CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT, dated October 4, 1994, is made by and
between Bennett Funding International, Ltd. ("Lender"), whose address is Two
Clinton Square, Syracuse, New York, 13202, and VCA South Bend Incorporated
("Borrower"), whose address is 2777 E. Camelback Road, Phoenix, Arizona 85016,
in respect of a loan in the principal sum of Five Million Dollars
($5,000,000.00) ("Loan Agreement"), for the project known as Varsity Clubs:
Notre Dame ("Project").
ARTICLE I - DEFINITIONS
For purposes of this Loan Agreement, the following terms shall have the
respective meanings assigned to them.
1.1 Advance. The term "Advance" shall mean a disbursement by Lender of
any of the proceeds of the Loan and/or the Borrower's Deposit.
1.2 Affidavit of Borrower. The term "Affidavit of Borrower" shall mean
a sworn affidavit of Borrower (and such other parties as Lender may require) to
the effect that all statements, invoices, bills, and other expenses incident to
the acquisition of the Property and the construction of the Improvements
incurred to a specified date, whether or not specified in the Approved Budget,
have been paid in full, except for (a) amounts retained pursuant to the
Construction Contract, and (b) items to be paid from the proceeds of an Advance
then being requested or in another manner satisfactory to Lender.
1.3 Application for Advance. The term "Application for Advance" shall
mean a written application on an AIA and other forms as set forth in Schedule
1.3, by Borrower (and such other parties as Lender may require) to Lender
specifying by name, current address, and amount all parties to whom Borrower is
obligated for labor, materials, or services supplied for the construction of the
Improvements and all other expenses incident to the Loan, the Property, and the
construction of the Improvements, whether or not specified in the Approved
Budget, requesting an Advance for the payment of such items, containing, if
requested by Lender, an Affidavit of Borrower, accompanied by such schedules,
affidavits, releases, waivers, statements, invoices, bills, and other documents
as Lender and Title Company may reasonably request.
1.4 Approved Budget. The Approved Budget is attached hereto as Schedule
1.4 and incorporated herein by reference.
1.5 Architect. The term "Architect" shall mean the Architect named on
Schedule 1.5 attached hereto and incorporated herein by reference.
1.6 Architectural Contract. The term "Architectural Contract" shall
mean all written agreements between Borrower and Architect for architectural
services pertaining to construction of the Improvements.
1.7 Borrower. The term "Borrower" shall mean all parties named Borrower
in the first paragraph of this Loan Agreement.
1.8 Borrower's Deposit. The term "Borrower's Deposit" shall mean such
cash sums as Lender may deem necessary, from time to time until the Loan is paid
in full, in addition to the Loan, for the payment of the costs of labor,
materials, and services required for the construction of the Improvements, other
costs and expenses specified in the Approved Budget, and other costs and
expenses required to be paid in connection with the construction of the
Improvements in accordance with the Plans, any Governmental Requirements, and
the requirements of any lessee, if applicable.
1.9 Code. The term "Code" shall mean the Uniform Commercial Code as in
force in the state in which the Property is located.
1.10 Completion Date. The term "Completion Date" shall mean the date
set forth on Schedule 1.5 attached hereto.
1.11 Construction Contract. The term "Construction Contract" shall mean
all construction contracts executed by Borrower for the construction of the
Improvements, including, without limitation, contracts between Borrower and
Contractor.
1.12 Contractor. The term "Contractor" shall mean the contractors,
whether one or more, named in Schedule 1.5 attached hereto.
1.13 Cure of Default. If Borrower shall fail (i) for a period of ten
(10) days after written notice to Borrower to observe or perform any of the
covenants or conditions to be performed under the terms of this Loan Agreement
concerning the payment of indebtedness; or (ii) for a period of thirty (30) days
after written notice to Borrower to observe or perform any non-monetary covenant
or condition, (provided, however, that if any such failure concerning a
non-monetary covenant or condition is reasonably susceptible of cure but not
within said thirty (30) day period, then no Event of Default shall be deemed to
exist hereunder so long as Borrower commences such cure within said thirty (30)
day period and diligently and in good faith pursues such cure to completion
within one hundred eighty (180) days of said written notice from Lender to
Borrower) then Lender shall have the right without further notice to pursue its
remedies hereunder.
1.14 Debtor Relief Laws. The term "Debtor Relief Laws" shall mean any
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
insolvency, reorganization, or similar laws affecting the rights or remedies of
creditors generally, as in effect from time to time.
1.15 Event of Default. The term "Event of Default" shall mean the
occurrence of any one of the following:
(a) Any indebtedness evidenced, governed or secured by any of the
Loan Instruments is not paid when due, whether by acceleration
or otherwise.
(b) Any covenant in this Agreement or any of the other Loan
Instruments is not fully and timely performed, or the
occurrence of any default or event of default thereunder.
(c) Any statement, representation or warranty in the Loan
Instruments, any Financial Statements or any other writing
delivered to Lender in connection with the Loan is false,
misleading or erroneous in any material respect.
(d) Once construction has begun, ie: the foundation has been
poured, the cessation of the construction of the Improvements
for more than thirty (30) days without the written consent of
Lender.
(e) Failure of the construction of the Improvements for or any
materials for which an Advance has been requested to comply
with the Plans, any Governmental Requirements, or the
requirements of any lessee, if applicable.
(f) Failure of Borrower to satisfy any condition specified herein
as precedent to the obligation of Lender to make an Advance
after an Application for Advance has been submitted by
Borrower to Lender.
(g) Construction of the Improvements is not completed on the
Completion Date, or within a reasonable time thereafter.
(h) The Borrower or owner of the Property:
(1) does not pay its debts as they become due or admits
in writing its inability to pay its debts or makes a
general assignment for the benefit of creditors; or
(2) commences any case, proceeding or other action
seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its
debts under any Debtor Relief Laws; or
(3) in any involuntary case, proceeding or other action
commenced against it which seeks to have an order for
relief entered against it, as debtor, or seeks
reorganization, arrangement, liquidation, dissolution
or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or
relief of debtors, (i) fails to obtain a dismissal of
such case, proceeding or other action within sixty
(60) days of its commencement, or (ii) converts the
case from one chapter of the Federal Bankruptcy Code
to another chapter, or (iii) is the subject of an
order for relief; or
(4) conceals, removes, or permits to be concealed or
removed, any part of its property, with intent to
hinder, delay or defraud any or all of its creditors,
or makes or suffers a transfer of any of its property
which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or makes any
transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly
situated have not been paid; or suffers or permits,
while insolvent, any creditor to obtain a lien upon
any of its property through legal proceedings which
is not vacated within sixty (60) days from the date
thereof; or
(5) has a trustee, receiver, custodian or other similar
official appointed for or take possession of all or
any part of the Property or any other of its property
or has any court take jurisdiction of any other of
its property which continues for a period of sixty
(60) days except where a shorter period is specified
in the immediately following subparagraph (6); or
(6) fails to have discharged within a period of thirty
(30) days any attachment, sequestration, or similar
writ levied upon any property of such owner; or
(7) fails to pay immediately any final money judgment,
after appeal, in the amount of $10,000.00 or greater.
(i) Title to all or any part of the Property (other than obsolete
or worn personal property replaced by adequate substitutes of
equal or greater value than the replaced items when new) shall
become vested in any party other than the granting party named
in the Mortgage, whether by operation of law or otherwise,
with the following three exceptions; 1) any property VCA
leases at the Project, eg: T.V.'s and personal Computers; 2)
to the extent releases have been recorded for those Interval
Units sold, and; 3) the interest to be held by VCA South Bend
Chapter, a Arizona non-profit corporation.
1.16 Guaranty. The term "Guaranty" shall mean the Guaranty and
Subordination Agreement executed by Guarantor of the Borrower to the Lender.
1.17 Guarantor. The term "Guarantor" shall mean such individuals who
Guaranty the payment and performance of Borrower to Lender and who have also
executed a Guaranty and Subordination Agreement.
1.18 Improvements. The term "Improvements" shall mean the Improvements
identified on Schedule 1.5 attached hereto.
1.19 Inspecting Architects/Engineers. The term "Inspecting
Architects/Engineers" shall mean such employees, representatives and agents of
Lender or third parties, who may, from time to time, conduct inspections of the
Property or offer other services related thereto.
1.20 Insurance Policies. The term "Insurance Policies" shall mean:
(a) All-risk builder's risk insurance during the construction of
the Improvements, in an amount equal to 100% of the
replacement cost of the Improvements, providing all-risk
coverage on the Improvements and materials stored on the
Property and elsewhere, and including the perils of collapse,
water damage and, if requested by Lender, flood, business
interruption and other risks;
(b) All-risk insurance on the Property until the Loan is paid in
full, as determined by Lender, in the amount of at least 100%
of the replacement cost of such Improvements or in such
additional amounts as Lender may require, providing all-risk
coverage on the Improvements, and, if requested by Lender, to
include the perils of flood, business interruption and other
risks;
(c) Comprehensive General Liability Insurance for owners and
contractors, including blanket contractual liability, products
and completed operations, personal injury (including
employees), independent contractors, explosion, collapse and
underground hazards for not less than $2,000,000 arising out
of any one occurrence or in any increased amount required by
Lender;
(d) Comprehensive Automobile Liability Insurance for contractors
for not less than $500,000 for bodily injury and $100,000 for
property damage arising out of any one occurrence or in any
increased amount required by Lender;
(e) Workers' Compensation Insurance for contractors for statutory
limits; and
(f) Such other insurance as Lender may reasonably require.
All Insurance Policies shall be issued on forms and by companies
satisfactory to Lender and shall be delivered to Lender. All-risk Insurance
Policies shall have loss made payable to Lender as mortgagee together with the
standard mortgagee clause if such is required in Indiana in the form set forth
on Schedule 1.5 attached hereto. Comprehensive General Liability, Comprehensive
Automobile Liability and Workers' Compensation coverages shall have a provision
giving Lender thirty (30) days' prior notice of cancellation or material change
of the coverage.
1.21 Interval Release Fee. The term "Interval Release Fee" shall mean
mandatory payments from Borrower to Lender through Borrower's sale of interval
units at the Property such payments to be applied to the Construction Promissory
Note, upon payment of which Lender shall contemporaneously release the interval
unit from the Mortgage providing Borrower has forwarded the necessary release to
Lender for execution. The sale of interval units may be by (i) direct cash
payment to Borrower, (ii) installment purchase financed by Lender, or (iii)
installment purchase financed by Borrower.
1.22 Lender. The term "Lender" shall mean the Lender named in the first
paragraph of this Loan Agreement.
1.23 Loan. The term"Loan" shall mean the Loan by Lender to Borrower, in
an amount set forth in the introductory paragraph on page one (1) of this Loan
Agreement, not to exceed, in the aggregate, the payment of the costs of labor,
materials, and services supplied for the construction of the Improvements and
all other expenses incident to the acquisition and the construction of the
Property, all as specified in the Approved Budget.
1.24 Loan Instruments. The term "Loan Instruments" shall mean this Loan
Agreement, the Mortgage, the Note, the Guaranty, the Financing Statements, and
such other instruments evidencing, securing, or pertaining to the Loan as shall,
from time to time, be executed and delivered by Borrower, Guarantor, or any
other party to Lender pursuant to this Loan Agreement, including, without
limitation, each Affidavit of Borrower, each Application for Advance, and the
Approved Budget.
1.25 Mortgage. The term "Mortgage" shall mean the Mortgage and Security
Agreement securing the payment of the Note and the payment and performance of
all obligations specified in the Mortgage and this Loan Agreement, and
evidencing a valid and enforceable lien on, and direct assignment of, the
Property.
1.26 Note. The term "Note" shall mean the Construction Promissory Note
from Borrower to Lender dated of even date herewith in the amount of and
evidencing the Loan.
1.27 Plans. The term "Plans" shall mean the final working drawings and
specifications as amended from time to time for the construction of the
Improvements.
1.28 Property. The term "Property" shall mean the land described in
Schedule 1.28 attached hereto and incorporated herein by reference, together
with the Improvements and all other property constituting the "Mortgaged
Property," as described in the Mortgage, and the collateral described in the
Security Agreement.
1.29 Security Agreement. The term "Security Agreement" shall mean a
Security Agreement granting to Lender a security interest in collateral for the
Loan and shall be set forth in the Mortgage.
1.30 Survey. The term "Survey" shall mean a current certified survey of
the Property and/or a recorded plat or map of the Property, as required by
Lender, which such plat or map shall be approved and accepted by all
Governmental Authorities having jurisdiction of the Property.
1.31 Title Company. The term "Title Company" shall mean the Title
Company named on Schedule 1.5 attached hereto.
1.32 Title Insurance. The term "Title Insurance" shall mean a title
insurance commitment, binder, or policy, as Lender may require, in the amount of
the Loan, insuring or committing to insure that the Mortgage constitutes a valid
lien covering the Property having the priority required by Lender and subject
only to those exceptions and encumbrances which lender may approve, issued by
the Title Company.
ARTICLE 2 - ADVANCES OF THE LOAN
2.1 Commitment of Lender. Subject to the conditions hereof, and
provided that an Event of Default has not occurred, Lender will make Advances to
Borrower in accordance with this Loan Agreement. Lender represents that it has
or will have at the time of the Advance sufficient funds to provide Borrower
with each Advance required hereunder.
2.2 Interest on the Loan. Interest on the Loan, at the rate or rates
specified in the Note, shall be computed on the unpaid principal balance which
exists from time to time and shall be computed with respect to each Advance only
from the date of such Advance (as to the portion of each Advance not
constituting a portion of Borrower's Deposit).
2.3 Advances. After the initial Advance, Advances for the payment of
costs of labor, materials, and services supplied for the construction of the
Improvements and the other items shown in the Approved Budget shall be made by
Lender as specified on Schedule 1.5 attached hereto, upon compliance by Borrower
with this Loan Agreement, after actual commencement of construction of the
Improvements. From time to time, Borrower shall submit an Application for
Advance to Lender requesting an Advance for the payment of costs of labor,
materials, and services supplied for the construction of the Improvements or for
the payment of other costs and expenses incident to the Loan, the acquisition of
the Property, or the construction of the Improvements, and specified in the
Approved Budget. Lender may require an inspection of and acceptable report on
the Improvements by the Inspecting Architects/Engineers prior to making any
Advance. Advances for payment of costs of construction of the Improvements and
the other items shown in the Approved Budget shall be limited to the amounts
shown in the Approved Budget and not exceed the aggregate of (a) the costs of
labor, materials, and services incorporated into the Improvements in a manner
acceptable to Lender, plus (b) if approved by Lender, the purchase price of all
uninstalled materials to be utilized in the construction of the Improvements
stored on the Property or elsewhere with the written consent of, and in a manner
acceptable to, Lender, less (c) retainage, if any, as set forth on Schedule 1.5
attached hereto, and less (d) all prior Advances for payment of costs of labor,
materials, and services for the construction of the Improvements. Each
Application for Advance shall be submitted by Borrower to Lender a reasonable
time (but not less than seven (7) business days) prior to the date on which an
Advance is desired by Borrower. The final Advance will not be made until the
Lender has received the following (1) a completion certificate from the
Inspecting Architects/Engineers, (2) evidence that all Governmental Requirements
have been satisfied, including but not limited to, delivery to Lender of
Certificates of Occupancy if issued by municipality, permitting the Improvements
to be legally occupied, (3) evidence that no mechanic's or materialman's lien or
other encumbrance has been filed and remains in effect against the Property, (4)
final lien releases or waivers by Architect, Contractor, and all subcontractors,
materialmen, and other parties who have supplied labor, materials, or services
for the construction of the Improvements, or who otherwise might be entitled to
claim a contractual, statutory, or constitutional lien against the Property, and
(5) if available under local rules, the Title Insurance shall be endorsed and
extended to acknowledge completion of construction of the Improvements without
any encroachment and in compliance with all applicable matters of public record
and Governmental Requirements, with no additional exception objectionable to
Lender.
2.4 Conditions to the First Advance. As a condition precedent to the
initial Advance hereunder, Borrower must execute and deliver to, procure for and
deposit with, and pay to Lender and, if appropriate, record in the proper
records with all filing and recording fees paid the documents, certificates, and
other items that are noted by (x) described in Schedule 2.4 attached hereto and
incorporated herein by reference, together with such other documents,
instruments, and certificates as Lender or Title Company may reasonably require.
2.5 Conditions to Subsequent Advances. As a condition precedent to each
Advance other than the initial Advance, in addition to all other requirements
herein, Borrower must satisfy the following requirements and, if required by
Lender, deliver to Lender evidence of such satisfaction:
(a) All conditions precedent to the initial Advance shall have
been satisfied;
(b) There shall then exist no Event of Default which remains
uncured beyond any grace period;
(c) The representations and warranties made in this Loan Agreement
shall be true and correct on and as of the date of each
Advance, with the same effect as if made on that date;
(d) Borrower will procure and deliver to Lender, if required by
Lender, releases or waivers of mechanics' liens and receipted
bills showing payment of all parties who have furnished
materials or services or performed labor of any kind in
connection with the construction of any of the Improvements;
and
(e) The Title Insurance Policy provided for at the closing of this
Contract shall remain in effect and at the written request of
Lender, a search shall be conducted to insure no exception
which might otherwise be objectionable to Lender has been
recorded.
2.6 Reallocation of Approved Budget. Borrower may not reallocate items
of cost or change the Approved Budget without the prior written consent of
Lender which consent shall be not unreasonably withheld.
2.7 No Waiver. No Advance shall constitute a waiver of any condition
precedent to the obligation of Lender to make any further Advance or preclude
Lender from thereafter declaring the failure of Borrower to satisfy such
condition precedent to be an Event of Default.
2.8 Conditions Precedent for the Benefit of Lender. All conditions
precedent to the obligation of Lender to make any Advance are imposed hereby
solely for the benefit of Lender, and no other party may require satisfaction of
any such condition precedent or be entitled to assume that Lender will refuse to
make any Advance in the absence of strict compliance with such conditions
precedent. All requirements of this Loan Agreement may be waived by Lender, in
whole or in part, at any time.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
OF BORROWER
Borrower hereby represents and warrants as follows:
3.1 Financial Statements. The Financial Statements are true, correct,
and complete as of the dates specified therein and fully and accurately present
the financial condition of Borrower and, if required, of Guarantor (who are set
forth on page 30 of this Loan Agreement and shall Guaranty the Borrower's
payment and performance hereunder) as of the dates specified. No material
adverse change has occurred in the financial condition of Borrower or Guarantor
since the dates of the Financial Statements.
3.2 Suits, Actions, Etc.. There are no material actions, suits, or
proceedings pending or, to the knowledge of Borrower, threatened, in any court
or before or by any Governmental Authority against or affecting Borrower,
Guarantor, or the Property, or involving the validity, enforceability, or
priority of any of the Loan Instruments, at law or in equity. The consummation
of the transactions contemplated hereby, and the performance of any of the terms
and conditions hereof and of the other Loan Instruments, will not result in a
breach of, or constitute a default in, any mortgage, deed of trust, lease,
promissory note, loan agreement, credit agreement, partnership agreement, or
other agreement to which Borrower or Guarantor is a party or by which Borrower
or Guarantor may be bound or affected. Neither Borrower nor any Guarantor is in
default of any order of any court or any requirement of any Governmental
Authority.
3.3 Valid and Binding Obligation. All of the Loan Instruments, and all
other documents referred to herein to which Borrower or Guarantor is a party,
upon execution and delivery will constitute valid and binding obligations of
Borrower and Guarantor, enforceable in accordance with their terms except as
limited by Debtor Relief Laws.
3.4 Title to the Property. Borrower holds full legal and equitable
title to the Property, subject only to title exceptions set forth in the Title
Insurance.
3.5 Commencement of Construction. Other than as described in Schedule
3.5, and except for the clearing and grading of the property associated with the
Project, prior to the recordation of the Mortgage, no work of any kind
(including the destruction or removal of any existing improvements, site work,
draining, or fencing of the Property) shall have commenced or shall have been
performed on the Property, no equipment or material shall have been delivered to
or upon the Property for any purpose whatsoever, and no contract (or memorandum
or affidavit thereof) for the supplying of labor, materials, or services for the
construction of the Improvements shall have been recorded in the mechanic's lien
or other appropriate records in the county where the Property is located.
3.6 Disclosure. There is no fact of which Borrower is aware that
Borrower has not disclosed to Lender in writing that could materially adversely
affect the property, business or financial condition of Borrower, Guarantor or
the Property.
3.7 System Compliance. The storm and sanitary sewer system, water
system, all mechanical systems of the Property and other parts of the
Improvements do (or when constructed will) comply with all applicable
environmental, pollution control and ecological laws, ordinances, rules and
regulations, and all Governmental Authorities having jurisdiction of the
Property have issued or to the best of Borrower's knowledge will issue all
necessary permits, licenses or other authorizations for the construction of the
Improvements (specifically including the named systems).
3.8 Submittals. The Loan Instruments and all Financial Statements,
Plans, budgets, schedules, opinions, certificates, confirmations, Contractor's
statements, applications, rent rolls, affidavits, agreements, Construction
Contract, Architectural Contract and other materials submitted to the Lender in
connection with or in furtherance of the Loan Instruments by or on behalf of the
Borrower or any Guarantor fully and fairly state the matters with which they
purport to deal, and neither misstate any material fact, nor, separately or in
the aggregate, fail to state any material fact necessary to make the statements
made not misleading.
3.9 Utility Availability. Subject only to payment of fees to be paid
from the Approved Budget, all utility and municipal services required for the
construction, occupancy and operation of the Improvements, including, but not
limited to, water supply, storm and sanitary sewer systems, electric and
telephone facilities, are available for use and tap-on at the boundaries of the
Property and will be available in sufficient amounts for the normal and intended
use of the Improvements, and written permission has been or will be obtained
from the applicable utility companies or municipalities to connect the
Improvements into each of said services.
3.10 Inducement to Lender. The representations and warranties contained
in the Loan Instruments are made by Borrower as an inducement to Lender to make
the Loan and Borrower understands that Lender is relying on such representations
and warranties and that such representations and warranties shall survive any
(a) bankruptcy proceedings involving Borrower, Guarantor or the Property, or (b)
foreclosure of the Mortgage or (c) conveyance of title to the Property to the
Lender in lieu of foreclosure of the Mortgage. Acceptance of each Advance
constitutes reaffirmation, as of the date of such acceptance, of the
representations and warranties of Borrower in the Loan Instruments, on which
Lender shall rely in making such Advance.
ARTICLE 4 - COVENANTS AND AGREEMENTS
OF BORROWER
Borrower hereby covenants and agrees as follows:
4.1 Compliance With Governmental Requirements. Borrower shall timely
comply with all Governmental Requirements and deliver to Lender evidence
thereof. Borrower assumes full responsibility for the compliance of the Plans
and the Property with all Governmental Requirements and with sound building and
engineering practices, and, notwithstanding any approvals by Lender, Lender
shall have no obligation or responsibility whatsoever for the Plans or any other
matter incident to the Property or the construction of the Improvements.
Immediately upon Borrower's receipt of any notice from a Governmental Authority
of noncompliance with any Governmental Requirements, Borrower shall provide
Lender with written notice thereof.
4.2 Construction of the Improvements. Borrower shall commence, with the
pouring of the foundation, construction of the Improvements within a
commercially reasonable time and the construction of the Improvements shall be
executed with diligence and continuity, in a good and workmanlike manner, and in
accordance with sound building and engineering practices, all applicable
Governmental Requirements, the Plans, and the requirements of any lessee, if
applicable. Other than Acts of God, Borrower shall not permit cessation of work
for a period in excess of thirty (30) days without the prior written consent of
Lender and shall complete construction of the Improvements on or before the
Completion Date, free and clear of all liens (except those as to which Borrower
has furnished a bond or other security acceptable to Lender and otherwise
complied with the requirements of Section 4.20).
4.3 Correction of Defects. Borrower shall correct or cause to be
corrected (a) any material defect in the Improvements, (b) any material
departure in the construction of the Improvements from the Plans, Governmental
Requirements, or the requirements of any lessee, if applicable, or (c) any
encroachment by any part of the Improvements, or any structure located on the
Property, on any easement, property line, or restricted area, or any
encroachment by any such structure on any building line.
4.4 Storage of Materials. Borrower shall cause all materials supplied
for, or intended to be utilized in, the construction of the Improvements, but
not affixed to or incorporated into the Improvements or the Property, to be
stored on the Property or at such other location as may be approved by Lender in
writing, with adequate safeguards, as required by Lender, to prevent loss,
theft, damage, or commingling with other materials or projects.
4.5 Inspection of the Property. Borrower shall permit Lender, any
Governmental Authority, and their agents and representatives, to enter upon the
Property and any location where materials intended to be utilized in the
construction of the Improvements are stored, for the purpose of inspection of
the Property and such materials at all reasonable times.
4.6 Notices by Governmental Authority, Casualty, Condemnation. Borrower
shall timely comply with and promptly furnish to Lender true and complete copies
of any notice or claim by any Governmental Authority pertaining to the Property.
Borrower shall promptly notify Lender of any fire or other casualty or any
notice of taking or eminent domain action or proceeding affecting the Property,
or the threat of any such action or proceeding of which Borrower becomes aware.
4.7 Special Account. Borrower shall maintain a special account into
which all Advances (but no other funds), and excluding direct disbursements made
by Lender pursuant to Section 4.10 hereof, shall be deposited by Borrower, and
against which checks shall be drawn only for the payment of (a) costs of labor,
materials, and services supplied for the construction of the Improvements
specified in the Approved Budget, and (b) other costs and expenses incident to
the Loan, the Property, and the construction of the Improvements specified in
the Approved budget.
4.8 Application of Advances. Borrower shall disburse all Advances for
payment of costs and expenses specified in the Approved Budget, and for no other
purpose.
4.9 Borrower's Deposit. If Lender reasonably determines at any time
that the unadvanced portion of the Loan will be insufficient for payment in full
of (a) costs of labor, materials, and services required for the construction of
the Improvements, (b) other costs and expenses specified in the Approved Budget,
(c) interest from time to time owing or to become owing on the Loan, and (d)
other costs and expenses required to be paid in connection with the construction
of the Improvements in accordance with the Plans, any Governmental Requirements,
or the requirements of any lessee, if applicable, then Borrower shall, on
request of Lender, make the Borrower's Deposit with Lender in an interest
bearing account. Lender may advance all or a portion of the Borrower's Deposit
prior to any portion of the Loan proceeds. Borrower shall promptly notify Lender
in writing if and when the cost of the construction of the Improvements exceeds,
or appears likely to exceed, the amount of the unadvanced portion of the Loan
and the unadvanced portion of the Borrower's Deposit.
4.10 Direct Disbursement and Application by Lender. In the event of
default hereunder, Lender shall have the right, but not the obligation, to
disburse and directly apply the proceeds of any Advance to the satisfaction of
any of Borrower's obligations hereunder or under any of the other Loan
Instruments. Any Advance by Lender for such purpose, except Borrower's Deposit,
shall be part of the Loan and shall be secured by the Loan Instruments. Borrower
hereby authorizes Lender to hold, use, disburse, and apply the Loan and the
Borrower's Deposit for payment of costs of construction of the Improvements,
expenses incident to the Loan and the Property, and the payment or performance
of any obligation of Borrower hereunder or under any of the other Loan
Instruments. Borrower hereby assigns and pledges the proceeds of the Loan and
the Borrower's Deposit to Lender for such purposes. Lender may advance and incur
such expenses as Lender deems necessary for the completion of construction of
the Improvements and to preserve the Property, and any other security for the
Loan, and such expenses, even though in excess of the amount of the Loan, shall
be secured by the Loan Instruments and payable to Lender.
4.11 Costs and Expenses. Borrower shall pay when due all costs and
expenses required by this Loan Agreement, including, without limitation, (a) all
taxes and assessments applicable to the Property, (b) all fees for filing or
recording the Loan Instruments, (c) all fees lawfully due by Borrower's actions
in connection with the Loan, or the Property, (d) all title insurance and title
examination charges, including premiums for the Title Insurance, (e) all survey
costs and expenses, including the cost of the Survey, (f) all premiums for the
Insurance Policies, and (g) all other costs and expenses payable to third
parties incurred by Borrower in connection with the consummation of the
transactions contemplated by this Loan Agreement.
4.12 Additional Documents. Borrower shall execute and deliver to
Lender, from time to time as requested by Lender, such other documents as shall
reasonably be necessary to provide the rights and remedies to Lender granted or
provided for by the Loan Instruments.
4.13 Inspection of Books and Records. Borrower shall permit Lender at
all reasonable times, to examine and copy the books and records of Borrower
pertaining to the Loan and the Property, and all sales and marketing records,
contracts, statements, invoices, bills, and claims for labor, materials, and
services supplied for the construction of the Improvements.
4.14 No Liability of Lender. Lender shall have no liability,
obligation, or responsibility whatsoever with respect to the construction of the
Improvements except to advance the Loan and the Borrower's Deposit pursuant to
this Loan Agreement. Lender shall not be obligated to inspect the Property or
the construction of the Improvements, nor be liable or responsible for any
defect in the Property or the Improvements by reason of inspecting same, nor be
liable for the performance or default of Borrower, Architect, the Inspecting
Architects/Engineers, Contractor, or any other party, or for any failure to
construct, complete, protect, or insure the Improvements, or for the payment of
costs of labor, materials, or services supplied for the construction of the
Improvements, or for the performance of any obligation of Borrower whatsoever.
Nothing including without limitation any Advance or acceptance of any document
or instrument, shall be construed as a representation or warranty, express or
implied, to any party by Lender.
4.15 No Conditional Sale Contracts, Etc. No materials, equipment, or
fixtures shall be supplied, purchased, or installed for the construction of the
Improvements pursuant to security agreements, conditional sale contracts, lease
agreements, or other arrangements or understandings whereby a security interest
or title is retained by any party or the right is reserved or accrues to any
party to remove or repossess any materials, equipment, or fixtures intended to
be utilized in the construction or operation of the Improvements except for
those personal property leases relative to the Project.
4.16 Defense of Actions. Lender may (but shall not be obligated to)
commence, appear in, or defend any action or proceeding purporting to affect the
Loan, the Property, or the respective rights and obligations of Lender and
Borrower pursuant to this Loan Agreement. Lender may (but shall not be obligated
to) pay all necessary expenses, including attorneys' fees and expenses incurred
in connection with such proceedings or action, which Borrower agrees to repay to
Lender on demand.
4.17 Assignment of Construction Contract. As additional security for
the payment of the Loan, Borrower hereby transfers and assigns to Lender all of
Borrower's rights and interest, but not its obligations, in, under, and to the
Construction Contract, upon the following terms and conditions:
(a) Borrower represents and warrants that the copy of any
Construction Contract it has furnished to Lender is a true and
complete copy thereof and that Borrower's interest therein is
not subject to any claim, setoff, or encumbrance.
(b) Neither this assignment nor any action by Lender shall
constitute an assumption by Lender of any obligation under the
Construction Contract, and Borrower shall continue to be
liable for all obligations of Borrower thereunder, Borrower
hereby agreeing to perform all of its obligations under the
Construction Contract. Borrower indemnifies and holds Lender
harmless against and from any loss, cost, liability, or
expense (including, but not limited to, attorneys' fees and
expenses) resulting from any failure of Borrower to so
perform.
(c) Lender shall have the right at any time (but shall have no
obligation) to take in its name or in the name of Borrower
such action as Lender may at any time determine to be
necessary or advisable to cure any default under the
Construction Contract or to protect the rights of Borrower or
Lender thereunder. Lender shall incur no liability if any
action so taken by it or in its behalf shall prove to be
inadequate or invalid, and Borrower agrees to hold Lender free
and harmless against and from any loss, cost, liability or
expense (including, but not limited to, attorneys' fees and
expenses) incurred in connection with any such action.
(d) Borrower hereby irrevocably constitutes and appoints Lender as
Borrower's attorney-in-fact, in Borrower's name or in Lender's
name, to enforce all rights of Borrower under the Construction
Contract.
(e) Prior to an Event of Default, Borrower shall have the right to
exercise its rights as Owner under the Construction Contract,
provided that Borrower shall not cancel or amend the
Construction Contract or do or suffer to be done any act which
would impair the security constituted by this assignment
without the prior written consent of Lender.
(f) This assignment shall inure to the benefit of Lender, its
successors and assigns, including any purchaser upon
foreclosure of the Mortgage, any receiver in possession of the
Property, and any corporation formed by or on behalf of Lender
which assumes Lender's rights and obligations under this Loan
Agreement.
4.18 Assignment of Plans. As additional security for the payment of the
Loan, Borrower hereby transfers and assigns to lender all of Borrower's right,
title, and interest in and to the Architectural Contract and Plans and hereby
represents and warrants to and agrees with Lender as follows:
(a) The schedule of the Plans delivered to Lender is a complete
and accurate description of the Plans.
(b) The Plans are complete and adequate for the construction of
the Improvements and there have been no modifications thereof
except as described in such schedule. The Plans shall not be
modified in any material way without the prior written consent
of Lender and Permanent Lender, if any.
(c) Lender may use the Plans for any purpose relating to the
Improvements, including but not limited to inspections of
construction and the completion of the Improvements.
(d) Lender's acceptance of this assignment shall not constitute
approval of the Plans by Lender. Lender has no liability or
obligation whatsoever in connection with the Plans and no
responsibility for the adequacy thereof or for the
construction of the Improvements contemplated by the Plans.
Lender has no duty to inspect the Improvements, and, if Lender
should inspect the Improvements, Lender shall have no
liability or obligation to Borrower arising out of such
inspection. No such inspection nor any failure by Lender to
make objections after any such inspection shall constitute a
representation by Lender that the Improvements are in
accordance with the Plans or constitute a waiver of Lender's
right thereafter to insist that the Improvements be
constructed in accordance with the Plans.
(e) This assignment shall inure to the benefit of Lender, its
successors and assigns, including any purchaser upon
foreclosure of the mortgage, any receiver in possession of the
Property, and any corporation formed by or on behalf of Lender
which assumes Lender's rights and obligations under this Loan
Agreement.
4.19 Prohibition on Assignment of Borrower's Interest. Borrower shall
not assign or encumber any interest of Borrower hereunder without the prior
written consent of Lender.
4.20 Payment of Claims. Borrower shall promptly pay or cause to be paid
when due all costs and expenses incurred in connection with the Property and the
construction of the Improvements, and Borrower shall keep the Property free and
clear of any lien, charge, or claim other than the encumbrances of the Mortgage
and other liens approved in writing by Lender. Notwithstanding anything to the
contrary contained in this Loan Agreement, Borrower (a) may contest the validity
or amount of any claim of any contractor, consultant, architect, or other person
providing labor, materials, or services with respect to the Property, (b) may
contest any tax or special assessments levied by any Governmental Authority, and
(c) may contest the enforcement of or compliance with any Governmental
Requirements, and such contest on the part of Borrower shall not be a default
hereunder and shall not release Lender from its obligations to make Advances
hereunder; provided, however, that during the pendency of any such contest
Borrower shall furnish to Lender and Title Company an indemnity bond with
corporate surety satisfactory to Lender and Title Company or other security
acceptable to them in an amount equal to the amount being contested plus a
reasonable additional sum to cover possible costs, interest, and penalties, and
provided further that Borrower shall pay any amount adjudged by a court of
competent jurisdiction to be due, with all costs, interest, and penalties
thereon, before such judgment becomes a lien on the Property.
4.21 Restrictions and Annexation. Other than amending the, Membership
Plan Borrower shall not impose any restrictive covenants, easements or other
encumbrances upon the Property, execute or file any subdivision plat affecting
the Property, or consent to the annexation of the Property to any city without
the prior written consent of Lender.
4.22 Advertising by Lender. Borrower agrees that, during the term of
the Loan, Lender may erect and maintain on the Property one or more advertising
signs indicating that the construction financing for the Property has been
provided by Lender.
4.23 Current Financial Statements. Borrower shall, (1) on or before
one-hundred twenty (120) days after the end of each fiscal year of Borrower,
deliver to Lender then current Financial Statements of Borrower and any
Guarantors, and (2) if Borrower routinely prepares more frequent Financial
Statements for interim periods, provide copies of such Financial Statements to
Lender when they are prepared, and (3) from time to time, as Lender may request,
deliver to Lender additional Financial Statements of Borrower and Guarantor.
4.24 Tax Receipts. Borrower shall furnish Lender with receipts or tax
statements marked "Paid" to evidence the payment of all taxes levied on the
Property prior to the date such taxes become delinquent.
4.25 Loan Participations. Borrower acknowledges and agrees that Lender
may, from time to time, sell or offer to sell interests in the Loan and the Loan
Instruments to one or more participants. Borrower authorizes Lender to
disseminate any information it has pertaining to the Loan, including, without
limitation, complete and current credit information on Borrower, any of its
principals and any Guarantor, to any such participant or prospective participant
in the Loan. In any event, Lender shall not assign its obligations hereunder nor
shall the payment of Advances be subject to Lender obtaining Loan Participants.
4.26 Notice of Litigation, Claims, and Financial Change. Borrower shall
promptly inform Lender of (a) any litigation against Borrower or any Guarantor
or affecting the Property, which, if determined adversely, might have a material
adverse effect upon the financial condition of Borrower or any Guarantor or upon
the Property, or might cause an Event of Default, (b) any claim or controversy
which might become the subject of such litigation, and (c) any material adverse
change in the financial condition of Borrower or any Guarantor. For purposes
hereof, a material adverse change shall be deemed to have occurred when there
has been a decline of fifteen percent (15%) or more in the tangible net worth of
Borrower or and any Guarantor as shown on the Financial Statements delivered to
Lender in connection with the Loan.
4.27 No Occupancy, Contrary to Builder's Risk Policy. The Improvements
shall not be occupied until Borrower has obtained and furnished to Lender a
"permission to occupy" endorsement to the builder's risk insurance policy, which
endorsement is satisfactory to Lender, or Borrower has obtained replacement
coverage in the form of an all-risk insurance policy upon the completed
Improvements, which policy will not be impaired by the occupancy of the
Improvements and is satisfactory to Lender.
4.28 Hold Harmless. Except for Lender's acts or omissions, Borrower
shall defend, at its own cost and expense, and hold Lender harmless from, any
proceeding or claim in any way relating to the Property or the Loan Instruments.
All costs and expenses incurred by Lender in protecting its interests hereunder,
including all court costs and attorney's fees and expenses, shall be borne by
Borrower. The provisions of this Section shall survive the payment in full of
the Loan and all other indebtedness secured by the Mortgage and the release of
the Mortgage as to events occurring and causes of action arising before such
payment and release.
4.29 Cooperation with Permanent Lender. Borrower hereby covenants,
promises and agrees to cooperate with the Lender to supply whatever information
and to execute appropriate documents and instruments which may be required by a
new Permanent Lender or its indemnitee.
ARTICLE 5 - RIGHTS AND REMEDIES OF LENDER
5.1 Rights of Lender. Upon the occurrence of an Event of Default,
Lender shall have the right, in addition to any other right or remedy of Lender
as set forth in the Loan Instruments but not the obligation, in its own name or
in the name of Borrower, to enter into possession of the Property; to perform
all work necessary to complete the construction of the Improvements
substantially in accordance with the Plans, Governmental Requirements, and the
requirements of any lessee, if applicable; and to employ watchmen and other
safeguards to protect the Property. Borrower hereby appoints Lender as the
attorney-in-fact of Borrower, with full power of substitution, and in the name
of Borrower, if Lender elects to do so, upon the occurrence of an Event of
Default, to (a) use such sums as are necessary, including any proceeds of the
Loan and the Borrower's Deposit, make such changes or corrections in the Plans,
and employ such architects, engineers, and contractors as may be required for
the purpose of completing the construction of the Improvements substantially in
accordance with the Plans, Governmental Requirements, (b) execute all
applications and certificates in the name of Borrower which may be required for
completion of construction of the Improvements, (c) endorse the name of Borrower
on any checks or drafts representing proceeds of the Insurance Policies, or
other checks or instruments payable to Borrower with respect to the Property,
(d) do every act with respect to the construction of the Improvements which
Borrower may do, and (e) prosecute or defend any action or proceeding incident
to the Property. The power of attorney granted hereby is a power coupled with an
interest and irrevocable. Lender shall have no obligation to undertake any of
the foregoing actions, and, if Lender should do so, it shall have no liability
to Borrower for the sufficiency or adequacy of any such actions taken by Lender.
5.2 Acceleration. Upon the occurrence of an Event of Default, Lender
may, at its option, declare the Loan immediately due and payable subject to
Borrower's cure provision in 1.13.
5.3 Cessation of Advances. Upon the occurrence of an Event of Default,
the obligation of Lender to disburse the Loan and the Borrower's Deposit and all
other obligations of Lender hereunder shall, at Lender's option, immediately
terminate, subject to 1.13.
5.4 Funds of Lender. Any funds of Lender used for any purpose referred
to in this Article 5 shall constitute Advances secured by the Loan Instruments
and shall bear interest at the rate specified in the Note to be applicable after
default hereunder.
5.5 No Waiver or Exhaustion. No waiver by Lender of any of its rights
or remedies hereunder, in the other Loan Instruments, or otherwise, shall be
considered a waiver of any other or subsequent right or remedy of Lender; no
delay or omission in the exercise or enforcement by Lender of any rights or
remedies shall ever be construed as a waiver of any right or remedy of Lender;
and no exercise or enforcement of any such rights or remedies shall ever be held
to exhaust any right or remedy of Lender.
5.6 Marshalling Waiver. Borrower waives any and all rights to require
the marshalling of assets in connection with the exercise of any of the remedies
hereunder.
ARTICLE 6 - GENERAL TERMS AND CONDITIONS
6.1 Notices. All notices, demands, requests, approvals and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given when presented personally or deposited in a regularly
maintained mail receptacle of the United States Postal Service, postage prepaid,
registered or certified, return receipt requested, addressed to Borrower or
Lender, as the case may be, at the respective addresses set forth on the first
page of this Loan Agreement, or such other address as Borrower or Lender may
from time to time designate by written notice to the other as herein required.
6.2 Entire Agreement and Modifications. The Loan Instruments constitute
the entire understanding and agreement between the undersigned with respect to
the transactions arising in connection with the Loan and supersede all prior
written or oral understandings and agreements between the undersigned in
connection therewith. No provision of this Loan Agreement or the other Loan
Instruments may be modified, waived, terminated, supplemented, changed or
amended except by a written Instrument executed by both parties hereto.
6.3 Severability. In case any of the provisions of this Loan Agreement
shall for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Loan Agreement shall be construed as if such invalid, illegal,
or unenforceable provision had never been contained herein.
6.4 Election of Remedies. Lender shall have all of the rights and
remedies granted in the Loan Instruments and available at law or in equity, and
these same rights and remedies shall be cumulative and may be pursued
separately, successively, or concurrently against Borrower, Guarantor, or any
property covered under the Loan Instruments, at the sole discretion of Lender.
The exercise or failure to exercise any of the same shall not constitute a
waiver or release thereof or of any other right or remedy, and the same shall be
nonexclusive.
6.5 Form and Substance. All documents, certificates, insurance
policies, evidence, and other items required under this Loan Agreement to be
executed and/or delivered to Lender shall be in form and substance satisfactory
to Lender.
6.6 Limitation on Interest. All agreements between Borrower and Lender,
whether now existing or hereafter arising and whether written or oral, are
hereby limited so that in no contingency, whether by reason of acceleration of
the maturity of any indebtedness governed hereby or otherwise, shall the
interest contracted for, charged or received by Lender exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever, interest
would otherwise be payable to Lender in excess of the maximum lawful amount, the
interest payable to Lender shall be reduced to the maximum amount permitted
under applicable law; and, if from any circumstance the Lender shall ever
receive anything of value deemed interest by applicable law in excess of the
maximum lawful amount, an amount equal to any excessive interest shall be
applied to the reduction of the principal of the Loan and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
of the Loan such excess shall be refunded to Borrower. All interest paid or
agreed to be paid to Lender shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full period until
payment in full of the principal of the Loan (including the period of any
renewal or extension thereof) so that interest thereon for such full period
shall not exceed the maximum amount permitted by applicable law. This paragraph
shall control all agreements between the Borrower and Lender.
6.7 No Third Party Beneficiary. This Loan Agreement is for the sole
benefit of Lender and Borrower and is not for the benefit of any third party.
6.8 Borrower in Control. In no event shall Lender's rights and
interests under the Loan Instruments be construed to give Lender the right to,
or be deemed to indicate that Lender is in control of the business, management
or properties of Borrower or has power over the daily management functions and
operating decisions made by Borrower.
6.9 Number and Gender. Whenever used herein, the singular number shall
include the plural and the plural the singular, and the use of any gender shall
be applicable to all genders. The duties, covenants, obligations, and warranties
of Borrower in this Loan Agreement shall be joint and several obligations of
Borrower and of each Borrower if more than one.
6.10 Captions. The captions, headings, and arrangements used in this
Loan Agreement are for convenience only and do not in any way affect, limit,
amplify, or modify the terms and provisions hereof.
6.11 Applicable Law. This Loan Agreement and the Loan Instruments shall
be governed by and construed in accordance with the laws of the State of New
York and the laws of the United States applicable to transactions within such
state.
6.12 Jurisdiction. In any action to enforce Lender's rights hereunder,
Borrower covenants to personal jurisdiction and venue in the Supreme Court of
the State of New York for the County of Onondaga.
6.13 Attorney's Fees. In any action hereunder, the prevailing party
shall be entitled to reasonable attorney's fees.
6.14 Release Fees. Payments received by Borrower for the purchase of
interval units shall be given to the Lender as set forth in the Note.
6.15 Escrow. It is understood that certain local requirements may
mandate that Borrower escrow all sales proceeds received from consumers for the
Sale of Interval Units at the Property during the pendency of construction of
the Improvements. In such event, the parties agree that an escrow agent ("Escrow
Agent") shall hold the sales proceeds during the pendency of construction and
release them as may be allowed by local law having jurisdiction over the
Property as set forth in provision 1.21 above and as set forth in the Note.
The parties further agree that the Escrow Agent must be
jointly approved by both Lender and Borrower.
6.16 Receivables Purchase. Borrower and Lender have entered into a
receivables purchase agreement ("Receivables Purchase Agreement") whereby
Borrower shall offer Lender creditworthy receivables representing installment
purchase obligations of consumers for interval units at the Property on a first
refusal and exclusive basis. In the event that the Construction Loan is
satisfied, either by the Borrower or by a new Permanent Lender, then the
Receivables Purchase Agreement shall survivee the satisfaction.
6.17 Closing Fee. At closing, the Borrower shall pay Lender the sum of
$50,000.00 representing a closing fee which shall be disbursed to Lender by
Borrower from the initial advance.
IN WITNESS WHEREOF, the parties set their hands the date above first
written.
VCA SOUTH BEND INCORPORATED BENNETT FUNDING
INTERNATIONAL, LTD.
By Joseph P. Martori By /S/
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Title Chairman Title CEO
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GUARANTOR APPROVAL
ILX INCORPORATED
By Joseph P. Martori
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Title Chairman
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