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REVOLVING WORKING CAPITAL, LAND ACQUISITION AND DEVELOPMENT
AND RESIDENTIAL CONSTRUCTION BORROWING BASE FACILITY
AGREEMENT
THIS REVOLVING WORKING CAPITAL, LAND ACQUISITION AND DEVELOPMENT AND RESIDENTIAL CONSTRUCTION BORROWING BASE FACILITY AGREEMENT (the “Agreement”) is entered into as of the date set forth above, by and between Borrower and Lender, with reference to the following facts:
A. Lender has approved a revolving loan facility (the “Loan” or the “Facility”) for Borrower under which Borrower may request funding for the acquisition or refinance of land, development thereof, and the construction of Units (as hereinafter defined) located in one or more Approved Projects (as hereafter defined) in the states of Florida, Georgia, North Carolina, South Carolina, Tennessee and Texas, and for working capital purposes. The availability of such credit for new projects hereunder is subject to the Expiration Date identified above.
B. The total amount of the Facility is the Maximum Facility Amount shown above, the availability of which is subject to certain sub-limits and restrictions, including the establishment of a Maximum Available Amount” that is determined from time to time based on the current value of the underlying collateral and certain other restrictions as set forth on SCHEDULE 1.
C. As of the date hereof, Lender has agreed to advance funds under the Facility in connection with the Project identified in Section I of SCHEDULE 1 hereto, which shall constitute an Approved project, as defined below. The approval by Lender of additional Approved Projects
Borrowing Base Facility Agreement- Loan No. 1001839
and the disbursement of funds in connection therewith shall be upon Borrower’s request and at Lender’s sole discretion, in accordance with the provisions hereinafter contained.
D. Except for funds advanced under the Working Capital Line, funds advanced under the Facility shall be secured by one or more mortgages and or deeds of trust, as applicable, in a form satisfactory to Lender (collectively, and as amended from time to time, the “Mortgages”) creating first priority liens or deeds of trust encumbering the Property (the “Property”) included or to be included within an Approved Project for which Borrower anticipates an immediate need for financing hereunder. In lieu of recording additional Mortgages to encumber additional Properties to be designated additional Approved Projects, any existing Mortgage and the legal description therein may be modified and amended, by a mortgage modification and spreader agreement, in form and content acceptable to Lender, to encumber such additional Property as funds under the Facility are advanced in connection with such additional Property.
E. The repayment of funds advanced from time to time under the Working Capital Line shall be (i) guaranteed by the Working Capital Line Guarantor and (ii) secured by a pledge of, and security interest in and to, all the equity interests (the “Working Capital Line Collateral”) in Borrower.
F. Any term set forth herein in quotes shall be as hereinafter defined in this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have the meanings set forth below:
1.1 “A&D Draw” means a “Draw” which is made for the acquisition or refinancing of “A&D Land”, development of “A&D Improvements”, or other costs contained in a “Budget” for an “A&D Project” set forth in an “A&D Project Addendum”.
1.2 “A&D Draw Request” means that portion of the Collateral Verification Certificate representing the Collateral Basis Amount for A&D Projects submitted in accordance with the draw procedures set forth in Section 4 below which shall be accompanied by (i) an AIA Application and Certificate for Payment signed by Borrower’s engineer and general contractor, if applicable, of the A&D Project, or equivalent acceptable to Lender; (ii) Borrower certifying the status of development and the percentage of completion; and (iii) a spreadsheet report for all costs confirmed by an applicable AIA form.
1.3 “A&D Improvements” means the development improvements being made by Borrower or the applicable Project Guarantor on A&D Land, as set forth in the A&D Project Budget.
1.4 “A&D Land” means Property for which Borrower or the applicable Project Guarantor has in place or shall obtain all permits and approvals for development, that is purchased by Borrower or a Project Guarantor for the purpose of eventual development as an A&D Project.
Borrowing Base Facility Agreement- Loan No. 1001839
l.5 “A&D Land Acquisition” means the acquisition or refinance of A&D Land by Borrower or a Project Guarantor.
1.6 “A&D Land Addendum” means a document which shall be substantially in the form shown on the attached EXHIBIT A, executed by an “Authorized Person” on behalf of Borrower and by Lender, which shall indicate Lender’s approval of an A&D Land Acquisition.
1.7 “A&D Land Allocation” means the portion of the Maximum Facility Amount allocated for a particular A&D Land Acquisition, as set forth in an A&D Land Addendum for such A&D Land Acquisition or as set forth on an A&D Project Budget.
1.8 “A&D Project” means the A&D Land and the A&D Improvements in or for a particular Approved Project.
1.9 “A&D Project Addendum” means a document which shall be substantially in the form shown on the attached EXHIBIT B, executed by an Authorized Person on behalf of borrower and by Lender, which shall indicate Lender’s approval of, and special conditions relating to, an A&D Project.
1.10 “A&D Project Allocation” means the portion of the Maximum Facility Amount allocated for a particular A&D Project, as set forth in an A&D Project Addendum for such A&D Project.
1.11 “Appraisal” means an appraisal ordered by Lender from an independent appraiser acceptable to Lender, that complies with all applicable state and federal laws and regulations and with the Uniform Standards of Professional Appraisal Practice; provided, however, that the value shown in any such Appraisal shall be subject to review and potential adjustment by Lender’s in-house appraisal review department, in its sole discretion.
1.12 “Approved Project” means Property approved by Lender in its sole discretion for inclusion as collateral for this Facility and for Draws hereunder under one of the applicable “Eligible Property Types”. Borrower shall provide Lender with all relevant information for each prospective or existing Approved Project based on its applicable Eligible Property Type, including, without limitation and at Lender’s request, appraisals, surveys, recorded plats, plans and specifications, copies of all existing permits and governmental approvals obtained for the Approved Project, insurance policies in form and amount acceptable to Lender and issued by insurance companies acceptable to Lender, environmental audits, project budgets, and all other documents and information that Lender may require, and that otherwise satisfy the requirements for approval of a particular Project as set forth in Section 4 below or on SCHEDULE 1.
1.13 “Authorized Person” means a person authorized to execute and deliver the “Loan Documents”, A&D Draw Requests, “Borrowing Base Draw Requests,” “Working Capital Line Draw Requests,” “Collateral Verification Certificates” in the form attached hereto and incorporated herein as EXHIBIT C, and “Certificates of Compliance” in the form attached hereto and incorporated herein as EXHIBIT D, and to certify financial statements in connection with
Borrowing Base Facility Agreement- Loan No. 1001839
this Facility, as set forth in a borrowing resolution or otherwise designated by Borrower in writing from time to time in a form acceptable to Lender.
1.14 “Borrower” means, individually and collectively if more than one, those entities identified above and on SCHEDULE 1 attached hereto.
1.15 “Borrowing Base Draw” means a Draw other than an A&D Draw or a Working Capital Line Draw.
1.16 “Borrowing Base Draw Request” means that portion of the Collateral Verification Certificate representing the Collateral Basis Amount other than A&D Projects.
1.17 “Borrowing Formula” means the percentages set forth in SCHEDULE 1 hereto, which represent the maximum rates at which Draws shall be made hereunder for the A&D Improvements and for the construction of particular types of Units on the Property.
1.18 “Budget” means a budget or series of budgets that cover all “Eligible Costs” for the acquisition or refinance of A&D Land and/or the development of an A&D Project with proceeds of this Facility and that have been reviewed and approved by Lender and/or any third-party consultant retained by Lender to review such budget(s) prior to the disbursement of the first A&D Draw to be made hereunder for such A&D Land Acquisition or A&D Project.
1.19 “Collateral Basis Amount” means as defined in SCHEDULE 1.
1.20 “Collateral Verification Certificate” means a document setting forth each A&D Land Allocation and associated costs in place, A&D Project Allocation and associated costs in place, the percentage of development completed in each such A&D Project, Units (and related “Developed Lots”) securing the Facility and associated costs in place, the percentage of construction completed on each such Unit, the marketing status of each such Unit, and such additional information regarding the status of construction of each such Unit as Lender, in its sole discretion, may require, which document shall be in the form shown on the attached EXHIBIT C, completed by Borrower and certified by an Authorized Person in a form provided by Lender or a form otherwise acceptable to Lender, and provided to Lender within twenty (20) days from month end for the month being reported.
1.21 “Construction Documents” means the general construction contract between Borrower or any applicable Project Guarantor and any general contractor for the rendering of all services and the furnishing of all materials for the development and construction of improvements on any portion of the Property, together with any other or additional contracts entered into in connection with the construction of the improvements on any portion of the Property, and all subcontracts, “Plans and Specifications”, and related documents, in all cases satisfactory in form and substance to Lender.
1.22 “Curtailment Requirement” means the minimum required principal repayment schedule, if any, for a particular A&D Project set forth on the applicable A&D Project Addendum.
Borrowing Base Facility Agreement- Loan No. 1001839
1.23 “Debt” means GAAP total liabilities for the specified Financial Covenant Party(ies), but excluding Subordinated Debt.
1.24 “Debt-to-Worth Ratio” means the ratio of the total Debt of the specified Financial Covenant Party(ies) to its “Tangible Net Worth”.
1.25 “Developed Lot” means a fully developed, platted, separately conveyable lot developed as part of an A&D Project.
1.26 “Draw” means a disbursement of funds under the “Note” in accordance with Section 4 below and the other terms of this Agreement.
1.27 “Eligible Costs” means, as applicable, the expenses of acquiring specific property and developing an Approved Project, including, without limitation: interest payments on the Loan, development costs, recording fees, closing and sale costs, and any other costs that Lender may approve in its sole discretion.
1.28 “Eligible Property Types” means A&D Land, A&D Improvements, Developed Lots, and Units that are located in one or more Approved Projects that secure the Facility with a first priority lien or trust deed under the Mortgages (subject only to exceptions approved by Lender) and have not been included in Borrower’s Collateral Verification Certificates for longer than the “Maximum Holding Period” specified in SCHEDULE 1, if any, for the particular property type.
1.29 “Equity Funds” means an amount to be contributed from Borrower’s own funds equal to the difference between the Eligible Costs and the amounts available for borrowing under the Facility.
1.30 “Expiration Date” means the date set forth above, which is the date on which Lender’s authorization for Borrower to add additional collateral to the Facility expires and the Term-Out Period begins, as such dates may be extended as set forth below.
1.31 “Expiration Date Extension” means as described in Section 2.4 herein.
1.32 “Financial Covenant Party” and, collectively, “Financial Covenant Parties” means each of the entities whose financial performance determines Borrower’s compliance with one or more of the financial covenants set forth on SCHEDULE 2 attached hereto, as such parties are identified in that Schedule.
1.33 “Guarantor” means, individually and collectively, the Working Capital Line Guarantor and each Project Guarantor.
1.34 “Guaranty” means, individually and collectively, the Unconditional and Continuing Limited Guaranty of the Working Capital Line Guarantor and the Unconditional and Continuing Guaranty and Indemnity Agreements executed by the Project Guarantors, as required herein.
Borrowing Base Facility Agreement- Loan No. 1001839
1.35 “Letter of Credit” means a letter of credit issued by Lender to or for the benefit of Borrower or any Project Guarantor.
1.36 “Leverage” means the Debt-to-Worth Ratio.
1.37 “Loan Documents” means the Note, the Guarantees, the Mortgages, the Working Capital Line Pledge, this Agreement, and all other agreements and documents evidencing, securing, or otherwise relating to this Facility or any Draw under this Facility, all of which shall be in the form required by Lender.
1.38 “Maturity Date” means the date which is twenty-four (24) months after the Expiration Date, as such Expiration Date may be extended as provided for herein or in the other Loan Documents.
1.39 “Maximum Available Amount” shall have the meaning given to such term in SCHEDULE 1.
1.40 “Maximum Holding Period” means the time period specified in SCHEDULE 1 for each Eligible Property Type, which time period represents the maximum amount of time that any particular Property may be included in Collateral Verification Certificates used in calculating the Maximum Available Amount in the manner set forth on SCHEDULE 1.
1.41 “Net A&D Allocations” means the sum of all A&D Project Allocations less the Per Lot Amounts for all Developed Lots within such A&D Projects that are either Released Lots or on which construction of a Unit has commenced, provided such Unit is included in a Collateral Verification Certificate.
1.42 “Note” means, collectively, one or more Revolving Promissory Notes, in the aggregate principal amount not exceeding the Maximum Facility Amount, executed and delivered to Lender by Borrower to evidence this Facility, as the same may be amended, modified, split, consolidated or renewed from time to time.
1.43 “Per Lot Amount” means the per lot amount set forth on the applicable A&D Project Addendum.
1.44 “Plans and Specifications” means, as applicable, the final development plans and specifications and the full set of engineering and architectural plans and specifications for development or construction in connection with the applicable Approved Project or Units, all as reviewed and approved by Lender.
1.45 “Project” means, from time to time all subdivision development and residential construction work scheduled or proposed by Borrower to be completed with proceeds of the Facility with respect to Approved Projects.
1.46 “Project Guarantor” means each owner of Property to become A&D Land or an Approved Project, which owner shall have executed and delivered to Lender (i) an unconditional guaranty, in form and content acceptable to Lender in its sole discretion, pursuant to which such
Borrowing Base Facility Agreement- Loan No. 1001839
owner shall have jointly and severally guaranteed the repayment, in full, of the Facility, (ii) a Mortgage encumbering such Property as a first priority lien or deed of trust thereon and (iii) such other documents as may be reasonably required in connection with the requested designation of Property owned by such person or entity as A&D Land or an Approved Project, in accordance with Section 3 hereof.
1.47 “Qualified Contract” means a binding contract, in form and content reasonably satisfactory to Lender, for the sale of a Unit for consideration approved by Lender to a purchaser unaffiliated with Borrower or Guarantors, under which (i) Borrower or the applicable Project Guarantor has received cash deposit(s) in such percentage of the Unit’s approved sale price as Lender may reasonably require; (ii) the proposed purchaser is purchasing the Unit for cash or has been approved for permanent financing by an institutional lender reasonably satisfactory to Lender; (iii) all contract contingencies, other than seller’s performance (including financing contingencies), have been satisfied or waived; (iv) all applicable cancellation or rescission periods have expired; and (v) neither Borrower, Guarantor nor any affiliate thereof is obligated to provide any purchase money financing for such Unit.
1.48 “Released Lot” means a Developed Lot which has been released from the lien and encumbrance of the applicable Mortgage.
1.49 “Sub-Limit” means the Maximum Available Amount and the related restrictions on the aggregate amounts outstanding under the Facility for the Working Capital Line or for particular Eligible Property Types and related limits on disbursements for certain purposes, all as set forth in SCHEDULE 1 hereto.
1.50 “Subordinated Debt” means indebtedness and liabilities of Borrower that have been subordinated by written agreement in form and substance acceptable to Lender to indebtedness owed by Borrower to Lender.
1.51 “Tangible Net Worth” means the aggregate of shareholder equity of the specified Financial Covenant Party(ies) increased by Subordinated Debt due to parent and decreased by all intangible assets (i.e., goodwill, trademarks, organizational expenses, and similar intangible items) and decreased by obligations due from shareholders and/or affiliates of the specified Financial Covenant Party(ies).
1.52 “Term-Out Period” means the twenty four (24) month period immediately following the Expiration Date, during which the Facility is subject to certain additional restrictions, all as set forth on SCHEDULE 1 hereto.
1.53 “Unit” means a Developed Lot and the residential dwelling constructed or to be constructed thereon, located in an Approved Project including any of the following, as designated in Borrower’s Collateral Verification Certificate and confirmed or adjusted by Lender’s inspections:
1.53.1 “Model Unit” means a Unit that is under construction or has been constructed for use as a model for sales and marketing purposes.
Borrowing Base Facility Agreement- Loan No. 1001839
1.53.2 “Pre-Sold Unit” means a Unit with respect to which there exists a Qualified Contract, subject only to completion, final inspection and closing.
1.53.3 “Spec Unit” means a Unit that is not pre-sold (or as to which a Qualified Contract has been terminated), and that will be sold on the open market upon completion.
1.54 “Unsatisfied Curtailment Requirement” means the cumulative Curtailment Requirement for a particular A&D Project as reduced by all Per Lot Amounts for all Developed Lots within such A&D Project that are either Released Lots or on which construction of a Unit has commenced, provided such Unit is included in a Borrowing Base Draw Request.
1.55 “Working Capital Line” means a portion of the Facility, in the amount not exceeding $15,000,000.00 at anyone time, available for disbursement to Borrower without regard to the Borrowing Formula or any Collateral Basis Amount, in accordance with the provisions of Section 2.6 and Section 4 hereof.
1.56 “Working Capital Line Collateral” means all of the equity interests in Borrower, and any successor thereof, which interest shall have been duly and validly pledged to Lender as collateral security for the prompt and full satisfaction of all obligations of the Working Capital Line Guarantor under its Guaranty of the Working Capital Line.
1.57 “Working Capital Line Draw” means a Draw made under, and subject to all conditions pertaining to, the Working Capital Line, in accordance with Section 4 hereof.
1.58 “Working Capital Line Draw Requests” means a written request for the disbursement to Borrower in accordance with the procedures set forth in Section 4 below.
1.59 “Working Capital Line Guarantor” shall mean Levitt Corporation a Florida corporation, and its successors.
1.60 “Working Capital Line Pledge” shall mean the Pledge and Security Agreement of even date herewith, executed by the Working Capital Line Guarantor in favor of Lender, encumbering the Working Capital Line Collateral as security for the obligations of the Working Capital Line Guarantor under its limited guaranty of the Facility.
2. LINE OF CREDIT PROVISIONS.
2.1 Description of the Facility. The purpose of the Facility is to fund the Borrower’s working capital needs and the acquisition or the refinance of A&D Land, the development of A&D Land, and the construction of Units located in one or more Approved Projects, and neither Borrower nor any Project Guarantor shall use Draws for any other purpose. Subject to the terms and conditions of this Agreement, upon Borrower’s submission of a Working Capital Line Draw Request or a Collateral Verification Certificate (comprised of A&D Draw Requests and Borrowing Base Draw Requests) and subject to Lender’s approval, Lender will authorize Draws, which shall be subject to the Maximum Facility Amount, the Maximum Available Amount, and all related Sub-Limits. Lender will maintain records reflecting the disbursed and un-disbursed portions of the Maximum Facility Amount and Maximum Available
Borrowing Base Facility Agreement- Loan No. 1001839
Amount, A&D Land Allocations, A&D Project Allocations, Net A&D Allocations, and payments received and applied to the outstanding Facility, interest accrued, and other matters related to the Facility and the Note, which shall be conclusive evidence of amounts owing thereunder absent manifest error.
2.2 Interest and Payment Provisions.
2.2.1 Interest and Payment Provisions. Interest rates and payment provisions shall be as set forth in the Note and as further described in Section 2.2.3.
2.2.2 A&D Project Interest Reserves. If applicable to a specific A&D Project, that portion of an A&D Land Allocation or an A&D Project Allocation allocated in the Budget for the A&D Land Acquisition or A&D Project set forth in the A&D Land Addendum or A&D Project Addendum, if any, for the payment of interest (the “Interest Reserve”) shall be retained by Lender and shall be available for payment of accrued interest due Lender pursuant to that portion of the outstanding principal balance of the Note consisting of A&D Draw Requests for the particular A&D Project. Borrower hereby authorizes Lender to advance such proceeds on behalf of Borrower directly to Lender each month to pay such portion of the interest due on the Note, notwithstanding that Borrower may not have requested an advance of such amount. Such advance, if made, shall be made by a bookkeeping entry on Lender’s records, shall be considered an A&D Draw Request, added to the outstanding principal balance of the Note and shall be deemed paid to and received by Borrower. The authorization hereby granted, however, shall not obligate Lender to make any such advance or prevent Borrower from paying interest from its own funds. Borrower acknowledges that the payment of interest by the method described in this section is for its convenience and benefit. Notwithstanding any term or provision hereof to the contrary, if from time to time Lender reasonably determines, in its sole and absolute discretion, that the undisbursed portion of the interest reserve established pursuant to the Budget for the A&D Project (the “Undisbursed Reserve Sum”) may not be sufficient to defray in its entirety the entire amount of interest allocated to the A&D Project which Lender then anticipates is likely to accrue during the remainder of the time the A&D Draw Request for such A&D Project shall be outstanding (the “Anticipated Interest Sum”), whether as a result of (a) any existing or anticipated increase in the applicable interest rate, (b) any existing or anticipated deviation from sales or income pro-formas or projections, (c) any existing or anticipated increase in cost of development or delay in commencement or completion of development, and/or (d) any other matter Lender deems relevant in assessing the possibility of any interest reserve insufficiency, then Lender may, at its option, elect to (i) make no further advances from the Undisbursed Reserve Sum and require interest payments to be made directly by Borrower, (ii) require Borrower to deposit in an escrow account with Lender or such other escrow agent as Lender may designate, pursuant to an escrow agreement in form and content as required by Lender, an amount equal to the difference between the Anticipated Interest Sum and the Undisbursed Reserve Sum, and/or (iii) require Borrower to provide such other and further assurances to Lender as Lender may, in its discretion, reasonably require, it being agreed that Borrower’s failure to fully comply with any of Lender’s requirements pursuant to this Section 2.2.2 within ten (10) days from the delivery to Borrower of Lender’s notice of such requirements shall, without further notice, constitute an “Event of Default” under this Agreement and each of the other Loan Documents.
Borrowing Base Facility Agreement- Loan No. 1001839
2.2.3 Principal Payments. In addition to the interest and principal payment requirements of the Note, Borrower shall make principal payments as needed from time to time in order to ensure that the principal amount outstanding under the Facility at no time exceeds the Maximum Facility Amount, that the aggregate outstanding principal amount of Draws at no time exceeds the Maximum Available Amount, or any applicable Sub-Limits are exceeded. Further, if there exists Unsatisfied Curtailment Requirements such that, after the application of such principal payments, the Collateral Basis Amounts (as further described in SCHEDULE 1) for all Eligible Property Types included in the Maximum Available Amount are insufficient to cover all Unsatisfied Curtailment Requirements and the face amount of all outstanding Letters of Credit, Borrower shall make an additional principal payment sufficient to satisfy all Unsatisfied Curtailment Requirements, which shall be applied by Lender to the Unsatisfied Curtailment Requirements, and to the outstanding Facility and shall further comply with the provisions of Section 2.5 below. Provided no Event of Default shall have occurred (and not been waived, in writing, by Lender), principal payments received by Lender shall be applied to the Facility first, to the extent applicable, in accordance with the preceding sentence and then as directed by Borrower. Following the occurrence of any Event of Default, which shall not have been waived, in writing, by Lender, Lender may apply such principal receipts in such order as Lender may determine, in its sole discretion.
2.3 Facility Fees and Costs. Borrower shall pay, either from proceeds of the Facility or from Borrower’s own funds, at Lender’s discretion, the nonrefundable Facility Fees in the amounts and in the manner specified in SCHEDULE 1. Borrower shall pay, within five (5) business days following Lender’s demand, all reasonable out-of-pocket costs related to the Facility, including without limitation: title insurance premiums, appraisal fees, recording costs, third-party architect/engineer fees, fees for plan and cost reviews, if any, by third-party consultants, and attorneys’ fees.
2.4 Extension of Expiration Date. Upon each annual anniversary of the date hereof, at the sole discretion and option of Lender, the Expiration Date may be extended in writing for a period of twelve (12) months, subject to Lender’s review of the latest annual fiscal year end financial information, and all supplemental current financial statements provided by Borrower to Lender and such other information as Lender may deem material, and on such terms as Lender may require, including payment of any applicable Facility Fee (See Schedule 1 hereto).
2.5 Letter of Credit. From time to time, upon the request of Borrower, Lender shall issue Letter(s) of Credit to or for the benefit of Borrower or any Project Guarantor; provided, however, that the issuance of each Letter of Credit by Lender shall be subject to the approval of Lender in Lender’s sole discretion. Each such Letter of Credit shall have an expiry date no later than thirty (30) days prior to the then applicable Maturity Date. In the event that the sum of (i) the outstanding principal balance of the Note plus (ii) unadvanced A&D Land Allocations and unadvanced Net A&D Allocations, plus (iii) the face amount of all outstanding Letters of Credit issued to or for the benefit of Borrower or any Project Guarantor, exceeds the sum of (a) the amount of the Working Capital Line and (b) the Collateral Basis Amounts for all Eligible Property Types included in the Maximum Available Amount after the application of any principal payments required by Section 2.2.3 above, Borrower shall immediately deposit with Lender, upon demand therefor, the amount of such excess, which shall be deposited into an account established with Lender, which account shall be assigned as additional collateral for the
Borrowing Base Facility Agreement- Loan No. 1001839
Note. Thereafter, Borrower shall maintain a balance in such account in the amount of such excess, as such excess may increase or decrease over time in conjunction with changes in the Maximum Available Amount and availability under the Working Capital Line.
2.6 Working Capital Line. Subject to all of the terms and conditions set forth in Section 4 or otherwise in this Agreement, upon Borrower’s submission of Working Capital Line Draw Requests, Lender shall disburse Draws under the Working Capital Line without regard to any Collateral Basis Amount, provided that the amount of any such disbursement shall not exceed the limitation set forth in Section 4.4.3 hereof. At Borrower’s request at any time during the term of the Facility, Borrower may irrevocably elect, by written notice to Lender, to terminate the Working Capital Line. Effective upon receipt of any such termination notice, Lender’s obligation to disburse any further Working Capital Line Draws shall cease and the Working Capital Line shall be reduced to the then outstanding principal balance thereof, as further reduced by the amount of each principal payment subsequently received by Lender and applied by Lender to the Working Capital Line, as provided in this Agreement. Upon the termination of the Working Capital Line and the repayment, in full, of the Working Capital Line, Lender shall (a) cancel the Working Capital Line Guarantor’s Guaranty, (b) terminate Lender’s security interests in the Working Capital Line Collateral and (c) cancel and return to the Working Capital Line Guarantor the Working Capital Line Guarantor’s Guaranty and the Working Capital Line Collateral.
3. CONDITIONS TO CLOSING AND ADVANCEMENT OF FUNDS FOR PROPERTY. Lender’s obligation to advance any funds under this Facility with respect to any existing Approved Project or A&D Land, and Lender’s subsequent obligation to advance funds with respect to any additional Property, shall be in Lender’s sole and absolute discretion and subject to approval by Lender’s credit administration department and (unless waived or deferred by Lender, in writing) the satisfaction, at Borrower’s sole cost and expense, of each of the following conditions for the particular Property providing the basis for which Borrower is requesting funds:
3.1 Approved Project. The additional Property shall either have been approved as A&D Land by Lender, in its sole discretion, or shall be located in an Approved Project, and for A&D Projects, Lender shall have approved Borrower’s plans for the current stage of development of such A&D Project proposed as additional Property hereunder. For A&D Land, it shall be sufficient to indicate Lender’s approval by its execution of an A&D and Addendum. For an A&D Project, it shall be sufficient to indicate Lender’s approval by its execution of an A&D Project Addendum, which may contain special conditions precedent to any or all advances hereunder.
3.2 Guaranty of Property Owner. The fee owner of the applicable Property shall have become a Project Guarantor, guaranteeing repayment (as a direct obligor, and not as a guarantor of collection) of the Note and all obligations of Borrower under the Facility.
3.3 Recording of Mortgages. A Mortgage (together with an assignment of leases, rents, development and similar rights and such other security documents as are customary in the applicable jurisdiction) shall have been recorded in the appropriate jurisdiction and Borrower or the applicable Project Guarantor shall have paid all recording fees and taxes
Borrowing Base Facility Agreement- Loan No. 1001839
(excluding real estate taxes not then due and payable) and removed all encumbrances (a) necessary to perfect the Mortgage as first lien or first deed of trust (as applicable) on the applicable Property and (b) not approved by Lender, in its sole discretion.
3.4 Title Policy. Borrower or the applicable Project Guarantor shall have procured, before any A&D Draw is made hereunder with respect to the particular A&D Land or A&D Project, after the initial recordation of the Mortgage encumbering such Property or following the recording of any amendments thereto or any additional Mortgages required to secure the Facility, an ALTA 1970 form extended coverage lender’s policy of title insurance (or its equivalent acceptable to Lender) in a form and issued by a title company satisfactory to Lender, in an insured amount of not less than (a) in those jurisdictions imposing material taxes on Mortgages based on the amount secured thereby, the Maximum Available Amount allocated to the applicable Approved Project plus 120%, and (b) in all other jurisdictions, an amount equal to the Maximum Facility Amount minus the maximum amount of the Working Capital Line (i.e. $85,000,000.00), insuring the Mortgages as first liens or first deeds of trust (as applicable) on all Property securing the Facility, subject only to such exceptions as may be approved in writing by Lender and including such endorsements as shall be customary or as Lender may require, including, but not limited to Tie-In Endorsements, Florida Form 9 (or comparable comprehensive endorsements in other States), Letter of Credit Endorsements and Revolving Credit Endorsements (provided issuance of the requested endorsements is legal in the applicable State). No work of any character is to be commenced or material delivered to the applicable Property before the title policy insuring such Mortgage is furnished to Lender and Lender has advised Borrower that such policy has been received and is acceptable to Lender, except to the extent that the title policy ultimately provided to Lender insures the first lien priority of such Mortgage subject only to permitted exceptions approved by Lender despite any such prior work and without exceptions for construction liens. The intention of the parties hereto is that every Mortgage granted as security for the Facility is and, to the extent modified by any modification and spreader thereof, shall continue to be prior to any construction lien. If any material is delivered or work performed before Lender has received each such policy, Lender may, at its option, refuse to make any Draws hereunder with respect to such Property, other than to pay all expenses incurred in connection with the Facility and proceed to exercise any and all remedies available to Lender under the Loan Documents upon an occurrence of an Event of Default.
3.5 Appraisals and Market Studies. For A&D Land, Lender shall have obtained an Appraisal setting forth the as-is market value of the undeveloped A&D Land. For A&D Projects, Lender shall have obtained an Appraisal setting forth the as-is market value of the undeveloped A&D Land and the bulk discounted market value of the Developed Lots to be developed in the A&D Project. For Units, Lender shall have obtained a master appraisal on base model types and lots with option value addendum for each Approved Project which shall be utilized throughout the period of sales of the Units, but updated if and when requested by Lender at Borrower’s expense. In addition, Borrower shall deliver to Lender a then current market study for the Units to be constructed in such Project. Each such Appraisal and market study shall demonstrate a market value acceptable to Lender utilizing Lender’s then current policies and guidelines. Further, at any time, Lender shall have the right to re-appraise any portion of the Property at Borrower’s expense and adjust the Collateral Basis Amounts for such portions of the
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Property in the event such re-appraisal indicates a decline in the market value of the re-appraised portions of the Property.
3.6 Plans/Permits. For A&D Projects (i.e. for Draws other than simply to finance or refinance A&D Land), Lender shall have been provided with Plans and Specifications, acceptable to Lender and its third party consultant, for the applicable phase of development or construction and, for A&D Land on which Borrower intends to begin Unit construction, a final plat map, in a form satisfactory in all respects to Lender, shall have been recorded in the appropriate jurisdiction. In addition, Borrower shall have provided Lender with evidence satisfactory to Lender that Borrower or the applicable Project Guarantor has obtained or will obtain (as determined in Lender’s reasonable satisfaction) all permits and approvals necessary to allow Borrower or the applicable Project Guarantor to proceed with the development of the A&D Project or the construction of individual Units in accordance with the Plans and Specifications.
3.7 Third Party Contracts. Borrower or the applicable Project Guarantor shall have provided Lender with such construction, development, engineering, and architectural contracts, and major subcontracts relating to the applicable Approved Project, as Lender may request and Lender in its sole discretion shall have approved such contracts in writing.
3.8 Budget. Lender (and its inspecting engineer) shall have received and approved a cost breakdown and itemization of all hard and soft costs for the applicable Approved Project and the sources for payment of such costs from the Borrower or the applicable Project Guarantor. This itemization shall include: (i) a summary page indicating costs of land, site work, hard and soft costs of construction, and (ii) detailed schedules supporting the construction costs.
3.9 Zoning and Concurrency. Borrower shall have provided Lender with evidence satisfactory to Lender that the Property has zoning and concurrency approvals which will permit the development and construction of the applicable Approved Project.
3.10 Search. Lender shall have received satisfactory federal and state tax lien, judgment, UCC, and pending litigation search for Borrower and the applicable Project Guarantor for the state and county in which Borrower and such Project Guarantor was formed as well as for the State and county in which the applicable Property is located in each case, dated not more than sixty (60) days prior to the date of the first Draw to be disbursed with respect to such Property.
3.11 Cost Analysis. Lender shall have received a cost analysis, in form and substance satisfactory to Lender, as determined in its sole discretion that supports the information in the Budget submitted by Borrower.
3.12 Insurance. Borrower shall have provided Lender with evidence acceptable to Lender of the insurance required to be maintained under Section 8.11 hereof and under any of the other Loan Documents, which insurance shall be in form and amount, and issued by companies satisfactory to Lender.
3.13 Utilities. Where applicable, Borrower shall have delivered to Lender evidence satisfactory to Lender that all utilities, including water, electric, gas, and telephone, and all storm and sanitary sewer drainage facilities are or will be available at the Property for
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utilization by Borrower or the applicable Project Guarantor for the development and use of the Approved Project and that the respective lines and treatment or generating plants are of adequate size and capacity to serve the Approved Project.
3.14 Survey. At Lender’s request, Borrower shall have delivered to Lender a current survey (dated note more than ninety (90) days prior to the date of the first Draw with respect to such Property), properly certified and in a form acceptable to Lender, showing such Property to be free from encroachments and otherwise acceptable to Lender.
3.15 Soil Tests, Environmental Report. Borrower shall have delivered to Lender copies of all soil analysis reports, all soil compaction tests, all environmental reports or statements, and all other tests prepared or performed with respect to Property, all of which shall be satisfactory to Lender in form and content. In addition, Lender shall have received a fully completed environmental questionnaire, in form and content acceptable to Lender, the answers to which must be acceptable to Lender, in it sole discretion. Further, Lender shall have received and approved from an approved engineer hired by Borrower, a Phase I Environmental Site Assessment together with a Reliance Letter thereto issued in favor of Lender (if said assessment is not addressed to Lender), in form and substance satisfactory to Lender, as determined in its sole and absolute discretion, indicating, that the Property in the subdivision proposed for approval is free from risk, in Lender’s sole judgment, from all hazardous substances, toxic substances, or hazardous wastes as defined by any federal, state, or local law, statute, ordinance, or regulation and is free of all other contamination which, even if not so regulated, is known to pose a hazard to the health of any person on or about the Property, and unless specifically approved by Lender, that the subject Property is not located within a “Wetlands” or “Flood Plain” area, and contains no underground storage tanks or oil or gas wells.
3.16 Fees and Expenses. Borrower shall have paid all legal, appraisal, and inspection fees; title insurance and survey costs; recording and filing fees; documentary stamp, intangible or other applicable mortgage taxes; real estate commissions; hazard and liability insurance and property taxes (due and payable) on the Project; and any and all other charges or expenses reasonably incurred by Lender in connection with the Loan or the preparation and recording or filing of the Loan Documents. Borrower shall indemnify and hold Lender harmless against any and all claims for such fees, charges, commissions, taxes, or other expenses of any kind in any way connected with the Loan.
3.17 Notice of Commencement. For each Unit (or building within which such Unit is situated), Borrower or the applicable Project Guarantor shall have prepared and recorded a Notice of Commencement in accordance with Chapter 713, Part I, Florida Statutes, or any similar requirement under the lien laws of the State in which the applicable Property is situated.
3.18 Financial Reports and Covenant Compliance. Borrower, and the reporting parties set forth therein, shall have provided Lender with current versions of all the financial reports described in SCHEDULE 2, and Borrower and such reporting parties shall be in compliance with all reporting requirements and financial covenants set forth on SCHEDULE 2.
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3.19 Default. No Event of Default shall have occurred (which shall not have been waived, in writing, by Lender) and no event shall have occurred which, with the giving of notice or passage of time, could become an Event of Default.
3.20 Other Documents. Borrower shall have provided Lender with such other reports, certificates, documents, and instruments regarding Borrower, the applicable Project Guarantor and the applicable Property and Approved Project as may be listed in the A&D Land Addendum or A&D Project Addendum or as Lender may otherwise reasonably require.
3.21 Authority Documents.
3.21.1 Organizational Documents. Borrower and each Guarantor shall have provided Lender with an updated certified copy of each of their respective Articles of Incorporation, Bylaws and shareholder agreements or Articles of Organization and Operating Agreements, together with all amendments and modifications thereto, and such other organizational documents as Lender may request, and a certified copy of each assumed name certificate, if any, of Borrower and/or each Guarantor.
3.21.2 Good Standing Certificates. Borrower and each Guarantor shall have provided Lender with good standing certificates, or their equivalent, issued by the Secretary of State or other appropriate offices within the State of organization of Borrower and each Guarantor, and evidence satisfactory to Lender of Borrower’s and each Guarantor’s authorization to do business in the State wherein the Approved Project is located, if the State of Borrower’s and/or the Guarantor’s organization is other than the State of the location of the applicable Approved Project.
3.21.3 Resolutions and Consents. Borrower shall have provided Lender with certified resolutions and/or consents authorizing Borrower and the applicable Guarantor to enter into the Loan Documents, including but not limited to the Mortgages or any mortgage modification and spreader agreement amending any then existing Mortgage (if the applicable Property is not currently subject to the Mortgage).
3.21.4 Delivery of Loan Documents. Borrower and Guarantors shall have executed and delivered to Lender all Loan Documents required by Lender and any other documentation as required by Lender to carry out the provisions and purposes of this Agreement and the Facility.
3.21.5 Borrower’s Counsel’s Opinions. Lender shall have received an opinion letter from counsel to the Borrower or the applicable Project Guarantor, in form and content satisfactory to Lender and its counsel, opining to such matters as Lender may require, including, but not limited to opinions regarding (a) the due organization, existence and good standing of Borrower or the applicable Project Guarantor (and any applicable general partner or manager thereof), (b) the due power, authorization and execution of the Guaranty, Mortgage and other applicable Loan Documents executed by such Project Guarantor, (c) that the form of the Mortgage and other documents to be recorded or filed are proper for recording or filing in the applicable State and (d) all documents executed by the Borrower or the Project Guarantor (as applicable) are valid and binding (subject to customary qualifications and assumptions).
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3.21.6 Other Conditions. Borrower and Guarantors shall have fulfilled each and every other condition to any initial Draw (i.e. to finance or refinance A & D Land) or any subsequent Draw set forth in SCHEDULE 1 attached hereto or the applicable A&D Land Addendum or A&D Project Addendum.
4. A&D DRAWS/BORROWING BASE DRAWS/WORKING CAPITAL LINE DRAWS. Lender shall make Draws available to Borrower for the purposes and in accordance with the procedures set forth in this Agreement, and in the case of all Draws other than Working Capital Line Draws, based on Borrower’s most current Collateral Verification Certificate, in each case, subject to verification or adjustment based on Lender’s inspections and review as set forth below, and provided that the total amount outstanding under the Facility shall at no time exceed the Maximum Facility Amount and Maximum Available Amount as defined in SCHEDULE 1. Lender may impose such additional conditions on such Draws as Lender may subsequently determine are necessary to insure that the proceeds of the Facility are applied to the purposes contemplated hereunder.
4.1 Draw Procedures.
4.1.1 Collateral Verification Certificate Report. Borrower shall submit periodic Collateral Verification Certificates no less than one (1) time per month and within twenty (20) days of month end for the month being reported, on a day Lender is open for business at the address set forth above, that shall cover all amounts being requested hereunder for A&D Draws and Borrowing Base Draws by providing Lender with such information, authorizations, and documents as Lender may request, including but not limited to Borrower’s A&D Draw Request, a spreadsheet report for all A&D Project Budget Costs and related costs incurred, and a report detailing and listing all costs by category (“Borrower’s Job Cost Reports”) by Approved Project and Borrowing Base Draw Request. If all conditions to Draws set forth herein and in the applicable Loan Documents have been satisfied, including each of the conditions set forth in Section 3 above and in SCHEDULE 1 hereof, Lender will make available the difference between the current outstanding principal amount of the Facility and the Maximum Available Amount as directed from time to time by Borrower.
4.1.2 All Draws. Lender shall not be required to fund any Draw unless, on the date such Draw is requested to be made (which shall not be less than 5 business days after Lender’s receipt of the applicable Draw request), each of the following conditions are satisfied:
4.1.2.1 Representations and Warranties. All representations and warranties contained herein or in any of the applicable Loan Documents shall be true and correct, in all material respects;
4.1.2.2 No Default. Borrower and Guarantors shall be in full compliance with all terms, conditions, and covenants set forth herein or in any of the applicable Loan Documents, no Event of Default shall have occurred (which shall not have been waived, in writing, by Lender) and no event shall have occurred which, with the giving of notice or passage of time would become an Event of Default;
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4.1.2.3 No Illegality. No change in applicable Laws, or in the interpretation of such Laws shall have occurred which would make it illegal for Lender to perform its obligations under this Agreement, and the making of any advance hereunder would not cause Lender to exceed its then current loans-to-one-borrower limitation; and
4.1.2.4 Title Endorsements. If required by Lender in accordance with the terms of this Agreement, Lender has received (i) such continuation endorsements and date-down endorsements to the title policies issued pursuant to Section 3.4 hereof, in form and substance satisfactory to Lender as Lender determines in its sole discretion necessary to insure the priority of the applicable Mortgages as valid first liens on the Property described in the most recent Collateral Verification Certificate or (ii) an unconditional, irrevocable written commitment by the applicable title insurance company to issue such endorsements.
4.2 Project Information. Borrower shall provide all information requested by Lender, in form and content satisfactory to Lender, prior to any Draw hereunder, including without limitation: Budgets for all Approved Projects under development or Units under construction, appraisals, surveys, recorded plats, plans and specifications, copies of all applicable permits and governmental approvals obtained for the particular Approved Project, copies of all recorded declarations or covenants affecting that Approved Project, insurance policies in form and amount reasonably acceptable to Lender and issued by insurance companies reasonably acceptable to Lender, environmental reports, borrowing resolutions, evidence of corporate or other status, current contractor’s licenses, lien waivers or subordinations, evidence of all required surety bonding and insurance coverages, plan and cost reviews performed by an independent inspection agent, and all other documents and information that Lender may require. Date down endorsements to title insurance policies and/or lien releases may be required as a condition to making any Draw (other than a Working Capital Line Draw).
4.3 Property Inspections.
4.3.1 A&D Project Inspections. Lender may, at Lender’s option, inspect A&D Projects at such intervals and as often as Lender may desire but not less than quarterly, and Lender will not withhold funding for A&D Draw Requests pending the inspection report next due. Should inspections of the A&D Projects indicate that the A&D Draw Requests portion of the Collateral Verification Certificate overstate the values, costs, or completion percentages, in addition to any other remedy afforded Lender, Lender may increase its frequency or scope of its inspections.
4.3.2 Lot and Unit Inspections. Lender may, at Lender’s option, inspect Developed Lots and Units securing the Facility at such intervals and as often as Lender may desire. Lender shall have sole discretion as to which portion and how much of the Property to inspect. Should inspections of the Property indicate that the Collateral Verification Certificates overstate the values, costs, or completion percentages, in addition to any other remedy afforded Lender, Lender may increase its sample size, frequency, or scope of its inspections.
4.3.3 All Inspections. Borrower shall cooperate and shall cause Guarantors to cooperate with Lender in arranging for inspections by representatives of Lender or
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any third-party consultant retained by Lender of the progress of the development and construction from time to time, including an examination of (i) the Approved Project improvements; (ii) all materials to be used in the development and construction; (iii) all Plans and Specifications; (iv) any contract, bill of sale, statement, receipt, or voucher in connection with the Approved Project improvements; (v) all work done, labor performed, materials furnished in and about the Approved Projects; (vi) all books, contracts, and records with respect to the Approved Projects; and (vii) any other Construction Document. Borrower shall cooperate and shall cause the Project Guarantors to cooperate with Lender to enable Lender to perform its functions hereunder and shall promptly comply with Lender’s requirements and correct any deficiency regarding the construction of the Approved Projects or the progress thereof. Draw inspections shall be made by in-house Lender personnel or by a third-party architect/engineer, as required by Lender. Borrower shall pay inspection costs of Lender within twenty (20) days of demand. If inspections of the Property indicate that the Collateral Verification Certificate overstates the values, costs, or completion percentages, in addition to any other remedy afforded Lender, Lender may increase its sample size, frequency or scope of its inspections. In such event Borrower shall pay an additional inspection fee commensurate with the increased inspections.
4.4 Draw Amounts.
4.4.1 A&D Draw Requests. The allowed amount of each A&D Draw Request shown in the Collateral Verification Certificate shall be subject to the Maximum Facility Amount and all applicable Sub-Limits, in accordance with the approved Budget for the A&D Project set forth on the applicable A&D Project Addendum and determined by the information provided by Borrower in its A&D Draw Request, subject to adjustment based on Lender’s inspections. A&D Draw Requests shall be further limited by the A&D Limitations set forth in paragraph K on SCHEDULE 1 or in the applicable A & D Project Addendum. If applicable, the A&D Draws shall also be made for the payment of interest in accordance with the provisions of Section 2.2.2 above (to the extent provided for in the applicable Budget) and for payment of all other Eligible Costs shown in the Budget for the particular A&D Project, payable by or on behalf of Borrower in connection with the particular A&D Project. The allowed amount of each A&D Draw Request shall be determined, at Lender’s option: (i) by Lender’s review of a detailed report listing all invoices and costs as provided by Borrower and Lender’s confirming physical inspection; (ii) on a percentage completion basis with reference to the schedules included in the applicable approved Budget, as established by a physical inspection of the construction conducted by Lender or its agent (or, at Lender’s sole discretion, as disclosed by the information provided by Borrower in the A&D Draw Request); or (iii) by a combination of the foregoing methods. Lender shall require that Borrower or the applicable Project Guarantor contribute any Equity Funds necessary to pay any portion of Eligible Costs incurred to the date of Borrower’s Collateral Verification Certificate that are not covered by the applicable A&D Draw Request which, unless otherwise agreed to by Lender, in writing, shall be amounts not less than (a) thirty-five percent (35%) of the cost of the A&D Land and (b) twenty percent (20%) of all hard and soft costs incurred from time to time in connection with the applicable Project. The aggregate amount available shall be the total of such Eligible Costs actually paid or incurred by Borrower for each of the cost line items specified in such Budget, but in no event shall the A&D Draw Request for a particular A&D Project exceed the total of all sums allocated to such cost line items, being in the aggregate the A&D Project Allocation. Notwithstanding anything herein to the contrary, Lender, in its sole discretion, shall have the right, but shall not be obligated, to increase, decrease, reallocate, or reapply the amount of the A&D Project Allocation to be disbursed for each item set forth in the Budget. Notwithstanding any other provisions contained herein, Borrower shall
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maintain records of all Approved Project invoices and Lender, at its discretion, may require submission by Borrower of the invoices set forth on the spreadsheets.
4.4.2 Borrowing Base Draws. The allowed amount of each Borrowing Base Draw Request shall be subject to the Maximum Facility Amount, the Maximum Available Amount and all applicable Sub-Limits and determined by the information provided by Borrower and Guarantors. Borrower shall not be entitled to any Draws based on the information in a particular Collateral Verification Certificate until Lender has had at least five (5) full business days to review and confirm the information provided by Borrower in that certificate, subject to adjustment based on Lender’s inspections; provided, however, that Lender’s failure to require adjustment within such time frame shall in no way limit Lender’s right to require adjustments thereafter prior to the time funds are to be available in order to allow time for inspection. Borrower acknowledges that the foregoing disbursement schedule may be different than the disbursement schedule contained in Borrower’s or the Project Guarantors’ construction contracts or subcontracts and Borrower acknowledges that it is its responsibility to resolve any such differences directly with the applicable contractors or subcontractors. The Maximum Available Amount is based on the applicable Collateral Basis Amounts for the Eligible Property Types calculated as set forth on SCHEDULE 1. In reviewing Borrower’s Collateral Verification Certificate, determinations of “value,” “cost,” and “percentage of completion” shall be made by Lender in its reasonable discretion and in accordance with its standard credit procedures. In the event the percentage of completion or other information relating to a particular Eligible Property Type as determined by Lender varies from the information provided by Borrower in its most current Collateral Verification Certificate, Lender may, at any time and in its sole discretion, use the information as determined by Lender to calculate the Collateral Basis Amount.
4.4.3 Working Capital Line Draws. The allowed amount of each Working Capital Line Draw shall be subject to the Maximum Facility Amount and shall in no event exceed the difference between $15,000,000.00 and the outstanding principal balance allocated to the Working Capital Line from time to time.
4.4.4 Application of Draws. Although Borrowing Base Draws shall not be made hereunder on a line-item or paid invoice basis, the parties intend that all such proceeds of the Facility be applied first to pay all costs incurred for the refinance or purchase and development of the Property and the construction of single family residences thereon, as applicable, and that A&D Draws and Borrowing Base Draws be used to pay all such costs before being used to repay Borrower or any Guarantor any portion of their equity in the Property. Working Capital Line Draws may be used by Borrower for general working capital purposes; provided, however, that in no event shall proceeds of the Working Capital Line (or the Facility) be used for (a) personal, consumer, family, household, educational, agricultural or similar uses, (b) land banking or land speculation or (c) the purpose of purchasing or carrying any margin stock within the meaning of Regulation G of the Board of Governors of the Federal Reserve System or to extend credit to any party for the purpose of purchasing or carrying any such margin stock, or for any purpose which violates, or is inconsistent with, Regulation X of such Board of Governors. Lender shall have no obligation to ensure that proceeds of the Facility are properly applied to purposes of the Facility as set forth herein or in the other Loan Documents. Borrower shall have the sole obligation to ensure proper allocation of all Draws hereunder. Despite the foregoing, Lender shall have the right, but not the obligation, to disburse Facility proceeds directly to any unpaid supplier of labor, materials, equipment, services, or supplies whose claim
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has or may become a lien against any portion of the Property, or to require that Draws be made in the form of dual-payee checks or other restricted forms of transfer.
5. MANNER OF CONSTRUCTION.
5.1 Conformance with Plans and Laws. All work shall be performed and the Approved Projects and Units shall be developed and constructed in a good and workmanlike manner, free from all material defects in materials or workmanship. Development of Approved Projects and construction and use of the Units shall conform in all material respects to the applicable Plans and Specifications and all federal, state, and local laws, ordinances, regulations, and rules relating thereto (“Laws”), including, without limitation, all building, zoning, planning, subdivision, fire, traffic, safety, health, disability, labor, discrimination, environmental, air quality, wetlands, shoreline, and flood plain laws, ordinances, regulations, and rules. The Laws shall also include all governmental and private covenants, conditions, and restrictions applicable to the development of the Property and the construction of Units thereon. Prior to any Draw hereunder with respect to any Approved Project, Lender may require Borrower to supply evidence satisfactory to Lender that it and each applicable Project Guarantor has complied in all material respects with the applicable Plans and Specifications and that neither Borrower nor any Project Guarantor has been cited for the violation of any Laws.
5.2 Right of Entry. Lender or its agents shall at all times have the right to enter upon any portion of the Project during the period of development or construction upon one (1) business day prior notice to Borrower. If the work is not satisfactory to Lender in its reasonable discretion, Lender shall have the right to stop such non-conforming work and order its replacement, whether or not the unsatisfactory work has theretofore been incorporated in the improvements.
5.3 Rights In Personal Property. No materials, equipment, fixtures, or any other part of such improvements or apparatus to be used in connection therewith shall be purchased and/or installed under conditional sale agreements or other arrangements wherein the right is reserved or may accrue to anyone to remove and/or to repossess any such items.
5.4 No Changes in the Construction Documents. Borrower and the Project Guarantors shall make no changes in the Plans and Specifications or the other Construction Documents, after the same have been approved by Lender, which would result in an increase in the cost of construction by more than five percent (5%) in the aggregate, without first obtaining the written consent of Lender to such changes (which shall not be unreasonably withheld), unless such increased cost is as a result of options chosen by and fully paid for by the purchaser of a Pre-Sold Unit or required by Law.
5.5 Deadline for Start of Development/Construction. Borrower and/or the applicable Project Guarantor shall begin development of particular A&D Improvements prior to or by the commencement date set forth in the A&D Project Addendum for the applicable A&D Project. In the event that the development of such A&D Improvements has not commenced on or before the Commencement Date set forth in the applicable A&D Project Addendum, all funding availability for such A&D Project shall be immediately reduced to zero on the Collateral
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Verification Certificate. Borrower and/or the applicable Project Guarantor shall begin construction of a particular Unit, as applicable, within ninety (90) days of the Unit’s inclusion in a Collateral Verification Certificate or Lender shall require that the advance for the Developed Lot upon which the Unit shall be constructed be reduced to no more than sixty-five percent (65%) loan-to-appraised value.
5.6 Start Limitation. Unless otherwise approved by Lender, neither Borrower nor any Project Guarantor shall be entitled to add any additional A&D Projects to the Facility either (a) at any time during which Borrower is in violation of the minimum pre-tax net income financial covenant set forth in Schedule 2, Section B hereto or (b) after the Expiration Date, as such date may be extended as set forth herein. Further, Lender shall not be required to advance any Draw or portion thereof with respect to any Unit, as to which construction shall have commenced later than six (6) months prior to the Maturity Date (as same may be extended pursuant to the terms hereof).
5.7 Lender’s Right to Complete Development/Construction. If (i) development or construction is at any time abandoned, discontinued, or not carried on with reasonable dispatch and not cured within five (5) days after written notice or such longer period as approved by Lender, except as may be extended by force majeure, if Borrower commences to cure and is proceeding diligently to complete such cure; (ii) the work is not properly performed as determined by Lender and such failure is not cured within five (5) days after written notice or such longer period as approved by Lender if Borrower commences to cure and is proceeding diligently to complete such cure; or (iii) an Event of Default exists under the Loan Documents, then Lender may, at its option and in addition to any and all other remedies available to Lender under the Loan Documents, without further notice, take possession of the affected Property and enter into contracts for or proceed with the finishing of such improvements according to the applicable Plans and Specifications and pay the cost thereof. Borrower shall repay any and all costs incurred by Lender in taking such action upon demand by Lender and repayment thereof, together with interest charged at the default rate under the Note from the date funds are advanced by Lender for such purpose, shall be secured by the Mortgages.
5.8 Recorded Covenants. Borrower shall submit to Lender a copy of any declaration of covenants, conditions, and restrictions, or any other restrictive covenants affecting the Property and obtain Lender’s approval of any such declaration or covenant prior to recording, which approval shall not be unreasonably withheld. Upon approval, Lender agrees to consent to such document(s), to the extent such consent is required by Law.
5.9 Time/Construction/Development. Once Borrower or the applicable Project Guarantor has commenced physical development of A&D Improvements within a particular A&D Project or construction of a particular Unit, Borrower and the applicable Project Guarantor shall not cease or substantially cease productive work on that A&D Project or Unit, as applicable, for more than twenty (20) days in the aggregate, except as may be extended by force majeure, without the prior written consent of Lender. In any event, unless each A&D Project shall be completed to Lender’s satisfaction on or before the Completion Date set forth in the applicable A&D Project Addendum, Lender shall have no further obligation to fund further A&D Draws with respect to such A&D Project. Once construction of an individual Unit with proceeds of the Facility shall be commenced, the construction of such Unit shall be diligently pursued to
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completion, to Lender’s reasonable satisfaction, and shall remain included in Collateral Verification Certificates, but only for such period specified by Lender in writing. [see SCHEDULE 1 attached hereto].
5.10 Actions Required by Lien Laws. Borrower shall take all steps necessary under the Laws of each applicable State to prevent the assertion of claims or liens against the Property or any part thereof or right or interest appurtenant thereto, or of claims against Lender or the Facility and shall otherwise comply with all provisions of lien laws applicable to Borrower, each Project Guarantor and the Property.
5.11 Costs Incurred by Lender. Borrower shall be liable to Lender for all sums paid or incurred by Lender in finishing the improvements or otherwise protecting its security hereunder, whether the same shall be paid or incurred pursuant to the provisions of this Section 5 or otherwise in accordance with the Loan Documents, and all such payments made or liabilities incurred by Lender of any kind whatsoever as a result thereof shall be paid by Borrower to Lender within twenty (20) days of demand, together with interest at the default rate under the Note to the date of payment to Lender, and all of the foregoing sums, including interest thereon, shall be deemed advances by Lender to protect its security, separate and distinct from advances of proceeds of the Facility, and shall be evidenced and secured by the Guarantees, the Mortgages and other Loan Documents:
6. PARTIAL RELEASES. So long as (i) there does not exist any Event of Default or uncured default by Borrower or Guarantors hereunder or under the other Loan Documents or under any document evidencing or securing any other loan from Lender or its affiliates to Borrower, the Guarantors or their subsidiaries or affiliates or (ii) there does not exist any event which, following notice and/or the expiration of any applicable cure period without a cure, would constitute a default thereunder, Borrower shall be entitled to a partial release of the particular Unit and/or Developed Lot or other parcel of land from the lien and encumbrance of the applicable Mortgage only upon Borrower’s fulfillment and the applicable Project Guarantor’s fulfillment of all conditions to such partial release set forth below:
6.1 Third-Party Sale. The Unit or Developed Lot has been sold to a third- party unaffiliated with Borrower pursuant to a Qualified Contract;
6.2 Interest and Reimbursable Advances. Borrower pays any delinquent monthly interest payments and any advances by Lender that are reimbursable by Borrower hereunder or under any of the Loan Documents, whether or not Borrower is then in default with respect to such reimbursement;
6.3 Property Legally Subdivided. The applicable Property has been legally subdivided into parcels or lots such that both (a) the Developed Lot or Unit to be released and (b) the portion of the applicable Property remaining subject to the Mortgage are legally segregated properties capable of being transferred in accordance with the law;
Borrowing Base Facility Agreement- Loan No. 1001839
6.4 Access Unimpaired. The partial release does not deny or unreasonably impair access to public roads and utilities for either the portion of the Property remaining subject to the applicable Mortgage or the Developed Lot or Unit to be released;
6.5 Indemnification of Property. Borrower or the applicable Project Guarantor secures all necessary services of surveyors, engineers, and other consultants of any kind or nature whatsoever required in connection with the partial release in order to sufficiently identify the portion of the Property to be released and to enable Lender or any trustee to complete the partial release; and
6.6 Request for Partial Release. Lender shall have received a written request for such release at least three (3) business days prior the proposed date for such release, and such request shall be accompanied by a statement, certified to be true, accurate and complete by an Authorized Person, calculating the Collateral Basis Amount remaining after the requested release;
6.7 Costs and Expenses. Borrower pays the reasonable costs of preparing and delivering the partial release, the premium for any special title insurance endorsements required by Lender, and any and all other escrow, legal, closing, and recording costs incurred by Lender in connection with such partial release.
6.8 Release Price. Provided all the conditions of this Section 6 have been complied with by the Borrower, the release price for a Unit or Developed Lot shall be for the consideration of ZERO DOLLARS ($0.00), except that if the removal of the Unit or developed Lot from the Collateral Basis Amount would cause the outstanding principal amount under the Facility to exceed the Maximum Available Amount or any Sublimit, Borrower shall pay within five (5) days, a “Release Fee” equal to such excess principal amount, which Lender shall apply to the outstanding principal balance of the Facility in accordance with the provisions of Section 2.2 hereof.
6.9 Other Releases. Subject to the satisfaction of the conditions contained in this Section 6 above, Lender shall release the lien and encumbrance of the applicable Mortgage from any portion of the Property that is conveyed or dedicated to a homeowners’ or master association or that is dedicated to governmental entities, if such conveyance is made without any compensation and made pursuant to an agreement or applicable homeowners or condominium documents approved, in writing, by Lender. At Borrower’s request, Lender shall terminate the Working Capital Line Pledge, release its lien upon the Working Capital Line Collateral and return the Working Capital Line Collateral to the Working Capital Line Guarantor, subject to and in accordance with the provisions of Section 2.6 hereof.
6.10 Joinders and Consents. Lender agrees, upon Borrower’s request, to join in any plat for A&D Land and any utility easements or licenses, and to consent to any homeowner’s association documents or declarations, development agreements or similar instruments affecting the A&D Land and needed by the applicable Project Guarantor in connection with the development of such A&D Land (as contemplated in the applicable A&D Project Addendum), at no cost or liability to Lender, provided that such instruments are in form and substance reasonably acceptable to Lender; provided, however, that Lender shall not be
Borrowing Base Facility Agreement- Loan No. 1001839
required to join in or consent to any such document if doing so would materially diminish the value of the A&D Land or require Lender to directly assume any obligations of Borrower or any Project Guarantor thereunder.
7. GENERAL REPRESENTATIONS AND WARRANTIES. Borrower, as of the date of execution hereof and as of the date of each request for a Draw hereunder, represents and warrants to Lender that:
7.1 Payment of Taxes and Proper Books and Records. Borrower and each Guarantor have filed all required tax returns and paid all federal and state taxes, FICA payments, and similar taxes now due and owing, and maintains proper books and records relating to all operations of Borrower and each Guarantor.
7.2 Liens and Encumbrances. The liens, security interests and assignments created by the Loan Documents are valid, effective, properly perfected and enforceable liens, security interests and assignments. There are no claims for social security, unemployment compensation, unpaid taxes, construction work or materials, or other obligations to or claims by any governmental body or any private person, firm, or corporation that are or could become liens upon the Property securing the Facility.
7.3 Condemnation. Neither Borrower nor any Guarantor has received any notice of any eminent domain or condemnation proceeding that in any way affects any material portion of the Property and, to the best of Borrower’s and each Guarantor’s knowledge, no such action or proceeding is pending or threatened.
7.4 Improvement Districts. Except as disclosed to Lender in writing or in the title policy, no portion of the Property is situated within any metropolitan, local, special, or other improvement district and neither Borrower nor any Guarantor has knowledge of any proposal under which any portion of the Property or any particular Project is to be placed in any such improvement district. Neither Borrower nor any Guarantor shall consent or agree to the inclusion of the Property in an improvement district of any kind without the written consent of Lender so long as any portion of the Loan remains unpaid.
7.5 Access. Each parcel of the Property has full and free (subject to terms of easements) access to and from public highways, streets, and/or roads, and neither Borrower nor any Guarantor has knowledge of any fact or condition that would result in the termination of such access.
7.6 Existence and Authority. Borrower and each Guarantor are duly organized, validly existing, and in good standing under the laws of the State in which it is organized. Borrower and each Guarantor have taken all necessary action on the part of Borrower and Guarantors relating to the authorization, execution, delivery and performance of this Agreement and the related Loan Documents, and this Agreement and all related documents, when executed and delivered, will be valid and enforceable against Borrower and Guarantors in accordance with their terms.
7.7 Litigation. There are no pending or threatened actions or proceedings by or against Borrower, any Guarantor or any Project before any federal, state, or local court or
Borrowing Base Facility Agreement- Loan No. 1001839
administrative agency, that might have a material adverse effect on Borrower or any Guarantor or their respective ability to perform under this Agreement or the related Loan Documents, except as has been disclosed to Lender in writing.
7.8 Financial Statements; Taxes; Indebtedness. Borrower has furnished to Lender (i) current financial statements that have been prepared in accordance with generally accepted accounting principles (or such variations thereof as may have been explained to and approved by Lender in writing) consistently followed and (ii) such other financial information as may be required hereunder, and such information fairly presents the financial condition of Borrower as of the applicable date in all material respects and the results of its operations for the applicable period, and since such date there has been no material change in such Borrower’s condition or operations. Borrower has filed all federal, state, and other tax returns required to be filed by it. The IRS has not asserted any liability for taxes in excess of those already paid by Borrower and its assets are free of any federal or state tax liens. Borrower does not have indebtedness in existence as of the applicable date other than the indebtedness reflected on the financial statements referred to above, except as has been disclosed in writing to Lender.
7.9 Legally Enforceable Agreements. This Agreement is, and each of the other Loan documents when delivered pursuant to this Agreement shall be, legal, valid and binding obligations of Borrower and each Guarantor, as applicable, enforceable against Borrower and the applicable Guarantor in accordance with their respective terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors’ rights generally.
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