EXHIBIT 10.1
LOAN AGREEMENT
For valuable consideration, the sufficiency of which is hereby
acknowledged, this Loan Agreement ("Agreement") is entered into this 6th day of
December, 2004 by and between Horn Irrevocable Trust (Horn) dated July 1, 2002,
and Vescovo Finance, LLC (Vescovo), a Utah limited liability company,
hereinafter collectively referred to as "Lender," and HomeNet Corporation, a
Delaware corporation, HomeNet Communications, Inc., a Washington corporation,
and Home Marketing Group, a Utah corporation, hereinafter collectively referred
to as "Borrower" upon the terms and conditions hereinafter set forth.
1. Loan Amount. Lender hereby agrees to loan Borrower the original
principal sum of One Million Two Hundred Thousand Dollars
($1,200,000.00 USD) (the "Loan"), upon the following terms and
conditions.
2. Collateral. Borrower shall pledge, or caused to be pledged through its
Guarantors, the five (5) parcels of real property located at the
following addresses: 1) ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇, No debt
with a $400,000 value, 2) ▇▇▇ ▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇, No Debt
with a $600,000 value, 3) ▇▇▇ ▇. ▇▇▇▇ ▇., ▇▇▇, ▇▇▇▇, ▇▇▇▇▇, no debt
with a $450,000 value, 4) ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇, $600,000
debt with a $1.2 Million value and 5) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇, ▇▇,
▇▇▇▇▇, $230,000 debt with a $950,000 value. The aforementioned 5
Properties are additionally described through a legal description on
Exhibit A hereto, as collateral for this Loan (hereinafter collectively
referred to as the "Properties" or "Property" if referring to any
individual Property).
3. Borrower's Warranties and Representations. Borrower hereby represents
and warrants as follows:
A. That Borrower and each of them is a duly organized and
validly existing corporation in good standing under the laws
of the States in which they were organized.
B. That Borrower has taken all necessary corporate action to
authorize Borrower to enter into and perform this Agreement.
C. That the execution by Borrower of this Agreement, and the
performance of its obligations hereunder no not and will not
violate or conflict with any provision of Borrower's Articles
of Incorporation or Bylaws.
D. To the best of Borrower's knowledge and belief, the owners
have obtained all governmental licenses, permits and approvals
necessary to use and occupy the Properties, and the owners are
in compliance with all applicable requirements of federal,
state and local law, including without limitation building and
use ordinances and environmental protection statutes, and any
restrictive covenants of record affecting the operation, use
and occupancy of the Properties.
E. That there are no unrecorded easements or claims of
interest in and to the Properties, nor any facts indicating
the existence of any such easements, claims or interest other
than those covenants and easements set forth as exceptions to
the title insurance policy.
F. That there are no mechanic's or materialmen's liens in
existence on or against the Properties.
G. That it/they have personal knowledge on information and
belief of the facts hereinabove given and are competent to
make these representations. Each of the Undersigned
acknowledges that the Lender has relied on their
representations contained herein in entering into this
transaction.
H. That the execution and delivery by Borrower or owner of a
Deed of Trust will not violate any indenture, agreement or
other instrument to which the Borrower is a party, or the
Properties are bound, or be in conflict with, result in a
breach of or constitute (with due notice and/or lapse of time)
a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon the
Properties.
I. That no consent or approval of any regulatory body is
required for the execution, delivery and performance of a Deed
of Trust.
J. That no suits, proceedings or investigations are pending or
threatened against or affecting the Borrower or owners of the
Properties, at law or in equity, or before or by any
governmental or administrative agency or instrumentality,
which, if adversely determined, would have a material adverse
effect on the Properties.
K.. That no decree or order of any court or governmental or
administrative agency or instrumentality has been issued
against the Borrower or any owner of the Properties which has
or may have any material, adverse effect on the Properties.
L. That the execution and the delivery of a Deed of Trust does
not contravene any law, order, decree, rule or regulation to
which the Borrower or any owner of the Properties is subject
M. That Borrower is not bankrupt, nor has any of the
undersigned committed any acts of bankruptcy nor are there any
outstanding liens, suits, garnishments, petitions (whether
voluntary or involuntary) in bankruptcy or court actions which
could render the Borrower insolvent or bankrupt.
N. That to Borrower's knowledge and belief there are currently
no hazardous or toxic materials (including without limitation,
asbestos, PCB's, toxic wastes, or any substance which is
defined as "hazardous" in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended,
or similar State or local statute or regulation) present on,
under or about the Properties.
O. That Borrower shall not store, use or dispose of hazardous
materials (including without limitation, asbestos, PCB's,
toxic wastes or any substance which is prohibited or limited
by Federal, State or local statute or regulation), nor allow
the storage, use or disposal of such hazardous materials, on,
under or about the Properties. The Borrower shall be liable
for and indemnify, defend and hold Lender harmless against any
and all damages and/or claims resulting from said hazardous
materials.
2
P. The foregoing representations and warranties shall be true
and correct as of the date of this Agreement and are restated
as of closing. Borrower agrees to give Lender written notice
of any fact, circumstance, or development which would limit,
impair, or invalidate these warranties and representations,
and failure to do so shall constitute a breach of this
Agreement by Borrower. Lender shall have the right, but not
the obligation, to terminate this Agreement in full and to
avail itself of any and all remedies under applicable law,
including (without limitation) the remedy of specific
performance, restitution, collection of damages, and the
recovery of costs and attorneys' fees for Borrower's breach of
the foregoing representations and warranties.
Q. That Borrower has obtained competent legal counsel in the
State of Utah specific to the terms of this Agreement.
R. That the Loan is solely for Business Purposes and as such,
Borrower agrees that all Properties (Borrower is pledging or
causing to be pledged) shall be vested in the name of an
entity that is either a Corporation, Limited Liability
Company, Limited Partnership, or Trust.
S. That Borrower has represented the values and debts against
the Properties to be as found under Paragraph 2 "Collateral"
above. Borrower has also represented that the equity in the
Collateral to be worth a minimum of 2.5 Million Dollars.
4. Use of Proceeds. Borrower shall receive a first disbursement of
$150,000 upon the execution of the Note, Deeds of Trust against all
collateral Properties located in Utah as well as the execution of
Personal Guarantees by the guarantors as outlined in 7(B) below. The
subsequent loan proceeds shall be disbursed, contingent upon the
recording of all the Deeds of Trust against all the Properties. The
second disbursement shall be performed first towards the repayment of a
Business loan to Zions bank in the approximate amount of $720,000.00.
This second disbursement shall be disbursed directly to Zion's Bank for
the benefit of Borrower in paying off its existing loan with Zion's
Bank, and the remainder of the loan proceeds if any, shall be disbursed
directly to Borrower for working capital or any other lawful business
purpose of Borrower.
5. Cost of Loan. The cost to Borrower for the Loan shall be 17 points
($204,000.00), payable to Lender concurrent with and as a condition of
funding of the Loan, together with other terms as set forth in the
security instruments associated with the Loan, which documents Borrower
hereby affirms that they have read and fully understand. The foregoing
fee shall be deemed earned in full by Lender upon the funding, or any
partial funding of the Loan Proceeds. In addition, Borrower shall pay
all costs associated with the preparation and closing of the Loan
including but not limited to legal fees, Title & Escrow Fees, and due
diligence fees by Vescovo. Additionally, no later than the closing of
the Loan, Borrower shall provide Lender with valid and enforceable
common stock purchase warrants, in a form acceptable to Lender, to
acquire seventy-five thousand (75,000) shares of HomeNet common stock
at an exercise price of one dollar and fifty cents ($1.50) per share
(the "Warrant"). Lender shall release the Warrant instrument to Lender
at closing and Lender shall be given a period of five (5) years from
the date of closing of the Loan to exercise each of the Warrants.
Additionally, Lender and HomeNet acknowledge and understand that the
Loan shall be contingent to the prior or concurrent execution of a
Lease Agreement suitable to Horn, specific to office space owned by
Horn. Borrower herein grants to Lender, at the sole discretion of
Lender, the option to convert any portion of the loan proceeds
including any points or interest due lender towards the purchase of
securities of HomeNet at a discount of 20% off HomeNet's next round of
equity financing.
3
6. Term of Loan. The Loan shall be due in full one-hundred and twenty
(120) days after the date upon which any of the security instruments
associated with the Loan are executed. Failure by Borrower to repay the
full amount of the outstanding principal, fees and interest by said
date shall be an event of default and shall entitle Lender to all
remedies provided by this Agreement, in the Loan documents described in
paragraph 7 below, and under applicable law. Borrower may prepay any
portion of the principal at any time without penalty.
7. Security. The following provisions shall be conditions precedent to the
funding of the Loan.
A. Promissory Note & Deed of Trust. Borrower shall execute a
Promissory Note in favor of Lender evidencing Borrower's
obligation to repay the loan and setting forth the specific
loan provisions as expressed herein. Additionally, Borrower
shall execute and have recorded, prior to or contemporaneous
with the disbursement of Loan proceeds, Deed(s) of Trust
naming Lender as Beneficiary with respect to the Properties.
To the extent that title to any of the Properties is held by a
legal entity other than a natural person, Borrower shall
provide Lender with the organizing and governing instruments
of such entities, and the approval of such instruments by
Lender shall be a condition to this Loan.
B. Guaranty. The following individuals and entities shall
guaranty the performance and satisfaction of all duties and
obligations set forth herein and in the Promissory Note and
Deed(s) of Trust required hereby: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇.
C. No Other Encumbrance. With the exception of encumbrances
which are acceptable to Lender at Lender's sole discretion,
said exceptions to be based on representations to Lender by
Borrower specific to existing debt owed against the Properties
as well as value and equity in the Properties, Borrower hereby
warrants that at the time of closing there shall be no
encumbrances or claims against the Properties, and that during
the term of the Loan, Borrower will not cause or allow any
encumbrance or claim to arise against the Properties.
Borrower, shall indemnify Lender against any and all loss
arising from any violation of this provision.
8. Title Insurance. At Borrower's expense, Borrower shall provide Lender
with a standard form lender's policy of title insurance with respect to
the Properties, which policy shall include coverage against mechanic's
lien claims.
9. Closing. Closing shall occur at and be performed by and through
Independence Title, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ unless
otherwise directed by Lender (the "Closing Agent"). Prior to Closing,
all necessary documentation together with the Loan proceeds shall be
delivered to the Closing Agent, who shall provide title and escrow
services customary to this type of transaction. Closing shall have
occurred when the initial Loan proceeds are made available to Borrower,
or when Borrower otherwise receives the benefit of the initial loan
proceeds. Borrower shall be responsible for all costs associated with
the closing of the Loan. The Loan proceeds will not be disbursed until
Lender has received evidence that Deeds of Trust respecting the
Properties have been recorded with the appropriate County Recorder's
Offices. Notwithstanding the foregoing, $150,000.00 of the Loan
proceeds may be released to Borrower upon the execution of the Deeds of
4
Trust against all of the Properties located in Utah, with the balance
released upon the recording of the Deeds of Trust against any of the
remaining Properties including the execution and recording of the Deed
of Trust against the Property located in Arizona. In the event that
Lender learns, at any time during the disbursement period of proceeds
for the Loan, information you have furnished by Borrower contains
factual inaccuracies and/or misstatements, including, but not limited
to existing debt or value of collateral Properties, Borrower's income
and financial status, and credit status, Lender shall not be obligated
to proceed and in such event, Borrower agrees that it shall release and
hold Lender harmless and waives any defenses, claims, setoffs, suits,
defenses, demands, allegations, charges, damages, or causes of action
whatsoever, in law or in equity, under federal, state, municipal or
local statute, law, ordinance, regulation, constitution, or common law,
whether known or unknown, which Borrower may desire to assert against
Lender, which arise in whole or in part from the Loan.
10. Default. Upon any event of default by Borrower, which for the purposes
of this agreement shall be defined as the breach of any contractual
provision, or any event that could impair Lender's security in the
Collateral, Lender shall be entitled to pursue any remedy or remedies
provided by this Agreement or any document associated with the loan,
and any remedy or remedies allowed by law. The election of any remedy
or remedies by Lender shall in no way operate to deprive Lender of the
right to seek a deficiency judgement against Borrower or any guarantor
of the Loan.
11. Attorneys Fees. Upon an event of default of any of the covenants or
agreements contained herein or in any instrument or contract associated
with this transaction, or should litigation be commenced, the non
breaching or prevailing party shall be entitled to all costs and
expenses, including a reasonable attorney's fee, which may arise or
accrue from enforcing or terminating this Agreement, or in obtaining
possession of the property, or in pursuing any remedy provided
hereunder or by applicable law.
12. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Utah. Any legal action
initiated to enforce this Agreement, shall be filed and prosecuted only
in the District Court in and for Utah County.
13. Binding Effect. This Agreement is and shall be binding upon and inure
to the benefit of the parties hereto and to their respective heirs,
personal representatives, successors and assigns. The provisions herein
shall survive the closing of this loan transaction as necessary to
protect the interests of the parties.
14. Entire Agreement. This Agreement, together with the terms of the
documents described herein, contains the entire agreement between the
parties hereto relative to the subject matter hereof. Any provisions
hereof not enforceable under the laws of the State of Utah shall not
affect the validity of any other provisions hereof. No supplement
modification or amendment of this Agreement shall be binding on the
parties hereto unless signed in writing by both parties hereto.
5
IN WITNESS WHEREOF, the parties have set their signatures on the day and year
first above written.
BORROWER LENDER
HomeNet Corporation Horn Irrevocable Trust
Address: Address:
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ #▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇ Phone: (801)
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (801)
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------- ------------------------------
Its: President Its: Trustee
HomeNet Communications, Inc. Vescovo Finance, LLC
Address: Address:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇. ▇▇▇ ▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇)▇▇▇-▇▇▇▇ Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By /s/ ▇▇▇▇▇ ▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------- ------------------------------
Its: CEO Its: Manager
BORROWER
Home Marketing Group, a Utah corporation
Address:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Its: President
6