EXHIBIT 10.1
CONSTRUCTION LOAN AGREEMENT
---------------------------
THIS CONSTRUCTION LOAN AGREEMENT (this "Agreement") is made as of June 30,
1999, by and among ERIE CENTER LOFTS, INC., an Illinois corporation ("Erie"),
CAPITOL HILL LOFTS, INC., an Illinois corporation ("Capitol"), SANGAMON LOFTS,
INC., an Illinois corporation ("Sangamon"), MARATHON CENTER, INC., an Illinois
corporation ("Marathon"; Erie, Capitol, Sangamon and Marathon are sometimes
hereinafter individually referred to as "Borrower" and are sometimes hereinafter
collectively referred to as "Borrowers"), each with a mailing address c/o
Sundance Homes, Inc., ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (Fax No.: ▇▇▇-▇▇▇-▇▇▇▇), and CORUS BANK, N.A.,
whose address is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (Fax No.: ▇▇▇-▇▇▇-▇▇▇▇) (hereinafter referred to as "Lender").
R E C I T A L S
A. Erie is the owner of fee simple title to the real estate commonly
known as ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, and legally described on Exhibit
"▇-▇" ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇ "▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇"). The Erie Tower Land is improved
with a partially completed twenty-four (24) story residential development
consisting of, or to consist of, one hundred twenty-four (124) residential
condominium units, two (2) retail condominium units, and two hundred twenty-six
(226) indoor parking spaces (the "Erie Tower Building"). The Erie Tower Land,
the Erie Tower Building, the Work (as hereinafter defined) related thereto and
all other Improvements (as hereinafter defined) heretofore and hereafter
constructed on the Erie Tower Land, together with all systems, fixtures and
equipment located on the Erie Tower Land or the Erie Tower Building to be
constructed and completed in accordance with the Approved Plans, is hereinafter
collectively referred to as the "Erie Tower Project").
B. Capitol is the owner of fee simple title to the real estate commonly
known as ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, and legally described on Exhibit
"▇-▇" ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇ ▇▇▇▇"). The Capitol Land is improved with a
partially completed eight (8) story residential development consisting of, or to
consist of, ninety (90) residential condominium units, two (2) retail
condominium units, and thirty-seven (37) indoor parking spaces and fifty-five
(55) outdoor parking spaces (the "Capitol Building"). The Capitol Land, the
Capitol Building, the Work related thereto and all other Improvements heretofore
and hereafter constructed on the Capitol Land, together with all systems,
fixtures and equipment located on the Capitol Land or the Capitol Building to be
constructed and completed in accordance with the Approved Plans, is hereinafter
collectively referred to as the "Capitol Project").
C. Sangamon is the owner of fee simple title to the real estate commonly
known as ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, and legally described on Exhibit
"▇-▇" ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇▇ ▇▇▇▇"). A portion of the Arthouse Land is
improved with a partially completed four (4) story residential development
consisting of twenty-six (26) residential condominium units, two (2) retail
condominium units, and nineteen (19) parking spaces (the "Arthouse I Building").
A portion of the Arthouse Land, legally described on Exhibit "A-3-a"attached
hereto (the "Arthouse II Parcel") is unimproved and may be used for a future
residential development. The Arthouse Land, the Arthouse I Building, the Work
related thereto and all
other Improvements heretofore and hereafter constructed on the Arthouse Land,
together with all systems, fixtures and equipment located on the Arthouse Land
or the Arthouse I Building to be constructed and completed in accordance with
the Approved Plans, is hereinafter collectively referred to as the "Arthouse I
Project").
D. Marathon is the owner of fee simple title to the real estate commonly
known as ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, and legally described on Exhibit
"A-4" attached hereto (the "Plaza 32 Land"). Marathon is proposing to construct
a residential/retail development consisting of (i) a five (5) story and (ii) a
nine (9) story building, containing in the aggregate (a) one hundred thirty
(130) residential condominium units with one hundred forty-nine (149) indoor
parking spaces allocated to the residential condominium units, and (b) an
approximately thirty-one thousand four hundred (31,400) square foot retail
development with eighty-one (81) indoor parking spaces allocated to the retail
development (the "Plaza 32 Building"). The Plaza 32 Land, the Plaza 32 Building,
the Work related thereto and all other Improvements heretofore and hereafter
constructed on the Plaza 32 Land, together with all systems, fixtures and
equipment located on the Plaza 32 Land or the Plaza 32 Building to be
constructed and completed in accordance with the Approved Plans, is hereinafter
collectively referred to as the "Plaza 32 Project").
E. The estimated cost of completing the Erie Tower Project is
approximately One Million Seven Hundred Seventy-Six Thousand Two Hundred
Seventy-One and 31/100 Dollars ($1,776,271.31).
F. The estimated cost of completing the Capitol Project is approximately
Eight Million Two Hundred Twenty-Seven Thousand Seven Hundred Sixty-Four Dollars
($8,227,764).
G. The estimated cost of completing the Arthouse I Project is
approximately One Million Seven Hundred Forty-Eight Thousand Three Hundred
Seventy-Seven and 87/100 Dollars ($1,748,377.87).
H. The estimated cost of constructing the Plaza 32 Project is
approximately Thirty-Four Million Two Hundred Ninety-Three Thousand Seventy-Four
Dollars ($34,293,074), of which Twenty-Eight Million Four Hundred Forty-Two
Thousand Dollars ($28,442,000) shall be funded out of the Tranche B Loan
proceeds.
I. Subject to the terms and conditions set forth herein, Lender has
agreed to make the Loan (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants made herein, and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
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SECTION 1
RECITALS AND EXHIBITS
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1.1 Incorporation of Recitals. The Recitals and preamble are hereby
incorporated in and expressly made a part of this Agreement.
1.2 Incorporation of Exhibits. All Exhibits are incorporated in and
expressly made a part of this Agreement.
SECTION 2
DEFINITIONS
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2.1 Affiliates: With respect to an individual, any relative of such
individual; and with respect to any Person, any other Person: (i) directly or
indirectly controlling, controlled by or under direct or indirect common control
with, such Person or (ii) that directly or indirectly owns any of the voting
securities or capital stock of such person. A Person shall be deemed to control
another Person, if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through the ownership of voting securities by contract or
otherwise.
2.2 Appraisals: As defined in Section 6.20 hereof.
2.3 Approved Budgets: The Tranche A Approved Project Budget and the
Tranche B Approved Project Budget.
2.4 Approved Leases: Any lease pertaining to any of the Projects which has
been approved by Lender in its reasonable discretion. Lease approval by Lender
shall be predicated upon, among other things: (i) current tenant financial
information in sufficient detail to assess experience and creditworthiness of
the tenant, (ii) creditworthiness of the tenant, (iii) form and content of the
lease agreement including, among other things, a tenant's obligation to provide,
at least annually, financial information on the condition of the tenant to
Borrower, (iv) a lease term of not less than five (5) years without any right
for the tenant to cancel such lease prior to the end of the fifth (5th) lease
year, and (v) a minimum triple net rent or gross rent acceptable to Lender in
its sole and absolute discretion.
2.5 Approved Plans: The Tranche A Approved Plans and the Tranche B
Approved Plans.
2.6 Approved Sales Contract: Any sales contract for any Unit shall be
deemed an Approved Sales Contract provided all of the following conditions are
met: (i) the sales contract used in the sale of the condominium unit must be the
form which has been approved by the Lender; (ii) the contract price is no less
than ninety percent (90%) of the applicable Pro Forma List Price herein; (iii)
sales commissions and other deductions from the sale price, including but not
limited to real estate tax prorations, shall not exceed eight percent (8%) of
the sale price; (iv) the sales contract must require a non-refundable ▇▇▇▇▇▇▇
money deposit of at least five percent (5%) of the sale price (or such lesser
percentage with respect to sales involving FHA/VHA or other applicable
government sponsored financing, as approved by Lender in its reasonable
discretion), and such deposit shall be either: (a) held in an account at Lender,
or (b) be evidenced
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by a copy of the associated check, and by written confirmation from the real
estate agent who holds the ▇▇▇▇▇▇▇ money deposit in escrow; (v) all condominium
unit buyers' contingencies in the sales contract must be waived in writing by
the buyer; (vi) the sales contract (if it relates to a Unit in the Plaza 32
Project) must require a delivery date no sooner than the expected completion
date of the Plaza 32 Project as determined by Lender in its sole but reasonable
discretion, with a minimum ninety (90) day grace period before the Borrower is
in default of such contract; and (vii) the purchaser under the sales contract
must be a bona fide independent third party purchaser.
2.7 Architects: (a) ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Ltd. for the Erie Tower Project
and the Plaza 32 Project; (b) Booth/▇▇▇▇▇▇ & Associates, Ltd. for the Capitol
Project; and (c) ▇▇▇▇▇▇▇▇▇▇ Associates Architects for the Arthouse I Project.
2.8 Architect's Contracts: The Erie Tower Architect's Contract, the
Capitol Architect's Contract, the Arthouse I Architect's Contract and the Plaza
32 Architect's Contract.
2.9 Arthouse I Architect's Contract: Agreement between Owner and
Architect dated October 10, 1997 between Sangamon, as assignee of Chicago Urban
Properties, Inc. and ▇▇▇▇▇▇▇▇▇▇ Associates Architects.
2.10 Arthouse I Building: As defined in the Recitals.
2.11 Arthouse I Construction Contract: None.
2.12 Arthouse Land: As defined in the Recitals.
2.13 Arthouse I Project: As defined in the Recitals.
2.14 Arthouse II Parcel: As defined in the Recitals.
2.15 Blocked Account(s): An Operating Account of any Borrower established
with Lender.
2.16 Buildings: The Erie Tower Building, the Capitol Building, the
Arthouse I Building and the Plaza 32 Building.
2.17 Capitol Architect's Contract: Standard Form of Agreement between
Owner and Architect dated August 21, 1997 between Capitol, as assignee of
Chicago Urban Properties, Inc. and Booth/▇▇▇▇▇▇ & Associates, Ltd.
2.18 Capitol Building: As defined in the Recitals.
2.19 Capitol Construction Contract: None.
2.20 Capitol Land: As defined in the Recitals.
2.21 Capitol Project: As defined in the Recitals.
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2.22 Collateral: The Projects, the Collateral CD, and any and all other
property (real, personal, or intangible) in which a security interest has been
granted to secure the Secured Obligations.
2.23 Collateral CD: That certain certificate of deposit in the principal
amount of Eight Hundred Thousand Dollars ($800,000) which has been pledged to
and for the benefit of Lender pursuant to the terms of the Pledge Agreement,
which Collateral CD may be released from such pledge in accordance with the
terms of the Pledge Agreement.
2.24 Commitment Letter: That certain loan commitment letter dated June 7,
1999, executed by Borrowers and Lender.
2.25 Completion Date: The Maturity Date.
2.26 Construction: As defined in Section 6.16 hereof.
2.27 Construction Contracts: The Erie Tower Construction Contract, the
Capitol Construction Contract, the Arthouse I Construction Contract and the
Plaza 32 Construction Contract.
2.28 Construction Disbursement: Disbursements made by Lender to Borrowers
to pay Hard Costs and Soft Costs, excluding the Initial Disbursement.
2.29 Construction Escrow Agreement: The Construction Escrow Agreement
described in Section 5.1(p).
2.30 Consultant: LM Consultants, Inc., who shall act solely as an advisor
to Lender with respect to the Projects. Lender may elect to consider the
assessments and/or opinions of Consultant, or may disregard such information.
2.31 Contractors: The contractors under the Construction Contracts. The
Contractors may not be Affiliates of Borrowers, prior to or during the term of
the Loan.
2.32 Costs: Any and all reasonable costs and expenses (including, without
limitation, the reasonable fees and expenses of any in-house/outside counsel,
accountants, appraisers or other professionals) incurred by Lender at any time,
in connection with: (i) the preparation, negotiation, execution and
administration of this Agreement and all other Loan Documents and any agreement
with any participant, including but not limited to reasonable fees of Lender's
attorneys (for the purposes of this Agreement, attorney's fees shall include the
fees of in-house counsel based upon an hourly rate competitive with mid-sized
law firms); (ii) the preparation, negotiation and execution of any amendment or
modification of this Agreement or the other Loan Documents; (iii) the custody,
preservation, use or operation of, or the sale of, collection from or other
realization upon the Collateral; (iv) the exercise or enforcement of any of the
rights of Lender hereunder or under any other Loan Document; (v) any failure or
alleged failure by Borrowers to perform or observe any of the provisions of this
Agreement or any other Loan Document; (vi) any litigation, contest, dispute,
suit, proceeding or action (whether instituted by Lender, Borrowers or any other
Person) in any way relating to this Agreement, the other Loan Documents, the
Secured Obligations, the Collateral, Borrowers' affairs or any Affiliate's
affairs;
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(vii) any reasonable consultation between Lender and its accountants, attorneys
or agents relating to the provisions of this Agreement or any other Loan
Document and the performance by Borrowers under this Agreement or any other Loan
Document; (viii) any evaluation or appraisal of the Collateral after the
occurrence of an Unmatured Default, whether or not declared or thereafter cured;
(ix) any attempt to enforce any rights of Lender against Borrowers or any other
Person which may be obligated to Lender by virtue of this Agreement or any other
Loan Document; (x) performing any of the obligations (to the extent authorized
under the Loan Documents) relating to or payment of any of Borrowers'
obligations; (xi) amounts necessary or appropriate to protect the lien or
priority of the Mortgages or of any of the other Loan Documents or to pay,
settle, compromise or contest any lien or claim of lien against the Collateral
or any part thereof (to the extent authorized under the Loan Documents), and
(xii) the payment or performance of any of the obligations of Borrowers set
forth in this Agreement or any of the other Loan Documents, including without
limitation all amounts necessary or appropriate to complete the construction of
the Projects in accordance with the applicable Plans and Specifications (to the
extent authorized under the Loan Documents).
2.33 Default Interest Rate: An annual rate of interest equal to four
percent (4%) above the Interest Rate then in effect under the Note.
2.34 Disbursement: Any advance or disbursement of Loan proceeds made
pursuant to this Agreement, as defined in Section 4.2.
2.35 Environmental Laws: The definition ascribed to this term in the
Environmental Indemnity Agreements (identified in Section 6.5), which definition
is incorporated herein by reference.
2.36 Erie Tower Architect's Contract: Standard Form of Agreement between
Owner and Architect dated August 1, 1996 between Erie, as assignee of Chicago
Urban Properties, Inc. and ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Ltd.
2.37 Erie Tower Building: As defined in the Recitals.
2.38 Erie Tower Construction Contract: None.
2.39 Erie Tower Land: As defined in the Recitals.
2.40 Erie Tower Project: As defined in the Recitals.
2.41 Event of Default: As defined in Section 13 hereof.
2.42 Extras: Any labor, material, change in the Approved Plans or other
item which will result in an increase in the applicable line item set forth in
the applicable Approved Budget, excluding changes deemed to be Upgrades.
2.43 Gross Sales Proceeds: The total purchase price for an individual
Unit and any parking spaces sold appurtenant thereto, including Extras and
Upgrades (less the actual costs of such Extras and Upgrades).
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2.44 Guarantors: Sundance Homes, Inc., an Illinois corporation, and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, together with any other Person who has agreed to guaranty
payment or performance of the Secured Obligations.
2.45 Guaranty Agreements: The Guaranty Agreements described in Section 6.4
hereof.
2.46 Hard Costs: Any and all costs directly related to and incurred in
connection with the construction of the Projects in accordance with the Approved
Plans, including, without limitation, the cost of acquisition of the Land and
the cost of all labor, materials and equipment incurred pursuant to the
Construction Contracts and any subcontract, but excluding any fees for
architectural and engineering services.
2.47 Improvements: The Buildings including the improvements for the
Buildings on site in accordance with the Approved Plans.
2.48 Inconsequential Variances: As defined in Section 6.16(c) hereof.
2.49 Initial Disbursement: The initial disbursement of Loan proceeds, to
be made in accordance with Section 4.4, and which shall be made to pay certain
Soft Costs, including, without limitation, Costs and Loan Expenses and such Hard
Costs permitted hereunder.
2.50 Initial Disbursement Date: The date of the Initial Disbursement of
Loan proceeds, whether into an escrow at the direction of Borrowers or to any
other Person, including, but not limited to Disbursements by Lender to itself to
pay Costs or Loan Expenses.
2.51 Insignificant Setback: As defined in Section 6.16 hereof.
2.52 Interest Reserve: As defined in Section 4.3(a) hereof.
2.53 Inventory: All Units which have not yet been conveyed to purchasers
thereof, plus available parking spaces.
2.54 Land: The Erie Tower Land, the Capitol Land, the Arthouse Land and
the Plaza 32 Land.
2.55 Laws: All laws, statutes, ordinances, rules, decrees, judgments,
orders, and/or regulations of any kind whatsoever (including without limitation
those relating to building, zoning, health, safety, life code, environmental
protection, access, environmental barriers, public highway and public access)
and specifically including without limitation all Environmental Laws, the
Americans with Disabilities Act and similar state and local laws.
2.56 Loan: The Tranche A Loan and the Tranche B Loan.
2.57 Loan Documents: All documents now or hereafter executed by Borrowers
evidencing or securing all or any part of the indebtedness evidenced by the
Note, including, without limitation, the Commitment Letter, the Note, the
Mortgages and the Guaranty
7
Agreements, the Pledge Agreements, and all renewals, modifications, amendments
and supplements of the foregoing.
2.58 Loan Expenses: The Loan Expenses as defined in Section 11 hereof.
2.59 Maturity Date: The Maturity Date as defined in the Note.
2.60 Maximum Disbursement Amount: Sixty-One Million One Thousand One
Hundred Eighty-Nine Dollars ($61,001,189).
2.61 Maximum Outstanding Balance: Twenty-Five Million Five Hundred
Thousand Dollars ($25,500,000).
2.62 Modifications: Any extension, renewal, substitution, replacement,
supplement, amendment or modification of any agreement, document or instrument,
whether or not contemplated in the original agreement, document or instrument.
2.63 Mortgages: The Mortgages described in Section 6.2 hereof.
2.64 Net Sales Proceeds: The total purchase price for an individual Unit
and any parking spaces sold appurtenant thereto, including Extras and Upgrades
(less the actual costs of such Extras and Upgrades), less customary independent
third party broker's fees, real estate tax prorations, title and escrow charges,
transfer taxes and reasonable attorneys' fees.
2.65 Note: The Promissory Note described in Section 6.1 hereof.
2.66 Operating Accounts: As defined in Section 10.21 hereof.
2.67 Organizational Documents: Of any Person shall mean its articles of
incorporation, by-laws, certificate of existence, operating agreement,
shareholders' agreement, certificate of partnership, certificate of limited
partnership, partnership agreement, articles of organization, or similar
documents or agreements governing its management and the rights, duties and
privileges of its equity owners.
2.68 Pending Contract Price: The pending contract price for any Unit as
set forth in Exhibit "E" attached hereto.
2.69 Permits: All building, zoning, safety, health, fire, water district,
sewage and environmental protection agency permits and all other permits or
licenses or appraisals which are required at any time and from time to time, by
any governmental authority having jurisdiction over Borrowers, the construction
of the Improvements and the use, occupancy, management and/or operation of the
Projects as residential and/or retail buildings.
2.70 Permitted Exceptions: Those exceptions to title listed on Exhibit
"B" attached hereto.
2.71 Person: Any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution,
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entity, party or government (whether national, federal, state, county, city,
municipal or otherwise, including without limitation any instrumentality,
division, agency, body, or department thereof).
2.72 Plans and Specifications: With respect to the Tranche A Projects,
the Tranche A Approved Plans, and with respect to the Tranche B Project, the
Preliminary Plans, if Lender has not yet accepted the Tranche B Approved Plans,
and the Tranche B Approved Plans after such acceptance.
2.73 Plaza 32 Architect's Contract: Standard Form of Agreement between
Owner and Architect dated February 10, 1997 between Marathon, as assignee of
Chicago Urban Properties, Inc. and ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Ltd., as amended by
Amendment to Agreement between Owner and Architect dated November 11, 1997.
2.75 ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇: As defined in the Recitals.
2.76 Plaza 32 Construction Contract: Agreement between Owner and
Contractor dated September 5, 1998 between Marathon and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇,
Inc.
2.77 Plaza 32 Land: As defined in the Recitals.
2.78 Plaza 32 Project: As defined in the Recitals.
2.79 Pledge Agreements: Those certain Pledge Agreements of even date
herewith from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in favor of Lender and from each Borrower with
respect to such Borrower's Operating Accounts.
2.80 Preliminary Plans: The Preliminary Plans as defined in Section 6.18
hereof.
2.81 Prior Covered Cost Overruns: As defined in Section 7.6 hereof.
2.82 Pro Forma List Prices: The pro forma list prices for the Units as
set forth in Exhibit "E" attached hereto.
2.83 Projects: The Tranche A Projects and the Tranche B Project.
2.84 Residential Units: Any condominium unit contained within the
Projects which has been designated for use as a residential condominium unit.
2.85 Retail Units: Any condominium unit contained within the Projects
which has been designated for use as a retail condominium unit.
2.86 Retainage(s): As defined in Section 7.2 hereof.
2.87 Schedule: As defined in Section 6.16 hereof.
2.88 Secured Obligations: The indebtedness evidenced by the Note and/or
this Agreement, together with all obligations, liabilities, covenants and
agreements of Borrowers and/or Guarantors to Lender arising under or relating to
this Agreement and/or all other Loan
9
Documents, whether now existing or hereafter arising, absolute or contingent,
whether contemplated herein, or in any other Loan Document or any Modification
thereto or thereof.
2.89 Soft Costs: All costs incurred or to be incurred in connection with
the Projects other than Hard Costs, including, without limitation, interest on
the Loan, all fees incurred in connection with the Loan and payable to Lender,
commissions, appraisal fees, architectural and engineering fees, title and
recording charges, special counsel fees, real estate tax and Interest Reserves,
real estate taxes and special assessments becoming due and payable during the
period of construction, the Loan Expenses and those costs (other than Hard
Costs) set forth on the Approved Budgets.
2.90 Subcontract(s): All written agreements pursuant to which
subcontractors agree to perform various services in connection with the
construction of the Improvements.
2.91 Subordinated Debt: As defined in Section 4.3 hereof.
2.92 Surveys: As defined in Section 6.10 hereof.
2.93 Title Company: Ticor Title Insurance Corporation.
2.94 Title Policy: Collectively, the title policies and endorsements to
be delivered pursuant to Section 6.10 hereof.
2.95 Tranche A Approved Plans: The Tranche A Approved Plans as defined in
Section 6.18 hereof.
2.96 Tranche B Approved Plans: The Tranche B Approved Plans as defined in
Section 6.18 hereof.
2.97 Tranche A Approved Project Budget: The Tranche A Approved Project
Budget defined in Section 6.19 hereof.
2.98 Tranche B Approved Project Budget: The Tranche B Approved Project
Budget defined in Section 6.19 hereof.
2.99 Tranche A Loan: As defined in Section 4.3(a) hereof.
2.100 Tranche B Loan: As defined in Section 4.3(b) hereof.
2.101 Tranche A Preliminary Budget: The Tranche A Preliminary Budget as
defined in Section 6.19 hereof.
2.102 Tranche B Preliminary Budget: The Tranche B Preliminary Budget as
defined in Section 6.19 hereof.
2.103 Tranche A Projects: The Erie Tower Project, the Capitol Project and
the Arthouse I Project.
2.104 Tranche B Project: The Plaza 32 Project.
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2.105 Units: The Residential Units and the Retail Units.
2.106 Unmatured Default: Any event which with the passage of time, the
giving of notice or both would be an Event of Default hereunder or under any
other Loan Document.
2.107 Upgrades: Any special feature required by a purchaser of a Unit in
excess of Borrower's standard unit specifications/sales package.
2.108 Work: The labor and materials to be furnished for the construction
of the Improvements.
SECTION 3
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lender to execute this Agreement and to make the Loan (as more
fully described in Section 4 below), Borrower represents and warrants as
follows:
3.1 Title.
(a) Erie has good, marketable and indefeasible fee simple title to the
Erie Tower Project free of all liens, claims and encumbrances, except the
Permitted Exceptions applicable thereto.
(b) Capitol has good, marketable and indefeasible fee simple title to
the Capitol Project free of all liens, claims and encumbrances, except the
Permitted Exceptions applicable thereto.
(c) Sangamon has good, marketable and indefeasible fee simple title to
the Arthouse I Project (including the Arthouse II Parcel) free of all
liens, claims and encumbrances, except the Permitted Exceptions applicable
thereto.
(d) Marathon has good, marketable and indefeasible fee simple title to
the Plaza 32 Project free of all liens, claims and encumbrances, except the
Permitted Exceptions applicable thereto.
3.2 Organization. Each Borrower (i) is an Illinois corporation, duly
organized, validly existing and in good standing under the laws of the State of
Illinois and has complied with all conditions prerequisite to its doing business
in the State of Illinois; (ii) has the power and authority to own its properties
and to carry on its business as now being conducted; (iii) is qualified to do
business in every jurisdiction in which the nature of its business or its
properties makes such qualification necessary; and (iv) is in compliance with
all Laws applicable to it. The Organizational Documents of each Borrower, copies
of which have been furnished to Lender, are in full force and effect, have not
been amended since the date of delivery to Lender, and are true, correct and
complete copies of all documents relating to such Borrower's creation and
governance.
3.3 Projects. Subject to the terms and conditions contained in this
Agreement, Borrowers intend to cause the construction of the Improvements on the
Land.
11
3.4 Buildings. The Buildings are or shall be as depicted on the
applicable Approved Plans.
3.5 Authority. Borrowers have full power and authority to execute and
deliver this Agreement and the other Loan Documents to be executed and delivered
by Borrowers pursuant to this Agreement, and to perform its obligations
hereunder and thereunder. Upon the execution and delivery hereof and thereof,
this Agreement and all such Loan Documents will be valid, binding upon and
enforceable against Borrowers in accordance with their respective terms. The
execution and delivery by Borrowers of this Agreement and the other Loan
Documents to be executed and delivered by Borrowers do not and will not
contravene, conflict with, violate or constitute a default under the
Organizational Documents of Borrowers or any applicable Law, or the material
provisions of any agreement, indenture or instrument to which any Borrower is a
party, by which any Borrower or any of its property is bound, or which is
binding upon or applicable to the Projects or any portion thereof.
3.6 Litigation. There is no condition, event or circumstance existing, or
any litigation, arbitration, governmental or administrative proceedings,
actions, examinations, claims or demands pending nor, to Borrowers' knowledge,
threatened: (i) materially and adversely affecting any Borrower, any Project or
the use or operation thereof, or (ii) which would prevent any Borrower from
complying with or performing its respective obligations under this Agreement,
the Note or any of the other Loan Documents within the time limits set forth
therein for such compliance or performance, and no basis for any such matter
exists, or (iii) which would prevent any Borrower from owning, managing, or
leasing its Project as a residential and/or retail building.
3.7 Utilities. The Buildings have, or upon completion of the Work, will
have all utilities necessary for the construction, use, and occupancy thereof as
the Buildings described in the Plans and Specifications. All requirements for
unrestricted use of all such utilities have been (or upon completion shall be)
fulfilled.
3.8 Permits and Licenses. All Permits which are required by any
governmental authority for the construction of the Improvements and the use,
occupancy and operation of the Projects as residential and/or retail projects
will be obtained and maintained in full force and effect by Borrowers when and
as required by such governmental authority.
3.9 Financial Statements. All financial statements submitted to Lender
relating to Borrowers, the Projects and Guarantors, are true and correct in all
material respects, fairly present the financial condition of the person or
entity to which they pertain and the other information therein described, and do
not contain any untrue statement of a material fact or omit to state a fact
material to the financial statement submitted or this Agreement. No adverse
change has occurred in the financial condition of Borrowers, the Projects or, to
Borrowers' knowledge, Guarantors, since the dates of said financial statements.
3.10 Compliance with Laws. The Projects do not, and upon completion of
the construction of the Improvements the use, occupancy and operation thereof
will not, violate (a) any Laws applicable to the Projects, the Projects'
construction, use, occupancy or operation, or (b) any material provisions of
contractual arrangements with third parties or any covenants,
12
conditions, easements, rights of way or restrictions of record. Neither
Borrowers nor any agent of Borrowers has received any notice, written or
otherwise, alleging any such violation. Upon completion of the construction of
the Improvements in accordance with the Plans and Specifications, the Projects
will be in full compliance with all then applicable zoning requirements,
including, without limitation, those relating to setbacks, height, parking,
floor area ratio and percentage of land coverage and will be in accordance with
any and all Permits. Except to the extent provided in the Permitted Exceptions,
no right to any off-site facilities is necessary to insure compliance by the
Projects with all environmental protection, public highway, water use, zoning,
building, fire, health, safety or similar statutes, laws, ordinances, codes,
rules, regulations, orders and decrees.
3.11 Construction Contracts.
(a) With respect to the Tranche A Projects, each Borrower, as owner,
and the applicable Contractor have entered into a Construction Contract
pursuant to which such Contractor will construct the applicable Project.
Borrowers have delivered to Lender, and Lender has approved, true, complete
and correct certified copies of the Construction Contracts related to the
Tranche A Projects. The Construction Contracts related to the Tranche A
Projects are in full force and effect, have not been amended and no default
exists thereunder by any party thereto.
(b) With respect to the Tranche B Project, Marathon, as owner, and the
Contractor for the Plaza 32 Project have entered into the Plaza 32
Construction Contract pursuant to which such Contractor will construct the
Plaza 32 Project. Marathon has delivered to Lender for its review and
approval, a true, complete and correct certified copy of the Plaza 32
Construction Contract. The Plaza 32 Construction Contract is in full force
and effect, has not been amended and no default exists thereunder by any
party thereto. If Lender elects, in its sole discretion, to make the
Initial Disbursement without approving and accepting the final Plaza 32
Construction Contact, then, prior to any Construction Disbursement related
to the Plaza 32 Project or additional Disbursements hereunder related to
the Plaza 32 Project, Marathon shall cause to be prepared and delivered to
Lender for Lender's review and approval, which approval may be withheld in
Lender's sole discretion, a guaranteed maximum or fixed price construction
contract with an independent third party Contractor in form and amount
acceptable to Lender in its sole and absolute discretion, with the
applicable Contractor. Lender's approval of the Plaza 32 Construction
Contract shall be evidenced by a letter from Lender to Borrowers.
(c) The Construction Contracts (including the Plaza 32 Construction
Contract once it has been approved by Lender) will not be amended or
modified in any material respect without the prior written consent of
Lender, which consent may be withheld in Lender's sole discretion.
3.12 Architect's Contracts.
(a) With respect to the Tranche A Projects, each Borrower, as owner,
and the applicable Architect have entered into an Architect's Contract
pursuant to which such Architect has agreed to perform architectural
services in connection with the design and
13
construction of the Improvements related to the Tranche A Projects.
Borrowers have delivered to Lender, and Lender has approved, true, complete
and correct certified copies of the Architect's Contracts related to the
Tranche A Projects. The Architect's Contracts related to the Tranche A
Projects are in full force and effect, have not been amended and no default
exists thereunder by any party thereto.
(b) With respect to the Tranche B Project, Marathon, as owner, and
the Architect for the Plaza 32 Project have entered into an Architect's
Contract pursuant to which such Architect has agreed to perform
architectural services in connection with the design and construction of
the Improvements related to the Tranche B Project. Marathon has delivered
to Lender for its approval, a true, complete and correct certified copy of
the Plaza 32 Architect's Contract. The Plaza 32 Architect's Contract is in
full force and effect, has not been amended and no default exists
thereunder by any party thereto. If Lender elects, in its sole discretion,
to make the Initial Disbursement without approving and accepting the final
Plaza 32 Architect's Contract, then, prior to any Construction Disbursement
related to the Plaza 32 Project or additional Disbursements hereunder
related to the Plaza 32 Project, Marathon shall cause to be prepared and
delivered to Lender for Lender's review and approval, which approval may be
withheld in Lender's sole discretion, an architect's contract with
applicable Architect. Lender's approval of the Plaza 32 Architect's
Contract shall be evidenced by a letter from Lender to Borrowers.
(c) The Architect's Contracts (including the Plaza 32 Architect's
Contract once it has been approved by Lender) will not be amended or
modified in any material respect without the prior written consent of
Lender, which consent may be withheld in Lender's sole discretion.
3.13 Subcontracts.
(a) Borrowers shall provide Lender with a schedule setting forth all
contracts, purchase orders or agreements entered into by any Borrower
(other than the Architects' Contracts and the Construction Contracts) with
respect to the Land, the Improvements, the Projects (or any portion
thereof) and the development, construction, operation, maintenance,
management, leasing or transfer thereof. Such schedule may be in the form
of a Sworn Owner's Statement, if such form accurately sets forth the
information required pursuant to this Section 3.13(a). Except as disclosed
in Sections 3.11 and 3.12 and as set forth on any schedule submitted
pursuant to this subsection, Borrowers have not entered as of the date
hereof, and will not enter, into any contracts with Contractors, Architects
or any other contractors, subcontractors or other parties for the
performance of services in connection with the construction of, or with
respect to, the Projects or for the operation, maintenance, management,
leasing or transfer of the Projects or any portion thereof.
(b) The Contractors will enter into the Subcontracts using their form
contracts, which form contracts shall provide that the subcontractors will
recognize and perform under such Subcontracts for Borrowers, as owner, and
their successors and assigns in the event of default by the Contractor
under the Subcontract or the applicable
14
Construction Contract. All subcontractors and materialmen shall be
acceptable to Lender in Lender's sole discretion. Borrowers will provide
trade references and current financial information for each and every
subcontractor or materialman, if requested by Lender.
(c) Upon Lender's request, Borrowers shall provide Lender with a
complete schedule of: (i) all contracts, purchase orders, Subcontracts and
agreements entered into by Contractors in connection with the Land, the
Improvements and the Projects, (ii) the amount of the contract, (iii) a
detailed description of the Work to be performed, (iv) any contract amount
paid prior to the Initial Disbursement Date, (v) the name of all
materialmen by whom materials will be furnished to the Contractors, (vi)
the amounts due or to become due for each materialman, (vii) information
identifying the performance bond obtained or to be obtained by such
Subcontractor, and (viii) a description of all Work or materials for which
Subcontracts have not yet been let. Such schedule may be in the form of the
Contractor's Sworn Statement, if such form accurately sets forth the
information required pursuant to this Section 3.13.
3.14 UCC Financing Statements. There shall be no UCC financing statements
in effect which pertain to any rights in any personal property or fixtures now
or hereafter situated on the Projects, as to any personal property or fixtures
owned by Borrowers, other than those filed and recorded or to be filed or
recorded by Lender.
3.15 Single Purpose Entity. At all times during the term of this
Agreement, Borrowers represent, warrant, covenant and agree to ensure at all
times that each Borrower operates and maintains its status as an independent
entity, separate and distinct from all other entities, that:
(a) each Borrower shall own no property or assets, other than the
portion of the Land owned by such Borrower, the Improvements thereon,
leases thereof, contract rights relating thereto, and other personal and
intangible property used or useful solely in connection with the portion of
the Project owned by such Borrower;
(b) Borrowers shall not enter into any agreement to provide services
to any third party;
(c) Borrowers' Organizational Documents shall limit its purpose to
owning, operating, managing, improving, leasing, selling, mortgaging,
financing, refinancing and maintaining the Projects and other lawful
activities incidental thereto; provided that in the event Borrowers'
Organizational Documents do not so provide, Borrowers shall have thirty
(30) days following the Initial Disbursement to so modify Borrowers'
Organizational Documents;
(d) Borrowers shall not engage in any business or activity other than
the acquisition, construction, ownership, operation or maintenance of the
Projects, and other lawful activities incidental thereto;
15
(e) Borrowers shall not acquire or own any material asset other than
the Projects and incidental personal property as may be necessary for the
operation of the Projects;
(f) Borrowers shall not merge into or consolidate with any Person or
dissolve, terminate or liquidate, in whole or in part, transfer or
otherwise dispose of all or substantially all of its assets or change its
legal structure, without in each case Lender's consent;
(g) Borrowers shall not own any subsidiary or make any investment in
or acquire the obligations or securities of any other Person;
(h) Borrowers shall not co-mingle its assets with the assets of any
other Person;
(i) Borrowers shall not fail to pay its debts and liabilities from its
own assets or funds available from the Loan;
(j) Borrowers shall not fail to correct any known misunderstandings
regarding the separate identity of its member or managers;
(k) Borrowers shall not hold itself out to be responsible for the
debts of another Person;
(l) Borrowers shall maintain books and records and bank accounts
separate from those of any other Person;
(m) Borrowers shall maintain its assets in such a manner that is not
costly or difficult to segregate, identify or ascertain such assets;
(n) Borrowers shall hold regular entity meetings, as appropriate, to
conduct its business and observe all other appropriate entity formalities;
(o) Borrowers shall hold itself out to creditors and the public as a
legal entity separate and distinct from any other Person;
(p) Borrowers shall prepare separate tax returns and financial
statements, or if part of a consolidated group, then it will be shown as a
separate member of such group;
(q) Borrowers shall allocate and charge fairly and reasonably any
common employee or overhead shared with Affiliates; and
(r) Borrowers shall not assume, guarantee, or pay the debts or
obligations of any other Person.
3.16 Hazardous Material. Borrowers represent, warrant and covenant that,
to the best of their knowledge and after due inquiry, the Projects are in
compliance with all Environmental
16
Laws; that there are no conditions existing currently during the term of the
Note that require or are likely to require cleanup, removal or other remedial
action pursuant to any Environmental Laws; that Borrowers are not a party to any
litigation or administrative proceeding contemplated or threatened which would
assert or allege any violation of any Environmental Laws; that neither the
Projects nor Borrowers are subject to any judgment, decree, order or citation
related to or arising out of any Environmental Laws; and that no permits or
licenses are required under any Environmental Laws regarding the Projects.
Borrowers covenant and agree to comply with all applicable Environmental Laws;
to provide to Lender immediately upon receipt copies of any correspondence,
notice, pleading, citation, indictment, complaint, order or other document
received by any Borrower asserting or alleging a circumstance or condition that
requires or may require a cleanup, removal or other remedial action under any
Environmental Laws, or that seeks criminal or punitive penalties for an alleged
violation of any Environmental Laws; and to advise Lender in writing as soon as
such Borrower becomes aware of any condition or circumstance which makes any of
the representations or statements contained in this Section 3.16 incomplete or
inaccurate. In the event Lender determines in its reasonable discretion that
there is any evidence that any such circumstance might exist, whether or not
described in any communication or notice to either Borrowers or Lender,
Borrowers agree, at their own expense and at the request of Lender, to permit an
environmental audit to be conducted by Lender or an independent agent selected
by Lender. This provision shall not relieve Borrowers from conducting their own
environmental audits or taking any other steps necessary to comply with any
Environmental Laws. If, in the reasonable opinion of Lender, there exists any
uncorrected violation by any Borrower of an Environmental Law or any condition
which requires or may require any cleanup, removal or other remedial action
under any Environmental Laws, and such cleanup, removal or other remedial action
is not completed within sixty (60) days from the date of written notice from
Lender to Borrowers, the same shall, at the option of Lender, constitute a
default hereunder, without further notice or cure period.
3.17 Continuation of Representations and Warranties. All representations
and warranties which have been made by Borrowers shall be true at and as of the
time of each Disbursement of the Loan except as Borrowers may advise Lender in
writing from time to time and as may be acceptable to Lender.
SECTION 4
AGREEMENT TO LOAN
------------------
4.1 Agreement to Make Loan. Lender agrees to lend to Borrowers and
Borrowers agree to borrow from Lender the Loan, to be used only for the
refinance of existing third party indebtedness, and for the construction of the
Improvements, upon the terms and provisions and subject to the conditions
contained in this Agreement and the Note.
4.2 Loan Disbursement. Lender's agreement to make the Loan is made by
Lender in reliance upon the representations, warranties and agreements contained
herein and upon the documents, exhibits, schedules and other information
furnished by Borrowers to Lender in connection with this Agreement. Subject to
and upon the terms and conditions set forth in this Agreement, Lender agrees to
lend to Borrowers, from time to time such sums as may be requested by Borrowers,
the total of which shall neither exceed at any one time the Maximum Outstanding
Balance of Twenty-Five Million Five Hundred Thousand Dollars ($25,500,000) nor
17
shall the total amount disbursed under the Loan exceed the Maximum Disbursement
Amount of Sixty-One Million One Thousand One Hundred Eighty-Nine Dollars
($61,001,189). In this Agreement, all loans and disbursements made by Lender
pursuant to this Agreement are collectively called the Loan, and each
disbursement made by Lender is herein called a "Disbursement". It is
contemplated that the Loan will be disbursed in a series of Disbursements as
construction progresses in compliance with the terms and conditions set forth
below.
4.3 Allocation of Loan Proceeds. The Proceeds of the Loan shall be
disbursed as follows:
(a) Tranche A Loan. The Tranche A Loan (the "Tranche A Loan") shall
include a portion of the Maximum Disbursement Amount of Thirty-One Million
Six Hundred Twenty-Three Thousand Dollars ($31,623,000), to be disbursed as
follows:
(i) Nineteen Million Two Hundred Seven Thousand Eight
Hundred Fifty Dollars ($19,207,850): to payoff all remaining
debt to LaSalle National Bank (after the sale of Sundance Homes,
Inc.'s suburban assets to Centex Homes, a Nevada general
partnership, with the remainder (up to a maximum amount of Five
Million Dollars ($5,000,000)) available to pay down a portion of
the approximately Six Million Six Hundred Ninety-Three Thousand
Dollars ($6,693,000) in subordinated debt (the "Subordinated
Debt") owed by Borrowers to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
(ii) One Million Seven Hundred Seventy-Six Thousand Two Hundred
Seventy-One and 31/100 Dollars ($1,776,271.31): to fund all remaining
actually incurred hard and Soft Costs of the Erie Tower Project as
approved by Lender from time to time in accordance with the Tranche A
Approved Project Budget.
(iii) One Million Seven Hundred Forty-Eight Thousand Three
Hundred Seventy-Seven and 87/100 Dollars ($1,748,377.87): to fund all
remaining actually incurred hard and Soft Costs of the Arthouse I
Project as approved by Lender from time to time in accordance with the
Tranche A Approved Project Budget.
(iv) Eight Million Two Hundred Twenty-Seven Thousand Seven
Hundred Sixty-Four Dollars ($8,227,764): to be used to fund all
remaining actually incurred Hard and Soft Costs of the Capitol Hill
Project as approved by Lender from time to time in accordance with the
Tranche A Approved Project Budget.
(v) One Million Seven Hundred Fifty Thousand Dollars
($1,750,000): to be used to fund the commitment fee and closing fee
specified in Section 11 hereof, and the interest reserve for the
Tranche A Loan and the Tranche B Loan (the "Interest Reserve").
(b) Tranche B Loan. The Tranche B Loan (the "Tranche B Loan") shall
include a portion of the Maximum Disbursement Amount of Twenty-Eight
Million Four Hundred Forty-Two Thousand Dollars ($28,442,000): to be used
to completely fund the
18
actually incurred Hard and Soft Costs of the Tranche B Project as approved
by Lender from time to time in accordance with the Tranche B Approved
Project Budget.
(c) The proceeds of the Tranche A Loan allocated to the Tranche A
Projects, as further specified in the Tranche A Approved Project Budget,
shall be reduced accordingly if project costs for a Project are less than
those estimated in the Tranche A Approved Project Budget. The Tranche B
Loan shall be reduced accordingly if the Tranche B Project costs are less
than those estimated in the Tranche B Approved Project Budget. Any
reductions pursuant to the preceding sentences resulting from cost savings
in hard cost line items for any of the Tranche A Projects may be
reallocated to fund hard costs line items for any of the other Tranche A
Projects.
(d) Notwithstanding the allocations set forth above, it is expressly
understood that the Loan is a revolving credit facility which shall not
exceed at any one time, the Maximum Outstanding Balance of Twenty-Five
Million Five Hundred Thousand Dollars ($25,500,000).
4.4 Initial Disbursement. In Lender's sole discretion, the Initial
Disbursement may be made on the date hereof to be utilized by Borrowers solely
for the purpose of paying certain Loan Expenses, Costs and to pay off the
outstanding portion of Borrowers' existing third party indebtedness related to
the Projects, all as more fully described in the Tranche A Approved Project
Budget and the Tranche B Approved Project Budget. Further, a portion of the
Initial Disbursement in the amount of Eight Hundred Thousand Dollars ($800,000)
may be used by Borrowers for the purpose of paying to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ a
portion of the Subordinated Debt owed by Borrowers to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
provided no further portion of the Subordinated Debt may be repaid to ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ until Lender has released its security interest in the Collateral CD
in accordance with the terms of the Pledge Agreement. The balance of the Loan
will be available for disbursement from time to time upon completion of each
portion of the construction in accordance with the terms of this Agreement.
Unless otherwise determined by Lender in Lender's sole discretion, all
subsequent Disbursements will be made through an escrow account established with
the Title Company pursuant to the Construction Escrow Agreement or other
documentation satisfactory in form and substance to Lender, all of the expenses
of which will be paid by Borrowers.
4.5 Subsequent Disbursements. Disbursements of the Loan after the Initial
Disbursement will be made periodically by Lender upon satisfaction of the
conditions precedent set forth in Section 5.1 and in accordance with the
provisions of this Agreement. Borrowers hereby covenant that all conditions
precedent to the first Construction Disbursement for the Plaza 32 Project shall
be satisfied and first Construction Disbursement for the Plaza 32 Project shall
occur on or before October 1, 1999.
4.6 Loan Purpose. Borrowers acknowledge and agree that the Loan is a
business loan and is extended solely and exclusively for the purposes of
providing financing for the Projects, subject to the terms and conditions of
this Agreement and for no other purpose whatsoever.
19
SECTION 5
CONDITIONS PRECEDENT TO DISBURSEMENT
------------------------------------
5.1 Conditions to Disbursement. The obligation of Lender to make the
Initial Disbursement and each subsequent Disbursement of proceeds of the Loan
shall be conditioned upon and subject to the payment to Lender of all amounts
owed to Lender hereunder and the satisfaction of all of the conditions set forth
in this Section 5.1 on or before the Initial Disbursement and on the date of
each subsequent Disbursement. Lender may temporarily waive one or more of the
following conditions precedent. Notwithstanding such waiver, Lender may require
that all applicable conditions be complied with prior to any Construction
Disbursement or additional Disbursements, as well as the continuing satisfaction
of all requirements hereunder at all times thereafter.
a. The Loan shall not be "Out of Balance", as determined under
Section 7.3 below.
b. All representations and warranties of Borrowers contained in this
Agreement and in all of the other Loan Documents shall be true in all
material respects as of the date of such Disbursement.
c. Borrowers shall have performed all of its material obligations
under all Loan Documents (including, without limitation, the Commitment
Letter) which are required to be performed on or prior to the date of such
Disbursement.
d. No Event of Default or Unmatured Default shall have occurred and
be continuing.
e. There shall be no material adverse change in the financial
condition of Borrowers, the Projects or Guarantors from that reflected in
the financial statements of Borrowers, the Projects or Guarantors,
respectively, heretofore furnished to Lender or furnished to Lender from
time to time in accordance with Section 10.10.
f. There shall be no material adverse change in the condition of any
of the Projects.
g. There shall be no pending or threatened litigation known to
Borrowers, or their counsel, against any Borrower, any Guarantor or any
Project, the determination of which shall have a material adverse effect on
any Borrower, Guarantor or any Project.
h. Neither the Projects nor any part thereof shall have suffered any
casualty or be subject to any existing or threatened condemnation or taking
by eminent domain proceeding or otherwise.
i. Lender shall have received evidence satisfactory to it that the
Projects are in compliance with all Laws (including Environmental Laws and
the Americans with Disabilities Act, as amended), and that there are no
conditions existing currently or likely to exist during the term of the
Loan that require or are likely to require clean-up, removal
20
or other remedial action pursuant to any Environmental Laws which are not
the subject of costs contained in the Approved Budgets.
j. Lender shall have received an inspection report from the
Consultant certifying as to the percentages of completion of the components
of the Work and setting forth the amount authorized for disbursement and
such other matters as Lender may require (including compliance with the
Approved Plans). Notwithstanding anything contained in this Agreement to
the contrary, it is understood and agreed that any and all inspections of
the Work made by Lender, the Consultant or their respective agents and
employees shall be solely for Lender's own information and shall not be
deemed to have been made for or on account of Borrowers or any other party.
Borrowers hereby relieve Lender of any and all liability or responsibility
relating in any way whatsoever to the construction of the Projects,
including, without limitation, the Work and any errors, inconsistencies or
other defects in the Plans and Specifications.
k. Borrowers shall have delivered to Lender evidence reasonably
satisfactory to Lender: (i) that each Project, when completed substantially
in accordance with the Plans and Specifications applicable to such Project,
and the intended use of the applicable Project shall be in full compliance
with all applicable Laws; and (ii) that all Permits necessary for
construction and completion of that portion of the Work the payment for
which such Disbursement is being requested have been issued and are in full
force and effect.
l. Lender shall have received from each of the Architects a
certificate stating that the applicable Project, when completed in
accordance with the Plans and Specifications, and the contemplated use
thereof will be in full compliance with all applicable zoning laws and
ordinances. Borrowers shall also provide Lender with such other evidence,
satisfactory to Lender in its sole discretion, that the applicable
Project, when completed, will be in compliance with all zoning
requirements and that all required zoning approvals have been obtained.
m. Borrowers shall have provided Lender with evidence that the
Projects will have an adequate water supply, fire protection, storm and
sanitary sewage disposal, gas and electricity and that agreements have been
made with local authorities for the installation and construction of the
aforesaid utilities.
n. (i) With respect to the initial disbursement of the Tranche A
Loan, Lender shall have accepted the Tranche A Approved Plans and the
Tranche A Approved Project Budget; provided, however, that after
Lender's acceptance of the Tranche A Approved Plans and the Tranche A
Approved Project Budget, Lender shall only require delivery to and
approval by Lender of (A) Borrowers' certification that the Tranche A
Approved Plans and the Tranche A Approved Project Budget remain
unmodified, unamended and in full force and effect, other than change
orders either previously approved by Lender or those then being
submitted to Lender for approval pursuant to this Section 5.1(n),
and/or (B) any proposed changes in the Tranche A Approved Plans. The
parties hereto acknowledge and agree that the decision of Lender with
respect to any requested
21
changes therein shall be final and binding upon all parties hereto.
Except as expressly permitted hereunder, Borrowers shall not amend or
modify the Tranche A Approved Plans, or the Tranche A Approved Project
Budget, without the prior written consent of Lender, which consent may
be withheld in Lender's sole and exclusive discretion.
(ii) With respect to the initial disbursement of the Tranche B
Loan, Lender shall have accepted the Tranche B Approved Plans and the
Tranche B Approved Project Budget; provided, however, that after
Lender's acceptance of the Tranche B Approved Plans and the Tranche B
Approved Project Budget, Lender shall only require delivery to and
approval by Lender of (A) Borrowers' certification that the Tranche B
Approved Plans and the Tranche B Approved Project Budget remain
unmodified, unamended and in full force and effect, other than change
orders either previously approved by Lender or those then being
submitted to Lender for approval pursuant to this Section 5.1(n),
and/or (B) any proposed changes in the Tranche B Approved Plans. The
parties hereto acknowledge and agree that the decision of Lender with
respect to any requested changes therein shall be final and binding
upon all parties hereto. Except as expressly permitted hereunder,
Borrowers shall not amend or modify the Tranche B Approved Plans, or
the Tranche B Approved Project Budget, without the prior written
consent of Lender, which consent may be withheld in Lender's sole and
exclusive discretion.
o. With respect to the initial disbursement of the Tranche B Loan,
Lender shall have received and approved a fully executed copy of the Plaza
32 Construction Contract and the Plaza 32 Architect's Contract and all
Subcontracts in accordance with the provisions of Sections 3.11, 3.12 and
3.13. No changes may be made in any of the Construction Contracts,
including, without limitation, changes in the amount of money to be
expended during the construction of the Projects, without Lender's prior
written approval. Any Contractor's fee specified in the Construction
Contract related to the Tranche B Project shall be disbursed in accordance
with the terms of such Construction Contract, subject to Lender's
reasonable approval of such fees.
p. Borrowers, Contractor, Lender and Title Company shall have
executed a construction escrow agreement (the "Construction Escrow
Agreement") pursuant to which all Disbursements shall be funded directly to
the Architect, Contractor or Subcontractors (if applicable) in form and
content acceptable to Lender. Lender, at its sole option, may require
Borrowers to execute four (4) separate Construction Escrow Agreements to be
executed, one such Construction Escrow Agreement for each of the Projects.
q. Borrowers shall deliver to the Lender, prior to the disbursement
of any monies, copies of an executed AIA Standard Contract for each
subcontractor along with a Sworn Contractor's Statement which discloses the
names of each subcontractor and the amount of their contract along with a
description of the Work to be performed as well as any contract amounts
previously paid, the name of all materialmen by whom materials will be
furnished to Contractors along with amounts due for each materialman and a
22
description of the amounts to be provided. At the Lender's request,
Borrowers shall furnish trade references and current financial information
for each subcontractor.
r. With respect to disbursements of proceeds of the Tranche A Loan,
all of the Tranche A Projects must be free and clear of all liens; and with
respect to disbursements of proceeds of the Tranche B Loan, the Tranche B
Project must be free and clear of all liens and Borrowers shall have
invested no less than Five Million Seven Hundred Thousand Dollars
($5,700,000) of Borrowers' equity into the acquisition or construction of
the Plaza 32 Project, which investment shall not be reimbursed out of Loan
proceeds. Borrowers' equity contribution with respect to the Tranche B
Project shall be contributed prior to the initial disbursement of proceeds
of the Tranche B Loan. Loan proceeds shall in no event be used to reduce
Borrowers' or Guarantors' cash equity contribution.
s. Sundance Homes, Inc., an Illinois corporation, has sold all of its
suburban assets to Centex Homes, a Nevada general partnership, and after
such date its post-sale balance sheet shall conform, in all material
respects, with the balance sheet attached to the Commitment Letter as
Exhibit D.
t. With respect to the initial disbursement of the Tranche B Loan,
construction of the Plaza 32 Project shall have commenced on or before the
date ninety (90) days following the date hereof.
5.2 Commencement Date of Construction. Borrower's acknowledge that the
Tranche A Projects are currently under construction. The obligation of Lender
to make any Disbursement under the Tranche B Loan, of proceeds of the Loan shall
be conditioned upon and subject to Borrowers satisfying all conditions precedent
to the initial Construction Disbursement related to the Plaza 32 Project on or
before October 1, 1999.
5.3 Completion Date of Construction. Borrowers shall complete the Projects
according to the Approved Plans no later than the Completion Date. If the
Projects are not completed according to the terms of this Section 5.3, Lender
may declare an Event of Default hereunder.
5.4 Lender's Verification. Lender may at any time take such action as it
reasonably deems appropriate to verify that the conditions precedent to each
Disbursement have been satisfied, including, without limitation, verification of
the amounts due under each Subcontract. Borrowers agree to cooperate with
Lender in any such action. If, in the course of any such verification, any
amount shown on any Subcontract, application for payment, sworn statement or
waiver of lien is subject to possible discrepancy, such discrepancy shall be
resolved by Borrowers to Lender's satisfaction.
5.5 Continuing Compliance with Conditions. In the event any of the
conditions set forth in Section 5.1 are not satisfied in a manner acceptable to
Lender on or prior to the dates set forth for the satisfaction thereof in said
Section or in the event Lender reasonably determines that the condition set
forth in Section 5.3 will not be satisfied, and after the expiration of any
applicable cure periods, at the option of Lender, the obligation of Lender to
make any further
23
Disbursements of proceeds of the Loan shall terminate. In the event Lender
exercises its right to terminate its obligations to make Disbursements of
proceeds of the Loan in accordance with this Section 5.5, any and all of the
outstanding principal balance of the Loan previously disbursed, together with
all accrued and unpaid interest thereon, shall become immediately due and
payable to Lender, Lender shall not be required to refund any Loan fees
previously paid, and, in addition thereto, upon demand by Lender, Borrowers
shall reimburse Lender for the Costs and Loan Expenses which Borrowers are
required to pay pursuant to the terms hereof. The foregoing shall in no way
limit any other remedies which Lender may have against Borrowers for damages
incurred by Lender.
SECTION 6
LOAN DOCUMENTS
--------------
Unless waived in writing by Lender, Borrowers shall execute and deliver to
Lender prior to the Initial Disbursement (or at such other time as may be set
forth in this Section 6) the following documents required to be executed by
Borrowers, and will cause to be executed and delivered to Lender the following
documents required to be executed by others, all of which documents shall
contain such provisions as shall be required to conform to this Agreement and
otherwise shall be satisfactory in form and substance to Lender.
6.1 Note. A Promissory Note (the "Note") executed by Borrowers payable to
the order of Lender in the principal amount of Twenty-Five Million Five Hundred
Thousand Dollars ($25,500,000).
6.2 Mortgages. A Construction Mortgage, Assignment of Rents and Leases,
Security Agreement and Fixture Financing Statement from each of the Borrowers
(collectively, the "Mortgages"), creating a first lien on the portion of the
Projects owned by such Borrower in favor of Lender, executed by the applicable
Borrower and securing the payment of the Note and the satisfaction of all of the
obligations of Borrowers in connection therewith and subject only to the
applicable Permitted Exceptions.
6.3 Security Agreements. A Security Agreement, together with the Uniform
Commercial Code Financing Statement to be filed with the Secretary of State of
Illinois (collectively, the "Security Agreements") executed by each Borrower
granting a security interest in the Collateral (as such term is defined in the
Security Agreements) owned by each such Borrower and all of Borrowers' present
and hereafter-acquired right, title and interest in and to the Collateral, as
further described in the Security Agreements.
6.4 Guaranty Agreements. Guaranty Agreement and Completion Guaranty and
Agreement executed by Sundance Homes, Inc., an Illinois corporation, and Limited
Guaranty Agreement executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (collectively, the "Guaranty
Agreements"), guarantying all amounts owed to Lender under the Note and the
completion of the Projects (except as expressly limited therein), this Agreement
and the other Loan Documents, as further described in the Guaranty Agreements.
24
6.5 Environmental Indemnity Agreements. Environmental Indemnity
Agreements pertaining to the Projects from each of the Borrowers and Guarantors
in form and substance satisfactory to Lender.
6.6 Blocked Account Pledge Agreements. Blocked Account Pledge Agreements
from each of the Borrowers in form and substance satisfactory to Lender.
6.7 Pledge Agreement. Pledge Agreement from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in form and
substance satisfactory to Lender.
6.8 Building Permits. All Permits relating to construction of the
Projects which are necessary to have been issued prior to or on the date of the
applicable Disbursement or which relate to Work to be paid for from such
Disbursement. Borrowers shall provide Lender with copies of all Permits within
five (5) days after the issuance thereof.
6.9 Collateral Assignments of Construction Documents. First collateral
assignments of the Construction Contracts, Architect's Contracts, the
Subcontracts, the Plans and Specifications and all permits, licenses, consents,
authorizations and utility installation and service agreements required for the
construction, use and operation of the Projects, executed by each of the
Borrowers, together with consent by the Contractors and Architects, as
applicable, to said collateral assignments.
6.10 Surveys. Existing ALTA plats of survey of the Land comprising each
of the Projects (the "Surveys") certified to Lender and the Title Company,
including, without limitation, (i) the legal description of the applicable
Project; (ii) dimensions and locations of buildings, fences, and other
improvements; (iii) locations of all visible or recorded easements (and
recording numbers, to the extent recorded) water courses, drains, sewers,
utility lines, public and private roads (including the names and widths thereof
and recording numbers for the dedications thereof); (iv) if the applicable Land
comprises more than one parcel, interior lines and other data sufficient to
insure contiguity; (v) if the applicable Land is located in a flood plain; (vi)
the locations of all adjoining streets and parking areas, and (vii) such
additional information which may be reasonably required by Lender or the Title
Insurer. The Surveys shall be certified to Borrowers, Lender and the Title
Company.
6.11 Insurance Policies. Borrowers shall deliver evidence of insurance to
Lender at least four business days prior to the Initial Disbursement, and
maintain in full force for the duration of the Loan term, appropriate insurance
policies from an insurance company acceptable to Lender. All property
certificates and policies shall name Corus Bank, N.A., its successors and/or
assigns as Mortgagee and Loss Payee, and the Title Holders of record, as Named
Insured. All liability certificates and policies shall name Corus Bank, N.A.,
its successors and/or assigns as Additional Insured. Insurance coverages for
the Projects shall include, but not be limited to:
(a) Builder's risk maintenance covering the full insurable value of
the Work in place on the Improvements from time to time during all states
of construction. Prior to the Initial Disbursement, a certificate of
insurance must be provided to Lender in an amount not less than the full
insurable value of the Work in place on the Improvements as of said date,
and coverage for delayed income. Thereafter Borrowers shall deliver to
25
Lender every three (3) months, insurance policies, or certificates of
insurance, evidencing increases in the total dollar coverage based upon
additional Work in place on the Improvements.
(b) Worker's Compensation and General Liability Insurance (including
contractual liability) carried during the course of construction, with
liability limits for death or injury to persons of not less than Five
Million Dollars ($5,000,000) and to property of not less than Five Million
Dollars ($5,000,000).
(c) Each Contractor will maintain insurance for casualty losses
concerning the Land including Worker's Compensation, Structural Work Act
and General Liability Insurance with coverage in amounts acceptable to
Lender.
(d) Such other insurance Lender reasonably requires covering the
Projects and the Land.
Upon completion of construction of each of the Projects, Borrowers must
provide Lender with an all risks and extended coverage policy in the amount
equal to the full replacement value of all Improvements or the amount of the
loan, whichever is greater, with liability coverage of at least Five Million
Dollars ($5,000,000), in addition to such other terms and coverages required by
Lender in its sole but reasonable discretion.
Each policy shall state that no cancellation thereof shall be effective
without thirty (30) days prior written notice to Lender. Borrowers shall provide
original, certified copies of corresponding insurance policies within sixty (60)
days of the Initial Disbursement. Borrowers' failure to provide copies of
policies as aforesaid shall be considered an Event of Default hereunder.
Notwithstanding the provisions of Section 15.21 below, Borrower and Lender
agree that with respect to this Section 6.11, in the event of any inconsistency
between the terms of this Agreement and the terms of the Commitment Letter, the
terms of the Commitment Letter shall control.
6.12 Title Insurance. ALTA Form Construction Loan Policies of Title
Insurance issued by the Title Company in the aggregate amount of Twenty-Five
Million Five Hundred Thousand Dollars ($25,500,000) covering the Projects and
insuring that the Mortgage related to the applicable Project will be a first
priority lien upon fee simple title to the applicable Project to the extent of
advances made from time to time hereunder or under the Note or any of the other
Loan Documents, subject to no liens, claims, exceptions or encumbrances except
the Permitted Exceptions, and containing such endorsements as may be reasonably
required by Lender.
6.13 Title Clearance Documents. Upon Lender's request, copies of such
documents, if any, as Borrowers have provided the Title Company in connection
with the issuance of the Title Policy.
6.14 Recorded Documents. Copies of all recorded documents described in
the Title Policy.
26
6.15 Construction Documents. Copies of the Construction Contracts, any
Subcontracts requested in accordance with Section 3.13, the form of Subcontract
to be used by each Contractor, and all Permits necessary for construction,
completion and operation of the Projects (except those Permits which by their
nature cannot be obtained until further completion of the Work), all of which
Permits shall be unconditional.
6.16 Construction Schedules. Borrowers shall submit a detailed schedule
for the completion of the construction of the Projects, including, without
limitation, a trade-by-trade breakdown of the estimated periods of commencement
and completion of the Work, a copy of which is attached hereto as Exhibit "F".
Lender's approval of the preliminary schedule shall not be unreasonably withheld
and shall be evidenced by Lender's execution of Exhibit "F". The schedule, as
approved by Lender (as the same may be modified from time to time in accordance
with this Agreement) is referred to herein as the "Schedule". The Schedule
provides that the Work will be fully completed on or before the Completion Date.
In the event that Work on the Projects is not proceeding in accordance with and
is behind the Schedule, Borrowers shall immediately submit to Lender for its
approval or disapproval a revised Schedule; provided that so long as the
Projects are less than thirty (30) days behind schedule and Borrowers reasonably
anticipate that the Projects will nevertheless be completed by the Completion
Date (an "Insignificant Setback"), Borrowers shall so inform Lender in writing,
in which event Lender's approval of the revised Schedule shall not be required.
The revised Schedule shall identify with specificity Borrowers' requested
changes and shall be accompanied by Borrowers' written statement of the reason
for each change. If Lender's approval of the revised Schedule is required
pursuant to this Section 6.16, Lender need make no further Disbursements unless
and until Lender approves the revised Schedule. If Lender's approval of the
revised Schedule is required pursuant to this Section 6.16, Lender may approve
or disapprove the revised Schedule in its sole but reasonable discretion.
Borrowers shall conduct the construction of any and all site and building
improvements which are part of the Improvements (all collectively, the
"Construction"), which, as to buildings, shall consist of the structural
components, operating systems, tenant improvements and all other elements of
such buildings, all in accordance with the Plans and Specifications, the Tranche
A Approved Project Budget, the Tranche B Approved Project Budget, the Schedule
and the other requirements of this Agreement, including, without limitation, the
other requirements, subject only to Inconsequential Variances (as hereinafter
defined) and Insignificant Setbacks. Borrowers shall complete the Construction
on or before the Completion Date.
6.17 Contractors/Architect Certificate. A certificate executed by
Borrowers, the applicable Contractors, the applicable Architects or an engineer,
as appropriate, containing the following: (i) a detailed list of the applicable
Approved Plans; (ii) a statement that the applicable Approved Plans are complete
in all material respects and that all Work and materials required for
construction and completion of the Improvements, completed in accordance
therewith, shall render the applicable Building ready for use and occupancy for
its intended purposes in compliance with all applicable zoning laws, regulations
and ordinances; (iii) a statement that the applicable Approved Plans were
prepared in a manner consistent with accepted architectural practices and in
full compliance with all applicable zoning, building, environmental protection,
safety and health laws, ordinances and regulations applicable to the
construction, use and operation of the applicable Project; (iv) a statement of
all certificates, permits, licenses, consents and authorizations of governmental
authorities which will be required for the performance of the
27
Work, and a statement that all such certificates, permits, licenses and other
authorizations of governmental authorities which are necessary to permit the
commencement of the Work have been obtained and are in full force and effect;
and (v) a statement that to best knowledge and belief adequate sewer, water,
electrical, power and other public and private utilities are available to the
applicable Land in such capacities as to adequately service the applicable
Project after the completion of the Improvements located thereon.
6.18 Plans and Specifications/Approved Plans.
(a) With respect to the Tranche A Projects, Borrowers have caused the
applicable Architects to prepare working drawings, plans and
specifications, design specifications, a construction schedule, and a site
plan for the construction of the Tranche A Projects as dated and referenced
on Exhibit "D-1" attached hereto and incorporated herein (the "Tranche A
Approved Plans"). With respect to the Tranche B Project, Borrowers have
caused the applicable Architect to prepare working drawings, plans and
specifications, design specifications, a construction schedule, and a site
plan for the construction of the Tranche B Project (collectively, the
"Preliminary Plans"). Borrowers shall submit the Preliminary Plans to
Lender for review and approval by Lender. Lender's approval of the
Preliminary Plans may be withheld in Lender's sole discretion. Lender shall
review the Preliminary Plans and thereafter notify Borrowers of Lender's
approval or disapproval. Lender's approval of the Preliminary Plans shall
be evidenced by its execution of Exhibit "D-2". The Tranche A Approved
Plans and the working drawings, plans and specifications, design
specifications, construction schedule and site plan for the Tranche B
Project as approved by Lender (the "Tranche B Approved Plans"), in Lender's
sole discretion, are collectively referred to herein as the "Approved
Plans".
(b) Notwithstanding anything contained herein: (i) any Disbursement
prior to Lender's acceptance of the Approved Plans shall not be deemed to
be a waiver of any requirement herein, and (ii) any Disbursement prior to
Lender's acceptance of the Approved Plans shall not be deemed to require
Lender to make any additional advance of Loan proceeds.
(c) No changes shall be made to the Approved Plans without Lender's
prior written consent, subject to (i) Extras and Upgrades pursuant to
Approved Sales Contracts and (ii) inconsequential deviations from the Plans
and Specifications in the nature of "field changes" that are not
customarily the subjects of formal change orders in the commercial real
estate development industry, and which do not, in Lender's reasonable
judgment, impair the value of the Projects; such deviations being referred
to herein as "Inconsequential Variances".
6.19 Approved Budget(s).
(a) With respect to the Tranche A Loan, Borrowers shall submit a
detailed budget(s) for all Hard Costs and Soft Costs of the Tranche A
Projects for Lender's approval ("Tranche A Preliminary Budget"), a copy of
which is attached hereto as Exhibit "C-1" and made a part hereof. Lender's
approval of the Tranche A Preliminary
28
Budget will be predicated on, among other things, Lender's evaluation and
opinion, in its sole discretion, of the adequacy, for each of the Tranche A
Projects, of each of the individual line items comprising the Tranche A
Preliminary Budget, including, but not limited to, an accounting and
analysis of the line items previously paid and the amounts necessary to
complete each of the Tranche A Projects. Among other considerations, Lender
shall determine, in its sole discretion, that (i) the interest reserve line
item(s) in the Tranche A Preliminary Budget will be adequate to cover
anticipated interest costs for both the Tranche A Loan and the Tranche B
Loan, and (ii) the hard cost contingency line item in the Tranche A
Preliminary Budget will be adequate. Once the Tranche A Preliminary Budget
is approved ("Tranche A Approved Budget"), which approval shall be
evidenced by Lender's execution of Exhibit "C-1", subject to the provisions
of Section 7.3 hereof, Borrowers must obtain Lender's additional prior
written approval before any amendments are to be made to the Tranche A
Approved Project Budget, unless a reallocation is allowed pursuant to
Section 7.3(b) hereof. In no event shall the Tranche A Approved Project
Budget contain any line items payable to Borrowers. In the event the total
actual costs for any of the Tranche A Projects are less than the amount
shown in the Tranche A Approved Project Budget for any such Tranche A
Project, the Loan shall be reduced by the amount of such savings.
(b) With respect to the Tranche B Loan, Borrowers shall submit a
detailed budget for all Hard Costs and Soft Costs of the Tranche B Project
for Lender's Approval ("Tranche B Preliminary Budget"), a copy of which is
attached hereto as Exhibit "C-2" and made a part hereof. Lender's approval
of the Tranche B Preliminary Budget will be predicated on, among other
things, Lender's evaluation and opinion, in its sole discretion, of the
adequacy, for the Tranche B Project, of each of the individual line items
comprising the Tranche B Preliminary Budget. Among other considerations,
Lender shall determine, in its sole discretion, that (i) the interest
reserve line item in the Tranche A Preliminary Budget will be adequate to
cover anticipated interest costs for the Tranche B Loan, and (ii) the hard
cost contingency line item equals at least five percent (5%) of the hard
construction costs line item in such budget. Once the Tranche B Preliminary
Budget is approved ("Tranche B Approved Budget"), which approval shall be
evidenced by Lender's execution of Exhibit "C-2", subject to the provisions
of Section 7.3 hereof, Borrowers must obtain Lender's additional prior
written approval before any amendments are to be made to the Tranche B
Approved Project Budget, unless a reallocation is allowed pursuant to
Section 7.3(b) hereof. In no event shall the Tranche B Approved Project
Budget contain any line items payable to Borrowers. In the event the total
actual costs for the Plaza 32 Project are less than the amount shown in the
Tranche B Approved Project Budget, the Loan shall be reduced by the amount
of such savings.
6.20 Appraisals. Lender has received appraisals of each of the Projects
in form and content acceptable to Lender (collectively, the "Appraisals"). The
cost of said Appraisals shall be paid by Borrowers.
6.21 Leases. In the event that any of the Buildings is occupied by
tenants during the term of the Loan, all such tenancies shall be under the
Approved Leases.
29
6.22 Flood Hazards. Evidence satisfactory to Lender that the Projects are
not located in an area designated as having special flood hazards, or if it is
so located, satisfactory evidence that flood insurance, in form and amount
acceptable to Lender, is in effect.
6.23 Environmental Audit. Borrowers have has delivered to Lender Phase I
Environmental Assessments of the Projects prepared by environmental counseling
firms acceptable to Lender, which assessments are in form and substance
acceptable to Lender. Borrowers shall pay the cost of such assessments. In
connection with the review by Lender of evidence required under this Section
6.23, Lender shall have the right to independently hire consultants to perform
tests and physical inspections of the Projects, order reports on the history of
the Projects and do whatever else Lender deems necessary to determine whether
the Projects are free from Hazardous Materials and whether, in Lender's sole and
absolute discretion, there is an unacceptable risk of liability to Lender in
connection with the past, present or future existence on or under the surface of
the Projects of Hazardous Material, all at Borrowers' cost.
6.24 Real Estate Tax Bills. A copy of the most recent real estate tax
bills covering the Projects and Improvements currently thereon.
6.25 Borrowers' Certificate. Borrowers' certificate that the
representations and warranties made by Borrowers in this Agreement are true on
and as of the date of each Disbursement.
6.26 Construction Escrow Agreement. A copy of the executed Construction
Escrow Agreement by and between the Title Company, Borrowers, Lender and the
Contractors.
6.27 Form of Sales Contract. A certified copy of the form of Unit sales
contracts to be utilized by Borrowers.
6.28 Form of Condominium Declaration For Units. A copy of the proposed
form of condominium declaration for each of the Projects.
6.29 Other Documents. Such other documents, assignments, certificates and
opinions as shall be reasonably required by Lender or Lender's counsel.
SECTION 7
DISBURSEMENT OF THE LOAN
------------------------
7.1 Disbursements. Lender shall disburse the Loan proceeds through the
Title Company, pursuant to the Construction Escrow Agreement, based on a
percentage of the Work completed in accordance with this Loan Agreement and the
other Loan Documents. Borrowers shall not request and, subject to the
provisions hereof, Lender shall not be required to make a Disbursement either
directly or through the Title Company more frequently than once each calendar
month for each Project. Lender may at any time take such action as it deems
appropriate to verify that the conditions precedent to each Disbursement have
been satisfied, including, but not limited to, verification of the amounts due
under any construction contract relative to the Work. Borrowers agree to
cooperate with Lender in any such action. If, in the course of any such
verification, any amount shown on any construction contract, application for
30
payment, sworn statement or waiver of lien is subject to a possible discrepancy,
such discrepancy shall be resolved by Borrowers to Lender's satisfaction.
Lender shall not be obligated to disburse Loan proceeds following any Event of
Default or Unmatured Default under this Agreement, any other Loan Document, or
the Construction Escrow Agreement. Each request for Disbursement, excluding the
Initial Disbursement or a Construction Disbursement made simultaneously to the
Initial Disbursement, shall be made by a notice from Borrowers and addressed to
Lender or its agent delivered at least ten (10) business days prior to the date
of the requested Disbursement specifying in detail the amount and mode of each
Disbursement and accompanied by the following, all in form and substance
satisfactory to Lender, as appropriate, in its sole but reasonable discretion:
a. Duplicate originals of an Owner's Sworn Statement and disbursement
request in the form prescribed by Lender (which form shall also be
acceptable to the Title Company);
b. Duplicate originals of Contractors' Application and Certificate
for Payment and Sworn Contractor's Statements in the form prescribed by
Lender (which form shall also be acceptable to the Title Company), executed
by each applicable Contractor and each subcontractor, and a statement of
each applicable Contractor and each subcontractor that all items of
construction cost have been incorporated into the Projects, in accordance
with the Approved Plans;
c. Waivers of lien with respect to all previous Disbursements and the
current Disbursement from each applicable Contractor, each subcontractor
and each materialman to whom payment is to be made; provided such waivers
may be provided on a thirty (30) day delay basis if the Title Company
agrees to issue the endorsement for the Title Policy required pursuant to
subsection (g) hereof;
d. If not previously delivered, evidence that all Permits required to
perform such Work for which a Disbursement is being requested have been
issued;
e. Evidence (including invoices and contracts) satisfactory to Lender
showing the propriety of each nonconstruction cost item for which payment
is requested and such supporting data as Lender may require to enable
Lender to verify the correctness of the items described in subsections (a)
and (b) above;
f. Duplicate originals of certificates of both the Architects, as
applicable, and Consultant, in form and substance satisfactory to Lender,
to the effect that each of them has made diligent investigation and that,
based on such investigation, all construction to the date of the request
for Disbursement has been completed and to the extent applicable in
accordance with the Approved Plans, the Approved Budgets and the Sworn
Statements, and certifying both the Architects' and the Consultant's
approval of the request for Disbursement;
g. The Title Company has issued an endorsement to the Title Policy
extending and increasing the coverage to include the date and the amount of
the requested Disbursement, insuring that the Mortgages are first and prior
liens on the Projects, as
31
applicable, subject only to the Permitted Exceptions with mechanic's lien
coverage through the date that Work was last performed at the applicable
Project pursuant to the Sworn Contractor's Statement; and
h. Such other documentation as Lender or the Title Company requires.
Each request for Disbursement by Borrowers shall constitute (i) Borrowers'
certification that the representations and warranties contained in Section 3
hereof are true and correct in all material respects as of the date of such
request, except as Borrowers may have advised Lender in writing prior to such
request, (ii) Borrowers' certification that Borrowers are in compliance with the
conditions contained in Section 5, and (iii) Borrowers' representation and
warranty to Lender that the Work and other items for which payment is requested
have been incorporated into the Projects free of all liens and encumbrances
other than Lender's first priority lien, and the value thereof is as estimated
therein; to the best of Borrowers' knowledge, such Work and materials other than
tenant improvements conform to the Approved Plans, this Agreement and all
applicable Laws; and the requisitioned value of such Work and materials and the
amounts of all other items of cost for which payment is requested by Borrowers
have theretofore been in fact paid for in cash by Borrowers or the same are then
due and owing by Borrowers. Approval by Lender of requests for advances shall
not constitute an acceptance by Lender of the Work, materials or other items of
cost for which payment is requested by Borrowers.
Provided Lender receives complete and orderly draw requests, together with
the appropriate lien waivers, Lender shall fund such requests within ten (10)
business days; provided, absent Lender's gross negligence or willful misconduct,
Lender shall not be liable for any losses due to its failure to fund draw
requests within ten (10) business days. All disbursements shall be made by the
Title Company directly to the applicable subcontractors, except for
disbursements related to the Tranche B Loan which shall be disbursed directly to
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Inc.
Loan proceeds may be disbursed to pay incurred Hard Costs, including
general contractor's overhead and profit, and developer's fee on a pro rata
basis according to the percentage of the applicable Project complete or as
otherwise required under the Plaza 32 Construction Contract. Contingency funds
for each Project may be reallocated on a pro rata basis according to the
percentage of the applicable Project complete. Loan proceeds may be disbursed
to pay Soft Costs as they are incurred.
7.2 Retainage.
(a) Retainage Requirement. The amount of each Disbursement shall be
the amount requested by Borrowers; provided, however, that Lender shall
have the right to retain ten percent (10%) of each Hard Cost line item of
each of the Approved Budgets (the "Retainage") until each such line item is
completed. In addition, with respect to the Plaza 32 Project, Lender shall
retain ten percent (10%) of the draw request for each Hard Cost line item
in the Tranche B Approved Project Budget (the "Plaza 32 Project Retainage")
until each line item is completed, provided that the aggregate amount of
the Plaza 32 Project Retainage shall not exceed One Million One Hundred
Thousand Dollars ($1,100,000); and provided further, that such Plaza 32
Project Retainage shall be subject
32
to the progress release payments to be made pursuant to Section 5.7.1 of
the Plaza 32 Construction Contract.
(b) Release of Retainage. All Retainages held by Lender shall be
released as follows:
(i) Upon application by Borrowers, together with (1) a
certificate in writing signed by Borrowers and the Contractors, as
applicable, certifying that all Work to be performed in a Hard Cost
line item category has been fully performed, and (2) the written
approval of the Consultant, Lender shall, in Lender's sole but
reasonable discretion, release the Retainage for such Hard Cost line
item.
(ii) Final disbursement of all Retainages not previously released
shall be made upon satisfaction of the following conditions, in
addition to satisfaction of all other conditions precedent for
disbursement set forth in this Agreement:
(1) Borrowers have delivered to Lender (A) a certificate in
writing signed by Borrowers and the Contractors, as applicable,
certifying that all obligations of the Contractors, as
applicable, and all subcontractors have been fully performed,
including all punch-list items, and (B) a certificate in writing
signed by Borrowers, as applicable, certifying that the
construction of the Improvements have been completed in all
respects and to the extent applicable in accordance with the
Approved Plans and the use and occupancy of the Building is
permitted under all applicable Laws;
(2) Lender has received a certificate in writing signed by
the Consultant certifying that the construction of the
Improvements has been completed and to the extent applicable in
accordance with the Approved Plans and use and occupancy of the
Buildings is permitted under all applicable Laws;
(3) Borrowers have delivered to Lender all Permits necessary
for the use of the Projects as planned;
(4) Borrowers have delivered to Lender evidence that all
equipment owned by Borrowers and required for the use and
operation of the Buildings as intended has been installed free
and clear of all liens and security interests except those
granted to Lender or approved by Lender in writing;
(5) The Title Company is prepared to issue the final
endorsement to the Title Policy;
(6) Borrowers have delivered to Lender final and
unconditional waivers of lien from the Contractors and all
subcontractors and materialmen who have supplied labor or
material for the construction of the Projects.
33
(d) Notwithstanding anything contained in this Section 7.2 to the
contrary, in the event Lender elects in its sole and exclusive discretion
to release the Retainage prior to completion of all punch-list items,
Lender shall have the right, at its option, to retain an amount equal to
one hundred twenty-five percent (125%) of the cost of punch-list items
reasonably estimated by Lender until such time as such items are fully
completed to the reasonable satisfaction of Lender.
7.3 Balancing Requirement.
(a) Balancing Determination. The Loan shall be deemed to be "Out of
Balance" if (at any time during the term hereof) Lender determines, in Lender's
sole but reasonable discretion, that the remaining amount available under the
Loan is not or will not be sufficient to complete the Projects in accordance
with the Approved Plans, pay interest on the Loan through completion of the
Project, and to pay all costs and expenses set forth in the Approved Budgets,
plus such additional amounts as Lender, in its sole and exclusive discretion
deems necessary or reasonable to complete the Projects, including, without
limitation, insufficient funds in the Interest Reserve(s) contained in the
Approved Budgets, pay all liabilities and perform all obligations of Borrower
hereunder. It is agreed that if, with respect to the Tranche A Approved Project
Budget, the specific funds allocated to complete any of the Erie Tower Project,
the Capitol Project or the Arthouse I Project are deemed by Lender, in its sole
and absolute discretion, to be insufficient to complete said Projects, then the
entire Loan shall be deemed to be Out of Balance, and/or if the Tranche B Loan
is deemed to be Out of Balance, then the entire Loan shall be deemed to be Out
of Balance. In the event Lender determines that the Loan is Out of Balance,
then within ten (10) days after written notice thereof from Lender to Borrower,
Borrower shall either provide Lender with a letter of credit in an amount and
with terms satisfactory to Lender in its sole and absolute discretion, or
deposit with Lender funds equal to the amount that Lender estimates that the
Loan is or will be Out of Balance. The funds deposited by Borrower with Lender
will be disbursed by Lender under the Loan through the construction escrow prior
to any further Disbursements of the Loan proceeds. Any such amounts deposited
with Lender shall be added to and made a part of the equity of Borrower in the
Projects, and shall earn interest at Lender's ultimate money market account
rate.
(b) Changes Orders and Changes to Approved Budgets.
(i) Borrowers agree to provide Lender with copies of all change
orders, together with all additional documents that Lender may require,
including, without limitation: (i) plans and specifications indicating the
proposed change; (ii) a written description of the proposed change and
related working drawings; (iii) a written estimate to the cost of the
proposed change and the time necessary to complete it, including all
changes to the Approved Budgets and the Schedule likely to result
therefrom, and (iv) certificate of the applicable Architect with each
request for change order to the effect that such change order is in
compliance with all Laws.
(ii) Without limitation of any other requirement for Lender's approval
set forth in this Agreement, Borrowers shall obtain Lender's prior written
approval or disapproval of any change in the Plans and Specifications
(except for Inconsequential
34
Variances), the Approved Budgets, the Schedule (except for Insignificant
Setbacks) or any other requirements which:
(1) could adversely affect the value of Lender's security; or
(2) regardless of cost, involves a change in structure, design,
function or exterior appearance of the Improvements (other than
Inconsequential Variances); or
(3) requires the approval of a Person other than Lender;
(4) could delay completion of the Work beyond the Completion
Date; or
(5) would result in a net increase in the total amount of the
Approved Budgets.
(iii) (1) Tranche A Loan Reallocation: Borrowers shall have the
right to reasonably reallocate sums between line items of the Tranche
A Approved Project Budgets, provided that Lender is advised of such
reallocation in a timely manner, the total amount of the Tranche A
Approved Project Budget is not increased and the overall quality and
functionality of any of the Tranche A Projects is not diminished;
provided, however, that no reallocation from the interest reserve line
item amount stated in the Tranche A Approved Project Budget shall be
permitted without Lender's prior written approval; the contingency may
only be reallocated as a percentage of total Hard Costs and Soft Costs
expended, excluding the cost of Land acquisition; provided, further,
that any cost savings in hard cost line items for any Tranche A
Project may be reallocated to fund hard cost line items for any of the
other Tranche A Projects.
(2) Tranche B Loan Reallocation: Borrowers shall have the right
to reasonably reallocate sums between line items of the Tranche B
Approved Project Budget, provided that Lender is advised of such
reallocation in a timely manner, the total amount of the Tranche B
Approved Project Budget is not increased and the overall quality and
functionality of the Tranche B Project is not diminished; the
contingency may only be reallocated as a percentage of total Hard
Costs and Soft Costs expended, excluding the cost of Land acquisition.
(iv) Notwithstanding anything to the contrary contained in Section
7.3(b)(iii), no reallocation among line items in any of the Approved
Budgets, other than the contingency line item, which exceeds One Hundred
Thousand Dollars ($100,000) individually, or Five Hundred Thousand Dollars
($500,000) in aggregate, shall be permitted without Lender's prior written
approval. For the purpose of the limits set forth in the proceeding
sentence, a change in a line item shall only be counted once. For example,
a decrease in the marketing/advertising line item of Seventy-Five Thousand
Dollars ($75,000) and a corresponding increase in the architect/engineer
line item shall be deemed to be an aggregate change of Seventy-Five
Thousand Dollars ($75,000).
35
7.5 Construction Escrow. Lender shall make Disbursements of the Loan
through the Title Company in accordance with the provisions of the Construction
Escrow Agreement. Notwithstanding the foregoing, Lender shall not be liable or
obligated to Architects, Contractors, or any contractors, subcontractors,
suppliers, materialmen, laborers, architects, engineers or any other parties for
services or Work performed or for goods delivered in and upon the Land or
employed directly or indirectly in the construction of the Improvements, or for
any debts or claims whatsoever accruing in favor of any such parties and against
Borrowers or others or against the Projects. It is expressly understood and
agreed that Borrowers are not and shall not be agents of Lender for any purpose
whatsoever. Without limiting the generality of the foregoing, although advances
must be made by the Title Company directly to any contractor, subcontractor or
supplier of labor and/or materials or any other party, such Disbursements shall
not be deemed a recognition by Lender of any third party beneficiary status of
any such person or entity. After the date of Initial Disbursement, all Project
costs funded by Borrowers' equity contribution (as discussed above), or any
other sources shall be disbursed through the Construction Escrow Agreement.
7.6 Cost Overrun Recoupment. Notwithstanding anything herein to the
contrary, provided that: (a) the Loan is not Out of Balance, including adequate
funds remaining in the Interest Reserve to pay interest for the remaining term
of the Loan; (b) there are no Events of Default or Unmatured Defaults then in
existence under the Loan; and (c) there were cost overruns pertaining to the
Projects which were paid for by Borrower ("Prior Covered Cost Overruns"), then
Borrower may draw on the Loan to recoup Prior Covered Cost Overruns provided
that the outstanding principal balance of the Loan, after such Disbursement and
during the remaining term of the Loan, will not, in Lender's estimation and in
its sole discretion, exceed the sum of (i) costs spent through that date on the
Plaza 32 Project, less (ii) Nine Million Eight Hundred Thousand Dollars
($9,800,000), less (iii) Prior Covered Cost Overruns pertaining to the Plaza 32
Project, plus (iv) eighty percent (80%) of the value of the remaining Inventory
in the Tranche A Projects, using the lesser of Pending Contract Prices or Pro
Forma List Prices detailed in the pro-formas attached hereto as Exhibit "E";
provided further, the value of the remaining Inventory for the Tranche A
Projects shall be less than Two Million Dollars ($2,000,000).
Furthermore, if the budgeted amount for Extras and Upgrades for any Tranche
A Project is exhausted, additional Extras and Upgrades shall be paid for by
Borrower due to the resulting loan imbalance; provided, however Lender will fund
the costs of such Extras and Upgrades to the extent the expected aggregate sale
proceeds from the Tranche A Project in question, as estimated by Lender, in its
sole but reasonable opinion, exceed the pro forma aggregate proceeds for such
Project as detailed in Exhibit "E".
If the budgeted amount for Extras and Upgrades for the Tranche B Project is
exhausted, additional Extras and Upgrades shall be paid for by Borrower due to
the resulting loan imbalance; provided, however Lender will fund the costs of
such Extras and Upgrades to the extent the expected aggregate sale proceeds from
the Tranche B Project, as estimated by Lender, in its sole but reasonable
opinion, exceed the pro forma aggregate proceeds for the Tranche B Project as
detailed in Exhibit "E".
7.7 Material Storage. No Disbursement for material purchased by Borrowers
but not yet installed or incorporated into the Projects shall be made without
Lender's prior approval
36
of the conditions under which such materials are purchased and stored. In no
event shall any Disbursement be made unless the materials involved have been
delivered to the Land or stored with a bonded warehouseman, with satisfactory
evidence of security, insurance and suitable storage. In connection with such
materials, Borrowers shall provide to Lender a copy of the ▇▇▇▇ of sale or other
evidence of title in Borrowers, together with a copy of UCC searches against
Borrowers and the warehouseman, if applicable, indicating no liens or claims
which may affect such materials.
7.8 Lender's Right to Reimbursement. Borrowers hereby authorize Lender to
make advances of proceeds of the Loan directly to Lender for payment and
reimbursement of all interest due hereunder and under the Note and all other
charges, Costs and expenses (including, without limitation, Loan Expenses)
required to be paid by Borrowers under this Agreement or any other Loan
Document. Lender shall notify Borrowers in writing of each such Disbursement of
proceeds; provided that Lender's failure to so notify Borrowers shall not be
deemed a default by Lender hereunder or modify Lender's right to reimbursement
hereunder.
SECTION 8
INTEREST
--------
8.1 Interest Rate. The principal balance of the Loan from time to time
outstanding will bear interest at an annual rate equal to one percent (1%) above
the Prime Rate (as defined in the Note) and adjusted from time to time as
provided in the Note.
8.2 Payments.
(a) Principal and interest payments shall be due and payable at the
times set forth in the Note, with a final payment of all principal and
unpaid interest on the Maturity Date. Subject to the terms and provisions
hereof and of the Note, interest payments may be made through periodic
draws of Loan proceeds (which payments may be made by Lender outside of the
Construction Escrow Agreement, provided that the Interest Reserve (as
provided for in the Approved Budgets) is not exhausted.
(b) Payments Related to Sales of Units: Provided that there is not
then existing any Event of Default or any Unmatured Default, Lender agrees
to release individual Units from the lien of the applicable Mortgage
pursuant to the following terms and provisions:
(i) Release of Residential Units and any parking spaces
appurtenant thereto:
(A) That at the time of such partial release, there shall be
no Event of Default or any Unmatured Default under the Note, the
Mortgage, this Agreement or any of the other Loan Documents;
(B) The sale of the Residential Unit is subject to and
closed in accordance with the terms of an Approved Sales
Contract;
37
(C) Borrowers shall deliver to Lender a payment in the
amount of the greater of (i) ninety-five percent (95%) of the
Gross Sales Proceeds for such Residential Unit and any parking
spaces appurtenant thereto; or (ii) ninety-five percent (95%) of
the Pending Contract Price or Pro Forma List Price for such
Residential Unit and any parking spaces appurtenant thereto; as
the release price for each such Residential Unit and any parking
spaces appurtenant thereto to be so released, which amounts shall
be applied in accordance with the terms of the Note; provided if
such amounts exceed an amount which would reduce the principal
balance of the Loan to zero, such excess amounts after the
principal balance of the Loan has been so reduced to zero shall
be deposited into a strict joint order escrow with the Title
Company to be disbursed to pay costs of construction under the
Approved Budgets prior to the disbursement of additional funds
under the Loan; and
(D) That any and all documents and agreements used in
connection with any partial release pursuant to this Section
8.2(b) shall be in form and substance reasonably satisfactory to
provide for the release of the appropriate portion of the
Projects.
(ii) Release of Retail Units:
(A) That at the time of such partial release, there shall
be no Event of Default or Unmatured Default under the Note, the
Mortgage, this Agreement or any of the other Loan Documents;
(B) The sale of the Retail Unit is subject to and closed
in accordance with the terms of an Approved Sales Contract;
(C) Borrowers shall deliver to Lender a payment in the
amount of the greater of (i) ninety-two percent (92%) of the
Gross Sales Proceeds for such Retail Unit; or (ii) one hundred
percent (100%) of the Net Sales Proceeds for such Retail Unit; as
the release price for each such Retail Unit to be so released,
which amounts shall be applied in accordance with the terms of
the Note; provided if such amounts exceed an amount which would
reduce the principal balance of the Loan to zero, such excess
amounts after the principal balance of the Loan has been so
reduced to zero shall be deposited into a strict joint order
escrow with the Title Company to be disbursed to pay costs of
construction under the Approved Budgets prior to the disbursement
of additional funds under the Loan; and
(D) That any and all documents and agreements used in
connection with any partial release pursuant to this Section
8.2(b) shall be in form and substance reasonably satisfactory to
provide for the release of the appropriate portion of the
Projects.
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(iii) Release of Arthouse II Parcel:
(A) That at the time of such partial release, there shall
be no Event of Default or Unmatured Default under the Note, the
Mortgage, this Agreement or any of the other Loan Documents;
(B) Not less than twenty-four (24) of the Residential
Units in the Arthouse I Project have been sold and closed
pursuant to Approved Sales Contracts for sales prices equal to or
greater than the Pro Forma List Prices set forth in Exhibit "E".
8.3 Invalidated Payments. To the extent that Lender receives any payment
on account of the Secured Obligations, and any such payment(s) and/or proceeds
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, subordinated and/or required to be repaid to a trustee,
receiver or any other Person under any bankruptcy act, state or federal law,
common law or equitable cause, then, to the extent of such payment(s) or
proceeds received, the Secured Obligations or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if such
payment(s) and/or proceeds had not been received by Lender and applied on
account of the Secured Obligations.
8.4 Default Interest Rate. At any time following an Event of Default and
until such Event of Default is cured, the principal amount of the Loan shall
bear interest at the Default Interest Rate. In addition to the foregoing,
Borrower shall pay to Lender a "late charge" as set forth in the Note.
SECTION 9
REPAYMENT OF THE LOAN
---------------------
The Loan shall be paid in accordance with the terms and conditions of this
Agreement, the Note and the other Loan Documents.
SECTION 10
BORROWER'S COVENANTS
--------------------
10.1 Construction. Borrowers shall cause the construction of the Projects
to be diligently and expeditiously carried out in a good and workmanlike manner,
and to the extent applicable substantially in accordance with the Approved
Plans, and in accordance with all Laws. Without limiting the generality of the
foregoing, Borrowers shall cause construction of the Improvements related to the
Plaza 32 Project to be commenced on or before the date specified in Section 5.2,
to continue without interruption until completion and to be completed in
accordance with the Approved Plans on or before the Completion Date, without any
further notice or opportunity to cure. Construction of the Projects shall not be
deemed to be complete until Lender has verified in its sole but reasonable
discretion that all space located within the Buildings can be used and occupied
in accordance with all applicable Laws and is ready to be owned by unit owners
or leased to tenants.
39
10.2 Completion of Projects. As provided in Section 7.2, Borrowers shall
deliver to Lender a certificate of each applicable Architect stating that the
Projects have been completed in accordance with the Approved Plans and in
accordance with all Laws.
10.3 Change Orders. Borrowers shall not, without the prior written
approval or disapproval of Lender, make or permit any changes in the Approved
Plans and/or the Approved Budgets, except as reallocations in the Approved
Budgets are expressly permitted pursuant to Section 7.3 hereof. Borrowers
acknowledge that Lender may, at Lender's option, require the consent of the
Consultant prior to approving any such change orders. Borrowers shall furnish
Lender with a certificate of the Architect with each request for change order to
the effect that such change order is in compliance with all applicable Laws.
Borrowers shall also provide Lender with a copy of the change orders and such
other information as Lender may require.
10.4 Extras. No Extras shall be allowed to the Contractor or any
subcontractor without the prior written consent of Lender which shall not be
unreasonably withheld or delayed and the prior deposit by Borrowers with Lender
of one hundred percent (100%) of the amount of such Extras, which amount shall
be disbursed by Lender in payment for said Extras in the same manner as
hereinbefore provided for the disbursement of the proceeds of the Loan.
10.5 Amendments to Contracts. After approval by Lender in accordance with
Sections 3.11, 3.12, and 3.13, neither Borrowers nor Contractors shall, without
the prior written approval or disapproval of Lender, amend, modify or in any way
change the Construction Contracts, Architect's Contracts, or any Subcontract.
10.6 Inspection of the Projects. Borrowers shall permit at any reasonable
time and from time to time inspection of the Projects by Lender or its agents.
10.7 Mechanic's Lien Claims. Borrowers will not suffer or permit any
mechanic's lien claims to be filed or otherwise asserted against the Projects or
against any funds due any contractor or subcontractor, and Borrowers will
promptly, and in any event within fifteen (15) days after receipt of notice of
filing, discharge or cause to be discharged, the same in case of the filing of
any claims for lien or proceedings for the enforcement thereof; provided that in
connection with any such lien or claim which Borrowers may in good faith desire
to contest, Borrowers may contest the same by appropriate legal proceedings
diligently prosecuted, but only if Borrowers shall furnish to Lender such
security or indemnity as Lender requires to induce the Title Company to issue an
endorsement to the Title Policy insuring over the exception created by such
lien. Lender shall not be required to make any further Disbursements of the Loan
until any mechanic's lien claims shown by the commitment for or any endorsement
to the Title Policy furnished pursuant to this Agreement have been so insured
against by the Title Company.
10.8 Lender's Right to Discharge Lien Claims. With respect to the matters
set forth in Section 10.7, if Borrowers shall (a) fail within said fifteen (15)
days to discharge any asserted liens or claims, or (b) fail within said fifteen
(15) days to contest asserted liens or claims and to give security or indemnity
in the manner provided in Section 10.7, or (c) having commenced to contest the
same, and having given such security or indemnity, fail to prosecute such
contest with diligence, or to maintain such indemnity or security so required by
the Title Company for its full amount, or (d) upon adverse conclusion of any
such contest, fail within fifteen (15) days
40
after the date of any such adverse conclusion of judgment to cause any judgment
or decree to be satisfied and lien to be released, then Lender may, at its
election, but shall not be required to, procure the release and discharge of any
such claim and any judgment or decree thereon and, further, may, in its sole
discretion, effect any settlement or compromise of the same, or may furnish such
security or indemnity to any title company, and any amounts so expended by
Lender, including premiums paid or security furnished in connection with the
issuance of any surety company bonds, shall be deemed to constitute
Disbursements of the proceeds of the Loan hereunder and shall bear interest from
the date so disbursed until paid at the Default Interest Rate. In settling,
compromising or discharging any claims for lien, Lender shall not be required to
inquire into the validity or amount of any such claim.
10.9 Insurance Premiums. Borrowers shall pay all premiums on all insurance
policies required from time to time during the progress of construction, and
shall furnish to Lender with premiums prepaid, additional and renewal insurance
policies, premiums prepaid, in form and with companies, coverage, deductibles
and amounts satisfactory to Lender not less than thirty (30) days before the
expiration of any such policies. In the event of failure by Borrowers to provide
such insurance, Lender may obtain such insurance policies on behalf of Borrowers
and treat the amounts expended therefor as disbursements of Loan proceeds, and
such amounts from the date so expended until paid shall bear interest at the
Default Interest Rate.
10.10 Financial Statements. Borrowers shall deliver, or cause to be
delivered, to Lender a detailed monthly report showing the progress of
construction of the Building, as well as Improvements. In addition, Borrowers
shall deliver or cause to be delivered to Lender on at least an annual basis and
at such other times as Lender may request financial information including but
not limited to: (a) current financial statements of Borrowers and Guarantors
within ninety (90) days after the end of each fiscal year on Lender's standard
form or on such other form as Lender shall approve, setting forth the
information therein required as of the immediately preceding fiscal year,
containing income and expense statements and a balance sheet, prepared by
Borrowers or a certified public accountant or accounting firm acceptable to
Lender; (b) within ten (10) days of the filing thereof, federal income tax
returns of Borrowers and Guarantors, all certified to be true, complete and
correct by an authorized representative of Borrowers and Guarantors, as
appropriate; (c) statements of revenues, expenses and cash flows relating to the
Projects, and the most recent federal income tax return; and (d) such other
information and reports, financial and otherwise, concerning Borrowers,
Guarantors and the construction and operation of the Projects as Lender may
reasonably request. Borrowers shall also deliver to Lender, within ten (10) days
after the end of each calendar month, (x) current sales and closing status
reports for the Projects in detail acceptable to Lender, (y) copies of any and
all new Approved Sales Contracts, all as verified by Lender, and (z) a detailed
schedule for the completion of the construction and leasing, if any, of the
Projects, including, without limitation, a trade-by-trade breakdown of the
estimated periods of commencement and completion of the specific Work to be
completed on the Projects, all certified by Borrowers to be true, complete and
correct.
10.11 Notice of Material Adverse Change. Borrowers shall promptly deliver
to Lender notice of the occurrence of any Event of Default or Unmatured Default,
or any event which might have any material adverse effect on any security for
the Loan or on Borrowers' ability to perform their obligations under this
Agreement or any of the other Loan Documents.
41
10.12 Liens. Except for (a) the Mortgages and other Loan Documents, (b)
mechanic's liens which are bonded against to the satisfaction of Lender, (c) the
Permitted Exceptions, (d) such other liens, claims or encumbrances reviewed and
approved by Lender in writing, (e) Units released pursuant to the terms of the
Loan Documents, Borrowers shall at all times own fee simple title to the Project
free of all liens, claims and encumbrances, whether senior or junior to the
Mortgages, other than the lien created by the Mortgages and the Permitted
Exceptions.
10.13 Borrowers' Obligation to Contest Liens. If any proceedings are filed
seeking to enjoin or otherwise prevent or declare invalid or unlawful the
construction, occupancy, maintenance or operation of the Projects or any portion
thereof, Borrowers will cause such proceedings to be vigorously contested in
good faith, and in the event of an adverse ruling or decision shall prosecute
all allowable appeals therefrom, and will, without limiting the generality of
the foregoing, resist the entry or seek the stay of any temporary or permanent
injunction that may be entered and use its best efforts to bring about a
favorable and speedy disposition of all such proceedings. All such proceedings,
and all of Lender's costs and reasonable fees and disbursements of Lender's
counsel in connection with any such proceedings, whether or not Lender is a
party thereto, shall be at Borrowers' expense, and all such costs and reasonable
fees and disbursements incurred by Lender shall be deemed to be additional
indebtedness due and payable hereunder, shall bear interest from the date so
incurred until paid at the Default Interest Rate and shall be payable to Lender
on demand.
10.14 Prohibition of Transfer. Except for the sale of Residential Units,
associated parking spaces and Retail Units, sold in the ordinary course of
business as authorized under the Mortgages, Borrowers shall not, without
Lender's prior written consent, suffer, permit or enter into any agreement for
any sale or transfer, or in any way encumber or dispose of or grant or suffer
any security or other assignment (collateral or otherwise) of or in all or any
portion of the Project or permit any events prohibited under Section 3.09 of the
Mortgages. Borrowers shall not enter any agreement to lease all or any portion
of the Project, without Lender's prior written consent, which consent may be
withheld in Lender's sole and absolute discretion. Any consent by Lender, or any
waiver of an Event of Default under this Section 10.14, or of any other
requirement contained in this Agreement or any of the other Loan Documents,
shall not constitute a consent to or waiver of any right, remedy or power of
Lender with respect to any subsequent Event of Default.
10.15 Subcontracts. Upon Lender's request, Borrowers shall deliver to
Lender a copy of each Subcontract entered into by the Contractor within five (5)
days after the execution thereof.
10.16 Real Estate Tax Escrow. In the event either (i) Borrowers are ever
delinquent or late in making any required real estate tax payment related to the
Projects when said taxes are due and payable, or (ii) there is an Event of
Default hereunder, Borrowers, to provide for the payment of real estate taxes
and assessments pertaining to the Project and to the extent permitted by
applicable law, promise to pay monthly, in addition to the above payments, one-
twelfth (1/12th) of One Hundred Ten Percent (110%) of the amount of the last
ascertainable annual real estate taxes in such manner as Lender may prescribe,
so as to provide for the current year's tax obligation. If the amount estimated
to pay said taxes, assessments and other charges is not sufficient, Borrowers
promise to pay the difference within ten (10) days following Lender's
42
demand therefor. It shall not be obligatory upon Lender to inquire into the
validity or accuracy of any of said items before making payments of the same and
nothing herein contained shall be construed as requiring Lender to advance other
monies for said purposes nor shall Lender incur any personal liability for
anything it may do or omit to do hereunder. It is agreed that all such payments
made, at the option of Lender, and subject to the provision of applicable law,
shall: (a) be held in trust by it without earnings for the payment of such
items; (b) be carried in a tax account for the benefit of Borrowers and
withdrawn by Lender to pay such items; or (c) be credited to the unpaid balance
of the indebtedness evidenced hereby as received, provided that Lender advances
upon this obligation sums sufficient to pay said items as the same accrue and
become payable. If such items are held in trust or carried in a tax account for
Borrowers, the same are hereby pledged together with any other account of
Borrowers or any Guarantor hereof held by Lender to further secure the
indebtedness evidenced by this Note and any officer of Lender is authorized to
withdraw the same and apply said sums as aforesaid. After full payment of all
indebtedness owed hereunder and under the Mortgages, all amounts remaining in
the escrow accounts, if any, shall be returned to Borrowers.
10.17 Modification to By-Laws. Each Borrower shall not, without the prior
written consent of Lender, amend or modify its by-laws.
10.18 Signage and Advertising. Lender may, at Lender's sole option and
expense, construct and maintain, in accordance with all applicable legal
requirements, a sign at the Projects designating Lender as having provided
financing for the Projects. Lender may also issue such press releases and
otherwise publicize the financing described herein as Lender may elect, in its
sole discretion.
10.19 Approved Leases. Borrowers shall not execute any lease without
written acknowledgment of Lender that the lease is an Approved Lease. Borrowers
shall provide Lender with a copy of each proposed lease for all or a portion of
the Projects, as well as any and all other information related thereto as
requested by Lender. Lender shall endeavor to provide preliminary approval or
disapproval of any proposed lease within three (3) business days of the receipt
of all pertinent information needed for approval. Lender shall endeavor to
provide final approval or disapproval of any proposed lease transaction within
ten (10) business days of the receipt of final proposed lease documentation and
any other information needed for its decision. Failure to disapprove any
proposed lease within ten (10) business days shall be deemed an approval of such
proposed lease by Lender.
10.20 All contracts for the sale of Units which are or will be furnished
to Lender qualify or will qualify as Approved Sales Contracts and to the best of
Borrowers' knowledge, the Approved Sales Contracts are in full force and effect
and are the legal and binding obligation of purchasers, enforceable in
accordance with their terms.
10.21 To induce Lender to execute and perform this Agreement, each
Borrower hereby covenants, at all time from and after the date hereof and until
all obligations of Borrowers have been paid in full, to maintain all of its
operating accounts for the Projects with Lender (the "Operating Accounts"), to
deposit any and all revenue associated with the Projects in such Operating
Accounts (including, without limitation, all ▇▇▇▇▇▇▇ money (subject to Section
2.6(iv) hereof) and/or advances against Extras) and to utilize such amounts to
pay any and all operating
43
expenses of the Projects and/or distributions related to the Projects from such
Operating Accounts. Each such Operating Account shall be pledged to and for the
benefit of Lender.
SECTION 11
LOAN FEES; LOAN EXPENSES
------------------------
Borrowers acknowledge that Lender has fully earned a loan application fee
of Fifty Thousand Dollars ($50,000). Said loan application fee has been paid and
is non-refundable. In addition to the foregoing, Borrowers agree to pay (a) a
commitment fee of One Hundred Thousand Dollars ($100,000) concurrent with the
Initial Disbursement, such commitment fee is deemed paid and non-refundable, (b)
a closing fee of One Hundred Thousand Dollars ($100,000) concurrent with the
Initial Disbursement, such closing fee to be deemed paid and non-refundable upon
disbursement, and (c) all expenses, charges, costs and fees of the Loan or
relating to the performance of the Work and the development of the Project,
including, without limitation, negotiation, documentation and Lender's
attorneys' fees and expenses and court costs incurred in connection with the
enforcement of the terms of the Loan Documents, consulting architect fees,
appraisal fees, environmental assessment fees, insurance review fees, standard
flood hazard determinations, travel expenses, processing fees, broker's fees,
the fees charged by the Title Company and all costs of the Title Company, all
recording fees and charges, title insurance charges and premiums, escrow fees,
costs of surveys and of other bonds required by the Title Company in connection
with clearing title to the Projects or the issuance of title reports, binders,
policies and the like, and all other costs, expenses, charges and fees referred
to in or necessitated by the terms of this Agreement or any of the other Loan
Documents or otherwise related to the Loan (collectively, the "Loan Expenses").
In the event that the Loan Expenses are not paid to Lender within five (5) days
after deemed therefor, the Loan Expenses shall bear interest from the date so
incurred until paid at the Default Interest Rate then in effect under the Note
and shall be paid by Borrowers to Lender upon demand, or may be paid by Lender
at any time by disbursement of proceeds of the Loan. All Loan Expenses shall be
payable by Borrowers regardless of whether there shall be any Disbursements of
the Loan.
SECTION 12
LENDER'S REPRESENTATIVES
------------------------
12.1 Consultant and Attorneys. Lender shall have the right to engage
personnel in connection with negotiation, documentation, administration,
servicing and enforcement of the Loan, including, without limitation, the
Consultant, to (i) review and approve the Plans and Specifications, (ii) review
and approve Borrowers' final construction budgets and perform cost analyses,
(iii) conduct monthly compliance inspections of the Improvements and report on
the progress of construction thereof, (iv) inspect the structural, mechanical,
electrical, plumbing, HVAC and roof systems comprising the Work, (v) review and
approve applications for Disbursements and accompanying documents, (vi) review
and approve all change orders, (vii) determine whether the Work has been
completed substantially in accordance with the Approved Plans, (viii) issue
reports and certificates to Lender, and (ix) perform tests and inspections and
order reports on the Land in order to determine whether the Land is free from
Hazardous Material, and (x) provide other reasonable services as requested by
Lender. Any reasonable expense incurred by Lender pursuant to this Section 12.1
shall be Costs hereunder, shall be part of the Secured Obligations, shall be
secured by the Collateral, and shall be payable on demand.
44
Borrowers shall pay all expenses incurred by Lender in connection with
inspecting the Projects, including, without limitation, all reasonable fees and
expenses charged by the Consultant, and shall cooperate with such personnel in
all reasonable respects. Any amount not paid within ten (10) days after demand
therefor shall bear interest at the Default Interest Rate.
12.2 Waiver of Reliance by Borrowers. The authority herein conferred upon
Lender, and any action taken by Lender, to inspect the Projects, to procure
waivers or sworn statements, to approve contracts, Subcontracts and purchase
orders, and to approve Plans and Specifications, will be exercised and taken by
Lender and by Consultant for Lender's protection only and may not be relied upon
by Borrowers for any purposes whatever; and neither Lender nor Consultant shall
be deemed to have assumed any responsibility to Borrowers with respect to any
such action herein authorized or taken by Lender or Consultant or with respect
to the proper construction of improvements on the Projects, performance of
contracts, Subcontracts or purchase orders by any contractor, subcontractor or
material supplier, or prevention of mechanics' liens from being claimed or
asserted against the Projects. Any review, investigation or inspection conducted
by Lender, Lender's Consultant or any other architectural or engineering
consultants retained by Lender or any agent or representative of Lender to
verify independently Borrowers' satisfaction of any conditions precedent to
Disbursements under this Agreement, Borrowers' performance of any of the
covenants, agreements and obligations of Borrowers under this Agreement, or the
validity of any representations and warranties made by Borrowers hereunder
(regardless of whether the party conducting such review, investigation or
inspection shall have discovered that any of such conditions precedent were not
satisfied or that any such covenants, agreements or obligations were not
performed or that any such representations or warranties were not true), shall
not affect (or constitute a waiver by Lender of) (a) any of Borrowers'
representations and warranties under this Agreement or Lender's reliance
thereon, or (b) Lender's reliance upon any certifications of Borrowers, the
Contractors or the Architects required under this Agreement or any other facts,
information or reports furnished to Lender by Borrowers hereunder.
SECTION 13
EVENT OF DEFAULT
----------------
The occurrence of any one or more of the following shall constitute an
"Event of Default" for purposes of this Agreement:
(a) Failure by Borrowers to pay any installment of principal or
interest or any other amount payable pursuant to this Agreement (including,
without limitation, any shortfall resulting from insufficient funds in the
real estate tax reserve as stated in the Approved Budgets), the Note, the
Mortgages, or any of the other Loan Documents after ten (10) days written
notice from Lender any amount after the same becomes due and payable
hereunder.
(b) Failure by Borrowers after thirty (30) days written notice from
Lender to promptly perform any other obligation or observe any other
condition, covenant, term, agreement or provision required to be performed
or observed by Borrowers under this Agreement which is not covered by any
of the other provisions of this Section 13; provided that this period may
be extended in the reasonable discretion of Lender for a maximum period of
an additional thirty (30) days, provided Borrowers cannot cure the
45
default within said original thirty (30) day period and Borrowers are
diligently seeking to cure the item set forth in the notice.
(c) If the Loan is deemed to be "Out of Balance" as determined in
accordance with Section 7.3 hereof and Borrowers do not deposit funds with
Lender in accordance with Section 7.3.
(d) Any material inaccuracy or untruth in any representation,
covenant or warranty contained in this Agreement or any of the other Loan
Documents, or of any statement or certification as to facts delivered to
Lender pursuant to any Loan Document.
(e) A discontinuance of the construction of Improvements for a period
of twenty (20) consecutive days regardless of cause, or any material delays
from the Schedule, the result of which may be, in Lender's sole reasonable
judgment, that the construction of the Buildings or such other Improvements
will not be completed by the Completion Date.
(f) If the Projects are not completed on or before the Completion
Date, in accordance with Section 5.3 hereof.
(g) Borrowers, any shareholder of Borrowers or any Guarantor files a
bankruptcy petition, or is adjudicated a bankrupt or insolvent, or
institutes as debtor (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement,
composition, readjustment, dissolution, liquidation or similar proceedings
under any present or future federal, state or other statute or law, or
admits in writing his or its inability to pay his or its debts as they
mature, or makes arrangement, composition, readjustment, dissolution,
liquidation or similar proceedings under any present or future federal,
state or other statute or law, or the appointment of a receiver, trustee or
other officer for all or any substantial part of the property of Borrowers,
any shareholder of Borrowers, or any Guarantor which shall remain
undismissed or undischarged for a period of sixty (60) days.
(h) The bankruptcy or insolvency of any Contractor, any general
contractor who is a substitute for any Contractor or any subcontractor who
performs services in connection with the Projects under a Subcontract, the
contract price of which exceeds $50,000, or the withdrawal of any of the
foregoing from proceeding with the Work, and failure of Borrowers to
procure a contract with a new general contractor or subcontractor
satisfactory to Lender within sixty (60) days from the occurrence of such
bankruptcy, insolvency or withdrawal.
(i) A material adverse change in the financial condition of any
Borrower or any Guarantor, or a material adverse change in the value of any
Project and the failure of Borrowers to deliver to Lender other collateral
satisfactory to Lender within twenty (20) days following written notice by
Lender to Borrowers of such adverse change.
(j) The written disapproval by Lender at any time of any Work for
failure to comply with this Agreement or substantially to comply with the
Approved Plans, and
46
failure to cause the same to be corrected to the satisfaction of Lender
within ten (10) days after the date of such disapproval.
(k) A sale, transfer, lease, assignment, conveyance, lien or
encumbrance made in violation of Section 10.14.
(l) If the initial Construction Disbursement for the Plaza 32 Project
has not been effected on or before October 1, 1999.
(m) Failure of Borrowers for a period of thirty (30) days after
Lender's written demand to procure the dismissal or disposition to Lender's
satisfaction or in the manner otherwise permitted herein of any proceedings
seeking to enjoin or otherwise prevent or declare invalid or unlawful the
construction, occupancy, maintenance or operation of any of the Projects,
or any material portion thereof, as called for by the terms of this
Agreement, or of any proceedings which could or might affect the validity
or priority of the lien of the Mortgages or other security for the Loan or
which could materially affect Borrowers' ability to perform its obligations
under this Agreement.
(n) The attachment, seizure, levy upon or taking of possession by any
receiver, custodian or assignee for the benefit of creditors or all or a
substantial part of the property of Borrowers; provided, however, that if
Borrowers are taking steps to cure said default, same shall not be an Event
of Default unless, in Lender's sole judgment, any of the Projects shall be
threatened as security for the Loan.
(o) The filing or threatened filing of any condemnation or
administrative proceeding or litigation against any of the Projects or any
casualty thereto which would in any way impair the completion of the Work
or the full utilization of the Projects once completed; provided, however,
that if Borrowers are taking steps to cure said default, same shall not be
an Event of Default unless, in Lender's sole judgment, any of the Projects
shall be threatened as security for the Loan.
(p) The occurrence of any Default or Event of Default under any of
the Note, the Mortgages or any of the other Loan Documents.
(q) The termination of any Borrower as a corporation, whether
voluntary, by operation of law, or otherwise, without Lender's prior
written consent.
(r) The death, bankruptcy, dissolution or adjudicated incompetency of
any Guarantor. Borrowers and Lender hereby expressly agreeing that Lender
would not make the Loan to Borrowers absent such guaranty, that such
guaranty is a material inducement to Lender, and that such death,
bankruptcy, dissolution or adjudication would be a material default
hereunder, notwithstanding the adequacy of the Collateral.
(s) In the event Sundance Homes, Inc. pays any dividends to its
shareholders during the term of the Loan.
(t) In the event ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇'▇ total compensation from all
sources in any calendar year during the term of the Loan exceeds One
Million Dollars ($1,000,000).
47
(u) In the event Sundance Homes, Inc. repays any portion of the
Subordinated Debt in excess of the Eight Hundred Thousand Dollars
($800,000) repayment allowed under the terms of the Loan Documents.
SECTION 14
REMEDIES
--------
Upon the occurrence of any Event of Default, Lender, in addition to
availing itself of any remedies conferred upon it by law and by the terms of the
Note, the Mortgages and the other Loan Documents, may pursue any one or more of
the following remedies first, concurrently or successively with each other and
with any other available remedies, it being the intent hereof that none of such
remedies shall be to the exclusion of any others:
a. Take possession of the Projects and do anything necessary or
desirable in its sole judgment to complete the construction of the Work and
equipping of the Buildings, including the right either to avail itself of
and procure performance of any Subcontract or to let new or additional
contracts with the same contractors or subcontractors or others, and to
employ watchmen to protect the Projects from injury. Without restricting
the generality of the foregoing, Borrowers hereby appoint and constitute
Lender their lawful attorney-in-fact with full power of substitution in the
premises (i) to complete construction of the Work and furnishing and
equipping of the Buildings in the name of Borrowers; (ii) to use portions
of the Loan or other funds which may be reserved, escrowed or set aside for
any purposes hereunder at any time to complete the Projects; (iii) to make
changes in the Plans and Specifications which shall be necessary to
complete the Work; (iv) to retain or employ new general contractors,
subcontractors, architects and inspectors as shall be required for said
purposes; (v) to pay, settle or compromise all existing bills and claims,
which may be liens or security interests or to avoid such bills and claims
becoming liens against the Projects or security interests against any
personal property located thereon, or as may be necessary or desirable for
the completion of the construction of the Work and equipping of the
Buildings or for the clearance of title; (vi) to execute all applications
and certificates in the name of Borrowers which may be required by any of
the Loan Documents; (vii) to prosecute and defend all actions or
proceedings in connection with the Projects; (viii) to take such action and
require such performance as it deems necessary under any of the bonds, to
be furnished hereunder and to make settlements and compromises with the
surety or sureties thereunder, and in connection therewith to execute
instruments of release and satisfaction, it being understood that this
power of attorney shall be a power coupled with an interest and cannot be
revoked.
b. Withhold further Disbursements of proceeds of the Loan.
c. Declare the unpaid indebtedness evidenced by the Note to be
immediately due and payable.
d. Foreclose the Mortgages and exercise any of the rights and
remedies contained in this Agreement, the Note or any of the other Loan
Documents or exercise any other rights and remedies that Lender may have at
law or in equity.
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e. Apply the balance of any deposits made with Lender in the same
manner as provided for payments under the Note, if applicable.
SECTION 15
MISCELLANEOUS
-------------
15.1 Form of Payments. All payments of principal and interest on the Loan
shall be made to Lender in immediately available funds not later than noon
Chicago time on the date such payments are to be made.
15.2 Advances by Lender. If any advances or payments made by Lender
pursuant to this Agreement or any other Loan Document, together with
Disbursements of the Loan, shall exceed the aggregate face amount of the Note,
all such advances and payments shall constitute additional indebtedness secured
by the Mortgages and all other security for the Loan, and shall, after notice of
said advance to Borrowers, bear interest at the Default Interest Rate.
15.3 Documents of Further Assurance. Borrowers shall, upon request of
Lender, execute and deliver such further instruments and documents and do such
further acts and things as may be reasonably required to provide to Lender the
evidence of, and security for, the Loan.
15.4 Incorporation of Other Agreements. The provisions of the other Loan
Documents are incorporated in this Agreement by this reference thereto. Except
as otherwise provided in this Agreement and except as otherwise provided in the
other Loan Documents by specific reference to the applicable provision of this
Agreement, if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in the other Loan Documents, Lender shall have
the right to elect, in its sole and absolute discretion, which provision shall
govern and control. Except to the extent provided to the contrary in this
Agreement and in the other Loan Documents, no termination or cancellation
(regardless of cause or procedure) of this Agreement or the other Loan Documents
shall in any way affect or impair the powers, obligations, duties, rights and
liabilities of Borrowers or Lender in any way or respect relating to (a) any
transaction or event occurring prior to such termination or cancellation, and/or
(b) any of the undertakings, agreements, covenants, warranties and
representations of Borrowers contained in this Agreement or the other Loan
Documents. All such undertakings, agreements, covenants, warranties and
representations shall survive such termination or cancellation.
15.5 Lender's Right to Cure Defaults. If Borrowers fail to perform any of
their obligations under this Agreement or any other Loan Document, or if any
Event of Default shall occur hereunder, Lender may, but shall not be obligated
to, perform such obligation or cure such Event of Default, and all amounts
expended in so doing, as well as all Loan Expenses and other amounts paid or
advanced by Lender, pursuant to the Loan Documents, shall constitute additional
advances of the Loan, shall be secured by the Mortgages and all of the other
Loan Documents, and shall bear interest at the Default Interest Rate.
15.6 Amendments and Modifications. This Agreement shall not be amended,
modified or supplemented without the written agreement of Borrowers and Lender
at the time of such amendment, modification or supplement. No waiver of any
provision of this Agreement or
49
any other Loan Documents shall be effective unless set forth in writing signed
by Lender, and any such waiver shall be effective only to the extent therein set
forth. Failure by Lender to insist upon full and prompt performance of any
provisions of this Agreement or any other Loan Documents, or to take action in
the event of any breach of any such provision or Event of Default, shall not
constitute a waiver of any rights of Lender, and Lender may at any time
thereafter exercise all rights specified herein or provided by applicable law
with respect to such breach or Event of Default. Receipt by Lender of any
instrument or document shall not constitute or be deemed to be an approval
thereof. Any approval required under any of the Loan Documents must be in
writing signed by Lender and directed to Borrowers. Borrowers expressly agree
that for the purposes of this Agreement and each and every other Loan Document;
(i) this Agreement and each and every Loan Document shall be a "credit
agreement" under the Illinois Credit Agreements Act, 815 ILCS 160/1 et.seq. (the
"Act"); (ii) the Act applies to this transaction including, but not limited to,
the execution of this Agreement and each and every other Loan Document; and
(iii) any action on or in any way related to this Agreement and each and every
other Loan Document shall be governed by the Act.
15.7 Notices. Any notice which any party hereto gives to any other party
hereunder shall be in writing and shall be mailed or delivered to the intended
recipient thereof at its address set forth below or at such other address as
such intended recipient, from time to time, by notice in writing, designates to
sender pursuant hereto. Any such notice shall be deemed to have been delivered
two (2) business days after mailing by United States certified mail, return
receipt requested, or when delivered in person, and receipted for, or upon
receipt if sent by a nationally recognized overnight air courier.
To Borrowers: At the address set forth in the first paragraph of this
Agreement
with a copy to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
To Lender: At the address set forth in the first paragraph of this
Agreement
with a copy to: ▇▇▇▇▇▇ & Coff
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Unless specifically required herein, notice of the exercise of any option
granted to Lender by this Agreement is not required to be given.
15.8 Successors and Assigns. The rights, powers and remedies of Lender
under this Agreement shall inure to the benefit of Lender, its successors and
assigns. The rights and
50
obligations of Borrowers under this Agreement may not be assigned without the
prior written consent of Lender, and any such purported assignment by Borrowers
shall be null and void.
15.9 GOVERNING LAW; LITIGATION. THE VALIDITY OF THIS AGREEMENT, ITS
CONSTRUCTION, INTERPRETATION AND ENFORCEMENT, AND THE RIGHTS OF BORROWERS AND
LENDER SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWERS AND LENDER
EACH HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT SHALL BE TRIED AND DETERMINED ONLY IN THE FEDERAL COURT LOCATED
IN THE NORTHERN DISTRICT OF ILLINOIS, OR THE STATE COURT LOCATED IN THE COUNTY
OF ▇▇▇▇, STATE OF ILLINOIS, OR, AT THE SOLE OPTION OF LENDER IN ANY OTHER COURT
IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, BORROWERS AND LENDER EACH HEREBY EXPRESSLY WAIVES ANY
RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
15.9.
15.10 Indemnification. Borrowers agree to indemnify, defend and hold
Lender, its successors, assigns, and participants (if any), harmless from and
against any and all liabilities, obligations, losses, damages, claims, costs and
expenses (including reasonable attorneys' fees, and expenses, and court costs)
of whatever kind or nature which may be suffered, incurred or imposed on Lender
by virtue of this Agreement (except for any of the aforementioned which arise
solely out of Lender's gross negligence or willful misconduct), including,
without limitation, any liability resulting from the release of any Hazardous
Material from the Land into the environment or resulting from any other
violation or alleged violations of law with respect to any Hazardous Materials
at the Land; any brokerage commissions or finder's fees asserted against Lender
with respect to the making of the Loan; any loss or damage incurred by Lender by
reason of the construction of Borrowers and Lender as having the relationship of
joint venturer or partners or Borrowers or Lender being deemed to have acted as
agent for the other; and any loss or damages incurred by Lender as a result of
the breach by Borrowers of any of their agreements, covenants, warranties or
representations contained herein.
15.11 Headings. The titles and headings of the sections and paragraphs of
this Agreement have been inserted as a matter of convenience of reference only
and shall not control or affect the meaning or construction of any of the terms
or provisions of this Agreement.
15.12 No Joint Venture. Lender, by executing and performing this
Agreement, does not become a partner or joint venturer with Borrowers. All
inspections of the Projects herein provided for are for the sole benefit of
Lender.
51
15.13 Time of Essence. Time is of the essence with respect to the payment
of all amounts due Lender under this Agreement and performance and observance by
Borrowers of each covenant, agreement, provision and term of this Agreement.
15.14 Invalidity. In the event any one or more of the provisions
contained in this Agreement or in any of the Loan Documents shall for any reason
be held to be invalid, illegal or unenforceable in any respect by a court of
competent jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement or any such Loan Document, and
this Agreement and any such Loan Document shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein or therein.
15.15 Violation of Laws. Notwithstanding anything herein contained to the
contrary, Lender will not be required to make any Disbursement or perform any
other act under this Agreement if, as a result thereof, Lender will violate any
law, statute, ordinance, rule, regulation or judicial decision applicable
thereto.
15.16 Representation by Counsel. Borrowers hereby represent that they
have been represented by competent counsel of its choice in the negotiation and
execution of this Agreement and the other Loan Documents; that it has read and
fully understood the terms hereof; that Borrowers and their counsel have been
afforded an opportunity to review, negotiate and modify the terms of this
Agreement, and that they intend to be bound hereby. In accordance with the
foregoing, the general rule of construction to the effect that any ambiguities
in a contract are to be resolved against the party drafting the contract shall
not be employed in the construction and interpretation of this Agreement or any
other Loan Document.
15.17 FAX Delivery. For purposes of negotiating and finalizing this
Agreement (including any subsequent amendments thereto), any signed document
transmitted by facsimile machine ("FAX") shall be treated in all manner and
respects as an original document. The signature of any party by FAX shall be
considered for these purposes as an original signature. Any such FAX document
shall be considered to have the same binding legal effect as an original
document, provided that an original of the faxed document was mailed by first
class U.S. mail or personally delivered to the recipient, on the date of its
transmission with proof of the fax transmission. At the request of either party,
any FAX document subject to this Agreement shall be re-executed by both parties
in an original form. The undersigned parties hereby agree that neither shall
raise the use of the FAX or the fact that any signature or document was
transmitted or communicated through the use of a FAX as a defense to the
formation of this Agreement.
15.18 Counterparts. This Agreement may be executed in counterparts, and
all said counterparts when taken together shall constitute one and the same
Agreement.
15.19 Jury Waiver. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWERS AND
LENDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY ACTION, CAUSE OF
ACTION, CLAIM, DEMAND OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS
AGREEMENT, OR IN ANY WAY CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
DEALINGS OF BORROWERS AND LENDER WITH RESPECT TO THIS AGREEMENT, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE
52
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWERS AND LENDER
HEREBY AGREE THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND OR PROCEEDING
SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT BORROWERS OR LENDER
MAY FILE AN EXECUTED COPY OF THIS AGREEMENT WITH ANY COURT OR OTHER TRIBUNAL AS
WRITTEN EVIDENCE OF THE CONSENT OF BORROWERS AND LENDER TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.
15.20 No Third Party Beneficiaries. This Agreement is solely for the
benefit of Lender, Borrowers and their respective permitted successors and
assigns and nothing contained herein shall be deemed to confer upon any Person
any right to insist on or to enforce the performance or observance of any of the
obligations contained herein. All conditions to the obligations of Lender to
make the Loan hereunder are imposed solely and exclusively for the benefit of
Lender and its respective successors and assigns and no other Person shall have
standing to require satisfaction of such conditions in accordance with their
terms and no other Persons shall under any circumstances be deemed to be a
beneficiary of such conditions.
15.21 Survival of Commitment Letter. The Commitment Letter and the terms
therein, shall survive closing; provided, however, in the event of a conflict
between the terms of the Commitment Letter and the Loan Documents, the terms of
the Loan Documents shall control.
[SIGNATURES ON FOLLOWING PAGE]
53
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as
of the day and year first above written.
BORROWERS:
ERIE CENTER LOFTS, INC.,
an Illinois corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Vice President and
Chief Financial
Officer
CAPITOL HILL LOFTS, INC.,
an Illinois corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Vice President and
Chief Financial
Officer
SANGAMON LOFTS, INC.,
an Illinois corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Vice President and
Chief Financial
Officer
MARATHON CENTER, INC.,
an Illinois corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Vice President and
Chief Financial
Officer
LENDER:
CORUS BANK, N.A.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Its Vice President
-------------------
54
EXHIBIT "A-1"
The Erie Tower Land
-------------------
P.I.N.
Commonly known as
55
EXHIBIT "A-2"
The Capitol Land
----------------
P.I.N.
Commonly known as
56
EXHIBIT "A-3"
The Arthouse Land
-----------------
P.I.N.
Commonly known as
57
EXHIBIT "A-3-a"
The Arthouse II Parcel
----------------------
P.I.N.
Commonly known as
58
EXHIBIT "A-4"
The Plaza 32 Land
-----------------
P.I.N.
Commonly known as
59
EXHIBIT "B"
The Permitted Exceptions
------------------------
The following exceptions delineated on Schedule B of Title Commitment No.
_________________ issued by _______________ Title Company :____________________.
60
EXHIBIT "C-1"
The Tranche A Project Budget
----------------------------
By its signature below, Lender has accepted and approved the above-referenced
Tranche A Preliminary Budget as the "Tranche A Approved Project Budget".
CORUS BANK, N.A.
By__________________________
Its____________________
61
EXHIBIT "C-2"
The Tranche B Project Budget
----------------------------
By its signature below, Lender has accepted and approved the above-referenced
Tranche B Preliminary Budget as the "Tranche B Approved Project Budget".
CORUS BANK, N.A.
By___________________________
Its_____________________
62
EXHIBIT "D-1"
The Tranche A Approved Plans and Specifications
-----------------------------------------------
The Plans and Specifications prepared by _________________________ for the
Project titled ______________________________ Project No. _____ are hereby
incorporated by reference.
By its signature below, Lender has accepted and approved the above referenced
Preliminary Plans as the "Approved Plans".
CORUS BANK, N.A.
By__________________________
Its____________________
63
EXHIBIT "D-2"
The Tranche B Plans and Specifications
--------------------------------------
The Plans and Specifications prepared by _________________________ for the
Project titled ______________________________ Project No. _____ are hereby
incorporated by reference.
By its signature below, Lender has accepted and approved the above referenced
Preliminary Plans as the "Approved Plans".
CORUS BANK, N.A.
By__________________________
Its____________________
64
EXHIBIT "E"
Pending Contract Prices and Pro Forma List Prices
-------------------------------------------------
65
EXHIBIT "F"
-----------
Schedule
--------
66