EXHIBIT 3(a)
DEVELOPMENT LOAN AGREEMENT
DATE: NOVEMBER 30, 1999
PARTIES: YAVAPAI HILLS, INC., a Delaware Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ("Borrower")
and
COUNTY BANK
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Bank")
PROJECT: YAVAPAI HILLS, UNIT 8
AMOUNT OF LOAN: $**1,000,000.00**
ORIGINATION FEE: An origination fee of $**10,000.00**, of which $7,500.00 will
be due upon execution of this Agreement, and $2,500.00 shall be due upon advance
of funds from the $250,000.00 construction holdback.
PROJECT
COMPLETION DATE: June 6, 2001
RECITALS
Borrower desires to obtain a loan in the amount of $**1,000,000.00**
(the "Loan") for the purposes described herein.
Bank is willing to make the Loan, subject, however, to the terms and
conditions hereinafter set forth. The terms and conditions of this Agreement are
to be read in cumulative context with the Deed of Trust, Note, Security
Agreement and Related Documents. In the event of a contradiction in the text of
any of the aforementioned documents, this Agreement shall control.
Now, therefore, it is agreed as follows:
AGREEMENTS
1
1. WARRANTIES AND COVENANTS OF BORROWER
1.1 Borrower represents, warrants and covenants as follows:
a) All information set forth in Borrower's loan application
and in all statements given to Bank by Borrower in connection with the Loan is
true, correct and complete in all material respects;
b) The Note, Security Agreement, Deed of Trust and this
Agreement together with any Related Documents, are in all respects legal, valid
and binding upon Borrower and enforceable according to their terms and grant to
Bank direct, valid and enforceable liens upon and security interests in the
Property and the Improvements, now located or to be located on the Property;
c) Borrower is and will continue to be a CORPORATION duly
formed and validly existing under the laws of the State of DELAWARE;
d) The Loan is made with full recourse to the Borrower who
shall be liable for the payment of the Loan and the performance of the duties
and obligations of the Borrower under the Loan Documents;
e) Borrower shall, upon written request from Bank, provide
Bank with financial statements of Borrower and shall cause, to be delivered to
Bank financial statements of Borrower;
f) There are no actions, suits or proceedings pending or to
the knowledge of Borrower threatened against or affecting it, the Property, or
the Improvements or involving the validity or enforceability of any of the Loan
Documents or the priority of the liens thereof, at law or in equity, or before
or by any governmental authority, and Borrower is not in default with respect to
any order, writ, injunction, decree or demand or any court or any governmental
authority. Borrower shall hereafter inform Bank in writing immediately after
Borrower acquires knowledge thereof of any litigation threatened or instituted
against Borrower or Improvements, the financial condition of Borrower, or
Borrower's ability to repay the indebtedness hereunder, and at Bank's request
will furnish to Bank a written summary of all such litigation;
g) Borrower has no knowledge or notice of any violation of any
law, including any environmental regulations or of any requirement of the State
of Arizona or any municipal department or other governmental
2
authority, which violation in any way materially relates to or affects the
Property or the Improvements;
h) The Loan proceeds will be used by Borrower solely for the
purposes of (1) $750,000.00 to pay off existing Development Line of Credit at
▇▇▇▇▇ Fargo Bank with the assurance that any remaining balance due in connection
with the ▇▇▇▇▇ Fargo Credit Facility will be cleared to zero concurrently; and
(2) $250,000.00 to be reserved for the completion of onsite and offsite
improvements in accordance with plans and specifications approved by the City of
PRESCOTT for the YAVAPAI HILLS SUBDIVISION, ▇▇▇▇ ▇, ▇▇▇▇▇ ▇ in PRESCOTT, AZ.;
i) Except for sales of individual lots contained within the
Property in the ordinary course of business, Borrower shall not at any time
sell, convey, assign, lease with option of sale or dispose of all or part of the
Property or Improvements or otherwise transfer the Property or Improvements, in
whole or in part, to any other party;
j) Borrower shall at all times keep accurate and complete
books, records and accounts with respect to all of Borrower's business
activities, such books, records and accounts to be maintained at Borrower's
principal place of business;
k) All utility services necessary for the construction of the
Improvements and the operation thereof are available on the Property or will be
made available during construction, including water supply, storm and sanitary
sewer facilities, and electric and telephone facilities, and Borrower will
obtain all necessary permits and permissions required from all governmental
authorities for access to and use of such services in connection with operation
of the Improvements prior to their construction;
l) All permits required for the construction of the
Improvements in accordance with the Plans and Specifications have been or will
be obtained prior to the commencement of construction of that portion of the
Improvements for which they are required. Borrower shall immediately deliver
copies of all such permits to Bank; and
m) Borrower shall at all times maintain policies of insurance
providing general liability coverages
3
for Borrower and General Contractor in an amount not less than
$**2,000,000.00**.
2. AMOUNT OF LOAN, INTEREST RATE AND TERMS FOR REPAYMENT
2.1 Bank hereby agrees to lend to Borrower up to the aggregate
principal sum of $**1,000,000.00**, subject, however, to the terms and
conditions contained in the Note.
2.2 The Loan shall be evidenced by a Note (the "Note") of even date
herewith in the face amount of $**1,000,000.00** payable in accordance with the
terms thereof with interest at an annual rate equal to Wall Street Journal Prime
Rate plus 1.00%.
All interest rate changes shall be effective on the date of change announced in
The Wall Street Journal.
Interest shall be computed on the basis of a 360-day year. Interest shall be
payable monthly on the FIRST day of each and every month. Prepayments of
principal may be made at any time without penalty. All unpaid principal and
accrued interest, if not sooner paid, shall be due and payable in full on or
before JUNE 1, 2002.
3. ORIGINATION FEE
3.1 Borrower shall pay to Bank an origination fee of up to
$**10,000.00** for the making of the Loan, of which $**7,500.00** shall be due
and payable at the time of the execution of this Agreement, and $**2,500.00**
shall be due upon advance of funds from the $250,000.00 construction holdback.
3.2 All fees payable by Borrower pursuant to this section are
nonrefundable under any circumstances.
4. PURPOSES OF LOAN
The Loan Proceeds shall be used by Borrower solely for the purposes of
(1) $750,000.00 to pay off existing Development Line of Credit at ▇▇▇▇▇ Fargo
Bank; and (2) $250,000.00 to be reserved for the completion of onsite and
offsite improvements in accordance with plans and specifications approved by the
City of PRESCOTT for the ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇, ▇▇▇▇▇ ▇ in PRESCOTT,
AZ.
4
5. COSTS OF CONSTRUCTION
5.1 The cost for the construction of the Improvements in accordance
with the Plans and Specifications is $**250,000.00**. Borrower agrees to provide
Bank an accurate, detailed estimate of the cost of constructing the Improvements
in accordance with the Plans and Specifications (including all indirect
construction costs).
5.2 Upon Bank's written request, Borrower shall give to Bank a list of
all entities who have a direct contractual relationship with the Borrower to
complete the Improvements. The financial condition and work history of all such
entities and material suppliers must be reasonably satisfactory to Bank.
5.3 Borrower will advise Bank of any increases in the total
Construction Contract amount. No such increases in total Contract amount shall
be made or agreed to by Borrower without Bank's prior written consent.
6. LOAN PROCEEDS AND BORROWER'S FUNDS
6.1 Disbursements under the Loan shall be up to the sum of
$**1,000,000.00** TOTAL, WITH $750,000.00 BEING DISBURSED AT CLOSING TO FIRST
AMERICAN TITLE AGENCY FOR CLOSE OF ESCROW, AND $250,000.00 BEING HELD BACK BY
BANK FOR CONSTRUCTION COSTS IN CONNECTION WITH THE COMPLETION OF YAVAPAI HILLS,
▇▇▇▇ ▇, ▇▇▇▇▇ ▇, subject to the terms and conditions contained herein. If at any
time during the course of construction of the Improvements, Bank determines in
the exercise of its reasonable discretion that the undisbursed loan funds and/or
funds set aside and on deposit at Bank for said purpose are insufficient to pay
the remaining costs of the construction of the Improvements in accordance with
the Plans and Specifications, Bank may, at its option, either (i) require
Borrower to deposit funds with Bank sufficient in the reasonable judgment of
Bank to make up such deficiency or (ii) cause Borrower to expend such funds as
are necessary to make up such deficiency and cause Borrower to complete the
Improvements according to the Plans and Specifications, and Borrower shall
furnish Bank with satisfactory proof of any such expenditures. Upon Bank's
demand, Borrower will deposit the Loan funds in a separate interest bearing
account to be maintained and used solely for the Improvement costs.
5
6.2 Unless Bank shall agree otherwise in writing, disbursements
hereunder will only be made to pay actual costs of construction.
6.3 Bank reserves the right, in its reasonable discretion, to defer,
reduce or decline payment of any item when, in Bank's reasonable judgment, the
payment is not justified by the value of the related work in place, or by
material suitably stored on the Property or if the item is not included in the
cost breakdown.
7. METHOD AND CONDITIONS OF LOAN DISBURSEMENTS
7.1 Borrower shall make each request for any advance hereunder no less
than three (3) business days prior to the day on which the advance is to be made
and shall, at the time of each such request, inform Bank of (i) the total amount
of such proposed borrowing and (ii) the date of such proposed borrowing.
Bank will lend to Borrower such amount as Borrower may request upon the
condition that (i) the advance meets the requirements set forth herein; (ii)
there shall exist no event of default or event which with the giving of notice
or the passage of time, or both, would be an event of default hereunder or under
any of the Loan Documents; (iii) the conditions precedent for lending shall have
been fully satisfied; and (iv) the security instruments required hereof shall
have, where applicable, been recorded and the title policy required hereby
issued or committed hereto.
Each request for an advance for the purpose of making payment to any
subcontractor or material supplier or any other Improvement cost shall be in
writing on a draw request form acceptable to Bank and shall be accompanied by
evidence in form and substance satisfactory to Bank from the City of Prescott
documenting approval and acceptance of work completed and authorizing Bank to
release funds under financial assurance agreements as applicable, together with
other documentation including but not limited to: (i) copies of all bills or
statements for expenses for which the advance is requested if required by Bank,
(ii) where applicable, on AIA forms G-702 and G-703A or equivalent, certificates
of Borrower, the construction manager and Borrower's architect responsible for
issuing certificates of completion, (iii) if required by Bank, lien waivers from
subcontractors and material suppliers evidencing that any
6
prior advance has been properly applied, (iv) where applicable, the report of
Bank's inspector showing:
a) The percentage of completion of the Improvements and the value of
that portion of the Improvements completed, and equipment and materials
purchased at that time and suitably stored at the job site (or stored and
insured at another secure location satisfactory to Bank) or incorporated into
the Improvements;
b) That all outstanding claims for labor, materials, fixtures and
equipment due and not included in such request for an advance have been paid;
c) That Borrower has complied with all Borrower's obligations under the
Loan Documents as of the date thereof;
d) That all construction prior to the date of the request for an
advance has been accomplished in accordance with the Plans and Specifications;
e) That all funds previously disbursed by or through Bank have been
applied in accordance with the Plans and Specifications;
f) That, where applicable, change orders have been approved in writing
by Bank;
g) That the amount of such advance is included in the cost breakdown
referred to unless Bank has agreed otherwise in writing and Borrower has
remained within the estimated costs;
h) That the amount of undisbursed Loan proceeds and/or funds set aside
and on deposit at Bank are sufficient to pay the cost of completing the
Improvements in accordance with the Plans and Specifications.
7.2 At the time of each advance, if requested by Bank, Borrower shall
furnish statements from the general contractor performing work:
a) Stating the amount of its contract and the amount paid to
date;
b) Acknowledging full payment (less any applicable retainage) for
all work done and/or materials supplied for which payment is due and which is
not included in such advance.
7.3 At no time and in no event shall Bank be obligated to disburse
funds:
a) In excess of the amount reasonably recommended by Bank's
in-house inspector or by the architect;
7
b) If any event of default or event which with the giving of
notice or the passage of time, or both, would be an Event of Default hereunder
or under the Loan Documents shall have occurred;
c) in the reasonable opinion of Bank the Improvements cannot
be completed by the completion date;
d) If in the reasonable opinion of Bank the estimated
remaining cost of construction in accordance with the Plans and Specifications
exceeds: (i) the remaining undisbursed portion of Loan Proceeds plus any funds
on deposit with Bank from Borrower or (ii) the estimated costs and any
additional costs approved by the Bank;
e) If the Improvements shall have been damaged by fire or
other casualty and Bank shall not have received insurance proceeds or funds from
Borrower sufficient in the reasonable judgment of Bank to (i) effect the
restoration of the Improvements in accordance with the Plans and Specifications,
and (ii) permit the completion of the Project on or before the completion date;
f) If in Bank's reasonable judgment, the advance is not
justified by the value of the related work in place, or by material suitably
stored on the Property or suitably stored and insured at another secure location
satisfactory to Bank.
7.4 Loan disbursement request shall be disbursed only upon receipt
by Bank of each of the following (in addition to the satisfaction of all
other requirements for disbursements):
a) Satisfactory evidence of the completion of the
Improvements in accordance with the Plans and Specifications which may be
evidenced by a construction loan disbursement authorization from the
Borrower, and, if applicable, by all governmental authorities whose approval
may be required;
b) The approval of the Improvements by an architect and/or
Bank's inspector if required by Bank; and
c) Evidence that no mechanic's or materialmen's liens will
be filed against the Property (which may be shown by the recording of a
certificate of completion pursuant to A.R.S. 33-993 and the lapse of any
period provided by statute for the filing of such liens).
7.5 Bank, at its option, may make any or all advances directly or
jointly to Borrower, the construction manager and/or any subcontractor or
material supplier, and the execution of this Agreement by Borrower shall, and
hereby does, constitute an irrevocable direction and authorization
8
to so advance the funds. No further direction or authorization from Borrower
shall be necessary to warrant such direct advances and all such advances shall
satisfy pro tanto the obligations of Bank hereunder and shall be covered and
secured by the Loan Documents as fully as if made only to Borrower, regardless
of the disposition thereof by such person.
8. BORROWER'S RECORDS
Bank, or any persons designated by it, shall have the right at any time
with reasonable prior notice and during business hours, without hindrance or
delay, to inspect, audit, check and make extracts from Borrower's records and
accounts, including, without limitation, all journals, orders, receipts, any
correspondence and any other data relating to the books, records and accounts
as may be maintained, generated or stored. Borrower hereby irrevocably
authorizes any person, including, without limitation, any of Borrower's
employees or agents, having possession or control of any such books, records
and accounts to make them available for Bank's inspection within three (3)
working days after Bank's request or, at the option of Bank, make any
computer programs or other mechanical devices or programs related thereto
available to Bank. Bank, or any persons designated by it, shall have the
right to make such verifications concerning Borrower's business, as Bank may
consider reasonable under the circumstances.
9. INSPECTIONS
9.1 Borrower shall permit Bank and its representatives and agents to enter
upon the Property with reasonable notice and during business hours and to
inspect the Improvements and all materials to be used in the construction
thereof and to cause all contractors and subcontractors to cooperate with
Bank and its representatives and agents during such inspections.
9.2 Providing there are no existing events of default, there shall be no
fees for inspections. Any inspections or determinations made by Bank or
instructions obtained by Bank, are made or obtained solely for Bank's own
benefit, and not in any way for the benefit or protection of Borrower. Bank
may accept and rely on any statement,
9
figures or representations of the general contractor, subcontractors, the
project architect or engineer or Borrower as to labor and materials furnished or
incorporated in the construction of the Improvements and the cost thereof and as
to matters relating to such construction without the necessity of verifying the
same.
9.3 At Bank's discretion, it may waive any inspections and make
disbursements solely upon such statements and representations, as it shall
deem appropriate. Bank has no obligation to supervise or review construction
of the Improvements.
10. SECURITY
10.1 The Loan and the Note and any extensions, renewals, modifications and
replacements thereof shall be secured by:
a) A valid first position Deed of Trust of even date herewith (the
"Deed of Trust") on the property, executed by YAVAPAI HILLS, INC., a Delaware
corporation, and to be recorded in the office of the YAVAPAI County Recorder.
b) A Security Agreement and UCC Financing Statements giving Bank a
valid first position security interest in all materials and fixtures
incorporated or to be incorporated into the real property together with
assignments of the Borrower's interest in all agreements, and documents
including but not limited to an assignment of all plans, specifications, utility
deposits and reimbursements, and contract rights under all construction,
architectural, engineering or other agreements or contracts related to the
Project.
11. EVENTS OF DEFAULT
11.1 Each of the following, at the option of Bank, shall constitute an
event of default ("Event of Default") under this Agreement:
a) Failure of Borrower to make any payment when due on the
Indebtedness.
b) Failure of Borrower within the time required by the Deed of Trust to
make any payment for taxes or insurance, or any other payment necessary to
prevent filing of or to effect discharge of any lien.
c) Failure of Borrower to comply with or perform when due any term,
obligation covenant or condition contained in any environmental agreement
executed in connection with the Property.
10
d) Failure of Borrower to comply with any other term, obligation,
covenant or condition contained in this Agreement, the Deed of Trust, the Note
or in any of the Related Documents.
e) Any warranty, representation or statement made or furnished to Bank
by or on behalf of Borrower under this Agreement, the Deed of Trust, the Note or
the Related Documents is false or misleading in any material respect, either now
or at the time made or furnished.
f) This Agreement, the Deed of Trust or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any time
and for any reason.
g) The dissolution or termination of Borrower's existence as a going
business, 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.
h) 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 of the Property.
However, this subsection shall not apply in the event of a good faith dispute by
Borrower as to the validity or reasonableness of the claim which is the basis of
the foreclosure or forfeiture proceeding, provided that Borrower gives Bank
written notice of such claim and furnishes reserves or a surety bond for the
claim satisfactory to Bank.
i) Any breach by Borrower under the terms of any other agreement
between Borrower and Bank that is not remedied within any grace period provided
therein, including without limitation any agreement concerning any indebtedness
or other obligation of Borrower to Bank, whether existing now or later.
j) A material adverse change occurs in Borrower's financial condition,
or Bank believes the prospect of payment or performance of the Indebtedness is
impaired
k) Bank in good ▇▇▇▇▇ ▇▇▇▇▇ itself insecure.
l) If the construction of the Improvements is not completed on or
before the Completion Date;
m) If the Improvements shall be damaged or destroyed by casualty;
provided that there shall not be an existing Event of Default, if Bank receives
insurance proceeds or
11
proceeds from Borrower sufficient to repair or restore the Improvements in
accordance with the Plans and Specifications, the Improvements can be repaired
or restored and fully completed before the Completion Date and Borrower
expeditiously proceeds to so repair or restore;
n) If Bank determines at any time that the remaining Loan funds are
insufficient to pay the remaining costs of construction of the Improvement and
Borrower fails to expend or deposit with Bank, at Bank's election, such
additional funds as are necessary to make up such deficiency within thirty (30)
days after notice thereof to Borrower by Bank;
o) If mechanic's or materialmen's lien is filed against the Property or
any part thereof and in the further event that Borrower does not record and
serve a surety bond pursuant to Arizona Revised Statutes 33-1004 within ten (10)
days after service upon Borrower of notice of any such filing or otherwise make
arrangements satisfactory to Bank in its reasonable discretion for the removal
of such lien;
p) If any suit or legal action materially affecting the Property or the
improvements located thereof (including the Improvements), or materially
affecting Borrower is filed and Borrower fails to take steps reasonably
satisfactory to Bank to defend or resolve such action within sixty (60) days
after notice thereof to Borrower by Bank;
q) If Borrower is unable to satisfy any condition to a Loan advance
under Section 7 hereof within thirty (30) days after notice thereof to Borrower
by Bank;
r) If any action, rule, law or decision of any legislative or
administrative body or of any court should materially impair or materially and
adversely affect the enforceability of the Loan Documents;
s) If any deed of trust, mortgage, or other encumbrance not consented
to by Bank in writing or permitted by this Agreement is filed against the
Property and Borrower shall fail to remove the same or take such action with
regard thereto as shall be satisfactory to Bank in its sole discretion within
thirty (30) days after notice thereof by Bank to Borrower;
t) If Borrower should incur any debt or contingent liabilities for
construction of the Improvements other than the Loan, without obtaining Bank's
prior written consent.
12. RIGHT TO CURE:
If such a failure, other than a default in payment, is curable it may be cured
(and no Event of Default will have
12
occurred) if Borrower, after Bank sends written notice demanding cure of such
failure: (a) cures the failure within thirty (30) days; or (b) if the cure
requires more than thirty (30) days, immediately initiates steps which Bank
deems in Bank's reasonable discretion to be sufficient to cure the failure and
thereafter continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical. If any default in payment
occurs, it may be cured (and no event of default will have occurred) if
Borrower, after receipt of notice from Bank, cures such default within twenty
(20) days.
13. REMEDIES OF BANK
13.1 Upon the occurrence of any Event of Default, Bank may, at its
option and without notice, do one or more of the following:
a) Withhold making any further advances under the note; it
being agreed that Bank may also take such action upon the occurrence of an event
which would be an Event of Default except for any notice or cure periods set
forth herein;
b) Declare the amount of the Loan proceeds then advanced under
the Loan, together with all accrued and unpaid interest and all costs and
expenses, immediately due and payable;
c) Take possession of the Property through a receiver or
Bank's agents, employ security watchmen, and cause the Improvements to be
completed at the expense of Borrower, using the remaining Loan proceeds under
the Note for such purpose and charging any additional expense to Borrower, which
sums shall be secured by the Loan Documents;
d) Foreclose its liens or exercise its power of sale on the
Property and the property described in the Loan Documents, and exercise any
rights and remedies given to Bank in all other Loan Documents;
e) Apply any remaining Loan funds to the direct payment of
bills, claims or liens of laborers or materialmen that Bank in its judgment
believes to be valid;
f) File suit for any sums owing or for damages; or
g) Take such other actions as may be allowed by law or by the
Loan Documents or as Bank may deem necessary to protect its interest.
13
13.2 Any and all remedies conferred upon Bank in this Agreement, the Deed of
Trust, the Note and other Related Documents shall be deemed cumulative with, and
nonexclusive of any other remedy conferred hereby or by law, and Bank in the
exercise of any one remedy shall not be precluded from the exercise of any
other.
14. COMPLETION BY BANK
If Bank takes possession of the Project, Borrower agrees that Bank may use any
undisbursed funds that are necessary to complete construction of the
Improvements in accordance with the Plans and Specifications, and if the
completion requires a larger sum than the remaining undisbursed portion of the
Loan, to disburse such additional funds, all of which funds so disbursed by Bank
shall be deemed to have been disbursed to Borrower and shall be secured by the
Loan Documents. For this purpose, Borrower hereby irrevocably constitutes and
appoints Bank its true and lawful attorney-in-fact with full power of
substitution to complete the construction of the Improvements in the name of
Borrower, and hereby empowers Bank as said attorney;
a) To take all actions necessary in connection therewith for the
purpose of completing the improvements in the manner called for by the Plans and
Specifications;
b) To make such additions, changes and corrections in the Plans and
Specifications that may be necessary or desirable to complete the Improvements
in substantially the manner contemplated by the Plans and Specifications;
c) To employ such contractors, subcontractors, agents, architects, and
inspectors as shall be required for said purposes;
d) To pay, settle or compromise all existing or future bills and claims
that are or may be liens against the Property or may be necessary or desirable
for the completion of the Improvements or the clearance of title to the
Property;
e) To execute all applications and certificates in the name of Borrower
that may be required by the contracts with Borrower's contractors and
subcontractors and to do any and every act with respect to construction of the
Improvements that Borrower may do in its own behalf. This power of attorney
shall be deemed to be a power coupled with an interest that cannot be revoked by
death or otherwise. Said attorney-in-fact shall also have power to prosecute and
defend all actions or proceedings in connection with the construction of the
Improvements and to take such action and require such performance as it deems
14
necessary. In accordance therewith, Borrower hereby assigns, transfers and sets
over to Bank all sums to be advanced hereunder, including retainage, for
completion of the Improvements; and
f) To exercise all of Borrower's rights as to this Agreement, and other
rights or privileges relating to the property.
15. PARTIAL RELEASE OF DEED OF TRUST
15.1 Bank may release from the Deed of Trust, any part or parts of the Property
given to secure payment of the Indebtedness. Borrower shall execute and deliver
to Bank a written partial release upon receiving a written request from Bank.
The written request shall include a description of the Property to be released
and a declaration that the Bank is the owner and holder of the debt mentioned in
the Deed of Trust. The partial release executed by the Borrower shall identify
the Deed of Trust and describe the property to be released. A partial release
executed and delivered by the Borrower under the authority of this section shall
not affect or impair the security remaining under the Deed of Trust. Bank shall
execute partial releases of the lien of the Deed of Trust upon the following
conditions:
a) No Event of Default has occurred and is continuing.
b) The release is requested in connection with the sale of the lot to a
third party purchaser;
c) Borrower shall have paid to Bank the applicable release price (if
any) payable pursuant to the subparagraph (c). If Borrower is providing
seller-financing to the purchaser of the lot, then no release price shall be
payable to Bank; provided, however, that Bank shall not be obligated to release
more than one-half of the number of lots originally pledged at the loan closing
without payment of a release price. With respect to the balance of the lots,
Borrower shall pay to Bank a release price of $40,000.00. Payments of release
prices shall be applied to the principal balance of the Promissory Note executed
by Borrower of even date. Payments of principal under the Promissory Note will
be applied toward release prices.
Upon the closing of the escrow and payment to Bank of the release price set
forth above, Bank shall cause the lien of the Deed of Trust and Security
Agreement to be released as to the lot that is the subject of the escrow;
provided,
15
however, that the receipt by Bank of such release payment shall be without
prejudice to Bank's rights to exercise or to continue to exercise its rights
under the Deed of Trust and Security Agreement as to any property covered by the
Deed of Trust that is not the subject of the escrow. Payments of interest under
the Note shall not be applied toward the release price of a lot from the lien of
the Deed of Trust.
16. FIXTURES AND GENERAL INTANGIBLES
If required by Bank, Borrower shall execute a Security Agreement, and
UCC-1 Financing Statements in a form acceptable to Bank.
17. ATTORNEY'S FEES AND EXPENSES
17.1 Borrower shall pay all reasonable costs of closing the Loan and all
expenses of Bank with respect thereto, including, but not limited to, recording
expenses, surveys, insurance, taxes, and similar items.
17.2 In addition to any rights Bank may have under Arizona Revised Statutes
12-341.01, Borrower shall pay Bank's reasonable attorneys' fees and costs
incurred in the collection of any indebtedness hereunder, or in enforcing this
Agreement, whether or not suit is brought, and any attorneys' fees and costs
incurred by Bank in any proceeding under the Federal Bankruptcy Code in order to
collect any indebtedness hereunder or to preserve, protect or realize upon any
security for such indebtedness.
18. WAIVER
Any Waiver of any of the terms of this Agreement by Bank or Borrower
shall not be construed as a waiver of any other terms of this Agreement, and no
waiver shall be effective unless made in writing. The failure of Bank to
exercise any right with respect to the declaration of any default shall not be
deemed or construed to constitute a waiver by, or to preclude Bank from
exercising any right with respect to such default at a later date or with
respect to any subsequent default by Borrower.
19. ASSIGNMENT OF CONSTRUCTION CONTRACTS
Borrower hereby assigns to Bank its rights, title and interest in, to
and under all construction contracts for the Improvements now in existence or
those to be entered into by Borrower in the future (the "Construction
16
Contracts") and grants Bank a security interest in the Construction Contracts as
additional security for the repayment of the Note and the Loan. Upon the
occurrence of any Event of Default hereunder, Borrower agrees that Bank shall
have the rights and remedies with respect to the Construction Contracts as are
provided for by the Arizona Uniform Commercial Code in addition to the other
rights and remedies herein granted to Bank. Upon the occurrence of any such
Event of Default, Bank shall have the right, at its option, to enforce
Borrower's rights under the Construction Contracts and to bring an action for
the breach thereof in the name of Bank or, at Bank's option, in the name of
Borrower; provided, however, that Bank shall not be obligated to enforce the
Construction Contract or to bring any action for the breach thereof, Bank may,
but shall not be obligated, perform Borrower's obligations under the
Construction Contracts in Borrower's name or that of Bank. All sums expended by
Bank in keeping the Construction Contracts in force or in enforcing Borrower's
rights thereunder shall be deemed advances for the protection of Bank's security
under the Loan Documents and shall be secured thereby.
20. ASSIGNMENT OF PLANS AND SPECIFICATIONS AND OF PERMITS
Borrower hereby assigns to Bank its rights, title and interest in, to and under
the Plans and Specifications and in and to all permits, licenses and
certificates issued by various governmental agencies, utility companies and
their entities in connection with the construction, ownership, occupancy or
operation of the Property and the Improvements (collectively the "Permits"); and
Borrower hereby grants Bank a security interest in and to the Plans and
Specifications and the permits as additional security for the repayment of the
note and the Loan. Upon the occurrence of any Event of Default, Bank shall have
all of the rights and remedies with respect to the Plans and Specifications and
the Permits as are provided for by the Arizona Uniform Commercial Code in
addition to all other rights and remedies herein granted to Bank. Upon the
occurrence of any Event of Default, Bank, at its option, may enforce Borrower's
rights under the Plans and Specification and the Permits.
21. NOTICE
17
Any written notice to a party which may be necessary hereunder shall be
given by mailing a copy of such notice by United States mail, postage prepaid
(except any notice of an Event of Default under this Agreement shall be given by
certified mail, return receipt requested) addressed to the party as given below:
If to Borrower: If to Bank:
YAVAPAI HILLS, INC. COUNTY BANK
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇. ▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Such notice shall be deemed effective three (3) days after the mailing of such
notice.
22. MISCELLANEOUS
22.1 Borrower shall execute and deliver any and all documents that may be
reasonably requested by Bank in order to properly document and secure the Loan.
22.2 This Agreement is made solely between Borrower and Bank, no other person
shall have any right of action hereunder, and the Loan proceeds are not a fund
held for the benefit of laborers, materialmen or subcontractors. The parties
expressly agree that no person shall be a third-party beneficiary to this
Agreement.
22.3 Borrower agrees to and shall indemnify Bank from any liability, claims or
losses not fully compensated for by insurance resulting from the disbursement of
Loan proceeds or from the condition of the project, whether related to the
quality of construction or otherwise, and whether arising during or after the
term of the loan provided, however, that Borrower shall have no obligation to
indemnify Bank from any liability, claims or losses arising from or related to
the negligence of intentional acts of Bank. This provision shall survive
repayment of the loan and shall continue in full force and effect so long as the
possibility of such liability, claims or losses exists.
22.4 This Agreement shall inure to the benefit of, and be binding upon the
parties hereto, their respective executors, administrators, heirs, successors
and assigns; provided, however, that neither this Agreement nor any rights or
obligations hereunder shall be assignable by Borrower without the prior express
written consent of Bank
18
and any purported assignment made in contravention hereof shall be void.
22.5 The rights, duties and obligations of the parties hereto shall be governed
and construed in accordance with the laws of the State of Arizona.
22.6 Borrower and Bank expressly agree that this transaction is not an
"installment loan" nor a "revolving loan account" within the meaning, intent or
preview of Arizona Revised Statutes, Section 44-1205(A) or (B).
22.7 Time is of the essence hereof.
19
In witness whereof, the parties have executed this Agreement as of the date
first above written.
YAVAPAI HILLS, INC., a Delaware corporation
By:
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
CHAIRMAN/SECRETARY
By:
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
PRESIDENT/CEO
COUNTY BANK
By:
----------------------------
▇▇▇▇▇ ▇▇▇▇, VP
20