the A&D Term Sheet.
"A&D ENGINEER" means the licensed engineer retained by the Borrower in
connection with the construction of the A&D Improvements.
"A&D IMPROVED LOT PROJECT" means an A&D Project where the A&D Improvements have
been completed prior to the A&D Eligibility Date.
"A&D IMPROVEMENTS" means (i) offsite improvements which may exist or which are
to be constructed on the A&D Land (including, without limitation, curbs,
grading, landscape, sprinklers, storm and sanitary sewers, paving, sidewalks,
and utilities) necessary to make the A&D Land suitable for the construction of
single family homes, and (ii) any common area improvements which may exist or
which are to be constructed on the A&D Land.
"A&D LAND" means the real property upon which the A&D Improvements exist or are
to be constructed.
"A&D LOT" means an individual lot designated on the final subdivision plat or
filing of the A&D Land.
"A&D PLANS AND SPECIFICATIONS" means all plans and specifications for the A&D
Improvements and the related working drawings prepared by the Engineer, as
amended and modified from time to time in accordance with this Agreement.
"A&D PROJECT" means the A&D Land, the A&D Improvements, and the fixtures and
other tangible personal property located or used in or on the A&D Land or the
A&D Improvements.
"A&D PROJECT TERM" means the maximum period for which an A&D Project may
continue to qualify as Eligible Collateral, as set forth in SECTION 3.5.3.
"A&D SUBCOMMITMENT" means the total commitment approved by Bank with respect to
each A&D Project, as set forth on the A&D Term Sheet.
"A&D TERM SHEET" means a term sheet in the form attached as EXHIBIT A.
"A&D TOTAL COSTS" means, with respect to each A&D Project, the total costs,
expenses and fees included in the respective A&D Budget (including the cost of
the applicable A&D Land).
"A&D UNIMPROVED LOT PROJECT" means an A&D Project where the A&D Improvements
have not been completed prior to the A&D Eligibility Date.
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"ADVANCE" means an advance by Bank to a Borrower hereunder.
"AGREEMENT" means this Loan Agreement, as it may be amended, modified, extended,
renewed, restated, or supplemented from time to time.
"APPROVALS AND PERMITS" means each and all approvals, authorizations, bonds,
consents, certificates, franchises, licenses, permits, registrations,
qualifications, and other actions and rights granted by or filings with any
Persons necessary, or appropriate for acquisition of the A&D Land and/or Lots,
for construction of the A&D Improvements, for construction of Units, for
ownership and use by the Borrower and other Persons of the A&D Land, the A&D
Improvements, and/or the Units, or for the occupancy of the Units, or for the
conduct of the business and operations of the Borrower.
"AVAILABLE COMMITMENT" means, at any time, the lowest of
(i) the applicable Commitment Amount LESS (A) the aggregate of all
Letter of Credit Subcommitment Amounts, LESS (B) the aggregate of all A&D
Subcommitment amounts less the aggregate of the current A&D Collateral
Values for all A&D Projects that constitute Eligible Collateral; or
(ii) the sum of (A) the aggregate of the current Unit Collateral
Values for all Units that constitute Eligible Collateral, PLUS (B) the
aggregate of the current A&D Collateral Values for all A&D Projects that
constitute Eligible Collateral, LESS (C) the aggregate of all Letter of
Credit Subcommitment amounts.
"BORROWERS" means all of the Persons specified in SECTION 1 as Borrowers;
"BORROWER" means any one of the Borrowers.
"BORROWER LOAN DOCUMENTS" means the Loan Documents executed or delivered by any
Borrower from time to time.
"BORROWER'S EQUITY" means the funds of the applicable Borrower expended or to be
expended for costs, expenses, and fees included in the A&D Budget in the
aggregate amount shown as "BORROWER'S EQUITY" in the applicable A&D Budget.
"BORROWING BASE REPORT" means Borrowers' monthly report disclosing the matters
required pursuant to SECTION 6.3.8.
"BUSINESS DAY" means a day of the year on which banks are not required or
authorized to close in Phoenix, Arizona.
"CALENDAR MONTH" shall mean the twelve (12) calendar months of the year. Any
payment or obligation that is due or required to be performed within a specified
number of Calendar Months shall become
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due on the day in the last of such specified number of Calendar Months that
corresponds numerically to the date on which such payment or obligation was
incurred or commenced, provided, however, that with respect to any obligation
that is incurred or commences on the 29th, 30th, or 31st day of any Calendar
Month and if the Calendar Month in which such payment or obligation would
otherwise be due does not have a numerically corresponding date, such payment or
obligation shall become due on the first day of the next succeeding Calendar
Month.
"CASH COLLATERAL ACCOUNT" and "CASH COLLATERAL ACCOUNTS" mean, respectively,
each and all deposit accounts maintained by Bank, in Bank's name, and subject to
the terms and conditions of the Cash Collateral Agreement.
"CASH COLLATERAL AGREEMENT" and "CASH COLLATERAL AGREEMENTS" mean, respectively,
each and all agreements by and between the respective Borrowers and Bank, in
form and substance satisfactory to Bank, governing the use of monies held in the
respective Cash Collateral Accounts.
"COLLATERAL" means the property, interests in property, and rights to property
securing any or all Obligations from time to time.
"COLLATERAL CERTIFICATE" means the certificate delivered to Bank by Borrower
pursuant to SECTION 6.3.9.
"COMMITMENT" means the agreement by Bank in SECTION 3.1 to issue Letters of
Credit and to make Advances pursuant to the terms and conditions in the Letter
of Credit Agreements and herein.
"COMMITMENT AMOUNT" means the amount specified in SECTION 1.
"CONVERSION DATE" means June 30, 1995; provided, however, that Bank may, in
Bank's absolute and sole discretion, extend the Conversion Date annually for
periods of twelve (12) months each or such other period as the parties may agree
upon, upon such terms and conditions as Bank may require, in its absolute and
sole discretion, and with such changes to this Agreement or the terms and
conditions herein as Bank may require, in its absolute and sole discretion,
including, without limitation, any changes in or additions to required financial
and other covenants; or such other date determined pursuant to SECTION 3.1.2.
"CONVERSION PERIOD" means the period of time following the Conversion Date.
"CONVERTIBLE SUBORDINATED NOTES" means those $28,000,000.00 principal amount of
8 3/4% convertible subordinated notes due 2005 issued by Guarantor as described
in that private placement memorandum dated December 17, 1993.
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"COVENANT RELATING TO OTHER DEBT" means Guarantor's covenant with respect to
Guarantor's other Debt set forth in SECTION 5.6 of the Guaranty.
"CUSTOM UNIT" means a Unit that is not located in an approved Subdivision where
the estimated Unit Sales Price (if a Spec Unit) or the actual Unit Sales Price
(if a Presold Unit) is greater than $250,000.00.
"DEBT" means, as to any Person, without limitation, (a) any indebtedness of such
Person for borrowed money, (b) all indebtedness of such Person evidenced by
bonds, debentures, notes, letters of credit, drafts or similar instruments,
(c) all indebtedness of such Person to pay the deferred purchase price of
property or services, including accounts payable and accrued expenses arising in
the ordinary course of business, (d) all capitalized lease obligations of such
Person, (e) all Debt of others secured by a lien on any asset of such Person,
whether or not such Debt is assumed by such Person or guaranteed by such Person,
and (f) all Debt of others guaranteed by such Person and all other indebtedness
that would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP.
"DEED OF TRUST" and "DEEDS OF TRUST" means respectively, each and all Deeds of
Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing and
Financing Statement securing the Note and the other Obligations, granted from
time to time by a Borrower, as Trustor, for the benefit of Bank, as Beneficiary,
as the same may be amended, modified, extended, renewed, restated, or
supplemented from time to time, each being in the form approved by Bank in its
reasonable discretion, and each and all Mortgages, Assignment of Leases and
Rents, Fixture Filing and Security Agreement, securing the Note and the other
Obligations, granted from time to time, by a Borrower, as Mortgagor, to Bank, as
Mortgagee, as the same may be amended, modified, extended, renewed, restated, or
supplemented from time to time, each being substantially in the form approved by
Bank in its reasonable discretion.
"DRAW REQUEST" means a completed, written request in form and substance
satisfactory to Bank, from a Borrower to Bank for an Advance, together with such
other documents and information as Bank may require or specify from time to
time.
"ELIGIBLE COLLATERAL" means:
(a) Units which satisfy each of the following requirements: (i)
such Units are in a Subdivision approved pursuant to SECTION 4.2 (or such
Units are Custom Units approved by Bank in its absolute and sole
discretion), (ii) Borrower has satisfied the conditions precedent set forth
in
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SECTION 4.3 with respect to such Units, and (iii) such Units have not
become subject to SECTION 3.5.12.
(b) A&D Projects which satisfy each of the following requirements:
(i) Borrower has satisfied the conditions precedent set forth in SECTION
4.5 with respect to such A&D Projects, and (ii) such A&D Projects have not
become subject to SECTION 3.5.12.
"ENVIRONMENTAL AGREEMENT" and "ENVIRONMENTAL AGREEMENTS" mean, respectively,
each and all Certifications and Agreement Regarding Hazardous Substances, by a
Borrower and Guarantor from time to time for the benefit of Bank, and relating
to the Collateral, as the same may be amended, modified, extended, renewed,
restated, or supplemented from time to time, each being in the form approved by
Bank in its reasonable discretion.
"ERISA" means the Employee Retirement Income Security act of 1974 and the
regulations and published interpretations thereunder, as in effect from time to
time.
"EVENT OF DEFAULT" has the meaning specified in the Note and the other Loan
Documents, and in the Guaranty, and in the Environmental Agreements.
"FINANCIAL COVENANT" means Guarantor's covenant with respect to Guarantor's
Tangible Net Worth set forth in SECTION 5.5 of the Guaranty.
"GAAP" means generally accepted accounting principles consistently applied;
provided, however, that for purposes of this Agreement, financial statements
shall not be deemed to be inconsistent with GAAP solely by reason of a
Borrower's accounting for transfers of land among Borrowers and Guarantor, a
Borrower and one or more other Borrowers, or their respective Subsidiaries at
the lesser of (i) inter company transfer amounts, or (ii) the historical cost of
such land as it appears on the books of a Borrower, Guarantor, or their
respective Subsidiaries.
"GOVERNMENTAL AUTHORITY" means any government, any court, and any agency,
authority, body, bureau, department, or instrumentality of any government.
"GUARANTOR" means the Person specified in SECTION 1.
"GUARANTY" means the Guaranty of Payment executed by Guarantor, for the benefit
of Bank, guaranteeing repayment of the indebtedness under the Note.
"HAZARDOUS SUBSTANCES" has the meaning specified in the Environmental Agreement.
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"IMPOSITIONS" has the meaning specified in the Deed of Trust.
"INITIAL APPROVED SUBDIVISIONS" means the Subdivisions approved by Bank as of
the date hereof, which are those Subdivisions currently encumbered by deeds of
trust or mortgages in favor of Bank executed pursuant to (i) that Loan Agreement
between Bank and Richmond American Homes of California, Inc., a Colorado
corporation dated October 13, 1993, as amended, or (ii) that Loan Agreement
between Bank and Richmond American Homes, Inc., a Delaware corporation, and
Guarantor dated November 16, 1993, or (iii) that Loan Agreement between Bank and
Richmond Homes, Inc. II, a Delaware corporation, dated May 21, 1993.
"INTANGIBLE ASSETS" means all intangible assets under GAAP, including, without
limitation, copyrights, franchises, goodwill, licenses, non-competition
covenants, organization or formation expenses, patents, service marks, service
names, trademarks, tradenames, write-up in the book value of any asset in excess
of the acquisition cost of the asset to such Person, any amount, however
designated on the balance sheet, representing the excess of the purchase price
paid for assets or stock acquired over the value assigned thereto on the books
of such Person, unamortized leasehold improvements expense not recoverable at
the end of the lease term, and unamortized debt discount.
"INVOLUNTARY LIENS" has the meaning specified in the Deed of Trust.
"LETTER OF CREDIT" means a standby letter of credit in Bank's standard form from
time to time issued pursuant to SECTIONS 3.1 AND 3.2 in conjunction with
Eligible Collateral by the applicable Borrower for the benefit of the
Governmental Authority, utility company, improvement district, or other similar
Person specified as beneficiary of the Letter of Credit in an amount requested
by such Borrower and approved by Bank.
"LETTER OF CREDIT AGREEMENT" means Bank's standard form Application for Standby
Letter of Credit and Standby Letter of Credit Agreement.
"LETTER OF CREDIT SUBCOMMITMENT" means the face amount of each Letter of Credit.
"LIEN OR ENCUMBRANCE" and "LIENS AND ENCUMBRANCES" mean, respectively, each and
all of the following: (i) any lease or other right to use; (ii) any assignment
as security, conditional sale, grant in trust, lien, mortgage, pledge, security
interest, title retention arrangement, other encumbrance, or other interest or
right securing the payment of money or the performance of any other liability or
obligation, whether voluntarily or involuntarily created and whether arising by
agreement, document, or instrument, under any law, ordinance, regulation, or
rule (federal, state, or local), or otherwise; and (iii) any option or right of
first
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refusal, except for any approved by Bank in its absolute and sole discretion.
"LOAN DOCUMENTS" means this Agreement, the Note, the Deeds of Trust, the Letter
of Credit Agreements executed and delivered by each Borrower in connection with
the Letters of Credit, the Cash Collateral Agreements, and any other agreements,
documents, or instruments evidencing, guarantying or securing any and all
Advances made hereunder, as such agreements, documents, and instruments may be
amended, modified, extended, renewed, or supplemented from time to time. Loan
Documents shall specifically not include the Environmental Agreements or the
Guaranty.
"LOT" means an individual lot designated on the final subdivision plat or filing
for each Subdivision.
"LOT ALLOCATION" means either (i) with respect to all Lots that were NOT A&D
Lots and that are located in California, twenty percent (20%) of the Unit Base
Appraised Value, (ii) with respect to all Lots that were NOT A&D Lots and that
are not located in California, ten percent (10%) of the Unit Base Appraised
Value, or (iii) with respect to all Lots that were A&D Lots, the release price
paid by the applicable Borrower pursuant to SECTION 3.5.11.1(b).
"MATERIAL ADVERSE CHANGE" means any change in the assets, financial condition,
or results of operations of a Borrower or any other event or condition with
respect to a Borrower that in the reasonable opinion of Bank (i) could affect
the likelihood of performance by such Borrower of any of the Obligations or the
obligations under the Environmental Agreements, (ii) could affect the ability of
such Borrower to perform any of the Obligations or any of the obligations under
the Environmental Agreements, (iii) could affect the legality, validity, or
binding nature of any of the Obligations, or the obligations of such Borrower
under the Environmental Agreements, or any Lien or Encumbrance securing any of
the Obligations or any of such Borrower's obligations under the Environmental
Agreements, or (iv) could affect the priority of any Lien or Encumbrance
securing any of the Obligations or any of Borrower's obligations under the
Environmental Agreements.
"MAXIMUM ALLOWED ADVANCE" means:
(a) with respect to each Presold Unit that constitutes Eligible
Collateral and that is NOT located in California, the lesser of (i) eighty
percent (80%) of the respective Unit Base Appraised Value, or (ii) eighty
percent (80%) of the respective Unit Sales Price; PROVIDED, HOWEVER, that
if such Presold Unit is a Custom Unit, then the Maximum Allowed Advance
shall be the lesser of (A) seventy percent (70%) of the respective Unit
Base Appraised Value, or (B) seventy
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percent (70%) of the respective Unit Sales Price, or (C) $500,000.00; or
(b) with respect to each Presold Unit that constitutes Eligible
Collateral and that IS located in California, the lesser of (i) seventy-
five percent (75%) of the respective Unit Base Appraised Value, or (ii)
seventy-five percent (75%) of the respective Unit Sales Price; PROVIDED,
HOWEVER, that if such Presold Unit is a Custom Unit, then the Maximum
Allowed Advance shall be the lesser of (A) sixty-five percent (65%) of the
respective Unit Base Appraised Value, or (B) sixty-five percent (65%) of
the respective Unit Sales Price, or (C) $500,000.00; or
(c) with respect to each Spec Unit that constitutes Eligible
Collateral, seventy percent (70%) of the respective Unit Base Appraised
Value; PROVIDED, HOWEVER, that if such Spec Unit is a Custom Unit, then the
Maximum Allowed Advance shall be the lesser of (A) sixty percent (60%) of
the respective Unit Base Appraised Value, or (B) $500,000.00; or
(d) with respect to each Model Unit that constitutes Eligible
Collateral, seventy-five percent (75%) of the respective Unit Base
Appraised Value; or
(e) with respect to each A&D Project, the A&D Subcommitment Amount;
PROVIDED, HOWEVER, that the Maximum Allowed Advance, as so determined, may be
adjusted from time to time by Bank pursuant to any applicable Reclassification
Adjustment or Term Adjustment.
"MODEL UNIT" means a Unit constructed initially for inspection by prospective
purchasers that is not intended to be sold until all or substantially all other
Units in the applicable Subdivision are sold.
"NET INCOME" means, for any period, the net income (loss) of any Person for such
period, determined in accordance with GAAP.
"NET SALES PROCEEDS" means the gross sales price of a Unit set forth in the
Purchase Contract for such Unit, less (i) any earnest money deposit, (ii)
customary tax prorations, (iii) real estate brokerage commissions payable to any
Person who is neither (A) employed by any Borrower or Guarantor, nor (B) engaged
in on-site sales at the Subdivision in which the Unit is located, and (iv)
reasonable and customary closing costs, including any "points" payable by the
Borrower.
"NOTE" means that certain Promissory Note of even date herewith, executed by
Borrower and payable to Bank, evidencing Borrowers'
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indebtedness hereunder, as the same may be amended, modified, extended, renewed,
restated or supplemented from time to time.
"OBLIGATIONS" means the obligations of each Borrower under the Loan Documents
(including, without limitation, the obligation to pay the Reimbursement Amount).
"OPERATING LOSSES" means operating losses of Guarantor and its Subsidiaries,
calculated on a consolidated basis in accordance with GAAP, excluding therefrom
the impact of net realizable value writedowns and accounting changes.
"OPTION AGREEMENT" means a fully executed agreement between a Borrower and the
seller of any Lots providing for periodic purchases of Lots in a Subdivision.
"PERMITTED EXCEPTIONS" has the meaning specified in the Deed of Trust.
"PERSON" means a natural person, a partnership, a joint venture, an
unincorporated association, a limited liability company, a corporation, a trust,
any other legal entity, or any Governmental Authority.
"PRESOLD UNIT" means a Unit that is subject to a Purchase Contract.
"PROJECT" means all of the A&D Projects, Subdivisions, Lots and Units that are
encumbered by Deeds of Trust from time to time.
"PURCHASE CONTRACT" means a bona fide written agreement between a Borrower and a
third Person purchaser for sale in the ordinary course of such Borrower's
business of any Unit and the related Lot, accompanied by a cash earnest money
deposit or down payment in an amount that is customary, and subject only to
ordinary and customary contingencies to the purchaser's obligation to buy the
Unit and related Lot.
"RECLASSIFICATION ADJUSTMENT" means
(a) with respect to a Model Unit or a Spec Unit NOT located in
California that is reclassified as a Presold Unit, an increase in the
otherwise applicable Maximum Allowed Advance to the lesser of (i) eighty
percent (80%) of the respective Unit Base Appraised Value, or (ii) eighty
percent of the respective Unit Sales Price; PROVIDED, HOWEVER, that if such
Spec Unit is a Custom Unit that is reclassified as a Presold Unit, an
increase in the otherwise applicable Maximum Allowed Advance to the lesser
of (A) seventy percent (70%) of the respective Unit Base Appraised Value,
or (B) seventy percent (70%) of the respective Unit Sales Price, or (C)
$500,000.00; or
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(b) with respect to a Model Unit or a Spec Unit located in California
that is reclassified as a Presold Unit, an increase in the otherwise
applicable Maximum Allowed Advance to the lesser of (i) seventy-five
percent (75%) of the respective Unit Base Appraised Value, or (ii) seventy-
five percent (75%) of the respective Unit Sales Price; PROVIDED, HOWEVER,
that if such Spec Unit is a Custom Unit that is reclassified as a Presold
Unit, an increase in the otherwise applicable Maximum Allowed Advance to
the lesser of (A) sixty-five percent (65%) of the respective Unit Base
Appraised Value, or (B) sixty-five percent (65%) of the respective Unit
Sales Price, or (C) $500,000.00; or
(c) with respect to a Presold Unit or Model Unit reclassified as a
Spec Unit, a decrease in the otherwise applicable Maximum Allowed Advance
to seventy percent (70%) of the respective Unit Base Appraised Value;
PROVIDED, HOWEVER, that if such Presold Unit is a Custom Unit that is
reclassified as a Spec Unit, an decrease in the otherwise applicable
Maximum Allowed Advance to the lesser of (i) sixty percent (60%) of the
respective Unit Base Appraised Value, or (ii) $500,000.00;
(d) with respect to a Presold Unit or Spec Unit reclassified as a
Model Unit, a change in the otherwise applicable Maximum Allowed Advance to
seventy-five percent (75%) of the respective Unit Base Appraised Value;
PROVIDED, HOWEVER, that the Maximum Allowed Advance for all Units, as so
determined, may be adjusted from time to time by Bank pursuant to any applicable
Term Adjustment.
"REIMBURSEMENT AMOUNT" means the amount a Borrower is obligated to pay to Bank
under the Letter of Credit Agreement in respect of a draft drawn or drawn and
accepted under the Letter of Credit, which amount shall be the amount of the
draft or acceptance and all costs, expenses, fees, and other amounts then
payable by such Borrower to Bank under the Letter of Credit Agreement.
"REQUIREMENTS" shall have the meaning specified in the Deed of Trust.
"SENIOR NOTES" means those $190,000,000.00 principal amount of 11 1/8% senior
notes due 2003, issued by Guarantor as described in that private placement
memorandum dated December 17, 1993, including the Exchange Notes, as defined in
such private placement memorandum.
"SHORTAGE" means the amount by which the Maximum Allowed Advance applicable to
a Unit exceeds the Net Sales Proceeds received from the sale of such Unit.
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"SPEC UNIT" means a Unit constructed for the purpose of addition to a Borrower's
inventory of Units and which is not subject to a Purchase Contract. A Unit that
is not a Presold Unit or a Model Unit shall be deemed a Spec Unit.
"SPECIFIC UNIT BUDGET" means an actual construction budget for each Unit
proposed to be included in Eligible Collateral containing the information
required in the corresponding Unit Budget for that type of Unit.
"STANDARD NUMBER OF DAYS" means the standard number of days established by Bank
from time to time to allow for delivery to Bank of drafts drawn under letters of
credit issued by Bank and presented to financial institutions other than Bank
for delivery to Bank. Bank may change such number of days at any time and from
time to time in its absolute and sole discretion without notice to any Borrower
and may have a different number of days for commercial letters of credit and
standby letters of credit.
"SUBDIVISION" means a group of Lots designated on an individual subdivision plat
or filing; PROVIDED, HOWEVER, that with respect to multiple subdivision plats or
filings that are phases of a larger development and are in reasonable proximity
to each other, then all of the Lots shown on such subdivision plats or filing or
in such phases in which a common product type is being constructed shall be
deemed in the aggregate to constitute a single Subdivision, as approved by Bank
in its reasonable discretion.
"SUBSIDIARY" or "SUBSIDIARIES" means, with respect to any Person, any
corporation of which a majority of the capital stock having ordinary voting
power to elect a majority of the board of directors or other Persons performing
similar functions is at the time directly or indirectly owned by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof.
"TERM ADJUSTMENT" means
(a) with respect to any Model Unit remaining in Eligible Collateral
beyond the first twelve (12) Calendar Months of the Model Unit's Unit Term,
a decrease in the otherwise applicable Maximum Allowed Advance to seventy-
two (72%) of the respective Unit Base Appraised Value; and with respect to
any Model Unit remaining in Eligible Collateral beyond the first eighteen
(18) Calendar Months of the Model Unit's Unit Term, a decrease in the
otherwise applicable Maximum Allowed Advance to sixty-nine percent (69%) of
the respective Unit Base Appraised Value; and with respect to any Model
Unit remaining in Eligible Collateral beyond the first twenty-four (24)
Calendar Months of the Model Unit's Unit Term, a decrease in the otherwise
applicable Maximum Allowed Advance to sixty-six percent (66%) of the
respective Unit Base Appraised Value; or
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(b) With respect to each A&D Project remaining in Eligible Collateral
on the last day of the eighteenth (18th) Calendar Month after commencement
of the A&D Project's A&D Project Term, a decrease in the otherwise
applicable Maximum Allowed Advance to eighty-eight percent (88%) of the A&D
Subcommitment Amount; with respect to each A&D Project remaining in
Eligible Collateral on the last day of the twenty-first (21st) Calendar
Month after commencement of the A&D Project's A&D Project Term, a decrease
in the otherwise applicable Maximum Allowed Advance to seventy-six percent
(76%) of the A&D Subcommitment Amount; with respect to each A&D Project
remaining in Eligible Collateral on the last day of the twenty-fourth
(24th) Calendar Month after commencement of the A&D Project's A&D Project
Term, a decrease in the otherwise applicable Maximum Allowed Advance to
sixty-four percent (64%) of the A&D Subcommitment Amount; with respect to
each A&D Project remaining in Eligible Collateral on the last day of the
twenty-seventh (27th) Calendar Month after commencement of the A&D
Project's A&D Project Term, a decrease in the otherwise applicable Maximum
Allowed Advance to fifty-two percent (52%) of the A&D Subcommitment Amount;
with respect to each A&D Project remaining in Eligible Collateral on the
last day of the thirtieth (30th) Calendar Month after commencement of the
A&D Project's A&D Project Term, a decrease in the otherwise applicable
Maximum Allowed Advance to forty percent (40%) of the A&D Subcommitment
Amount; or
(c) with respect to any Unit or A&D Project whose Unit Term or A&D
Project Term has expired, a decrease in the otherwise applicable Maximum
Allowed Advance to zero (0) and the exclusion of such Unit or A&D Project
from Eligible Collateral.
"TERMINATION DATE" shall mean the date thirty-six (36) Calendar Months after the
Conversion Date; PROVIDED, HOWEVER, that if Guarantor has breached the Financial
Covenant or the Covenant Relating to Other Debt as more specifically described
in SECTION 3.1.2.3, then the Termination Date shall mean the date twenty-four
(24) Calendar Months after the Conversion Date.
"TITLE COMPANY" means a title insurance company or companies and any reinsurers
or co-insurers satisfactory to Bank in its absolute and sole discretion.
"TITLE POLICY" and "TITLE POLICIES" mean, respectively, each and all title
insurance policies and endorsements thereto and any reinsurance or co-insurance
agreements and endorsements described in this Agreement or the Tri-Party
Agreement insuring the Deeds of Trust.
"TRI-PARTY AGREEMENT" means that certain letter agreement executed in connection
herewith among Bank, Land Title Guarantee Company,
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and Old Republic National Title Insurance Company, and consented to by Richmond
Homes Inc., I and Richmond Homes, Inc. II, governing, among other things, the
issuance of Title Policies for Collateral in Colorado, as the same may be
amended, modified, extended or renewed.
"UNIT" means a single-family detached dwelling (i) constructed or to be
constructed on a Lot, and (ii) described in a set of Unit Plans and
Specifications, including, without limitation, any furniture, furnishings,
fixtures, and equipment to be installed therein as shown in the respective Unit
Plans and Specifications. Condominiums, townhomes, homes with common walls, and
other forms of "attached" housing shall not be "Units" for the purpose of this
Agreement, unless otherwise agreed to by Bank in its absolute and sole
discretion. For purposes of this Agreement, each Unit is either (A) a Presold
Unit, (B) a Model Unit, or (C) a Spec Unit.
"UNIT BASE APPRAISAL" means, with respect to each type of Unit, an appraisal of
the Unit and a typical Lot in the applicable Subdivision, as selected by Bank
(or, with respect to Custom Units, an appraisal of such Custom Unit and the Lot
upon which the Custom Unit will be constructed), as such Unit will exist upon
completion (i) ordered by Bank, (ii) prepared by an appraiser satisfactory to
Bank, (iii) in compliance with all federal and state standards for appraisals,
(iv) reviewed by Bank, and (v) in form and substance satisfactory to Bank in its
absolute and sole discretion.
"UNIT BASE APPRAISED VALUE" means the value of a Unit and a typical Lot in the
applicable Subdivision, as selected by Bank (or, with respect to Custom Units,
an appraisal of such Custom Unit and the Lot upon which the Custom Unit will be
constructed), without lot premiums, options, and upgrades (except with respect
to Custom Units, which shall include options and upgrades only), as approved or
determined by Bank in its absolute and sole discretion after review of a Unit
Base Appraisal.
"UNIT BUDGET" means, with respect to each type of Unit, the budget of the costs,
expenses, and fees necessary for or related to construction of that type of Unit
approved by Bank in its reasonable discretion, together with any amendments or
modifications thereof consented to by Bank in its reasonable discretion. Such
budget shall include (i) the onsite cost of labor and materials directly related
to construction of the type of Unit, other "hard costs," construction permits,
tap fees and other fees for permits required by any Governmental Authority, and
costs of direct project supervision, (ii) costs and expenses related to
upgrades, options, and decorator items, (iii) insurance costs, advertising and
marketing costs, escrow and title fees, processing and closing fees, wire
transfer fees, legal fees, and appraisal fees, in an amount equal to or less
than $2,000.00; and (iv) a reserve for repair and maintenance. There shall be a
separate
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budget for each type of Unit. The Unit Budgets shall not include the Lot
Allocation.
"UNIT COLLATERAL VALUE" means the maximum Advances the applicable Borrower may
obtain against a Unit that constitutes Eligible Collateral based upon the Unit's
stage of construction, determined on a cumulative basis in accordance with
EXHIBIT B.
"UNIT COMPLETION DATE" has the meaning specified in SECTION 1.
"UNIT PLANS AND SPECIFICATIONS" means, with respect to each type of Unit, plans
and specifications for construction of that type of Unit, prepared by an
architect, certified by the applicable Borrower to Bank together with any
amendments or modifications thereof.
"UNIT SALES PRICE" means the price at which a Unit is to be sold to a purchaser
under the applicable Purchase Contract.
"UNIT TERM" means the maximum period for which a Unit may continue to qualify as
Eligible Collateral, as set forth in SECTION 3.5.3.
"UNIT TOTAL COSTS" means, with respect to each type of Unit, the total costs,
expenses, and fees included in the respective Unit Budget plus the applicable
Lot Allocation.
"UNMATURED EVENT OF DEFAULT" means any condition or event that with notice,
passage of time, or both would be an Event of Default.
"UTILITY AND SERVICES CHARGES" has the meaning specified in the Deed of Trust.
3. LETTER OF CREDIT AND LOAN FACILITY.
3.1 LOAN FACILITY.
3.1.1 COMMITMENT. Subject to the terms and conditions of this
Agreement, Bank agrees to make Advances to the applicable Borrower with respect
to Eligible Collateral from time to time on or before the Termination Date,
PROVIDED that the aggregate amount of Advances outstanding at any time and from
time to time, shall not exceed the Available Commitment, and PROVIDED FURTHER
that the aggregate amount of Advances outstanding at any time and from time to
time to any individual Borrower shall not exceed the portion of the Available
Commitment calculated with respect to Eligible Collateral owned by such
Borrower. Proceeds of Advances may be used by the applicable Borrower only for
the purpose described in SECTIONS 3.5.1 and 5.1.6. Advances shall be on a
revolving basis. Advances repaid may be re-borrowed subject to the terms and
the conditions herein. Although the outstanding principal of the Note may be
zero from time to time, the Loan Documents and all obligations of Guarantor
under the Guaranty shall
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remain in full force and effect until the Commitment terminates and all
Obligations of Borrowers under the Loan Documents and all obligations of
Guarantor under the Guaranty are paid and performed in full. If monies (except
monies reflecting an A&D Deficiency Amount in accordance with SECTION 3.5.9) are
being held in a Cash Collateral Account at any time, Bank shall apply such
monies to the outstanding balance of the Advances made against Eligible
Collateral owned by the respective Borrower, in accordance with the terms of
this Agreement. Upon the occurrence of an Event of Default or an Unmatured
Event of Default, Bank, in its absolute and sole discretion and without notice,
may suspend the commitment to make Advances. In addition, upon occurrence of an
Event of Default, Bank, in its absolute and sole discretion and without notice,
may terminate the commitment to make Advances. The obligation of each Borrower
to repay Advances made to such Borrower shall be evidenced by the Note.
3.1.2 CONVERSION PERIOD.
3.1.2.1 CONVERSION PERIOD ESTABLISHED BY BANK. Bank may cause
the Conversation Date to occur and the Conversion Period to commence at any time
in Bank's sole and absolute discretion. If Bank causes the Conversion Date to
occur on any date other than the calendar date or anniversary date thereof set
forth in the definition of Conversion Date in SECTION 2, then Bank will give
Borrowers at least five (5) Business Days notice prior to the Conversion Date.
If Bank causes the Conversion Date to occur and the Conversion Period to
commence pursuant to this SECTION 3.1.2.1, then from and after the first
anniversary of the Conversion Date, the Commitment Amount in effect as of the
Conversion Date shall be reduced on the first day of each quarter-annual period
by a percentage of such Commitment Amount as follows:
Percentage Percentage
of Commitment of Commitment
PERIOD REDUCTION REMAINING
------ ------------- -------------
15 Calendar Months after
Conversion Date 12.5% 87.5%
18 Calendar Months after
Conversion Date 12.5% 75.0%
21 Calendar Months after
Conversion Date 12.5% 62.5%
24 Calendar Months after
Conversion Date 12.5% 50.0%
27 Calendar Months after
Conversion Date 12.5% 37.5%
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30 Calendar Months after
Conversion Date 12.5% 25.0%
33 Calendar Months after
Conversion Date 12.5% 12.5%
Termination Date 12.5% 0%
3.1.2.2 CONVERSION PERIOD RESULTING FROM OPERATING LOSSES. If
Guarantor's consolidated financial statements submitted to Bank pursuant to
SECTION 6.3.1 show Operating Losses for two (2) consecutive fiscal quarters or
if Guarantor breaches the provisions of SECTION 4.1.4 of the Guaranty, then
unless Bank in its sole and absolute discretion agrees otherwise the
Conversation Date shall automatically occur and the Conversion Period shall
automatically commence, effective as of the first day of the first Calendar
Month immediately following the second such fiscal quarter. If the Conversion
Date occurs and the Conversion Period commences pursuant to this SECTION
3.1.2.2, then from and after the Conversion Date, the Commitment Amount in
effect as of the Conversion Date shall be reduced on the first day of each
quarter-annual period by a percentage of such Commitment Amount as follows:
Percentage Percentage
of Commitment of Commitment
Period Reduction Remaining
------ ------------- -------------
3 Calendar Months after
Conversion Date 5% 95%
6 Calendar Months after
Conversion Date 5% 90%
9 Calendar Months after
Conversion Date 9% 81%
12 Calendar Months after
Conversion Date 9% 72%
15 Calendar Months after
Conversion Date 9% 63%
18 Calendar Months after
Conversion Date 9% 54%
21 Calendar Months after
Conversion Date 9% 45%
24 Calendar Months after
Conversion Date 9% 36%
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27 Calendar Months after
Conversion Date 9% 27%
30 Calendar Months after
Conversion Date 9% 18%
33 Calendar Months after
Conversion Date 9% 9%
Termination Date 9% 0%
3.1.2.3 CONVERSION PERIOD RESULTING FROM OTHER BREACHES BY
GUARANTOR. If Guarantor breaches the Financial Covenant (except for a breach
that are results solely from accounting changes) or the Covenant Relating to
Other Debt and such breach continues uncured for ninety (90) days, then unless
Bank in its sole and absolute discretion agrees otherwise the Conversation Date
shall automatically occur and the Conversion Period shall automatically
commence, effective as of the first day of the first Calendar Month immediately
following the time period to which the breach relates. If the Conversion Date
occurs and the Conversion Period commences pursuant to this SECTION 3.1.2.3,
then from and after three (3) Calendar Months after the Conversion Date, the
Commitment Amount in effect as of the Conversion Date shall be reduced on the
first day of each quarter-annual period by a percentage of such Commitment
Amount as follows:
Percentage Percentage
of Commitment of Commitment
Period Reduction Remaining
------ ------------- -------------
3 Calendar Months after
Conversion Date 5% 95%
6 Calendar Months after
Conversion Date 10% 85%
9 Calendar Months after
Conversion Date 10% 75%
12 Calendar Months after
Conversion Date 15% 60%
15 Calendar Months after
Conversion Date 15% 45%
18 Calendar Months after
Conversion Date 15% 30%
21 Calendar Months after
Conversion Date 15% 15%
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Termination Date 15% 0%
3.1.3 VOLUNTARY REDUCTIONS IN COMMITMENT AMOUNT. At any
time, Borrowers may elect to reduce the Commitment Amount in such amounts as
Borrowers may designate; PROVIDED, HOWEVER, Borrowers shall have provided Bank
written notice of Borrowers' desire to reduce the Commitment Amount, and
Borrowers shall have paid to Bank any amount payable pursuant to SECTION 3.7
after giving effect to the reduction in the Commitment Amount.
3.2 LETTER OF CREDIT.
3.2.1 ISSUANCE OF LETTER OF CREDIT. Subject to the terms and
conditions of this Agreement and the applicable Letter of Credit Agreement and
subject to the policies, procedures, and requirements of Bank in effect from
time to time for issuance of Letters of Credit (including, without limitation,
payment of Bank's standard letter of credit fees), Bank agrees to issue, on or
before the Termination Date, Letters of Credit in connection with upon request
by and for the account of any Borrower, provided that Borrower has delivered to
Bank a completed and executed Letter of Credit Agreement, and provided further
that the date that is the Standard Number of Days after the last date for
payment of drafts drawn or drawn and accepted under the requested Letter of
Credit is at least thirty-one (31) days before the scheduled Termination Date.
The terms of any Letter of Credit Agreement will not be inconsistent with the
terms of this Agreement. Each reference in this Agreement to "issue" or
"issuance" or other forms of such words in relation to the Letter of Credit
shall also include any extension or renewal of the Letter of Credit. Upon
occurrence of an Event of Default or an Unmatured Event of Default, Bank, in its
absolute and sole discretion and without notice, may suspend the commitment to
issue any Letters of Credit. In addition, upon occurrence of an Event of
Default, Bank, in its absolute and sole discretion and without notice, may
terminate the commitment to issue any Letters of Credit.
3.2.2 ISSUANCE PROCEDURE. To obtain a Letter of Credit, Borrower
shall complete and execute a Letter of Credit Agreement and submit it to the
letter of credit department of Bank. Upon receipt of a completed and executed
Letter of Credit Agreement, Bank will process the application in accordance with
the policies, procedures, and requirements of Bank then in effect. If the
application meets the requirements of Bank and is within the policies of Bank
then in effect but does not contradict this Agreement, and meets the regulatory
requirements applicable thereto, Bank will issue the requested Letter of Credit.
The Letter of Credit Subcommitment amount will not be part of any A&D Budget or
any Unit Budget. Until the Letter of Credit expires or is drawn in full, and
any drafts drawn or drawn and accepted under the Letter of Credit are paid in
full, the Letter of Credit Subcommitment amount will be deemed to be an Advance,
and will be
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subject to the restrictions and limitations set forth in this Agreement that
relate to Advances; PROVIDED that such Advance will not bear interest except to
the extent of any drafts drawn or drawn and accepted under the Letter of Credit.
3.2.3 REIMBURSEMENT OF BANK FOR PAYMENT OF DRAFTS DRAWN OR DRAWN
AND ACCEPTED UNDER THE LETTER OF CREDIT. The obligation of the applicable
Borrower to reimburse Bank for payment by Bank of drafts drawn or drawn and
accepted under a Letter of Credit shall be as provided in the Letter of Credit
Agreement. Bank will notify the applicable Borrower of payment by Bank of a
draft drawn or drawn and accepted under a Letter of Credit and of the
Reimbursement Amount and will give such Borrower the election (i) to pay the
Reimbursement Amount pursuant to Letter of Credit Agreement or (ii) to pay the
Reimbursement Amount by Bank making an Advance, subject to the terms and
conditions herein and applying the proceeds of the Advance to pay the
Reimbursement Amount. If such Borrower does not communicate to Bank its
election within two (2) Business Days after notification by Bank of payment of
the draft or acceptance, then such Borrower shall be deemed to have elected to
pay the Reimbursement Amount by Bank making an Advance hereunder, provided that
if the terms and conditions in this Agreement for a such Advance hereunder are
not satisfied, such Borrower shall be deemed to have elected to pay the
Reimbursement Amount pursuant to the Letter of Credit Agreement. The Advance to
pay the Reimbursement Amount will be dated the date that Bank pays the
respective draft or acceptance and will accrue interest from and after such
date.
If a Borrower is to pay the Reimbursement Amount pursuant to the Letter of
Credit Agreement, such Borrower shall also pay to Bank interest on the
Reimbursement Amount from and including the date Bank pays the respective draft
or acceptance at the Variable Rate (as defined in the Note) until the
Reimbursement Amount and such interest are paid in full, provided that if the
Borrower fails to pay the Reimbursement Amount and accrued interest thereon
within five (5) Business Days after notification by Bank to such Borrower of
payment of the respective draft or acceptance, interest thereafter will accrue
at the Default Rate (as such term is defined in the Note). Such interest shall
be computed on the basis of a 360-day year and accrue on a daily basis for the
actual number of days elapsed.
Notwithstanding the above, if a Borrower elects or is deemed to have
elected to pay the Reimbursement Amount pursuant to the Letter of Credit
Agreement and fails to pay the Reimbursement Amount and interest thereon within
five (5) Business Days after notification by Bank to such Borrower, Bank, in its
absolute and sole discretion and without notice to such Borrower and regardless
of whether the terms and conditions in this Agreement for such Advances are
satisfied, may make an Advance under this Agreement in the amount of the
Reimbursement Amount and accrued interest thereon
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and apply the proceeds of such Advance to pay the Reimbursement Amount and
accrued interest.
3.3 A&D SUBCOMMITMENT FACILITY.
3.3.1 AGREEMENT TO MAKE ADVANCES. Subject to the terms and
conditions of this Agreement, Bank agrees to make Advances to the applicable
Borrower from time to time on or before the Termination Date with respect to A&D
Projects owned by such Borrower that constitute Eligible Collateral, provided
that with respect to A&D Unimproved Lot Projects, if the total costs, expenses,
and fees in the construction contract(s) for A&D Improvements are less than
total amount of the A&D Budget (including the contingency items), Bank, in its
absolute and sole discretion, may reduce the A&D Subcommitment Amount by such
difference.
3.3.2 AMOUNT OF A&D SUBCOMMITMENT. Unless otherwise agreed to by
Bank in its sole and absolute discretion, the A&D Subcommitment amount will be:
(A) with respect to each A&D Project that is not located in California, the
lesser of (i) seventy percent (70%) of the respective A&D Appraisal Review
Market Value, or (ii) seventy percent (70%) of the respective A&D Total Costs;
PROVIDED, HOWEVER, that if such A&D Project includes or is estimated to include
more than 125 A&D Lots, then the percentages in clauses (i) and (ii) shall be
reduced to sixty-five percent (65%); or (B) with respect to each A&D Project
that is located in California, the lesser of (I) sixty-five percent (65%) of the
respective A&D Appraisal Review Market Value, or (II) sixty-five percent (65%)
of the respective A&D Total Costs; PROVIDED, HOWEVER, that if such A&D Project
includes or is estimated to include more than 125 A&D Lots, then the percentages
in clauses (I) and (II) shall be reduced to sixty percent (60%).
3.4 REQUEST FOR LETTERS OF CREDIT AND ADVANCES. A Letter of Credit may be
issued and Advances may be made by Bank to the applicable Borrower at the
written request (in the form of a Draw Request) by the Person or Persons
designated from time to time on Bank's form of signature authorization;
PROVIDED, HOWEVER, that Bank shall have acknowledged receipt of any changes in
the Person or Persons designated by such Borrower, and such Person or Persons
shall have executed a new signature authorization form. Such Person or Persons
are hereby authorized by each Borrower to request Advances not more frequently
than one time per Business Day, and Letters of Credit Letters of Credit at any
time, and to direct the disposition of the proceeds of Advances until written
notice of the revocation of such authority is received from such Borrower by
Bank and Bank has had a reasonable time to act upon such notice. Bank shall
have no duty to monitor for any Borrower or to report to any Borrower the use of
a Letter of Credit or proceeds of Advances. Bank shall not be required to make
any requested Advance before two (2) Business Days after receipt of the Draw
Request; PROVIDED,
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HOWEVER, that if Bank receives the Draw Request before 3:00 p.m., Phoenix time,
on a Business Day, then Bank will use its best efforts to make the requested
Advance by noon, Phoenix time, on the following Business Day. Advances will be
disbursed directly to the account of the Borrower that owns the Eligible
Collateral, as directed by such Borrower; PROVIDED HOWEVER, that upon an Event
of Default or an Unmatured Event of Default, Advances will be disbursed at
Bank's option (A) directly to the account of the Borrower that owns the Eligible
Collateral, (B) directly to Persons providing labor, materials, and service in
connection with such Eligible Collateral, (C) directly to other Persons entitled
to the funds, or (D) jointly to the applicable Borrower and the Persons
described in (B) or (C).
3.5 ADVANCES.
3.5.1 PURPOSE OF FACILITY AND USE OF ADVANCES. Advances may be
used by the applicable Borrower to pay interest and fees due under the Loan
Documents, and to pay or reimburse costs, expenses, and fees actually incurred
by such Borrower in connection with the construction of Units and A&D Projects
owned by such Borrower constituting Eligible Collateral.
3.5.2 DETERMINATION OF AMOUNT OF ADVANCES AND LIMITATIONS ON
ADVANCES.
3.5.2.1 GENERAL DETERMINATION. The Available Commitment, the
Maximum Allowed Advance, the A&D Collateral Value, the Unit Collateral Value,
and the amount of each Advance shall be determined by Bank based upon: (i) the
Borrowing Base Report and the Collateral Certificate most recently submitted by
the applicable Borrower (adjusted to reflect Units sold, Reclassification
Adjustments, Term Adjustments and other adjustments and limitations pursuant to
this Agreement), and (ii) Bank's inspections made pursuant to SECTION 6.15 AND
6.20 (as such inspections may result in any adjustments to reflect any variance
between (A) the Borrowing Base Report and the Collateral Certificate, and (B)
the results of such inspections or other information available to Bank), and
(iii) such other information as Bank may reasonably require in order to verify
such amounts. Advances will be made against Units and A&D Projects that
constitute Eligible Collateral based on the respective Unit Collateral Values
and A&D Collateral Values, not to exceed in any event the Maximum Allowed
Advance.
3.5.2.2 PERCENTAGE LIMITATIONS. Advances will be further
subject to the following limitations, which shall be calculated with respect to
each Borrowing Base Report:
(a) The total outstanding Advances made against Custom Units shall
not any time exceed four percent (4%) of the then applicable Commitment
Amount.
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(b) The sum of (i) the aggregate of all A&D Subcommitment amounts
relating to A&D Projects located in Arizona, plus (ii) the aggregate Unit
Collateral Values for all Units located in Arizona, shall not at any time
exceed fifty-five percent (55%) of the then applicable Commitment Amount.
(c) The sum of (i) the aggregate of all A&D Subcommitment amounts
relating to A&D Projects located in Colorado, plus (ii) the aggregate Unit
Collateral Values for all Units located in Colorado, shall not at any time
exceed eighty percent (80%) of the then applicable Commitment Amount.
(d) The sum of (i) the aggregate of all A&D Subcommitment amounts
relating to A&D Projects located in Nevada, plus (ii) the aggregate Unit
Collateral Values for all Units located in Nevada, shall not at any time
exceed forty-five percent (45%) of the then applicable Commitment Amount.
(e) The sum of (i) the aggregate of all A&D Subcommitment amounts
relating to A&D Projects located in California, plus (ii) the aggregate
Unit Collateral Values for all Units located in California, shall not at
any time exceed fifty-five percent (55%) of the then applicable Commitment
Amount.
(f) The aggregate amount of all A&D Subcommitment amounts shall not
at any time exceed 26.66 percent (26.66%) of the then applicable Commitment
Amount.
(g) The aggregate of all A&D Subcommitment amounts relating to
Eligible Collateral located in the same state shall not at any time exceed
twenty percent (20%) of the then applicable Commitment Amount.
(h) At least fifty percent (50%) of the total outstanding Advances
must be made against Model Units and Presold Units (including Custom
Units).
3.5.3 TERM PERIOD. Each Unit and each A&D Project shall
constitute Eligible Collateral only during the applicable Unit Term and A&D
Project Term for such Unit and A&D Project set forth below; PROVIDED, HOWEVER,
that in no event shall any Unit Term or any A&D Project Term extend beyond the
Termination Date:
3.5.3.1 PRESOLD UNITS. A Presold Unit may constitute Eligible
Collateral for not more than twelve (12) Calendar Months from the date an
Advance is first made against Eligible Collateral that includes such Presold
Unit.
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3.5.3.2 SPEC UNITS. A Spec Unit may constitute Eligible
Collateral for not more than twelve (12) Calendar Months from the date an
Advance is first made against Eligible Collateral that includes such Spec Unit.
3.5.3.2 MODEL UNITS. A Model Unit may constitute Eligible
Collateral for not more than thirty-six (36) Calendar Months from the date an
Advance is first made against Eligible Collateral that includes such Model Unit;
PROVIDED, HOWEVER, (i) any Model Unit remaining as Eligible Collateral for more
than twelve (12) Calendar Months from the date an Advance is first made against
Eligible Collateral that includes such Model Unit shall be subject to a Term
Adjustment for purposes of determining the applicable Maximum Allowed Advance;
(ii) any Model Unit remaining as Eligible Collateral for more than eighteen (18)
Calendar Months from the date an Advance is first made against Eligible
Collateral that includes such Model Unit shall be subject to a Term Adjustment
for purposes of determining the applicable Maximum Allowed Advance; and (iii)
any Model Unit remaining as Eligible Collateral for more than twenty-four (24)
Calendar Months from the date an Advance is first made against Eligible
Collateral that includes such Model Unit shall be subject to a Term Adjustment
for purposes of determining the applicable Maximum Allowed Advance.
3.5.3.4 A&D PROJECTS. An A&D Project may constitute Eligible
Collateral for not more than thirty (30) Calendar Months from the A&D
Eligibility Date for such A&D Project; PROVIDED, HOWEVER, (i) any A&D Project
remaining as Eligible Collateral on the last day of the eighteenth (18th)
Calendar Month after the A&D Eligibility Date for such A&D Project shall be
subject to a Term Adjustment for purposes of determining the applicable Maximum
Allowed Advance; (ii) any A&D Project remaining as Eligible Collateral on the
last day of the twenty-first (21st) Calendar Month after the A&D Eligibility
Date for such A&D Project shall be subject to a Term Adjustment for purposes of
determining the applicable Maximum Allowed Advance; (iii) any A&D Project
remaining as Eligible Collateral on the last day of the twenty-fourth (24th)
Calendar Month after the A&D Eligibility Date for such A&D Project shall be
subject to a Term Adjustment for purposes of determining the applicable Maximum
Allowed Advance; (iv) any A&D Project remaining as Eligible Collateral on the
last day of the twenty-seventh (27th) Calendar Month after the A&D Eligibility
Date for such A&D Project shall be subject to a Term Adjustment for purposes of
determining the applicable Maximum Allowed Advance; (v) any A&D Project
remaining as Eligible Collateral on the last day of the thirtieth (30th)
Calendar Month after the A&D Eligibility Date for such A&D Project shall be
subject to a Term Adjustment for purposes of determining the applicable Maximum
Allowed Advance.
3.5.4 LIMITATION ON ELIGIBLE COLLATERAL. Borrower shall not be
entitled to include in Eligible Collateral:
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(a) Spec Units in a single Subdivision that exceed (i) six (6) Spec
Units, for Subdivisions in Arizona, (ii) eight (8) Spec Units, for
Subdivisions in Colorado, (iii) six (6) Spec Units, for Subdivisions in
Nevada, and (iv) ten (10) Spec Units, for Subdivisions in California;
(b) an aggregate number of Spec Units exceeding forty percent (40%) of
all Units that constitute Eligible Collateral;
(c) more than four (4) Model Units in any Subdivision;
(d) any Custom Units that are Model Units;
(e) any A&D Unimproved Lot Project where ninety (90) days have lapsed
since the A&D Eligibility Date without commencement of construction of the
A&D Improvements;
(f) any A&D Unimproved Lot Project where ninety (90) days have lapsed
since the A&D Eligibility Date without recordation of a plat map satisfying
the requirements in SECTION 6.21; or
(g) any A&D Unimproved Lot Project where fifteen (15) Calendar Months
have lapsed since the A&D Eligibility Date without completion of
construction of the A&D Improvements.
In the event that Borrowers or a Borrower are in violation of the limitations
set forth in this SECTION 3.5.4, upon notice thereof from Bank, Borrowers or the
Borrower, as applicable, shall select and remove the affected Units or A&D
Projects from Eligible Collateral until such limitations are no longer violated.
3.5.5 CLASSIFICATION AND RECLASSIFICATION OF UNITS. Bank may
classify or reclassify Units as to type from time to time, or change a
Borrower's proposed classification of any and all Units, provided that such
reclassified Unit meets the requirements set forth herein for that type of Unit.
At any time a Unit is reclassified as to type, such reclassification shall give
rise to a Reclassification Adjustment to the Maximum Allowed Advance applicable
to such Unit. In no event shall a reclassification change the commencement date
of any Unit Term.
3.5.6 LIMITATIONS RELATING TO EACH BORROWER. The aggregate amount
of Advances made against Units and A&D Projects owned by a single Borrower shall
not exceed the Maximum Allowed Advances for all Units and A&D Projects owned by
such Borrower.
3.5.7 A&D BUDGET LIMITATIONS AND COVENANTS.
3.5.7.1 GENERAL LIMITATION. The Maximum Allowed Advances for
an A&D Project shall not exceed the A&D Subcommitment amount.
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3.5.7.2 BORROWER EQUITY. The Maximum Allowed Advances for an
A&D Project will not include any amounts shown as "BORROWER EQUITY" in the A&D
Budget.
3.5.7.3 SPECIFIC LINE ITEM LIMITATIONS. In addition to the
other limitations in this Agreement, with respect to A&D Unimproved Lot
Projects, the following A&D Budget line items are subject to the following
limitations:
3.5.7.3.1 The "ENGINEERING" line item includes the costs,
expenses, and fees of site inspections and related activities by the Engineer.
If the engineer that prepared the A&D Plans and Specifications is not an
independent third party or is no longer under contract with the applicable
Borrower, Bank shall determine, in its absolute and sole discretion, the value,
pro rata or otherwise, that the A&D Plans and Specifications have contributed to
the A&D Project and this value shall be the amount included in the A&D Budget in
the "ARCHITECTURE AND ENGINEERING" line item.
3.5.7.3.2 The "APPROVALS AND PERMITS AND MUNICIPAL FEES"
line item does not include costs, expenses, and fees included in other line
items, for example, property and sales taxes.
3.5.7.3.3 The "BORROWER INSURANCE" line item does not
include insurance included in other line items, for example, title insurance,
contractor bonds, and contractor insurance.
3.5.7.3.4 The "LEGAL" line item, if any, is for costs,
expenses, and fees of such Borrower's counsel and of Bank's in-house and outside
counsel in documenting, negotiating, and closing the A&D Subcommitment. This
line item does not include legal fees and costs and expenses relating to
formation of any Borrower or Guarantor, the negotiation or preparation of any
corporate or partnership agreements, documents, or instruments or the
negotiation and preparation of any agreements with architects, contractors, and
suppliers.
3.5.7.3.5 The "REAL ESTATE TAXES" line item includes all
real estate taxes until the Termination Date and any optional extension thereof.
Each Borrower hereby authorizes Bank to make Advances from time to time with
respect to Eligible Collateral owned by such Borrower to pay real estate taxes
as they become due if such Borrower is not paying such taxes and is not
contesting such taxes in accordance with the Deed of Trust, and also authorizes
Bank to make such payment directly to the taxing Governmental Authority. This
authorization shall be irrevocable, and no further direction or authorization
from any Borrower shall be necessary for Bank to make such Advances.
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3.5.8 FURTHER LIMITATIONS ON ADVANCES. In addition to the other
terms, conditions, and limitations in this Agreement, Bank's obligation to make
each Advance against Eligible Collateral that includes A&D Projects is subject
to the following limitations:
3.5.8.1 LAND ADVANCE. After the A&D Eligibility Date for an
A&D Unimproved Lot Project, and until commencement of construction of the A&D
Improvements and until recordation or filing of a plat in accordance with
SECTION 6.21, the Maximum Allowed Advance will be the amount set forth in the
"LAND" line item.
3.5.8.2 RETAINAGE. At Bank's option, Bank may not permit
inclusion of the final ten percent (10%) of the original Maximum Allowed Advance
for an A&D Unimproved Lot Project until Bank has inspected the A&D Project and
deemed the A&D Improvements to be completed (subject to correction of minor
punch list items), and until the Borrower that owns such A&D Project has
delivered or caused to be delivered to Bank the following:
(a) TITLE POLICY ENDORSEMENTS. Such additional endorsements to the
Title Policy or such additional policies of title insurance with
endorsements thereto as Bank may require, with a liability limit not less
than the amount of the Title Policy issued by Title Company and with
coverage and in form satisfactory to Bank in its absolute and sole
discretion, insuring Bank's interest under the Deed of Trust as a valid
first lien on the A&D Project, excepting only such items as Bank approves
in writing and providing affirmative insurance therein against mechanics'
liens, materialmen's liens, and claims or liens in the nature thereof on
account of construction of the A&D Improvements.
(b) NOTICE OF COMPLETION. If requested by Bank in its absolute and
sole discretion, a notice of completion on Bank's approved form executed by
Borrower and duly recorded in the county recorder's office where the A&D
Project is located.
(c) AS BUILT PLANS. If requested by Bank in its absolute and sole
discretion, "AS-BUILT" plans and specifications of the A&D Improvements,
showing the final plans and specifications of all A&D Improvements.
(d) ACCEPTANCE BY GOVERNMENTAL AUTHORITIES. A letter of acceptance
or its equivalent from each applicable Governmental Authority regarding
completion of the A&D Improvements.
(e) AFFIDAVITS AND CONSENTS. If requested by Bank in its absolute
and sole discretion and if applicable, completed and executed copies of AIA
Form G706 (Contractor's Affidavit of Payment of Debts and Claims), AIA Form
G706A (Contractor's
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Affidavit of Release of Liens), and AIA Form G707 (Consent of Surety to
Final Payment).
(f) LIEN WAIVERS. If requested by Bank in its absolute and sole
discretion, unconditional lien waivers on Bank's approved form from each
Person that has recorded a preliminary notice of lien against the A&D
Project and from each other Person that has supplied labor, materials, or
services for the A&D Project.
3.5.8.3 INFORMATION RELATING TO A&D BUDGETS. In connection
with A&D Unimproved Lot Projects, the applicable Borrower will provide to Bank,
upon Bank's request, (i) the actual costs, expenses, and fees incurred by such
Borrower for labor and other work performed on the A&D Improvements and for
materials incorporated in the A&D Improvements or suitably stored on the A&D
Land as indicated by bills, invoices, receipts, statements, vouchers, or other
written evidence satisfactory to Bank showing the costs, expenses, and fees
incurred, (ii) the actual value of such labor, work, and materials, or (iii) the
amounts allocated to such labor, work, and materials in the line items in the
A&D Budget multiplied by the percentage of completion of such labor, work, and
materials. Materials will be "suitably" stored on the A&D Land only if they are
adequately stored and safeguarded to protect against theft and damage and, if
required by Bank, are insured against loss, theft, and damage under insurance
policies naming Bank as loss payee and complying with the requirements of
SECTION 6.7. Bank shall not be required to include in the calculation of A&D
Collateral Value the cost of materials stored away from the A&D Land. However,
Bank, in its absolute and sole discretion, may permit to be included in the A&D
Collateral Value a portion of the costs of such materials if Bank has been
provided with a perfected, first-priority security interest in such materials,
has received evidence satisfactory to Bank that such materials are adequately
stored at a suitable location agreed to by Bank and such Borrower and that all
such materials are inventoried, clearly segregated from materials not to be used
for the Improvements, identified, safeguarded, and, if required by Bank, insured
against loss, damage, and theft (including, without limitation, while in
transit) under insurance policies naming Bank as loss payee and complying with
the requirements in SECTION 6.7.
3.5.8.4 AMOUNT OF ADVANCES FOR SOFT COSTS. The portion of
Maximum Allowed Advances attributable to "SOFT COSTS" line items in the A&D
Budget shall be limited to the lesser of (i) the actual costs, expenses, and
fees incurred by the applicable Borrower as indicated by bills, invoices,
receipts, statements, vouchers, or other written evidence satisfactory to Bank
showing the costs, expenses, and fees incurred, and (ii) the amounts allocated
for such costs, expenses, and fees in the line items in the A&D Budget.
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3.5.9 DEFICIENCIES. If from time to time Bank makes an A&D
Deficiency Determination, Bank's obligation to continue to include the A&D
Project in Eligible Collateral may be suspended by Bank in its absolute and sole
discretion until either (i) the applicable Borrower deposits into the applicable
Cash Collateral Account funds from or for the benefit of the applicable Borrower
in an amount equal to the respective A&D Deficiency Amount and such amount is
disbursed as provided in this SECTION 3.5.9, or (ii) such Borrower delivers to
Bank paid bills, invoices, receipts, statements, vouchers, or other written
evidence satisfactory to Bank showing that such Borrower has paid from its own
funds costs, expenses, and fees included in the A&D Budget in an amount equal to
the A&D Deficiency Amount, or (iii) the A&D Subcommitment Amount and the amount
of Advances available against the applicable A&D Land (as shown on the A&D
Budget) is reduced by such A&D Deficiency Amount. Borrower shall either make
such deposit of an A&D Deficiency Amount with Bank or deliver to Bank such paid
bills, invoices, receipts, statements, vouchers or other written evidence, or
notify Bank to make the reductions in clause (iii), within thirty (30) days
after written notice by Bank to Borrower. All amounts deposited by Borrower
with Bank shall be disbursed subject to the terms and conditions of this
Agreement applicable to the making of Advances. Any such deposit by a Borrower
shall be effective as an amendment of the A&D Budget. This SECTION 3.5.9 shall
not affect or impair the requirements in SECTION 6.12.
3.5.10 GENERAL. Anything in this SECTION 3 or the Loan Documents
to the contrary notwithstanding, each Borrower agrees that no limitation on any
Advances shall limit or otherwise change any Borrower's obligations and
liabilities under this Agreement, that each Borrower shall remain obligated to
pay all costs, expenses, and fees required to be paid by such Borrower pursuant
to this Agreement and the other Loan Documents and the Environmental Agreements,
and that each Borrower shall remain obligated to pay all costs, expenses, and
fees now or hereafter arising in connection with acquisition, development,
maintenance, occupancy, operation, and use of the Eligible Collateral owned by
such Borrower and construction of the A&D Improvements and Units by such
Borrower.
3.5.11 RELEASES OF COLLATERAL.
3.5.11.1 RELEASE OF CERTAIN COLLATERAL AT REQUEST OF BORROWER.
So long as no Event of Default has occurred and is continuing, a Borrower may
request releases of Units, Lots and A&D Lots from the lien and encumbrance of a
Deed of Trust from time to time; PROVIDED, HOWEVER, Bank shall be under no
obligation to release any Unit, Lot or A&D Lot unless each of the following
conditions precedent is satisfied:
(a) in the case of any Unit that is being released for the purpose of
sale, (i) such Borrower shall have paid to
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Bank, from its own funds (including Net Sales Proceeds) and not from
proceeds of Advances, the greater of (A) the applicable Maximum Allowed
Advance or (B) the Net Sales Proceeds (PROVIDED, HOWEVER, that if the Lot
or Unit to be released is not included in Eligible Collateral, such
Borrower shall not be required to pay to Bank any amounts pursuant to this
clause (i)); (ii) such Borrower shall have delivered to Bank a closing
report pursuant to SECTION 6.3.3; and (iii) both before and after giving
effect to such release and any payments to be made pursuant to
CLAUSE (a)(i) of this sentence, the outstanding Advances do not exceed the
Available Commitment or the portion of the Available Commitment
attributable to Eligible Collateral owned by such Borrower, and such
Borrower has made any payments then required pursuant to SECTION 3.7; or
(b) with respect to releases of A&D Lots, such Borrower shall have
paid to Bank, from the its own funds (including sales proceeds), either (i)
if more than one A&D Lot in a single A&D Project is sold to a single
purchaser (other than another Borrower), then the release price shall be
the A&D Collateral Value DIVIDED BY the number of A&D Lots in the A&D
Project then subject to Bank's Deed of Trust (including the A&D Lots to be
released) MULTIPLIED BY the number of A&D Lots to be released MULTIPLIED BY
either (A) 130% (for A&D Projects containing more than 150 A&D Lots) or by
(B) 125% (for A&D Projects containing more than 100 A&D Lots, but not more
than 150 A&D Lots) or by (C) 120% (for A&D Projects containing 100 or fewer
A&D Lots); or (ii) for releases of individual A&D Lots or for releases of
A&D Lots in connection with transfers to another Borrower, the release
price shall be the A&D Collateral Value DIVIDED BY the number of A&D Lots
in the A&D Project then subject to Bank's Deed of Trust (including the A&D
Lot to be released) MULTIPLIED BY the number of A&D Lots to be released;
and
(c) with respect to releases of Lots or Units for purposes other than
sale, both before and after giving effect to such release, the outstanding
Advances do not exceed the Available Commitment and Borrower has made any
payments required pursuant to SECTION 3.7; and
(d) Borrower shall have paid Bank, from its own funds, the Release Fee
identified in SECTION 1.
Any amounts paid to Bank under subparagraphs (a), (b) and (c) including, without
limitation, Net Sales Proceeds, shall be applied to the outstanding principal
balance of all Advances made with respect to Collateral owned by such Borrower,
and if no unpaid Advances are then outstanding, for deposit into the Cash
Collateral Account established with respect to such Borrower. Any amounts paid
to Bank under subparagraphs (c) or (d) shall be applied
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against, and shall reduce, the A&D Subcommitment Amount and the A&D Collateral
Value for such A&D Project.
Notwithstanding the foregoing, if an Event of Default or Unmatured Event of
Default has occurred and is continuing, a Borrower may request releases of Lots
or Units or A&D Lots that are not included in Eligible Collateral from the lien
and encumbrance of a Deed of Trust from time to time; PROVIDED, HOWEVER, Bank
shall be under no obligation to release any Lot or Unit unless each of the
conditions precedent set forth in subparagraphs (a) through (d) have been
satisfied. For purposes of subparagraph (a)(i), such Borrower shall be required
to pay to Bank, from its own funds (including Net Sales Proceeds) and not from
proceeds of Advances, the greater of (I) the appraised value of such Lot or Unit
or A&D Lot, as determined by Bank in its absolute and sole discretion, based on
an appraisal provided by such Borrower to Bank, at such Borrower's expense, or
(II) the Net Sales Proceeds (if the release is requested in connection with a
sale).
3.5.11.2 MANDATORY RELEASES BY BORROWER. During the time
periods set forth below, each Borrower shall satisfy the conditions for release
set forth in SECTION 3.5.11.1 and obtain the release of, or remove from Eligible
Collateral, the specified number of A&D Lots in each A&D Project. If a Borrower
fails to obtain such releases or remove such A&D Lots from Eligible Collateral,
then Bank in its absolute and sole discretion and without notice, may suspend or
terminate the applicable A&D Subcommitment.
Months After A&D Cumulative Lots to be
Approval Date Released
---------------- ----------------------
Last day of 15th
Calendar Month 0
Last day of 18th
Calendar Month 12% of original number of A&D Lots
Last day of 21st
Calendar Month 24% of original number of A&D Lots
Last day of 24th
Calendar Month 36% of original number of A&D Lots
Last day of 27th
Calendar Month 48% of original number of A&D Lots
Last day of 30th
Calendar Month 60% of original number of A&D Lots
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After the last day
of the 30th Calendar
Month 100% of original number of A&D Lots
3.5.11.3 RELEASE OF FINANCING STATEMENTS. In connection with
any release of Collateral by Borrower pursuant to this SECTION 3.5, Bank will
execute and deliver to Borrower partial releases of Bank's financing statements
as Borrower may reasonably request.
3.5.12 EXTRAORDINARY EVENTS AFFECTING COLLATERAL. Upon the
occurrence of any of the following events, Units or A&D Projects, as applicable,
at any time constituting Eligible Collateral may be declared by Bank to no
longer be Eligible Collateral:
3.5.12.1 MATERIAL DAMAGE, DESTRUCTION, OR CONDEMNATION. Any
Unit is materially damaged, destroyed, or becomes subject to any condemnation
proceeding.
3.5.12.2 DEFAULT REGARDING TITLE INSURANCE. Any Title Company
fails to perform its obligations under the Tri-Party Agreement with respect to
any Unit or A&D Project or the requirements of the Loan Documents for title
insurance with respect to any Unit or A&D Project are not satisfied.
3.5.13 ADVANCES DURING CONVERSION PERIOD. Borrowers may continue
to request Advances and Letters of Credit during the Conversion Period. Such
Advances may be made and such Letters of Credit may be issued by Bank pursuant
to the terms and conditions of this Agreement; PROVIDED, HOWEVER,
(a) If the Conversion Date occurs and the Conversion Period is
commenced pursuant to SECTION 3.1.2.1, (i) a Borrower may not request Bank
to approve any new A&D Projects after the first eighteen (18) Calendar
Months of the Conversion Period, (ii) a Borrower may not request Bank to
approve any new Subdivisions after the first twenty-four (24) Calendar
Months of the Conversion Period, and (iii) a Borrower may not add any new
Units to Eligible Collateral after the first twenty-seven (27) Calendar
Months of the Conversion Period;
(b) If the Conversion Date occurs and the Conversion Period is
commenced pursuant to SECTION 3.1.2.2, (i) a Borrower may not request Bank
to approve any new A&D Projects after the first six (6) Calendar Months of
the Conversion Period, (ii) a Borrower may not request Bank to approve any
new Subdivisions after the first eighteen (18) Calendar Months of the
Conversion Period, and (iii) a Borrower may not add any new Units to
Eligible Collateral after the first twenty-seven (27) Calendar Months of
the Conversion Period; and
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(c) If the Conversion Date occurs and the Conversion Period is
commenced pursuant to SECTION 3.1.2.3, (i) a Borrower may not request Bank
to approve any new A&D Projects or any new Subdivisions after the first six
(6) Calendar Months of the Conversion Period, and (ii) a Borrower may not
add any new Units to Eligible Collateral after the first fifteen (15)
Calendar Months of the Conversion Period.
3.6 FEES. As additional consideration for the Commitment, each Borrower
agrees to pay to Bank the following fees, from such Borrower's own funds, which
shall be earned by Bank on the date due under the Loan Documents and shall be
non-refundable to such Borrower:
3.6.1 COMMITMENT FEES.
3.6.1.1 QUARTERLY COMMITMENT FEE. On the date hereof and on
the last day of each three (3) month period thereafter, Borrowers shall pay a
Quarterly Commitment Fee at the rates set forth in SECTION 1 on the applicable
portions of the Commitment Amount in effect in the upcoming three (3) month
period, after giving effect to any reductions thereof pursuant to SECTIONS 3.1.2
and 3.1.3; PROVIDED HOWEVER, that each Borrower shall be responsible to pay a
portion of such fee calculated as follows: the total fee DIVIDED by the number
of Borrowers EQUALS the portion of the fee to be paid by each Borrower. For
purposes of this SECTION 3.6.1.1, any reductions in the Commitment Amount
pursuant to SECTIONS 3.1.2 and 3.1.3 shall be made first to the Upper
$25,000,000.00 of the Commitment Amount. If the date hereof is a date other
than the first day of a calendar quarter (I.E., January 1, April 1, July 1 or
October 1), then on the date hereof Borrowers shall pay a Quarterly Commitment
Fee at the rates set forth in SECTION 1 on the applicable portions of the
Commitment Amount in effect in the upcoming calendar quarter plus the portion of
a calendar quarter (if any) occurring between the date hereof and the first day
of the first calendar quarter occurring after the date hereof.
3.6.1.2 EXTENSION FEE. As a condition precedent to any
extension of the Conversion Date (and without in any way obligating Bank to
extend the Conversion Date, which is intended to be in the absolute and sole
discretion of Bank), Borrowers shall pay to Bank a fee determined by Bank in its
absolute and sole discretion; PROVIDED HOWEVER, that each Borrower shall be
responsible to pay a portion of such fee calculated as follows: the total fee
DIVIDED by the number of Borrowers EQUALS the portion of the fee to be paid by
each Borrower.
3.6.2 UNUSED COMMITMENT FEE. An Unused Commitment Fee computed at
the rate per annum set forth in SECTION 1 on the unused portion of the
Commitment Amount, calculated from the date hereof and payable monthly in
arrears; PROVIDED HOWEVER, that each
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Borrower shall be responsible to pay a portion of such fee calculated as
follows: the total fee DIVIDED by the number of Borrowers EQUALS the portion of
the fee to be paid by each Borrower. For each month (or portion thereof), the
unused commitment fee shall be equal to (A) the Commitment Amount (as in effect
at the beginning of such month) MINUS (B) the "average monthly outstandings" for
the month (or portion thereof) with respect to which the Unused Commitment Fee
is being computed, with the resulting number multiplied by (C) one-twelfth
(1/12th) of the rate per annum set forth in SECTION 1. As used herein, "average
monthly outstandings" means the sum of the outstanding amount of the Advances on
each day during the month (or portion thereof for which the fee is being
computed) with respect to which the Unused Commitment Fee is being computed,
divided by the number of days in that month (or portion thereof). If the Unused
Commitment Fee is being computed for less than a full month, the percentage used
in clause (C) above shall be computed on a daily basis for the number of days
for which the fee is being computed. Such fee shall continue to be payable
monthly during the Conversion Period.
3.6.3 PROCESSING FEE. A processing fee for the Bank's ongoing
processing of Deeds of Trust in the amount specified in SECTION 1, payable
monthly during the term of the Commitment by the fifteenth (15th) day of each
Calendar Month. One-half of the processing fees for Colorado shall be paid by
each Richmond Homes, Inc. I and Richmond Homes, Inc. II.
3.6.4 ATTORNEYS' COSTS, EXPENSES, AND FEES. Attorneys costs,
expenses, and fees for Bank's counsel as provided in the Loan Documents, the
Guaranty and the Environmental Agreements, payable on or before the date hereof
and during the term of the Advances, from time to time upon the presentation by
Bank of statements therefor.
3.6.5 APPRAISAL FEES, TITLE INSURANCE PREMIUM, AND OTHER COSTS,
EXPENSES, AND FEES. Appraisal fees, appraisal review fees, title insurance
premium, and other costs, expenses, and fees that each Borrower is obligated to
pay pursuant to the Loan Documents, including, without limitation, all fees and
costs associated with periodic inspections of the Eligible Collateral owned by
such Borrower, in the amounts specified by Bank, payable on or before the date
hereof, and monthly thereafter during the term of the Commitment by the
fifteenth (15th) day of each Calendar Month.
3.7 MANDATORY PREPAYMENTS. If for any reason at any time the outstanding
principal amount of Advances exceeds the Available Commitment, or if the
outstanding principal amount of Advances exceeds any of the limitations set
forth in SECTIONS 3.5.2.2 OR 3.5.6, Borrowers or the applicable Borrower shall,
within five (5) Business Days after notice from Bank, make a payment to Bank
from the funds of the Borrower or Borrowers owning the affected
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Collateral in an amount equal to such excess principal amount; PROVIDED,
HOWEVER, that if such payment results from Bank's disapproval of Subdivision or
an A&D Project pursuant to SECTION 4.2 OR SECTION 4.5 following preliminary
approval, then the applicable Borrower shall have fifteen (15) calendar days
after notice from Bank to make such payment. If Bank terminates an A&D
Subcommitment pursuant to this Agreement, the applicable Borrower shall, within
five (5) Business Days after notice from Bank, make a payment to Bank from its
own funds all interest and principal, if any, owed to Bank in connection with
such A&D Subcommitment.
4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND TO THE
EFFECTIVENESS OF THE COMMITMENT. This Agreement and the Commitment shall become
effective only upon satisfaction of the following conditions precedent, in each
case as determined by Bank in its absolute and sole discretion:
4.1.1 REPRESENTATIONS AND WARRANTIES ACCURATE. The
representations and warranties by Borrowers and Guarantor in the Loan Documents,
the Environmental Agreements and the Guaranty are correct on and as of the date
of this Agreement as though made on and as of each such date.
4.1.2 DEFAULTS. No Event of Default or Unmatured Event of Default
shall have occurred and be continuing.
4.1.3. DOCUMENTS. Bank shall have received the following
agreements, documents, and instruments and Environmental Agreements, each duly
executed by the parties thereto and in form and substance satisfactory to Bank
in its absolute and sole discretion:
4.1.3.2 LOAN AND OTHER DOCUMENTS. The Loan Documents and
Guaranty and financing statements and Environmental Agreements, which shall
include all agreements, documents, and instruments specified by Bank.
4.1.3.2 CORPORATION, LIMITED LIABILITY COMPANY, OR PARTNERSHIP
DOCUMENTS. If a Borrower and/or Guarantor is a corporation, a limited liability
company, or a partnership, certified copies of (i) resolutions of its board of
directors or, if all members or all general partners do not sign the Loan
Documents, Environmental Agreements and Guaranty, resolutions of the members of
the limited liability company or partners of the partnership, as the case may
be, authorizing such Borrower or Guarantor, as applicable, to execute, deliver,
and perform its obligations under the Loan Documents, Environmental Agreements
and Guaranty, and to grant to Bank the Liens and Encumbrances on the Collateral
in the Loan Documents and certifying the names and signatures of the officer(s),
member(s), manager(s), or partner(s),
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as the case may be, of the Borrower or Guarantor, as applicable, authorized to
execute the Loan Documents, Environmental Agreements and Guaranty and, in the
case of the Borrower, to request Advances on behalf of the Borrower, (ii) the
certificate of incorporation and bylaws, limited liability company operating
agreement, or partnership agreement, as the case may be, of the Borrower or
Guarantor, as applicable, and all amendments thereto, (iii), if a Borrower
and/or Guarantor is a general partnership or joint venture, the filed or
recorded fictitious name certificate for the Borrower and/or Guarantor and all
amendments thereto, (iv), if a Borrower and/or Guarantor is a limited
partnership, the filed or recorded certificate of limited partnership of the
Borrower and/or Guarantor and all amendments thereto, and (v) a certificate of
good standing as a corporation, limited liability company, or limited
partnership, as the case may be, from the jurisdiction of formation or
organization of the Borrower and/or Guarantor, and (A) with respect to each
Borrower, if such jurisdiction is not the State where the Eligible Collateral
owned by such Borrower is located and where Borrower's principal office is
located, or (B) with respect to Guarantor, if such jurisdiction is not the State
where Guarantor's principal office is located, a certificate of qualification
as a foreign corporation, limited liability company, or limited partnership, as
the case may be, authorized to transact business in such foreign state.
4.1.3.3 INSURANCE POLICIES. A certificate of insurance or
other evidence thereof satisfactory to Bank, and at Bank's request, certified
copies of the policies of insurance required under the Loan Documents.
4.1.3.4 OPINION LETTER. A favorable opinion from a law firm
representing Borrowers and Guarantor covering such matters as Bank may require.
4.1.3.5 FINANCIAL STATEMENTS. Audited financial statements
prepared by independent certified public accountants acceptable to Bank,
including, without limitation, a balance sheet, cash flow statement,
reconciliation of net worth, and a profit and loss statement, of Borrowers and
Guarantor, for Borrowers' and Guarantor's three (3) most recent fiscal years.
4.1.3.6 CONTRACTS. If requested by Bank, all executed
contracts relating to design and construction of the Units between a Borrower
and any other Person (including, without limitation, the architect and each
contractor or subcontractor for labor, material, or services).
4.1.4 COMPLETION OF FILINGS AND RECORDINGS. Bank shall have
received evidence of the completion of all recordings and filings to establish
or maintain the perfection and priority of the Liens and Encumbrances on the
Collateral granted in the Loan
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Documents and required by Bank to be in effect prior to the effectiveness of
this Agreement and the Commitment.
4.1.5 PAYMENT OF COSTS, EXPENSES, AND FEES. All costs, expenses,
and fees to be paid by any Borrower under the Loan Documents and the
Environmental Agreements on or before the effectiveness of this Agreement, the
effectiveness of the Commitment, or the making of Advances shall have been paid
in full, including, without limitation, applicable fees set forth in
SECTION 3.3.
4.1.6 OTHER ITEMS OR ACTIONS. Bank shall have received such other
agreements, documents, and instruments, and Borrowers and Guarantor shall have
performed such other actions as Bank may reasonably require.
4.1.7 TRI-PARTY AGREEMENT. If required by Bank, Bank shall have
received a fully executed original of the Tri-Party Agreement.
4.2 CONDITIONS PRECEDENT TO APPROVAL OF SUBDIVISIONS. Each Borrower may,
from time to time, request Bank to approve additional Subdivisions. Approval of
new Subdivisions shall be at Bank's absolute and sole discretion and Bank shall
have no obligation to grant preliminary or final approval of any such
Subdivisions. In any event, Bank will only consider approval of Subdivisions
owned by such Borrower that are located in Arizona, California, Colorado and
Nevada. Subdivisions approved by Bank shall receive either preliminary approval
or final approval; Subdivisions will be deemed to be Eligible Collateral upon
receipt of preliminary approval. In order for a Borrower to obtain preliminary
approval, such Borrower shall have delivered to Bank the completed subdivision
checklist and all other items described in this SECTION 4.2. If a Borrower
receives preliminary approval of a Subdivision, and Bank neither approves nor
disapproves Borrower's request for final approval within ninety (90) days after
Bank grants preliminary approval, then Bank will be deemed to have granted final
approval for the Subdivision. If Bank grants preliminary approval, but does not
grant final approval, then the Subdivision shall be automatically removed from
Eligible Collateral.
When requesting consideration of a new Subdivision, a Borrower shall
deliver to Bank a completed subdivision checklist in form and substance
satisfactory to Bank, supported by such documentation as Bank may require, and
each of the following conditions precedent shall have been satisfied in Bank's
absolute and sole discretion, and each of the following deliveries shall have
been approved by Bank in its absolute and sole discretion:
4.2.1 PLAT AND/OR SURVEY. The Borrower shall have delivered to
Bank one or more recorded plats, covering the Subdivision. Each plat must
contain a legal description of the
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land covered by the plat, must describe and show all boundaries of and lot lines
within such land, all streets and other dedications, and all easements affecting
such land. In addition, if requested by Bank as a condition to final approval,
Borrower shall provide Bank an ALTA survey for such Subdivision, in form and
substance acceptable to Bank.
4.2.2 CC&RS. The Borrower shall have provided Bank all CC&Rs,
easements and other rights that exist or are contemplated with respect to the
Subdivision.
4.2.3 TYPES OF UNITS. The Borrower shall have provided Bank a
description of the types of Units to be constructed within such Subdivision
together with Unit Budgets for each such type of Unit, and a pro forma for the
Subdivision in a form satisfactory to Bank showing such Borrower's expected
profit from the Subdivision.
4.2.4 UNIT BASE APPRAISALS. Bank shall have received and approved
a Unit Base Appraisal with respect to each Custom Unit and each of the Unit
types referred to in SECTION 4.2.3.
4.2.5 LOT INFORMATION. The Borrower shall have provided Bank
documentation relating to such Borrower's acquisition of Lots, including,
without limitation, the identity of the seller of such Lots. The Borrower also
shall have provided to Bank documentation establishing the acquisition price of
such Lots, including, without limitation, a copy of the applicable Option
Agreement or other agreement for purchase of such Lots, and settlement
statements for Lots previously purchased. If any Lots in the Subdivision have
been sold, the Borrower shall have provided to Bank the date of the first sale,
and the number of sales to date.
4.2.6 COMPLETION. Borrower shall have provided to Bank evidence
that all offsite improvements in the Subdivision are complete and ready for use,
that all permits for the use of the Subdivision required from any Governmental
Authorities have been obtained, that all streets and other areas intended for
public use have been appropriately dedicated, and that all homeowners' and
property owners' associations have been established, or are in the process of
being established.
4.2.7 APPROVALS. The Borrower shall have provided to Bank
evidence of appropriate zoning and existence of all approvals of Governmental
Authorities and other third parties necessary to permit the construction and
sale of Units in the Subdivision; including, without limitation, all applicable
public reports, architectural committee approvals and any other approvals
required under the CC&Rs.
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4.2.8 SOILS TESTS. At Bank's request, the Borrower shall have
provided a soils test report prepared by a licensed soils engineer satisfactory
to Bank showing the location of, and containing boring logs from, all borings,
together with recommendations for the design of the foundations, paved areas and
underground utilities for the Subdivision. At Bank's request, the Borrower
shall also provide such soils test reports for individual Lots within each
Subdivision as a condition to final approval.
4.2.9 ENVIRONMENTAL ASSESSMENT. The Borrower shall have delivered
to Bank a report of an environmental assessment (including a fifty (50) year
chain of title review) of each Subdivision (or applicable phase thereof)
addressed to Bank by an environmental engineer acceptable to Bank containing
such information, results, and certifications as Bank may require, in its
absolute and sole discretion, and dated not earlier than six (6) Calendar Months
before the Borrower's request. Depending upon the results of the environmental
assessment, the Borrower shall also provide such follow up testing, reports, and
other actions as may be required by Bank in its absolute and sole discretion.
The contents of the environmental assessment report and any follow up must be
satisfactory to Bank in its absolute and sole discretion. If such reports are
not addressed to Bank, the Borrower shall cause a reliance letter, in form and
substance satisfactory to Bank, to be provided to Bank.
4.2.10 ENVIRONMENTAL INDEMNITY. Borrower shall have delivered to
Bank, Bank's form of environmental questionnaire, fully completed and duly
executed by the Borrower. The answers to the questions in the questionnaire
must be satisfactory to Bank.
4.2.11 UTILITIES. The Borrower shall have provided to Bank
evidence, which may be in the form of letters from local utility companies or
local authorities, that (a) telephone service, electric power, storm sewer,
sanitary sewer and water facilities are available to the Subdivision and to the
boundary of each Lot therein; (b) such utilities are adequate to serve the Lots
in such Subdivision and exist at the boundary of the Subdivision; and (c) no
conditions exist to affect such Borrower's right to connect into and have
adequate use of such utilities except for the payment of a normal connection
charge or tap charges and except for the payment of subsequent charges for such
services to the utility supplier.
4.2.12 PRELIMINARY TITLE REPORT. The Borrower shall have provided
to Bank a preliminary title report for the Subdivision, prepared by the Title
Company, together with a legible copy of each Schedule B item requested by Bank.
4.2.13 DRAINAGE; FLOOD REPORT. The Borrower shall have provided to
Bank a drainage report by an engineer acceptable to Bank containing such
information, results, and certifications as
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Bank may require, in its absolute and sole discretion. The Borrower shall have
provided to Bank evidence satisfactory to Bank, as to whether (a) the
Subdivision is located in an area designated by the Department of Housing and
Urban development as having special flood or mudslide hazards, and (b) the
community in which the Subdivision is located is participating in the National
Flood Insurance Program.
4.2.14 DEED OF TRUST/MODIFICATION TO DEED OF TRUST. The Borrower
shall have executed, delivered, acknowledged, and recorded a Deed of Trust
covering the Subdivision; PROVIDED, HOWEVER, that if such Borrower does not own
all Lots within a Subdivision or will acquire the Lots in the Subdivision under
an Option Agreement, such Deed of Trust will only cover the Lots owned by such
Borrower.
4.2.15 TITLE INSURANCE. The Borrower shall have provided to Bank
an American Land Title Association loan policy or policies of title insurance or
an irrevocable and unconditional commitment to issue such policy or policies, or
an endorsement to an existing title policy or policies in form satisfactory to
Bank, issued by the Title Company and a commitment by the Title Company to issue
disbursement endorsements at Bank's request insuring the Deed of Trust. Such
policy or policies shall have a liability limit in an amount to be determined by
Bank in its absolute and sole discretion shall provide coverage and otherwise be
in form and substance satisfactory to Bank (including, without limitation,
mechanic's lien coverage) insuring Bank's interest under the applicable Deed of
Trust as a valid first lien on the property encumbered by the Deed of Trust.
Such policy shall be accompanied by such reinsurance and co-insurance agreements
and endorsements as Bank may require. Such policy must contain only such
exceptions as are satisfactory to Bank and must have attached such endorsements
as Bank may require.
4.2.16 ASSESSMENTS, CHARGES, AND TAXES. For Impositions that Bank
has approved in writing for payment in installments pursuant to the Deed of
Trust, the Borrower shall have delivered to Bank evidence that such installments
are current. For all other Impositions, the Borrower shall have delivered to
Bank evidence that such Impositions have been paid in full.
4.2.17 ASSIGNMENTS. The Borrower shall have delivered to Bank
copies of the Unit Plans and Specifications and all contracts shall have been
delivered to Bank relating to the construction of Units in the Subdivision.
4.2.18 OTHER. The Borrower shall provide such other documents and
information that Bank may reasonably request.
4.3 ADDITIONAL CONDITIONS PRECEDENT TO THE INCLUSION OF EACH UNIT IN
ELIGIBLE COLLATERAL. In addition to the conditions
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precedent for approval of a Subdivision, a Borrower may include and maintain a
Unit in Eligible Collateral only if the following conditions precedent are
satisfied, in each case as determined by Bank in its absolute and sole
discretion.
4.3.1 REPRESENTATIONS AND WARRANTIES ACCURATE. The
representations and warranties by all Borrowers and Guarantor shall be correct
in all material respects on and as of the date that each Unit becomes Eligible
Collateral, as though made on and as of each such date, other than matters
disclosed by Borrowers or Guarantor to Bank and approved by Bank in its absolute
and sole discretion.
4.3.2 DEFAULTS. No Event of Default shall have occurred and be
continuing.
4.3.3 SATISFACTION OF OTHER CONDITIONS. Borrowers or the
applicable Borrower shall have satisfied the conditions precedent set forth in
SECTIONS 4.1 AND 4.2; PROVIDED, HOWEVER, that with respect to Custom Units, Bank
may in Bank's absolute and sole discretion require the applicable Borrower to
satisfy some or all of the conditions precedent for approval of a Subdivision
with respect to the Subdivision in which the Custom Unit is located.
4.3.4 DOCUMENTS. Bank shall have received the following
agreements, documents, and instruments, each duly executed by the parties
thereto and in form and substance satisfactory to Bank in its absolute and sole
discretion:
4.3.4.1 UNIT BASE APPRAISAL. A Unit Base Appraisal for the
type of Unit in question dated within 364 days of the date of the requested
Advance and, if requested by Bank, an updated Unit Base Appraisal for the
respective type of Unit. The Unit Base Appraised Value for the type of Unit
shall have been approved by Bank in its absolute and sole discretion.
4.3.4.2 UNIT BUDGET. If requested by Bank, a Specific Unit
Budget for the respective Unit.
4.3.4.3 UNIT PLANS AND SPECIFICATIONS. Unit Plans and
Specifications for the respective type of Unit.
4.3.4.4 PURCHASE CONTRACT. If such Unit is a Presold Unit, a
copy of a Purchase Contract for such Unit if requested by Bank.
4.3.4.5 DEED OF TRUST/MODIFICATION TO DEED OF TRUST. If the
Lot on which the Unit is to be constructed has not previously been encumbered by
a Deed of Trust, a Deed of Trust, duly executed, acknowledged, delivered and
recorded. In addition, if the Lot on which the Unit is to be constructed has
not previously been encumbered by a Deed of Trust, the Borrower shall provide a
policy of title insurance, which policy shall have a
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liability limit in an amount to be determined by Bank in its absolute and sole
discretion, and shall provide coverage and otherwise be in form and substance
satisfactory to Bank (including, without limitation, mechanic's lien coverage)
insuring Bank's interest under the applicable Deed of Trust as a valid first
lien on the property encumbered by the Deed of Trust. Such policy shall be
accompanied by such reinsurance and co-insurance agreements and endorsements as
Bank may require. Such policy must contain only such exceptions as are
satisfactory to Bank and must have attached such endorsements as Bank may
require. Bank may accept such Deeds of Trust from time to time; however, Bank
shall be under no obligation to accept and include in Eligible Collateral such
Units or Lots proposed by any Borrower more frequently than twice in each
Calendar Month.
4.3.4.6 ASSESSMENTS, CHARGES, AND TAXES. Evidence that all
real property taxes, assessments, water, sewer, and other charges levied or
assessed prior to delinquency against the respective Lot which are then due and
payable have been paid in the amount required.
4.3.4.7 COMPLETION OF FILINGS AND RECORDINGS. Evidence of the
completion of all recordings and filings to establish or maintain the perfection
and priority of the Liens and Encumbrances on such Lot and Unit granted in the
Loan Documents.
4.3.4.8 CONTRACTS. If requested by Bank, all executed
contracts relating to design and construction of the Unit between the Borrower
and any other Person (including, without limitation, the architect and each
contractor or subcontractor for labor, materials, or services).
4.3.5 LIMITATIONS. After giving effect to the addition of such
Unit to Eligible Collateral, the provisions of SECTIONS 3.5.2.2 AND 3.5.4 shall
not have been violated.
4.3.6 START OF CONSTRUCTION. The Unit shall have commenced
construction and the foundation for the Unit shall have been completed.
4.3.7 DISTRESSED IMPROVEMENT DISTRICTS. Any improvement or
assessment district in which the Unit is located shall not (i) be insolvent
under applicable law or subject to any bankruptcy or similar proceedings; or
(ii) directly or indirectly cause the Subdivision in which the Unit is to be
built to be subject to any suspension, disqualification, or disapproval by FHA,
FNMA, VA, FHLMC, or any similar governmental or quasi-governmental agency that
originates, purchases, insures or guarantees home mortgage loans.
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4.3.8 OTHER ITEMS. The Borrower shall have provided to Bank such
other agreements, documents, and instruments as Bank may reasonably require.
4.3.9 OTHER ACTIONS. Borrowers and Guarantor have performed such
other actions as Bank may reasonably require.
4.4 ADDITIONAL CONDITIONS PRECEDENT TO ALL ADVANCES AGAINST ELIGIBLE
COLLATERAL THAT INCLUDES UNITS. Bank shall be obligated to make Advances
against Eligible Collateral that includes Units only upon satisfaction of the
following additional conditions precedent, as determined by Bank in its absolute
and sole discretion:
4.4.1 REPRESENTATIONS AND WARRANTIES ACCURATE. The
representations and warranties by Borrowers and Guarantor are correct in all
material respects on and as of the date of such Advance, both before and after
giving effect to such Advance, other than matters disclosed by Borrowers or
Guarantor to Bank and approved by Bank in its absolute and sole discretion.
4.4.2 DEFAULTS. No Event of Default or Unmatured Event of Default
shall have occurred and be continuing on the date of such Advance, both before
and after giving effect thereto.
4.4.3 OTHER CONDITIONS PRECEDENT. Borrowers or the Borrower that
owns the Units shall have satisfied all conditions precedent in SECTIONS 4.1,
4.2 AND 4.3.
4.4.4 INSPECTION REPORT. Bank shall not have received written
evidence from Bank's inspector(s) or from Bank's employee(s) performing
inspections for Bank (i) that construction of each Unit constituting Eligible
Collateral does not comply with the respective Unit Plans and Specifications in
all material respects, and (ii) that the applicable Borrower has not completed
each such Unit to the stage reported on the most recent Borrowing Base Report
received by Bank.
4.4.5 LOT LOCATION SURVEY. If requested by Bank in its absolute
and sole discretion, the Borrower shall have obtained and delivered to Bank a
lot location survey for any Unit or Units constituting Eligible Collateral.
4.4.6 APPROVALS AND INSPECTIONS BY GOVERNMENTAL AUTHORITIES. If
requested by Bank, all inspections and approvals by Governmental Authorities
required for the stage of completion of each Unit shall have been obtained and
Bank shall have received evidence thereof satisfactory to Bank, or shall have
obtained such evidence upon inspection of the Subdivision.
4.4.7 TITLE POLICY ENDORSEMENTS. If required by Bank in its
reasonable discretion, Bank has received (i) such continuation endorsements and
date-down endorsements to the Title
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Policy, in form and substance satisfactory to Bank in its absolute and sole
discretion, as Bank determines necessary to insure the priority of the Deed of
Trust as a valid first lien on the Units as of the date of and including the
amount covered by the requested Advance, or (ii) an unconditional, irrevocable
written commitment by the Title Company to issue such endorsements. Borrower
has furnished to the Title Company such surveys and other documents and
information as Bank or the Title Company may require for the Title Company to
issue such endorsements.
4.4.8 PAYMENT OF COSTS, EXPENSES, AND FEES. All costs, expenses,
and fees to be paid by any Borrower on or before the date of the Advance under
the Loan Documents, the Environmental Agreement or the Guaranty have been paid
in full.
4.5 CONDITIONS PRECEDENT TO APPROVAL OF A&D PROJECTS. Each Borrower may,
from time to time, request Bank to approve A&D Projects. Approval of new A&D
Projects shall be at Bank's absolute and sole discretion and Bank shall have no
obligation to grant preliminary or final approval of any A&D Projects. In any
event, Bank will only consider approval of A&D Projects located in Arizona,
California, Colorado and Nevada. A&D Projects approved by Bank shall receive
either preliminary approval or final approval; A&D Projects will be deemed to be
Eligible Collateral upon receipt of preliminary approval, which shall also be
the A&D Eligibility Date. In order for a Borrower to obtain preliminary
approval, such Borrower shall have delivered to Bank the items described in
SECTIONS 4.5.1, 4.5.2(ii), 4.5.4, 4.5.5, 4.5.11 AND 4.5.21. If a Borrower
receives preliminary approval of an A&D Project and thereafter delivers to Bank
all of the items and information described below and Bank neither approves nor
disapproves Borrower's request for final approval of the A&D Project within
ninety (90) days after the A&D Eligibility Date, then Bank will be deemed to
have granted final approval of the A&D Project. If Bank grants preliminary
approval, but does not grant final approval, then the A&D Project shall be
automatically removed from Eligible Collateral.
When requesting consideration of a new A&D Project, the Borrower shall
deliver to Bank a completed A&D Project checklist in form and substance
satisfactory to Bank, supported by such documentation as Bank may require, and
each of the following conditions precedent shall have been satisfied in Bank's
absolute and sole discretion, and each of the following deliveries shall have
been approved by Bank in its absolute and sole discretion:
4.5.1 APPRAISAL. Bank shall have received a current A&D
Appraisal.
4.5.2 PLAT OR SURVEY. The Borrower shall have delivered to Bank
either (i) a recorded plat of the A&D Land containing a legal description of the
A&D Land, describing and
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showing all boundaries of and lot lines within the A&D Land, and describing and
showing all easements affecting the A&D Land, or (ii) a preliminary plat and a
current survey of the A&D Land by a surveyor or civil engineer licensed in the
State in which the A&D Land is located satisfactory to Bank stamped with the
professional seal of the surveyor or civil engineer, satisfying the requirements
for an American Land Title Association survey and such additional requirements
as Bank may prescribe in its absolute and sole discretion.
4.5.3 ENVIRONMENTAL ASSESSMENT. The Borrower shall have delivered
to Bank a report of an environmental assessment (including a fifty (50) year
chain of title review) of the A&D Project addressed to Bank by an environmental
engineer acceptable to Bank containing such information, results, and
certifications as Bank may require, in its absolute and sole discretion, and
dated not earlier than six (6) Calendar Months before the Borrower's request.
Depending upon the results of the environmental assessment, Borrower will also
provide such follow up testing, reports, and other actions as may be required by
Bank in its absolute and sole discretion. The contents of the environmental
assessment report and any follow up must be satisfactory to Bank in its absolute
and sole discretion. If such reports are not addressed to Bank, Borrower shall
cause a reliance letter, in form and substance satisfactory to Bank, to be
provided to Bank.
4.5.4 ENVIRONMENTAL INDEMNITY. Borrower shall have delivered to
Bank, Bank's form of environmental questionnaire, fully completed and duly
executed by Borrower. The answers to the questions in the questionnaire must be
satisfactory to Bank.
4.5.5 DEED OF TRUST/TITLE POLICY. If the A&D Project has not
previously been encumbered by a Deed of Trust, a Deed of Trust, duly executed by
such Borrower, acknowledged, delivered and recorded. In addition, if the A&D
Project has not previously been encumbered by a Deed of Trust, Borrower shall
provide a policy of title insurance, which policy shall have a liability limit
in an amount to be determined by Bank in its absolute and sole discretion, and
shall provide coverage and otherwise be in form and substance satisfactory to
Bank (including, without limitation, mechanic's lien coverage) insuring Bank's
interest under the applicable Deed of Trust as a valid first lien on the
property encumbered by the Deed of Trust. Such policy shall be accompanied by
such reinsurance and co-insurance agreements and endorsements as Bank may
require shall include a commitment by the Title Company to issue disbursement
endorsements at Bank's request insuring the Deed of Trust. Such policy must
contain only such exceptions as are satisfactory to Bank and must have attached
such endorsements as Bank may require. Bank shall accept such Deeds of Trust as
proposed by the Borrowers from time to time; notwithstanding the foregoing, Bank
shall be under no obligation to accept into Eligible Collateral any such A&D
Projects proposed by any
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individual Borrower more frequently than twice in each Calendar Month.
4.5.6 DRAINAGE; FLOOD ZONE. The Borrower shall have provided to
Bank a drainage report by an engineer acceptable to Bank containing such
information, results and certifications as Bank may require, in its absolute and
sole discretion. The Borrower shall have provided to Bank evidence satisfactory
to Bank, as to whether (i) the A&D Land is located in an area designated by the
United States Department of Housing and Urban Development as having special
flood or mudslide hazards, and (ii) the community in which the A&D Land is
located is participating in the National Flood Insurance Program.
4.5.7 SERVICES. Evidence, which may be in the form of letters
from local utility companies or local Governmental Authorities, that (i)
telephone service, electric power, storm sewer, sanitary sewer, and water
facilities are available to the A&D Project, (ii) such utilities are adequate to
serve the A&D Project, (iii) such utilities exist at the boundary of the A&D
Project, and (iv) no conditions exist to affect such Borrower's or any A&D Lot
owner's right to connect to, to obtain, and to have adequate use of such
utilities, except for the payment of a normal connection charge or tap charges
and except for payment of subsequent charges for such services and utilities to
the utility supplier.
4.5.8 ASSESSMENTS, CHARGES, AND TAXES. For Impositions that Bank
has approved in writing for payment in installments pursuant to the Deed of
Trust, evidence that such installments are current. For all other Impositions,
the Borrower shall have delivered to Bank evidence that they have been paid in
full.
4.5.9 SOILS TESTS. At Bank's request, the Borrower shall have
provided a soils test report prepared by a licensed soils engineer satisfactory
to Bank showing the locations of, and containing boring logs for, all borings,
together with recommendations for the design of the paved areas, and underground
utilities for the A&D Improvements.
4.5.10 PLANS AND SPECIFICATIONS. The Borrower shall have provided
the A&D Plans and Specifications.
4.5.11 BUDGET. The Borrower shall have provided the A&D Budget.
4.5.12 CONSTRUCTION CONTRACTS. If requested by Bank, the Borrower
shall have provided an executed contract for construction of the A&D
Improvements between such Borrower and the A&D Contractor (if applicable).
Also, if requested by Bank, the Borrower shall have provided a certified copy of
each construction
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subcontract, purchase agreement, architectural agreement, engineering agreement,
and other agreements, documents, and instruments relating to construction of the
A&D Improvements. The contract price in each such agreement, document, and
instrument must be within the budgeted amount in the A&D Budget.
4.5.13 BORROWER'S EQUITY. The Borrower shall have provided
evidence that such Borrower has paid from its funds costs, expenses, and fees
included in the A&D Budget equal to the total amount in the A&D Budget for the
"BORROWER'S EQUITY." Alternatively, such Borrower has deposited into its Cash
Collateral Account such "BORROWER'S EQUITY" amount from funds of such Borrower,
which amount shall be subject to SECTION 3.5.9 as if such funds were a deposit
with Bank of a Deficiency Amount.
4.5.14 ZONING. The Borrower shall have provided evidence of final,
appropriate zoning approval of the A&D Project and all other approvals of
Governmental Authorities and other third parties necessary to permit the
construction of the A&D Improvements, provided that the Borrower may not have
obtained all of the approvals necessary for construction of the A&D Improvements
to the extent such approvals are not yet necessary.
4.5.15 PRELIMINARY TITLE REPORT. The Borrower shall have provided
a preliminary title report for the A&D Project, prepared by the Title Company,
together with a legible copy of each Schedule B item requested by Bank.
4.5.16 DISTRESSED IMPROVEMENT DISTRICTS. Any improvement or
assessment district in which the A&D Project is located shall not (i) be
insolvent under applicable law or subject to any bankruptcy or similar
proceedings; or (ii) directly or indirectly cause the A&D Project to be subject
to any suspension, disqualification, or disapproval by FHA, FNMA, VA, FHLMC, or
any similar governmental or quasi-governmental agency that originates,
purchases, insures or guarantees home mortgage loans.
4.5.17 PURCHASE DOCUMENTS. The Borrower shall have provided copies
of the purchase agreement, settlement statement and other documentation relating
to such Borrower's purchase of the A&D Project.
4.5.18 CONSTRUCTION SCHEDULE. The Borrower shall have provided the
construction schedule for the completion of the A&D Improvements.
4.5.19 MARKETING INFORMATION. If available, the Borrower shall
have provided marketing information with respect to the Units to be constructed
on the A&D Project, including floor plans, square footage, anticipated
absorption, estimated Unit mix, Unit cost breakdown, subdivision pro formas,
number of Model Units, and plans for Model Units.
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4.5.20 PRO FORMA CASH FLOW. The Borrower shall have provided a pro
forma balance sheet for the A&D Project, showing the projected cash flow from
the A&D Project. Such pro forma will include information relating to the
anticipated construction and sales time for Units to be built on the A&D
Project, the types of Units to be constructed at the A&D Project, and the
estimated cash flow and profit relating to the A&D Project.
4.5.21 TERM SHEET. The Borrower and Bank shall have executed the
A&D Term Sheet for the A&D Project.
4.5.22 OTHER ITEMS. The Borrower shall have provided such other
agreements, documents, and instruments as Bank may reasonably require.
4.5.23 OTHER ACTIONS BY LOAN PARTIES. Borrowers and Guarantor have
performed such other actions as Bank may reasonably require.
4.6 ADDITIONAL CONDITIONS PRECEDENT TO ALL ADVANCES AGAINST ELIGIBLE
COLLATERAL CONTAINING A&D PROJECTS. Bank shall be obligated to make Advances
against Eligible Collateral that includes an A&D Project only upon satisfaction
of the following additional conditions precedent, as determined by Bank in its
absolute and sole discretion:
4.6.1 REPRESENTATIONS AND WARRANTIES ACCURATE. The
representations and warranties by Borrowers and Guarantor are correct in all
material respects on and as of the date of such Advance, both before and after
giving effect to such Advance, other than matters disclosed by a Borrower or
Guarantor to Bank and approved by Bank in its absolute and sole discretion.
4.6.2 DEFAULTS. No Event of Default or Unmatured Event of Default
shall have occurred and be continuing on the date of such Advance, both before
and after giving effect thereto.
4.6.3 OTHER CONDITIONS. Borrowers or the Borrower that owns the
A&D Project shall have satisfied the conditions precedent set forth in SECTIONS
4.1 AND 4.5.
4.6.4 INSPECTION REPORT. Bank shall not have received written
evidence from Bank's inspector(s) or from Bank's employee(s) performing
inspections for Bank (i) that construction of the A&D Improvements does not
comply with the respective A&D Plans and Specifications in all material
respects, and (ii) that the applicable Borrower has not completed the A&D
Improvements to the stage set forth on the most recent Borrowing Base Report.
4.6.5 APPROVALS AND INSPECTIONS BY GOVERNMENTAL AUTHORITIES. If
requested by Bank, all inspections and approvals by Governmental Authorities
required for the stage of completion of
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the A&D Improvements shall have been obtained and Bank shall have received
evidence thereof satisfactory to Bank, or shall have obtained such evidence upon
inspection of the A&D Project.
4.6.6 TITLE POLICY ENDORSEMENTS. If required by Bank in its
absolute and sole discretion, Bank has received (i) such continuation
endorsements and date-down endorsements to the Title Policy, in form and
substance satisfactory to Bank in its absolute and sole discretion (including
with limitation affirmative coverage as to mechanics' and materialmen's liens),
as Bank determines necessary to insure the priority of the Deed of Trust as a
valid first lien on the A&D Project as of the date of and including the amount
covered by the requested Advance, or (ii) an unconditional, irrevocable written
commitment by the Title Company to issue such endorsements. The applicable
Borrower has furnished to the Title Company such surveys and other documents and
information as Bank or the Title Company may require for the Title Company to
issue such endorsements.
4.6.7 PAYMENT OF COSTS, EXPENSES, AND FEES. All costs, expenses,
and fees to be paid by any Borrower on or before the date of the Advance under
the Loan Documents, the Environmental Agreement or the Guaranty have been paid
in full.
4.7 RIGHT TO WAIVE. Each Borrower hereby authorizes Bank, and Bank
reserves the right in its absolute and sole discretion, to verify any documents
and information submitted to Bank in connection with this Agreement. Bank may
elect, in its absolute and sole discretion, to waive any of the foregoing
conditions precedent. Any such waiver shall be limited to the condition(s)
precedent therein and the requirements therein. Delay or failure by Bank to
insist on satisfaction of any condition precedent shall not be a waiver of such
condition precedent or any other condition precedent. The making of an Advance
by Bank shall not be deemed a waiver by Bank of the occurrence of an Event of
Default or an Unmatured Event of Default.
5. BORROWER REPRESENTATIONS AND WARRANTIES.
5.1 CLOSING REPRESENTATIONS AND WARRANTIES. Each Borrower represents and
warrants to Bank as to itself and not as to any other Borrower, as of the date
of this Agreement:
5.1.1 CORPORATE, LIMITED LIABILITY COMPANY, OR PARTNERSHIP
EXISTENCE AND AUTHORIZATION. If such Borrower is a corporation, a limited
liability company, or a partnership, Borrower is validly existing, and in the
case of a corporation or limited liability company is in good standing, under
the laws of the jurisdiction of its formation or organization and has the
requisite power and authority to execute, deliver, and perform the Borrower Loan
Documents and the Environmental Agreements. The execution, delivery, and
performance by such Borrower of the
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Borrower Loan Documents and Environmental Agreements have been duly authorized
by all requisite action by or on behalf of such Borrower and will not conflict
with, or result in a violation of or a default under, the certificate of
incorporation and bylaws, the limited liability company operating agreement, or
the partnership agreement of such Borrower, as the case may be. Such Borrower
is qualified to do business as a foreign corporation, limited liability company,
or partnership, as the case may be, and in the case of a corporation or limited
liability company is in good standing, under the law of the each state where
such Borrower is doing business.
5.1.2 NO APPROVALS, ETC. No approval, authorization, bond,
consent, certificate, franchise, license, permit, registration, qualification,
or other action or grant by or filing with any Person is required in connection
with the execution, delivery, or performance by such Borrower of the Borrower
Loan Documents or Environmental Agreements, which has not already been obtained.
5.1.3 NO CONFLICTS. The execution, delivery, and performance by
such Borrower of the Borrower Loan Documents and the Environmental Agreements
will not conflict with, or result in a violation of or a default under: any
applicable law, ordinance, regulation, or rule (federal, state, or local); any
judgment, order, or decree of any arbitrator, other private adjudicator, or
Governmental Authority to which such Borrower is a party or by which such
Borrower or any of the assets or property of such Borrower is bound; any of the
Approvals and Permits; or any agreement, document, or instrument to which such
Borrower is a party or by which such Borrower or any of the assets or property
of such Borrower is bound.
5.1.4 EXECUTION AND DELIVERY AND BINDING NATURE OF DOCUMENTS. The
Borrower Loan Documents and the Environmental Agreements have been duly executed
and delivered by or on behalf of such Borrower. The Borrower Loan Documents and
the Environmental Agreements are legal, valid, and binding obligations of such
Borrower, enforceable in accordance with their terms against such Borrower,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization, or similar laws and by equitable principles of
general application.
5.1.5 ACCURATE INFORMATION.
5.1.5.1 FINANCIAL STATEMENTS. All information in any loan
application, financial statement, certificate, or other document, and all other
information delivered by or on behalf of such Borrower to Bank in obtaining the
Commitment is correct and complete in all material respects as of the date
thereof, and there are no omissions therefrom that result in any such
information being materially incomplete, incorrect, or misleading as of the
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date thereof. All financial statements heretofore delivered to Bank by Borrower
were prepared in accordance with the requirements in SECTION 1 and accurately
present the financial conditions and results of operations as at the dates
thereof and for the periods covered thereby in all material respects. The
fiscal year of such Borrower is as set forth in SECTION 1.
5.1.5.2 MATERIAL ADVERSE CHANGE. There has been no Material
Adverse Change relative to such Borrower since the date of any information
provided to Bank pursuant to SECTION 5.1.5.1.
5.1.6 PURPOSE OF ADVANCES. The purpose of Advances is a business
purpose and not a personal, family, or household purpose.
5.1.7 LEGAL PROCEEDINGS; HEARINGS, INQUIRIES, AND INVESTIGATIONS.
Except as disclosed to Bank in writing prior to the date of this Agreement, (i)
no legal proceeding is pending or, to best knowledge of Borrower, threatened
before any arbitrator, other private adjudicator, or Governmental Authority to
which such Borrower is a party or by which such Borrower or any assets or
property of such Borrower may be bound or affected that if resolved adversely to
such Borrower could result in a Material Adverse Change and (ii) no hearing,
inquiry, or investigation relating to such Borrower or any assets or property of
such Borrower is pending or, to the best knowledge of such Borrower, threatened
by any Governmental Authority that if resolved adversely to such Borrower could
result in a Material Adverse Change (other than in connection with customary
zoning, platting, and building inspection corrections).
5.1.8 NO EVENT OF DEFAULT OR UNMATURED EVENT OF DEFAULT. No Event
of Default and no Unmatured Event of Default has occurred and is continuing.
5.1.9 APPROVALS AND PERMITS; ASSETS AND PROPERTY. Such Borrower
has obtained and there are in full force and effect all Approvals and Permits
necessary for the conduct of the business of said Borrower, provided that
Borrower may not have obtained all of the Approvals and Permits necessary for
construction of Units or A&D Improvements to the extent such Approvals and
Permits are not yet necessary. Such Borrower owns, leases, or licenses all
assets and property necessary for conduct of the business and operations of
Borrower (including, without limitation, any Option Agreement). The Eligible
Collateral owned by such Borrower not subject to any Liens and Encumbrances,
other than the Permitted Exceptions.
5.1.10 TAXES. Such Borrower has filed or caused to be filed all
tax returns (federal, state, and local) required to be filed by such Borrower
and has paid all taxes and other amounts shown thereon to be due (including,
without limitation, any interest or penalties).
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5.1.11 ERISA. Such Borrower and Guarantor are in compliance with
ERISA. No Reportable Event or Prohibited Transaction (as defined in ERISA) or
termination of any plan has occurred and no notice of termination has been filed
with respect to any plan established or maintained by such Borrower or Guarantor
and subject to ERISA. Neither such Borrower nor Guarantor has incurred any
material funding deficiency within the meaning of ERISA or any material
liability to the Pension Benefit Guarantee Corporation in connection with any
such plan established or maintained by such Borrower or Guarantor. Neither such
Borrower nor Guarantor is a party to any Multiemployer Plan (as defined in
ERISA).
5.1.12 COMPLIANCE WITH LAW. Other than noncompliance with
applicable building and/or land use development codes which is not unusual and
is correctable by such Borrower and without substantial expense, neither such
Borrower nor the Eligible Collateral owned by such Borrower is in violation of
any law, ordinance, regulation, or rule (federal, state, or local).
5.1.13 UNIT BUDGETS AND PLANS AND SPECIFICATIONS. Each Unit Budget
and Specific Unit Budget contains all costs, expenses, and fees anticipated to
be incurred by such Borrower in connection with respective type of Unit. Each
set of Unit Plans and Specifications and related working drawings are an
accurate and complete description of the respective Unit type.
5.1.14 BUDGETS, PLANS AND SPECIFICATIONS, AND CONSTRUCTION
CONTRACT(S). Each A&D Budget contains all costs, expenses, and fees anticipated
to be incurred by such Borrower in connection with acquisition of the A&D Land
and construction of the A&D Improvements. The A&D Plans and Specifications and
related working drawings are an accurate and complete description of the A&D
Improvements. The construction contract(s) relating to the construction of the
A&D Improvements provide for all work and materials anticipated to be necessary
to construct and all payments necessary to pay for the construction of the A&D
Improvements.
5.1.15 ENVIRONMENTAL MATTERS. To the best of such Borrower's
knowledge, neither such Borrower nor any of the Eligible Collateral owned by
such Borrower is in violation of any Environmental Laws or subject to any
existing, pending, or to such Borrower's knowledge any threatened investigation
by any Governmental Agency under any Environmental Laws. Such Borrower hereby
acknowledges that Bank has made a written request of such Borrower for
information concerning the environmental condition of the Eligible Collateral
owned by such Borrower, including, without limitation, (i) the presence, alleged
presence or threatened presence, and (ii) the release, alleged release or
threatened release, of Hazardous Substances on, under, in, from, or about the
Project. Such Borrower hereby represents, warrants and certifies to Bank that
such Borrower has no actual knowledge or notice of the
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presence, alleged presence, threatened presence, release, alleged release, or
threatened release of Hazardous Substances on, under, in, from, or about the
Eligible Collateral owned by such Borrower, except as has been disclosed to Bank
in writing. As used herein, the term "release" has the meaning assigned to such
term in any applicable state or federal law.
5.2 REPRESENTATIONS AND WARRANTIES UPON REQUESTS FOR ADVANCES. Each
request for an Advance shall be a representation and warranty by each Borrower
to Bank that the representations and warranties by such Borrower in this SECTION
5 are correct and complete as of the date the Advance except as otherwise
disclosed and that the conditions precedent in SECTION 4 are satisfied as of the
date of the Advance.
5.3 REPRESENTATIONS AND WARRANTIES UPON DELIVERY OF FINANCIAL STATEMENTS,
DOCUMENTS, AND OTHER INFORMATION. Each delivery by a Borrower to Bank of
financial statements, other documents, or information after the date of this
Agreement (including, without limitation, documents and information delivered in
obtaining an Advance) shall be a representation and warranty by such Borrower
that such financial statements, other documents, or information is correct and
complete in all material respects, that there are no material omissions
therefrom that result in such financial statements, other documents, or
information being materially incomplete, incorrect, or misleading as of the date
thereof, and that such financial statements accurately present the financial
condition and results of operations of such Borrower as at the dates thereof and
for the periods covered thereby.
6. BORROWER AFFIRMATIVE COVENANTS. Until the Commitment terminates in full
and the obligations under the Loan Documents and the Guaranty are paid and
performed in full, each Borrower agrees that, unless Bank otherwise agrees in
writing in Bank's absolute and sole discretion:
6.1 CORPORATE EXISTENCE. Such Borrower shall continue to be validly
existing, and in good standing, under the law of the jurisdiction of its
organization or formation. If such Borrower is not formed or organized under
the laws of each state where such Borrower is doing business, such Borrower
shall continue to be qualified to do business as a foreign corporation, in good
standing, under the law of each such state.
6.2 BOOKS AND RECORDS; ACCESS BY BANK. Such Borrower will maintain a
single, standard, modern system of accounting, in accordance with the
requirements in SECTION 1 (including, without limitation, a single, complete,
and accurate set of books and records of its assets, business, financial
condition, operations, property, prospects, and results of operations) in
accordance with GAAP. During business hours such Borrower will give
representatives of Bank access to all assets, property, books,
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records, and documents of such Borrower and will permit such representatives to
inspect such assets and property and to audit, copy, examine, and make excerpts
from such books, records, and documents. Prior to the occurrence of an Event of
Default, Bank shall provide reasonable prior notice of such inspections and
shall conduct such inspections during normal business hours.
6.3 INFORMATION AND STATEMENTS. Borrowers shall furnish to Bank each of
the following, which shall be segregated for each Borrower and shall be
cumulated for all Borrowers so as to include information for all Borrowers and
all Eligible Collateral, as applicable:
6.3.1 FISCAL PERIOD FINANCIAL STATEMENTS. As soon as available
and in any event within the number of days set forth in SECTION 1 after the end
of each fiscal period of Borrowers and Guarantor set forth in SECTION 1, except
the last period in each fiscal year of Borrowers and Guarantor:
6.3.1.1 STATEMENTS. Copies of the balance sheet of Borrowers
and Guarantor as of the end of such fiscal period and statements of income and
retained earnings and a statement of cash flow of Borrowers and Guarantor for
such fiscal period and for the portion of the fiscal year of Borrowers and
Guarantor ending with such fiscal period, all in reasonable detail, prepared in
accordance with the requirements in SECTION 1, containing the certifications
specified in SECTION 1, and signed on behalf of Borrowers and Guarantor by the
person(s) named in SECTION 1. All such balance sheets shall set forth in
comparative form figures for the preceding year end. All such income statements
and statements of cash flow shall reflect current period and year-to-date
figures.
6.3.1.2 PROJECTION. Within forty-five (45) days after the end
of each calendar quarter, a twelve (12) month projection of cash flow for
Borrowers and Guarantor, in reasonable detail, prepared in accordance with the
requirements in SECTION 1, and signed on behalf of Borrowers and Guarantor by
the person(s) named in SECTION 1.
6.3.2 ANNUAL FINANCIAL STATEMENTS. As soon as available and in
any event within the number of days set forth in SECTION 1 after the end of each
fiscal year of Borrowers and Guarantor, copies of the balance sheet of Borrowers
and Guarantor as of the end of such fiscal year and statements of income and
retained earnings and a statement of cash flow of Borrowers and Guarantor for
such fiscal year, in each case setting forth in comparative form the figures for
the preceding fiscal year of Borrower and Guarantor, all in reasonable detail
and prepared in accordance with the requirements in SECTION 1, containing the
certifications specified in SECTION 1. Borrowers' annual financial statements
shall also be accompanied by Borrowers' consolidated budget and business plan
for each of the upcoming fiscal year, and
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Guarantor's annual financial statements shall also be accompanied by Guarantor's
consolidated budget and business plan for each of the upcoming two (2) fiscal
years, all in reasonable detail and containing such information as Bank may
request. The consolidated budget and business plan shall be signed on behalf of
Borrowers and Guarantor, as applicable, by the person(s) named in SECTION 1.
6.3.3 CLOSING REPORT. On each Business Day, a report of all Unit
sales closed on the previous Business Day, in form and substance satisfactory to
Bank, which report shall be supported by settlement statements given to Bank
within five (5) days thereafter relating to each Unit sale, together with a
reconciliation of the most recently submitted Inventory Report and recalculation
of Eligible Collateral after giving effect to such closings. For purposes of
this SECTION 6.3.3, a sale will be deemed to have closed when the escrow agent
for the sale has received all funds necessary to close the sale and pay to Bank
all sums owed to Bank pursuant to SECTION 3.5.11 and is unconditionally prepared
to record the deed conveying title to such Unit.
6.3.4 COMPLIANCE CERTIFICATES. Monthly commencing on July 15,
1994 and on the fifteenth day of each Calendar Month thereafter, a certificate,
in form and substance satisfactory to Bank, signed on behalf of each Borrower
and Guarantor by the persons named in SECTION 1, stating that each Borrower and
Guarantor is in compliance with all covenants, terms, and conditions applicable
to each of Borrower and Guarantor under or pursuant to the Loan Documents, the
Guaranty and the Environmental Agreements and that, to the best of their
respective knowledge, neither any Borrower nor Guarantor are in default under or
pursuant to any other Debt owing by any Borrower or Guarantor to any Person in a
principal amount of $500,000.00 or more (including without limitation the Senior
Notes), and disclosing any noncompliance therewith and describing the status of
such Borrower's or Guarantor's actions to correct such noncompliance, if
applicable.
6.3.5 SALES AND INVENTORY REPORTS. As soon as the same are
available and in any event within fifteen (15) days after the end of each
Calendar Month, (i) a report showing sales and cancellation of sales of Units
during the preceding Calendar Month, and (ii) a report showing (A) the inventory
of completed Units as of the end of the preceding Calendar Month, and (B) Units
in progress as of the end of the preceding Calendar Month. Such report shall
contain such detailed information as Bank may reasonably require.
6.3.6 GROSS PROFIT ANALYSIS. Within forty-five (45) days after
the end of each calendar quarter, an analysis of gross profit for each
Subdivision, as of the end of such calendar quarter, and cumulatively for the
calendar year.
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6.3.7 BACKLOG REPORT. Within forty-five (45) days after the end
of each calendar quarter, a backlog report, effective as of the end of such
calendar quarter, reflecting the number of Units then under construction
pursuant to contracts for sale, the anticipated delivery date of all such Units,
and the aggregate value of such Units upon completion thereof.
6.3.8 BORROWING BASE REPORT. Within fifteen (15) days after the
end of each Calendar Month, a Borrowing Base Report in form and content
satisfactory to Bank, showing for each Unit in Eligible Collateral, among other
things, the following: (i) the street address of the Lot; (ii) the name of the
Subdivision; (iii) the Lot number as indicated on the recorded plat of the
Subdivision; (iv) the Unit plan type; (v) whether the Unit is a Presold Unit, a
Spec Unit or a Model Unit and whether the Unit is also a Custom Unit; (vi) the
Specific Unit Budget; (vii) percentage of completion; (viii) the Unit Base
Appraised Value; (ix) the selling price of the Unit or the amount of the
Purchase Contract, as applicable; (x) the date of the first Advance against the
Unit in Eligible Collateral; (xi) the actual closing date of the sale of the
Unit, if the Unit is a Presold Unit; (xii) the maximum Advance against the Unit
based upon the stage of completion and the Maximum Allowed Advance for such
Unit. With respect to A&D Projects, the Borrowing Base Report will also show
whether the A&D Project is an Improved Lot Project or an Unimproved Lot Project.
With respect to Unimproved Lot Projects, the Borrowing Base Report shall also
set forth such information concerning construction of the A&D Improvements as
Bank may require, including, without limitation, the status of construction of
the A&D Improvements, a detailed breakdown of the costs of the various phases of
construction of the A&D Improvements showing the amounts expended to date for
such construction, an itemized estimate of the amount necessary to complete
construction of the A&D Improvements in their entirety. Borrowers may submit a
Borrowing Base Report no more than twice in a Calendar Month; each Borrowing
Base Report shall be accompanied by a Collateral Certificate. Units and A&D
Projects may be added as Eligible Collateral only upon receipt of the Borrowing
Base Report and Collateral Certificate which include such Unit or A&D Project.
6.3.9 COLLATERAL CERTIFICATE. Within fifteen (15) days after the
end of each Calendar Month, a Collateral Certificate (which accompanies the
Borrowing Base Report for such month) in form and substance satisfactory to Bank
setting forth the following:
(a) the information required to be shown on the Borrowing Base
Report;
(b) the total number of Letter of Credit Subcommitments, and the
amount of each Letter of Credit Subcommitment;
(c) the total number of Presold Units, Spec Units, Model Units,
Custom Units, A&D Unimproved Lot Projects and A&D Improved Lot Projects
that constitute Eligible Collateral;
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(d) the A&D Collateral Value and the A&D Subcommitment amount for
each A&D Project that constitutes Eligible Collateral;
(e) the total value for all Collateral, including Eligible Collateral
and Collateral that is not Eligible Collateral;
(f) the amount of Loan proceeds that are available for Advances
against Eligible Collateral based on the terms of this Agreement;
(g) a statement that Borrowers are in compliance with the terms and
conditions of the Loan Documents and the Environmental Agreements; and
(h) a statement that Guarantor is in compliance with the Financial
Covenant and the Covenant Relating to Other Debt.
6.3.10 LAND HOLDINGS. Quarterly commencing on July 1, 1994 and
within forty-five (45) days after the end of each quarter thereafter, a detailed
schedule of all land owned by each Borrower and Guarantor, setting forth,
without limitation, the location and book value of all such holdings.
6.3.11 UNIT BUDGETS. On each anniversary of the date of this
Agreement, and at such other time as requested by Bank, updated Unit Budgets.
6.3.12 OTHER CONSTRUCTION INFORMATION. If requested by Bank in
connection with each A&D Unimproved Lot Project:
(i) A list of the names and addresses of all contractors, subcontractors,
material suppliers, other vendors, artisans, and laborers performing work or
providing materials or supplies for the A&D Project.
(ii) Invoices or bills of sale for amounts included in the A&D Collateral
Value for such A&D Project, and unconditional partial releases and waivers of
lien (on forms approved by Bank) for all work performed and materials supplied
payment for which was included in the A&D Collateral Value for such A&D Project.
(iii) Evidence that any required inspection by any Governmental Authority
having or exercising jurisdiction over all or any part of the A&D Project has
been satisfactorily completed.
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(iv) Such other bills, invoices, receipts, statements, and other documents
and information as Bank may require in order to substantiate the amount of the
A&D Collateral Value and the appropriateness of including the A&D Project as
Eligible Collateral under the terms and conditions of this Agreement.
6.3.13 OTHER ITEMS AND INFORMATION. Such other information
(including without limitation supporting schedules for financial statements)
concerning any Borrower and Guarantor, the Project, and the assets, business,
financial condition, operations, property, prospects, and results of operations
of any Borrower and Guarantor as Bank reasonably requests from time to time.
Promptly upon filing thereof, the applicable Borrower shall deliver to Bank
copies of all reports and information filed by Guarantor with the Securities and
Exchange Commission and any other government agency. Additionally, promptly
upon request of Bank, the applicable Borrower shall deliver to Bank counterparts
and/or conditional assignments as security of any and all construction
contracts, receipted invoices, bills of sale, statements, conveyances, and other
agreements, documents, and instruments of any nature relating to the Eligible
Collateral owned by such Borrower or under which such Borrower claims title to
any materials or supplies used or to be used in the Eligible Collateral. Also,
in this regard, promptly upon request of Bank, each Borrower shall deliver to
Bank a complete list of all contractors, subcontractors, material suppliers,
other vendors, artisans, and laborers performing work or services or providing
materials or supplies for the Eligible Collateral owned by such Borrower.
6.4 LAW; JUDGMENTS; MATERIAL AGREEMENTS; APPROVALS AND PERMITS. Except
for normal construction corrections occasioning temporary noncompliance which
are corrected by the Borrower with diligence and without substantial expense,
each Borrower shall comply with all laws, ordinances, regulations, and rules
(federal, state, and local) and all judgments, orders, and decrees of any
arbitrator, other private adjudicator, or Governmental Authority relating to
such Borrower, the Eligible Collateral owned by the Borrower, or the assets,
business, operations, or property of such Borrower; PROVIDED, HOWEVER, that such
Borrower may, in good faith, contest the applicability of such matters to the
extent such matters do not affect title to any Unit, Lot or Subdivision or the
validity or enforceability of any Deed of Trust. Each Borrower shall comply in
all material respects with all material agreements, documents, and instruments
to which such Borrower is a party or by which Borrower, the Eligible Collateral
owned by such Borrower, or any of the other assets or property of such Borrower
is bound or affected. Each Borrower shall comply with all Requirements
(including, without limitation, as applicable, requirements of the Federal
Housing Administration and the Veterans Administration) and all conditions and
requirements of all Approvals and Permits. Each Borrower shall obtain and
maintain in effect from time to time all Approvals and Permits required for the
business activities and
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operations then being conducted by such Borrower in the Subdivisions.
6.5 TAXES AND OTHER INDEBTEDNESS. Except for (i) Involuntary Liens and
Impositions being contested in accordance with the Deed of Trust, (ii) income
taxes or franchise taxes for which no lien has been filed, which are contested
in good faith and for which the applicable Borrower or Guarantor is maintaining
adequate reserves, and (iii) Impositions that Bank has agreed in its absolute
and sole discretion may be paid in installments as provided in the Deed of
Trust, each Borrower shall pay and discharge (A) before delinquency all taxes,
assessments, and governmental charges or levies imposed upon said Borrower, upon
its income or profits, or upon any property belonging to it, (B) when due all
lawful claims (including, without limitation, claims for labor, materials, and
supplies), which, if unpaid, might become a Lien or Encumbrance upon any of the
assets or property of such Borrower, other than such claims which such Borrower
may contest pursuant to the terms and conditions of a Deed of Trust, and (C) all
its other indebtedness.
6.6 ASSETS AND PROPERTY. Each Borrower will maintain, keep, and preserve
all of its assets and property (tangible and intangible) (including, without
limitation, Eligible Collateral) necessary or useful in the proper conduct of
their respective business and operations in good working order and condition,
ordinary wear and tear excepted.
6.7 INSURANCE. The following insurance shall be obtained and maintained
and all related premiums shall be paid as they become due:
6.7.1 PROPERTY. Insurance of the Eligible Collateral against
damage or loss by fire, lightning, and other perils, on an all-risks basis, such
coverage to be in an amount not less than the amount set forth in SECTION 1.
During the period of construction of the Units or A&D Projects, such policy
shall be written on an all-risks basis, with no coinsurance requirement, and
shall contain a provision granting the insured permission to complete and/or
occupy the Units or A&D Projects, as applicable.
6.7.2 LIABILITY. Commercial general liability insurance
protecting Borrowers and Bank against loss or losses from standard liability,
including contractual liability, and arising from bodily injury, death, or
property damage with a limit of liability of not less than the respective
amounts specified in SECTION 1 per occurrence and general aggregate. Also,
"UMBRELLA" excess liability insurance in an amount not less than the amount set
forth in SECTION 1. Such policies must be written on an occurrence basis so as
to provide blanket contractual liability, broad form property damage coverage,
and coverage for products and completed operations. In addition, there shall be
obtained and
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maintained business motor vehicle liability insurance protecting Borrowers and
Bank against loss or losses from liability relating to motor vehicles owned,
non-owned, or hired used by a Borrower with a limit of liability of not less
than the amount set forth in SECTION 1 (combined single limit for personal
injury (including bodily injury and death) and property damage).
6.7.3 FLOOD. A policy or policies of flood insurance in the
maximum amount of flood insurance available with respect to each Lot or Unit
under the Flood Disaster Protection Act of 1973, as amended. This requirement
will be waived with respect to a Unit upon presentation of evidence satisfactory
to the Bank that no portion of the Unit in question is located within an area
identified by the U.S. Department of Housing and Urban Development as having
special flood hazards.
6.7.4 WORKER'S COMPENSATION. Worker's compensation insurance,
disability benefits insurance, and such other forms of insurance as required by
law covering loss resulting from injury, sickness, disability, or death of
employees of each Borrower. Borrowers shall cause each contractor and each
subcontractor having employees located on or assigned to the Project to obtain
and maintain this same coverage for all eligible employees.
6.7.5 ADDITIONAL INSURANCE. Each Borrower shall obtain and
maintain such other policies of insurance as Bank may reasonably request in
writing.
6.7.6 OTHER. All policies for required insurance shall be in form
and substance satisfactory to Bank in its absolute and sole discretion. Such
insurance may be carried under blanket policies, so long as such policy provides
the coverage for each Unit as provided in SECTION 6.7.1 and otherwise complies
with this SECTION 6.7. All required insurance shall be procured and maintained
in financially sound and generally recognized responsible insurance companies
selected by Borrowers and approved by Bank. Such companies must be authorized
to write such insurance in the State where the Collateral is located. Each
company shall be rated "A" or better by A.M. Best Co., in Bests' Key Guide, or
such other rating acceptable to Bank in Bank's absolute and sole discretion.
All property policies evidencing required insurance shall name Bank as first
mortgagee and loss payee. All liability policies evidencing required insurance
shall name Bank as additional insured. The policies shall not be cancelable as
to the interests of the Bank due to the acts of any Borrower or Guarantor. The
policies shall provide for at least thirty (30) days prior written notice of the
cancellation or modification thereof to Bank.
6.7.7 EVIDENCE. A certificate and, if requested by Bank, a
certified copy of each insurance policy or, if acceptable to Bank in its
absolute and sole discretion, certificates of insurance evidencing that such
insurance is in full force and
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effect, shall be delivered to Bank, together with proof of the payment of the
premiums thereof. At least ten (10) days prior to the expiration of each such
policy, Borrowers shall furnish Bank evidence that such policy has been renewed
or replaced in the form of the original or a certified copy of the renewal or
replacement policy or, if acceptable to Bank in its absolute and sole
discretion, a certificate reciting that there is in full force and effect, with
a term covering at least the next succeeding calendar year, insurance of the
types and in the amounts required in this SECTION 6.7.
6.8 ERISA. Each Borrower and Guarantor will fund each Defined Benefit
Plan and Defined Contribution Plan (as such terms are defined in ERISA)
established or maintained by such Borrower and Guarantor, as applicable, so that
there is never an Accumulated Funding Deficiency (as defined in SECTION 412 of
the Internal Revenue Code of 1986, as amended).
6.9 UNIT BASE APPRAISALS. Bank shall have the right to order Unit Base
Appraisals from time to time. Each Unit Base Appraisal is subject to review and
approval by Bank and shall be accompanied by the following documents and
information: (i) one (1) set of Unit Plans and Specifications for the type of
Unit covered by the Unit Base Appraisal; (ii) the proposed sales price for the
type of Unit; (iii) the final Unit Budget (or the estimated Unit Budget, if the
final Unit Budget is not approved) for the type of Unit covered by the Unit Base
Appraisal; (iv) mini floor plans, square footage, anticipated absorption,
estimated unit mix, and number of models (by floor plan), all for the applicable
Subdivision; and (v) a complete legal description of the specific lots in the
Subdivision, together with applicable recording information.
The Borrower that owns the appraised Units agrees, within fifteen (15) days
after demand by Bank, to pay to Bank the cost and expense for such Unit Base
Appraisals and a fee prescribed by Bank for review of each such Unit Base
Appraisal by Bank. All FNMA appraisals or other appraisals of Units accepted by
Bank that do not have a specific expiration date shall be updated at Bank's
request. Based on the updated, respective Unit Base Appraised Value approved or
determined by Bank in its absolute and sole discretion, Bank shall have the
right to revise the Unit Collateral Values and/or Maximum Allowed Advances
applicable to each type of Unit. If the outstanding principal amount of
Advances exceeds the Available Commitment or exceeds the limitations in SECTION
3.5.2.2 or SECTION 3.5.6 as a result of such revision, then Borrower shall be
required to make a mandatory prepayment to Bank pursuant to SECTION 3.7.
6.10 A&D APPRAISALS. Bank shall have the right to order A&D Appraisals of
the A&D Project from time to time, but not more frequently than once during any
twelve (12) Calendar Month period. Each A&D Appraisal is subject to review and
approval by Bank. The
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Borrower that owns the appraised A&D Project agrees, within fifteen (15) days
after demand by Bank, to pay to Bank the cost and expense incurred by Bank for
such A&D Appraisals and a fee prescribed by Bank for review of each A&D
Appraisal by Bank. Based on the updated, respective A&D Appraisal Review Market
Value approved or determined by Bank in its absolute and sole discretion, Bank
shall have the right to revise the A&D Collateral Values and/or A&D
Subcommitment Amount applicable to such A&D Project. If the outstanding
principal amount of Advances exceeds the Available Commitment or exceeds the
limitations in SECTION 3.5.2.2 or SECTION 3.5.6 as a result of such revision,
then Borrower shall be required to make a mandatory prepayment to Bank pursuant
to SECTION 3.7.
6.11 COMMENCEMENT AND COMPLETION OF A&D IMPROVEMENTS. The applicable
Borrower shall cause construction of the A&D Improvements to be prosecuted and
completed in good faith, with due diligence, and without delay subject to acts
of God, labor strikes and other force majeure events beyond the reasonable
control of such Borrower. The construction of the A&D Improvements shall be
commenced no later than the Commencement Date set forth in the A&D Term Sheet
and shall be fully completed on or before the Completion Date set forth in the
A&D Term Sheet, except for correction of minor punch list items. Such Borrower
shall obtain the issuance of a letter of acceptance or other equivalent from
each applicable Governmental Authority regarding completion of the A&D
Improvements and deliver a copy thereof to Bank within a reasonable time after
the A&D Completion Date. Such Borrower shall cause the A&D Improvements to be
constructed (i) in a good and workmanlike manner, (ii) in compliance with all
applicable Requirements, and (iii), unless otherwise consented to by Bank in
advance in writing in the absolute and sole discretion of Bank, in accordance
with the A&D Plans and Specifications without material deviation and within the
limitations of the A&D Budget. Upon demand by Bank, such Borrower shall correct
any defect in the A&D Improvements or any material departure from any applicable
Requirements or, to the extent not theretofore approved in writing by Bank, the
A&D Plans and Specifications. Each Borrower understands and agrees that the
inspection of the A&D Improvements by or on behalf of Bank, the review by Bank
of A&D Draw Requests and related documents and information, the making of
Advances by Bank, any actions by Bank under SECTION 6.15, and any other actions
by Bank shall not be a waiver of Bank's right to require compliance with this
SECTION 6.11.
6.12 CHANGE ORDERS. Without Bank's prior written consent in its absolute
and sole discretion, a Borrower shall not (i) amend or modify the A&D Budget, or
(ii) make or permit any material amendments or modifications of the construction
contract(s) for construction of the A&D Project, the A&D Plans and
Specifications, or any other agreements, documents, or instruments relating to
construction of the A&D Project. Notwithstanding the provisions of this SECTION
6.12, a Borrower shall not be required to obtain
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Bank's consent to any individual amendment or modification of such construction
contract(s), the A&D Plans and Specifications, or any other agreements,
documents, or instruments relating to construction of the A&D Project if the
result is an increase of the A&D Budget equal to or less $50,000.00. Regardless
of whether Bank's consent to any such amendments or modifications is required
under this Agreement, if any such modification or amendment creates an A&D
Deficiency Amount, Borrower shall pay or deposit such Deficiency Amount or take
such other action as provided in SECTION 3.5.9 and if any such funds are so
deposited, then such funds will be disbursed by Bank as provided in SECTION
3.5.9.
6.13 COMMENCEMENT AND COMPLETION OF UNITS. Each Borrower shall cause
construction of its respective Units to be prosecuted and completed in good
faith, with due diligence, and without delay subject to acts of God, labor
strikes and other force majeure events beyond the reasonable control of such
Borrower. A Borrower may commence construction of Units at any time. On or
before the Unit Completion Date, (i) each Model Unit shall be completed, and
(ii) all other Unit types shall be completed through Stage 4 (as set forth in
the definition of "Unit Collateral Value"). Each Borrower shall cause its
respective Units to be constructed (i) in a good and workmanlike manner, (ii) in
compliance with all applicable Requirements, and (iii), unless otherwise
consented to by Bank in advance in writing in the absolute and sole discretion
of Bank, in substantial accordance with the respective Unit Plans and
Specifications. Upon demand by Bank, each Borrower shall correct any defect in
its respective Units or any material departure from any applicable Requirements
or, to the extent not theretofore approved in writing by Bank, the respective
Unit Plans and Specifications. Each Borrower understands and agrees that
inspection of the Units by or on behalf of Bank, the review by Bank of Draw
Requests and related documents and information, the making of Advances by Bank,
any actions by Bank under SECTION 6.15, and any other actions by Bank shall not
be a waiver of Bank's right to require compliance with this SECTION 6.13. If
Bank shall ever be required to complete the construction of any Units, whether
occasioned by the occurrence of an Event of Default or for any other reason, any
sums expended by Bank in constructing such Units shall be treated as Advances to
the applicable Borrower hereunder and shall be deemed the legal, valid and
binding obligations of such Borrower to Bank.
6.14 TRI-PARTY AGREEMENT AND TITLE INSURANCE.
6.14.1 TRI-PARTY AGREEMENT. Richmond Homes, Inc. I and Richmond
Homes, Inc. II at all times shall cause the Title Company to comply with the
Tri-Party Agreement. From and after termination of the Tri-Party Agreement,
Richmond Homes, Inc. I and Richmond Homes, Inc. II shall at all times cause to
be obtained Title Insurance in conformity with this Agreement and any agreements
replacing the Tri-Party Agreement. Prior to the
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termination of the Tri-Party Agreement and so long as Title Company is not in
violation thereof, Title Policies and endorsements issued pursuant to the Tri-
Party Agreement shall satisfy SECTIONS 4.2.15 AND 4.3.4.5.
6.14.2 TITLE INSURANCE CLAIMS. If Title Company pays any claims
under any Title Policies, the applicable Borrower will take any and all action
necessary to cause the total liability under the Title Policies to remain at or
to be increased to the original liability notwithstanding the payment of such
claim or claims, including without limitation, providing any supplemental Title
Policies or endorsements or reinsurance agreements if requested by Bank, the
cost of which shall be paid by such Borrower. Upon payment of any such claims,
such Borrower will obtain and provide to Bank any and all documentation
reasonably requested by Bank to ensure that the maximum coverage provided for
hereunder shall not have been diminished as a result of the payment of such
claims.
6.15 RIGHTS OF INSPECTION; CORRECTION OF DEFECTS; AGENCY. Bank and its
agents, employees, and representatives shall have the right at any time and from
time to time to enter upon the Project in order to inspect the Project;
PROVIDED, HOWEVER, any Person entering upon the Project shall observe and comply
with the applicable Borrower's safety requirements. So long as no Event of
Default has occurred and is continuing, Bank shall inspect each Unit and each
A&D Project no less frequently than once in any calendar quarter; PROVIDED,
HOWEVER, that if the results of any such inspection disclose (i) with respect to
Units, errors in the information provided by the applicable Borrower with
respect to Units that constitute, in the aggregate, three percent (3%) or more
of the total Units owned by such Borrower that constitute Eligible Collateral,
or (ii) with respect to A&D Projects, errors in the A&D Collateral Value
provided by the applicable Borrower that exceed, in the aggregate, an amount
equal to three percent (3%) of the total A&D Collateral Value for all A&D
Projects owned by such Borrower that constitute Eligible Collateral, then Bank
may, in is sole and absolute discretion, (A) increase the frequency of all
inspections conducted with respect to all Units or A&D Projects, as applicable,
that are Eligible Collateral, and/or (B) increase the frequency of all
inspections conducted with respect to all Units and A&D Projects owned by the
such Borrower.
If Bank, in its judgment, determines that any materials or work do not
conform with the respective Unit Plans and Specifications or the A&D Plans and
Specifications, as applicable, in all material respects or with any applicable
Requirements or are otherwise not in conformity with sound building practice,
Bank shall have the right to stop the work (unless, with respect to any Unit,
such Unit is removed from Eligible Collateral) and to order replacement or
correction of any such materials or work regardless of whether or not such
materials or work have theretofore been
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incorporated in the Units, regardless of whether Bank's representatives have
previously inspected such work or materials, and regardless of whether Bank has
previously made Advances to pay for such work or materials. The Borrower that
owns the Unit or A&D Project shall promptly make such replacement or correction.
Inspection by Bank or by Bank's inspectors of the A&D Project or the Units is
for the sole purpose of protecting the security of Bank and is not to be
construed as a representation by Bank that there has been compliance with the
Unit Plans and Specifications or the A&D Plans and Specifications, the
applicable Requirements or that the Units or A&D Projects are free of defects in
materials or workmanship. Borrowers may make or cause to be made such other
independent inspections as Borrowers may desire for their own protection.
6.16 MISCELLANEOUS. Any inspections or determinations made by Bank or lien
waivers, receipts, or other agreements, documents, and instruments obtained by
Bank are made or obtained solely for Bank's own benefit and not in any way for
the benefit or protection of any Borrower. Bank may accept and rely on any
information from an architect, any other Person providing labor, materials, or
services for Units or A&D Projects, Borrower, or any other Person as to labor or
materials furnished or incorporated in the Units or the A&D Projects and the
cost and payment therefor and as to all other matters relating to construction
of the Units and the A&D Improvements without the necessity of verifying such
information. Bank has no obligation to any Borrower or Guarantor to ensure
compliance by contractor, engineer, or any other Person in carrying out
construction of the Units or A&D Improvements.
6.17 VERIFICATION OF COSTS. Bank shall have the right at any time and
from time to time to review and verify all costs, expenses, and fees in each
Unit Budget and each A&D Budget. Based on its review and verification of costs,
expenses, and fees in each Unit Budget, Bank shall have the right to adjust any
and all such budgeted amounts. Based on its review and verification of costs,
expenses, and fees in the A&D Budget, Bank shall have the right to (i) reduce or
increase the total amount of the A&D Collateral Value, or (ii) suspend or
terminate Bank's approval of the A&D Budget, which action under (II) shall have
the effect of the condition precedent for Advances in SECTION 4.5.11 not being
satisfied. If any such action by Bank creates an A&D Deficiency Amount,
Borrower shall pay or deposit such A&D Deficiency Amount or take such other
action as provided in SECTION 3.5.9 and if any funds are so deposited, such
funds will be disbursed by Bank as provided in SECTION 3.5.9.
6.18 USE OF PROCEEDS OF ADVANCES. Each Borrower shall use proceeds of
Advances only for the purposes described in SECTIONS 3.5.1 and 5.1.6.
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6.19 CROSS-COLLATERALIZATION. At Bank's request at any time and from time
to time, each Borrower agrees to execute or obtain the execution of and deliver
such additional agreements, documents, and instruments as Bank determines to be
necessary or appropriate so that all Collateral provided by such Borrower shall
also secure any or all (as determined by Bank) other obligations of such
Borrower to Bank (so long as Bank One, Arizona, NA and its corporate successors
are "Bank" under this Agreement) and/or so that any or all property, interests
in property, and rights to property selected by Bank securing other obligations
of such Borrower to Bank also secure the Obligations. Borrower agrees to pay
all costs, expenses, and fees incurred by Bank in connection with any and all
such cross-collateralization requests by Bank (including, without limitation,
costs, expenses, and fees of Bank's attorneys).
6.20 BANK'S INSPECTOR(S). Each Borrower agrees that during construction of
Units and the A&D Improvements, Bank shall have the right to employ an outside
inspector or inspectors who shall review as agent for Bank all construction
activities undertaken in regard to Units and A&D Improvements and who shall
prepare reports of such reviews. Alternatively, Bank may elect to have
employees of Bank perform such reviews and prepare such reports. In addition,
the employees of Bank will review the inspection reports of any outside
inspector(s), will review Draw Requests, will perform other activities related
to Draw Requests, and will perform other activities in administering and
monitoring the Advances.
6.21 PLAT MAP. In the event that a plat map of the A&D Land approved by
Bank in its absolute and sole discretion is not recorded on or prior to the A&D
Eligibility Date relating thereto, the Borrower that owns such A&D Land shall
prepare and record a plat map of the A&D Land within ninety (90) calendar days
after the A&D Eligibility Date, or such other day as Bank may approve in its
absolute and sole discretion. Such plat map must comply with all Requirements
and must be satisfactory in form and substance to Bank in its absolute and sole
discretion. Such plat map must be approved by Bank prior to its being recorded.
Prior to evaluation by Bank of the plat map for approval, such Borrower shall
deliver to Bank such certifications, maps, surveys, and other documents and
information as Bank requires. Also prior to approval of the plat map by Bank,
such Borrower will deliver to Bank such title endorsements insuring the
continued priority of the Deed of Trust after recording of the plat map as Bank
may require. Within five (5) days after recording of the approved plat map,
such Borrower shall notify Bank of the recording and shall deliver to Bank a
copy of the recorded plat map. Such Borrower agrees to take such steps as Bank
may require in (i) either re-recording the Deed of Trust or amending the Deed of
Trust to reflect the new plat legal description, and (ii) obtaining an
endorsement to the Title Policy to amend the legal description therein.
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6.22 FURTHER ASSURANCES. Each Borrower shall promptly execute,
acknowledge, and deliver such additional agreements, documents, and instruments
and do or cause to be done such other acts as Bank may reasonably request from
time to time to better assure, preserve, protect, and perfect the interest of
Bank in the Collateral of such Borrower and the rights and remedies of Bank
under the Loan Documents and the Environmental Agreements.
6.23 COSTS AND EXPENSES OF BORROWER'S PERFORMANCE OF COVENANTS AND
SATISFACTION OF CONDITIONS. Each Borrower will perform all of its obligations
and satisfy all conditions under the Loan Documents and the Environmental
Agreements at its sole cost and expense.
6.24 PAYMENT OF NET SALES PROCEEDS. Each Borrower shall, upon the closing
of a sale of any Unit, pay to Bank from its own funds for application to the
outstanding unpaid aggregate amount of Advances against Eligible Collateral
owned by such Borrower, an amount equal to the Net Sales Proceeds from such Unit
sale, and, if applicable, any Shortage. To the extent that such Net Sales
Proceeds are held by Title Company or any other Person, such Borrower shall take
all action requested by Bank to cause such Net Sales Proceeds to be paid
directly to Bank. If a Borrower collects or receives any such Net Sales
Proceeds, such Borrower will forthwith, upon receipt, transmit and deliver to
Bank, in the form received, all cash, checks, drafts, chattel paper, and other
instruments or writings for the payment of money (endorsed without recourse,
where required, so that such items may be collected by Bank).
6.25 CONSTRUCTION AND SALES RECORDS. Each Borrower shall, at all times,
maintain complete and accurate records of its construction and sales activities
and shall, upon prior notice thereof by Bank, permit Bank to review such records
upon request by Bank at any time and from time to time during regular business
hours. Such records shall include, without limitation, (i) any and all
documents, instruments, contracts and agreements relating to the construction or
sale of Units entered into by such Borrower with or for the benefit of
purchasers, contractors, subcontractors, or other Persons, as applicable,
(ii) lien waivers and releases with respect to all construction in place,
(iii) requests for disbursement and vouchers submitted by contractors,
subcontractors, or other Persons, and (iv) all permits, licenses and approvals
necessary for the continuation and completion of construction.
7. BORROWER NEGATIVE COVENANTS. Until the Commitment terminates in full and
the Obligations are paid and performed in full and such Borrower's obligations
under the Environmental Agreements are paid and performed in full, each Borrower
agrees that, unless Bank otherwise agrees in writing in Bank's absolute and sole
discretion:
7.1 CORPORATE RESTRICTIONS. Such Borrower shall not issue any capital
stock or other securities in such Borrower or grant any
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option, right-of-first-refusal, warrant, or other right to purchase any capital
stock or other securities in such Borrower (except to Guarantor or any
Subsidiary of Guarantor). Such Borrower shall not be dissolved or liquidated.
Such Borrower shall not amend, modify, restate, supplement, or terminate its
certificate of incorporation or bylaws in any manner that would materially
affect the validity or enforceability of the Obligations or such Borrower's
obligations under the Environmental Agreements or such Borrower's ability to
borrow hereunder, or that would materially impair any security for the
Obligations. Such Borrower shall not reorganize itself or consolidate with or
merge into any other corporation or permit any other corporation to be merged
into such Borrower (except for (i) mergers of any Subsidiary of such Borrower
into such Borrower pursuant to which such Borrower is the surviving entity, (ii)
mergers of such Borrower into another Borrower, or (iii) mergers of such
Borrower into Guarantor, and which do not in any event otherwise constitute an
Event of Default).
7.2 CHANGE IN OR REACQUISITION OF OWNERSHIP INTERESTS. In addition to any
requirement in any other Loan Document, a Borrower will not repurchase any
capital stock of such Borrower or any option, right-of-first refusal, warrant or
other right to purchase any capital stock or other securities of such Borrower.
In addition, a Borrower will not suffer to occur or exist, whether occurring
voluntarily or involuntarily, after the date of this Agreement (i) any change in
the legal or beneficial ownership of any capital stock of Borrower (except for
changes which result in Guarantor having legal or beneficial ownership of such
stock), (ii) any pledge, hypothecation, or transfer to any trust (including,
without limitation, voting trusts) of any such stock, except as security for the
Senior Notes, or (iii) any grant of a proxy with respect to such stock to any
other Person, except in connection with the Senior Notes, without the prior
written consent of Bank in its absolute and sole discretion.
7.3 LIMITATION ON UPSTREAMING. Each Borrower will not, directly or
indirectly, make any payment or transfer of funds or other consideration
(including without limitation, any Dividend [as defined in the Guaranty],
advances, or repayments of Debt) to Guarantor after an Event of Default shall
have occurred and be continuing.
8. ADDITIONAL RIGHTS OF BANK. Bank shall have the following rights in
addition to its other rights set forth in the Deed of Trust and in the other
Loan Documents and the Environmental Agreements and the Guaranty, and Bank may,
without notice to or demand upon any Borrower, without releasing any Borrower
from any obligation under any of the Loan Documents and the Environmental
Agreements and the Guaranty and in addition to and without waiving its other
rights under the Deed of Trust and the other Loan Documents and the
Environmental Agreements and the Guaranty:
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(a) WAIVER OF SECURITY. In accordance with California Code of Civil
Procedure Section 726.5, as such Section may be amended from time to time, Bank
may waive the security of the Deed of Trust and the other Loan Documents as to
any parcel of the Project which is real property that is "environmentally
impaired" or is an "affected parcel" (as such terms are defined in such
Section), and as to any property which is personal property attached to such
parcel, and thereafter exercise against the applicable Borrower, to the extent
permitted by such Section 726.5, the rights and remedies of an unsecured
creditor, including reduction of Bank's claim against any Borrower to judgment,
and any other provisions of California Code of Civil Procedure Section 726.5(c),
as such Section may be amended from time to time. Each Borrower hereby waives
the provisions of California Code of Civil Procedure Section 726.5(c), as such
Section may be amended from time to time, and acknowledges and agrees that this
waiver was signed by such Borrower for good and valuable consideration, as such
Borrower's informed and voluntary act. Each Borrower shall pay all expenses,
costs and other amounts incurred by Bank in connection with any proceeding under
California Code of Civil Procedure Section 726.5.
(1) Each Borrower and Bank acknowledge that pursuant to
California Code of Civil Procedure Section 726.5, Bank's rights under such
Section are limited to instances in which such Borrower or any affiliate, agent,
cotenant, partner or joint venturer of such Borrower either (i) caused,
contributed to, permitted or acquiesced in the release (as defined in such
Section 726.5) or threatened release of toxic or hazardous waste or waste
products, or (ii) had actual knowledge or notice of such release or threatened
release prior to the execution and delivery of this Agreement and failed to
disclose such release or threatened release to Bank in writing after Bank's
written request for information concerning the environmental condition of the
Project, unless Bank otherwise obtained actual knowledge of such release or
threatened release prior to the execution and delivery of this Agreement.
(b) ENVIRONMENTAL CLAIMS. In accordance with California Code of
Civil Procedure Section 736, as such Section may be amended from time to time,
Bank may bring an action for breach of contract against the applicable Borrower
for breach of any "environmental provision" (as such term is defined in such
Section) made by each Borrower herein, in any other Loan Document, or in any
Environmental Agreement for the recovery of damages (including attorneys' fees
and costs) and/or for the enforcement of the environmental provision (including
without limitation to recover all costs and expenses incurred by Bank in
connection with any Remedial Work (as such term is defined in the Environmental
Agreement and in the Deed of Trust)) without foreclosing the Deed of Trust
judicially or nonjudicially or accepting a deed or assignment in lieu of
foreclosure. Each Borrower agrees to pay to Bank, upon Bank's demand, all
expenses, costs and other amounts
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incurred by Bank in connection with any such action under California Code of
Civil Procedure Section 736.
(c) ENVIRONMENTAL INSPECTIONS. Bank shall have all rights of a Bank
under California Code of Civil Procedure Section 2929.5, as such Section may be
amended from time to time. Each Borrower agrees to pay to Bank, upon Bank's
demand, all expenses, costs and other amounts incurred by Bank in performing any
inspection and/or testing for the purposes set forth in such Section 2929.5.
(d) RIGHT TO APPOINTMENT OF A RECEIVER. Bank shall have all rights
of a Bank under California Code of Civil Procedure Section 564, as such Section
may be amended from time to time. The applicable Borrower agrees to pay to
Bank, upon Bank's demand, all expenses, costs and other amounts incurred by Bank
in connection with any appointment of a receiver under California Code of Civil
Procedure Section 564.
9. BANK'S OBLIGATIONS TO BORROWER ONLY AND DISCLAIMER BY BANK. No Person,
other than Borrowers and Bank, shall have any rights hereunder or be a third-
party beneficiary hereof. Bank is not a joint venturer or a partner with any
Borrower. Prior to an Event of Default and thereafter until Bank elects in
writing to assume specific obligations of the applicable Borrower, Bank shall
not be obligated to any Person providing labor, materials, or other services for
the Project and payment of funds from Advances directly to any such Persons
shall not give or be a recognition of any third-party beneficiary status.
10. PUBLICITY. Bank shall have the right, in accordance with applicable laws,
to place one or more signs on the Lots and the A&D Projects at location(s)
visible from public street(s) indicating that Bank has provided financing for
the Project.
11. NO BROKERS. Except as disclosed by Borrower to Bank in writing prior to
the date of this Agreement, each of Borrower and Bank represent and warrant to
the other that it knows of no broker's or finder's fee due in respect of the
transaction described in this Agreement and that it has not used the services of
a broker or a finder in connection with this transaction.
12. PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT. This Agreement is subject to
certain terms and provisions in the Note, to which reference is made for a
statement of such terms and provisions.
13. CHOICE OF LAW. Except as otherwise expressly provided in this Agreement,
the parties agree and intend that this Agreement, and the respective rights and
obligations of the parties hereto, shall be governed by and construed according
to the internal laws of the State of Arizona (without regard to its conflict of
laws principles). The parties agree and stipulate that this Agreement
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was negotiated primarily in Arizona, that this Agreement was executed, delivered
and accepted by Bank in Arizona, all payments shall be made to Bank in Arizona,
and that Arizona has a substantial relationship to the parties and to the
underlying transaction contemplated by this Agreement. Notwithstanding the
foregoing, the parties agree that:
(i) With respect to any collateral given by any Borrower to Bank, the
perfection and priority of Bank's security interests in personal property
collateral or liens on real property collateral shall be governed by the law of
the respective states where the respective collateral is located.
(ii) The procedures governing the enforcement by Bank of provisional
remedies against any Borrower or Guarantor, including by way of illustration,
but not limited to, actions for claim and delivery of property, for injunctive
relief or for the appointment of a receiver, shall be governed by the law of the
state in which such provisional remedies or relief are sought.
(iii) With respect to any collateral given by any Borrower to Bank,
the procedures for foreclosing on the security interests or liens of Bank shall
be governed by the laws of the state in which the collateral is located and in
which the foreclosure is carried out; provided, however, that this subparagraph
shall in no event be construed to provide that the substantive law of such state
shall apply to this Agreement, the parties intending that the substantive law of
the State of Arizona shall govern this Agreement and all nonprocedural incidents
of foreclosure, including but not limited to the right of Bank to obtain a
judgment for any deficiency following foreclosure.
Notwithstanding that various provisions of this Agreement, the Note, the
other Loan Documents, the Guaranty, and the Environmental Agreements have been
drafted to address or waive the laws of other states, in the event of any
foreclosure by Bank on any collateral, regardless of where the collateral is
located, the parties agree and intend that the laws of the State of Arizona
shall govern the right of Bank to collect and obtain a judgment for any
deficiency following foreclosure, and the parties specifically intend that the
laws of other states, including but not limited to Sections 580a, 580b, 580c,
580d and 726 of the California Code of Civil Procedure, and Nevada Revised
Statutes Section 40.430, shall not be applicable. In such connection, the
parties further agree that:
(a) Bank may enforce its rights under the Loan Documents, the
Guaranty, and the Environmental Agreements, to collect any outstanding
indebtedness, or to obtain a judgment against any Borrower or Guarantor in
California, Nevada, Arizona or other states (including without limitation a
judgment for any deficiency following foreclosure), in accordance with
Arizona law, and if Bank obtains a judgment
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(including without limitation a deficiency judgment) in a state other than
in California or Nevada, then Bank shall have the right to enforce such
judgment in California and Nevada, as well as in other states;
(b) California's and Nevada's antideficiency, one-action, and
security-first rules (including, without limitation, California Code of
Civil Procedure Sections 580a, 580c, and 580d and Nevada Revised Statutes
Section 40.430) are inapplicable to the obligations and indebtedness
secured by the Deeds of Trust and other Loan Documents and to the
enforcement or realization by Bank of its rights and remedies relating
thereto; and
(c) Section 726 of the California Code of Civil Procedure shall not
apply (i) to prevent or limit exercise or enforcement of any other rights
or remedies of Bank (including, but not limited to, Bank's right to obtain
a deficiency judgment) either prior to or following foreclosure, or (ii) to
prevent or limit Bank's right to foreclosure judicially or nonjudicially
following any exercise or enforcement of any other rights or remedies of
Bank.
14. COUNTERPART EXECUTION. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same document. Signature pages may be
detached from the counterparts and attached to a single copy of this Agreement
to physically form one document.
DATED as of the date first above stated.
Richmond American Homes, Inc.,
a Delaware corporation
By: /s/ John J. Heaney
-------------------------------------
Name: John J. Heaney
----------------------------------
Title: Vice President
---------------------------------
By: /s/ Kenneth J. Ryerson
------------------------------------
Name: Kenneth J. Ryerson
----------------------------------
Title: Vice President
---------------------------------
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Richmond American Homes of
California, Inc., a Colorado
corporation
By: /s/ John J. Heaney
------------------------------------
Name: John J. Heaney
----------------------------------
Title: Vice President
---------------------------------
By: /s/ Kenneth J. Ryerson
------------------------------------
Name: Kenneth J. Ryerson
----------------------------------
Title: Vice President
---------------------------------
Richmond Homes, Inc. I, a Delaware
corporation
By: /s/ John J. Heaney
------------------------------------
Name: John J. Heaney
----------------------------------
Title: Vice President
---------------------------------
By: /s/ Kenneth J. Ryerson
------------------------------------
Name: Kenneth J. Ryerson
----------------------------------
Title: Vice President
---------------------------------
Richmond Homes, Inc. II, a Delaware
corporation
By: /s/ John J. Heaney
------------------------------------
Name: John J. Heaney
----------------------------------
Title: Vice President
---------------------------------
By: /s/ Kenneth J. Ryerson
------------------------------------
Name: Kenneth J. Ryerson
----------------------------------
Title: Vice President
---------------------------------
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Richmond American Homes of Nevada,
Inc., a Colorado corporaration
By: /s/ John J. Heaney
------------------------------------
Name: John J. Heaney
----------------------------------
Title: Vice President
---------------------------------
By: /s/ Kenneth J. Ryerson
------------------------------------
Name: Kenneth J. Ryerson
----------------------------------
Title: Vice President
---------------------------------
BANK ONE, ARIZONA, NA, a national
banking association
By: /s/ Carol R. Grimley
------------------------------------
Name: Carol R. Grimley
----------------------------------
Title: Vice President
---------------------------------
BANK
-77-
EXHIBIT "A" TO LOAN AGREEMENT
-----------------------------
A&D TERM SHEET
Name of Project: ____________________________________________________________
Location of Project: ______________________________________________________
Approved A&D Subcommitment Amount: $__________________
A&D Appraisal Review Market Value: $_________________
Approved Budget: See Schedule 1 attached
Maximum aggregate changes in Budget without Bank's consent: $50,000.00
A&D Commencement Date: Not later than ninety (90) days after A&D Eligibility
Date
A&D COmpletion Date: Fifteen (15) Calendar Months after A&D Eligibility Date
Date Preliminary A&D Approval Expires (if applicable): _________________
Date A&D Term Expires: ___________________________________
A&D Contractor: ____________________________________________________________
A&D Engineer: ______________________________________________________________
A&D Eligibility Date (date A&D Project is deemed Eligible Collateral): ________
BANK ONE, ARIZONA, NA, a ________________________________,
national banking association a ___________ corporation
By: ________________________________ By: _____________________________
Name: _______________________________ Name: ____________________________
Title: ____________________________ Title: __________________________
By: _____________________________
Name: ____________________________
Title: _________________________
SCHEDULE "1" TO TERM SHEET
BUDGET
------
BORROWER'S TOTAL
ADVANCES EQUITY BUDGET
-------- ---------- ------
Land (______sf @_______psf) $_______ $_________ $_______
Hard Costs:
Grading
Sewers
Paving
Landscape
Perimeter Fencing
Utilities
Municipal Set Asides
and Assurances
Hard Cost Contingency
_______________
_______________
Sub-total Hard Costs $_______ $________
Soft Costs:
Engineering
Approvals and Permits
and Municipal Fees
Contractor Bonds
Borrower Insurance
Bank Inspection and Review
Commitment Fee
Document Fee
Legal
Title and Closing
Real Estate Taxes
Soils Report
Environmental Assessment
Report and Follow up
Appraisal
Appraisal Reveiw Fees
Soft Cost Contingency
_______________
_______________
Sub-Total Soft Costs $_______ $________
TOTALS $_______ $_________ $________
EXHIBIT B TO LOAN AGREEMENT
UNIT COLLATERAL VALUES
FOR UNITS IN COLORADO:
(i) STAGE 1. The sum of (a) twenty-five percent (25%) of the applicable
Specific Unit Budget, plus (b) the applicable Lot Allocation, if excavation,
backfill and foundation are complete, and all required permits, tap fees, and up
front municipal and school district fees have been paid by Borrower;
(ii) STAGE 2. The sum of (a) forty-five percent (45%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the rough framing of the Unit
is complete;
(iii) STAGE 3. The sum of (a) sixty percent (60%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the roof, windows, exterior
trim and temporary exterior doors are complete;
(iv) STAGE 4. The sum of (a) eighty percent (80%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the rough-in (mechanical,
plumbing top-out and electrical), insulation and drywall are complete;
(v) STAGE 5. The sum of (a) ninety-five percent (95%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the Unit interior and
exterior have been finished with the exception of floor coverings, final
cleaning, and landscaping; and
(vi) STAGE 6. The sum of (a) one hundred percent (100%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the Unit is finished,
including floor coverings, and a certificate of occupancy or its equivalent has
been obtained;
PROVIDED, HOWEVER, if the sum of the total of the construction costs set forth
in the applicable Specific Unit Budget and the applicable Lot Allocation exceeds
the Maximum Allowed Advance for the Unit, then for purposes of calculating the
Unit Collateral Value pursuant hereto, the Lot Allocation shall be reduced so
that the sum of the total Specific Unit Budget and the Lot Allocation do not
exceed the applicable Maximum Allowed Advance.
EXHIBIT B TO LOAN AGREEMENT
UNIT COLLATERAL VALUES
FOR UNITS IN ARIZONA:
(i) STAGE 1. The sum of (a) fifteen percent (15%) of the applicable
Specific Unit Budget, plus (b) the applicable Lot Allocation, if the floor slab
is poured, and all required permits, tap fees, and up front municipal and school
district fees have been paid by Borrower;
(ii) STAGE 2. The sum of (a) forty-five percent (45%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the rough framing of the Unit
is complete;
(iii) STAGE 3. The sum of (a) fifty percent (50%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the roof dry in, windows,
exterior trim and temporary exterior doors are complete;
(iv) STAGE 4. The sum of (a) sixty-five percent (65%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the rough-in (mechanical,
plumbing top-out and electrical), insulation and drywall are complete;
(v) STAGE 5. The sum of (a) ninety-five percent (95%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the Unit interior and
exterior have been finished with the exception of floor coverings, final
cleaning, and landscaping; and
(vi) STAGE 6. The sum of (a) one hundred percent (100%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the Unit is finished,
including floor coverings, and a certificate of occupancy or its equivalent has
been obtained;
PROVIDED, HOWEVER, if the sum of the total of the construction costs set forth
in the applicable Specific Unit Budget and the applicable Lot Allocation exceeds
the Maximum Allowed Advance for the Unit, then for purposes of calculating the
Unit Collateral Value pursuant hereto, the Lot Allocation shall be reduced so
that the sum of the total Specific Unit Budget and the Lot Allocation do not
exceed the applicable Maximum Allowed Advance.
EXHIBIT B TO LOAN AGREEMENT
UNIT COLLATERAL VALUES
FOR UNITS IN NEVADA:
(i) STAGE 1. The sum of (a) fifteen percent (15%) of the applicable
Specific Unit Budget, plus (b) the applicable Lot Allocation, if the floor slab
is poured, and all required permits, tap fees, and up front municipal and school
district fees have been paid by Borrower;
(ii) STAGE 2. The sum of (a) forty-five percent (45%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the rough framing of the Unit
is complete;
(iii) STAGE 3. The sum of (a) fifty-five percent (55%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the roof dry in, windows,
exterior trim and temporary exterior doors are complete;
(iv) STAGE 4. The sum of (a) seventy percent (70%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the rough-in (mechanical,
plumbing top-out and electrical), insulation and drywall are complete;
(v) STAGE 5. The sum of (a) ninety-seven percent (97%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the Unit interior and
exterior have been finished with the exception of floor coverings, final
cleaning, and landscaping; and
(vi) STAGE 6. The sum of (a) one hundred percent (100%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the Unit is finished,
including floor coverings, and a certificate of occupancy or its equivalent has
been obtained;
PROVIDED, HOWEVER, if the sum of the total of the construction costs set forth
in the applicable Specific Unit Budget and the applicable Lot Allocation exceeds
the Maximum Allowed Advance for the Unit, then for purposes of calculating the
Unit Collateral Value pursuant hereto, the Lot Allocation shall be reduced so
that the sum of the total Specific Unit Budget and the Lot Allocation do not
exceed the applicable Maximum Allowed Advance.
EXHIBIT B TO LOAN AGREEMENT
UNIT COLLATERAL VALUES
FOR UNITS IN CALIFORNIA:
(i) STAGE 1. The sum of (a) twenty percent (20%) of the applicable Specific
Unit Budget, plus (b) the applicable Lot Allocation, if the floor slab is
poured, and all required permits, tap fees, and up front municipal and school
district fees have been paid by Borrower;
(ii) STAGE 2. The sum of (a) fifty percent (50%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the rough framing of the Unit
is complete;
(iii) STAGE 3. The sum of (a) sixty percent (60%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the roof dry in, windows,
exterior trim and exterior doors are complete;
(iv) STAGE 4. The sum of (a) seventy percent (70%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the rough-in (mechanical,
plumbing top-out and electrical), insulation and drywall are complete;
(v) STAGE 5. The sum of (a) ninety-five percent (95%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the Unit interior and
exterior have been finished with the exception of floor coverings, countertops,
final cleaning, and landscaping; and
(vi) STAGE 6. The sum of (a) one hundred percent (100%) of the Specific Unit
Budget, plus (b) the applicable Lot Allocation, if the Unit is finished,
including floor coverings, and a certificate of occupancy or its equivalent has
been obtained;
PROVIDED, HOWEVER, if the sum of the total of the construction costs set forth
in the applicable Specific Unit Budget and the applicable Lot Allocation exceeds
the Maximum Allowed Advance for the Unit, then for purposes of calculating the
Unit Collateral Value pursuant hereto, the Lot Allocation shall be reduced so
that the sum of the total Specific Unit Budget and the Lot Allocation do not
exceed the applicable Maximum Allowed Advance.