EXHIBIT 10.16
CONSTRUCTION LOAN AGREEMENT
BORROWER: OCM Development, LLC LENDER: Independent Bank West
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THIS CONSTRUCTION LOAN AGREEMENT DATED _______________ IS MADE AND EXECUTED
BETWEEN OCM DEVELOPMENT, LLC ("BORROWER") AND INDEPENDENT BANK WEST MICHIGAN
("LENDER") ON THE FOLLOWING TERMS AND CONDITIONS. BORROWER HAS APPLIED TO LENDER
FOR ONE OR MORE LOANS FOR PURPOSES OF CONSTRUCTING THE IMPROVEMENTS ON THE REAL
PROPERTY DESCRIBED BELOW. LENDER IS WILLING TO LEND THE LOAN AMOUNT TO BORROWER
SOLELY UNDER THE TERMS AND CONDITIONS SPECIFIED IN THIS AGREEMENT AND IN THE
RELATED DOCUMENTS, TO EACH OF WHICH BORROWER AGREES. BORROWER UNDERSTANDS AND
AGREES THAT: (A) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING
UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS AS SET FORTH IN THIS
AGREEMENT, AND (B) ALL SUCH LOANS SHALL BE AND REMAIN SUBJECT TO THE TERMS AND
CONDITIONS OF THIS AGREEMENT.
TERM. This Agreement shall be effective as of _____________ and shall continue
in full force and effect until such time as all of Borrower's Loans in favor of
Lender have been paid in full, including principal, interest, costs, expenses,
attorneys' fees, and other fees and charges, or until such time as the parties
may agree in writing to terminate this Agreement.
LOAN. The Loan shall be in an amount not to exceed the principal sum of U.S.
___________ and shall bear interest on so much of the principal sum as shall be
advanced pursuant to the terms of this Agreement and the Related Documents. The
Loan shall bear interest on each Advance from the date of the Advance in
accordance with the terms of the Note. Borrower shall use the Loan Funds solely
for the payment of: (A) the costs of constructing the Improvements and equipping
the Project in accordance with the Construction Contract; (B) other costs and
expenses incurred or to be incurred in connection with the construction of the
Improvements as Lender in its sole discretion shall approve; and (C) if
permitted by Lender, interest due under the Note, including all expenses and all
loan and commitment fees described in this Agreement. The Loan amount shall be
subject at all times to all maximum limits and conditions set forth in this
Agreement or in any of the Related Documents, including without limitation, any
limits relating to loan to value ratios and acquisition and Project costs.
PROJECT DESCRIPTION. The word "Project" as used in this Agreement means the
construction and completion of all improvements contemplated by this Agreement,
including without limitation the erection of the building or structure on the
Real Property identified to this Agreement by Borrower and Lender, installation
of equipment and fixtures, landscaping, and all other work necessary to make the
Project usable and complete for the intended purposes. The Project includes the
following work:
CONSTRUCTION OF O'CHARLEY'S RESTAURANT.
The word "Property" as used in this Agreement means the Real Property together
with all improvements, all equipment, fixtures, and other articles of personal
property now or subsequently attached or affixed to the Real Property, together
with all accessions, parts, and additions to, all replacements of, and all
substitutions for any such property, and all proceeds (including insurance
proceeds and refunds of premiums) from any sale or other disposition of such
property. THE REAL ESTATE DESCRIBED BELOW CONSTITUTES THE REAL PROPERTY AS USED
IN THIS AGREEMENT.
THE REAL ESTATE OR ITS ADDRESS IS COMMONLY KNOWN AS:
Real Property located at ____________________________________________.
FEES AND EXPENSES. Whether or not the Project shall be consummated, Borrower
shall assume and pay upon demand all out-of-pocket expenses incurred by Lender
in connection with the preparation of loan documents and the making of the Loan,
including without limitation the following: (A) all closing costs, loan fees,
and disbursements; (B) all expenses of Lender's legal counsel; and (C) all title
examination fees, title insurance premiums, appraisal fees, survey costs,
required fees, and filing and recording fees.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 2
NO CONSTRUCTION PRIOR TO RECORDING OF SECURITY DOCUMENT. Borrower will not
permit any work or materials to be furnished in connection with the Project
until (A) Borrower has signed the Related Documents; (B) Lender's mortgage or
deed of trust and other Security Interests in the Property have been duly
recorded and perfected; (C) Lender has been provided evidence, satisfactory to
Lender, that Borrower has obtained all insurance required under this Agreement
or any Related Documents and that Lender's liens on the Property and
Improvements are valid perfected first liens, subject only to such exceptions,
if any, acceptable to Lender.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any indebtedness exists;
ORGANIZATION. Borrower is a limited liability company which is, and at all times
shall be, duly organized, validly existing, and in good standing under and by
virtue of the laws of the State of Michigan. Borrower is duly authorized to
transact business in all other states in which Borrower is doing business,
having obtained all necessary filings, governmental licenses and approvals for
each state in which Borrower is doing business. Specifically, Borrower is, and
at all times shall be, duly qualified as a foreign limited liability company in
all states in which the failure to so qualify would have a material adverse
effect on its business or financial condition. Borrower has the full power and
authority to own its properties and to transact the business in which it is
presently engaged or presently proposed to engage. Borrower maintains an office
at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Unless Borrower
has designated otherwise in writing, the principal office is the office at which
Borrower keeps its books and records including its records concerning the
Collateral. Borrower will notify Lender prior to any change in the location of
Borrower's state of organization or any change in Borrower's name. Borrower
shall do all things necessary to preserve and to keep in full force and effect
its existence, rights and privileges, and shall comply with all regulations,
rules, ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to Borrower and Borrower's
business activities.
ASSUMED BUSINESS NAMES. Borrower has filed or recorded all documents or filings
required by law relating to all assumed business names used by Borrower.
Excluding the name of Borrower, the following is a complete list of all assumed
business names under which Borrower does business:
Borrower Assumed Business Name Filing Location Date
-------- ------------------------------------------- --------------- ----
OCM Development, LLC O'Charley's Development Company of Michigan
AUTHORIZATION. Borrower's execution, delivery, and performance of this Agreement
and all the Related Documents have been duly authorized by all necessary action
by Borrower and do not conflict with, result in a violation of, or constitute a
default under (1) any provision of (a) Borrower's articles of organization or
membership agreements, or (b) any agreement or other instrument binding upon
Borrower or (2) any law, governmental regulation, court decree, or order
applicable to Borrower or to Borrower's properties.
FINANCIAL INFORMATION. Each of Borrower's financial statements supplied to
Lender truly and completely disclosed Borrower's financial condition as of the
date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
Borrower is required to give under this Agreement when delivered will constitute
legal, valid, and binding obligations of Borrower enforceable against Borrower
in accordance with their respective terms.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 3
PROPERTIES. Except as contemplated by this Agreement or as previously disclosed
in Borrower's financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrower's properties free
and clear of all Security Interests, and has not executed any security documents
or financing statements relating to such properties. All of Borrower's
properties are titled in Borrower's legal name, and Borrower has not used or
filed a financing statement under any other name for at least the last five (5)
years.
HAZARDOUS SUBSTANCES. Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (1) During the period of
Borrower's ownership of Borrower's Collateral, there has been no use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance by any person on, under, about or from any of
the Collateral. (2) Borrower has no knowledge of, or reason to believe that
there has been (a) any breach or violation of any Environmental Laws; (b) any
use, generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance on, under, about or from the
Collateral by any prior owners or occupants of any of the Collateral; or (c) any
actual or threatened litigation or claims of any kind by any person relating to
such matters. (3) Neither Borrower nor any tenant, contractor, agent or other
authorized user of any of the Collateral shall use, generate, manufacture,
store, treat, dispose of or release any Hazardous Substance on, under about or
from any of the Collateral; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws, regulations, and
ordinances, including without limitation all Environmental Laws. Borrower
authorizes Lender and its agents to enter upon the Collateral to make such
inspections and tests as Lender may deem appropriate to determine compliance of
the Collateral with this section of the Agreement. Any inspections or tests made
by Lender shall be at Borrower's expense and for Lender's purposes only and
shall not be construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. The representations and warranties
contained herein are based on Borrower's due diligence in investigating the
Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1)
releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other costs
under any such laws, and (2) agrees to indemnify and hold harmless Lender
against any and all claims, losses, liabilities, damages, penalties, and
expenses which Lender may directly or indirectly sustain or suffer resulting
from a breach of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release of a
hazardous waste or substance on the Collateral. The provisions of this section
of the Agreement, including the obligation to indemnify, shall survive the
payment of the indebtedness and the termination, expiration or satisfaction of
this Agreement and shall not be affected by Lender's acquisition of any interest
in any of the Collateral, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower's financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowleged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all of Borrower's tax returns and
reports that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and
Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements (if any), and
all Related Documents are binding upon the signers thereof, as well as upon
their successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 4
TITLE TO PROPERTY. Borrower has, or on the date of first disbursement of Loan
proceeds will have, good and marketable title to the Collateral free and clear
of all defects, liens, and encumbrances, excepting only liens for taxes,
assessments, or governmental charges or levies not yet delinquent or payable
without penalty or interest, and such liens and encumbrances as may be approved
in writing by the Lender. The Collateral is contiguous to publicly dedicated
streets, roads, or highways providing access to the Collateral.
PROJECT COSTS. The Project costs are true and accurate estimates of the costs
necessary to complete the improvements in a good and workmanlike manner
according to the Plans and Specifications presented by Borrower to Lender, and
Borrower shall take all steps necessary to prevent the actual cost of the
Improvements from exceeding the Project costs.
UTILITY SERVICES. All utility services appropriate to the use of the Project
after completion of construction are available at the boundaries of the
Collateral.
ASSESSMENT OF PROPERTY. The Collateral is and will continue to be assessed and
taxed as an independent parcel by all governmental authorities.
COMPLIANCE WITH GOVERNING AUTHORITIES. Borrower has examined and is familiar
with all the easements, covenants, conditions, restrictions, reservations,
building laws, regulations, zoning ordinances, and federal, state, and local
requirements affecting the Project. The Project will at all times and in all
respects conform to and comply with the requirements of such easements,
covenants, conditions, restrictions, reservations, building laws, regulations,
zoning ordinances, and federal, state, and local requirements.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees that
in making the Loan, Lender is relying on all representations, warranties, and
covenants made by Borrower in this Agreement or in any certificate or other
instrument delivered by Borrower to Lender under this Agreement or the Related
Documents. Borrower further agrees that regardless of any investigation made by
Lender, all such representations, warranties and covenants will survive the
making of the Loan and delivery to Lender of the Related Documents, shall be
continuing in nature, and shall remain in full force and effect until such time
as Borrower's indebtedness shall be paid in full, or until this Agreement shall
be terminated in the manner provided above, whichever is the last to occur.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.
APPROVAL OF CONTRACTORS, SUBCONTRACTORS, AND MATERIALMEN. Lender shall have
approved a list of all contractors employed in connection with the construction
of the Improvements, showing the name, address, and telephone number of each
contractor, a general description of the nature of the work to be done, the
labor and materials to be supplied, the names of materialmen, if known, and the
approximate dollar value of the labor, work, or materials with respect to each
contractor or materialman. Lender shall have the right to communicate with any
person to verify the facts disclosed by the list or by any application for any
Advance, or for any other purpose.
PLANS, SPECIFICATIONS, AND PERMITS. Lender shall have received and accepted a
complete set of written Plans and Specifications setting forth all Improvements
for the Project, and Borrower shall have furnished to Lender copies of all
permits and requisite approvals of any governmental body necessary for the
construction and use of the Project.
ARCHITECT'S AND CONSTRUCTION CONTRACTS. Borrower shall have furnished in form
and substance satisfactory to Lender an executed copy of the Architect's
Contract and an executed copy of the Construction Contract.
BUDGET AND SCHEDULE OF ESTIMATED ADVANCES. Lender shall have approved detailed
budget and cash flow projections of total Project costs and a schedule of the
estimated amount and time of disbursements of each Advance.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 5
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
consummation of the Project and duly authorizing the execution and delivery of
this Agreement, the Note and the Related Documents. In addition, Borrower shall
have provided such other resolutions, authorizations, documents and instruments
as Lender or its counsel, in their sole discretion, may require.
BOND. If requested by Lender, Borrower shall have furnished a performance and
payment bond in an amount equal to 100% of the amount of the Construction
Contract, as well as a materialmen's and mechanics' payment bond, with such
riders and supplements as Lender may require, each in form and substance
satisfactory to Lender, naming the General Contractor as principal and Lender as
an additional obligee.
APPRAISAL. If required by Lender, an appraisal shall be prepared for the
Property, at Borrower's expense, which in form and substance shall be
satisfactory to Lender, in Lender's sole discretion, including applicable
regulatory requirements.
PLANS AND SPECIFICATIONS. If requested by Lender, Borrower shall have assigned
to Lender on Lender's forms the Plans and Specifications for the Project.
ENVIRONMENTAL REPORT. If requested by Lender, Borrower shall have furnished to
Lender, at Borrower's expense, an environmental report and certificate on the
Property in form and substance satisfactory to Lender, prepared by an engineer
or other expert satisfactory to Lender stating that the Property complies with
all applicable provisions and requirements of the "Hazardous Substances"
paragraph set forth in this Agreement.
SOIL REPORT. If requested by Lender, Borrower shall have furnished to Lender, at
Borrower's expense, a soil report for the Property in form and substance
satisfactory to Lender, prepared by a registered engineer satisfactory to Lender
stating that the Property is free from soil or other geological conditions that
would preclude its use or development as contemplated without extra expense for
precautionary, corrective or remedial measures.
SURVEY. If requested by Lender, Borrower shall have furnished to Lender a survey
of recent date, prepared and certified by a qualified surveyor and providing
that the improvements, if constructed in accordance with the Plans and
Specifications, shall lie wholly within the boundaries of the Collateral without
encroachment or violation of any zoning ordinances, building codes or
regulations, or setback requirements, together with such other information as
Lender in its sole discretion may require.
ZONING. Borrower shall have furnished evidence satisfactory to Lender that the
Collateral is duly and validly zoned for the construction, maintenance, and
operation of the Project.
TITLE INSURANCE. Borrower shall have provided to Lender an ALTA Lender's
extended coverage policy of title insurance with such endorsements as Lender may
require, issued by a title insurance company acceptable to Lender and in a form,
amount, and content satisfactory to Lender, insuring or agreeing to insure that
Lender's security agreement or other security document on the Property is or
will be upon recordation a valid first lien on the Property free and clear of
all defects, liens, encumbrances, and exceptions except those as specifically
accepted by Lender in writing. If requested by Lender, Borrower shall provide to
Lender, at Borrower's expense, a foundation endorsement to the title policy upon
the completion of each foundation for the Improvements, showing no
encroachments, and upon completion an endorsement which insures the lien-free
completion of the Improvements.
INSURANCE. Unless waived by Lender in writing, Borrower shall have delivered to
Lender the following insurance policies or evidence thereof: (a) an all risks
course of construction insurance policy (builder's risk), with extended coverage
covering the Improvements issued in an amount and by a company acceptable to
Lender, containing a loss payable or other endorsement satisfactory to Lender
insuring Lender as mortgagee, together with such other endorsements as may be
required by Lender, including stipulations and coverages will not be cancelled
or diminished without at least (30) days prior written notice to Lender; (b)
owners and General Contractor general liability insurance, public liability and
workmen's compensation insurance; (c) flood insurance if required by Lender or
applicable law; and (d) all other insurance required by this Agreement or by the
Related Documents.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 6
WORKERS' COMPENSATION COVERAGE. Provide to Lender proof of the General
Contractor's compliance with all applicable workers' compensation laws and
regulations with regard to all work performed on the Project.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document.
SATISFACTORY CONSTRUCTION. All work usually done at the stage of construction
for which disbursement is requested shall have been done in a good and
workmanlike manner and all materials and fixtures usually furnished and
installed at that stage of construction shall have been furnished and installed,
all in compliance with the Plans and Specifications. Borrower shall also have
furnished to Lender such proofs as Lender may require to establish the progress
of the work, compliance with applicable laws, freedom of the Property from
liens, and the basis for the requested disbursement.
CERTIFICATION. Borrower shall have furnished to Lender a certification by an
engineer, architect, or other qualified inspector acceptable to Lender that the
construction of the Improvements has complied and will continue to comply with
all applicable statutes, ordinances, codes, regulations, and similar
requirements.
LIEN WAIVERS. Borrower shall have obtained and attached to each application for
an Advance, including the Advance to cover final payment to the General
Contractor, executed acknowledgments of payments of all sums due and releases of
mechanic's and materialmen's liens, satisfactory to Lender, from any party
having lien rights, which acknowledgments of payment and releases of liens shall
cover all work, labor, equipment, materials done, supplied, performed, or
furnished prior to such application for an Advance.
NO EVENT OF DEFAULT. There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this Agreement or
under any Related Document.
DISBURSEMENT OF LOAN FUNDS. The following provisions relate to the disbursement
of funds from the Loan Fund.
APPLICATION FOR ADVANCES. Each application shall be stated on a standard AIA
payment request form or other form approved by Lender, executed by Borrower, and
supported by such evidence as Lender shall reasonably require. Borrower shall
apply only for disbursement with respect to work actually done by the General
Contractor and for materials and equipment actually incorporated into the
Project. Each application for an Advance shall be deemed a certification of
Borrower that as of the date of such application, all representations and
warranties contained in the Agreement are true and correct, and that Borrower is
in compliance with all of the provisions of this Agreement.
PAYMENTS. At the sole option of Lender, Advances may be paid in the joint names
of Borrower and the General Contractor, subcontractor(s), or supplier(s) in
payment of sums due under the Construction Contract. At its sole option, Lender
may directly pay the General Contractor and any subcontractors or other parties
the sums due under the Construction Contract. Borrower appoints Lender as its
attorney-in-fact to make such payments. This power shall be deemed coupled with
an interest, shall be irrevocable, and shall survive an Event of Default under
this Agreement.
PROJECTED COST OVERRUNS. If Lender at any time determines in its sole discretion
that the amount in the Loan Fund is insufficient, or will be insufficient, to
complete fully and to pay for the Project, then within ten (10) days after
receipt of a written request from Lender, Borrower shall deposit in the Loan
Fund an amount equal to the deficiency as determined by Lender. The judgment and
determination of Lender under this section shall be final and conclusive. Any
such amounts deposited by Borrower shall be disbursed prior to any Loan
proceeds.
FINAL PAYMENT TO GENERAL CONTRACTOR. Upon completion of the Project and
fulfillment of the Construction Contract to the satisfaction of Lender and
provided sufficient Loan Funds are available, Lender shall make and Advance to
cover the final payment due to the General Contractor upon delivery to Lender of
endorsements to the ALTA title insurance policy following the posting of the
completion notice, as provided under applicable law. Construction shall not be
deemed complete for purposes of final disbursement unless and until Lender shall
have received all of the following:
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 7
1) Evidence satisfactory to Lender that all work under the Construction
Contract requiring inspection by any governmental authority with
jurisdiction has been duly inspected an approved by such authority,
that a certificate of occupancy has been issued, and that all parties
performing work have been paid, or will be paid, for such work;
2) A certification by an engineer, architect, or other qualified
inspector acceptable to Lender that the Improvements have been
completed substantially in accordance with the Plans and
Specifications and the Construction Contract, that direct connection
has been made to all utilities set forth in the Plans and
Specifications, and that the Project is ready for occupancy; and
3) Acceptance of the completed improvements by Lender and Borrower.
CONSTRUCTION DEFAULT. If Borrower fails in any respect to comply with the
provisions of this Agreement or if construction ceases before completion
regardless of the reason, Lender, at its option, may refuse to make further
Advances, may accelerate the indebtedness under the terms of the Note, and
without thereby impairing any of its rights, powers, or privileges, may enter
into possession of the construction site and perform or cause to be performed
any and all work and labor necessary to complete the improvements, substantially
in accordance with the Plans and Specifications.
DAMAGE OR DESTRUCTION. If any of the Collateral or Improvements is damaged or
destroyed by casualty of any nature, within sixty (60) days thereafter Borrower
shall restore the Collateral and Improvements to the condition in which they
were before such damage or destruction with funds other than those in the Loan
Fund. Lender shall not be obligated to make disbursements under this Agreement
until such restoration has been accomplished.
ADEQUATE SECURITY. When any event occurs that Lender determines may endanger
completion of the Project or the fulfillment of any condition or covenant in
this Agreement, Lender may require Borrower to furnish, within ten (10) days
after delivery of a written request, adequate security to eliminate, reduce, or
indemnify Lender against, such danger. In addition, upon such occurrence, Lender
in its sole discretion may advance funds or agree to undertake to advance funds
to any party to eliminate, reduce, or indemnify Lender against, such danger or
to complete the Project. All sums paid by Lender pursuant to such agreements or
undertakings shall be for Borrower's account and shall be without prejudice to
Borrower's rights, if any, to receive such funds from the party to whom paid.
All sums expended by Lender in the exercise of its option to complete the
Project or protect Lender's interests shall be payable to Lender on demand
together with interest from the date of the Advance at the rate applicable to
the Loan. In addition, any Advance of funds under this Agreement, including
without limitation direct disbursements to the General Contractor or other
parties in payment of sums due under the Construction Contract, shall be deemed
to have been expended by or on behalf of Borrower and to have been secured by
Lender's Mortgage, if any, on the Collateral.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (D) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in
good ▇▇▇▇▇ ▇▇▇▇▇ itself insecure, even though no Event of Default shall have
occurred.
LIMITATION OF RESPONSIBILITY. The making of any Advance by Lender shall not
constitute or be interpreted as either (A) an approval or acceptance by Lender
of the work done through the date of the Advance, or (B) a representation or
indemnity by Lender to any party against any deficiency or defect in the work or
against any breach of contract. Inspections and approvals of the Plans and
Specifications, the improvements, the workmanship and materials used in the
Improvements, and the exercise of any other right of inspection, approval, or
inquiry granted to Lender in this Agreement are acknowledged to be solely for
the protection of Lender's interests, and under no circumstances shall they be
construed to impose any responsibility of any nature whatsoever on Lender to any
party. Neither Borrower nor any contractor, subcontractor, materialman, laborer,
or any other person shall rely, or have any right to rely, upon Lender's
determination
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 8
of the appropriateness of any Advance. No disbursement or approval by Lender
shall constitute a representation by Lender as to the nature of the Project, its
construction, or is intended use for Borrower or for any other person, nor shall
it constitute an indemnity by Lender to Borrower or to any other person against
deficiency or defects in the Project or against any breach of any contract.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:
NOTICES OF CLAIMS AND LITIGATION. Promptly inform Lender in writing of (1) all
material adverse changes in Borrower's financial condition, and (2) all existing
and all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial condition
of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with GAAP,
applied on a consistent basis, and permit Lender to examine and audit Borrower's
books and records at all reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with the following:
ADDITIONAL REQUIREMENTS. Bank may request financial monitoring information.
All financial reports required to be provided under this Agreement shall be
prepared in accordance with GAAP, applied on a consistent basis, and certified
by Borrower as being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as Lender may request
from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and ratios:
OTHER REQUIREMENTS. DEBT SERVICE COVERAGE RATIO (DSCR): At least 1.20 to 1.0.
EBITDA shall be calculated as follows: for any period the sum of (A) net income
before income taxes, plus interest expense, plus depreciation expense and
amortization expense, plus or minus non cash adjustments to net income, plus or
minus extraordinary losses or gains, divided by (B) Debt Service (defined as
principal and interest) plus capital lease payments.
LEVERAGE RATIO: Not to exceed 6.0 to 1.0. Leverage Ratio shall be calculated as
follows: for any period (A) Total Funded Debt divided by (B) EBITDA (defined
above). Total Funded Debt shall be calculated as (a) the aggregate amount of all
current and non-current indebtedness for borrowed money, plus (b) the aggregate
amount of all current and non-current outstanding capital lease obligations. To
the extent the actual number of months a restaurant has been open for business
is less than twelve months as of the measurement date, the Total Funded Debt for
such restaurant shall be reduced by a fraction: the numerator of which is twelve
months minus the number of months the restaurant was opened during the
measurement period, and the denominator of which is twelve.
Both the DSCR and the Leverage Ratio will be measured at the consolidated
O'Charley's/Wendy's of Michigan operation level, and will be measured on a
trailing 12-month basis beginning the first full month six months after a new
store opening.
Except as provided above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in accordance with
generally accepted accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.
OTHER AGREEMENTS. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 9
INSURANCE. Maintain fire and other risk insurance, hail, federal crop insurance,
public liability insurance, and such other insurance as Lender may require with
respect to Borrower's properties and operations, in form, amounts, coverages and
with insurance companies acceptable to Lender. Borrower, upon request of Lender,
will deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that coverages
will not be cancelled or diminished without at least thirty (30) days prior
written notice to Lender. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired in
any way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or is offered
a security interest for the Loans, Borrower will provide Lender with such
lender's loss payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (1) the name of the
insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties
insured; (5) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (6) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.
GUARANTIES. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, executed by the guarantors named
below, on Lender's forms, and in the amounts and under the conditions set forth
in those guaranties.
Names of Guarantors Amounts
------------------- ---------
Meritage Hospitality Group Unlimited
OCM Food Service, LLC Unlimited
LOAN FEES, CHARGES AND EXPENSES. Whether or not the Project is completed,
Borrower also shall pay upon demand all out-of-pocket expenses incurred by
Lender in connection with the preparation of loan documents and the making of
the Loan, including, without limitation, all closing costs, fees, and
disbursements, all expenses of Lender's legal counsel, and all title examination
fees, title insurance premiums, appraisal fees, survey costs, required fees, and
filing and recording fees.
LOAN PROCEEDS. Use the Loan Funds solely for payment of bills and expenses
directly related to the Project.
TAXES, CHARGES, AND LIENS. Pay and discharge when due all of its indebtedness
and obligations, including without limitation all assessments, taxes,
governmental charges, levies and liens, of every kind and nature, imposed upon
Borrower or its properties, income, or profits, prior to the date on which
penalties would attach, and all lawful claims that, if unpaid, might become a
lien or charge upon any of Borrower's properties, income, or profits.
PERFORMANCE. Perform and comply, in a timely manner, with all terms, conditions,
and provisions set forth in this Agreement, in the Related Documents, and in all
other instruments and agreements between Borrower and Lender. Borrower shall
notify Lender immediately in writing of any default in connection with any
agreement.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower's expense.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 10
COMPLIANCE CERTIFICATES. Unless waived in writing by Lender, provide Lender at
least annually, with a certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and correct
as of the date of the certificate and further certifying that, as of the date of
the certificate, no Event of Default exists under this Agreement.
CONSTRUCTION OF THE PROJECT. Commence construction of the Project no later than
_____________, and cause the improvements to be constructed and equipped in a
diligent and orderly manner and in strict accordance with the Plans and
Specifications approved by Lender, the Construction Contract, and all applicable
laws, ordinances, codes, regulations, and rights of adjoining or concurrent
property owners. Borrower agrees to complete the Project for purposes of final
payment to the General Contractor on or before ________________, regardless of
the reason for any delay.
DEFECTS. Upon demand of Lender, promptly correct any defect in the Improvements
or any departure from the Plans and Specifications not approved by Lender in
writing before further work shall be done upon the portion of the Improvements
affected.
PROJECT CLAIMS AND LITIGATION. Promptly inform Lender of (1) all material
adverse changes in the financial condition of the General Contractor; (2) any
litigation and claims, actual or threatened, affecting the Project or the
General Contractor, which could materially affect the successful completion of
the Project or the ability of the General Contractor to complete the Project as
agreed; and (3) any condition or event which constitutes a breach or default
under any of the Related Documents or any contract related to the Project.
PAYMENT OF CLAIMS AND REMOVAL OF LIENS. (1) Cause all claims for labor done and
materials and services furnished in connection with the improvements to be fully
paid and discharged in a timely manner, (2) diligently file or procure the
filing of a valid notice of completion of the Improvements, or such comparable
document as may be permitted under applicable lien laws, (3) diligently file or
procure the filing of a notice of cessation, or such comparable document as may
be permitted under applicable lien laws, upon the happening of cessation of
labor on the Improvements for a continuous period of thirty (30) days or more,
and (4) take all reasonable steps necessary to remove all claims of liens
against the Collateral, the Improvements or any part of the Collateral or
Improvements, or any rights or interests appurtenant to the Collateral or
Improvements. Upon Lender's request, Borrower shall make such demands or claims
upon or against laborers, materialmen, subcontractors, or other persons who have
furnished or claim to have furnished labor, services, or materials in connection
with the Improvements, which demands or claims shall under the laws of the State
of Michigan require diligent assertions of lien claims upon penalty of loss or
waiver thereof. Borrower shall, within ten (10) days after the filing of any
claim of lien that is disputed or contested by Borrower, provide Lender with a
surety bond issued by a surety acceptable to Lender sufficient to release the
claim of lien or deposit with Lender an amount satisfactory to Lender for the
possibility that the contest will be unsuccessful. If Borrower fails to remove
any lien on the Collateral or Improvements or provide a bond or deposit pursuant
to this provision, Lender may pay such lien, or may contest the validity of the
lien, and Borrower shall pay all costs and expenses of such contest, including
Lender's reasonable attorneys' fees.
TAXES AND CLAIMS. Pay and discharge when due all of Borrower's indebtedness,
obligations, and claims that, if unpaid, might become a lien or charge upon the
Collateral or Improvements; provided, however, that Borrower shall not be
required to pay and discharge any such indebtedness, obligation, or claim so
long as (1) its legality shall be contested in good faith by appropriate
proceedings, (2) the indebtedness, obligation, or claim does not become a lien
or charge upon the Collateral or Improvements, and (3) Borrower shall have
established on its books adequate reserves with respect to the amount contested
in accordance with GAAP. If the indebtedness, obligation, or claim does become a
lien or charge upon the Collateral or Improvements, Borrower shall remove the
lien or charge as provided in the preceding paragraph.
ENVIRONMENTAL STUDIES. Promptly conduct and complete, at Borrower's expense, all
such investigations, studies, samplings and testings as may be requested by
Lender or any governmental authority relative to any substance, or any waste or
by-product of any substance defined as toxic or a hazardous substance under
applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by Borrower.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 11
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, assignments, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to perfect
all Security Interests in the Collateral and Improvements.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the indebtedness and, at Lender's option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (1) Except for trade debt incurred in the normal course
of business and indebtedness to Lender contemplated by this Agreement, create,
incur or assume indebtedness for borrowed money, including capital leases, (2)
sell, transfer, mortgage, assign, pledge, lease, grant a security interest in,
or encumber any of Borrower's assets (except as allowed as Permitted Liens), or
(3) sell with recourse any of Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (1) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (2) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change its name, dissolve or transfer or sell Collateral out of the
ordinary course of business, or (3) make any distribution with respect to any
capital account, whether by reduction of capital or otherwise.
LOANS, ACQUISITIONS AND GUARANTIES. (1) Loan, invest in or advance money or
assets to any other person, enterprise or entity. (2) purchase, create or
acquire any interest in any other enterprise or entity, or (3) incur any
obligation as surety or guarantor other than in the ordinary course of business.
MODIFICATION OF CONTRACT. Make or permit to be made any modification of the
Construction Contract.
LIENS. Create or allow to be created any lien or charge upon the Collateral or
the Improvements.
AGREEMENTS. Borrower will not enter into any agreement containing any provisions
which would be violated or breached by the performance of Borrower's obligations
under this Agreement or in connection herewith.
GENERAL PROJECT PROVISIONS. The following provisions relate to the construction
and completion of the Project:
CHANGE ORDERS. All requests for changes in the Plans and Specifications, other
than minor changes involving no extra cost, must be in writing, signed by
Borrower and the architect, and delivered to Lender for its approval. Borrower
will not permit the performance of any work pursuant to any change order or
modification of the Construction Contract or any subcontract without the written
approval of Lender. Borrower will obtain any required permits or authorizations
from governmental authorities having jurisdiction before approving or requesting
a new change order.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 12
PURCHASE OF MATERIALS; CONDITIONAL SALES CONTRACTS. NO MATERIALS, equipment,
fixtures, or articles of personal property placed in or incorporated into the
Project shall be purchased or installed under any Security Agreement or other
agreement whereby the seller reserves or purports to reserve title or the right
of removal or repossession, or the right to consider such items as personal
property after their incorporation into the Project, unless otherwise authorized
by Lender in writing.
LENDER'S RIGHT OF ENTRY AND INSPECTION. Lender and its agents shall have at all
times the right of entry and free access to the Property and the right to
inspect all work done, labor performed, and materials furnished with respect to
the Project. Lender shall have unrestricted access to and the right to copy all
records, accounting books, contracts, subcontracts, bills, statements, vouchers,
and supporting documents of Borrower relating in any way to the Project.
LENDER'S RIGHT TO STOP WORK. If Lender in good faith determines that any work or
materials do not conform to the approved Plans and Specifications or sound
building practices, or otherwise depart from any of the requirements of this
Agreement, Lender may require the work to be stopped and withhold disbursements
until the matter is corrected. In such event, Borrower will promptly correct the
work to Lender's satisfaction. No such action by Lender will affect Borrower's
obligation to complete the improvements on or before the Completion Date. Lender
is under no duty to supervise or inspect the construction or examine any books
and records. Any inspection or examination by Lender is for the sole purpose of
protecting Lender's security and preserving Lender's rights under this
Agreement. No default of Borrower will be waived by any inspection by Lender. In
no event will any inspection by Lender be a representation that there has been
or will be compliance with the Plans and Specifications or that the construction
is free from defective materials or workmanship.
INDEMNITY. Borrower shall indemnify and hold Lender harmless from any and all
claims asserted against Lender or the Property by any person, entity, or
governmental body, or arising out of or in connection with the Property,
Improvements, or Project. Lender shall be entitled to appear in any proceedings
to defend itself against such claims, and all costs and expenses reasonable
attorneys' fees incurred by Lender in connection with such defense shall be paid
by Borrower to Lender. Lender shall, in its sole discretion, be entitled to
settle or compromise any asserted claims against it, and such settlement shall
be binding upon Borrower for purposes of this indemnification. All amounts paid
by Lender under this paragraph shall be secured by Lender's security agreement
or Mortgage, if any, on the Property, shall be deemed an additional principal
Advance under the Loan, payable upon demand, and shall bear interest at the rate
applicable to the Loan.
PUBLICITY. Lender may display a sign at the construction site informing the
public that Lender is the construction lender for the Project. Lender may obtain
other publicity in connection with the Project through press releases and
participation in ground-breaking and opening ceremonies and similar events.
ACTIONS. Lender shall have the right to commence, appear in, or defend any
action or proceeding purporting to affect the rights, duties, or liabilities of
the parties to this Agreement, or the disbursement of funds from the Loan Fund.
In connection with this right, Lender may incur and pay reasonable costs,
expenses and reasonable attorneys' fees. Borrower covenants to pay to Lender on
demand all such expenses, together with interest from the date Lender incurs the
expenses at the rate specified in the Note, and Lender is authorized to disburse
funds from the Loan Fund for such purposes.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any ▇▇▇ or ▇▇▇▇▇ accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 13
PAYMENT DEFAULT. Borrower fails to make any payment when due under the Loan.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.
FALSE STATEMENTS. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf under this Agreement or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.
DEATH OR INSOLVENCY. The dissolution of Borrower (regardless of whether election
to continue is made), any member withdraws from Borrower, or any other
termination of Borrower's existence as a going business or the death of any
member, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the Loan. This includes garnishment of any of Borrower's
accounts, including deposit accounts, with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower as to the
validity or reasonable ness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a surety
bond for the creditor or forfeiture proceeding, in an amount determined by
Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.
BREACH OF CONSTRUCTION CONTRACT. The Improvements are not constructed in
accordance with the Plans and Specifications or in accordance with the terms of
the Construction Contract.
CESSATION OF CONSTRUCTION. Prior to the completion of construction of the
Improvements and equipping of the Project, the construction of the Improvements
or the equipping of the Project is abandoned or work thereon ceases for a period
of more than ten (10) days for any reason, or the Improvements are not completed
for purposes of final payment to the General Contractor prior to _____________,
regardless of the reason for the delay.
TRANSFER OF PROPERTY. Sale, transfer, hypothecation, assignment, or conveyance
of the Property or the Improvements or any portion thereof or interest therein
by Borrower or any Borrower without Lender's prior written consent.
CONDEMNATION. All or any material portion of the Collateral is condemned,
seized, or appropriated without compensation, and Borrower does not within
thirty (30) days after such condemnation, seizure, or appropriation, initiate
and diligently prosecute appropriate action to contest in good faith the
validity of such condemnation, seizure, or appropriation.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the Loan
is impaired.
INSECURITY. Lender in good faith believes itself insecure.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 14
EFFECT OF AN EVENT OF DEFAULT; REMEDIES. Upon the occurrence of any Event of
Default and at any time thereafter, Lender may, at its option, but without any
obligation to do so, and in addition to any other right Lender without notice to
Borrower may have, do any one or more of the following without notice to
Borrower: (a) Cancel this Agreement; (b) Institute appropriate proceedings to
enforce the performance of this Agreement; (c) Withhold further disbursement of
Loan Funds; (d) Expend funds necessary to remedy the default; (e) Take
possession of the Property and continue construction of the Project; (f)
Accelerate maturity of the Note and/or Indebtedness and demand payment of all
sums due under the Note and/or Indebtedness; (g) Bring an action on the Note
and/or Indebtedness; (h) Foreclose Lender's security agreement or Mortgage, if
any, on the Property in any manner available under law; and (i) Exercise any
other right or remedy which it has under the Note or Related Documents, or which
is otherwise available at law or in equity or by statute.
COMPLETION OF IMPROVEMENTS BY LENDER. If Lender takes possession of the
Collateral, it may take any and all actions necessary in its judgment to
complete construction of the Improvements, including but not limited to making
changes in the Plans and Specifications, work, or materials and entering into,
modifying or terminating any contractual arrangements, subject to Lender's right
at any time to discontinue any work without liability. If Lender elects to
complete the Improvements, it will not assume any liability to Borrower or to
any other person for completing the Improvements or for the manner or quality of
construction of the Improvements, and Borrower expressly waives any such
liability. Borrower irrevocably appoints Lender as its attorney-in-fact, with
full power of substitution, to complete the Improvements, at Lender's option,
either in Borrower's name or in its own name. In any event, all sums expended by
Lender in completing the construction of the Improvements will be considered to
have been disbursed to Borrower and will be secured by the Collateral for the
Loan. Any such sums that cause the principal amount of the Loan to exceed the
face amount of the Note will be considered to be an additional Loan to Borrower,
bearing interest at the Note rate and being secured by the Collateral. For these
purposes, Borrower assigns to Lender all of its right, title and interest in and
to the Project Documents; however Lender will not have any obligation under the
Project Documents unless Lender expressly hereafter agrees to assume such
obligations in writing. Lender will have the right to exercise any rights of
Borrower under the Project Documents upon the occurrence of an Event of Default.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies, whether evidenced by this Agreement or by any other writing, shall be
cumulative and may be exercised singularly or concurrently.
ADDITIONAL DOCUMENTS. Borrower shall provide Lender with the following
additional documents:
ARTICLES OF ORGANIZATION AND COMPANY RESOLUTIONS. Borrower has provided or will
provide Lender with a certified copy of Borrower's Articles of Organization,
together with a certified copy of resolutions properly adopted by the members of
the company, under which the members authorized one or more designated members
or employees to execute this Agreement, the Note and any and all Security
Agreements directly or indirectly securing repayment of the same, and to
consummate the borrowings and other transactions as contemplated under this
Agreement, and to consent to the remedies following any default by Borrower as
provided in this Agreement and in any Security Agreements.
OPINION OF COUNSEL. When required by Lender, Borrower has provided or will
provide Lender with an opinion of Borrower's counsel certifying to and that: (1)
Borrower's Note, any Security Agreements and this Agreement constitute valid and
binding obligations on Borrower's part that are enforceable in accordance with
their respective terms; (2) Borrower is validly existing and in good standing;
(3) Borrower has authority to enter into this Agreement and to consummate the
transactions contemplated under this Agreement; and (4) such other matters as
may have been requested by Lender or by Lender's counsel.
ADDITIONAL PROVISIONS. Draws are to be insured by a title insurance company and
supported by contractor's sworn statements and appropriate waiver's of lien.
Draws must also be approved by an independent third party inspector.
CONDITIONS FOR ADVANCES. Draws will be limited to the first 6 months, no draws
shall be taken after __________________, at which time this shall be considered
a term Note.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 15
FIXED RATE OPTION. Borrower will have a one time option to fix the interest rate
at the Federal Home Loan Bank Advance Rate for the remaining term plus 2.65%.
Option to fix will carry a cost of .15% of the loan amount and will carry a
prepayment penalty as outlined below.
5 year fixed rate 3% in year 1, 2% in year 2, 1% in year 3
7 year fixed rate 3% in years 1-2, 2% in years 3-4, and 1% in year 5
10 year fixed rate 3% in years 1-2, 2% in years 3-4, and 1% in years 5-6.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
ATTORNEYS' FEES; EXPENSES. Borrower agrees to pay upon demand all of Lender's
costs and expenses, including Lender's reasonable attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this Agreement.
Lender may hire or pay someone else to help enforce this Agreement, and Borrower
shall pay the costs and expenses of such enforcement. Costs and expenses include
Lender's reasonable attorneys' fees and legal expenses whether or not there is a
lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Borrower also shall pay all court costs and such additional fees as may be
directed by the court.
AUTHORITY TO FILE NOTICES. Borrower appoints and designates Lender as its
attorney-in-fact to file for the record any notice that Lender deems necessary
to protect its interest under this Agreement. This power shall be deemed coupled
with an interest and shall be irrevocable while any sum or performance remains
due and owing under any of the Related Documents.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF MICHIGAN. THIS
AGREEMENT HAS BEEN ACCEPTED BY LENDER IN THE STATE OF MICHIGAN.
INDEMNIFICATION OF LENDER. Borrower agrees to indemnify, to defend and to save
and hold Lender harmless from any and all claims, suits, obligations, damages,
losses, costs and expenses (including, without limitation, Lender's reasonable
attorneys' fees, as well as Lender's architect's and engineering fees), demands,
liabilities, penalties, fines and forfeitures of any nature whatsoever that may
be asserted against or incurred by Lender, its officers, directors, employees,
and agents arising out of, relating to, or in any manner occasioned by this
Agreement and the exercise of the rights and remedies granted Lender under this.
The foregoing indemnity provisions shall survive the cancellation of this
Agreement as to all matters arising or accruing prior to such cancellation and
the foregoing indemnity shall survive in the event that Lender elects to
exercise any of the remedies as provided under this Agreement following default
hereunder.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale or
transfer, whether now or later, of one or more participation interests in the
Loan to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy Borrower may have with respect to such matters.
Borrower additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loan and will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 16
purchaser may enforce Borrower's obligation under the Loan irrespective of the
failure or insolvency of any holder of any interest in the Loan. Borrower
further agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses that
Borrower may have against Lender.
NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any Lender's rights or of any of Borrower's or any Grantor's
obligations as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
SEVERABILITY. If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance. If feasible, the offending provision
shall be considered modified so that it becomes legal, valid, and enforceable.
If the offending provision cannot be so modified, it shall be considered deleted
from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not
affect the legality, validity or enforceability of any other provision of this
Agreement.
SUCCESSORS AND ASSIGNS. All covenants and agreements by or on behalf of Borrower
contained in this Agreement or any Related Documents shall bind Borrower's
successors and assigns and shall inure to the benefit of Lender and its
successors and assigns. Borrower shall not, however, have the right to assign
Borrower's rights under this Agreement or any interest therein, without the
prior written consent of Lender.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees that
in making the Loan, Lender is relying on all representations, warranties, and
covenants made by Borrower in this Agreement or in any certificate or other
instrument delivered by Borrower to Lender under this Agreement or the Related
Documents. Borrower further agrees that regardless of any investigation made by
Lender, all such representations, warranties and covenants will survive the
making of the Loan and delivery to Lender of the Related Documents, shall be
continuing in nature, and shall remain in full force and effect until such time
as Borrower's Indebtedness shall be paid in full, or until this Agreement shall
be terminated in the manner provided above, whichever is the last to occur.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
WAIVE JURY. ALL PARTIES TO THIS AGREEMENT HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST
ANY OTHER PARTY.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:
ADVANCE. The word "Advance" means a disbursement of Loan funds made, to Borrower
or on Borrower's behalf on a line of credit or multiple advance basis under the
terms and conditions of this Agreement.
AGREEMENT. The word "Agreement" means this Construction Loan Agreement, as this
Construction Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Construction Loan
Agreement from time to time.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 17
ARCHITECT'S CONTRACT. The words "Architect's Contract" mean the architect's
contract between Borrower and the architect for the Project.
BORROWER. The word "Borrower" means OCM Development, LLC and includes all
co-signers and co-makers signing the Note.
COLLATERAL. The word "Collateral" means all property and assets granted as
collateral security for a Loan, whether real or personal property, whether
granted directly or indirectly, whether granted now or in the future, and
whether granted in the form of a security interest, mortgage, collateral
mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage,
collateral chattel mortgage, chattal trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention contract,
lease or consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract, or otherwise.
COMPLETION DATE. The words "Completion Date" mean ___________________.
CONSTRUCTION CONTRACT. The words "Construction Contract" mean the contract
between Borrower and Rockford Construction Co., the general contractor for the
Project, and any subcontracts with subcontractors, materialmen, laborers, or any
other person or entity for performance of work on the Project or the delivery of
materials to the Project.
CONTRACTOR. The word "Contractor" means Rockford Construction Co., the general
contractor for the Project.
ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 ("▇▇▇▇"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or federal laws, rules, or regulations adopted pursuant
thereto.
EVENT OF DEFAULT. The words "Event of Deafult" mean any of the events of default
set forth in this Agreement in the default section of this Agreement.
GAAP. The word "GAAP" means generally accepted accounting principles.
GUARANTOR. The word "Guarantor" means any guarantor, surety, or accommodation
party of any or all of the Loan and any guarantor under a completion guaranty
agreement.
GUARANTY. The word "Guaranty" means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Note.
HAZARDOUS SUBSTANCES. The words "Hazardous Substances" mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human health
or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words "Hazardous
Substances" are used in their very broadest sense and include without limitation
any and all hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term "Hazardous Substances" also
includes, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos.
IMPROVEMENTS. The word "Improvements" means all existing and future buildings,
structures, facilities, fixtures, additions, and similar construction on the
Collateral.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 18
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Borrower is responsible
under this Agreement or under any of the Related Documents.
LENDER. The word "Lender" means Independent Bank West Michigan, its successors
and assigns.
LOAN. The word "Loan" means the loan or loans made to Borrower under this
Agreement and the Related Documents as described.
LOAN FUND. The words "Loan Fund" mean the undisbursed proceeds of the Loan under
this Agreement together with any equity funds or other deposits required from
Borrower under this Agreement.
NOTE. The word "Note" means the promissory note dated ___________, in the
original principal amount of $_________________ from Borrower to Lender,
together with all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the promissory note or agreement.
PERMITTED LIENS. The words "Permitted Liens" mean (1) liens and security
interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (4) purchase money liens or purchase money
security interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (5) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (6) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower's assets.
PLANS AND SPECIFICATIONS. The words "Plans and Specifications" mean the plans
and specifications for the Project which have been submitted to and initialed by
Lender, together with such changes and additions as may be approved by Lender in
writing.
PROJECT. The word "Project" means the construction project as described in the
"Project Description" section of this Agreement.
PROJECT DOCUMENTS. The words "Project Documents" mean the Plans and
Specifications, all studies, data and drawings relating to the Project, whether
prepared by or for Borrower, the Construction Contract, the Architect's
Contract, and all other contracts and agreements relating to the Project or the
construction of the Improvements.
PROPERTY. The word "Property" means the property as described in the "Project
Description" section of this Agreement.
REAL PROPERTY. The words "Real Property" mean the real property, interests and
rights, as further described in the "Project Description" section of this
Agreement.
RELATED DOCUMENTS. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Loan.
SECURITY AGREEMENT. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.
CONSTRUCTION LOAN AGREEMENT
(CONTINUED)
PAGE 19
SECURITY INTEREST. The words "Security Interest" mean, without limitation, any
and all types of collateral security, present and future, whether in the form of
a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment,
pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever whether created by law, contract,
or otherwise.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS CONSTRUCTION LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS CONSTRUCTION LOAN AGREEMENT IS
DATED ___________________.
BORROWER:
OCM DEVELOPMENT, LLC
BY:
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LENDER:
INDEPENDENT BANK WEST MICHIGAN
BY:
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