U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1998
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission File Number 1-8631
DOVER INVESTMENTS CORPORATION
(Name of small business issuer in its charter)
DELAWARE 94-1712121
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Spear Street, Suite 520, San Francisco, California 94105
(Address of Principal Executive Offices) (Zip Code)
(415) 777-0414
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock, $.01 par value per share
(Title of class)
Class B Common Stock, $.01 par value per share
(Title of class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [x]
Issuer's revenues for its most recent fiscal year: $26,382,746.
The aggregate market value of the voting stock held by non-affiliates,
computed by reference to the average bid and asked prices of the Class A
Common Stock and Class B Common Stock as of February 1, 1999, was $4,648,284.
The average bid and asked prices of the Class A Common Stock and Class B
Common Stock were $8.25 and $9.25 per share, respectively, on that date.
The number of shares outstanding of each of the issuer's classes of Common
Stock as of February 1, 1999, were as follows:
Title Shares Outstanding
Class A Common Stock .......................... 746,798
Class B Common Stock .......................... 315,577
Transitional Small Business Disclosure Format
Yes No X
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Proxy Statement relating to the registrant's 1998
Annual Meeting of Stockholders are incorporated by reference into Part III of
this Report on Form 10-KSB.
TABLE OF CONTENTS
Page No.
PART I
ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . 1
ITEM 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . 1
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . 2
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . 2
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 7. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . 7
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . .7
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT .8
ITEM 10. EXECUTIVE COMPENSATION .. . . . . . . . . . . . . . . . . . 8
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . .8
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . 8
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . 9
APPENDIX A. CONSOLIDATED FINANCIAL STATEMENTS OF DOVER INVESTMENTS
CORPORATION AND SUBSIDIARIES, AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS,
DECEMBER 31, 1998 AND 1997
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company engages primarily in residential real estate development.
ITEM 2. DESCRIPTION OF PROPERTY
REAL ESTATE DEVELOPMENT - MARINA VISTA.
At December 31, 1998, the Company is nearing completion of its Marina Vista
Development project in San Leandro, California. As of this date, the Company
has five model homes, twenty four homes under construction, of which seventeen
are sold and twenty four remaining lots with all lot improvements completed.
The market for homes at Marina Vista has been very strong.
See "Management's Discussion and Analysis or Plan of Operations" for a
discussion of the financing of the Marina Vista property .
REAL ESTATE DEVELOPMENT - GLENBRIAR ESTATES.
The Company continues to develop the Glenbriar Estate Project in Tracy,
California, through three entities (the "Developers") that it has formed with
Westco Community Builders, Inc. [Glenbriar Joint Venture, a California
Partnership ("GJV"); Glenbriar Venture #2, LLC ("GV #2, LLC") and Tracy
Residential Venture Partners, LLC ("TRVP")]. As of this date, the
Developers have constructed major infra structure improvements, sold one
hundred and eighty unimproved lots to a merchant builder, completed lot
improvements on one hundred and sixty lots, commenced construction of single
family homes on one hundred and five lots, sold all one hundred and five
homes, and closed the sale on twenty nine of the one hundred and five homes
commenced in 1998. The Developers own unimproved land for an additional one
hundred and thirty eight lots and have contracts to purchase approximately
four hundred and twenty additional lots. All of the land owned or under
contract to purchase by the Developers is covered by a vesting tentative
subdivision map and several final subdivision maps have been filed with the
City of Tracy for approval. The market for homes built by the Developers has
been very strong during 1998. The development of the project during 1999
will depend largely upon the availability of Residential Growth Allocations
issued by the City of Tracy and the state of the economy generally in the Bay
Area. See "Management's Discussion and Analysis or Plan of Operations" for a
discussion of the financing of the Glenbriar Estate project.
REAL ESTATE DEVELOPMENT - HIGHER PRICED HOMES.
During 1997 and 1998, the Company entered into joint ventures to develop three
higher priced homes with Westco Community Builders, Inc. In January of 1999,
one of the three higher priced homes was sold and closed. Two other homes,
both located in Menlo Park, California, are currently under construction with
completion scheduled for June and September 1999.
The Company expects that the Marina Vista Project, the Glenbriar Estates
Project and the Higher Priced Homes will provide a profit from the sales.
The Company expects to invest in other real estate projects when appropriate
opportunities occur and is not subject to any limitations on the percentage
of assets which may be invested in any single investment or type of
investment. In order to maintain it's market share of new home sales, the
Company keeps home prices competitive with other builders of a similar
product, in the vicinity of the project.
Employees
The Company currently has five full-time employees, all of whom
work at the Company's executive offices in San Francisco.
Leases
The Company has previously entered into an agreement to lease
premises for a term that commenced on October 1, 1997 and ends on
September 30, 2002, with an option to extend the term of the lease for an
additional period of five years, commencing immediately after the expiration
of the term of the lease. The Company has also entered into an agreement to
sublease a portion of the premises to a related party corporation. That
Corporation's share of the lease equals 35% of the total rent and operating
costs and was based on actual square footage utilized, plus a proportionate
share of the common area. The base rent per rentable square foot for years
one thru three equals $20.59, years four thru five $23.09 per square foot.
The Company is also responsible for a yearly operating cost payment equal
to 1.73 percent of the basic operating cost, which amounted to $3,339.87 and
$3,293.67 per month for 1998 and 1997 respectively.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
Shares of the Class A Common Stock and the Class B Common Stock are
currently traded on the NASD OTC Bulletin Board under the symbols DOVR-A
and DOVR-B.
The high and low bid information for 1998 and 1997 are as reported
on the National Quotation Bureau Pink Sheets. Such bid quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.
CLASS A COMMON STOCK
High Low
Fiscal 1998 Quarter Ended:
March 31 9.750 8.125
June 30 10.500 9.250
September 30 10.500 9.250
December 31 10.000 7.250
Fiscal 1997 Quarter Ended:
March 31 5.875 4.750
June 30 6.375 6.000
September 30 7.500 7.000
December 31 8.125 8.125
CLASS B COMMON STOCK
High Low
Fiscal 1998 Quarter Ended:
March 31 9.370 7.370
June 30 10.870 9.250
September 30 11.500 9.750
December 31 11.500 9.250
Fiscal 1997 Quarter Ended:
March 31 5.875 4.750
June 30 6.375 6.000
September 30 7.500 7.000
December 31 8.125 8.125
Holders
As of February 1, 1999, there were 496 stockholders of record
of the Class A Common Stock and 153 stockholders of record of the Class B
Common Stock.
Dividends
The Company has not paid dividends on the Class A Common Stock
and Class B Common Stock since June 30, 1989 and presently has no intention
to pay dividends in the foreseeable future.
In August 1997 and June 1995, the Company's Board of Directors
approved a stock repurchase program under which the Company may, subject to
certain requirements, purchase up to 400,000 shares of its Common Stock in
the open market. Through December 31, 1998, the Company had repurchased
159,860 shares of Common Stock, at an aggregate purchase price of $835,000.
As of December 31, 1997 and 1998, 35,894 and 95,234 shares respectively
have been reissued.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
Results of Operations for the Years Ended December 31, 1998 and 1997
The Company had net income of $1,410,000 for the year ended
December 31, 1998, compared to net income of $388,000 for the year ended
December 31, 1997. The income for 1998 was the result of increased gross
profits from a higher number of home sales at the Marina Vista project,
and the sale of homes and lots at the Glenbriar Estates Project.
In the year ended December 31, 1998, the Company closed the
sale of 42 homes at Marina Vista, and 29 homes and 88 lots at the Glenbriar
Estates project , compared to 53 homes at Marina Vista and 92 lot sales at
Glenbriar Estates in the year ended December 31, 1997. Total sales were
$26,120,000 for 1998, resulting in a gross profit of $4,839,000 and a
gross profit margin of 18.53 percent, compared to total sales of $18,921,000
for 1997, resulting in a gross profit of $2,553,000 for the year and a gross
profit margin of 13.49 percent. The increase in profit margin is
attributable to the increase in sales prices and the sale of homes and
lots at the Glenbriar Estates Project. Selling expenses of $1,593,000
include the costs of maintaining a sales office, the model homes, commissions
payable to outside brokers and fees payable to Westco Community Builders, Inc.
General and Administrative expenses increased by $66,000 in 1998.
The increase in general & administrative expenses for 1998 was
attributable to increases in professional fees and other administrative
expenses.
The Company's cash requirements for the next twelve months are
expected to be satisfied from proceeds from home and lot sales.
Interest income in 1998 increased to $231,000, compared to
$131,000 in 1997, due to increased cash balances.
Costs for the development of property and the building of homes
are capitalized during the construction period. Such costs include
expenditures for land, land improvements, model homes, capitalized interest,
and construction in progress. When a home is sold, the cost of the sale is
recognized, which includes land, site development, construction, management
fees and financing costs.
Liquidity and Capital Resources
At December 31, 1998, the Company had total assets of
$37,467,000, as compared to total assets of $29,109,000 at December 31, 1997.
The cost of the Company's property being developed was $25,438,000 in 1998,
compared to $21,900,000 in 1997. Highly liquid assets were $9,016,000 at
December 31, 1998, compared to $4,076,000 at December 31, 1997.
The Company's total liabilities increased to $14,670,000 at
December 31, 1998, compared to $8,662,000 at December 31, 1997. This increase
was attributable primarily to an increase in notes payable to $12,650,000, in
1998, from $7,063,000, in 1997, and an increase in accrued interest and other
liabilities to $1,800,000 in 1998 from $1,373,000 in 1997.
The increase in additional paid-in capital of $631,000 for the
year ended December 31, 1998, is due to realization of the tax benefits
related to net operating losses incurred prior to the quasi-reorganization in
the amount of $614,000 and the reissuance of treasury stock of $17,000.
During 1998, the Company's primary liquidity needs were related
to funding development costs of the Marina Vista, the Glenbriar Estates
projects and the custom single family homes, in addition to notes payable and
interest payments of $763,000.
The Company borrowed a total of $5,587,000 to pay for home
construction costs, during 1998. The loans are secured by lots and homes
under construction and will be paid from the proceeds of home and lot sales.
The loans bear interest at the rate of prime plus 1.25 percent per annum and
have various maturity dates. The Company also obtained in a prior year an
$802,000 loan collateralized by four model homes. The loan bears interest at
the rate of 11.25 percent per annum and matures on June 30, 1999.
The Developers exercised an option to purchase land at the Glenbriar Estates
and have obtained financing of $391,000 secured by the property. The loan
bears interest at the rate of 9.0 percent per annum and matures on
February 26, 2000.
The Company's primary source of liquidity during 1998, was from
the proceeds of home and lot sales. The Company may also borrow funds from
time to time for development of real estate projects.
YEAR 2000 DISCLOSURE. The Company replaced its accounting
software with Solomon IV, which is year 2000 compliant. Personal Computers
have been replaced or upgraded and are also compliant. The expense, to become
Year 2000 compliant, had no material effect on the Company's financial
position or results of operation.
The Company believes all joint venture entities and major
suppliers are year 2000 compliant.
ITEM 7. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company,
as set forth on the pages indicated, are filed as part of this report.
Index to Financial Statements
Report of Independent Certified Public Accountants . . . . . . . . A-1
Consolidated Balance Sheets at December 31, 1998 and 1997. . . . . A-2
Consolidated Statements of Earnings for the Years Ended
December 31, 1998 and 1997. . . . . . . . . . . . . . . . . . . A-3
Consolidated Statement of Stockholders' Equity for the
Years Ended December 31, 1998 and 1997. . . . . . . . . . . . . A-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997. . . . . . . . . . . . . . . . . . . A-5
Notes to Consolidated Financial Statements at
December 31, 1998 and 1997. . . . . . . . . . . . . . . . . . . A-6
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
The information required by this item is incorporated by reference
to the information set forth under the caption "Proposal 1 -- Election of
Directors" contained in the Proxy Statement to be used by the Company in
connection with its 1999 Annual Meeting of Stockholders.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference
to the information set forth under the caption "Compensation of Executive
Officers and Directors" contained in the Proxy Statement to be used by the
Company in connection with its 1999 Annual Meeting of Stockholders.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated by reference
to the information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" contained in the Proxy Statement to be used
by the Company in connection with its 1999 Annual Meeting of Stockholders.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference
to the information set forth under the caption "Certain Transactions"
contained in the Proxy Statement to be used by the Company in connection with
its 1999 Annual Meeting of Stockholders.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits listed below are filed with this report.
3.1 Restated Certificate of Incorporation and Restated By-Laws
of the Company.(4)
10.1 1982 Stock Option Plan.(1)
10.2 Form of Nonqualified Incentive Stock Option Agreement.(1)
10.3 Development Agreement dated November 15, 1991 between
H. F. Properties, Ltd. and Westco Marina, Inc., as amended.(2)
10.5 Partnership Agreement, Glenbriar Joint Venture, dated January
7, 1994 between GIC Investment Corporation and Westco
Community Builders.(3)
10.6 Stock Option Plan for Nonemployee Directors.(4)
10.7 Form of Nonqualified Stock Option Agreement as of November
16, 1994.(5)
10.8 1995 Stock Option Plan.(6)
10.9 Form of Incentive Stock Option Agreement.(7)
10.10 Form of Nonqualified Stock Option Agreement.(8)
10.11 Partnership Agreement, Tracy Residential Venture
Partners, LLC, dated April 6, 1998 between the
Company and Westco Community Builders, Inc.(10)
10.12 $3,350,000 Line of Credit Collateralized by a
Deed of Trust dated October 22, 1998.
10.13 $10,500,000 Promissory Note and Loan Agreement
Collateralized by a Deed of Trust dated July 22, 1998.
22.1 Subsidiaries of the Company.
24.1 Consent of Grant Thornton LLP.
27.1 Financial Data Schedule for the Year Ended December 31, 1998.
___________________
(1) - Incorporated by reference to Exhibit 10.1 in the Company's
Annual Report on Form 10-K for the Year Ended
December 31, 1991.
(2) - Incorporated by reference to Exhibit 10.4 in the Company's
Annual Report on Form 10-K for the Year Ended
December 31, 1991.
(3) - Incorporated by reference to Exhibit 10.9 in the Company's
Annual Report on Form 10-K for the Year Ended
December 31, 1993.
(4) - Incorporated by reference to Exhibit 10.10 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1995.
(5) - Incorporated by reference to Exhibit 10.11 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1995.
(6) - Incorporated by reference to Exhibit 10.12 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1995.
(7) - Incorporated by reference to Exhibit 10.13 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1995
(8) - Incorporated by reference to Exhibit 10.14 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1995.
(9) - Incorporated by reference to Exhibit 10.15 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1998.
(b) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the fourth quarter of the year ended December 31, 1998.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DOVER INVESTMENTS CORPORATION
Date: March 29 , 1999 By: /s/ Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board,
President and Chief
Executive Officer
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/ Arnold Addison Director March 29, 1999
(Arnold Addison)
/s/ John Gilbert Director March 29, 1999
(John Gilbert)
/s/ Erika Kleczek Principal Financial March 29, 1999
(Erika Kleczek) Officer
/s/ Lawrence Weissberg Director, Chairman March 29, 1999
(Lawrence Weissberg) of the Board, President
and Chief Executive
Officer (Principal
Executive Officer)
/s/ Will C. Wood Director March 29, 1999
(Will C. Wood)
<PAGE>
APPENDIX A
CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
December 31, 1998 and 1997
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Dover Investments Corporation
We have audited the accompanying consolidated balance sheets of Dover
Investments Corporation and subsidiaries, as of December 31, 1998 and 1997,
and the related consolidated statements of earnings, stockholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Dover
Investments Corporation and subsidiaries as of December 31, 1998 and 1997,
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
San Francisco, California
March 3, 1999
DOVER INVESTMENTS CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
(in thousands except share amounts)
ASSETS 1998 1997
Cash and Cash Equivalents $ 8,622 $ 2,660
Restricted Cash 394 1,416
Homes Held for Sale 2,136 1,290
Property Held for Development 23,302 20,610
Notes Receivable 1,678 1,028
Other Assets 1,335 1,753
Deferred Income Taxes - 352
Total Assets $37,467 $ 29,109
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued Interest and Other Liabilities $ 1,800 $ 1,373
Notes Payable 12,650 7,063
Minority Interest in Joint Venture 220 226
Total Liabilities 14,670 8,662
Stockholders' Equity
Class A Common Stock, Par Value, $.01
Per Share-Authorized 2,000,000 Shares;
Issued 806,864 Shares at 12/31/98 and
804,927 Shares at 12/31/97 8 8
Class B Common Stock, Par Value, $.01
Per Share-Authorized 1,000,000 Shares;
Issued 320,137 Shares at 12/31/98 and
322,427 Shares at 12/31/97 3 3
Additional Paid-In Capital 20,441 19,810
Retained Earnings from January 1, 1993 2,682 1,272
Treasury Stock (60,066 in 1998 and 119,316
in 1997 of Class A Shares and 4,560
of Class B Shares) (337) (646)
Total Stockholders' Equity 22,797 20,447
Total Liabilities and Stockholders' Equity $37,467 $29,109
The accompanying notes are an integral part of these statements.
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended December 31,
(in thousands except per share amounts)
1998 1997
Home Sales $ 23,095 $ 16,972
Lot Sales 3,025 1,949
Total Sales 26,120 18,921
Cost of Homes Sold 18,322 14,969
Cost of Lot Sales 2,436 1,361
Total Cost of Sales 20,758 16,330
Minority Interest in Joint Ventures 523 38
Gross Profit 4,839 2,553
Selling Expenses 1,593 1,130
General and Administrative Expenses 684 618
Other Expenses 378 -
2,655 1,748
Operating Profit 2,184 805
Other Income
Interest 231 131
Fees 32 34
Total Other Income 263 165
Income before Income Taxes 2,447 970
Provision for Income Taxes 1,037 582
Net Income $ 1,410 $ 388
Net Income per Share $ 1.34 $ 0.39
Net Income per Share
Assuming Dilution $ 1.30 $ 0.38
The accompanying notes are an integral part of these statements.
<TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Two years ended December 31, 1998 and 1997
(in thousands)
<CAPTION>
Additional Treasury
Common Stock Paid-In Retained Stock
Class A Class B Capital Earnings at Cost Total
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $ 8 $ 3 $19,031 $ 884 $(830) $19,096
Reissuance of treasury stock - - 19 - 184 203
Realization of prequasi-
reorganization net operating
loss tax benefits - - 760 - - 760
Net income for the year - - - 388 - 388
Balance at December 31, 1997 8 3 19,810 1,272 (646) 20,447
Reissuance of treasury stock - - 17 - 309 326
Realization of prequasi-
reorganization net operating
loss tax benefits - - 614 - - 614
Net income for the year - - - 1,410 - 1,410
Balance at December 31, 1998 $ 8 $ 3 $20,441 $2,682 $(337) $22,797
<FN>
The accompanying notes are an integral part of this statement.
</TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
(in thousands)
1998 1997
Cash Flows from Operating Activities:
Net Income $ 1,410 $ 388
Reconciliation of Net Income to Net Cash
Provided by (Used in) Operating Activities:
Minority Interest (6) 95
Deferred Taxes 352 (361)
Tax Benefit of Utilizing Prequasi-
reorganization Net Operating Losses 614 760
Changes in Assets and Liabilities:
Restricted Cash 1,022 (1,291)
Property Held for Development (2,692) 1,072
Homes Held for Sale (846) 147
Other Assets 418 (2,138)
Notes Receivable (650) -
Accrued Interest and Other Liabilities, Net 427 (117)
Net Cash Provided by (Used in) Operating Activities: 49 (1,445)
Cash Flows from Financing Activities:
Net Proceeds from Notes Payable 5,587 1,064
Reissuance of Treasury Stock 326 203
Net Cash Provided by Financing Activities 5,913 1,267
Net Increase (Decrease) in Cash and Cash Equivalents 5,962 (178)
Cash and Cash Equivalents at Beginning of Year 2,660 2,838
Cash and Cash Equivalents at End of Year $ 8,622 $ 2,660
Supplemental Cash Flow Activity:
Cash Paid for Interest $ 763 $ 617
Cash Paid for Income Taxes $ 193 $ 134
The accompanying notes are an integral part of these statements.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
(in thousands except share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES
Dover Investments Corporation (the "Company"), engages primarily in residential
real estate development. Westco Community Builders, Inc. ("WCB") is primarily
responsible for the construction and the development of the real estate.
The Company and WCB formed one joint venture, Glenbriar Joint Venture ("GJV")
and two limited liability companies Glenbriar Venture #2, LLC ("GV #2, LLC")
and Tracy Residential Venture Partners, LLC ("TRVP"). For each of the
above entities the Company contributes the majority of the capital, ranging
from 75% to 100%. WCB is paid a fee for managing the construction and
development of the real estate. A preferred dividend is paid to the Company
and WCB based upon capital contributed in the range of 10% to 12%. Remaining
profits in each entity are split in the range of 50% to75% to the Company,
according to the agreements.
In preparing the financial statements in conformity with generally accepted
accounting principles, management is required to make estimates that affect
the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its Joint Venture and Limited Liability Companies. All significant
inter-company transactions are eliminated in consolidation.
Property Held for Development
Costs for the development of property and the building of homes are capitalized
during the construction period. Such costs include expenditures for land,
land improvements, model homes, capitalized interest, various fees, and costs of
construction-in-progress.
Revenues From and Cost of Home Sales
The Company recognizes income from home sales upon the closing and transfer
of title to the buyer. The cost of a home sold, includes land, site
development, construction, management fees and financing costs. For each
home sold, a reserve equal to one percent of the selling price is established
to cover warranty expense incurred subsequent to the home sale.
Warranty expenditures are charged to the reserve when paid. Sale of lots are
recognized upon the closing and transfer of title to the buyer.
The cost of the lot sold, includes land, site improvement, development and
financing costs.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
(in thousands except share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES (continued)
Income Taxes
The Company follows the liability method in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based
on differences between the financial reporting and tax basis of assets and
liabilities and on the expected future tax benefit to be derived from tax
loss carryforwards, if any. Additionally, deferred tax items are
measured using current tax rates. A valuation allowance is established to
reflect the likelihood of realization of deferred tax assets.
Concentrations of Risk
The Company maintains its cash balances, which exceed federally insured
limits, in a major Financial Institution. The Company has not experienced
any losses in such accounts and believes it is not exposed to significant
risk or loss.
Restricted Cash
Restricted cash is to be used for certain infrastructure improvements relating
to the Marina Vista Development and the Glenbriar Estates Project.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a maturity of
three months or less to be cash equivalents. Amounts also include purchased
securities, in the amount of $5,000, under agreements to resell (repurchase
agreements) with primary securities dealers. Such repurchase agreements are
typically overnight investments and collateralized by mortgage-backed
certificates which are held on behalf of the Company by the dealers
who arrange the transaction. At December 31, 1998, the weighted average
interest rate of such repurchase agreements was 5.125%. The market value of
the repurchase agreements approximates cost.
Reclassification
Certain prior year amounts have been reclassified to conform to current year
presentation.
NOTE B - NOTES RECEIVABLE
During 1998, the Company extended a line of credit of up to $3,350 to Westco
Community Builders for the purpose of building single family homes. The line
of credit bears an interest rate of Prime (7.75% at December 31, 1998) plus
two percent per annum and matures on October 22, 1999, and is collateralized
by a Deed of Trust.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
(in thousands except share amounts)
NOTE C - NOTES PAYABLE
Notes payable at December 31, are comprised of the following:
1998 1997
Notes Payable, maturing June 30, 1999,
and bearing interest at 11.25% per annum
collateralized by four model homes $ 802 $ 802
Notes Payable, maturing February 27, 2000,
and bearing interest at 9.00% per annum
collateralized by a Deed of Trust 391 -
Notes Payable, maturing September 30, 1999,
and bearing interest at prime
(7.75% at December 31, 1998) plus 1.5%;
collateralized by lots 1,407 5,347
Notes Payable, maturing August 30, 1999,
and bearing interest at USB rate
(7.75% at December 31,1998) plus 1.5%;
collateralized by a Deed of Trust 1,057 914
Notes Payable, maturing August 10, 1999,
and bearing interest at USB rate
(7.75% at December 31,1998) plus 1.25%;
collateralized by a Deed of Trust 4,636 -
Notes Payable, maturing October 7, 1999,
and bearing interest at USB rate
(7.75% at December 31,1998) plus 1.25%;
collateralized by a Deed of Trust 246 -
Notes Payable, maturing November 16, 1999,
and bearing interest at USB rate
(7.75% at December 31,1998) plus 1.25%;
collateralized by a Deed of Trust 1,459 -
Notes Payable, maturing November 16, 1999,
and bearing interest at USB rate
(7.75% at December 31,1998) plus 1.25%;
collateralized by a Deed of Trust 2,652 -
$12,650 $ 7,063
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
(in thousands except share amounts)
NOTE C - NOTES PAYABLE (continued)
Aggregate principal payments of $12,259 and $391 are due by November 16, 1999
and February 27, 2000, respectively.
Interest expense in 1998 and 1997, amounted to $763 and $638, respectively,
and was capitalized as part of property held for development.
NOTE D - LEASE COMMITMENT
The Company has an agreement to lease premises that expire on
September 30, 2002, with an option to renew for an additional period of five
years. The Company subleases a portion of the premises to a related party.
That corporation's share of the lease equals 35% of the total rent and
operating costs. Rent and yearly operating cost from the sublease were $39
and $38 for 1998 and 1997 respectively. A summary of net minimum lease
payments is as follows:
Years ending December 31,
1999 46
2000 50
2001 52
2002 39
Total $ 187
Rent expense for the years ended December 31, 1998 and 1997 totaled $73
and $33, respectively.
NOTE E - INCOME TAXES
Income tax expenses for the year ended December 31, consists of:
1998 1997
Current $ 71 $ 174
Deferred 966 408
Total $1,037 $ 582
In 1993, the Company under went a quasi-reorganization resulting in the
elimination of accumulated deficit and a decrease in additional paid-in
capital. The future tax benefit of utilization of prequasi-reorganization
operating losses are credited to paid-in capital. A tax benefit for 1998
and 1997 in the amount of $614 and $760, respectively, for prequasi-
reorganization net operating losses has been credited to paid in capital.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
(in thousands except share amounts)
NOTE E - INCOME TAXES (continued)
The following is a reconciliation between the federal statutory rate and the
effective rate used for the Company's provision for taxes:
1998 1997
Tax expense at statutory federal
income tax rate (34%) $ 848 $ 330
State franchise tax 145 57
Change in valuation allowance 133 193
Other (89) 2
Income tax expense $1,037 $ 582
Net deferred taxes as of December 31, are as follows:
1998 1997
Accrued warranty reserve $ 110 $ 64
AMT credit carry forward 175 199
Accrued expenses 5 13
State income taxes - 1
Capital loss carryover - 30
Depreciation (4) (6)
Net operating loss carry forward 151 355
437 656
Valuation allowance (437) (304)
Net deferred tax asset (liability) $ - $ 352
Statement of Financial Accounting Standards ("SFAS") 109 requires the
establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. The Company has recorded a valuation
allowance for the total amount of deferred tax assets. The deferred tax
asset schedule above does not give effect to any deferred tax asset related
to prequasi-reorganization tax loss carry forwards. Tax benefits resulting
from such tax loss carry forwards of approximately $20,100 for federal
purposes will be reflected in the financial statements as credits to
additional paid-in capital rather than as reductions in current income tax
expense, when and if recognized. The change in the valuation allowance
was $133 in 1998 and $274 in 1997.
As of December 31, 1998, the Company has Federal net operating loss carry
forwards of approximately $20,600 expiring through 2011.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
(in thousands except share amounts)
NOTE F - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No 107, "Disclosures about Fair
Value of Financial Instruments", requires disclosure of the estimated fair
value of an entity's financial instrument assets and liabilities. These
assets and liabilities consist of cash, notes receivable and long-term debt.
The balance sheet carrying amounts of cash, notes receivable and debt
approximate the estimated fair values.
NOTE G - COMMON STOCK OPTION PLANS AND EARNINGS PER SHARE
At December 31, 1998, the Company had three stock-based compensation plans.
Two of the plans are primarily for employees and the other is for non
employed Directors. The Company applies APB Opinion 25 "Accounting for Stock
Issued to Employees" and related interpretations in accounting for the plans.
No compensation costs have been recognized for the plans.
STOCK OPTION PLAN FOR EMPLOYEES
Under the Amended and Restated 1982 Stock Option Plan, options granted in
1992 to purchase 300 shares Class A Common Stock at $1.50 per share are
outstanding at December 31, 1998. The options become exercisable over 5 years.
The options terminate upon the earliest of (a) thirty days after the date of
cessation of employment, (b) one year after an optionee's death or (c) ten
years after the date such options were granted.
Under the 1995 Stock Option Plan (the "Plan"), 200,000 shares of Class A
Common Stock and 200,000 shares of Class B Common Stock of the Corporation
have been reserved for issuance pursuant to the Plan. The aggregate
number of shares which may be issued under the Plan shall not exceed 200,000
shares of any combination of shares of Class A Common Stock and Class B
Common Stock. Awards may be made under the Plan until January 16, 2005.
The exercise price for shares subject to the options granted under the Plan
is the fair market value of the shares at the date of grant. The option price
per share of a stock option granted to a person who, on the date of such
grant, owns stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company shall be not less than 110% of the fair
market value on the date that the option is granted. Options granted under
the Plan are exercisable in 1/3 increments on each anniversary of the grant
date, with full vesting occurring on the third anniversary date. As of
December 31, 1998, options for 145,616 shares were outstanding.
The Board of Directors has proposed to increase to 400,000 the number of
shares of the Company reserved for issuance upon exercise of stock options
granted under the Plan. The plan amendment is subject to stockholder
approval.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE G - COMMON STOCK OPTION PLANS AND EARNINGS PER SHARE (continued)
STOCK OPTION PLAN FOR NON EMPLOYED DIRECTORS
The 1990 Stock Option Plan for Non employed Directors (the "Restated Plan"),
was restated and approved by stockholders on June 7, 1995. The exercise price
for each option granted is the market price of the shares at the date of
grant. Options granted under the Restated Plan are exercisable in 50%
increments on each anniversary of the grant date, with full vesting occurring
on the second anniversary date. All options terminate upon the earliest of
(a) thirty days after an optionee ceases to be a director of the Company for
any reason other than death, (b) six months after an optionees death or
(c) ten years after the date such options were granted. The aggregate number
of shares which may be issued under the Restated Plan shall not exceed 12,500
shares of Class A Common Stock.
The Restated Plan provides that each director who is not an employee of the
Company and has not been an employee of the Company for all or any part of
the preceding fiscal year automatically receives options to purchase 1000
shares of Class A Common Stock upon their election or appointment as a
director of the Company. Thereafter, every year options to purchase 500
shares of Class A Common Stock (subject to adjustment for recapitalizations,
stock splits and similar events) will automatically be granted to such
director, provided, however, that such automatic option grants
will be made only if the director (a) has served on the Board of Directors
for the entire two preceding fiscal years, (b) is not otherwise an employee
of the Company or any subsidiaries on the date of grant and (c) has not been
an employee of the Company or any subsidiaries for all or any part of the
preceding fiscal years. As of December 31, 1998, options for 4,450 shares
were outstanding
Had compensation cost for all the plans been determined based on the fair
value of the options at the grant dates consistent with the methodology
prescribed by FAS 123, the Company's net income and income per share would be
reduced to the pro forma amounts indicated below;
1998 1997
Net income As reported $ 1,410 $ 388
Pro forma 1,333 313
Net Income
Per share As reported $ 1.34 $ 0.39
assuming dilution Pro forma 1.23 0.30
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE G - COMMON STOCK OPTION PLANS AND EARNINGS PER SHARE (continued)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options pricing model with the following weighted-average
assumptions: expected life, five years from the date of grant; stock
volatility 34% in 1998 and 88% in 1997; risk free interest rates, 5.5%
in 1998 and 6.2% in 1997; no dividends are expected. A summary of the status
of the Company's fixed stock plans as of December 31, 1998 and 1997, and
changes during the years ending on those dates is presented below:
1998 1997
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
Outstanding at
beginning of year 148,366 $ 5.36 108,750 $ 5.63
Granted 56,500 10.20 77,000 4.96
Canceled - - (2,250) 4.16
Exercised (59,250) 5.49 (35,134) 5.76
Outstanding at
ending of year 145,616 7.17 148,366 5.36
Options exercisable
at year end 37,866 $ 5.68 37,102 $ 5.69
Weighted-average
fair value of
options granted
during the year $ 3.60 $ 3.62
The following information applies to options outstanding at December 31, 1998:
Range of
exercise prices $0.70-$1.75 $3.25-$5.875 $6.00-$7.0125 $8.75-$10.3125
Options
outstanding 1,800 68,623 18,693 56,500
Weighted average
exercise price $ 1.35 $ 4.88 $ 6.93 $10.20
Weighted average
remaining
contractual life
(years) 5.11 3.63 2.64 5.58
Options
exercisable 1,800 18,040 18,026 -
Weighted average
exercise price $ 1.35 $ 4.85 $ 6.95 -
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE G - COMMON STOCK OPTION PLANS AND EARNINGS PER SHARE (continued)
The following table illustrates the reconciliation of the numerators and
denominators of the basic and diluted earnings per share ("EPS") computations.
For the Year Ended December 31, 1998
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS
Net Income $1,410,000 $1,048,930 $ 1.34
Effect of Dilutive Securities
Options 38,419
Dilutive EPS
Income available to common
shareholders and assumed
conversions $1,410,000 1,087,349 $ 1.30
EXHIBIT INDEX
Exhibit Description
Number
3.1 Restated Certificate of Incorporation and Restated By-Laws of the
Company.(4)
10.1 1982 Stock Option Plan.(1)
10.2 Form of Nonqualified Incentive Stock Option Agreement.(1)
10.3 Development Agreement dated November 15, 1991 between
H. F. Properties, Ltd. and Westco Marina, Inc., as amended.(2)
10.5 Partnership Agreement, Glenbriar Joint Venture, dated January 7,
1994 between GIC Investment Corporation and Westco
Community Builders.(3)
10.6 Stock Option Plan for Nonemployee Directors.(4)
10.7 Form of Nonqualified Stock Option Agreement as of November
16, 1994.(5)
10.8 1995 Stock Option Plan.(6)
10.9 Form of Incentive Stock Option Agreement.(7)
10.10 Form of Nonqualified Stock Option Agreement.(8)
10.11 Partnership Agreement, Tracy Residential Venture
Partners, LLC, dated April 6, 1998 between the
Company and Westco Community Builders, Inc.(10)
10.12 $3,350,000 Line of Credit Collateralized by a
Deed of Trust dated October 22, 1998.
10.13 $10,500,000 Promissory Note and Loan Agreement
Collateralized by a Deed of Trust dated July 22, 1998
22.1 Subsidiaries of the Company.
24.1 Consent of Grant Thornton LLP.
27.1 Financial Data Schedule for the Year Ended December 31, 1998.
___________________
(1) - Incorporated by reference to Exhibit 10.1 in the Company's Annual
Report on Form 10-K for the Year Ended December 31, 1991.
(2) - Incorporated by reference to Exhibit 10.4 in the Company's Annual
Report on Form 10-K for the Year Ended December 31, 1991.
(3) - Incorporated by reference to Exhibit 10.9 in the Company's Annual
Report on Form 10-K for the Year Ended December 31, 1993.
(4) - Incorporated by reference to Exhibit 10.10 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended June 30, 1995.
(5) - Incorporated by reference to Exhibit 10.11 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended June 30, 1995.
(6) - Incorporated by reference to Exhibit 10.12 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended June 30, 1995.
(7) - Incorporated by reference to Exhibit 10.13 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended June 30, 1995
(8) - Incorporated by reference to Exhibit 10.14 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended June 30, 1995.
(9) - Incorporated by reference to Exhibit 10.15 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended June 30, 1998.
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 9,016
<SECURITIES> 0
<RECEIVABLES> 1,678
<ALLOWANCES> 0
<INVENTORY> 25,438
<CURRENT-ASSETS> 36,132
<PP&E> 1,335
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,467
<CURRENT-LIABILITIES> 2,020
<BONDS> 12,650
0
0
<COMMON> 11
<OTHER-SE> 22,786
<TOTAL-LIABILITY-AND-EQUITY> 37,467
<SALES> 2,868
<TOTAL-REVENUES> 26,383
<CGS> 23,252
<TOTAL-COSTS> 23,252
<OTHER-EXPENSES> 684
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,447
<INCOME-TAX> 1,037
<INCOME-CONTINUING> 1,410
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,410
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.30
</TABLE>
PROMISSORY NOTE SECURED BY DEED OF TRUST
San Francisco, California
$3,350,000 (U.S.)
October 15, 1998
FOR VALUE RECEIVED, Westco Community Builders, Inc., a
California Corporation, ("Maker"), promises to pay to Dover Investments
Corporation, a Delaware corporation, or order ("Holder"), the principal
sum of Three Million Three Hundred Fifty Thousand Dollars
($3,350,000), or so much thereof as may be disbursed by Holder to or for
the benefit or account of Maker, together with interest on the outstanding
unpaid principal balance, all as hereinafter provided, and on the following
agreements, terms, and conditions:
The principal sum is being disbursed by Holder to Maker or for the
account of Maker in accordance with the terms and conditions of the
Construction Loan Agreement ("Construction Loan Agreement") entered
into between Maker and Holder of even date herewith. All capitalized
terms herein shall have the meanings ascribed to them in the Construction
Loan Agreement.
1. Purpose of Loan. Maker represents and warrants that the
proceeds of the Loan evidenced by this Note shall be used exclusively for
the business and/or commercial purposes more particularly set forth in the
Construction Loan Agreement and that no portion of the proceeds will be
used for personal, family, or household purposes. Maker further agrees and
acknowledges that the Loan evidenced by this Note was arranged by
Dabenica Investment Corporation, a licensed California real estate broker,
which represents Holder exclusively.
2. Interest Accrued and Payment. Interest on funds as disbursed
shall accrue at a rate equal to two (2) floating percentage points over the
prime rate established by Bank of America, NT&SA. Accrued interest on
the outstanding principal balance shall be paid in monthly installments on
the first day of each month, commencing on December 1, 1998.
3. Principal Payments; Maturity Date. The entire unpaid principal
balance and all unpaid accrued interest shall be due and payable twelve (12)
months after the date of the initial disbursement hereunder ("Maturity
Date") unless such Maturity Date is accelerated or extended as provided
herein. Provided Maker has not committed a default hereunder, Maker
shall have the right to extend the maturity date for two additional six (6)
month periods ("Extension Period"). In order to exercise such right,
written notice of exercise must be received by Holder not less than thirty
(30) days prior to the Maturity Date and together with such notice Maker
shall deliver to Holder an extension fee equal to 1/2% of the Principal
Sum of this Note then outstanding per each six month extension.. The
Extension Period is subject to the following additional condition precedent
"that there will have occurred no material adverse change, as determined
by Holder in its sole discretion, in the financial condition of Maker or any
guarantor or other person or entity in any manner obligated to Holder
under the Construction Loan Agreement from that which existed as of the
date of this Note."
4. Manner of Payment. All principal and interest shall be paid in
lawful money of the United States of America and in immediately available
funds. All payments shall be made to Holder at its offices located at 100
Spear Street, Suite 520, San Francisco, California 94105, or at such other
place as Holder may from time to time designate in writing.
If any installment of principal or interest is received by Holder later
than ten (10) days after the due date thereof, it shall bear interest from the
due date until paid at the Default Rate specified in Section 7. In addition to
any interest accruing on any delinquent amount, Maker shall pay to Holder
a late payment fee equal to six percent (6%) of the delinquent amount as
liquidated damages. Maker acknowledges that Holder will incur costs and
other damages not contemplated by this Note on account of a late payment,
that such damages and costs will be extremely difficult and impractical to
ascertain, and that the foregoing late payment fee represents a fair and
reasonable estimate of such damages and expenses considering all of the
circumstances existing on the date of this Note.
All payments received from Maker shall be applied first to any late
payment fee, second to any accrued interest due, and the remainder, if any,
to the prepayment of principal. Any other designation by Maker of the
manner in which a payment is to be applied shall be of no effect.
5. Deed of Trust. This Note and the debt evidenced hereby is
secured by a Construction Deed of Trust ("Deed of Trust") of even date
herewith covering certain real property described as follows:
LEGAL DESCRIPTION
REAL PROPERTY in the City of San Leandro, County of Alameda, State
of California, described as follows:
PARCEL ONE:
Beginning at a point on the Northeastern line of San Leandro Boulevard,
formerly Estudillo Street, distant thereon Northwesterly 110. 00 feet from
the point of intersection thereof with the Northwestern line of Williams
Street, as said streets are shown on the Map hereinafter referred to;
running thence Northeasterly alone the said line of San Leandro Boulevard
40.00 feet; thence at right angles Northeasterly 150.00 feet; thence at right
angles Southeasterly 40.00 feet; thence at right angles Southwesterly
150.00 feet to the point of beginning.
Being a portion of Lots "G", "L", "M", "N", in Block 27 as said
lots and block are shown on that certain Map entitled, "Map of the Town of
San Leandro, County Seat of Alameda County", filed February 27, 1855,
in Book 2 of Maps, Page 43, in the office of the County Recorder of
Alameda County
PARCEL TWO:
Beginning at a point on the Northeastern line of San Leandro Boulevard,
formerly Estudillo Street, distant thereon Northwesterly 75.00 feet from the
point of intersection thereof with the Northwestern line of intersection
thereof with the Northwestern line of Williams Street, as said streets are
shown on the Map hereinafter referred to; running thence Northwesterly
along the said line of San Leandro Boulevard 35.00 feet; thence at right
angles Northeasterly 150.00 feet; thence at right angles Southeasterly 35.00
feet; thence at right angles Southwesterly 150.00 feet to the point of
beginning.
Being a portion of Lots "L", "M", and "N", in Block 27, as said lots and
block are shown on that certain Map entitled, "Map of the Town of San
Leandro, County Seat of Alameda County, " filed February 27, 1855 in
Book 2 of Maps, Page 43, in the office of the County Recorder of Alameda
County.
Excepting from Parcels One and Two the land described as Parcels A & B
in the Final Order of Condemnation, recorded September 12, 1983, Series
No. 83-168337, Official Records.
A.P. No. 75-27-7-3
PARCEL THREE:
Lot 1, Tract 4879, filed June 5, 1984, Map Book 145, Pages I and 2,
Alameda County Records.
A.P. No. 75-27-8
PARCEL FOUR:
Those portions of lots H, I, J and K, Block 27, Map of Map of the Town
of San Leandro, etc., filed February 27, 1885, Map Book 1, Page 19,
Alameda County Records, described as follows:
Commencing at a point on the Western line of Carpentier Street, distant
thereon 98 feet Northerly from the point of intersection thereof with the
Northern line of Williams Street; running thence Northerly along said line
of Carpentier Street 52 feet; thence Westerly parallel with said line of
Williams Street 150 feet; thence Southerly parallel with said line of
Carpentier Street 100 feet; thence Easterly parallel with said line of
Williams Street 23 feet; thence Northerly parallel with said line if
Carpentier Street 48 feet; thence Easterly parallel with said line of
Williams Street 127 feet to the point of beginning.
A.P. No. 75-27-2-1
Reference is made to the Deed of Trust for a description of the
nature and extent of the security afforded by the Deed of Trust, the rights
of Holder with respect to such security, and the terms and conditions upon
which this Note is secured.
6. Right of Prepayment in Full. Upon ten (10) days' prior written
notice to Holder, Maker shall have the right to prepay this Note in full with
accrued interest and late fees, if any, to date of full prepayment.
7. Default and Acceleration. In the event of any Default, Holder
may, in its sole discretion, declare all sums owed and to become owing on
this Note immediately due and payable irrespective of any Maturity Date
expressed herein. All such sums shall bear interest from the date of Default
until paid at five percentage points per annum over the interest rate
otherwise payable hereunder ("Default Rate"). For purposes of this Note, a
"Default" shall mean:
(a) a breach or default in payment when due of any indebtedness evidenced
by this Note; or
(b) a breach or default in the performance of any other term,
covenant, condition or agreement under this Note or the Deed of Trust, or
the Construction Loan Agreement, or any other document or agreement
executed by Maker in connection with the making of this loan, which
breach or default is not cured within ten (10) days after notice of such
breach or default or, if such breach or default is not reasonably capable of
being cured within such ten (10) day period, if Maker has not commenced
in good faith the curing of such breach or default within such ten (10) day
period or does not thereafter prosecute to completion with diligence and
continuity the curing thereof, which cure must in any event be completed
within thirty (30) days after such notice to Maker; or
(c) if Maker applies for or consents to the appointment of a
receiver, liquidator, custodian or trustee for it or any portion of its
property, or if such receiver, liquidator, custodian or trustee is appointed
for Maker or its property and is not discharged within ten (10) days after
the date of such appointment, or Maker makes an assignment for the
benefit of creditors, or Maker admits in writing its inability to pay its debts
as they become due, or Maker becomes insolvent, or a petition is filed by
Maker pursuant to any of the provisions of the Bankruptcy Code,11 U.
S.C. Sections 101 et seq., as amended, or any similar or successor
statute, or such a petition is filed against Maker and is not dismissed or
vacated within ten (10) days after the date of such filing; or
(d) if there is an attachment or sequestration of any of the
property of Maker and the same is not discharged or bonded within thirty
(30) days; or
(e) if Maker shall cause or institute or there shall be instituted
against Maker any proceeding for the dissolution or termination of Maker;
(f) if any representation, warranty or disclosure made to Holder
by Maker proves to be materially false or misleading on the date as of
which made; or
(g) if Maker shall be in default in connection with any other
obligation of Maker to Holder, whether or not related to the obligations
arising under this Note.
8. Due on Transfer. Holder may, at its option, declare immediately
due and payable all sums owing on this Note upon the sale or transfer,
without the Holder's prior written consent, of all or any part of the real
property, or any interest in the real property described in the above
described Construction Deed of Trust. A "sale or transfer" means the
conveyance of real property or any right, title or interest therein; whether
legal or equitable; whether voluntary or involuntary; whether by outright sale,
deed, installment sale contract, land contract, contract for deed, leasehold
interest with a term greater than three (3) years, lease-option contract, or
by sale, assignment, or transfer of any beneficial interest in or to any land
trust holding title to the real property, or by any other method of conveyance
of real property interest. If any Maker is a corporation or partnership,
transfer also includes any change in ownership of more than twenty five percent
(25%) of the voting stock or partnership interests, as the case may be, of
Maker. However, this option shall not be exercised by Holder if such
exercise is prohibited by applicable law. Notwithstanding the above Holder
consents to the release provisions set forth in the Deed of Trust.
9. Costs of Collection. Maker agrees to pay all costs and expenses which
Holder may incur by reason of any Default including, without limitation,
reasonable attorneys' fees with respect to legal services incurred in
connection with any Default, or the determination of any rights or remedies
of Holder under this Note or under the Deeds of Trust, whether or
not a suit is actually commenced.
10. Liability. Maker waives diligence, presentment for payment,
protest, and demand with respect to this Note. Maker further waives notice
of protest, demand, dishonor, non-payment, and acceleration of this Note.
Maker agrees that any modification or extension of the terms of payment of
this Note that may be permitted from time to time by Holder with or
without notice to Maker, and the release of any property, whether real or
personal, or any part thereof, from the lien of the Deed of Trust, shall not
diminish or impair Maker's liability for the payment of this Note.
11. Notices. Any and all notices given under this Note shall be in
writing and shall be either personally delivered to the appropriate party or
shall be sent by United States registered or certified mail, postage prepaid,
and properly addressed as set forth below:
In the case of notice directed to Maker:
Westco Community Builders, Inc.
15225 Wicks Blvd.
San Leandro, CA 94579
In the case of notice directed to Holder:
Dover Investments Corporation
100 Spear Street, Suite 520
San Francisco, CA 94105
Any such notice shall be deemed given and effective upon personal delivery
or three days after being mailed in the manner set forth above.
12. Usury Savings Clause. All agreements between Maker and Holder
are hereby expressly limited so that in no contingency or event whatsoever
shall the amount paid or agreed to be paid to Holder for the use,
forbearance, or detention of the money to be loaned exceed the maximum
permissible under applicable law. If, from any circumstance whatsoever,
fulfillment of any provision hereof, at the time fulfillment of such provision
shall be due, shall be prohibited by law, the obligation to be fulfilled shall
be reduced to the maximum not so prohibited; and if from any
circumstance Holder should ever receive as interest an amount which
would exceed the highest lawful rate, such amount as would be excessive
interest shall be applied to the reduction of the principal of the Note and
not to the payment of interest. This provision shall control every other
provision of all agreements between Maker and Holder.
13. General Provisions
(a) Time is of the essence of this Note.
(b) This Note may not be changed, amended, or modified except
by a further written agreement between Maker and Holder.
(c) Any failure of Holder to exercise any of its rights under this
Note shall not constitute a waiver of those rights by Holder or a waiver by
Holder of any other rights.
(d) If Maker consists of one or more persons or entities, all
obligations under this Note shall be joint and several.
(e) This Note and the rights and duties of Maker and Holder shall
be governed by the laws of the State of California for all purposes.
(f) The terms of this Note shall inure to the benefit of and bind
Maker and Holder and their respective heirs, legatees, devisees,
administrators, legal representatives, successors, and assigns.
IN WITNESS WHEREOF, the undersigned Maker has executed the
within instrument as of the date first written above.
Westco Community Builders, Inc., a California Corporation
By: /s/ Jerry Finch
Jerry Finch, President
By: /s/ Britt Evans
Britt Evans, Executive Vice President
Dover Investments Corporation 100 Spear Street, #520 San Francisco,
California 94105
CONSTRUCTION DEED OF TRUST
THIS DEED OF TRUST IS DATED October 15,1998 and is entered
into by and among Westco Community Builders, Inc., a California
Corporation, whose address is 15225 Wicks Blvd, San Leandro, California
94579 (referred to below as "Trustor"); Dover Investments Corporation,
whose address is 100 Spear Street, Suite 520, San Francisco, CA 94105
(referred to below sometimes as "Lender" and sometimes as
"Beneficiary"); and First American Title Guaranty Company, whose
address is 5976 West Las Positas Blvd. #100, Pleasanton, California
945888543 (referred to below as "Trustee").
CONVEYANCE AND GRANT. For valuable consideration, Trustor
irrevocably grants, transfers and assigns to Trustee in trust, with power of
sale, for the benefit of Lender as Beneficiary, all of Trustor's right, title,
and interest in and to the following described real property, together with
all existing or subsequently erected or affixed buildings, improvements and
fixtures; all easements, right of way, and appurtenances; all water, water
rights and ditch rights (including stock in utilities with ditch or irrigation
rights); and all other rights, royalties, and profits relating to the real
property, including without limitation all minerals, oil, gas, geothermal and
similar matters, located in Alameda County, State of California (the "Real
Property"):
LEGAL DESCRIPTION
REAL PROPERTY in the City of San Leandro, County of Alameda, State
of California, described as follows:
PARCEL ONE:
Beginning at a point on the Northeastern line of San Leandro Boulevard,
formerly Estudillo Street, distant thereon Northwesterly 110. 00 feet from
the point of intersection thereof with the Northwestern line of Williams
Street, as said streets are shown on the Map hereinafter referred to;
running thence Northeasterly along the said line of San Leandro Boulevard
40.00 feet; thence at right angles Northeasterly 150.00 feet; thence at right
angles Southeasterly 40.00 feet; thence at right angles Southwesterly
150.00 feet to the point of beginning.
Being a portion of Lots "G", "L", "M", "N", in Block 27 as said
lots and block are shown on that certain Map entitled, "Map of the Town of
San Leandro, County Seat of Alameda County", filed February 27, 1855,
in Book 2 of Maps, Page 43, in the office of the County Recorder of
Alameda County
PARCEL TWO:
Beginning at a point on the Northeastern line of San Leandro Boulevard,
formerly Estudillo Street, distant thereon Northwesterly 75.00 feet from the
point of intersection thereof with the Northwestern line of intersection
thereof with the Northwestern line of Williams Street, as said streets are
shown on the Map hereinafter referred to; running thence Northwesterly
along the said line of San Leandro Boulevard 35.00 feet; thence at right
angles Northeasterly 150.00 feet; thence at right angles Southeasterly 35.00
feet; thence at right angles Southwesterly 150.00 feet to the point of
beginning.
Being a portion of Lots "L", "M", and "N", in Block 27, as said lots and
block are shown on that certain Map entitled, "Map of the Town of San
Leandro, County Seat of Alameda County, " filed February 27, 1855 in
Book 2 of Maps, Page 43, in the office of the County Recorder of Alameda
County.
Excepting from Parcels One and Two the land described as Parcels A & B
in the Final Order of Condemnation, recorded September 12, 1983, Series
No. 83-168337, Official Records.
A.P. No. 75-27-7-3
PARCEL THREE:
Lot 1, Tract 4879, filed June 5, 1984, Map Book 145, Pages 1 and 2,
Alameda County Records.
A.P. No. 75-27-8
PARCEL FOUR:
Those portions of lots H, I, J and K, Block 27, Map of Map of the Town
of San Leandro, etc., filed February 27, 1885, Map Book 1, Page 19,
Alameda County Records, described as follows:
Commencing at a point on the Western line of Carpentier Street, distant
thereon 98 feet Northerly from the point of intersection thereof with the
Northern line of Williams Street; running thence Northerly along said line
of Carpentier Street 52 feet; thence Westerly parallel with said line of
Williams Street 150 feet; thence Southerly parallel with said line of
Carpentier Street 100 feet; thence Easterly parallel with said line of
Williams Street 23 feet; thence Northerly parallel with said line if
Carpentier Street 48 feet; thence Easterly parallel with said line of Williams
Street 127 feet to the point of befinning.
A.P. No. 75-27-2-1
Trustor presently assigns to Lender (also known as Beneficiary in this Deed
of Trust) all of Trustor's right, title, and interest in and to all present and
future leases of the Property and all Rents from the Property. This is an
absolute assignment pursuant to California Civil Code Section 2938. In
addition, Trustor grants Lender a Uniform Commercial Code security
interest in the Rents and the Personal Property defined below.
DEFINITIONS. The following words shall have the following meanings
when used in this Deed of Trust. Terms not otherwise defined in this Deed
of Trust shall have the meanings attributed to such terms in the Uniform
Commercial Code or as specifically defined in the Related Documents. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Beneficiary. The word "Beneficiary" means Dover Investments
Corporation, its successors and assigns Dover Investments Corporation also
is referred to as "Lender" in this Deed of Trust.
Deed of Trust. The words "Deed of Trust" mean this Deed of
Trust among Trustor, Lender, and Trustee, and includes without
limitation all assignment and security interest provisions relating to the
Personal Property and Rents.
Guarantor. The word "Guarantor" means and includes without
limitation, any and all guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
Improvements. The word "Improvements" means and includes
without limitation all existing and future improvements, fixtures, buildings,
structures, mobile homes affixed on the Real Property, facilities, additions
and other construction on the Real Property.
Indebtedness. The word "Indebtedness" means all principal and
interest payable under the Line of Credit Note and any amounts expended
or advanced by Lender to discharge obligations of Trustor or expenses
incurred by Trustee or Lender to enforce obligations of Trustor under this
Deed of Trust, together with interest on such amounts as provided in this
Deed of Trust.
Lender. The word "Lender" means Dover Investments Corporation
its successors and assigns.
Note. The word "Note" means the Secured Promissory Note dated
October 15, 1998, in the principal amount of $3,350,00 from Trustor to
Lender, together with all renewals, extensions, modifications, refinances,
and substitutions for the Note.
Personal Property. The words "Personal Property" mean all
equipment, fixtures, and other articles of personal property now or
hereafter owned by Trustor, and now or hereafter attached or affixed to the
Real Property; together with all accessions, parts, and additions to, all
replacements of, and all substitutions for, any of such property; and
together with all proceeds (including without limitation all insurance
proceeds and refunds of premiums) from any sale of other disposition of
Property. The words "Personal Property" also include all tangible and
intangible items obtained or owned by, or in the possession of Trustor that
are directly or indirectly related to the acquisition, development, design,
construction, permitting, marketing, or habitation of the Real Property or
the Improvements to be constructed on the Real Property, whether
heretofore or hereafter issued, prepared, or executed, including without
limitation all permits, licenses, authorizations and approvals, trademarks
and trade names, and any and all land use entitlements, development rights,
sewer capacity, approvals, density allocations and other rights or approvals
relating to or authorizing the development or occupancy of the Property,
plus all utility or other deposits, reimbursement right, studies, tests,
contracts, plans and specifications, relating to the Property and
Improvements.
Property. The word "Property" means collectively the Real Property and the
Personal Property.
Real Property. The words "Real Property" mean the property, interests and
rights described above in the "Conveyance and Grant" section.
Related Documents. The words "Related Documents" mean and
include without limitation all Promissory Notes, Credit Agreements,
Construction Loan Agreements, Guaranties, Environmental Indemnity
Agreements, Security Agreements, Mortgages, Deeds of Trust, and all
other instruments, agreements and documents, whether now or hereafter
existing, executed in connection with the Indebtedness.
Rents. The word "Rents" means all present and future rents,
revenues, income, issues, royalties, profits, and other benefits derived from
the Property.
Trustee. The word "Trustee" means First American Title Guaranty
Company and any substitute or successor trustees.
Trustor. The word "Trustor" means any an all persons and entities
executing this Deed of Trust, including without limitations all Trustors
named above.
THE DEED OF TRUST, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST
IN THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (1) PAYMENT OF THE
INDEBTEDNESS AND (2) PERFORMANCE OF ANY AND ALL OBLIGATIONS OF TRUSTOR UNDER
THE NOTE, THE RELATED DOCUMENTS, AND THIS DEED OF TRUST. THIS DEED OF
TRUST, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN THE
RENTS AND PERSONAL PROPERTY, IS ALSO GIVEN TO SECURE ANY AND ALL OBLIGATIONS
OF TRUSTOR UNDER THAT CERTAIN CONSTRUCTION LOAN AGREEMENT BETWEEN TRUSTOR AND
LENDER OF EVEN DATE HEREWITH. ANY EVENT OF DEFAULT UNDER THE CONSTRUCTION
LOAN AGREEMENT, OR ANY OF THE RELATED DOCUMENTS REFERRED TO THEREIN, SHALL
ALSO BE AN EVENT OF DEFAULT UNDER THIS DEED OF TRUST. THE NOTE AND THIS DEED
OF TRUST ARE GIVEN AND ACCEPTED ON THE FOLLOWING TERMS:
PAYMENT AND PERFORMANCE. Except as otherwise provided in this
Deed of Trust, Trustor shall pay to Lender all amounts secured by this
Deed of Trust as they become due, and shall strictly and in a timely manner
perform all of Trustor's obligations under the Note, this Deed of Trust, and
the Related Documents.
POSSESSION AND MAINTENANCE OF THE PROPERTY. Trustor
agrees that Trustor's possession and use of the Property shall be governed
by the following provisions.
Possession and Use. Until the occurrence of an Event of Default,
Trustor may (a) remain in possession and control of the Property, (b) use,
operate or manage the Property, and (c) collect any Rents from the
Property.
Duty to Maintain. Trustor shall maintain the Property in tenant able
condition and promptly perform all repairs, replacements, and maintenance
necessary to preserve its value.
Environmental Compliance.
(A) In addition to and without limiting any other
obligations of Trustor under this Deed of Trust and the Related Documents,
Trustor shall comply with all Environmental Laws relating to the
Premises and the conduct of Trustor's business connection therewith.
Trustor shall immediately remove and dispose of any hazardous substance
found on, in, under or affecting the Premises. All such removals and
disposals shall be undertaken and performed in compliance with
Environmental Laws and at Trustor's expense. Trustor shall not release, or
permit, allow or suffer any release or threat of release, of any Hazardous
Substance on, in, under or affecting the Premises or from the Premises
onto any properties adjacent to the Premises except for such de minimums
release typically associated with the use of portions of the Premises for
driving and parking motor vehicles, and which are not likely to result in
any liability under any Environmental Laws. Trustor shall not generate or
permit, allow or suffer any Hazardous Substances to be generated on, in,
or under the Premises. Trustor shall not store or permit, allow or suffer
Hazardous Substances to be stored on, in or under the Premises. Trustor
shall not permit, allow or suffer any lien under any Environmental Law to
attach to or encumber the Premises or any part thereof or interest therein.
(B) Trustor shall indemnify Trustee and Beneficiary,
defend Trustee and Beneficiary (with attorneys acceptable to Trustee and
Beneficiary) and hold Trustee and Beneficiary harmless from and against
any and all environmental losses, except those caused by the sole
negligence or actions of Trustee or Beneficiary or their agents.
(C) If Trustor shall fail to comply with any of the
provisions of this Section or any provision of any of the Related Documents
relating to Hazardous Substances and/or Environmental Laws, Beneficiary
shall have the right, but not the obligation, to enter upon the Premises and
to expend funds to cure such failure by performing such remedial work as
may be necessary to make the Premises conform to Environmental Laws.
Any amounts expended by Beneficiary as a result thereof shall be due and
payable by Trustor to Beneficiary on demand and shall earn interest from
and after the date the same are expended by Beneficiary, whether or not
demand for repayment is then made, at the interest rate applicable under
the Note from and after maturity. All such amounts and all interest thereon
shall be a lien on and security in the Premises and shall be secured by this
Deed of Trust in addition to all other obligations of Trustor to Beneficiary
secured hereby. Any partial exercise by Beneficiary of Beneficiary's
remedies herein, including any partial undertaking by Beneficiary of
remedial work, shall not obligate Beneficiary to continue to exercise such
remedies or complete any remedial work commenced or to take any further
or additional actions or require Beneficiary to expend or incur any further
sums in connection therewith. The exercise by Beneficiary and
Beneficiary's remedies or approval rights herein shall not operate to place
upon Beneficiary any responsibility for the operation, control, care,
management or repair of the Premises, or make Beneficiary the "owner"
or "operator" of the Premises or a "responsible party" within the meaning
of Environmental Laws.
(D) Trustor shall promptly advise Beneficiary in writing
of (i) Trustor's receipt of any notice from any federal, state, local or other
governmental agency or authority in connection with any Hazardous
Substances on, in, under or affecting the Premises or emanating from the
Premises, or of any governmental or regulatory actions instituted or
threatened in writing under any governmental laws affecting the Premises
or any indemnity hereunder, including, without limitation, any notice of
inspection, abatement or noncompliance, (ii) all claims made or threatened
in writing by any third party against Trustor or the Premises relating to
any Hazardous Substances or in violation of any Environmental Laws, and
(iii) Trustor's discovery of the presence of any Hazardous Substances on
the Premises or any property adjacent thereto or any release or threat of
release of any Hazardous Substances on, in or under or affecting the
Premises or emanating from the Premises, or of any occurrence or
condition on the Premises or any real property adjoining the Premises
which could subject Trustor or the Premises to a claim under any
Environmental Laws or to any restrictions on ownership, occupancy,
transferability or use of the Premises under any Environmental Laws in
connection with the matters covered by this section on environmental
compliance.
(E) The obligations of Trustor under this Section on
environmental compliance or secured obligations under this Deed of Trust
for so long as this Deed of Trust shall remain in effect, and thereafter shall
survive and be unsecured obligations of Trustor to the extent permitted by
applicable law. The obligations of Trustor under this Section are intended
to be supplementary to and not in substitution for or in derogation of the
provisions of the Environmental Indemnity Agreement.
Nuisance, Waste. Trustor shall not cause, conduct or permit any
nuisance nor commit, pen-nit, or suffer any stripping of or waste on or to
the Property or any portion of the Property. Without limiting the generality
of the foregoing, Trustor will not remove, or grant to any other party the
right to remove, any timber, minerals (including oil and gas), soil, gravel
or rock products without the prior written consent of Lender.
Removal of Improvements. Trustor shall not demolish or remove
Improvements from the Real Property without the prior written consent of
Lender. As a condition to the removal of any Improvements, Lender may
require Trustor to make arrangements satisfactory to Lender to replace
such Improvements with Improvements of at least equal value.
Lender's Right to Enter. Lender and its agents and representatives
may enter upon the Real Property at all reasonable times to attend to
Lender's interests and to inspect the Property for purposes of Trustor's
compliance with the terms and conditions of this Deed of Trust.
Compliance with Governmental Requirements. Trustor shall
promptly comply with all laws, ordinances, and regulations, now or
hereafter in effect, of all governmental authorities applicable to the use or
occupancy of the Property. Trustor may contest in good faith any such law,
ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Trustor has notified Lender in
writing prior to doing so and so long as, in Lender's sole opinion, Lender's
interests in the Property are not jeopardized. Lender
may require Trustor to post adequate security or a surety bond, reasonably
satisfactory to Lender, to protect Lender's interest.
Duty to Protect. Trustor agrees neither to abandon nor leave
unattended the Property. Trustor shall do all other acts, in addition to those
acts set forth above in this section, which from the character and use of the
Property are reasonably necessary to protect and preserve the Property.
DUE ON SALE - CONSENT BY LENDER. Lender may, at its option,
declare immediately due and payable all sums secured by this Deed of
Trust upon the sale or transfer, without the Lender's prior written consent,
of all or any part of the Real Property, or any interest in the Real Property.
A "sale or transfer" means the conveyance of Real Property or any right,
title or interest therein; whether legal or equitable; whether voluntary or
involuntary; whether by outright sale, deed, installment sale contract, land
contract, contract for deed, leasehold interest with a term greater than three
(3) years, lease-option contract, or by sale, assignment, or transfer of any
beneficial interest in or to any land trust holding title to the Real Property,
or by any other method of conveyance of Real Property interest. If any
Trustor is a corporation or partnership, transfer also includes any change in
ownership of more than twenty-five percent (25%) of the voting stock or
partnership interests, as the case may be, of Trustor. However, this option
shall not be exercised by Lender if such exercise is prohibited by applicable
law. Notwithstanding the above and provided that (1) the Note is not in
default, and (ii) the final subdivision map of Tract 7001 subdividing the
Real Property into twenty five lots is of record, individual lots shall be
released from the lien of this Deed of Trust upon receipt by Holder of an
amount equal to $134,000 per lot/house to be released.
TAXES AND LIENS. The following provisions relating to the taxes and
liens on the Property are a part of this Deed of Trust.
Payment. Trustor shall pay when due (and in all events at least ten
(10) days prior to delinquency) all taxes, special taxes, assessments,
charges (including water and sewer), fines and impositions levied against or
on account of the Property, and shall pay when due all claims for work
done on or for services rendered or material furnished to the Property.
Trustor shall maintain the Property free of all liens having priority over or
equal to the interest of Lender under this Deed of Trust, except for the lien
of taxes and assessments not due and except as otherwise provided in this
Deed of Trust.
Right To Contest. Trustor may withhold payment of any tax,
assessment, or claim in connection with a good faith dispute over the
obligation to pay, so long as Lender's interest in the Property is not
jeopardized. If a lien arises or is filed as a result of nonpayment, Trustor
shall within thirty (30) days after the lien arises or, if a lien is filed,
within thirty (30) days after Trustor has notice of the filing, secure the
discharge of the lien, or if requested by Lender, deposit with Lender cash or a
sufficient corporate surety bond or other security satisfactory to Lender in
an amount sufficient to discharge the lien plus any costs and attorneys' fees
or other charges that could accrue as a result of a foreclosure or sale under
the lien. In any contest, Trustor shall defend itself and Lender and shall
satisfy any adverse judgment before enforcement against the Property.
Trustor shall name Lender as an additional oblige under any surety bond
furnished in the contest proceedings.
Evidence of Payment. Trustor shall upon demand furnish to Lender
satisfactory evidence of payment of the taxes or assessments and shall
authorize the appropriate governmental official to deliver to Lender at any
time a written statement of the taxes and assessments against the Property.
Notice of Construction. Trustor shall notify Lender at least fifteen
(15) days before any work is commenced, any services are furnished, or
any materials are supplied to the Property, if any mechanic's lien, material
men's lien, or other lien could be asserted on account of the work,
services, or materials. Trustor will upon request of Lender famish to
Lender advance assurances satisfactory to Lender that Trustor can and will
pay the cost of such improvements.
PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the
Property are a part of this Deed of Trust.
Maintenance of Insurance. Trustor shall procure and maintain
policies of fire insurance with standard extended coverage endorsements on
a replacement basis for the full insurable value covering all improvements
on the Real Property in an amount sufficient to avoid application of any
coinsurance, clause, and with a standard mortgagee clause in favor of
Lender, together with such other insurance, including but not limited to
hazard, liability, and business interruption, as Lender may reasonably
require. Notwithstanding the foregoing, in no event shall Trustor be
required to provide hazard insurance in excess of the replacement value of
the improvements on the Real property. Policies shall be written in form,
amounts, coverages and basis reasonably acceptable to lender and issued by
a company or companies reasonably acceptable to Lender. Trustor, upon
request of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be canceled of diminished without at
least ten (10) days' prior written notice to Lender. Should the Real
Property at any time become located in an area designated by the Director
of the Federal Emergency Management Agency as a special flood hazard
area, Trustor agrees to obtain and maintain Federal Flood Insurance to the
extent such insurance is required and is or becomes available, for the term
of the loan and for the full unpaid principal balance of the loan, or the
maximum limit of coverage that is available, whichever is less.
Application of Proceeds. Trustor shall promptly notify Lender of
any loss or damage to the Property. Lender may make proof of loss if
Trustor fails to do so within fifteen (15) days of the casualty. If in Lender's
sole judgment Lender's security interest in the Property has been impaired,
Lender may, at its election, receive and retain the proceeds and apply the
proceeds to the reduction of the Indebtedness, payment of any lien affecting
the Property, or the restoration and repair of the Property. If the proceeds
are to be applied to restoration and repair, Trustor shall repair or replace
the damaged or destroyed Improvements in a manner satisfactory to
Lender. Lender shall, upon satisfactory proof of such expenditure, pay or
reimburse Trustor from the proceeds for the reasonable cost of repair or
restoration if trustor is not in default under this Deed of Trust. Any
proceeds which have not been disbursed within 180 days after their receipt
and which Lender has not committed to the repair or restoration of the
Property shall be used first to pay any amount owing to Lender under this
Deed of Trust, then to pay accrued interest, and the remainder, if any, shall
be applied to the principal balance of the Indebtedness. If Lender holds any
proceeds after payment in full of the Indebtedness, such proceeds shall be
paid to Trustor as Trustor's interests may appear.
Unexpired Insurance at Sale. Any unexpired insurance shall insure
to the benefit of, and pass to, the purchaser of the Property covered by this
Deed of Trust at any trustee's sale or other sale held under the provisions
of this Deed of Trust, or at any foreclosure sale of such Property.
Trustor's Report on Insurance. Upon request of Lender, however
not more than once a year, Trustor shall furnish to Lender a report on each
existing policy of insurance showing: (a) the name of the insurer; (b) the
risks insured; (c) the amount of the policy; (d) the property insured, the
then current replacement value of such property, and the manner of
determining that value; and (e) the expiration date of the policy. Trustor
shall, upon request of Lender, have an independent appraiser satisfactory to
Lender determine the cash value replacement cost of the Property.
EXPENDITURES BY LENDER. If Trustor fails to comply with any
provision of this Deed of Trust, or if any action or proceeding is
commenced that would materially affect Lender's interests in the Property,
Lender on Trustor's behalf may, but shall not be required to, take any
action that Lender deems appropriate. Any amount that Lender expends in
so doing will bear interest at the rate charged under the Note from the date
incurred or paid by lender to the date of repayment by Trustor. All such
expenses, at Lender's option, will (a) be payable on demand, (b) be added
to the balance of the Note and be apportioned among and be payable with
any installment payments to become due during either (i) the term of any
applicable insurance policy or (ii) the remaining term of the Note, or (c) be
treated as a balloon payment which will be due and payable at the Note's
maturity. This Deed of Trust also will secure payment of these amounts.
The rights provided for in this paragraph shall be in addition to any other
rights or any remedies to which Lender may be entitled on account of the
default. Any such action by Lender shall not be construed as curing the
default so as to bar Lender from any remedy that it otherwise would have
had.
WARRANTY; DEFENSE OF TITLE. The following provisions relating to
ownership of the Property are a part of this Deed of Trust.
Title. Trustor warrants that: (a) Trustor holds good and marketable
title of record to the Property in fee simple, free and clear of all liens and
encumbrances other than those set forth in the Real Property description or
in any title insurance policy, title report, or final title opinion issued in
favor of, and accepted by, Lender in connection with this Deed of Trust,
and (b) Trustor has the full right, power, and authority to execute and
deliver this Deed of Trust to Lender.
Defense of Title. Subject to the exception in the paragraph above,
Trustor warrants and will forever defend the title to the Property against
the lawful claims of all persons. In the event any action or proceeding is
commenced that questions Trustor's title or the interest of Trustee or
Lender under this Deed of Trust, Trustor shall defend the action at
Trustor's expense. Trustor may be the nominal party in such proceeding,
but Lender shall be entitled to participate in the proceeding and to be
represented in the proceeding by counsel of Lender's own choice, and
Trustor will deliver, or cause to be delivered, to Lender such instruments
as Lender may request from time to time to permit such participation.
Compliance With Law. Trustor warrants that the Property and
Trustor's use of the Property complies with all existing applicable laws,
ordinances, and regulations of governmental authorities.
CONDEMNATION. The following provisions relating to condemnation
proceedings are a part of this Deed of Trust.
Application of Net Proceeds. If all or any part of the Property is
condemned by eminent domain proceedings or by any proceeding or
purchase in lieu of condemnation, Lender may at its election require that all
or any portion of the net proceeds of the award be applied to the
Indebtedness or the repair or restoration of the Property. The net proceeds
of the award shall mean the award after payment of all reasonable costs,
expenses, and attorneys' fees incurred by Trustee or Lender in connection
with the condemnation.
Proceedings. If any proceeding in condemnation is filed, trustor
shall promptly notify Lender in writing, and trustor shall promptly take
such steps as may be necessary to defend the action and obtain the award.
Trustor may be the nominal party in such proceeding, but Lender shall be
entitled to participate in the proceeding and to be represented in the
proceeding by counsel of its own choice, and Trustor will deliver or cause
to be delivered to Lender such instruments as may be requested by it from
time to time to permit such participation. Further in connection with the
above referenced right, Trustor may be a party to the action or proceeding
involved, and if so, Lender may be represented by counsel also
representing Trustor and mutually acceptable to Trustor and Lender, except
that in the case of (a) conflict of interest by said counsel in representing
both Trustor and Lender, (b) the existence of adverse interests between
Trustor and Lender, (c) said counsel not being reasonably satisfactory to
Lender or not defending Lender in a reasonably satisfactory manner, then
Lender shall have the right to be represented by counsel of its choice
without affecting or otherwise impairing any of its rights hereunder,
including without limitation the aforesaid right to charge Trustor with its
attorneys' fees and expenses.
IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES.
The following provisions relating to governmental taxes, fees and charges are
a part of this Deed of Trust.
Current Taxes, Fees and Charges. Upon request by Lender, Trustor
shall execute such documents in addition to this Deed of Trust and take
whatever other action is requested by Lender to perfect and continue
Lender's lien on the Real Property. Trustor shall reimburse Lender for all
taxes, as described below, together with all expenses incurred in recording,
perfecting or continuing this Deed of Trust, including without limitation all
taxes, fees, documentary stamps, and other charges for recording or
registering this Deed of Trust.
Taxes. The following shall constitute taxes to which this section
applies: (a) a specific tax upon this type of Deed of Trust or upon all or any
part of the Indebtedness secured by this Deed of Trust; (b) a specific tax on
Trustor which Trustor is authorized or required to deduct from payments
on the Indebtedness secured by this type of Deed of Trust; (c) a tax on this
type of Deed of Trust chargeable against the Lender or the holder of the
Note; and (d) a specific tax on all or any portion of the Indebtedness or on
payments of principal and interest made by Trustor.
Subsequent Taxes. If any tax to which this section applies is enacted
subsequent to the date of this Deed of Trust, this event shall have the same
effect as an Event of Default (as defined below), and Lender may exercise any
or all of its available remedies for an Event of Default as provided below
unless Trustor either (a) pays the tax before it becomes delinquent,
or (b) contests the tax as provided above in the Taxes and Liens section and
deposits with Lender cash or a sufficient corporate surety bond or other
security satisfactory to Lender.
SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating
to this Deed of Trust as a security agreement are a part of this Deed of Trust.
Security Agreement. This instrument shall constitute a security
agreement to the extent any of the Property constitutes fixtures or other
personal property, and Lender shall have all of the rights of a secured party
under the Uniform Commercial Code as amended from time to time.
Security Interest. Upon request by Lender, Trustor shall execute
financing statements and take whatever other action is requested by Lender
to perfect and continue Lender's security interest in the Rents and Personal
Property. Trustor shall reimburse Lender for all expenses incurred in
perfecting or continuing this security interest. Upon default, Trustor shall
assemble the Personal Property in a manner and at a place reasonably
convenient to Trustor and Lender and make it available to Lender within
three (3) days after receipt of written demand from Lender.
Addresses. The mailing addresses of Trustor (debtor) and Lender
(secured party), from which information concerning the security interest
granted by this Deed of Trust may be obtained (each as required by the
Uniform Commercial Code), are as stated on the first page of this Deed of
Trust.
FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to
farther assurances and attorney-in-fact are a part of this Deed of Trust.
Further Assurances. At any time, and from time to time, upon
request of Lender, Trustor will make, execute and deliver, or will cause to
be made, executed or delivered, to Lender or to Lender's designee, and
when requested by Lender, cause to be filed, recorded, re-filed, or re-
recorded, as the case may be, at such time and in such offices and places as
Lender may deem appropriate, any and all such mortgages, deeds of trust,
security deeds, security agreements, financing statements, continuation
statements, instruments of further assurance, certificates, and other
documents as may, in the sole opinion of Lender, be necessary or desirable
in order to effectuate, complete, perfect, continue, or preserve (a) the
obligations of Trustor under the Note, this Deed of Trust, and the Related
Documents, and (b) the liens and security interests created by this Deed of
Trust as first and prior liens on the Property, whether now owned or
hereafter acquired by Trustor. Unless prohibited by law or agreed to the
contrary by Lender in writing, Trustor shall reimburse Lender for all costs
and expenses incurred in connection with the matters referred to in this
paragraph.
Attorney-In-Fact. If Trustor fails to do any of the things referred to
in the preceding paragraph, Lender may do so for and in the name of
Trustor and at Trustor's expense. For such purposes, Trustor hereby
irrevocably appoints Lender as Trustor's attorney-in-fact for the purpose of
making executing, delivering, filing, recording, and doing all other things
as may be necessary or desirable, in Lender's sole opinion, to accomplish
the matters referred to in the preceding paragraph.
FULL PERFORMANCE. If Trustor pays all the Indebtedness when due,
terminates the line of credit, and otherwise performs all the obligations
imposed upon Trustor under this Deed of Trust, Lender shall execute and
deliver to Trustee a request for full reconveyance and shall execute and
deliver to Trustor suitable statements of termination of any financing
statement on file evidencing Lender's security interest in the Rents and the
Personal Property. Lender may charge Trustor a reasonable reconveyance
fee at the time of reconveyance.
DEFAULT. Each of the following, at the option of Lender, shall constitute
an event of default ("Event of Default") under this Deed of Trust:
Default on Indebtedness. Failure of Trustor to make any payment
when due on the Indebtedness.
Default on Other Payments. Failure of Trustor within the time
required by this 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.
Compliance Default. Failure to comply with any other term,
obligation, covenant or condition contained in this Deed of Trust, the Note
or in any of the Related Documents.
Breaches. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Trustor under this Deed of Trust,
the Note or the Related Documents is, or at the time made or furnished
was, false in any material respect.
Insolvency. The insolvency of Trustor, appointment of a receiver
for any part of Trustor's property, any assignment for the benefit of
creditors, the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Trustor, or the dissolution or termination of
Trustor's existence as a going business (if Trustor is a business). Except to
the extent prohibited by federal law or California law, the death of Trustor
(if Trustor is an individual) also shall constitute an Event of Default under
this Deed of Trust.
Foreclosure, Forfeiture, etc. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Trustor 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 Trustor as to the
validity or reasonableness of the claim which is the basis of the foreclosure
or forfeiture proceeding, provided that Trustor gives Lender written notice
of such claim and furnishes reserves or a surety bond for the claim
satisfactory to Lender.
Breach of Other Agreement. Any breach by Trustor under the terms
of any other agreement between Trustor and Lender that is not remedied
within any grace period provided therein, including without limitation any
agreement concerning any indebtedness or other obligation of Trustor to
Lender, whether existing now or later.
Events Affecting Guarantor. Any of the preceding events occurs
with respect to any Guarantor of any of the Indebtedness or such Guarantor
dies or becomes incompetent or any Guarantor revokes any guaranty of the
Indebtedness.
RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any
Event of Default and at any time thereafter, Trustee or Lender, at its
option, may exercise any one or more of the following rights and remedies,
in addition to any other rights or remedies provided by law:
Foreclosure by Sale. Upon an Event of Default under this Deed of
Trust, Beneficiary may declare the entire Indebtedness secured by this
Deed of Trust immediately due and payable by delivery to Trustee of
written declaration of default and demand for sale and of written notice of
default and of election to cause to be sold the Property, which notice
Trustee shall cause to be filed for record. Beneficiary also shall deposit
with Trustee this Deed of Trust, the Note, other documents requested by
Trustee, and all documents evidencing expenditures secured hereby. After
the lapse of such time as may then be required by law following the
recordation of the notice of default, and notice of sale having been given
as then required by law, Trustee, without demand on Trustor, shall sell the
Property at the time and place fixed by it in the notice of sale, either as a
whole or in separate parcels, and in such order as it may determine, at
public auction to the highest bidder for cash in lawful money of the United
States, payable at time of sale. Trustee may postpone sale of all or any
portion of the Property by public announcement at such time and place of
sale, and from time to time thereafter may postpone such sale by public
announcement at the time fixed by the preceding postponement in
accordance with applicable law. Trustee shall deliver to such purchaser its
deed conveying the Property so sold, but without any covenant or
warranty, express or implied. The recitals in such deed of any matters or
facts shall be conclusive proof of the truthfulness thereof. Any person,
including Trustor, Trustee or Beneficiary may purchase at such sale. After
deducting all costs, fees and expenses of Trustee and of this Trust,
including cost of evidence of title in connection with sale, Trustee shall
apply the proceeds of sale to payment of: all sums expended under the
terms hereof, not then repaid, with accrued interest at the amount allowed
by law in effect at the date hereof, all other sums then secured hereby; and
the remainder, if any, to the person or persons legally entitled thereto.
Judicial Foreclosure. With respect to all or any part of the Real
Property, Lender shall have the right in lieu of foreclosure by power of
sale to foreclosure by judicial foreclosure in accordance with and to the full
extent provided by California Law.
UCC Remedies. With respect to all or any part of the Personal
Property, Lender shall have all the rights and remedies of a secured party
under the Uniform Commercial Code, including without limitation the right
to recover any deficiency in the manner and to the full extent provided by
California law.
Collect Rents. Lender shall have the right, without notice to
Trustor, to take possession of and manage the Property and collect the
Rents, including amounts past due and unpaid, and apply the net proceeds,
over and above Lender's costs, against the Indebtedness. In furtherance of
this right, Lender may require any tenant or other user of the Property to
make payments of rent or use fees directly to Lender. If the Rents are
collected by Lender, then Trustor irrevocably designates Lender as
Trustor's attorney-in-fact to endorse instruments received in payment
thereof in the name of Trustor and to negotiate the same and collect the
proceeds. Payments by tenants or other users to Lender in response to
Lender's demand shall satisfy the obligations for which the payments are
made, whether or not any proper grounds for the demand existed. Lender
may exercise its rights under this subparagraph either in person, by agent,
or through a receiver.
Appoint Receiver. Lender shall have the right to have a receiver
appointed to take possession of all or any part of the Property, with the
power to protect and preserve the Property, to operate the Property
preceding foreclosure or sale, and to collect the Rents from the Property
and apply the proceeds, over and above the cost of the receivership, against
the indebtedness. The receiver may serve without bond if permitted by law.
Lender's right to the appointment of a receiver shall exist whether or not
the apparent value of the Property exceeds the indebtedness by a substantial
amount. Employment by Lender shall not disqualify a person from serving
as a receiver.
Tenancy at Sufferance. If Trustor remains in possession of the
Property after the Property is sold as provided above or Lender otherwise
becomes entitled to possession of the Property upon default of Trustor,
Trustor shall become a tenant at sufferance of Lender or the purchaser of
the Property and shall, at Lender's option, either (a) pay a reasonable rental
for the use of the Property, or (b) vacate the Property immediately upon the
demand of the Lender.
Other Remedies. Trustee or Lender shall have any other right or
remedy provided in this Deed of Trust or the Note or by law.
Notice of Sale. Lender shall give Trustor reasonable notice of the
time and place of any public sale of the Personal Property or of the time
after which any private sale or other intended disposition of the Personal
Property is to be made. Reasonable notice shall mean notice given at least
five (5) days before the time of the sale or disposition. Any sale of Personal
Property may be made in conjunction with any sale of the Real Property.
Sale of the Property. To the extent permitted by applicable law,
Trustor hereby waives any and all rights to have the Property marshaled. In
exercising its rights and remedies, the Trustee or Lender shall be free to
sell all or any part of the Property together or separately, in one sale or by
separate sales. Lender shall be entitled to bid at any public sale on all or
any portion of the Property.
Waiver; Election of Remedies. A waiver by any party of a breach of
a provision of this Deed of Trust shall not constitute a waiver or prejudice
the party's rights otherwise to demand strict compliance with that provision
or any other provision. Election by Lender to pursue any remedy provided
in this Deed of Trust, the Note, in any Related Document, or provided by
law shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Trustor under
this Deed of Trust after failure of Trustor to perform shall not affect
Lender's right to declare a default and to exercise any of its remedies.
Attorneys' Fees; Expenses. If Lender institutes any suit or action to
enforce any of the terms of this Deed of Trust, Lender shall be entitled to
recover such sum as the court may adjudge reasonable as attorneys' fees at
trial and on any appeal. Whether or not any court action is involved, all
reasonable expenses incurred by Lender which in Lender's opinion are
necessary at any time for the protection of its interest or the enforcement of
its rights shall become a part of the indebtedness payable on demand and
shall bear interest at the Note rate from the date of expenditure until repaid.
Expenses covered by this paragraph include, without limitation, however
subject to any limits under applicable law, Lender's attorneys' fees whether
or not there is a lawsuit, including attorneys' fees for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals and any anticipated post-judgment collection services,
the cost of searching records obtaining title reports (including foreclosure
reports), surveyors' reports, appraisal fees, title insurance, and fees for the
Trustee, to the extent permitted by applicable law. Trustor also will pay
any court costs, in addition to all other sums provided by law.
Rights of Trustee. Trustee shall have all of the rights and duties of
Lender as set forth in this section.
POWERS AND OBLIGATIONS OF TRUSTEE. The following provisions relating to the
powers and obligations of Trustee are part of this Deed of Trust.
Powers of Trustee. In addition to all powers of Trustee arising as a
matter of law, Trustee shall have the power to take the following actions
with respect to the Property upon the written request of Lender and
Trustor: (a) join in preparing and filing a map or plat of the Real Property,
including the dedication of streets or other rights to the public; (b) join in
granting any easement or creating any restriction on the Real Property; and
(c) join in any subordination or other agreement affecting this Deed of
Trust or the interest of Lender under this Deed of Trust.
Obligations to Notify. Trustee shall not be obligated to notify any
other party of a pending sale under any other trust deed or lien, or of any
action or proceeding in which Trustor, Lender, or Trustee shall be a party,
unless the action or proceeding is brought by Trustee.
Trustee. Trustee shall meet all qualifications required for Trustee
under applicable law. In addition to the rights and remedies set forth above,
with respect to all or any part of the Property, the Trustee shall have the
right to foreclose by notice and sale, and Lender shall have the right to
foreclose by judicial foreclosure, in either case in accordance with and to
the full extent provided by applicable law.
Successor Trustee. Lender, at Lender's option, may from time to
time appoint a successor Trustee to any Trustee appointed hereunder by an
instrument executed and acknowledged by Lender and recorded in the
office of the recorder of Alameda County, California. The instrument shall
contain, in addition to all other matters required by state law, the names of
the original Lender, Trustee, and Trustor, the book and page where this
Deed of Trust is recorded, and the name and address of the successor
trustee, and the instrument shall be executed and acknowledged by Lender
or its successors in interest. The successor trustee, without conveyance of
the Property, shall succeed to all the title, power, and duties conferred
upon the Trustee in this Deed of Trust and by applicable law. This
procedure for substitution of trustee shall govern to the exclusion of all
other provisions for substitution.
NOTICES TO TRUSTOR AND OTHER PARTIES. Any notice under this
Deed of Trust shall be in writing and shall be effective when actually
delivered or, if mailed, shall be deemed effective when deposited in the
United States mail first class, registered mail, postage prepaid, directed to
the addresses shown near the beginning of this Deed of Trust. Any party
may change its address for notices under this Deed of Trust by giving
formal written notice to the other parties, specifying that the purpose of the
notice is to change the party's address. All copies of notices of foreclosure
from the holder of any lien which has priority over this Deed of Trust shall
be sent to Lender's address, as shown near the beginning of this Deed of
Trust. For notice purposes, Trustor agrees to keep Lender and Trustee
informed at all time of Trustor's current address. Each Trustor requests
that copies of any notices of default and sale be directed to Trustor's
address shown near the beginning of this Deed of Trust.
STATEMENT OF OBLIGATION. Lender may collect a fee, in an amount
not to exceed the statutory maximum, for furnishing the statement of
obligation as provided by Section 2943 of the Civil Code of California.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Deed of Trust:
Amendments. This Deed of Trust, together with any Related Documents,
constitutes the entire understanding and agreement of the
parties as to the matters set forth in this Deed of Trust. No alteration of or
amendment to this Deed of Trust shall be effective unless given in writing
and signed by the party or parties sought to be charged or bound by the
alteration or amendment.
Annual Reports. If the Property is used for purposes other than
Trustor's residence, Trustor shall furnish to Lender, upon request, a
certified statement of net operating income received from the Property
during Trustor's previous fiscal year in such form and detail as Lender
shall require. "Net operating income" shall mean all cash receipts from the
Property less all cash expenditures made in connection with the operation
of the Property.
Acceptance by Trustee. Trustee accepts this Trust when this Deed
of Trust, duly executed and acknowledged, is made a public record as
provided by law.
Applicable Law. This Deed of Trust has been delivered to Lender
and accepted by Lender in the State of California. This Deed of Trust shall
be governed by and construed in accordance with the laws of the State of
California.
Caption Headings. Caption headings in this Deed of Trust are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Deed of Trust.
Merger. There shall be no merger of the interest or estate created
by this Deed of Trust with any other interest or estate in the Property at
any time held by or for the benefit of Lender in any capacity, without the
written consent of Lender.
Multiple Parties; Corporate Authority. All obligations of Trustor
under this Deed of Trust shall be joint and several, and all references to
Trustor shall mean each and every Trustor. This means that each of the
persons signing below is responsible for all obligations in this Deed of
Trust.
Severability. If a court of competent jurisdiction finds any provision
of this Deed of Trust to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforce ability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of the
Deed of Trust in all other respects shall remain valid and enforceable.
Successors and Assigns. Subject to the limitations stated in this
Deed of Trust on transfer of Trustor's interest, this Deed of Trust shall be
binding upon and inure to the benefit of the parties, their successors and
assigns. If ownership of the Property becomes vested in a person other than
Trustor, Lender, without notice to Trustor, may deal with Trustor's
successors with reference to this Deed of Trust and the indebtedness by
way of forbearance or extension without releasing Trustor from the
obligations of the Deed of Trust or liability under the indebtedness.
Time is of the Essence. Time is of the essence in the performance of this
Deed of Trust.
Waivers and Consents. Lender shall not be deemed to have waived
any rights under this Deed of Trust (or under the Related Documents)
unless such waiver is in writing and signed by Lender. No delay or
omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by any party of a
provision of this Deed of Trust shall not constitute a waiver of or prejudice
the party's right otherwise to demand strict compliance with that provision
or any other provision. No prior waiver by Lender, nor any course of
dealing between Lender and Trustor, shall constitute a waiver of any of
Lender's rights or any of Trustor's obligations as to any future
transactions. Whenever consent by Lender is required in this Deed of
Trust, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required.
EACH TRUSTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS DEED OF
TRUST, AND EACH TRUSTOR AGREES TO ITS TERMS.
TRUSTOR:
Westco Community Builders, Inc., a California Corporation
By: /s/ Jerry Finch
Jerry Finch , President
By: /s/ Britt Evans
Britt Evans, Executive Vice President
CONSTRUCTION LOAN AGREEMENT
BORROWER: Westco Community Builders, Inc., a California
Corporation
LENDER: Dover Investments Corporation
100 Spear St., #520
SAN FRANCISCO, CA 94105
THIS CONSTRUCTION LOAN GENERAL AGREEMENT between
Westco Community Builders, Inc., a California Corporation ("Borrower")
and Dover Investments Corporation a Delaware corporation ("Lender") is
made and executed on the following terms and conditions. Borrower has
applied to Lender for a loan up to the sum of U.S. $ 3,350,000.00 in order to
construct the improvements on the Real Property described below. Lender is
willing to lend the loan amount to Borrower solely under the terms and
conditions specified in this Agreement and in the Related Documents, to each
of which Borrower agrees. Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements as set forth in this
Agreement, and (b) all such Loans shall be and remain subject to the
following terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of the date set forth on the
signature page hereof and shall continue thereafter until all indebtedness has
been paid in full and all other obligations of Borrower hereunder have been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings
when used in this Agreement. Terms not otherwise defined in this Agreement
shall have the meanings attributed to such terms in the Uniform Commercial
Code or as specifically defined in the Related Documents. All references to
dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Construction Loan
Agreement, as this Construction Loan Agreement may be amended or
modified from time to time, together with all exhibits and schedules attached
to this Construction Loan Agreement from time to time.
Architecture Contract. The words "Architecture Contract" mean the
architect's contract relating to the Project, if any.
Borrower. The word "Borrower" means each and every person or entity
signing the Note, including without limitation Westco Community Builders,
Inc., a California Corporation
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for the Loan, whether real or
personal property, whether granted directly or indirectly, whether granted
now or in the future, whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever, whether
created by law, contract, or otherwise.
Construction Contract. The words "Construction Contract" mean and include
the contract between Borrower and the general contractor for the Project, if
any, and any subcontracts with subcontractors, materialmen, laborers, or any
other person or entity for performance of work on the Project or the delivery
of materials to the Project.
Event of Default. The words "Event of Default" mean and include any of
the Events of Default set forth below in the section titled "Events of
Default."
Grantor. The word "Grantor" means and includes each and all of the
persons or entities granting a Security Interest in any Collateral for the
Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation all
guarantors, sureties, and accommodation parties.
Improvements. The word "Improvements" means and includes without
limitation all existing and future buildings, structures, facilities, fixtures,
additions, and similar construction on the Property.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Loans relating to this Project and Property, together with all
other obligations, debts and liabilities of Borrower to Lender, or any one or
more of them relating to this Project and Property, as well as all claims by
Lender against Borrower, or any one or more of them relating to this Project
and Property; whether now or hereafter existing, voluntary or involuntary,
due or not due absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether Borrower
may be obligated as a guarantor, surety, or otherwise; whether recovery upon
such Indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such Indebtedness may be or hereafter may become
otherwise unenforceable.
Lender. The word "Lender" means Dover Investments Corporation, its
successors and assigns.
Loan. The word "Loan" means the loan made to Borrower under this
Agreement and the Related Documents as described below.
Loan Fund. The words "Loan Fund" mean the undisbursed proceeds of the
Loan under this Agreement together with any equity funds or other deposits
required from Borrower under this Agreement.
Note. The word "Note" means the secured promissory note dated October 15,
1998 in the original principal amount of $3,350,000 from Borrower to
Lender, together with all renewals of, extensions of, modifications of,
refinances of, consolidations of, and substitutions for the secured promissory
note. Plans and Specifications. The words "Plans and Specifications" mean the
plans and specifications for the Project which have been approved and
initialed by Lender, together with such changes and additions as may be
approved by Lender in writing.
Project. The word "Project" means the construction and completion of all
Improvements contemplated by this Agreement including without limitation
the erection of the building or structure, installation of equipment and
fixtures, landscaping, and all other work necessary to make the Property
usable and complete for the intended purposes.
Project Documents. The words "Project Documents" mean the Plans and
Specifications, all studies, data and drawings relating to the Project, whether
prepared by or for Borrower, the Construction Contract, the Architecture
Contract, and all other contracts and agreements relating to the Project or the
construction of the Improvements.
Property. The word "Property" means the Real Property together with all
Improvements, all equipment, fixtures, and other articles of personal property
now or subsequently attached or affixed to the real property, together with all
accessions, parts, and additions to, all replacements of, and all substitutions
for any of such property, and all proceeds (including insurance proceeds and
refunds of premiums) from any sale or other disposition of such property.
Real Property. The words "Real Property" mean the real property located in
the County of Alameda State of California, and legally described as:
LEGAL DESCRIPTION
REAL PROPERTY in the City of San Leandro, County of Alameda, State of
California, described as follows:
PARCEL ONE:
Beginning at a point on the Northeastern line of San Leandro Boulevard,
formerly Estudillo Street, distant thereon Northwesterly 110. 00 feet from the
point of intersection thereof with the Northwestern line of Williams Street, as
said streets are shown on the Map hereinafter referred to; running thence
Northeasterly alone the said line of San Leandro Boulevard 40.00 feet; thence
at right angles Northeasterly 150.00 feet; thence at right angles Southeasterly
40.00 feet; thence at right angles Southwesterly 150.00 feet to the point of
beginning.
Being a portion of Lots "G", "U', "M", "N", in Block 27 as said lots
and block are shown on that certain Map entitled, "Map of the Town of San
Leandro, County Seat of Alameda County", filed February 27, 1855, in Book
2 of Maps, Page 43, in the office of the County Recorder of Alameda County
PARCEL TWO:
Beginning at a point on the Northeastern line of San Leandro Boulevard,
formerly Estudillo Street, distant thereon Northwesterly 75.00 feet from the
point of intersection thereof with the Northwestern line of intersection thereof
with the Northwestern line of Williams Street, as said streets are shown on
the Map hereinafter referred to; running thence Northwesterly along the side
line of San Leandro Boulevard 35.00 feet; thence at right angles
Northeasterly 150.00 feet; thence at right angles Southeasterly 35.00 feet;
thence at right angles Southwesterly 150.00 feet to the point of beginning.
Being a portion of Lots "L", "M", and "N", in Block 27, as said lots and
block are shown on that certain Map entitled, "Map of the Town of San
Leandro, County Seat of Alameda County, " filed February 27, 1855 in Book
2 of Maps, Page 43, in the office of the County Recorder of Alameda County.
Excepting from Parcels One and Two the land described as Parcels A & B in
the Final Order of Condemnation, recorded September 12, 1983, Series No.
83-168337, Official Records.
A.P. No. 75-27-7-3
PARCEL THREE:
Lot 1, Tract 4879, filed June 5, 1984, Map Book 145, Pages 1 and 2, Alameda
County Records.
A.P. No. 75-27-8
PARCEL FOUR:
Those portions of lots H, I, J and K, Block 27, Map of Map of the Town of
San Leandro, etc., filed February 27, 1885, Map Book 1, Page 19, Alameda
County Records, described as follows:
Commencing at a point on the Western line of Carpentier Street, distant
thereon 98 feet Northerly from the point of intersection thereof with the
Northern line of Williams Street; running thence Northerly along said line of
Carpentier Street 52 feet; thence Westerly parallel with said line of Williams
Street 150 feet; thence Southerly parallel with said line old Carpentier Street
100 feet; thence Easterly parallel with said line of Williams Street 23 feet;
thence Northerly parallel with said line if Carpentier Street 48 feet; thence
Easterly parallel with said line of Williams Street 127 feet to the point of
beginning.
A.P. No. 75-27-2-1
Related Documents. The words "Related Documents" mean and include
without limitation all Promissory Notes, Credit Agreements, Loan
Agreements, Guaranties, Security Agreements, Mortgages, Deeds of Trust,
Environmental Indemnity Agreement, Assignment of Contracts
(Construction and Architecture), Agreement to Provide Insurance, and all
other instruments, agreements and documents, whether now or hereafter
existing, executed in connection with the Indebtedness or the earlier loan
between the parties relating to site work on the Property and the subdivision.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien
or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.
LOAN. The loan shall be in the principal sum set forth in the Note and shall
bear interest on so much of the principal sum as shall be advanced pursuant
to the terms of this Agreement and the Related Documents. The Loan shall
bear interest on each Advance from the date of the Advance in accordance
with the terms of the Note. Borrower shall use the Loan Funds solely for the
payment of (a) the costs of constructing the Improvements and equipping the
Project in accordance with the Construction Contract; (b) other costs and
expenses incurred or to be incurred in connection with the construction of the
Improvements and related purposes as Lender in its sole discretion shall
approve in accordance with the proformas attached hereto as Exhibit "A";
and (c) if permitted by Lender, interest due under the Note, including all
expenses and all loan and commitment fees described in this Agreement. The
loan is a construction loan to be drawn upon by Borrower only in compliance
with the proformas attached hereto as Exhibit "A" or as changed in writing
by mutual agreement.
FEES AND EXPENSES. Whether or not the Project shall be consummated,
Borrower shall assume and pay upon demand all out-of-pocket expenses
incurred by Lender in connection with the preparation of loan documents and
the making of the Loan, including without limitation the following: (a) all
closing costs, fees, and disbursements; (b) all title examination fees, title
insurance premiums, appraisal fees, survey costs, required fees, and filing
and recording fees. On funding the Loan, Borrower shall pay Lender a loan
origination fee equal to two percent (2%) of the principal amount of the Note.
NO CONSTRUCTION PRIOR TO RECORDING OF SECURITY DOCUMENT. Borrower will not
permit any work or materials to be furnished in connection with the Project
until (a) Borrower has signed the Related Documents; (b) Lender's mortgage or
deed of trust and other Security Interests in the Property have been duly
recorded and perfected; and (c) Lender has been provided evidence,
satisfactory to Lender, that Borrower has obtained all insurance required
under this Agreement or any Related Agreement and that Lender's liens on the
Property and Improvements are valid perfected first liens, subject only to
such exceptions, if any, acceptable to Lender.
REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to the best of its knowledge to Lender as of the date of this
Agreement and as of the date of each disbursement of Loan proceeds:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of California.
Borrower has the full power and authority to own its properties and to
transact the businesses in which it is presently engaged or presently proposes
to engage.
Authorization. The execution, delivery, and performance of this Agreement
by Borrower, to the extent to be executed, delivered or performed by
Borrower, have been duly authorized by all necessary action by Borrower; do
not require the consent or approval of any other person, regulatory authority
or governmental body; and do not conflict with, result in violation of, or
constitute a default under (a) any provision of its partnership agreement, or
any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or properties,
other than litigation, claims, or other events, if any, that have been disclosed
to and acknowledged by Lender in writing.
Title to Property. Borrower has, or on the date of first disbursement of Loan
proceeds will have, good and marketable title to the Property free and clear of
all defects, liens, and encumbrances, excepting only liens for taxes,
assessments, or governmental charges or levies not yet delinquent or payable
without penalty or interest, and such liens and encumbrances as may be
approved in writing by the Lender.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, et seq., the Resource Conservation and Recovery Act, 49 U.S.C.
Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the
California Health and Safety Code, Section 25 100, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (a) During the period of
Borrower's ownership of Borrower's properties, there has been no use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any person on, under, or
about any of the properties. (b) Borrower has no knowledge of, or reason to
believe that there has been (i) any use, generation, manufacture, storage,
treatment, disposal, release, or threatened release of any hazardous waste or
substance by any prior owners or occupants of any of the properties, or (ii)
any actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant, contractor,
agent or other authorized user of any of the properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste or
substance on, under, or about any of the properties; and any such activity
shall be conducted in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above. Borrower authorizes Lender and
its agents to enter upon the properties to make such inspections and tests as
Lender may deem appropriate to determine compliance of the properties with
this section of the Agreement. Any inspections or tests made by Lender shall
be for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any other
person. The representations and warranties contained herein are based on
Borrower's due diligence in investigating the properties for hazardous waste.
Borrower hereby (a) releases and waives any future claims against Lender for
indemnity or contribution in the event Borrower becomes liable for cleanup
or other costs under any such laws except as may be caused solely by Lender
or its agents, and (b) agrees to indemnify and hold harmless Lender against
any and all claims, losses, liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer resulting from a breach of
this section of the Agreement, except as may be caused solely by Lender or
its agents, or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to Borrower's
ownership or interest in the properties, whether or not the same was or should
have been known to Borrower. The provisions of this section of the
Agreement, including the obligation to indemnify, shall survive the payment
of the Indebtedness and the satisfaction of this Agreement and shall not be
affected by Lender's acquisition of any interest in any of the properties,
whether by foreclosure or otherwise.
Project Costs. The Project, as described in the proformas contained in Exhibit
"A" attached hereto, costs are true and accurate estimates of the costs
necessary to complete the Improvements in a good and workmanlike manner
according to the Plans and Specifications presented by Borrower to Lender,
and Borrower shall take all steps necessary to prevent the actual cost of the
Improvements from exceeding the Project costs.
Utility Services. All utility services appropriate to the use of the Project
after completion of construction are available at the boundaries of the
Property.
Access. The Property is contiguous to publicly dedicated streets, roads, or
highways providing access to the Property.
Assessment of Property. The Property is and will continue to be assessed and
taxed as an independent parcel by all governmental authorities.
Compliance with Governing Authorities. Borrower has examined and is
familiar with all the easements, covenants, conditions, restrictions,
reservations, building laws,
regulations, zoning ordinances, and federal, state, and local requirements
affecting the Project. The project will at all times and in all respects confirm
to and comply with the requirements of such easements, covenants,
conditions, restrictions, reservations, building laws, regulations, zoning
ordinances, and federal, state, and local requirements.
Survival of Representation and Warranties. Borrower understands and agrees
that Lender is relying upon the above representations and warranties in
extending Loan Advances to Borrower. Borrower further agrees that the
foregoing representations and warranties shall be continuing in nature and
shall remain in full force and effect until such time as Borrower's Loan and
Note shall be paid in full, or until this Agreement shall be terminated in the
manner provided above, whichever is the last to occur.
No Violation. The consummation of the transactions covered by this
Agreement and the payment and performance of all of the obligations in this
Agreement, the Note, the Deed of Trust, and the other Loan Documents, will
not result in any breach of, or constitute a default under, any mortgage, deed
of trust, lease, contract, loan or credit agreement, corporate charter, bylaws,
partnership agreement, trust agreement, or other instruments to which the
Borrower or any of its general partners is a party or by which it or they or the
Property may be bound or affected.
Permits. Borrower has, or prior to the commencement of construction of the
improvements will have:
(a) Received all requisite building permits and approvals from all
applicable Governmental Authorities;
(b) Filed or recorded all subdivision maps, plats, and other required
instruments; and
(c) To the best of Borrower's knowledge, comply with all other related
Governmental requirements.
Utilities. All utility services, including without limitation gas, electric,
water, storm and sanitary sewer, and telephone facilities, necessary for the
construction of the improvements and the operation for their intended
purposes:
(a) Are available at or within the boundaries of the Property, or
(b) All necessary steps have been taken by Borrower in all applicable
Governmental Authorities and utility companies to assure the complete
construction, installation, and availability of same on completion of the
improvements.
Roads. All roads necessary for the full use of the improvements for their
intended purposes:
(a) Have been completed, or
(b) The necessary rights-of-way have been acquired by or dedicated to
public use and accepted by appropriate Governmental Authorities, and
all other necessary steps have been taken by Borrower and such
Governmental Authorities to assure the complete construction,
installation, and availability of them on completion of the
improvements.
Adequacy of Loan. The aggregate amount of all loan proceeds, and any funds
held by Borrower, are sufficient to pay all costs of construction of the
Improvements in accordance with the Plans and Specifications.
Accuracy. All cash flow projections, pro forma reports, time-line reports,
documents, instruments, information, and forms of evidence delivered to
Lender concerning the loan or required by this Agreement or any of the other
loan documents are accurate, correct, and sufficiently complete to give
Lender true and accurate knowledge of their subject matter, and do not
contain any untrue statement of a material fact or omit any material fact
necessary to make them no misleading.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to
make the initial Advance and each subsequent Advance under this
Agreement shall be subject to the fulfillment to Lender's satisfaction of all of
the conditions set forth in this Agreement.
Approval of Contractors, Subcontractors, and Material men. Lender shall
have approved a list of all contractors employed in connection with the
construction of the Improvements, showing the name, address, and telephone
number of each contractor, a general description of the nature of the work to
be done, the labor and materials to be supplied, the names of material men, if
known, and the approximate dollar value of the labor, work, or materials with
respect to each contractor or material man. Lender shall have the right to
communicate with any person to verify the facts disclosed by the list or by
any application for any Advance, or for any other purpose.
Plans, Specifications, and Permits. Lender shall have received and accepted a
complete set of Plans and Specifications setting forth all Improvements for
the Project, and Borrower shall have furnished to Lender copies of all permits
and requisite approvals of any governmental body necessary for the
construction and use of the Project.
Architecture and Construction Contracts. Borrower shall have furnished in
form and substance satisfactory to Lender an executed copy of the
Architecture Contract and an executed copy of the Construction Contract and
Assignments of same to Lender within 45 days of the first (initial) advance
hereunder.
Budget and Schedule of Estimated Advances. Lender shall have approved
detailed budget and cash flow projections of total Project costs and a
schedule of the estimated amount and time of disbursements of each
Advance.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified authorization, duly
authorizing the execution and
delivery of the Loan documents, and consummation of the Project, and such
other authorizations and other documents as Lender in its sole discretion may
require.
Bond. If requested by Lender, Borrower shall have furnished a performance
and payment bond in an amount equal to 100% of the amount of the
Construction Contract, as well as a material men's and mechanics' payment
bond, with such riders and supplements as Lender may require, each in form
and substance satisfactory to Lender, naming the general contractor as
principal and Lender as an additional oblige. Any required bonds and the
contracts which they cover must be duly recorded or filed in accordance with
California Civil Code Section 3235, if required by Lender.
Survey. If requested by Lender, Borrower shall have furnished to Lender a
survey of recent date, prepared and certified by a qualified surveyor and
providing that the Improvements, if constructed in accordance with the Plans
and Specifications, shall lie wholly within the boundaries of the Property
without encroachment or violation of any zoning ordinances, building codes
or regulations, or setback requirements, together with such other information
as Lender in its sole discretion may require.
Zoning. Borrower shall have furnished evidence satisfactory to Lender that
the Property is duly and validly zoned for the construction, maintenance, and
operation of the Project.
Title Insurance. Borrower shall have provided to Lender an ALTA Lender's
extended coverage policy of title insurance with such endorsements as
Lender may require, issued by a title insurance company acceptable to
Lender and in a form, amount, and content satisfactory to Lender, insuring or
agreeing to insure that the Mortgage or Deed of Trust on the Property is or
will be upon recordation a valid first lien on the Property free and clear of
all defects, liens, encumbrances, and exceptions except those as specifically
accepted by Lender in writing. If requested by Lender, Borrower shall
provide to Lender, at Borrower's expense, a foundation endorsement (CLTA
102.5 or its equivalent) to the title policy upon the completion of each
foundation for the Improvements, showing no encroachments, and upon
completion an endorsement which insures the lien-free completion of the
Improvements (CLTA 10 1 series, as required by Lender). Insurance. Unless
waived by Lender in writing, Borrower shall have delivered to Lender the
following insurance policies or evidence thereof. (a) liability coverage in
amounts acceptable to Lender insuring Lender as mortgagee, together with
such other endorsements as may be required by Lender, including
stipulations that coverages will not be canceled or diminished without at least
ten (10) days' prior written notice to Lender; (b) flood insurance if required
by Lender or applicable law, and (c) all other insurance required by this
Agreement or by the Related Documents.
Payment of Fees and Expenses. Borrower shall have paid to Lender all
expenses specified in this Agreement as are then due and payable.
Satisfactory Construction. All work usually done at the stage of construction
for which disbursement is requested shall have been done in a good and
workmanlike manner and all materials and fixtures usually furnished and
installed at that stage of construction shall have been furnished and installed,
all in compliance with the Plans and Specifications.
Borrower shall also have furnished to Lender such proofs as Lender may
require to establish the progress of the work, compliance with applicable
laws, freedom of the Property from liens, and the basis for the requested
disbursement. Borrower shall pay the fees of Lender's inspectors, which fees
are currently charged at the rate of $ 100.00 per inspection.
Certification. Borrower shall have furnished to Lender a certification by an
engineer, architect, or other qualified inspector acceptable to Lender that the
construction of the Improvements has been completed to the extent
required for the disbursement and has complied and will continue to
comply with all applicable statutes, ordinances, codes, regulations, and
similar requirements.
Lien Waivers. Borrower shall have obtained and attached to each application
for an Advance, including the Advance to cover final payment to the general
contractor, executed acknowledgments of payments of all sums due and
releases of mechanics' and material men's liens, satisfactory to Lender, from
any party having lien rights, which acknowledgments of payment and
releases of liens shall cover all work, labor, equipment, materials done,
supplied, performed, or furnished prior to such application for an Advance.
Lack of Default. There shall not exist at the time of any Advance a condition
which would constitute an Event of Default under this Agreement.
DISBURSEMENT OF LOAN PROCEEDS. The following provisions relate
to the disbursement of funds from the Loan Fund.
Disbursement Schedule. The Loan Fund shall be disbursed in various draws
as requested, together with an initial disbursement.
Application for Advances. Each application for a disbursement of a portion
of the Loan Fund shall be stated on a standard AIA payment request form or
other form approved by Lender, executed by Borrower, and supported by
such evidence as Lender shall reasonably require. Borrower shall apply only
for disbursement with respect to work actually done by the general contractor
and for materials and equipment actually incorporated into the Project. Each
application for an Advance shall be deemed a certification of Borrower that
as of the date of such application, all representations and warranties
contained in the Agreement are true and correct, and that Borrower is in
compliance with all of the provisions of this Agreement.
Payments. At the sole option of Lender, Advances may be paid in the joint
names of Borrower and the general contractor, subcontractor(s), or
supplier(s) in payment of sums due under the Construction Contract. At its
sole option, Lender may directly pay the general contractor and any
subcontractors or other parties the sums due under the Construction Contract.
Borrower appoints Lender as its attorney-in-fact to make such payments.
This power shall be deemed to be coupled with an interest, shall be
irrevocable, and shall survive an Event of Default under this Agreement.
Projected Cost Overruns. If Lender at any time determines in its sole
discretion that the amount in the Loan Fund is insufficient, or will be
insufficient, to complete fully and to pay for the Project, then within ten (10)
days after receipt of a written request and supporting documentation from
Lender, Borrower shall deposit in the Loan Fund an amount equal to the
deficiency as determined by Lender. The judgment and determination of
Lender under this section shall be final and conclusive.
Final Payment to General Contractor. Upon completion of the Project and
fulfillment of the Construction Contract to the satisfaction of Lender and
provided sufficient Loan Funds are available, Lender shall make an Advance
to cover the final payment due to the general contractor upon delivery to
Lender of endorsements to the ALTA title insurance policy following the
posting of the completion notice, as provided under applicable law.
Construction shall not be deemed complete for purposes of final
disbursement unless and until Lender shall have received all of the following:
(a) Evidence satisfactory to Lender that all work under the Construction
Contract requiring inspection by any governmental authority with
jurisdiction has been duly inspected and approved by such authority,
that a certificate of occupancy has been issued, and that all parties
performing work have been paid, or will be paid, for such work;
(b) A certification by an engineer, architect, or other qualified inspector
acceptable to Lender that the Improvements have been completed
substantially in accordance with the Plans and Specifications and the
Construction Contract, that direct connection has been made to all
utilities set forth in the Plans and Specifications, and that the Project is
ready for occupancy; and
(c) Acceptance of the completed Improvements by Lender and Borrower.
Construction Default. If Borrower fails in any respect to comply with the
provisions of this Agreement or if construction ceases before completion
regardless of the reason, Lender, at its option, may refuse to make further
Advances, may accelerate the Indebtedness under the terms of the Note, and
without thereby impairing any of its rights, powers, or privileges, may enter
into possession of the construction site and perform or cause to be performed
any and all work and labor necessary to complete the Improvements,
substantially in accordance with the Plans and Specifications.
Damage or Destruction. If any of the Property or Improvements is damaged
or destroyed by casualty of any nature, within sixty (60) days thereafter
Borrower shall restore the Property and Improvements to the condition in
which they were before such damage or destruction with funds other than
those in the Loan Fund. Lender shall not be obligated to make disbursements
under this Agreement until such restoration has been accomplished.
Right to Advance Funds. When any event occurs that Lender determines may
materially endanger completion of the Project or the fulfillment of any
condition or covenant in this
Agreement, Lender may require Borrower to furnish, within ten (10) days
after delivery of a written request, adequate security to eliminate, reduce, or
indemnify Lender against, such danger. In addition, upon such occurrence,
Lender in its sole discretion may advance funds or agree to undertake to
advance funds to any party to eliminate, reduce or indemnify Lender against,
such danger or to complete the Project. All sums paid by Lender pursuant to
such agreements or undertakings shall be for Borrowers's account and shall
be without prejudice to Borrower's rights, if any, to receive such funds from
the party to whom paid. All sums expended by Lender in the exercise of its
option to complete the Project or protect Lender's interests shall be payable to
Lender on demand together with interest from the date of the Advance at the
rate applicable to the Loan. In addition, any Advance of funds under this
Agreement, including without limitation direct disbursements to the general
contractor or other parties in payment of sums due under the Construction
Contract, shall be deemed to have been expended by or on behalf of
Borrower and to have been secured by the Mortgage or Deed of Trust on the
Property.
LIMITATION OF RESPONSIBILITY. The making of any Advance by
Lender shall not constitute or be interpreted as either (a) an approval or
acceptance by Lender of the work done through the date of the Advance, or
(b) a representation or indemnity by Lender to any party against any
deficiency or defect in the work or against any breach of any contract.
Inspections and approvals of the Plans and Specifications, the Improvements,
the workmanship and materials used in the Improvements, and exercise of
any other right of inspection, approval, or inquiry granted to Lender in this
Agreement are acknowledged to be solely for the protection of Lender's
interests, and under no circumstances shall they be construed to impose any
responsibility or liability of any nature whatsoever on Lender to any party.
Neither Borrower nor any contractor, subcontractor, material man, laborer, or
any other person shall rely, or have any right to rely, upon Lender's
determination of the appropriateness of any Advance. No disbursement or
approval by Lender shall constitute a representation by Lender as to the
nature of the Project, its construction, or its intended use for Borrower or for
any other person, nor shall it constitute an indemnity by Lender to Borrower
or to any other person against any deficiency or defects in the Project or
against any breach of any contract.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with
Lender that, while this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all litigation and claims
and all threatened litigation and claims affecting Borrower or any Guarantor
which could materially affect the financial condition of Borrower or the
financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis, and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as Lender may
request from time to time.
Construction of the Project. Cause the Improvements to be constructed and
equipped in a diligent and orderly manner and in strict accordance with the
Plans and Specifications approved by Lender, the Construction Contract, and
all applicable laws, ordinances, codes, regulations, and rights of adjoining or
concurrent property owners. Loan Proceeds. Use the Loan Funds solely for
payment of bills and expenses directory related to the Project.
Workers' Compensation Coverage. Provide to Lender proof of the general
contractor's compliance with all applicable workers' compensation laws and
regulations with regard to all work performed on the Project.
Defects. Upon demand of Lender, promptly correct any defect in the
Improvements or any departure from the Plans and Specifications not
approved by Lender before further work shall be done upon the portion of the
Improvements affected.
Project Claims and Litigation. Promptly inform Lender of (a) all material
adverse changes in the financial condition of the general contractor; (b) any
litigation and claims, actual or threatened, affecting the Project or the
general contractor, which could materially affect the successful completion
of the Project or the ability of the general contractor to complete the
Project as agreed; and (c) any condition or event which constitutes a breach
or default under any of the Related Documents or any contract related to the
Project.
Payment of Claims and Removal of Liens. (a) Cause all claims for labor done
and materials and services furnished in connection with the Improvements to
be fully paid and discharged in a timely manner, (b) diligently file or procure
the filing of a valid notice of completion of the Improvements, or such
comparable document as may be permitted under applicable lien laws, (c)
diligently file or procure the filing of a notice of cessation, or such
comparable document as may be permitted under applicable lien laws, upon
the happening of cessation of labor on the Improvements for a continuous
period of thirty (30) days or more, and (d) take all reasonable steps necessary
to remove all claims of liens against the Property, the Improvements or any
part of the Property or Improvements, or any rights or interests appurtenant to
the Property or Improvements. Upon Lender's request, Borrower shall make
such demands or claims upon or against laborers, material men,
subcontractors, or other persons who have furnished or claim to have
furnished labor, services, or materials in connection with the Improvements,
which demands or claims shall under the laws of the State of California
require diligent assertions of lien claims upon penalty of loss or waiver
thereof. Borrower shall, within ten (10) days after the filing of any claim of
lien that is disputed or contested by Borrower, record or cause the general
contractor for the construction of the Improvements to record in the Office of
the Alameda County Recorder, a surety bond pursuant to California law
sufficient to release the claim of lien and, within five (5) days of Lender's
demand, make suitable provision by deposit of funds with Lender in an
amount satisfactory to Lender or by bond satisfactory to Lender for the
possibility that the contest will be unsuccessful. If Borrower is unable to
provide bonds utilizing its regular surety, the foregoing ten (10) and five (5)
day periods of limitation shall be increased to thirty
(30) days. If Borrower fails to remove any lien on the Property or
Improvements or provide a bond or deposit pursuant to this provision, Lender
may pay such lien, or may contest the validity of the lien, and Borrower shall
pay all costs and expenses of such contest, including Lender's reasonable
attorneys' fees.
Taxes and Claims. Pay and discharge when due all of Borrower's
indebtedness, obligations, and claims that, if unpaid, might become a lien or
charge upon the Property of Improvements; provided, however, that
Borrower shall not be required to pay and discharge any such indebtedness,
obligation, or claim so long as (a) its legality shall be contested in good
faith by appropriate proceedings, (b) the indebtedness, obligation, or claim
does not become a lien or charge upon the Property or Improvements, and (c)
Borrower shall have established on its books adequate reserves with respect
to the amount contested in accordance with generally accepted accounting
practices. If the indebtedness, obligation, or claim does become a lien or
charge upon the Property or Improvements, Borrower shall remove the lien
or charge as provided in the preceding paragraph.
Performance. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in all other instruments and agreements
between Borrower and Lender, and in all other loan agreements now or
hereafter existing between Borrower and any other party. Borrower shall
notify Lender immediately in writing of any default in connection with any
agreement.
Additional Assurances. Make, execute, and deliver to Lender such Security
Agreements, instruments, documents, and other agreements reasonably
necessary to document and secure the Loan and to perfect Lender's Security
Interests in the Property and Improvements.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender
that while this Agreement is in effect, Borrower shall not, without the prior
written consent of the Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (b) sell, transfer, mortgage, assign, pledge, lease,
grant a security in, or encumber any of Borrower's assets other than in the
normal course of Borrower's business or (c) sell with recourse any of
Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged or (b) cease
operation, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, dissolve or transfer or sell Collateral out of the
ordinary course of business.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise or
entity, or (c) incur any obligation as surety or guarantor other than in the
ordinary course of business.
Modification of Contract. Make or permit to be made any modification of the
Construction Contract.
Liens. Create or allow to be created any lien or charge upon the Property or
the Improvements.
GENERAL PROJECT PROVISIONS. The following provisions relate to the
construction and completion of the Project:
Change Orders. All requests for changes in the Plans and Specifications,
other than minor changes involving costs up to $5,000 per lot, must be in
writing, signed by Borrower and the architect, and delivered to Lender for
its approval. Borrower will not permit the performance of any work pursuant
to any change order or modification of the Construction Contract or any
subcontract without the written approval of Lender. Borrower will obtain any
required permits or authorizations from governmental authorities having
jurisdiction before approving or requesting a new change order.
Purchase of Materials; Conditional Sales Contracts. No materials, equipment,
fixtures, or articles of personal property placed in or incorporated into the
Project shall be purchased or installed under any Security Agreement or other
agreement whereby the seller reserves or purports to reserve title or the right
of removal or repossession, or the right to consider such items as personal
property after their incorporation into the Project, unless otherwise authorized
by Lender in writing.
Lender's Right of Entry and Inspection. Lender and its agents shall have at all
times the right of entry and free access to the Property and the right to
inspect all work done, labor performed, and materials furnished with respect
to the Project. Lender shall have unrestricted access to and the right to copy
all records, accounting books, contracts, subcontracts, bills, statements,
vouchers and supporting documents of Borrower relating in any way to the
Project.
Lender's Right to Stop Work. If Lender in good faith determines that any
work or materials do not conform to the approved Plans and Specifications or
sound building practices, or otherwise depart from any of the requirements of
this Agreement, Lender may require the work to be stopped and withhold
disbursements until the matter is corrected, provided that the non-conforming
work or materials pose a reasonable threat that the work will not be accepted
by the authorized agency within the County of Stanislaus. In such event,
Borrower will promptly correct the work to Lender's satisfaction. No such
action by Lender will affect Borrower's obligation to complete the
Improvements on or before the Completion Date. Lender is under no duty to
supervise or inspect the construction or examine any books and records. Any
inspection or examination by Lender is for the sole purpose of protecting
Lender's security and preserving Lender's rights under this Agreement. No
default of Borrower will be waived by any inspection by Lender. In no event
will any inspection by Lender be a representation that there has been or will
be compliance with the Plans and Specifications or that the construction is
free from defective materials or workmanship.
Indemnity. Borrower shall indemnify and hold Lender harmless from any and
all claims asserted against Lender or the Property by any person, entity, or
governmental body, or arising out of or in connection with the Property,
Improvements, or Project. Lender shall be entitled to appear in any action or
proceeding to defend itself against such claims, and all costs incurred by
Lender in connection with such defense, including attorneys' fees, shall be
paid by Borrower to Lender. Lender shall, in its sole discretion, be entitled to
settle or compromise any -asserted claims against it upon ten (10) days notice
to Borrower, and such settlement shall be binding upon Borrower for
purposes of this indemnification. All amounts paid by Lender under this
paragraph shall be secured by the Mortgage or Deed of Trust on the Property,
shall be deemed an additional principal Advance under the Loan, payable
upon demand, and shall bear interest at the rate applicable to the Loan.
Publicity. Lender may display a sign at the construction site informing the
public that Lender is the construction lender for the Project. Lender may
obtain other publicity in connection with the Project through press releases
and participation in ground-breaking and opening ceremonies and similar
events.
Actions. Lender shall have the right to commence, appear in, or defend any
action or proceeding purporting to affect the rights, duties, or liabilities
of the parties to this Agreement, or the disbursement of funds from the Loan
Fund. In connection with this right, Lender may incur and pay reasonable costs
and expenses, including, but not limited to, attorneys' fees, for both trial and
appellate proceedings. Borrower covenants to pay to Lender on demand all
such expenses, together with interest from the date Lender incurs the expense
at the rate specified in the Note, and Lender is authorized to disburse funds
from the Loan Fund for such purposes. Further in connection with the above
referenced right, Borrower may be a party to the action or proceeding
involved, and if so, Lender may be represented by counsel also representing
Borrower and mutually acceptable to Borrower and Lender, except that in the
case of (a) conflict of interest by said counsel in representing both Borrower
and Lender, (b) the existence of adverse interests between Borrower and
Lender, (c) said counsel not being reasonably satisfactory to Lender or not
defending Lender in a reasonably satisfactory manner, then Lender shall have
the right to be represented by counsel of its choice without affecting or
otherwise impairing any of its rights hereunder, including without limitation
the aforesaid right to charge Borrower with its attorneys' fees and expenses.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due
on the Loans.
Other Defaults. Failure of Borrower or any Guarantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure of
Borrower to comply with or to perform any other term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower
relating only to this Property and subdivision.
False Statements. Any warranty, representation, or statement made or
furnished to Lender by or on behalf of Borrower or any Guarantor under this
Agreement or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or lien)
at any time and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, insolvency, 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.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender. However, nothing herein
is intended to create cross-collateralization between the Loan herein and any
other loans between Lender and Borrower which exist relating to other
projects or property, but including the loan relating to site work on the
subdivision containing this Property.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor -of any of the Indebtedness or such Guarantor dies or
becomes incompetent, provided that such death or incompetence materially
affects Borrower's ability to complete the Project in the sole discretion of
Lender after giving Borrower thirty (30) days notice.
Change in Ownership. Any change in ownership of twenty-five percent
(25%) or more of the Borrower.
Breach of Construction Contract. The Improvements are not constructed in
accordance with the Plans and Specifications or in accordance with the terms
of the Construction Contract.
Cessation of Construction. Prior to the completion of construction of the
Improvements and equipping of the Project, the construction of the
Improvements or the equipping of the Project is abandoned or work thereon
ceases for a period of more than ten (10) days for any reason other than as
anticipated in the construction schedule, except for cessations beyond the
control of Borrower, its contractors, subcontractors or suppliers (e.g., acts of
any governmental authority, acts of a public enemy, unusually severe
weather, or fire not due to the negligence of Borrower, its contractors,
subcontractors or suppliers), or the Improvements are not completed for
purposes of final payment to the general contractor prior to the completion
date represented by Borrower to Lender, except as may be extended with
Lender's concurrence.
Transfer of Property. Sale, transfer, hypothecation, assignment, or
conveyance of the Property or the Improvements or any portion thereof or
interest therein by Borrower or any Grantor without Lender's prior written
consent other than the sale or individual finished homes to purchases as
contemplated by the release provided in the Deed of Trust.
Condemnation. All or any material portion of the Property is condemned,
seized, or appropriated without compensation, and Borrower does not within
thirty (30) days after such condemnation, seizure, or appropriation, initiate
and diligently prosecute appropriate action to contest in good faith the
validity of such condemnation, seizure, or appropriation.
EFFECT OF AN EVENT OF DEFAULT; REMEDIES. Upon the occurrence
of any Event of Default and at any time thereafter, Lender may, at its option,
but without any obligation to do so, and in addition to any other right Lender
may have, do any one or more of the following without notice to Borrower:
(a) Cancel this Agreement; (b) Institute appropriate proceedings to enforce
the performance of this Agreement; (c) Withhold further disbursement of
Loan Funds; (d) Expend funds necessary to remedy the default; (e) Take
possession of the Property and continue construction of the Project; (f)
Accelerate maturity of the Note and/or Indebtedness and demand payment of
all sums due under the Note and/or Indebtedness; (g) Bring an action on the
Note and/or Indebtedness; (h) Foreclose the Mortgage or Deed of Trust on
the Property in any manner available under law; and (i) Exercise any other
right or remedy which it has under the Note or Related Documents, or which
is otherwise available at law or in equity or by statute.
COMPLETION OF IMPROVEMENTS BY LENDER. If Lender takes
possession of the Property, it may take any and all actions necessary in its
judgment to complete construction of the Improvements, including but not
limited to making changes in the Plans and Specifications, work, or materials
and entering into, modifying or terminating any contractual arrangements,
subject to Lender's right at any time to discontinue any work without
liability. If Lender elects to complete the Improvements, it will not assume
any liability to Borrower or any other person for completing the
Improvements or for the manner or quality of construction of the
Improvements, and Borrower expressly waives any such liability. Borrower
irrevocably appoints Lender as its attorney-in-fact, with full power of
substitution, to complete the Improvements, at Lender's option, either in
Borrower's name or in its own name. In any event, all sums expended by
Lender in completing the construction of the Improvements will be
considered to have been disbursed to Borrower and will be secured by the
collateral for the Loan. Any such sums that cause the principal amount of the
Loan to exceed the face amount of the Note will be considered to be an
additional Loan to Borrower, bearing interest at the Note rate and being
secured by the collateral. For these purposes, Borrower assigns to Lender all
of its right, title and interest in and to the Project Documents; however
Lender will not have any obligation under the Project Documents unless
Lender expressly hereafter agrees to assume such obligations in writing.
Lender will have the right to exercise any rights of Borrower under the
Project Documents upon the occurrence of an Event of Default. All rights,
powers, and remedies of Lender under this Agreement are cumulative and
alternative, and are in addition to all rights which Lender may have under
applicable law.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:
Agency. Nothing in this Agreement shall be construed to constitute the
creation of a partnership or joint venture between Lender and Borrower or
any contractor. Lender is not an agent or representative of Borrower. This
Agreement does not create a contractual relationship with and shall not be
construed to benefit or bind Lender in any way with or create any
contractual duties by Lender to any contractor, subcontractor, material man,
laborer, or any other person.
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the party
or parties sought to be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of California. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of San
Francisco County, the State of California. This Agreement shall be governed
by and construed in accordance with the laws of the State of California.
Authority to File Notices. Borrower appoints and designates Lender as its
attorney-in-fact to file for record any notice that Lender deems necessary to
protect its interest under this Agreement. This power shall be deemed
coupled with an interest and shall be irrevocable while any sum or
performance remains due and owing under any of the Related Documents.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under this
Agreement shall be joint and several, and all references to Borrower shall
mean each and every Borrower. This means that each of the persons signing
below is responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's sale
or transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, only if related to Lender. Lender may
provide, without any limitation whatsoever, to any one or more purchasers, or
potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower
hereby waives any rights to privacy it may have with respect to such matters,
Borrower additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loans and will have all the rights granted under the participation agreement
or agreements governing the sale of such participation interests. Borrower
further waives all rights of offset or counterclaim that it may have now or
later against Lender (except that Borrower preserves its rights directly against
Lender for any breaches of its obligations by Lender) or against any
purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower's obligation under the
Loans irrespective of the failure or insolvency of any holder of any interest in
the Loans. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any personal
claims or defenses that Borrower may have against Lender.
Costs and Expenses. In the event of any default hereunder or under any of
the Related Documents, Borrower agrees to pay upon demand all of Lender's
out-of-pocket expenses, including attorneys' fees, incurred in connection with
the preparation, execution, enforcement and collection of this Agreement or
in connection with the Loans made pursuant to this Agreement. In the event
of any default hereunder or under any of the Related Documents, Lender may
pay someone else to help collect the Loans and to enforce this Agreement,
and Borrower will pay that amount. This includes, subject to any limits under
applicable law, Lender's attorneys' fees and Lender's legal expenses, whether
or not there is a lawsuit, including attorneys' fees for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Borrower also
will pay any court costs, in addition to all other sums provided by law.
Prevailing Party. Should any litigation be commenced between the parties
herein or any other party bound by this Agreement concerning this
Agreement or the rights and duties of any of them in relation thereto, the
party prevailing in such litigation shall be entitled to, in addition to such
other relief as may be granted, a reasonable sum as and for attorneys' fees in
such litigation, which shall be determined by the Court in such litigation or in
a separate action brought for that purpose.
Entire Agreement. This Agreement and the Related Documents constitute all
of the agreements between the parties relating to the Project and supersede all
other prior or concurrent oral or written agreements or understandings
relating to the Project.
Notices. All notices required to be given under this Agreement shall be given
in writing and shall be effective when actually delivered or when deposited in
the United States mail, first class, postage prepaid, addressed to the party to
whom the notice is to be given at the address shown above. Any party may
change its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is to
change the party's address. To the extent permitted by applicable law, if there
is more than one Borrower, notice to any Borrower will constitute notice to
all Borrowers. For notice purposes, Borrower agrees to keep Lender informed
at all times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance,
such finding shall not <PAGE>
render that provision invalid or unenforceable as to
any other persons or circumstances. If feasible, any such offending provision
shall be deemed to be modified to be within the
limits of enforce ability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.
Survival. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
Time is of the Essence. Time is of the essence in the performance of this
Agreement.
Waiver. Neither party shall be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by the other. No
delay or omission on the part of a party in exercising any right shall operate
as a waiver of such right or any other right. A waiver by a party of a
provision of this Agreement shall not prejudice or constitute a waiver of such
party's right otherwise to demand strict compliance with that provision or any
other provision of this Agreement. No prior waiver by Lender, nor any course
of dealing between Lender and Borrower, or between Lender and any Guarantor,
shall constitute a waiver of any of Lender's rights or of any obligations of
Borrower or of any Guarantor as to any future transactions. Whenever the
consent of a party is required under this Agreement, the granting of such
consent by such party in any instance shall not constitute continuing consent
in subsequent instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of such party.
BORROWER ACKNOWLEDGES HAVING READ ALL THE
PROVISIONS OF THIS CONSTRUCTION LOAN AGREEMENT, AND
BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
AS OF October 15,1998.
<PAGE>
BORROWER:
Westco Community Builders, Inc., a California Corporation
By: /s/ Jerry A. Finch
Jerry A. Finch, President
By: /s/ Britt Evans
Britt Evans, Executive Vice President
LENDER:
DOVER INVESTMENTS CORPORATION
By: /s/ Lawrence Weissberg
Its: CEO
Housing Capital Company
PROMISSORY NOTE
SECURED BY DEED OF TRUST
$10,500,000 San Mateo, California
FOR VALUE RECEIVED, the undersigned TRACY RESIDENTIAL
VENTURE PARTNERS, LLC, a California limited liability company
("Borrower"), promises to pay to the order of HOUSING CAPITAL
COMPANY, a Minnesota Partnership, its successors or assigns ("Lender"),
at its office in Costa Mesa, California, or at such other place as may be
designated in writing by Lender, the principal sum of TEN MILLION FIVE
HUNDRED THOUSAND AND NO/100THS DOLLARS ($10,500,000.00)
or so much thereof as may be disbursed by Lender to or for the benefit or
account of Borrower, with interest thereon at the rate of ONE AND ONE
QUARTER OF ONE PERCENT (1.25%) per annum (based on a 360 day year
and charged on the basis of actual days elapsed) in excess of the "Reference
Rate" in effect from time to time. As used herein, the term "Reference Rate"
means the rate of interest from time to time publicly announced by U.S. Bank
National Association, Minneapolis, Minnesota ("USB"), as its reference rate,
even though USB may lend to its customers at rates that are at, below or above
the reference rate. Any change in the rate of interest on this Note due to a
change in the Reference Rate shall become effective on the date each change
in the Reference Rate becomes effective. All sums owing hereunder are payable in
lawful money of the United States of America.
This Note is executed and delivered pursuant to that certain Borrowing Base
Revolving Loan Agreement of even date herewith between Borrower and
Lender (the "Loan Agreement") and is secured by, among other things, that
certain Construction Deed of Trust with Assignment of Leases and Rents,
Security Agreement and Fixture Filing of even date herewith made by Borrower
as Trustor in favor of Lender as Beneficiary (the "Deed of Trust").
This Note is a "Revolving Credit Note" and as such allows the undersigned to
borrow, repay, and re-borrow funds subject to the restrictions and limitations
set forth in the Loan Agreement. Lender shall enter in its ledgers and records
the amount of each Advance and any payments made thereon, and Lender is
authorized by Borrower to enter into Lender's records all such Advances and
payments; provided, however that the failure by Lender to make any such entry
or any error in making such entry shall not limit or otherwise affect the rights
of Lender or the duties and obligations of Borrower under this Note or the other
Loan Documents, and, in all events, the principal amounts owing by Borrower
in respect of the Loan shall be the aggregate amount of all Advances made by
Lender, less all payments of principal made thereon by Borrower. The terms of
this Note shall apply with equal force and effect to the total Loan or any
lesser amount then outstanding hereunder.
Interest accrued on this Note shall be due and payable on the first day of each
month commencing with the first month after the Effective Date (as defined in
the Loan Agreement).
The outstanding principal balance of this note, together with all accrued and
unpaid interest, shall be due and payable on the "Maturity Date", which is
defined as being twelve (12) months from the Effective Date as defined in the
Borrowing Base Revolving Loan Agreement, or any earlier date on which this
Note shall be required to be paid in full, whether by acceleration or otherwise.
Notwithstanding anything to the contrary contained herein, any outstanding
principal outstanding which is allocated to each Unit (as defined in the Loan
Agreement) shall be due and payable twelve (12) months from the date of the
initial advance for each Unit.
In order to assure timely payment of amounts and expenses due and owing to
Lender under the loan evidenced by this Note, Borrower hereby irrevocably
authorizes Lender to (a) disburse directly to Lender as provided in the Loan
Agreement or (b) directly debit the "Borrower's Funds Account", it any, (as
defined in the Loan Agreement) for payment when due of all such amounts and
expenses payable or reimbursable to Lender. Written notice of the amount and
purpose of any such direct debit shall be given to Borrower by Lender not less
than two (2) business days prior to its effective date; provided, however,
Lender's failure to give such notice shall not affect the validity of or
Borrower's authorization of such debit. Amounts and expenses subject to this
provision include, without limitation: accrued interest (after any available
interest reserve); principal; late charges; fixed rate fees; loan origination
fees; appraisal and cost engineering fees; legal fees (whether external or
internal); loan administration fees; and loan transaction fees. A monthly
statement showing the amounts and dates of such direct debits shall be
provided by Lender to Borrower.
If any monthly payment required hereunder is not paid on or before the fifteenth
(15th) calendar day of the month in which it becomes due, Borrower shall pay,
at Lender's option, a late or collection charge equal to four percent (4%) of
the amount of such unpaid monthly payment.
From and after the Maturity Date or the Conversion Maturity Date as the case
may be, or such earlier date as all sums owing on this Note become due and
payable by acceleration or otherwise, all sums owing on this Note shall bear
interest until paid in full at a rate equal to five percent (5%) per annum
(based on a 360 day year and charged on the basis of actual days elapsed) in
excess of the interest rate otherwise accruing under this Note (the "Default
Rate").
If: (a) Borrower shall fail to pay when due any sums payable hereunder; or (b)
a Default or Event of Default occurs under the Deed of Trust, Loan Agreement
or under any other "Loan Document" (as defined in the Loan Agreement); or (c)
any "Transfer" (as defined in the Deed of Trust) occurs,. other than as
expressly permitted by Lender in writing; THEN Lender may, at its sole option,
declare all sums owing under this Note immediately due and payable; provided
however, that if any document related to this Note provides for automatic
acceleration of payment of sums owing hereunder, all sums owing hereunder
shall be automatically due and payable in accordance with the terms of that
document.
If any attorney is engaged by Lender to enforce or construe any provision of
this Note or the Deed of Trust, or as a consequence of any Default or Event of
Default, with or without the filing of any legal action or proceeding, then
Borrower shall immediately pay on demand all reasonable attorneys' fees and
all other reasonable costs incurred by Lender, together with interest thereon
from the date of such demand until paid at the Default Rate of interest
applicable to the principal owing hereunder as if such unpaid attorneys' fees
and costs had been added to the principal.
No previous waiver and no failure or delay by Lender in acting with respect to
the terms of this Note or the Deed of Trust shall constitute a waiver of any
breach, default, or failure of condition under this Note, the Deed of Trust or
the obligations secured thereby. A waiver of any term of this Note, the Deed of
Trust or of any of the obligations secured thereby must be made in writing and
shall be limited to the express written terms of such waiver. In the event of
any inconsistencies between the terms of this Note and the terms of any other
document related to the loan evidenced by this Note, the terms of this Note
shall prevail.
Payments made under this Note shall be applied to any amounts owing
hereunder or under the "Loan Documents" (as defined in the Loan Agreement)
in such order and priority as Lender may elect in its sole discretion.
Borrower waives any right of offset it now has or may hereafter have against
Lender and agrees to make the payments called for herein without deduction or
counterclaim.
In no event whatsoever shall the amount of interest paid or agreed to be paid to
Lender pursuant to this Note or any of the Loan Documents exceed the highest
lawful rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Note or the other
Loan Documents shall involve exceeding the lawful rate of interest which a
court of competent jurisdiction may deem applicable hereto ("Excess Interest"),
then the obligation to be fulfilled shall be reduced to the highest lawful rate
of interest permissible under such law and if, for any reason whatsoever, Lender
shall receive as interest an amount which would be deemed Excess Interest, such
Excess Interest shall be applied to principal (whether or not due and payable)
and not to the payment of interest or refunded to Borrower provided this Note
has been paid in full. Neither Borrower nor any guarantor or endorser shall have
any action against Lender for any damages whatsoever arising out of the
payment or collection of any such Excess Interest.
If this Note is executed by more than one person or entity as Borrower, the
obligations of each such person or entity shall be joint and several. No person
or entity shall be a mere accommodation maker, but each shall be primarily and
directly liable hereunder. Except as otherwise provided in any loan agreement
executed in connection with this Note, Borrower waives: presentment; demand;
notice of dishonor; notice of default or delinquency; notice of acceleration;
notice of protest and nonpayment; notice of costs, expenses or losses and
interest thereon; notice of late charges; and diligence in taking any action to
collect any sums owing under this Note or in proceeding against any of the
rights or interests in or to properties securing payment of this Note. Time is
of the essence with respect to every provision hereof. This Note shall be
construed and enforced in accordance with the laws of the State of California,
except to the extent that Federal laws preempt the laws of the State of
California, and all persons and entities in any manner obligated under this
Note consent to the jurisdiction of any Federal or State Court within the
State of California having proper venue and also consent to service of
process by any means authorized by California (except the conflict of laws
provisions thereof) or Federal law.
Date: July 22, 1998 "Borrower"
TRACY RESIDENTIAL VENTURE PARTNERS, LLC, a
California limited liability company
BY: WESTCO COMMUNITY BUILDERS, INC., a
California Corporation Member
By: /s/ Glen Britton Evans, Jr.
Glen Britton Evans, Jr.
Its: Executive Vice President
By: /s/ Jerry A. Finch
Jerry A. Finch
Its: President
BY: DOVER INVESTMENTS CORP., a Delaware
Corporation Member
By: /s/ Lawrence Weissberg
Lawrence Weissberg
Its: President
HOUSING CAPITAL COMPANY
1825 South Grant Street, Suite 630
San Mateo, CA 94402
Attn: Loan Administration
Loan No. 619R-08-09
CONSTRUCTION DEED OF TRUST
with Assignment of Leases and Rents,
Security Agreement and Fixture Filing
THIS DEED OF TRUST IS A GLENBRIAR ESTATES DEED
LOAN AGREEMENT PROVIDES FOR BORROWING AND RE-BORROWING OF PRINCIPAL
AND INTEREST AND FOR A VARIABLE INTEREST RATE.
THE PARTIES TO THIS DEED OF TRUST, made as of July 22, 1998, are
TRACY RESIDENTIAL VENTURE PARTNERS, LLC, a California limited
liability company ("Trustor"), CHICAGO TITLE COMPANY ("Trustee"), and
HOUSING CAPITAL COMPANY, a Minnesota Partnership ("Beneficiary").
ARTICLE 1. GRANT IN TRUST
1.1 Grant. For the purposes and upon the terms and conditions in this
Deed of Trust, Trustor irrevocably grants, conveys and assigns to Trustee, in
trust for the benefit of Beneficiary, with power of sale and right of entry
and possession, all that real property located in the County of San Joaquin,
State of California, described on Exhibit A attached hereto ("the "Real
Property"), together with the following (all of which together with said
Real Property, is referred to herein as the "Subject Property");
(a) All appurtenances, easements, rights and rights of way appurtenant or
related thereto;
(b) All buildings, other improvements and fixtures now or hereafter located
thereon (the Improvements);
(c) All goods, building and other materials, supplies, work in process,
equipment, machinery, fixtures, furniture, furnishings, signs and other
personal property, wherever situated, which are or are to be incorporated
into, used in connection with, or appropriated for use on, the Real Property;
together with all inventory, accounts, accounts receivable, contract rights,
general intangibles, chattel paper, instruments, documents, notes, drafts,
letters of credit, insurance policies, insurance and condemnation awards and
proceeds, trade names, trademarks and services marks arising from or related
to the Real Property and any business conducted thereon by Trustor;
together with all books records and files relating to any of the foregoing;
(d) All sales contracts of any nature whatsoever now or hereafter executed
covering any portion of the Real Property or Improvements, together with
any modifications thereof, and also together with any and all deposits or
other payments made in connection therewith (subject, however, to any
applicable restrictions imposed by law);
(e) All permits, certificates, licenses, approvals, contracts, entitlements and
authorizations, however characterized, issued or in any way furnished for the
acquisition, construction, development, operation and use of the Real
Property or Improvements, including warranties and guaranties, and all
deposits made with or other security given to utility companies and
governmental agencies with respect to the escrowed for completion of
Real Property or Improvements, and all of Trustor's funds held back or
escrowed for completion of offsite improvements in the vicinity of the Real
Property or Improvements;
(f) All rights of Trustor under any construction contracts and subcontracts,
architects' and engineers' contracts, plans, specifications and drawings for
the Improvements;
(g) All rights of Trustor as declarant under any Declaration affecting any of
the Real Property;
(h) All insurance policies (and unearned premiums thereon) and all proceeds
of insurance required to be carried by the terms of the Loan Documents;
(i) Any evidence of title to the Subject Property provided by Trustor to
Beneficiary;
(j) Any bank account(s) into which proceeds of the Secured Obligations are
deposited by Beneficiary for the benefit of Trustor; and
(k) All interest or estate which Trustor may hereafter acquire in the
property described above, and all replacements, proceeds, additions and
accretions thereto. The listing of specific rights or property shall not be
interpreted as a limit of general terms.
1.2 Address. The address of the Subject Property (if known) is: not
applicable at this time. However, neither the failure to designate an address
nor any inaccuracy in the address designated shall affect the validity or
priority of the lien of this Deed of Trust on the Subject Property as
described on Exhibit A.
ARTICLE 2. OBLIGATIONS SECURED
2.1 Obligations Secured. Trustor makes this grant and assignment for the
purpose of securing the following obligations ("Secured Obligations"):
(a) Payment to Beneficiary of all sums at any time owing under a promissory
note ("Note") of even date herewith, in the principal amount of TEN
MILLION FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS
($10,500,000.00) executed by TRACY RESIDENTIAL VENTURE
PARTNERS, LLC, a California limited liability company, Trustor, and
payable to the order of Beneficiary; and
(b) Payment and performance of all obligations of TRACY RESIDENTIAL
VENTURE PARTNERS, LLC, a California limited liability company, under
that certain Deed of Trust (the "A&D Deed of Trust") dated March 18, 1998
and recorded April 28, 1998 as Instrument No. 98048795 in the Office of the
County Recorder of San Joaquin County, California; and
(c) Payment and performance of all obligations of Trustor under this Deed of
Trust and under any and all future deeds of trust which state that they are
future phase deeds of trust and/or Glenbriar Estates Deeds on or adjacent to
the Property; and
(d) Payment and performance of all obligations of Trustor under a Borrowing
Base Revolving Loan Agreement ("Loan Agreement") of even date herewith
by and between Trustor as Borrower, and Beneficiary, as "Lender and any
and all other "Loan Documents" (as defined in the Loan Agreement); and
(e) Payment and performance of all obligations, if any, which any rider
attached as an Exhibit to this Deed of Trust recites are secured hereby;
and
(f) Payment and performance of all future advances and other obligations that
the then record owner of all or part of the Subject Property may agree to pay
and/or perform (whether as principal, surety or guarantor) for the benefit of
Beneficiary, when such future advance or obligation is evidenced by a
writing which recites that it is secured by this Deed of Trust; and
recites that it is secured by this Deed of Trust; and
<PAGE>
(g) All modifications, extensions and renewals of any of the obligations
secured hereby, however evidenced, including, without limitation: (i)
modifications of the required principal payment dates or interest payment
dates or both, as the case may be, deferring or accelerating payment dates
wholly or partly; or (ii) modifications, extensions or renewals at a different
rate of interest whether or not in the case of a note, the modification,
extension or renewal is evidenced by a new or additional promissory note.
2.2 Obligations. The term "obligations" is used herein in its broadest and
most comprehensive sense and shall be deemed to include, without
limitation, all interest and charges, prepayment charges, late charges and
loan fees at any time accruing or assessed on any of the Secured
Obligations.
2.3 Incorporation. All terms of the Secured Obligations are incorporated
herein by this reference. All persons who may have or acquire an interest
in the Subject Property shall be deemed to have notice of the terms of the
Secured Obligations and to have notice, if provided therein, that: (a) the
Note or the Loan Agreement may permit borrowing, repayment and
re-borrowing so that repayments shall not reduce the amounts of the
Secured Obligations; and (b) the rate of interest on one or more Secured
Obligations may vary from time to time.
ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS
3.1 Assignment. Trustor hereby irrevocably assigns to Beneficiary all of
Trustor's right, title and interest in, to and under: (a) all leases of the
Subject Property, all licenses and agreements relating to the management,
leasing or operation of the Subject Property and all other agreements of any
kind relating to the use or occupancy of the Subject Property, whether now
existing or entered into after the date hereof ("Leases"); and (b) the rents,
issues and profits of the Subject Property, including, without limitation, all
mounts payable and all rights and benefits accruing to Trustor under the
Leases ("Payments"). The term Leases" shall also include all guarantees of
and security for the lessees' performance thereunder, and all amendments,
extensions, renewals or modifications thereto which are permitted hereunder.
This is a resent and absolute assignment, not an assignment for security
purposes only, and Beneficiary's right to he Leases and Payments is not
contingent upon, and may be exercised without possession of, the Subject
property.
3.2 Grant of License. Beneficiary confers upon Trustor a license
("License") to collect and retain the Payments as they become due and
payable, until the occurrence of a Default (as hereinafter defined). Upon a
Default, the License shall be automatically revoked and Beneficiary may
collect and apply the Payments pursuant to Section 6.4 without notice and
without taking possession of the Subject Property. Trustor hereby irrevocably
authorizes and directs the lessees under the Leases to rely upon and comply
with any notice or demand by Beneficiary for the payment to Beneficiary of
any rental or other sums which may at any time become due under the
Leases, or for the performance of any of the lessees' undertakings under the
Leases, and the lessees shall have no right or duty to inquire as to
whether any Default has actually occurred or is then existing hereunder.
Trustor hereby relieves the lessees from any liability to Trustor by reason of
relying upon and complying with any such notice or demand by Beneficiary.
3.3 Effect of Assignment. The foregoing irrevocable Assignment shall
not cause Beneficiary to be: (a) a mortgagee in possession; (b) responsible or
liable for the control, care, management or repair of the Subject Property or
for performing any of the terms, agreements, undertakings, obligations,
representations, warranties, covenants and conditions of the Leases; or (c)
responsible or liable for any waste committed on the Subject Property by the
lessees or any other parties; for any dangerous or defective condition of the
Subject Property; or for any negligence in the management, upkeep,
repair or control of the Subject Property resulting in loss or injury or death
to any Lessee, licensee, employee, invitee or other person. Beneficiary shall
not directly or indirectly be liable to Trustor or any other person as a
consequence of: (i) the exercise or failure to exercise any of the rights,
remedies or powers granted to Beneficiary hereunder; (ii)
the failure or refusal of Beneficiary to perform or discharge any obligation,
duty or liability of Trustor arising under the Leases.
<PAGE>
3.4 Representations and Warranties. Trustor represents and warrants
that: (a) all existing Leases are in full force and effect and are enforceable
in accordance with their respective terms, and no breach or default, or event
which would constitute a breach or default after notice or the passage of
time, or both, exists under any existing Leases; and (b) no rent or other
payment under any existing Lease has been paid by any lessee for more than
one (1) month in advance; and (c) none of the lessor's interests under any of
the Leases has been transferred or assigned.
3.5 Covenants. Trustor covenants and agrees at Trustor's sole cost and
expense to: (a) perform the obligations of lessor contained in the Leases and
enforce by all available remedies performance by the lessees of the
obligations of the lessees contained in the Leases; (b) give Beneficiary
prompt written notice of any default which occurs with respect to any of the
Leases, whether the default be that of the lessee or of the lessor; (c)
deliver to Beneficiary fully executed, counterpart original(s) of each and
every Lease if requested to do so; and (d) execute and record such additional
assignments of any Lease or specific subordinations of any Lease to the Deed
of Trust, in form and substance acceptable to Beneficiary, as Beneficiary may
request. Except with Beneficiary's prior written consent, or as otherwise
permitted by any provision of the Loan Agreement, Trustor shall not: (i)
enter into any Leases after the date of this Assignment; (ii) execute any
other assignment relating to any of the Leases; (iii) discount any rent or
other sums due under the Leases or collect the same in advance, other than to
collect rent one (1) month in advance of the time when it becomes due; (iv)
terminate, modify or amend any of the terms of the Leases or in any manner
release or discharge the lessees from any obligations thereunder; (v) consent
to any assignment or subletting by any lessee; or (iv) subordinate or agree
to subordinate any of the Leases to any other deed of trust or encumbrance.
Any such attempted action in violation of the provisions of this Subsection
shall be null and void.
3.6 Estoppel Certificates. Within thirty (30) days after request by
Beneficiary, Trustor shall deliver to Beneficiary and to any party designated
by Beneficiary estoppel certificates executed by Trustor and by each of the
lessees, in recordable form, certifying (if such be the case): (i) that the
foregoing assignment and the Leases are in full force and effect; (ii) the date
of each lessee's most recent payment of rent; (iii) that there are no defenses
or offsets outstanding, or stating those claimed by Trustor or lessees under the
foregoing assignment or the Leases, as the case may be; and (iv) any
other information reasonably requested by Beneficiary.
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 Security Interest. Trustor hereby grants and assigns to Beneficiary
as of the "Effective Date" (defined in the Loan Agreement) a security
interest, to secure payment and performance of all of the Secured
Obligations, in all of the Subject Property which is or may be held to be
personal property and in which Trustor now or at any time hereafter has any
interest ("Collateral"). As to all of the Subject Property which is or which
hereafter becomes a "fixture" under applicable law, this Deed of
Trust is to be recorded in the real property records and filed as a fixture
filing under Sections 9313 and 9402(6) of the California Uniform Commercial
Code, as amended or recodified from time to time, and is acknowledged and
agreed to be a "construction mortgage" under such Sections.
4.2 Representations and Warranties. Trustor represents and warrants
that: (a) Trustor has, or will have, good title to the Collateral; (b)
Trustor has not previously assigned or encumbered the Collateral, and no
financing statement covering any of the Collateral has been delivered to any
other person or entity; and (c) Trustor's principal place of business is
located at the address specified herein.
4.3 Rights of Beneficiary. In addition to Beneficiary's rights as a
"Secured Party" under the California Uniform Commercial Code, as amended
or recodified from time to time ("UCC"), Beneficiary may, but shall not be
obligated to, at any time without notice and at the expense of Trustor: (a)
give notice to any person of Beneficiary's rights hereunder and enforce such
rights at law or in equity; (b) insure, protect, defend and preserve the
Collateral or any rights or interests of Beneficiary therein; (c) inspect the
Collateral; and (d) endorse, collect and receive any right to payment of
money owing to Trustor under or from the Collateral. Notwithstanding the
above, in no event shall Beneficiary be deemed to have accepted any property
other than cash in satisfaction of any obligation of Trustor unless
Beneficiary shall make an express written election of said remedy underC
9505, or other applicable law.
4.4 Rights of Beneficiary on Default. Upon the occurrence of a Default
under this Deed of Trust, then in addition to all of Beneficiary's rights as a
"Secured Party" under the UCC or otherwise by law or under this Deed of
Trust:
(a) Beneficiary may (i) upon written notice, require Trustor to assemble any
or all of the Collateral and make it available to Beneficiary at a place
designated by Beneficiary; (ii) without prior notice, enter upon the Real
Property, the Improvements or any other place where any of the Collateral may
be located and take possession of, collect, sell, and dispose of any or all of
the Collateral, and store the same at locations acceptable to Beneficiary at
Trustor's expense; (iii) sell, assign and deliver at any place or in any
lawful manner all or any part of the Collateral and bid and become purchaser
at any such sales; and
(b) Beneficiary may, for the account of Trustor and at Trustor's expense: (i)
operate, use, consume, sell or dispose of the Collateral as Beneficiary deems
appropriate for the purpose of performing any or all of the Secured
Obligations; (ii) enter into any agreement, compromise, or settlement,
including insurance claims, which Beneficiary may deem desirable or proper
with respect to any of the Collateral; and (iii) endorse and deliver evidences
of title for, and receive, enforce and collect by legal action or
otherwise, all indebtedness and obligations now or hereafter owing to Trustor
in connection with or n account of any or all of the Collateral.
Notwithstanding any other provision hereof, Beneficiary shall not be deemed
to have accepted any property other than cash in satisfaction of any
obligation of Trustor to Beneficiary unless Trustor shall make an express
written election of said remedy under 9505, or other applicable law.
4.5 Power of Attorney. Upon ten (10) business days notice of the
necessity of a power of attorney, Trustor will appoint Beneficiary as Trustor's
attorney-in-fact (such agency being coupled with an interest), and as
such attorney-in-fact Beneficiary may, without the obligation to do so, in
Beneficiary's name, or in the name of Trustor, prepare, execute and file or
record financing statements, continuation statements, applications for
registration and like papers necessary to create, perfect or preserve any of
Beneficiary's security interests and rights in or to any of the Collateral, and,
upon a Default hereunder, take any other action required of Trustor;
provided, however, that Beneficiary as such attorney-in-fact shall be
accountable only for such funds as are actually received by Beneficiary.
4.6 Possession and Use of Collateral. Except as otherwise provided in
this Section or the other Loan Documents, so long as no Default exists under
this Deed of Trust or any of the Loan Documents, Trustor may possess, use,
move, transfer or dispose of any of the Collateral in the ordinary course of
Trustor's business and in accordance with the Loan Agreement.
ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES
5.1 Title. Trustor warrants that Trustor lawfully holds and possesses fee
simple title to the Subject Property without limitation on the right to
encumber, and that this Deed of Trust is a first and prior lien
on the Subject Property.
5.2 Taxes and Assessments. Subject to Trustor's rights to contest
payment of taxes as may be provided in the Loan Agreement, Trustor shall
pay prior to delinquency all taxes, assessments, levies and charges
imposed by any public or quasi-public authority or utility company which are
or which may become a lien upon or cause a loss in value of the Subject
Property or any interest therein. Trustor shall also pay prior
to delinquency all taxes, assessments, levies and charges imposed by any
public authority upon Beneficiary by reason of its interest in any Secured
Obligation or in the Subject Property, or by reason of any payment
made to Beneficiary pursuant to any Secured Obligation; provided however
Trustor shall have no obligation to pay taxes which may be imposed from
time to time upon Beneficiary and which are measured by and imposed upon
Beneficiary's net income.
5.3 Tax and Insurance Impounds. If Trustor should fail to pay when
due, then at Beneficiary's option and upon its demand, Trustor, shall, until all
Secured Obligations have been paid in full, pay to Beneficiary monthly,
annually or as otherwise directed by Beneficiary an amount estimated by
Beneficiary to be equal to: (i) all taxes, assessments and levies imposed by
any public or quasi-public authority or utility company which are
or may become a lien upon the Subject Property and will become due for the
tax year during which such payment is so directed; and 60 premiums for any
and all insurance required by the Loan Agreement next due. If Beneficiary
determines that any amounts paid by Trustor are insufficient for
the payment in full of such taxes, assessments, levies and/or insurance
premiums, Beneficiary shall notify Trustor of the increased
amounts required to pay all amounts due, whereupon Trustor shall pay to
Beneficiary within thirty (30) days thereafter the additional amount as stated
in Beneficiary's notice. All sums so paid shall not bear interest, except to the
extent and in any minimum amount required by law; and Beneficiary
shall, unless Trustor is otherwise in Default hereunder or under any Secured
Obligation, apply said funds to the payment of, or at the sole option of
Beneficiary release said funds to Trustor for the application to and
payment of, such sums, taxes, assessments, levies, charges, and insurance
premiums. Upon Default by Trustor hereunder or under any Secured
Obligation; Beneficiary may apply all or any part of said sums to any
Secured Obligation and/or to cure such Default, in which event Trustor shall
be required to restore all amounts so applied, as well as to cure any other
events or conditions of Default not cured by such application. Upon
assignment of this Deed of Trust, Beneficiary shall have the right to assign
all amounts collected and in its possession to its assignee whereupon
Beneficiary and its Trustee shall be released from all liability with respect
thereto. Within ninety-five (95) days following full repayment of the
Secured Obligations (other than full repayment of the Secured Obligations as
a consequence of a foreclosure or conveyance in lieu of foreclosure of the
liens and security interests securing the Secured Obligations) or
at such earlier time as Beneficiary may elect, the balance of all amounts
collected and in Beneficiary's possession shall be paid to Trustor and no other
party shall have any right or claim thereto.
5.4 Performance of Secured Obligations. Trustor shall promptly pay
and perform each Secured Obligation when due.
5.5 Liens, Encumbrances and Charges. Trustor shall immediately
discharge any lien not approved by Beneficiary in writing that has or may
attain priority over this Deed of Trust. Subject to the provisions of
the Loan Agreement regarding mechanics' liens, Trustor shall pay when due
all obligations secured by or reducible to liens and encumbrances which shall
now or hereafter encumber all or any part of the Subject Property or any
interest therein, whether senior or subordinate hereto.
5.6 Damages; Insurance and Condemnation Proceeds.
(a) The following (whether now existing or hereafter arising) are all
absolutely and irrevocably assigned by Trustor to Beneficiary and, at the
request of Beneficiary, shall be paid directly to Beneficiary: (i) all awards
of damages and all other compensation payable directly or indirectly by
reason of a condemnation or proposed condemnation for public or private use
affecting all or any part of, or any interest in, the Subject Property; (ii)
all other claims and awards for damages to, or decrease in value of, all or
any part of, or any interest in, the Subject Property; (iii) all proceeds of
any insurance policies payable by reason of loss sustained to all or any part
of the Subject Property; and (iv) all interest which may accrue on any of the
foregoing. Subject to applicable law, and without regard to any requirement
contained in Section 5.7(d), Beneficiary may at its discretion apply all or
any of the proceeds it receives to its expenses in settling, prosecuting or
defending any claim and may apply the balance to the Secured Obligations in
any order, and/or Beneficiary may release all or any part of the proceeds to
Trustor upon any conditions Beneficiary may impose. Beneficiary may commence,
appear in, defend or prosecute any assigned claim or action and may adjust,
compromise, settle and collect all claims and awards assigned to
Beneficiary; provided, however, in no event shall Beneficiary be responsible
for any failure to collect any claim or award, regardless of the cause of the
failure.
(b) Beneficiary shall permit insurance or condemnation proceeds held by
Beneficiary to be used for repair or restoration provided all of the following
have been satisfied: M the deposit with Beneficiary of such additional funds
which Beneficiary determines are needed to pay all cost of the repair or
restoration (including, without limitation, taxes, financing charges, insurance
and rent during the repair period);
(ii) establishment of an arrangement for lien releases and disbursement of funds
acceptable to Beneficiary; (iii) the delivery to Beneficiary of plans and
specifications for the work, a contract for the work signed by a contractor
acceptable to Beneficiary, a cost breakdown for the work and a payment and
performance bond for the work, all of which shall be acceptable to Beneficiary;
(iv) such reasonable conditions as Beneficiary may impose; and (v) the delivery
to Beneficiary of evidence acceptable to Beneficiary (aa) that upon completion
of the work, the size, capacity and total value of the Subject Property will
be at least as great as it was before the damage or condemnation occurred;
(bb) that there has been no material adverse change in the financial condition
or credit of Trustor since the date of this Deed of Trust; and (cc) of
satisfaction of any additional conditions that Beneficiary may reasonably
establish to protect its security. Trustor hereby acknowledges that the
conditions described above are reasonable.
5.7 Maintenance and Preservation of the Subject Property.
Subject to the provisions of the Loan Agreement, Trustor covenants: (a) to
insure the Subject Property against such risks as Beneficiary may
require and to comply with the requirements of any insurance companies
insuring the Subject Property; (b) to keep the Subject Property in good
condition and repair; (c) except with Beneficiary's prior written consent, not
to remove or demolish the Subject Property or any part thereof, not to alter,
restore or add to the Subject Property (except as expressly provided for in the
Loan Agreement) and not to initiate or acquiesce in any change in any zoning
or other land classification which affects the Subject Property; (d) to
complete or restore promptly and in good and workmanlike manner the
Subject Property, or any part thereof which may be damaged or destroyed,
without regard to whether Beneficiary elects to require that insurance
proceeds be used to reduce the Secured Obligations as provided in Section
5.6; (e) to comply with all laws, ordinances, regulations and standards, and
all covenants, conditions, restrictions and equitable servitude, whether public
or private, of every kind and character which affect the Subject Property and
pertain to acts committed or conditions existing thereon, including, without
limitation, any work, alteration, improvement or demolition mandated by
such laws, covenants or requirements; (f) not to knowingly commit or permit
waste of the Subject Property; (g) to do all other acts which from the
character or use of the Subject Property may be reasonably necessary to
maintain and preserve its value; (h) not to knowingly make any
use of the Subject Property which would invalidate any insurance thereon
which Trustor is required to carry pursuant to the Loan Agreement; and (i)
not to construct any improvements on the Real Property, except those
described in the Loan Agreement.
5.8 Defense and Notice of Losses, Claims and Actions. At Trustor's sole
expense, Trustor shall protect, preserve and defend the Subject Property and
title to and right of possession of the Subject Property, the security hereof
and the rights and powers of Beneficiary and Trustee hereunder against all
adverse claims. Trustor shall give Beneficiary and Trustee prompt notice in
writing of the assertion of any claim, of the filing of any action or
proceeding, of the occurrence of any damage to the Subject Property
and of any condemnation offer or action actually made or filed, and of any
Default hereunder, or any event which will become a Default hereunder after
notice and/or expiration of any cure period.
5.9 Acceptance of Trust; Powers and Duties of -Trustee. Trustee
accepts this trust when this Deed of Trust is recorded. From time to time
upon written request of Beneficiary and without affecting the personal
liability of any person for payment of any indebtedness or performance of
any obligations secured hereby, Trustee may, without liability therefor and
without notice: (i) reconvey all or any part of the Subject Property; (ii)
consent to the making of any map or plat thereof; and (iii) join in any grant
of easement hereon, any declaration of covenants and restrictions, or any
extension agreement or any agreement subordinating the lien or charge of
this Deed of Trust. Except as may be required by applicable law,
Trustee or Beneficiary may from time to time apply to any court of
competent jurisdiction for aid and direction in the execution of the trust
hereunder and the enforcement of the rights and remedies available
hereunder, and may obtain orders or decrees directing or confirming or
approving acts in the execution of said trust and the enforcement of said
remedies. Trustee has no obligation to notify any party of any
pending sale or any action or proceeding, including, without limitation,
actions in which Trustor, Beneficiary or Trustee shall be a party unless held
or commenced and maintained by Trustee under this Deed of Trust.
Trustee shall not be obligated to perform any act required of it hereunder
unless the performance of the act is requested in writing and Trustee is
reasonably indemnified and held harmless against loss, cost, liability or
expense.
5.10 Compensation: Exculpation; Indemnification.
(a) Trustor shall pay upon demand Trustee's fees and reimburse Trustee for
necessary expenses in the administration of this trust, including reasonable
attorneys' fees, together with interest at the "Default Rate" (as defined in the
Note) from the date funds were spent. Trustor shall pay to Beneficiary
reasonable compensation for services rendered concerning this Deed of
Trust, including without limit any statement of amounts owing under any
Secured Obligation. Beneficiary shall not directly or indirectly be liable to
Trustor or any other person as a consequence of (i) the exercise of the rights,
remedies or powers granted to Beneficiary in this Deed of Trust; (ii) the
failure or refusal of Beneficiary to perform or discharge any obligation or
liability of Trustor under any agreement related to the Subject Property or
under this Deed of Trust; or (iii) any loss sustained by Trustor or any third
party resulting from Beneficiary's failure to lease the Subject Property after
a default or from any other act or omission of Beneficiary in managing the
Subject Property after a Default unless the loss is caused by the gross
negligence or willful misconduct of Beneficiary and no such liability shall
be asserted against or imposed upon Beneficiary, and all such liability is
hereby expressly waived and released by Trustor.
(b) Trustor indemnifies Trustee, Beneficiary and their respective directors,
officers, agents, successors and assigns (including without limitation any
participants in the loan secured hereby) against, and holds Trustee,
Beneficiary and their respective directors, officers, agents, successors and
assigns (including without limitation any participants in the loan secured
hereby) harmless from, all losses, damages, liabilities, claims, causes of
action, judgments, fines, penalties, court costs, attorneys' fees and other
legal expenses, cost of evidence of title, cost of evidence of value, and other
expenses which they may suffer or incur: (i) by reason of this Deed of Trust;
(ii) by reason of the execution of this trust or in performance of any act
required or permitted hereunder or by law; (iii) as a result of any failure of
Trustor to perform Trustor's obligations; (iv) by reason of any alleged
obligation or undertaking on Beneficiary's part to perform or discharge any
of the representations, warranties, conditions, covenants or other obligations
contained herein or in any other document related to the Subject Property;
(v) as a result of the construction of or any failure to construct the
Improvements; (vi) as the result of any negligence or intentional wrongful
act or omission of Trustor; or (vii) as the result of any death, personal injury
or bodily injury occurring on or about the Real Property. The above
obligation of Trustor to indemnify and hold harmless shall survive the
release and cancellation of the Secured Obligations and the release and
reconveyance or partial release and reconveyance of this Deed of Trust.
(c) Trustor shall pay all amounts and indebtedness arising under this Section
5.10 immediately upon demand by Trustee or Beneficiary together with
interest thereon from the date the indebtedness arises at the rate of interest
applicable to the principal balance of the Note as specified therein.
5.11 Substitution of Trustees. From time to time, by a writing, signed and
acknowledged by Beneficiary and recorded in the Office of the Recorder
of the County in which the Subject Property is situated, Beneficiary may
appoint another trustee to act in the place and stead of Trustee or any
successor. Such writing shall set forth any information required by law-
The recordation of such instrument of substitution shall discharge
Trustee herein named and shall appoint the new trustee as the trustee
hereunder with the same effect as if originally named Trustee herein. A
writing recorded pursuant to the provisions of this Section 5.11 shall be
conclusive proof of the proper substitution of such new Trustee.
5.12 Transfer or Encumbrance of Property by Trustor. Trustor acknowledges
that: (a) the financial stability, development expertise and managerial
and marketing ability of Trustor were and are a substantial and material
consideration to Beneficiary and, in reliance thereon, Beneficiary has
agreed to make the loan to Trustor evidenced by the Loan Documents;
and (b) the transfer of possession of the Subject Property to anyone
other than an owner occupant of individual lots or units within the
subject property, or a change in the person or entity constructing and
developing the Subject Property may significantly and materially alter
or reduce Beneficiary's security for the Note. Accordingly, as a material
inducement to Beneficiary to enter into the transactions contemplated
by the Loan Documents, Trustor shall not transfer the Subject Property
or any portion thereof or interest therein, other than the sale and transfer
of Units to purchasers in the ordinary course of Trustor's business,
without the prior written consent of Beneficiary, except as may be
specifically permitted elsewhere herein. Beneficiary may grant or deny
such consent in its sole discretion and, if consent should be given, any
such transfer shall be subject to this Deed of Trust, and any
transferee shall assume all of Trustor's obligations hereunder and, agree
to be bound by all provisions and perform all obligations contained
herein. In the event of any such transfer without the written consent of
Beneficiary, Beneficiary may, at its option, without demand or notice,
declare all sums secured hereby immediately due and payable. Consent
to one such transfer shall not be deemed to be a waiver of the right to
require consent to future or successive transfers. As used herein,
"transfer" shall mean M the sale, agreement to sell, transfer or
conveyance of the Subject Property, or any portion thereof or interest
therein, including, without limitation, air rights and development rights,
whether voluntary, involuntary, by operation of law or otherwise, or the
lease of all or substantially all of the Subject Property, reasonably
necessary for the development of the Subject Property in compliance with the
Loan Agreement, the repair or replacement of any Collateral in the ordinary
course of business or the sale and transfer of Units to purchasers in the
ordinary course of Trustor's business; (ii) any transfer by way of
security, including the placing or permitting the placing on the Subject
Property of any mortgage, deed of trust, assignment of rents or other
security device; and (iii) if Trustor, or any person owning directly or
indirectly through one or more entities any interest in Trustor
individually and collectively a "Principal"), is a partnership, joint
venture, trust, closely-held corporation or other entity, the issuance, sale,
conveyance, transfer, disposition or encumbering of more than
twenty-five percent (25%) of any class of the currently issued and
outstanding stock or other beneficial interest of Trustor, or any Principal
or a change of any general partner or any joint venturer of Trustor or any
Principal, either voluntarily, involuntarily, or otherwise. For purposes of
this section, "closely-held corporation" shall mean any corporation not
listed on a national or regional stock exchange.
5.13 Releases, Extensions. Modifications and Additional Security. Without
notice to or the consent, approval or agreement of any persons or entities
having any interest at any time in the Subject Property or in any manner
obligated under the Secured Obligations ("Interested Parties"),
Beneficiary may, from time to time, release any person or entity from
liability for the payment or performance of any Secured Obligation, take
any action or make any agreement extending the maturity or otherwise
altering the terms or increasing the amount of any Secured Obligation,
or accept additional security or release all or a portion of the Subject
Property and other security for the Secured Obligations. None of the
foregoing actions shall release or reduce the personal liability of any of
said Interested Parties, or release or impair the priority of the lien of this
Deed of Trust upon the Subject Property.
5.14 Reconveyance. Upon Beneficiary's written request, Trustee shall
reconvey, without warranty, the Subject Property or that portion thereof
then held hereunder. To the extent permitted by law, the reconveyance
may describe the grantee as "the person or persons legally entitled
thereto" and the recitals of any matters or facts in any reconveyance
executed hereunder shall be conclusive proof of the truthfulness thereof.
Neither Beneficiary nor Trustee shall have any duty to determine the
rights of persons claiming to be rightful grantees of any reconveyance.
When the Subject Property has been fully reconveyed, the last such
reconveyance shall operate as a reassignment of all future rents, issues
and profits of the Subject Property to the person or persons legally
entitled thereto.
5.15 Subrogation. Beneficiary shall be subrogated to the lien of all
encumbrances, whether released of record or not, paid in whole or in
part by Beneficiary pursuant to this Deed of Trust or by the proceeds of
any loan secured by this Deed of Trust.
5.16 Right of Inspection. Beneficiary, its agents and employees, may enter
the Subject Property at any reasonable time for the purpose of inspecting
the Subject Property and ascertaining Trustor's compliance with the
terms hereof.
ARTICLE 6. DEFAULT PROVISIONS
6.1 Default. For all purposes hereof, the term "Default" shall mean (a) the
failure of Trustor to perform any material obligation hereunder, or the failure
to be true of any material representation or warranty of Trustor contained
herein and the continuance of such failure for ten (10) business days after
notice, or within any longer grace period, if any, allowed in the Loan
Agreement for such failure, or (b) the existence of any Default or Event of
Default as defined in the Note, Loan Agreement or any other Loan Document.
6.2 Rights and Remedies. At any time after Default, Beneficiary and
trustee shall each have all the following rights and remedies:
(a) With ten (10) business days notice, to declare all Secured Obligations
immediately due and payable;
(b) With ten (10) business days notice, and without releasing Trustor
from any Secured Obligation, and without becoming a mortgagee in possession,
to cure any breach or default of Trustor and, in connection therewith, to
enter upon the Subject Property and do such acts and things as Beneficiary
or Trustee deems necessary or desirable to protect the security hereof,
including, without limitation: (i) to appear in and defend any action or
proceeding purporting to affect the security of this Deed of Trust or the
rights or powers of Beneficiary or Trustee under this Deed of Trust; (ii) to
pay, purchase, contest or compromise any encumbrance, charge, lien or claim
of lien which, in the sole judgment of either Beneficiary or Trustee, is or
may be senior in priority to this Deed of Trust, the judgment of Beneficiary
or Trustee being conclusive as between the parties hereto; (iii) to
obtain insurance; (iv) to pay any premiums or charges with respect to
insurance required to be carried under this Deed of Trust; or (v) to employ
counsel, accountants, contractors and other appropriate persons;
(c) To commence and maintain an action or actions in any court of
competent jurisdiction to foreclose this instrument as a mortgage or to
obtain specific enforcement of the covenants of Trustor hereunder, and
Trustor agrees that such covenants shall be specifically enforceable by
injunction or any other appropriate equitable remedy and that for the
purposes of any suit brought under this subparagraph, Trustor waives the
defense of laches and any applicable statute of limitations;
(d) To apply to a court of competent jurisdiction for and obtain
appointment of a receiver of the Subject Property as a matter of strict right
and without regard to the adequacy of the security for the repayment of the
Secured Obligations, the existence of a declaration that the
Secured Obligations are immediately due and payable, or the filing of a
notice of default, and Trustor hereby consents to such appointment;
(e) To enter upon, possess, manage and operate the Subject Property or any
part thereof, to collect all rents, income and profits therefrom, to take and
possess all documents, books, records, papers and accounts of Trustor or the
then owner of the Subject Property, to make, terminate, enforce or
modify leases of the Subject Property upon such terms and conditions as
Beneficiary deems proper, and to make repairs, alterations and improvements
to the Subject Property as necessary, in Trustee's or Beneficiary's sole
judgment, to protect or enhance the security hereof;
(f) To execute a written notice of such Default and of its election to cause
the Subject Property to be sold to satisfy the Secured Obligations. As a
condition precedent to any such sale, Trustee shall give and record such
notice as the law then requires. When the minimum period of time required
by law after such notice has elapsed, Trustee, without notice to or demand
upon Trustor except as required by law, shall sell the Subject Property at the
time and place of sale fixed by it in the notice of sale, at one or
several sales, either as a whole or in separate parcels and in such manner and
order, all as Beneficiary in its sole discretion may determine, at public
auction to the highest bidder for cash, in lawful money of the United States,
payable at time of sale. Neither Trustor nor any other person or entity other
than Beneficiary shall have the right to direct the order in which the Subject
Property is sold. Subject to requirements and limits imposed by law, Trustee
may from time to time postpone sale of all or any portion of the Subject
Property by public announcement at such time and place of sale. Trustee
shall deliver to the purchaser at such sale a deed conveying the Subject
Property or portion thereof so sold, but without any covenant or warranty,
express or implied. The recitals in the deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including Trustee,
Trustor or Beneficiary may purchase at the sale; and
(g) To resort to and realize upon the security hereunder and any other
security now or later held by Beneficiary concurrently or successively and in
one or several consolidated or independent judicial actions or lawfully taken
non-judicial proceedings, or both, and to apply the proceeds received
upon the Secured Obligations all in such order and manner as Trustee and
Beneficiary, or either of them, determine in their sole discretion;
(h) To suspend or terminate, at its option, its obligation to make further
disbursements under the Loan Agreement; and
(i) To exercise any other rights or remedies available to Beneficiary at law,
in equity, by statute or otherwise.
If Beneficiary spends its funds in exercising any of its rights or remedies
hereunder, the amount of funds spent shall be payable to Beneficiary upon
demand, together with interest at the Default Rate from the date the funds were
spent. At any sale of the Subject Property held pursuant to Section 6.02(c)
or Section 6.02(f) above, Beneficiary may bid, as the equivalent of cash, the
amount of all or any of the Secured Obligations, including, without limitation,
attorneys' fees.
6.3 Application of Foreclosure Sale Proceeds. After deducting all costs,
fees and expenses of Trustee, and of this trust, including, without limitation,
cost of evidence of title and attorneys' fees in connection with sale,
Trustee shall apply all proceeds of any foreclosure sale: (i) to payment of all
sums expended by Beneficiary under the terms hereof and not then repaid,
with accrued interest at the rate of interest specified in the Note to be
applicable on or after maturity or acceleration of the Note, and to payment of
all other Secured Obligations, in any order Beneficiary may elect; and (ii) the
remainder, if any, to the, person or persons legally entitled thereto.
6.4 Application of Other Sums. All sums received by Beneficiary under
Section 3.2 or Section 6.2, less all reasonable costs and expenses incurred by
Beneficiary or any receiver under Section 3.2 or Section 6.2,
including, without limitation, reasonable attorneys' feds, shall be applied in
payment of the Secured Obligations in such order as Beneficiary shall
determine in its sole discretion; provided, however, Beneficiary shall
have no liability for funds not actually received by Beneficiary.
6.5 No Cure or Waiver. Neither Beneficiary's nor Trustee's nor any
receiver's entry upon and taking possession of all or any part of the Subject
Property, nor any collection of rents, issues, profits, insurance proceeds,
condemnation proceeds or damages, other security or proceeds of other
security, or other sums, nor the application of any collected sum to any
Secured Obligation, nor the exercise or failure to exercise of any
other right or remedy by Beneficiary or Trustee or any receiver shall cure or
waive any breach, Default or notice of default under this Deed of Trust, or
nullify the effect of any notice of default or sale (unless all Secured
Obligations then due have been paid and performed and Trustor has cured all
other defaults), or impair the status of the security, or prejudice Beneficiary
or Trustee in the exercise of any right or remedy, or be construed as an
affirmation by Beneficiary of any tenancy, lease or option or a subordination
of the lien of this Deed of Trust.
6.6 Payment of Costs. Expenses and Attorney's Fees. Trustor agrees to
pay to Beneficiary immediately and without demand all reasonable costs and
expenses incurred by Trustee and Beneficiary pursuant to subparagraphs (a)
through (g) inclusive of Section 6.2 (including, without limitation, court
costs and reasonable attorneys' fees, whether incurred in litigation or not)
with interest at the Default Rate from the date of expenditure until said sums
have been paid at the rate of interest applicable to the principal balance
of the Note as specified therein. In addition, Trustor shall pay to Trustee all
Trustee's fees hereunder and shall reimburse Trustee for all expenses incurred
in the administration of this trust, including, without limitation, any
attorneys' fees.
6.7 Power to File Notices and Cure Defaults. Trustor hereby Irrevocably
appoints Beneficiary and its successors and assigns, as its attorney-in-fact,
which agency is coupled with an interest, (a) to execute and/or record
any notices of completion, cessation of labor, or any other notices that
Beneficiary deems appropriate to protect Beneficiary's interest, (b) upon the
issuance of a deed pursuant to the foreclosure of this Deed of Trust or the
delivery of a deed in lieu of foreclosure, to execute all instruments of
assignment or further assurance with respect to the Leases and Payments in
favor of the grantee of any such deed, as may be necessary or desirable for
such purpose, (c) to prepare, execute and file or record financing statements,
continuation statements, applications for registration and like papers
necessary to create, perfect or preserve Beneficiary' security interests and
rights in or to any of the Collateral, and (d) upon the occurrence of an
event, act or omission which, with notice or passage of time or both, would
constitute a Default, Beneficiary may perform any obligation of Trustor
hereunder; provided, however that: (i) Beneficiary as such attorney-in-fact
shall only be accountable for such funds as are actually received
by Beneficiary; and (ii) Beneficiary shall not be liable to Trustor or any other
person or entity for any failure to act under this Section.
6.8 Restoration of Position. In case Beneficiary shall have undertaken to
enforce any right under this Deed of Trust by foreclosure, sale, entry or
otherwise, and such undertaking shall have been discontinued or
abandoned for any reason or shall have been determined adversely to
Beneficiary, then and in every such case Trustor, Trustee and Beneficiary
shall be restored to their former positions and rights hereunder with
respect to the Subject Property, and all rights, remedies, powers and security
of Beneficiary and Trustee shall continue in full force and effect, as if no
such proceedings had ever been initiated.
6.9 Evidence of Title. In the event of the occurrence of any Default under
this Deed of Trust, Beneficiary may procure evidence of title to the Subject
Property, including but not limited to an abstract of title or continuation
thereof or a title insurance policy or commitment therefor or extension
thereof, covering the Real Property, and/or chattel lien searches covering any
of the reminder of the Subject Property, all at the sole cost and expense of
Trustor, and, in case action is commenced to foreclose this Deed of Trust or to
sell the Subject Property, Trustor agrees that, in addition to the reasonable
attorneys' fees of Beneficiary (prior to trial, at trial and on appeal), it
will pay any court costs which may be incurred in connection therewith. The
reasonable costs of any such abstract of title, continuation, title insurance
policy, commitment or extension, and chattel lien searches, and all of such
court costs and reasonable attorneys' fees, together with interest thereon at
the Default Rate (as that term is defined in the Note) from the date
incurred, shall be charged and added to the indebtedness secured hereby and
shall be payable on demand.
ARTICLE 7. MISCELLANEOUS PROVISIONS
7.1 Additional Provisions. The Loan Documents contain or incorporate by
reference the entire agreement of the parties with respect to matters
contemplated herein and supersede all prior negotiations.
The Loan Documents grant further rights to Beneficiary and contain further
agreements and affirmative and negative covenants by Trustor which apply to
this Deed of Trust and to the Subject Property and such further rights
and agreements are incorporated herein by this reference.
7.2 Merger. No merger shall occur as a result of Beneficiary's acquiring
any other estate in, or any other lien on, the Subject Property unless
Beneficiary consents to a merger in writing.
7.3 Obligations of Trustor, Joint and Several. If more than one person has
executed this Deed of Trust as "Trustor", the obligations of all such persons
hereunder shall be joint and several.
7.4 Recourse to Sel2arate Property. Any married person who executes this
Deed of Trust as a Trustor agrees that any money judgment which Beneficiary
or Trustee obtains pursuant to the terms of this Deed of Trust or any other
obligation of that married person secured by this Deed of Trust may be
collected by execution upon that person's separate property, and any
community property of which that person is a manager.
7.5 Waiver of Marshalling Rights. Trustor, for itself and for all parties
claiming through or under Trustor, and for all parties who may acquire a lien
on or interest in the Subject Property, hereby waives all rights to have
the Subject Property and/or any other property which is now or later may be
security for any Secured Obligation ("Other Property") marshalled upon any
foreclosure of this Deed of Trust or on a foreclosure of any other security for
any of the Secured Obligations. Ben ' eficiary shall have the right to sell, and
any court in which foreclosure proceedings may be brought shall have the
right to order a sale of, the Subject Property and any or all of the Other
Property as a whole or in separate parcels, in any order that Beneficiary
may designate.
7.6 Rules of Construction. When the identity of the parties or other
circumstances make it appropriate the masculine gender includes the feminine
and/or neuter, and the singular number includes the plural. The term "Subject
Property means all and any part of the Subject property and any interest in
the Subject Property.
7.7 Successors in Interest. The terms, covenants, and conditions herein
contained shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties hereto; provided
however that this Section does not waive the provisions of Section 5.12.
7.8 Incorporation. Exhibit A, is attached, and is hereby incorporated into
this Deed of Trust by this reference.
7.9 Addresses: Request for Notice. Notice to Beneficiary shall be sent to
Beneficiary addressed to: HOUSING CAPITAL COMPANY, a Minnesota
Partnership, 1825 South Grant Street, Suite 630, San Mateo, California 94402,
Attn: Loan Administration, Loan #619R-08-09. Any Trustor whose address is set
forth below hereby requests that a copy of notice of default and notice of
sale be mailed to him at that address. Failure to insert an address shall
constitute a designation of Trustor's last known address as the address for
such notice. Correspondence to Trustee shall be addressed to: 501 West Weber
Avenue, Suite 300, Stockton, California 95203.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the
day and year set forth above.
Address "Trustor(s) "
15225 Wicks Boulevard TRACY RESIDENTIAL VENTURE PARTNERS,
San Leandro, CA 94577 LLC, a California limited liability company
BY: WESTCO COMMUNITY BUILDERS
INC., a California corporation,
Member
By: /s/ Glen Britton Evans, Jr.
Glen Britton Evans, Jr.
Its: Executive Vice President
By: /s/ Jerry A Finch
Jerry A Finch
Its: President
BY: DOVER INVESTMENTS CORP, a
Delaware Corporation, Member
INC., a California corporation,
Member
By: /s/ Lawrence Weissberg
Lawrence Weissberg
Its: President
EXHIBIT A
(Description of Property)
Exhibit A to DEED OF TRUST executed by TRACY RESIDENTIAL VENTURE PARTNERS,
LLC, a California limited liability company, as "Trustor" to CHICAGO TITLE
COMPANY as "Trustee' for the benefit of HOUSING CAPITAL COMPANY, a Minnesota
Partnership, as "Beneficiary", dated as of July 22, 1998.
Description of Property
That certain Real Property situated in the State of California, County of San
Joaquin, City of TRACY, described as follows:
LOTS 1 THROUGH 80 INCLUSIVE AS SHOWN UPON MAP ENTITLED TRACT NO. 2770
GLENBRIAR ESTATES UNIT NO. 2 FILED FOR RECORD JANUARY 30,1998 IN BOOK
OF MAPS AND PLATS, VOL. 33, PAGE 51, SAN JOAQUIN COUNTY RECORDS.
Housing Capital Company
BORROWING BASE REVOLVING LOAN AGREEMENT
Loan No. 619R-08-09
This Borrowing Base Revolving Loan Agreement (this "Agreement") is
made as of the 22nd day of July, 1998 by and between TRACY RESIDENTIAL
VENTURE PARTNERS, LLC, a California limited liability company
("Borrower"), and HOUSING CAPITAL COMPANY, a Minnesota Partnership
("Lender"), with respect to the following:
RECITALS
A. Borrower owns or intends to acquire certain real property in the
Subdivision (as hereinafter defined) located in California upon which Borrower
intends to construct detached single-family residential units,
B. Pursuant to the terms and subject to the conditions contained herein,
Lender has agreed to make available
to Borrower, and Borrower has agreed to obtain from Lender, a secured revolving
line of credit facility for the purpose of financing the construction of
detached single-family residential units on residential lots in the approved
Subdivision.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used herein (including any Exhibits attached hereto), the following terms
shall have the meanings set forth below (unless expressly stated to the
contrary):
"Advance" shall mean each advance of the Loan by Lender to Borrower pursuant
to the terms of this Agreement.
"Agreement" shall mean this Borrowing Base Revolving Loan Agreement, as it
may be amended, modified, extended, renewed, restated or supplemented from
time to time.
"Appraised Value Lot" shall mean, with respect to each Lot which constitutes
Eligible Collateral, the retail value of such Lot, as approved or determined by
Lender in its sole and absolute discretion after review of the Subdivision
Appraisal. Such Appraised Value-Lot will reflect any adjustments for deductions
or discounts reflected in the Subdivision Appraisal (i.e. a reduction to
reflect the Estimated Costs of Sale).
"Appraised Value Unit" shall mean, with respect to each Unit which constitutes
Eligible Collateral, the retail value of such Unit and its related Lot, as
approved or determined by Lender in its sole and absolute discretion after
review of the Subdivision Appraisal. Such Appraised Value-Unit will reflect
any adjustments for deductions or discounts reflected in the Subdivision
Appraisal (i.e. a reduction to reflect the Estimated Costs of Sale). Appraised
Value-Unit shall not reflect any options or upgrades.
"Arbitration Agreement" shall mean an agreement between Borrower and
Lender in substantially the form attached hereto as Exhibit A and otherwise in
form and substance satisfactory to Lender.
"Available Commitment" shall mean, as of each Borrowing Base Determination
Date, and as reflected on a Borrowing Base Certificate approved by Lender, the
lesser of: (i) the aggregate of the Maximum Subdivision Commitment Amount;
(ii) the aggregate of the Total Available-Unit for all Units and their
associated Lots that then constitute Eligible Collateral; or (iii) the
Maximum Facility Commitment Amount.
"Borrower's Funds" should mean the funds to be deposited by Borrower in the
Borrower's Funds Account pursuant to Section5.4(b) hereof.
"Borrower's Funds Account" shall mean a non-interest bearing account
maintained with Lender for the purpose of receiving Borrower's Funds and
making Advances.
"Borrowing Base Certificate" shall mean a certificate, in form and substance
attached hereto as-Exhibit D, showing for each Unit that then constitutes
Eligible Collateral, among other things, the following: (i) the Lot number as
indicated on the recorded plat of the Subdivision; (ii) the Unit plan type;
(iii) the Appraised Value-Unit; (iv) the Maximum Advance-Unit; (v) the Lot
Advance; (vi) the Total Construction Draw-Unit and the Unit Budget. Such
Borrowing Base Certificate shall be executed by the president, chief
financial officer, or other executive officer of Borrower and shall also
include (x) a certification that no Potential Default, or Event of Default
exists hereunder or under any of the other Loan Documents and (y) a
certification that Borrower is in compliance with all financial covenants set
forth in Section 7.16 as of the end of the most recently completed Fiscal
Quarter, together with calculations substantiating such compliance.
"Borrowing Base Determination Date" shall mean the last day of each
calendar month.
"Business Day" shall mean a day other than Saturday, Sunday or a day on which
Lender is legally closed for business in the State of California.
"Collateral" shall mean, all that certain collateral described in the Deed of
Trust together with all of Borrower's interest in all construction materials
and equipment and all furniture, furnishings, fixtures, machinery, equipment,
inventory and all other items of personal property in which Borrower now or
hereafter owns or acquires any interest or right, and which are used or
useful in the development, construction, marketing or sales of Units in the
Subdivision (including, without limitation, the Stored Materials); all of
Borrower's accounts receivable from sale of Units in the Subdivision; all of
Borrower's documents, instruments, contract rights and general intangibles
relating to the development, construction, marketing or sale of Units in the
Subdivision; condemnation proceeds relating to any portion of the Subdivision;
and all insurance proceeds from any policies of insurance covering any of
the aforesaid.
"Commitment" shall mean the agreement by Lender in Section 2.1 to make
Advances pursuant to the terms and conditions set forth herein.
"Commitment Fee" shall mean the fee in the amount of $131,250.00 to be paid
by Borrower to Lender on or before the Effective Date.
"Construction Draw Available-Unit" shall mean, with respect to each Unit which
constitutes Eligible Collateral, the amount up to which Borrower may obtain
Advances hereunder with respect to the construction of such Unit, which amount
shall be equal to: (i) the Total Construction Draw-Unit for such Unit times
ii) a percentage based on the Unit's completion stage of construction,
determined on a cumulative basis in accordance with the stage of completion
tables set forth on Exhibit C.
"Construction Schedule" shall mean, with respect to each Unit in the
Subdivision, a construction schedule showing a trade-by-trade breakdown of
the estimated periods of commencement and completion of construction of Units
in the Subdivision in form and substance satisfactory to Lender.
"Conversion Date" shall mean the date which is twelve (12) calendar months
after the Effective Date.
"Conversion Fee" shall mean the fee in the amount of five eights of one percent
(0.625%) of the total Commitment remaining on the Conversion Date; to be paid
by Borrower to Lender on or before the Conversion Date.
"Conversion Period" shall mean the six (6) calendar month period immediately
following the Conversion Date.
"County' shall mean the county in which the Subdivision is located.
"Deed of Trust" shall mean, with respect to the Subdivision, a deed of trust,
fixture filing and assignment of rents, otherwise in form and substance
satisfactory to Lender, executed by Borrower as trustor and naming Lender as
beneficiary, creating a first lien on the Subdivision and all structures,
fixtures and improvements now or hereafter owned or acquired by Borrower and
situated thereon, and all rights and easements appurtenant thereto, in the
amount of the Maximum Facility Commitment Amount.
"Default Rate" shall mean the rate of interest as set forth in the Note plus
five percent (5%) per annum.
"Direct Costs" shall mean all costs incurred for labor performed in the
construction of the applicable Units and the materials incorporated into such
Units.
"Documentation Fee" shall mean the amount of $1,500.00 to be paid by
Borrower to Lender on or before the Effective Date.
"Draw Request Documents" shall mean the documents in the form to be
approved by Lender with which Borrower may request a disbursement of the
Loan.
"Effective Date" shall mean the date on which the conditions set forth in
Section 3.1 are satisfied and the date the Deed of Trust is recorded in the
Office of the County Recorder of the County.
"Eligible Collateral" shall mean Units, and the Lots upon which such Units are
located, which are a part of the Subdivision.
"Environmental Indemnity" shall mean, with respect to the Subdivision, an
unsecured indemnity from Borrower in favor of Lender covering environmental
matters in substantially the form and substance satisfactory to Lender.
"Environmental Laws" shall mean any and all present and future federal, state
and local laws, ordinances, regulations, policies and any other requirements of
Governmental Authorities relating to the health, safety, the environment or to
any Hazardous Substances, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA), the
Resource Conservation Recovery Act (RCRA), the Hazardous Materials
Transportation Act, the Toxic Substance Control Act, the Endangered Species
Act, the Clean Water Act, the Occupational Safety and Health Act, the California
Environmental Quality Act and the applicable provisions of the California Health
and Safety Code, California Labor Code and the California Water Code, and the
rules, regulations and guidance documents promulgated thereunder.
"Event of Default" shall mean the occurrence of any of the events listed in
Section 9.1(a) and the expiration of any applicable notice and cure~period
provided in Section 9.1 (b).
"Governmental Authority" shall mean each federal, state or local body or
agency which has jurisdiction over the Property or the use, occupancy or
operation thereof, or the power to regulate, govern, approve or control the
Property or any aspect thereof.
"Guarantors" shall mean those persons or entities executing guarantees
pursuant to Section 3.1 (c).
"Hazardous Substance" shall mean (i) any chemical, compound, material,
mixture or substance that is now or hereafter defined or listed in, or otherwise
classified pursuant to, any Environmental Laws as a "hazardous substance",
"hazardous material", "hazardous waste", . extremely hazardous waste", "acutely
hazardous waste", "radioactive waste", "infectious waste", "biohazardous waste",
"toxic substance", "pollutant", "toxic pollutant", "contaminant" as well as any
formulation not mentioned herein intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity,
"EP toxicity", or TCLP toxicity"; (ii) petroleum, natural gas, natural gas
liquids, liquefied natural gas, synthetic gas usable for fuel (or mixtures of
natural gas and such synthetic gas) and ash produced by a resource recovery
facility utilizing a municipal solid waste stream, and defining fluids,
produced waters and other sites associated with the exploration, development
or production of crude oil, natural gas, or geothermal resources;
(iii) "hazardous substance" as defined in Section 25281 M
of the California Health and Safety Code; (iv) "waste" as defined in section
13050(d) of the~ California Water Code; (v) asbestos in any form- (vi) urea
formaldehyde foam insulation; (vii) polychlorinated biphenyls (PCBs); (viii)
radon; and (ix) any other chemical, material, or substance that, because of its
quantity, concentration, or physical or chemical characteristics, exposure to
which is limited or regulated for health and safety reasons by any Governmental
Authority, or which poses a significant present or potential hazard to human
health and safety or to the environment if released into the workplace or the
environment.
"Indirect Costs" shall mean all costs incurred for ancillary services performed
in connection with the construction of the applicable Units, such as appraisal,
marketing, engineering, environmental consulting, architectural, survey, legal,
permit, franchise and license fees, title insurance premiums and the like and
interest.
"Inventory Unit" shall mean a Unit that does not qualify as a Presold Unit.
"Lender" shall mean HOUSING CAPITAL COMPANY, a Minnesota
Partnership ("Lender"), its successors and assigns and any party to which the
Note is assigned or otherwise transferred.
"Loan" shall mean the revolving line of credit described in this Agreement in
a principal amount outstanding at any time not to exceed the Available
Commitment.
"Loan Documents" shall mean this Agreement, the Note, the Deed of Trust,
any and all Security Agreements, any and all fixture filings, any and all
Environmental Indemnities, the Arbitration
Agreement attached hereto, Repayment and Completion Guaranties, and any
and all other documents now or hereafter executed in connection with the
Loan.
"Lot" shall mean an individual Lot designated on the final subdivision plat, map
or filing for the Subdivision.
"Lot Advance" shall mean that portion of the Loan that is allocated for
disbursement of Land Costs as identified on Exhibit C-1 herein, to be paid to
Lender for repayment of loan No. 619.
"Maturity Date" shall mean the date which is twelve (12) calendar months after
the Effective Date, unless extended on the Conversion Date pursuant to Section
2.9, but in no event later than eighteen (18) calendar months after the
Effective Date.
"Maturity Date Unit" shall mean the date which is twelve (12) months after the
date of the initial advance under the Unit Budget for each individual Unit which
is Eligible Collateral.
"Maximum Advance-Unit" shall mean the maximum amount to be advanced
hereunder with respect to any Unit and its associated Lot, which amount shall be
equal to (i) seventy-five percent (75%) of the Appraised Value-Unit of the
applicable Unit and its associated lot.
"Maximum Facility Commitment Amount" shall mean an amount equal to
TEN MILLION FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS
($10,500,000.00).
"Members of Borrower" shall mean Westco Community Builders, Inc., a
California corporation and Dover Investments corp., a Delaware Corporation.
"Model Unit" shall mean the Units to be used as sales centers for the
Subdivision not to exceed four (4) Units.
"Note" shall mean a secured promissory note, in the original principal amount of
the Maximum Facility Commitment Amount, executed by Borrower as maker,
in favor of Lender as holder, in form and substance satisfactory to Lender.
"Potential Balancing Default" shall mean the failure to deposit with Lender,
within five (5) days after notice that the Loan is not "in balance", the amount
of cash, cash equivalents or other security satisfactory to Lender, in its sole
discretion, necessary to put the Loan "in balance" pursuant to Section 5.4.
"Potential Default" shall mean the existence of any event which, with the
giving of notice, the passage of time, or both, would constitute an Event of
Default under any of the Loan Documents.
"Presold Unit" shall mean a Unit which shall be deemed sold only if a bona fide
purchaser for value (a) has executed a firm, non-contingent purchase agreement
(in form and substance acceptable to Lender), and (b) has made a non-refundable
cash deposit of not less than ONE THOUSAND AND NO/1OOTHS DOLLARS
($1,000).
"Release Price" shall mean, with respect to any Unit and its associated Lot, the
amount payable by Borrower to obtain a partial reconveyance of the lien of the
applicable Deed of Trust, which amount is further defined in Article 11, Section
2.7(f).
"Sales Contract" shall mean a bona fide written non-contingent agreement
between Borrower and a third person purchaser for sale in the ordinary course of
Borrower's business of any Unit and the related Lot.
"Subdivision" means Lots 1 through 80, as shown on that certain Map entitled
Tract No. 2770 Glenbriar Estate Unit No. 2 which was filed for record in the
Office of the Recorder for the County of San Joaquin, State of California in
Volume 33, page 51.
"Subdivision Appraisal" shall mean, with respect to the Subdivision, an
appraisal of each Lot and each type of Unit in the Subdivision (without regard
to any standard upgrade items to be included in such Unit or any other options,
furniture, furnishings, fixtures and equipment to be included in such Unit),
which appraisal shall be performed by an appraiser and otherwise be
satisfactory to Lender in its sole and absolute discretion. In addition, the
Subdivision Appraisal must include an absorption analysis setting forth the
monthly projected sales rate for the type of Units covered by the Subdivision
Appraisal and an Estimated Costs of Sale for the Units covered by the
Subdivision Appraisal. The Subdivision Appraisal must comply with Lender's
appraisal methodology as then in effect by internal Lender policies or by
federal banking regulations.
"Subdivision Budget" shall mean, with respect to the Subdivision, the budget
of all Direct Costs and all Indirect Costs necessary for or related to
construction, of all Units to be constructed in the Subdivision, as approved
by Lender in its reasonable discretion, together with any amendments or
modifications thereof consented to by Lender in its sole and absolute
discretion.
"Subdivision Plans and Specifications" shall mean, with respect to the
Subdivision, the final plans and specifications for each type of Unit to be
constructed in the Subdivision, with evidence of appropriate approvals of each
Governmental Authority shown thereon, as approved by Lender in its sole and
absolute discretion and as changed from time to time with the prior written
approval of Lender.
"Substantially Complete" shall mean, with respect to a unit, that: (i) such unit
has been substantially completed in accordance with the applicable Subdivision
Plans and Specification; (ii) a valid notice of completion has been recorded
in the Official Records of the County; and (iii) all inspections by any
Governmental Authority have been completed and all necessary certificates and
approvals have been obtained.
"Termination Date" shall mean twelve (12) calendar months from the Effective
Date, unless such date is extended on the Conversion Date.
"Title Company" shall mean the title insurance company selected by Borrower
and approved by Lender in its sole and absolute discretion to provide any Title
Insurance Policy.
"Title Insurance Policy" shall mean, with respect to the Subdivision, a title
insurance policy in the form of an American Land Title Association Loan
Extended Coverage Policy of Title Insurance, insuring Lender
that, on the date the Deed of Trust is recorded against the Subdivision,
Borrower owns fee simple title to the Subdivision and that the Deed of Trust
is a valid lien, in the amount of the Maximum Facility Commitment Amount.
The Title Insurance Policy shall contain such endorsements (including,
without
limitation, a variable interest rate endorsement, a revolving line of credit
endorsement and a tie-in endorsement) and shall be subject to such
reinsurance and coinsurance agreements as Lender reasonably
requires and shall be subject only to such exceptions to coverage as approved
by Lender in its sole and absolute discretion in writing prior to the date such
Deed of Trust is recorded.
"Total Available-Unit" shall mean, as of each Borrowing Base Determination
Date with respect to each Unit and each Presold Unit and its associated Lot, an
amount equal to the sum of: W the applicable Construction Draw Available-Unit
plus (ii) the applicable Lot Advance.
"Total Construction Draw-Unit' shall mean, with respect to each Unit and each
Presold Unit which constitutes Eligible Collateral, an amount equal to the sum
of: (i) the Maximum Advance-Unit for such Unit minus (ii) the Lot Advance for
such Unit.
"Unit" shall mean a detached single-family dwelling (i) which is unsold, (ii)
constructed or to be constructed on a Lot, and (iii) described in the
Subdivision Plans and Specifications, including, without limitation, any
furniture, furnishings, fixtures and equipment to be installed therein as
shown in the Subdivision Plans and Specifications.
"Unit Budget" shall mean the total, as shown on the Subdivision Budget, of all
Direct Costs and all Indirect Costs necessary for or related to construction
of each Unit and each Presold Unit in the Subdivision.
ARTICLE 11
THE LOAN
2.1 Commitment. Subject to the terms and conditions of this Agreement,
Lender agrees, at any time and from time to time after the Effective Date
and prior to the date which is thirty (30) days prior to the Maturity Date, to
make Advances to Borrower, at the request of Borrower, with respect to
Eligible Collateral; provided, however, that the aggregate amount of
Advances outstanding at any time and from time to time shall not exceed
the Available Commitment. Proceeds of Advances may be used solely for
the purposes set forth in Section 5.1. Advances shall be on a revolving
basis. Subject to the terms and conditions contained herein, Advances
repaid may be reborrowed. Although the outstanding principal balance of
the Note may be zero from time to time, the Loan Documents shall remain
in full force and effect until the Commitment terminates and all obligations
of Borrower are paid and performed in full. Upon the occurrence of a
Potential Default, Potential Balancing Default or Event of Default, Lender,
in its absolute and sole discretion and without notice, may suspend the
Commitment to make Advances. In addition, upon occurrence of a
Potential Default, Potential Balancing Default or Event of Default, Lender,
in its absolute and sole discretion and without notice, may terminate the
Commitment to make Advances.
2.2 Evidence of Indebtedness and maturity. The Loan shall be evidenced by
the Note in the principal amount of the Maximum Facility Commitment
Amount. The outstanding principal balance of the Loan, together with
accrued interest thereon and all other amounts payable by Borrower under
the terms of the Loan Documents, shall be due and payable on the Maturity
Date.
2.3 Interest. The outstanding balance of the Note shall bear interest at the
rate per annum specified in the Note, which interest shall be due and
payable as specified therein.
2.4 Security. Payment of the Note 3nd performance of all of Borrower's other
obligations under the Loan Documents (excluding any and all
Environmental Indemnities) shall be secured by the following: (a) any and
all Deeds of Trust; (b) any and ,I[ Security Agreements and related UCC-1
financing statements; (c) any and all fixture filings, and (d) such other
security interests in property of Borrower as Lender shall reasonably
require.
2.5 Environmental Indemnities. Lender shall be indemnified with respect to
environmental matters by the Environmental Indemnities.
2.6 Prepayments.
(a) Mandatory Prepayments.
(i) Advances In Excess of Available Commitment. If for any reason at any
time the aggregate amount of all outstanding Advances exceeds the Available
Commitment, Borrower shall, within two (2) Business Days of receiving written
notice of such excess, make a payment to Lender in an amount equal to such
excess amount.
(ii) Release of Presold Units, Units and Lots. To obtain the release of a
Presold Unit, Unit and its related Lot from the lien or encumbrance of a Deed
of Trust, Borrower shall be in full compliance with the requirements of
5ection 2.7 and Borrower, without notice or demand, shall, make payment to
Lender in an amount equal to the applicable Release Price for such Unit.
(b) Voluntary Payments. Subject to Section 2.7 with respect to the release
of a Presold Unit, Unit and/or Lot, Borrower may, at any time, without penalty
or premium, prepay all or any portion of the outstanding Advances.
2.7 Conditions Precedent to Release of Presold Units. Units and Lots.
Lender shall have no obligation to release any Presold Unit, Unit and/or
Lot from the lien or encumbrance of a Deed of Trust unless all of the
following conditions are satisfied:
(a) There shall be no Potential Default, Potential Balancing Default or
Event of Default under this
Agreement or any of the other Loan Documents.
(b) Borrower shall have given Lender at least five (5) Business Days prior
written notice.
(c) The Title Company shall issue an appropriate endorsement to the
applicable Title Insurance Policy ensuring that, notwithstanding the release
of its interest in such Presold Unit, Unit and/or Lot, the lien of the
applicable Deed of Trust shall continue to be a first lien on the remaining
portion of the Subdivision, subject to no exceptions to title other than those
shown on such Title Insurance Policy as of the date of issuance.
(d) Lender shall have received satisfactory evidence that the portion of the
Subdivision not to be released will have the benefit of such easements and
rights of way in, over and through the Units and/or Lots to be released as are,
in Lender's and the Title Company's judgment, necessary or desirable to
provide or assure access vo and from, utility service to, parking
for and support to the remaining portion of the Subdivision.
(e) Borrower shall pay all costs associated with the release of Lender's
interest in such Presold Unit, Unit and/or Lot, including without limitation,
the endorsement referred to above and reasonable attorneys' fees.
Borrower shall, concurrently with such release, pay to Lender the following
release prices plus any interest which is outstanding on said Unit:
PLAN NO. UNIT
1 $168,750.00
1x $176,250.00
2 $176,250.00
2x $174,750.00
3 $182,250.00
3x $187,500.00
4 $193,500.00
4x $198,750.00
(9) The Release Price paid to Lender upon the release of any Presold Unit
or Unit shall be applied first to reduce Advances made with respect to the
Unit Budget to which such Presold Unit or Unit relates.
2.8 Credit for Principal Payments. Any payment made upon the outstanding
principal balance of the Loan shall be credited as of the business day upon
which the applicable following condition has occurred by no later than
11:00 a.m. (Pacific Standard Time or Pacific Daylight Time, as
appropriate):
(a) In the case of a principal payment made by a federal funds wire transfer,
receipt by Lender of written advice from the Federal Reserve System confirming
that the transferred amount has been credited for the account of Lender;
(b) In the case of a principal payment made by a cashier's check, receipt by
Lender of such cashier's check at the address designated elsewhere herein for
the delivery to Lender of notices; or
(c) In the case of a principal payment made by any other means, upon the
funds constituting such payment having become unconditionally available for
the use of Lender.
2.9 Extension of Conversion Date. Upon Borrowers written request at any
time at least thirty (30) days, but not more than sixty (60) days, before the
Conversion Date, Lender will consider extending the Conversion Date for
an additional six (6) calendar months. Approval of Borrowers request to
extend the Conversion Date for an additional six (6) calendar months shall
be at Lender's sole and absolute discretion, based on Lender's then
prevailing underwriting standards and Lender's then interpretation of
regulatory guidelines, and, if approved, may be subject to Borrower's
satisfaction of one or more conditions required by Lender in its sole and
absolute discretion including but not limited to the following Conditions
Precedent. No extension of the Conversion Date shall be given, or deemed
given, by Lender unless it is evidenced by a written document signed by
Lender. When requesting consideration of extending the Conversion Date
for an additional six (6) calendar months, Borrower shall deliver to lender
such documentation and information as Lender may reasonably require.
(a) Conditions Precedent to the Extension of Conversion Date:
(i) On or before the Conversion Date Borrower shall pay Lender in
immediately available funds the Conversion Fee;
(ii) On or before the Conversion Date a cumulative of at least forty (40)
Units shall have been delivered/closed to third party buyers and Lender shall
have received the Release Price for each of the forty (40) Units;
(iii) Borrower shall represent and warrant to Lender that no Default or Event
of Default, breach or failure of condition has occurred or exists under the Loan
Documents, or would exist after notice or passage of time or both, at the time
of the Conversion Date;
(iv) There has occurred no material adverse change,
as determined by Lender, in the financial condition of Borrower or any
guarantor or other person or entity in any manner obligated to Lender under
the Loan Documents from that which existed as of the Effective Date; and
(v) Except as modified by the exercise of the Extension of the Conversion
Date and other modifications approved by Lender and made in accordance
with the provisions of this Agreement, the Loan Documents shall remain
unmodified and in full force and effect.
(vi) If required by Lender, Lender shall have received an updated appraisal
establishing that the Appraised Value Unit is equal to or greater than the
Appraised Value Unit on the Effective Date.
ARTICLE III
EFFECTIVE DATE
3.1 Conditions Precedent to Effectiveness of this Agreement. Lender's
obligation to make the Loan and perform any of its other obligations under
this Agreement shall terminate if, on or before the Termination Date,
Borrower does not satisfy all of the following conditions, in each case as
determined by Lender in its absolute and sole discretion:
(a) Representations and Warranties Accurate. The representations and
warranties by Borrower in the Loan Documents are correct on and as of the
Effective Date as though made on and as of such Date.
(b) Defaults. No Potential Default, Potential Balancing Default or Event of
Default exists under this Agreement or any of the other Loan Documents.
(c) Loan Documents. Lender shall have received the following documents,
each duly executed by the parties thereto and in form and substance
satisfactory to Lender in its absolute and sole discretion:
(d) this Agreement; (b) the Note; (c) Repayment and Completion Guaranties
from Glenbriar Joint Venture, a California general partnership and Glenbriar
Venture No. 2, LLC, a California limited liability company; and (d) such other
documents that Lender reasonably may require.
(d) Payment of Fees and Other Costs and Expenses. Borrower shall have
paid the appraisal fee, the Commitment Fee, the Documentation Fee and all
other costs and expenses to be paid by the Borrower in connection with the
Loan.
(e) Formation Documents. Lender shall have received and approved the
following (as applicable):
(i) Current Certificates of Good Standing from the California Secretary of
State for Borrower.
(ii) Certified copies of the articles of incorporation and bylaws, together
with certified resolutions authorizing this transaction, and incumbency
certificates verifying the authority of the signatories, for Borrower.
(f) Financial Statements. Lender shall have received and approved all
financial statements of Borrower and such other parties as are required by
Lender.
(g) Other Items or Actions. Lender shall have received and approved such
other agreements, documents, and instruments, and Borrower shall have
performed such other actions, as Lender may reasonably require.
ARTICLE IV
ELIGIBLE COLLATERAL
4.1 Restriction during Conversion Period. Notwithstanding anything to the
contrary set forth in this Article IV or anywhere else in the Loan
Documents, construction of Units may be approved by Lender and added
to Eligible Collateral only before the Termination Date.
4.2 Removal of Units from Eligible Collateral: Ineligible Collateral.
Borrower shall not be entitled to include Units and their related Lots in
Eligible Collateral if such Units fail to comply with any of the
following:
(a) Construction Requirements.
(i) Within seventy-five (75) days of its Admission Date, the Unit shall not
be at least twenty percent (20%) complete, in accordance with the stage of
completion tables set for the Exhibit C attached hereto.
(i i) Within two hundred seventy (270) days of its Admission Date, the Unit
shall not be Substantially Completed.
(iii) More than fifteen (15) Inventory Units which may be under
construction at any one time.
(b) Limitation on Term of Units in Eligible Collateral. A Unit which is
not a Model Unit shall not constitute Eligible Collateral for more than twelve
(12) calendar months.
4.3 Extraordinary Events Affecting Units, Presold Units and Lots, or
Subdivision. Upon the occurrence of any of the following events, Units,
Presold Units and related Lots at any time constituting Eligible Collateral
may be declared by Lender to no longer be Eligible Collateral:
(a) Material Damage, Destruction, or Condemnation. Any Unit or
Presold Unit and related Lot is materially damaged, destroyed, or becomes
subject to any condemnation proceeding.
(b) Default Regarding Title Insurance. The requirements of the Loan
Documents for title insurance with respect to any Unit or Presold Unit
are not satisfied.
(c) Hazardous Substance. A Hazardous Substance is discovered to be
present on, in, under or about any Unit or Presold Unit and/or its related Lot.
(d) Material Change to Subdivision Plans and Specifications. The
Subdivision Plans and Specifications pertaining to any Unit or Presold Unit
are changed without Lender's prior written Consent, which shall not be
unreasonably withheld.
(e) Maintained in Good Condition. Any Unit or Presold Unit and related
Lot is not maintained in good condition and repair.
4.4 Lien Continues on Ineligible Collateral. Unless Lender in its sole and
absolute discretion determines otherwise, any Unit or Presold Unit and the
related Lot which are subject to the lien of a Deed of Trust but which later
become Ineligible Collateral as a result of Sections 4.2 will remain subject
to the lien and encumbrance of the Deed of Trust until the conditions
precedent specified in Section 2.7 have been satisfied with respect to such
Unit or Presold Unit and related Lot.
4.5 Classification and Reclassification of Units. Borrower may classify or
reclassify units as to type from time to time, or change Borrower's
proposed classification of any and all Units, provided that such reclassified
Unit meets the requirements set forth herein for that type of Unit. In the
event any Presold Unit ceases to constitute a Presold Unit for any reason,
then any such Presold Unit shall automatically become an Inventory Unit,
and Borrower agrees to immediately comply with all conditions,
restrictions and limitations applicable to an Inventory Unit. In the event
any Inventory Unit becomes a Presold Unit, Borrower agrees to
immediately comply with conditions, restrictions and limitations
applicable to a Presold Unit.
ARTICLE V
DISBURSEMENTS OF THE LOAN
5.1 Use of Advances. Borrower shall use Advances of the Loan only for the
payment of or reimbursement for costs, expenses and fees included in the
respective Unit Budget in connection with the construction of
Units or Presold Units constituting Eligible Collateral in such Unit or Presold
Unit, such payment of or reimbursement for costs, expenses and fees to be
made only after the same have been incurred by Borrower, provided, however,
in no event shall (i) the Advances outstanding with respect to any Unit or
Presold Unit and its related Lot exceed the Maximum Advance-Unit
applicable thereto, (ii) the Advances outstanding under the Loan exceed the
Available Commitment, or (iii) the Advances outstanding with respect to Units
or Presold Units in the Subdivision exceed the lesser of (a) the sum of the
Total Available Unit for all Units or Presold Units that then constitute
Eligible Collateral in the Subdivision, (b) the Maximum Subdivision Commitment
Amount. Costs related to the construction of Units or Presold Units and the
improvements of their related Lots shall be deemed to have been "incurred" by
Borrower at the following times: W Direct Costs: when the labor has been
performed or the materials have been supplied and incorporated into the
applicable Unit or Presold Unit and related Lot, payment therefor has been
requested by the contractor or supplier thereof, and such contractor or
supplier is entitled thereto; (ii) Indirect Costs: when such costs are due and
payable and, if applicable, the services relating thereto have been rendered
or the value thereof has been received by Borrower, or with respect to amounts
payable to Lender, when such amounts becomes due and payable pursuant to the
Loan Documents.
5.2 Requests for Advances. Borrower shall request disbursements of the
Loan periodically and not more frequently than once each month.
Requests shall be evidenced by the Borrowing Base Certificate.
5.3 Determination of Amount of Advances.
(a) Borrowing Base Certificate. Borrower shall deliver a Borrowing Base
Certificate to Lender at any time Lender approves construction of any
additional Unit or Presold Unit pursuant to Section 5.1 herein.
(b) Amount of Advances. The amount of each Advance requested by
Borrower shall be reviewed and subject to approval by Lender based upon:
(i) the Borrowing Base Certificate most recently submitted by Borrower
(adjusted to reflect Units or Presold Units released pursuant to Section 2.7
and other Units removed from Eligible Collateral pursuant to Section 4.2 and
4.3, (ii) Lender's inspections made pursuant to Section7.3 (as such inspections
may result in any adjustments to reflect any variance between (A) the
Borrowing Base Certificate, and (B) the results of such inspections), and
(iii) such other information as Lender may reasonably require in order to
verify such amounts.
(c) Conditions to Disbursements. Provided that: (i) no Event of Default,
Potential Default or Potential Balancing Default exists under this Agreement or
any of the other Loan Documents; (ii) all of the conditions set forth in
Exhibit B have been satisfied; and (iii) the Loan is -in balance" as required
in Section 5.4; then Lender shall disburse or issue, as the case may be, within
ten (10) Business Days after receipt of the Draw Request Documents, the
Advance approved by Lender. Borrower's Funds and any other amounts
deposited with Lender pursuant to Section 5.4 to put the Loan "in balance"
shall be the next funds disbursed by Lender. Unless Lender otherwise
elects, all Advances shall be deposited into the account requested by Borrower
and approved by Lender. Lender shall have no obligation hereunder to issue
"set aside" letters. As used herein, "set aside" Letters shall mean letters
to Governmental agencies, contractors or other third parties pursuant to which
Lender agrees to allocate Loan proceeds for the construction of certain
improvements.
5.4 Loan Balancing
(a) As a material condition to the making of the Loan and as a condition
precedent to Lender's duty to disburse proceeds of the Loan, Borrower
shall pay all costs, expenses and fees required to develop, construct,
market, sell and carry all of the Units or Presold Units constituting Eligible
Collateral which are in excess of the then applicable Available Commitment.
Lender shall be obligated to disburse proceeds of the Loan only when the Loan
is "in balance." The Loan shall be "in balance only at such times as
Borrower has invested sufficient funds into the payment of such costs,
expenses and fees so that, in Lender's sole judgment, the funds then or to
become available under the Loan, plus any funds deposited by Borrower
into the Borrower's Fund Account, shall be sufficient to fully develop,
complete, market, sell and carry all of the Units or Presold Units
constituting Eligible Collateral and to pay all such costs, expenses and
fees (including without limitation, all interest and all other sums which
may accrue or be payable under any Loan Documents) until the Maturity
Date. The determination as to whether or not the Loan is "in balance"
may be made by Lender at any time and for any reason, including with
each request for a disbursement of the Loan.
(b)Borrower shall, within five (5) days after notice from Lender that the
Loan is not "in balance," deposit with Lender into the Borrower's Funds
Account in cash the amount necessary to put the Loan "in balance." No
interest shall be paid by Lender on amounts deposited with Lender pursuant
to this Section 5.4.
5.5 Payment of Interest. Interest that accrues and becomes due under the Note
shall be disbursed from the interest reserve in accordance with the
provisions set forth in Exhibit B herein. At such time that the interest
reserve is depleted, Borrower shall pay all interest that accrues on the Note
from its own funds. In the event that Borrower fails to pay interest as
required under the terms of the Note or any other amounts which may
accrue or be payable under any Loan Document, Borrower hereby
authorizes Lender to disburse, at Lender's option, the proceeds of the Loan
to pay interest accrued on the Note or other amounts which may accrue or
be payable under any Loan Documents, notwithstanding that Borrower
may not have requested a disbursement of such amount. Lender in its sole
discretion may make such disbursements notwithstanding the fact that the
Loan is not "in balance" or that an Event of Default, Potential Balancing
Default or Potential Default has occurred and is continuing under the terms
of this Agreement or any other Loan Document. Such disbursements shall
be added to the outstanding principal balance of the Note. The
authorization hereby granted shall be irrevocable, and no further direction
or authorization from Borrower shall be necessary for Lender to make such
disbursements. No such disbursement shall be construed as a waiver by
Lender of any default by Borrower or any requirement that Borrower keep
the Loan "in balance" as required in Section 5.4. Nothing contained in this
Section 5.5 shall require Lender to disburse Loan proceeds to pay interest.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
As an inducement to Lender to execute this Agreement and to disburse the
proceeds of the Loan, Borrower represents and warrants to Lender the truth and
accuracy of the matters set forth in this Article VI.
6.1 Status. If Borrower is a corporation, it is duly organized, validly
existing, in good standing under the laws of the state of its incorporation,
has stock outstanding which has been duly and validly issued, and is qualified
to do business and is in good standing in the state in which the Subdivision is
located with full power and authority to consummate the transactions
contemplated hereby. If Borrower is a partnership, it is duly formed and
validly existing and, if required under the laws of the state in which the
Subdivision is located, is fully qualified to do business therein, with full
power and authority to consummate the transactions contemplated hereby.
6.2 Authority of Borrower. Borrower, has full power and authority to
execute, deliver and perform all of its obligations under this Agreement
and all other applicable Loan Documents. This Agreement and all other
Loan Documents to which Borrower is a party have been duly and validly
authorized, executed and delivered by Borrower and constitute legally
valid, binding and enforceable obligations of Borrower which have not and
will not constitute a breach or default under any agreement, court order,
judgment or law by or under which Borrower or the Subdivision is bound
or may be affected.
6.3 Compliance with Law To the extent required by applicable laws or
restrictive covenants, prior to requesting Lender's approval of the
Subdivision, the Subdivision Plans and Specifications will be approved by
all Governmental Authorities which have jurisdiction over the Subdivision
or construction thereon and the beneficiaries of any such covenants. Prior
to requesting Lender's approval of the Subdivision, Borrower will have all
authorizations, consents and licenses, including, without limitation,
building permits, annexation agreements, plot plan approvals, subdivision
approvals, environmental approvals (including an environmental impact
report or valid negative declaration if required under applicable law), sewer
and water permits and zoning and land use entitlements which are
necessary for the construction and operation of the Units or Presold Units
in the Subdivision in accordance with the Subdivision Plans and
Specifications and in accordance with all applicable building,
environmental, subdivision, land use and zoning laws. Prior to requesting
Lenders approval of Subdivision, the Subdivision will consist of legal and
separate lot(s) under the California Subdivision Map Act (California
Government Code Sections 66410 66499.37, as amended from time to
time) and for tax assessment purposes. All construction of Units and
Presold Units shall be in full compliance with all applicable laws and
regulations. At the time that Lender's approval of the Subdivision is
requested and at all times thereafter, the Subdivision will fully comply and
the Units and Presold Units, when competed, will fully comply with all
restrictive covenants and all applicable laws and regulations, including
without limitation, all building codes, Environmental Laws, the Americans
With Disabilities Act (Public Law 101-336) and the California Fair
Housing Act of 1992.
6.4 No Litigation. There is no litigation, action, suit, or proceeding pending
or threatened against Borrower, Members of Borrower or the Subdivision
which may in any manner whatsoever substantially adversely affect the
validity, priority or enforce ability of any of the Loan Documents or the
development, construction, marketing, sale or occupancy of the
Subdivision, the Units and Presold Units constructed or to be constructed
thereon, the related Lots or any part thereof.
6.5 Financial Position. The financial statements and all financial data
heretofore delivered to Lender in connection with the Loan and/or relating
to Borrower or Members of Borrower, are true, correct and complete in all
material respects. Such financial statements comply with the requirements
of Section 7.16 and accurately present the financial position of the parties
who are the subject thereof as of the date thereof. No material adverse
change has occurred in the financial position reflected in the most recent
financial statement. Except for this Loan, no borrowings have been made
by Borrower since the date thereof which are secured by, or might give rise
to, a lien or claim against the Subdivision, the proceeds of this Loan, or
other assets of Borrower.
6.6 Costs, Expenses and Fees. On a line-by-line and total basis, the costs,
expenses and fees shown on the Unit Budgets are true, correct and
complete, and represent the total of all costs, expenses and fees which
Borrower expects to pay or may be or become obligated to pay to develop,
construct, market, sell and carry the Units and Presold Units to be
constructed through the Maturity Date.
6.7 Utilities. Telephone services, gas, electric power, storm sewers, sanitary
sewers and water facilities are or will be available to the Subdivision,
adequate to serve the Subdivision, exist at the boundary of each Lot in the
Subdivision and are not subject to any conditions, other than normal
charges to the utility supplier, which would limit the use of such utilities.
Borrower has obtained letters from utility providers evidencing a
commitment to serve the Subdivision with all utilities necessary for the
development, construction, marketing and sale of the Units and Presold
Units. All streets and easements necessary for development, construction,
marketing and sale of the Units and Presold Units will be available to
occupy the Units and Presold Units.
6.8 Personal Property. Prior to granting any security interest in the
Collateral, Borrower will be, and will thereafter continue to be, the sole
owner of the Collateral free from any adverse lien, security interest or
adverse claim of any kind whatsoever, except for liens or security interests
in favor of Lender.
6.9 No Condemnation or Casualty. No condemnation or other like
proceedings are pending or threatened against the Subdivision which
would impair the full utilization of the Subdivision in any manner
whatsoever. No casualty has occurred to the Subdivision.
6.10 No Defaults. There is no default, Potential Default, Potential Balancing
Default or Event of Default on the part of Borrower or Members of
Borrower under this Agreement or any Loan Document.
6.11 Defects. There are no defects, facts or conditions affecting the
Subdivision which would make it unsuitable for the development,
construction, marketing or sale of the Units and Presold Units.
6.12 Hazardous Substances. There are no Hazardous Substances in existence or
construction, released, deposited, stored, disposed, placed or located in, on
or under the Subdivision or the Units or the Presold Units or other
improvements located thereon. There are no underground storage tanks
located at the Subdivision. All Units and Presold Units and other
improvements thereon are and, upon their completion, all Units and
Presold Units and other improvements located thereon will be free of
Hazardous Substances and in full compliance with all Environmental Laws.
6.13 Representations and Warranties Upon Requests for Advances. Each
request for an Advance shall be a representation and warranty by Borrower
to Lender that the representations and warranties in this Article VI are
correct and complete as of the date of the Advance except as otherwise
disclosed in writing.
ARTICLE VII
COVENANTS OF BORROWER
As an inducement to Lender to execute this Agreement and to make each
disbursement of the Loan, Borrower hereby covenants as follows:
7.1 No Liens. Borrower shall not permit any lien, levy, attachment or
restraint to be made or filed against the Subdivision, any Unit, Presold Unit
or any Lot or permit any receiver, trustee or assignee for the benefit of
creditors to be appointed to take possession of the Subdivision, any Unit,
Presold Unit or any Lot, except for any claims filed or asserted against any
such property and concerning which Borrower is in full compliance with the
provisions of Section 7.8 below.
7.2 Compliance with Laws. Borrower shall comply with, and the
Subdivisions, all Units, Presold Units and all Lots shall comply with all
applicable laws, statutes, regulations, codes and requirements (including
without limitation, all Environmental Laws, building, zoning and use laws,
requirements, regulations and ordinances, the American With Disabilities
Act and the California Fair Housing Act of 1992), all restrictive covenants
and all obligations created by private contracts and leases which affect
ownership, development, construction, marketing, use or sale of the
Subdivision, any Units, Presold Units or any Lots. If requested by Lender,
Borrower shall deliver to Lender, promptly after receipt thereof, copies of
all permits and approvals received from any Governmental Authority
relating to the development, construction, marketing, use, occupancy or
sale of the Subdivision, any Units or any Lots.
7.3 Construction Information; Inspections. From time to time, and within
ten (10) business days of receipt from Lender of a request therefor,
Borrower shall deliver to Lender:
(a) a complete list stating 0) the name, address and phone number of each
contractor, subcontractor
and material supplier employed or used for construction of the Improvements,
and (ii) the dollar amount, including changes if any, of each contract and
subcontract, and the portion thereof, if any, paid through the date of such
list; and
(b) copies of each contract and subcontract identified in such list, including
any changes thereto; and
(c) a cost breakdown, in a form reasonably acceptable to Lender, stating the
projected total cost of constructing the Improvements, and that portion, if
any, of each cost item (i) which has been incurred, and (ii) which has been
paid, all as of the date of such cost breakdown; and
(d) a construction progress schedule, in a form reasonably acceptable to
Lender, showing the progress of construction and the projected sequencing and
completion time for uncompleted work, all as of the date of such schedule; and
(e) with respect to any item designated above which has been previously
delivered, such update thereof as Lender may reasonably request.
Lender is expressly authorized to contact any contractor, subcontractor or
material supplier and, at all reasonable times, to enter the Property and
inspect the Improvements and the work of construction in order to verify
information disclosed pursuant to this Section, or for any other purpose.
7.4 Commencement and Completion. Unless otherwise provided by this
Agreement, Borrower shall promptly commence construction of the
Improvements and shall diligently continue construction to Completion
prior
to the Maturity Date. For purposes of the Loan Documents, "Completion" means
that an Improvement is constructed and has been fully completed in accordance
with the Plans and Specifications, as reasonably approved by Lender; a valid
notice of completion has been recorded and the applicable lien periods have
expired or, in lieu thereof, Lender has received lien waivers or releases in
form and content satisfactory to Lender evidencing actual payment for all work
performed from all contractors, subcontractors, laborers and material men
employed or furnishing materials in connection with such Improvement; all
claims of liens with respect to such Improvement, and all stop notices with
respect to the Property and Improvements, that may have been recorded or notice
thereof served on Lender have either been paid in full and released, or Borrower
has posted an appropriate surety bond to discharge the same; completion has been
approved and certified by Lender's inspecting architect and a certificate of
substantial completion has been signed by Borrower, the design architect and the
general contractor and delivered to Lender, and no material punch-list items
remain to be completed; Borrower shall have procured and delivered to Lender
a CLTA title insurance indorsement No. 101.2, or its equivalent, and such
additional title insurance endorsements as are reasonably required by Lender
showing the Deed of Trust to be a first lien or charge upon the Property,
excepting only such items as have previously been approved by Lender;
Borrower has delivered to Lender the original or a certified copy of an
unconditional Certificate of Occupancy for the Improvement; Lender has
received photographs of the completed Improvement; If requested by Lender,
Borrower will provide copies of all warranties from suppliers covering
materials, equipment and appliances included within the Improvement; (i)
Lender has received evidence that all insurance required hereby is in full
force and effect with respect to the Improvement; (j) Lender has received
evidence reasonably acceptable to Lender that all Requirements as defined in
Section 7.6 relating to such Improvement have been complied with or satisfied;
and (k) no Default exists hereunder. Notwithstanding anything to the contrary
herein, no more than sixty (60) Units within the Subdivision may be under
construction or completed at any time. Unless Lender consents in writing to
an earlier commencement date, Borrower shall commence construction of twenty
(20) Units without delay after recordation of the Deed of Trust. Construction
of additional Units may be started only upon the sale of not less than six (6)
Units. Notwithstanding anything to the contrary herein, no more than fifteen
(15) Inventory Units may be under construction or completed at any time.
Borrower shall complete construction of all of the Improvements on or before
the Maturity Date. Borrower covenants and agrees to use its best efforts to
sell Units in accordance with a marketing plan approved by Lender.
7.5 Force Majeure. The time within which construction of the Improvements
must be completed shall be extended for a period of time equal to the
period of any delay directly affecting the construction work which is
caused by fire, earthquake or other acts of God, strike, lockout, acts of
public enemy, riot, insurrection, or governmental regulation of the sale or
transportation of materials, supplies or labor provided Borrower furnishes
Lender with written notice (as specified in Section 10.2), of any such delay
within ten (10) business days from the occurrence of any such delay. In no
event, however, shall the time for completion of the Improvements be
extended beyond the maturity date set forth in the Note.
7.6 Construction. Borrower shall construct the Improvements in a
workmanlike manner according to the Plans and Specifications and the
recommendations of any soils or engineering report approved by Lender,
and all Units and Presold Units, once commenced, shall be roofed and
sided as quickly as reasonably possible to protect the same from the
elements. In constructing the Improvements, Borrower shall comply with
all applicable laws, ordinances, rules, regulations, building restrictions,
recorded covenants and restrictions, and requirements of all regulatory
authorities having jurisdiction over the Improvements or Property
(collectively "Requirements"). If necessary, the Plans and Specifications
shall be modified to comply with the Requirements. Lender, its
representatives, consultants and assigns, shall have access to the Property
and Improvements for the purpose of inspecting the same at all reasonable times.
At Borrower's expense, Borrower shall promptly correct any defects in the
Improvements, material deviations from the Plans and Specifications and
violations of any Requirements discovered by Borrower, or of which Borrower
receives notice and Borrower shall implement the recommendations of any soils
or engineering reports.
7.7 Changes to Subdivision Plans and Specifications. Borrower agrees to
obtain the prior written consent of Lender prior to making any changes in
the Subdivision Plans and Specifications for any type of Unit or Presold
Unit. It shall not be unreasonable for Lender to withhold its consent until
Lender obtains an appraisal for the applicable type of Unit or Presold Unit
with respect to any such material change.
7.8 Contesting Liens.
(a) Borrower shall promptly discharge or cause to be discharged any
mechanics' or material men's liens or claims of lien filed or otherwise
asserted against the Subdivision, any Lot, any Unit or any Presold Unit
thereon, or any stop notices received by Lender, and any proceedings for the
enforcement of any thereof to be promptly dismissed; provided, however, that
Borrower shall have the right to contest in good faith and with diligence the
validity of any such liens or claims upon providing, prior to the commencement
of an action to enforce such lien or Claim, a security bond issued by a surety
acceptable to Lender in Lender's sole discretion which pursuant to applicable
law is sufficient to release such lien or claim of lien. Lender shall not be
required to make any further disbursements of the Loan until all such
mechanics' or material man's liens, claims of lien or stop notices have been
bonded against to Lender's satisfaction. In the case of stop notices, Borrower
shall have the right to contest, in good faith and with diligence, the validity
of any stop notice, provided that Borrower shall immediately provide to Lender
a bond from a surety acceptable to Lender in its sole discretion and in form
and amount sufficient to release such stop notice. Lender shall have no
obligation to make any further disbursements of the Loan until all such
mechanic's or material men's liens, claims of lien and stop notices have been
fully released, discharged or bonded against to Lender's satisfaction.
(b) If (1 ) Borrower fails to promptly discharge or contest liens, Claims of
lien or stop notices and provide the bond in the manner provided in Section
7.8(a) or (ii) after having complied with the provisions of Section7.8(a)
there is an adverse conclusion to any such contest and Borrower does not
cause any final Judgment or decree to be immediately satisfied and the lien
or stop notice to be discharged, then Lender may, but shall not be required
to, procure the release and discharge of any such lien or stop notice and any
judgment or decree thereon, and in furtherance thereof may, in its reasonable
discretion, affect any settlement or compromise or furnish any security or
Indemnity as may be required by the Title Company. All amounts expended by
Lender in connection with the provisions of this Section7.8(b) shall be
deemed to constitute a disbursement of the Loan. In settling, compromising or
arranging for the discharge of any liens or stop notices under this
Section7.8(b), Lender shall not be required to establish or confirm the
validity or amount of the lien or stop notice, but shall use commercially
reasonable good faith efforts to do so.
7.9 Americans With Disabilities Act Compliance. Borrower represents and
warrants to Lender that the Improvements have been designed and shall be
constructed and completed, and hereafter maintained, in strict accordance
and full compliance with all of the requirements of the Americans with
Disabilities Act ("ADA"), of July 26, 1990, Pub. L. No. 101-336, 104 Stat.
327, 42 U.S.C. 12101, et. seq. as amended from time to time, if such
acts shall apply to the Improvements. Borrower is responsible for all ADA
compliance costs, including, without limitation, attorney's fees and
litigation costs.
7.10 Construction Responsibilities. Borrower shall be solely responsible for
all aspects of Borrower's business and conduct in connection with the
Property and Improvements, including, without limitation, to the quality
and suitability of the Plans and Specifications and their compliance with
the Requirements, the supervision of the work of construction, the
qualifications, financial condition and performance of all architects,
engineers, contractors, material suppliers, consultants and property
managers, and the accuracy of all applications for payment and the proper
application of all disbursements. Lender is not obligated to supervise,
inspect or inform Borrower or any third party of any aspect of the
construction of the Improvements or any other matter referred to above.
Any inspection or review by Lender is to determine whether Borrower is
properly discharging its obligation to Lender and may not be relied upon
by Borrower or any third party. Lender owes no duty of care to Borrower or
any third party to protect against, or to inform Borrower or any third party
of, any negligent, faulty, inadequate or defective design or construction
of the Improvements.
7.11 Improvement District. Without Lender's prior written consent, Borrower
shall not, directly or indirectly, advocate or assist in the incorporation of
any of the Property or Improvements into any improvement or other
assessment district.
7.12 Delay. Borrower shall promptly notify Lender in writing of any event
causing a material delay or interruption of construction, or the timely
completion of construction. The notice shall specify the particular work
delayed, and the cause and period of each delay.
7.13 Surveys. At Lender's request, Borrower shall deliver to Lender: (a) a
perimeter survey of the Property; and (b) upon completion of the
foundations of the Improvements, a survey showing the location of the
Improvements on the Property and showing that the Improvements are
located entirely within the Property and do not encroach upon any
easement, or breach or violate any of the Requirements.
7.14 Bonds. Within five (5) business days of Lender's request, Borrower shall
procure from a surety acceptable to Lender, and deliver to Lender, dual
oblige performance and labor and material payment bonds in a form,
substance and amount acceptable to Lender and, if requested by Lender,
cause any such bond to be recorded and the Plans and Specifications and
Construction Agreement, if any, to be filed in the office of the County
Recorder of the County where the Property is located.
7.15 Corporate Structure. Borrower will not suffer or permit any amendments
to Borrower's articles of incorporation or by-laws without the prior written
content of Lender. Borrower shall maintain and preserve its existence and
all rights and franchises material to its business.
7.16 Financial Statements and Reports.
(a) Within ninety (90) days after the end of each fiscal year of Borrower,
Borrower shall provide to Lender annual financial statements of Borrower and
Members of Borrower, including a balance sheet, a cash flow statement, an
income statement, and, if applicable, income accounts, and such
other statements as may be reasonably required by Lender, prepared in
accordance with generally accepted accounting principles consistently applied
and certified as true and complete without qualification by Borrower or, if
required by Lender, a certified public accountant.
(b) Within forty-five (45) days after the end of each month end of Borrower
and Members of Borrower and its subsidiaries, Borrower shall provide interim
financial statements as requested by Lender.
7.17 Expenses. Borrower shall pay all expenses, costs and disbursements of
every kind and nature incurred by or on behalf of Borrower during the term
of the Loan with respect to the development, construction, operation,
maintenance, management, marketing and sale of the Subdivision, the
Units, the Presold Units and the Lots, as applicable. Borrower shall pay
any and all valid Claims of any brokers or agents with whom it has dealt
who claim a right to any fees in connection with, arranging the financing
of the Subdivision, and shall Indemnity, defend and hold Lender harmless
from such Claims, whether or not they are valid.
7.18 Litigation. Borrower shall give Lender prompt written notice of any action
or proceeding commenced or threatened against Borrower, the Subdivision
or any portion thereof and will deliver to Lender copies of all notices, and
other information regarding such proceeding or action promptly upon
receipt or transmittal thereof.
7.19 Representations and Warranties. Until repayment of the Loan and the
full discharge of all other obligations secured by the Deed of Trust, the
representations and warranties of Article VI shall remain true and
complete.
7.20 Further Assurances. Borrower shall execute and deliver from time to time,
promptly after any request therefor by Lender, any and all Instruments,
agreements and documents and shall take such other action as reasonably
determined by Lender to be necessary or desirable to maintain, perfect or
insure Lender's security provided for herein and in the other Loan
Documents, including, without limitation, the execution of UCC-1 renewal
statements, the execution of such amendments to any and all Deeds of
Trust and the other Loan Documents and the delivery of such
endorsements to any Title Insurance Policy, all as Lender shall reasonably
require, and shall pay all fees and expenses (including reasonable attorneys'
fees) related thereto. Promptly upon the request of Lender, Borrower shall
execute and deliver a certification of nonforeign status consistent with the
requirements of Section 1445 of the Internal Revenue Code.
7.21 Environmental Matters.
(a) Borrower shall, at its own expense, comply and cause all persons
entering the Subdivision to comply
with all Environmental Laws applicable to the Subdivision. Borrower shall
immediately advise Lender in writing of any W discovery of Hazardous
Substances on the Subdivision; or (ii) claim, action or
order threatened or instituted by any third party (including Government
Authorities) against the Subdivision or Borrower relating to damages, cost
recovery, loss or injury resulting from any Hazardous Substances. Borrower
shall provide Lender with copies of all communications with any
third party (including Governmental Authorities) relating to any
Environmental Law or any claim, action or order relating to Hazardous
Substances at, on, under or in the Subdivision. Lender shall
have the right, at Borrower's expense, to retain a professional environmental
consultant to conduct an investigation of the Subdivision with respect to
Hazardous Substances or its compliance with Environmental Laws. Borrower
hereby grants to Lender, its agents, employees, consultants and
contractors, an irrevocable license and authorization to enter upon and inspect
the Subdivision and to conduct such tests and investigations on ' the
Subdivision as Lender, in its sole discretion, determines necessary. If any
remedial action is required to bring the Subdivision into compliance
with Environmental Laws, Borrower shall immediately notify Lender of such
situation and shall prepare a written plan setting forth a description of such
situation (and all environmental reports relating thereto) and the remedial
action that Borrower proposes to implement to bring the Subdivision into
compliance with all Environmental Laws. Borrower shall, at its own expense,
thereafter diligently and continuously pursue the remediation of the condition
necessary to bring the Subdivision into compliance with all Environmental
Laws.
(b) To the fullest extent permitted by law, Borrower agrees to protect,
Indemnify, defend, save and hold
harmless Lender, its directors, officers, agents and employees from and against
any and all loss, liability, expense or damage of any kind or nature and from
any suits, claims or demands, including
(i) any consequential damages; (ii) all damages to any natural resources, and
the costs of any required or necessary repair, clean up, response cost, or
remediation of the Subdivision or any portion thereof, and the preparation and
implementation of any closure, remedial or other required plans; and (iii) all
costs and expenses incurred in connection with clauses M and (ii), including
reasonable attorneys' fees and costs, whether in suit or not, to the extent
arising directly or indirectly, in whole or in part, out of (a) the existence
or alleged existence of any Hazardous Substances on or under the Subdivision
or in any of the Units or Presold Units, (b) the removal of or failure to
remove any Hazardous Substances from the Subdivision or the Units or Presold
Units, or (c) any activity involving Hazardous Substances with respect to the
Subdivision carried on or undertaken on or off the Subdivision, whether prior
to or during the term of the Loan, and whether by Borrower or any
predecessor-in-title or any employees, agents, contractors or subcontractors of
Borrower or any predecessor-in-title, or any third parties occupying or present
on the Subdivision. The foregoing Indemnity shall apply to any residual
contamination on or under the Subdivision that occurs prior to or during the
term of the Loan and to any contamination of any property or natural
resources arising in connection with any activity involving Hazardous
Substances with respect to the Subdivision that occurs prior to or during the
term of the Loan, respective of whether any of such activities were or will be
undertaken in accordance with applicable Environmental Laws. Upon
receiving knowledge of any suit, claim or demand asserted by a third party
that Lender believes is covered by this indemnity, Lender shall give Borrower
notice of the matter and an opportunity to defend it, at Borrower's sole cost
and expense, with legal counsel satisfactory to Lender. Lender
may also require borrower to so defend the matter. The obligations of Borrower
under this Section 7.2 1 (b) shall survive the closing of the Loan and the
repayment thereof.
7.22 Use of Loan Proceeds. Borrower shall use the proceeds from the Loan only
for the purposes set forth in Section 5.1. and except to the extent of
proposed borrowing heretofore disclosed to Lender, if any, it shall not
require and shall not avail itself of any additional extension of credit for
such purpose.
7.23 Pre-Sale Occupancy. Borrower shall not lease or otherwise permit
occupancy of any Unit or Presold Unit prior to the close of escrow of or
the transfer of title to any such Unit or Presold Unit.
7.24 Additional Reporting Requirements. Following the first Advance,
Borrower shall furnish
lender:
(a) Sales and Closing Reports. Commencing with the tenth (10th) day of
the first full calendar month following the commencement of sales activity for
the Subdivision (unless sooner requested by Lender), and thereafter on the
tenth (1Oth) day of every calendar month until the Loan is repaid in
full, Borrower shall provide to Lender a report, certified as true and complete
by Borrower containing such information required by Lender regarding the
status of sales in the Subdivision.
(b) Other Items and Information. Such other information concerning
Borrower and Members of Borrower, the Subdivision, any Unit, any Presold Unit
or any Lot or the assets, business, financial condition, operations, property
prospects, and results of operations of Borrower as Lender reasonably requests
from time to time.
7.25 Updated Subdivision Appraisals. Lender shall have the right to order
updated Subdivision Appraisals from time to time. Each updated
Subdivision Appraisal, is subject to review and approval by Lender. In
connection with the preparation of any such appraisal, Borrower shall
provide to Lender such information as Lender may reasonably request, and
provide access to the Subdivision and any Unit or any Presold Unit to any
appraiser conducting such appraisal, or any employee or other consultant
engaged by Lender to review the appraisal. Based on any such updated
Subdivision Appraisal, Lender may adjust the Appraised Value-Unit and
the Maximum Advance-Unit for the effected Units or Presold Units to
reflect the values shown in such updated Subdivision Appraisal. Borrower
acknowledges that such adjustments may result in the Total Available-Unit
for the effected Units or Presold Units to be reduced, and, in turn, may
result in Borrower having to deposit Borrower's Funds with Lender to
bring the Loan "in balance" as required under Section 5.4. Borrower agrees
upon demand by Lender to pay to Lender the cost and expense for such
appraisals and a fee prescribed by Lender for review of each such appraisal
by Lender.
7.26 Verification of Costs. Lender shall have the right at any time and from
time to time to review and verify all costs, expenses and fees with respect to
each Unit or Presold Unit and related Lot which is Eligible Collateral.
Based on its review and verification of costs, expenses and fees in each
Unit or Presold Unit, Lender shall have the right to require Borrower to
adjust all such budgeted amounts and, if necessary, to bring the Loan "in
balance" as required by Section 5.4.
7.27 Construction and Sa es Records. Borrower shall, at all times, maintain
complete and accurate records of Borrower's construction and sales
activities and shall, upon prior notice thereof by Lender, permit Lender to
review such records upon request by Lender at any time and from time to
time during regular business hours. Such records shall include, without
limitation, (a) any and all documents, instruments, contracts and
agreements relating to the construction or sale of any Lots or Units entered
into by Borrower with or for the benefit of purchasers, contractors,
subcontractors or other Persons, as applicable, (b) lien waivers and releases
with respect to all construction in place, (c) requests for disbursement and
vouchers submitted by contractors, subcontractors, or other Persons, and
(d) all permits, licenses and approvals necessary for the continuation and
completion of construction.
ARTICLE VIII
INSURANCE AND CONDEMNATION
8.1 Insurance Requirements.
(a) Title Insurance. Borrower shall procure from a Title Insurer acceptable
to Lender, an LP-10 ALTA, 1992 Policy of Title Insurance ("Title Policy"),
together with any endorsements which Lender may require, Insuring Lender, in
the principal amount of the Loan, of the vesting in Borrower of fee title
to, and the validity and the priority of the lien of the Deed of Trust upon, the
Property and Improvements, subject only to matters reasonably approved by
Lender in writing. During the term of the Loan, Borrower shall procure and
deliver to Lender, within five (5) business days of Lender's
written request to Borrower, such other customary endorsements to the Title
Policy as Lender may require, including but not limited 122 endorsements on
each advance hereunder.
(b) Hazard Insurance. Borrower shall procure and maintain from an
insurer reasonably satisfactory to Lender and in an amount acceptable to
Lender, fire and extended coverage insurance, including customary "Builder's
All Risk" completed value insurance in the full amount of the replacement cost
of the Improvements until Completion thereof, including a vandalism and
malicious mischief endorsement and such other endorsements as Lender may
require, insuring Lender against damage to the Property and Improvements.
Lender and any successors or assigns of Lender shall be named under a Lender's
Loss Payable Endorsement (form #438BFU or equivalent) attached to the policy
and, at Lender's or such successor's or assigns' request, the policy shall
contain an agreed value clause sufficient (as reasonably determined by Lender)
to eliminate any risk of co-insurance.
(c) Liability Insurance. Borrower shall procure and maintain from an
insurer reasonably satisfactory to Lender a policy or policies of liability
insurance with coverage and limits not less than $1,000,000.00 with an Umbrella
Coverages not less than $1,000,000.00, insuring against liability
for injury or death to any person and property damage occurring on the
Property or in the Improvements from any cause whatsoever. Such insurance
shall provide that the insurer waives any right to contribution from any other
liability insurance carried by Lender or its successors or assigns, as
applicable. Borrower shall provide to Lender policies or certificates
evidencing such insurance from insurers acceptable to Lender, naming Lender
(and Lender's successors and assigns) as additional insureds thereunder.
(d) Worker's Compensation. Borrower shall, and Borrower shall require
all contractors working on the Improvements to, procure and maintain from
insurers acceptable to Lender, worker's compensation insurance with statutory
limits and with Lender and any successors and assigns of Lender named
as additional insureds.
(e) Blanket Coverage. Lender may accept, at its option, blanket insurance
policies in satisfaction of Borrower's obligations to provide insurance.
(f) General. Borrower shall procure and maintain all other insurance
required by this Agreement and/or applicable law. Lender shall receive the
originals of all required insurance policies, or other evidence of insurance
acceptable to Lender. Borrower shall maintain all required insurance until the
Loan is repaid. All insurance policies shall be issued by licensed insurance
companies reasonably acceptable to Lender and shall provide that the insurance
shall not be cancelable or materially changed without thirty (30) days prior
written notice to Lender and its assigns.
8.2 Loss Proceeds.
(a) If the Subdivision or any portion thereof encumbered by the Deed of
Trust shall be damaged or destroyed by an insured peril or otherwise, Lender
may, at its option, upon written notice to Borrower, settle, adjust or
compromise any and all claims. All proceeds of insurance with respect
to any damage or destruction shall be payable to Lender and Borrower hereby
authorizes and directs any affected insurance company to make payment of
such proceeds directly to Lender and Borrower shall promptly pay over to
Lender any such proceeds received by Borrower. Lender shall apply all
loss proceeds remaining after deduction of all expenses of collection and
settlement thereof, including, without limitation, attorneys' and adjustors'
fees and charges, to the reconstruction of the Subdivision, provided that: (i)
no Event of Default, Potential Balancing Default, or Potential Default exists
under any of the Loan Documents; (ii) Lender determines, in its reasonable
Judgment, that the damage destruction can be repaired and completed by the
Maturity Date; (iii) Lender and all applicable Governmental Authorities shall
have approved the final plans and specifications for reconstruction of the
Subdivision; (iv) Borrower shall have delivered to Lender (A) a budget of all
costs of reconstruction of the Subdivision, (B) a construction schedule for the
reconstruction of the Subdivision, (C) a construction contract for the
reconstruction work in form and content, and with a contractor, reasonably
acceptable to Lender, and (D) such documents and agreements as Lender
reasonably shall require; and (v) Lender shall have determined that after the
reconstruction work is completed the value of the Subdivision, as determined
by Lender in its reasonable discretion, shall be not less than the original
appraised value of the Subdivision approved by Lender.
All proceeds so applied to the reconstruction of the Subdivision shall be
disbursed in accordance with this Agreement and only as repairs or replacements
are effected and as continuing expenses become due and payable. Any loss
proceeds remaining after completion of all necessary repairs shall be applied to
the outstanding principal balance of the Note, whether or not then due.
(b) If any one or more of the conditions set forth in Section 8.2(a) are not
met: (i) Lender shall not be obligated to make any further disbursements
pursuant to this Agreement or the other Loan Documents and Lender. shall
apply all loss proceeds remaining after deduction of all of Lender's
costs and expenses incurred in connection therewith, to the repayment of the
outstanding balance of the Note, together with accrued interest,
notwithstanding that the outstanding balance may not be due and payable; (i)
if the loss proceeds are not sufficient to repay the Note in full, Borrower
shall immediately pay the remaining balance together with accrued interest
thereon; and (ii) if there are loss proceeds remaining after repayment of the
Note in full, such remaining proceeds shall be paid over to the persons
legally entitled thereto.
(c) if there are no loss proceeds available after damage or destruction, upon
written notice to Borrower and Borrower's failure to provide to Lender,
within ten (10) days after Lender's delivery of such written notice, evidence,
in a form reasonably satisfactory to Lender, of funds immediately available
to Borrower and sufficient to repair and restore all such damage and
destruction, then the outstanding balance of the Note, together with accrued
interest, shall become immediately due and payable and Lender shall be under
no further obligation to disburse funds pursuant to this Agreement or the other
Loan Documents.
8.3 Eminent Domain. In the event that any proceeding or action be
commenced for the taking of the Subdivision or any material part thereof
or Interest therein, for public or quasi-public use under the power of
eminent domain, by reason of any public improvement or condemnation
proceeding, or in any other manner (any of the foregoing being a
"Condemnation Event"), or should Borrower receive any notice or other
information regarding such Condemnation Event, Borrower shall give
prompt written notice thereof to Lender. Upon the occurrence of a
Condemnation Event, Lender shall be entitled by written notice to
Borrower to terminate its obligation to make further disbursements of the
Loan and to declare all outstanding indebtedness under the Loan to be
immediately due and payable. Lender shall be entitled at its option,
without regard to the adequacy of its security, to appear in and prosecute
in its own name any action or proceeding relating to the Condemnation
Event. Lender shall also be entitled to make any compromise or settlement
in connection with such Condemnation Event. All proceeds of such
Condemnation Event are hereby assigned to Lender and Borrower agrees
to execute such further assignments of the condemnation proceeds as
Lender may require. After deducting therefrom all costs and expenses
(regardless of the particular nature thereof and whether incurred with or
without suit), including, without limitation, reasonable attorneys' fees,
incurred by it in connection with any such action or proceeding, Lender
shall distribute such condemnation proceeds in accordance with the Deed
of Trust.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
9.1 Events of Default.
(a) Upon written notice from Lender to Borrower (except for the
occurrence of any event described in Section 9.1 (a) (i), 9.1 (a)(vi)
and 9.1(a)(x) through 9.1 (a)(xvii) inclusive, in which event no notice
shall be required, and, in the case of the events described in Section
9.1(a)(ii) and 9.1(a)(iii), the expiration of the cure period provided in
Section 9.11(b), the occurrence of one or more of the following shall
constitute an Event of Default under this Agreement:
(i) failure to pay any interest, principal or other monies due under the Note,
this Agreement or any of the other Loan Documents (exclusive of any monies
to be deposited with Lender pursuant to Section 5.4(b)) within fifteen (115)
calendar days after any such amount is due;
(ii) failure to comply with, perform or observe any of the obligations of, or
covenants made by, Borrower in this Agreement or any of the other Loan
Documents (other than any of the obligations of, or covenants made by, Borrower
which are included within the scope of Section 9.1 (a)(i) above);
(iii) a material default by Borrower under any material construction contract
(including any general contract) affecting the Subdivision;
(iv) inability of Borrower to satisfy any condition for the receipt of a
disbursement hereunder, or to resolve the situation to the satisfaction of
Lender, for a period in excess of thirty (30) days after written notice from
Lender;
(v) if any representation or warranty made by Borrower at the date hereof
or at the date of any disbursement of the Loan shall be materially false or
materially misleading;
(vi) failure to deposit with Lender in cash, the amount necessary to put the
Loan "in balance" within the time period specified in Section 5.4(b),
(vii) any Governmental Authorities take or institute action, which in the
reasonable opinion of Lender, will materially and adversely affect Borrower's
condition, operations, or ability to
repay the Loan if such action remains effective for more than thirty (30) days;
(viii) Lender fails to have a legal, valid, binding, and enforceable first
priority lien acceptable to Lender on all Units, Presold Units, Lots and
Collateral;
(ix) work is discontinued for a period of thirty (30) days and Lender has not
excused such discontinuation, or if Lender has excused the discontinuation,
work is not commenced and completed within the period specified by Lender;
(x) a stop notice affecting the balance of the Loan proceeds is served on
Lender, unless and until a bond in form and substance reasonably satisfactory
to Lender, issued by a surety acceptable to Lender in its reasonable discretion,
is furnished to Lender within the time period specified by Lender;
(xi) insolvency or a material adverse change in the assets, liabilities or
financial position of Borrower or any Guarantor;
(xii) the commencement by any partner in Borrower of any action or
proceeding which seeks as one of its remedies the dissolution of Borrower or
any partner in Borrower;
(xiii) if any Governmental Authority, or any court at the instance thereof,
shall assume control over the affairs or operations of, or a receiver or trustee
shall be appointed over or of any substantial part of, or a writ or order of
attachment or garnishment shall be issued or made against any substantial part
of the property of Borrower or any Guarantor;
(xiv) if Borrower or any Guarantor shall admit in writing its inability to pay
its debts when due, or shall make an assignment for the benefit of creditors;
or Borrower or any Guarantor shall apply for or consent to the appointment
of any receiver, trustee or similar officer for Borrower or any Guarantor,
as the case may be, or for all or any substantial part of their respective
property; Borrower or any Guarantor shall institute (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debts, dissolution, liquidation, or similar
proceedings relating to Borrower or any Guarantor, as the case may be, or under
the laws of any jurisdiction;
(xv) if a receiver, trustee or similar officer shall be appointed for Borrower
or any Guarantor and for all or any substantial part of their respective
property without the application or consent of Borrower or any Guarantor,
as the case may be, and such appointment shall continue undischarged for
a period of thirty (30) days (whether or not consecutive); or any
bankruptcy, insolvency, reorganization, arrangements, readjustment of
debt, dissolution, liquidation or similar proceedings shall be instituted (by
petition, application or otherwise) against Borrower or any Guarantor and
shall remain undismissed for a period of thirty (30) days (whether or not
consecutive);
(xvi) any transfer of the Trust Estate (as defined in the Deed of Trust) or any
portion thereof without the prior written consent of lender or not in
accordance with any provisions of a Deed of Trust regarding the release of
portions of the Trust Estate from such Deed of Trust;
(xvii) the occurrence of a default under (a) that certain promissory note in
the amount of $1,300,000.00 dated as of May 19, 1997 and that certain
additional advance promissory note in the amount of $200,000.00 dated
as of June 10, 1998 secured by the deed of trust executed by WESTCO
COMMUNITY BUILDERS, INC., a California corporation, as trustor,
to North American Title Company, as trustee, in favor of HOUSING
CAPITAL COMPANY, a Minnesota partnership, as beneficiary, dated
May 19, 1997, and recorded June 20, 1997 as Instrument No. 97-074796
in the records of the County Recorder of San Mateo County; and (b) that
certain promissory note in the amount of $900,000.00 dated as of
December 19, 1997 secured by the deed of trust executed by WESTCO
COMMUNITY BUILDERS, INC., a California corporation and DOVER
INVESTMENTS CORPORATION, a Delaware corporation, as trustor,
to First American Title Guaranty Company, as trustee, in favor of
HOUSING CAPITAL COMPANY, a Minnesota partnership, as
Beneficiary, dated December 19, 1997, recorded December 31, 1997 as
Document No. 13997247 in the Records of the County Recorder of Santa
Clara County; (c) that certain promissory note in the amount of
$1,500,000.00 dated as of December 22, 1997 secured by the deed of
trust executed by WESTCO COMMUNITY BUILDERS, INC., a
California corporation and DOVER INVESTMENTS CORPORATION,
a Delaware corporation, as trustor, to First American Title Guaranty
Company, as trustee, in favor of HOUSING CAPITAL COMPANY, a
Minnesota partnership, as Beneficiary, dated December 22, 1997,
recorded December 31, 1997 as Instrument No. 97-173093 in the
Records of the County Recorder of San Mateo County; and (d) that
certain promissory note in the amount of $2,745,000.00 dated March 18,
1998 secured by the deed of trust executed by TRACY RESIDENTIAL
VENTURE PARTNERS, LLC, a California limited liability company,
as trustor, to First American Title Company of Stockton, as trustee; in
favor of Housing Capital Company, a Minnesota partnership, as
Beneficiary, dated March 18, 1998, recorded April 28, 1998 as
Instrument No. 98048795 in the records of the County Recorder of San
Joaquin County;
(xviii) a default under any future promissory notes which may be executed by
TRACY RESIDENTIAL VENTURE PARTNERS, LLC, a California
limited liability company; and
(xix) the occurrence of any of the events specified in Sections 9.1 (xi), 9.1
(xiv) or 9.1 (xv) of this Agreement with respect to Westco Community
Builders, Inc., or Dover Investments Corporation.
(b) Only the defaults set forth in Section 9.1 (a)(ii) and 9.1 (a)(iii) are
curable and shall be deemed cured, if:
Borrower commences to cure said default within ten (10) days of receipt of
Lender's notice of default and diligently proceeds to cure the same;
(ii) Borrower cures such default within ten (10) days after receipt of
Lender's notice or if such default is not reasonably capable of being cured
within such ten (10) day period, Borrower diligently and continuously proceeds
to cure such default within such time as Lender, in its sole discretion,
deems to be reasonable; and
(iii) With respect only to a default under Section 7.21 (a) and 7.21(b).
Borrower delivers to Lender personal guarantees, on Lender's standard guaranty
form, of all of Borrower's shareholders, guaranteeing the amount of the Loan
outstanding at that time or with respect to which Lender has an outstanding
commitment to disburse funds at that time; provided that Lender shall have
received from the proposed Guarantors their most recent financial statements
prepared in accordance with GAAP and that Lender shall have approved the
same in its sole discretion.
(c) All notice and cure periods provided herein or in any other Loan
Document shall run concurrently with any notice or cure periods provided by
applicable law.
9.2 Remedies.
(a) Notwithstanding any provision to the contrary herein or in any of the
other Loan Documents, upon the happening of any Event of Default under this
Agreement, or upon an Event of Default under any of the other Loan Documents:
(i) Lenders obligation to make further disbursements of the Loan shall
cease; (ii) Lender shall, at its option, have the rights and remedies provided
in the Loan Documents, including, without limitation, the option to declare all
outstanding indebtedness to be immediately due and payable without
presentment, demand, protest or further notice of any kind, lo apply any
of Borrower's funds in its possession to the outstanding indebtedness under
the Note whether or not such indebtedness is then due, and to obtain the
appointment of a receiver, (iii) lender shall have the right to cause an
independent contractor selected by Lender to enter into possession of
the Subdivision and to perform any and all work and labor necessary for the
completion of the Units and Presold Units substantially in accordance with the
Subdivision Plans and Specifications and to perform Borrowers obligations
under this Agreement; (i) Lender may pursue any remedies available
to it pursuant to California Code of Civil Procedure 726.5; and (v) all
outstanding indebtedness under the Loan shall bear interest at the Default
Rate. All sums expended by Lender for such purposes shall be deemed to have
been disbursed to and borrowed by Borrower and shall be secured by the
Deeds of Trust.
(b) Borrower hereby constitutes and appoints Lender, or an Independent
contractor selected by Lender, as its true and lawful attorney-in-fact with
full power of substitution to perform Borrowers obligations under this
Agreement and upon the occurrence of an Event of Default to take all such
actions as Lenders deems necessary to complete the Units and Presold Units,
including without limitation, any of the following in the name of the
Borrower: (i) to use any of the funds of Borrower, including any balance of
the Loan and any funds which may be held by Lender for Borrower; (ii) to
make such additions, changes and connections in the Subdivision Plans and
Specifications as shall be necessary or desirable to complete the Units and
Presold Units; (iii) to employ any consultants, contractors, subcontractors,
attorneys, agents, architects and inspectors and enter into contracts
required for the completion of the Units and Presold Units; Ov) to pay, settle
or compromise all existing bills and claims which are or may be liens against
the Subdivision or may be necessary or desirable for the completion of the
Units and Presold Units; (v) to execute all applications and certificates
necessary for the completion of the Units and Presold Units; and (vi) to take
such action and require such performance as it deems necessary under any of
the bonds or insurance policies to be furnished hereunder. It is understood and
agreed that the foregoing power of attorney shall be deemed to be a power
coupled with an interest which cannot be revoked until repayment in full
of the Loan.
(c) The remedies of Lender as provided herein or in any other Loan
Document, or any one or more of them, or at law or equity, shall be cumulative
and concurrent, and may be pursued singly, successively or together at the
sole discretion of Lender, and may be exercised as often as occasion thereof
shall occur.
ARTICLE X
MISCELLANEOUS
10.1 Assignment. Borrower shall not assign any of its rights under this
Agreement.
10.2 Notices. Whenever Borrower or Lender shall desire to give or serve any
notice, demand, request or other communication with respect to this
Agreement or any Loan Document, each such notice, demand, request or
communication shall be given in writing (at the address set forth below)
by any of the following means; (a) personal service (including service by
overnight courier service); (b) electronic communication, whether by
telex, telegram or telecopying (if confirmed in writing sent by personal
service or by registered or certified, first class mail, return receipt
requested); or (c) registered or certified first class mail, return receipt
requested. Such addresses may be changed by notice to the other party given
in the same manner as provided above. Any notice, demand or request sent
pursuant to either subsection (a) or (b) hereof shall be deemed received upon
such personal service or upon dispatch by electronic means, and, if sent
pursuant to subsection (c) shall be deemed received five (5) days following
deposit in the mail.
To Lender: Housing Capital Company
1825 South Grant Street, Suite 630
San Mateo, CA 94402
To Borrower: Tracy Residential Venture Partners, LLC
Attn: Jerry Finch
15225 Wicks Boulevard
San Leandro, CA 94577
10.3 Authority to File Notices. Borrower irrevocably appoints Lender as its
Attorney-in-fact, with full power of substitution, to file for record, at the
Borrower's cost and expense and in Borrower's name, any notices of
completion, notices of cessation of labor, or any other notices that Lender
considers necessary or desirable to protect its security.
10.4 No Waiver. No disbursement of proceeds of the Loan shall constitute a
waiver of any conditions to Lender's obligation to make further
disbursements nor, in the event Borrower is unable to satisfy any such
conditions, nor shall any such water have the effect of precluding Lender
from thereafter declaring such inability to constitute a default under this
Agreement.
10.5 Lender Approval of Instruments and Parties. All proceedings taken in
accordance with transactions provided for herein; an waivers of lien,
surveys, appraisals and documents required or contemplated by this
Agreement and the persons responsible for the execution and preparation
thereof; and the form of the general contracts, subcontracts, all leases,
bonds and guaranties shall be reasonably satisfactory to and subject to
reasonable approval by Lender.
10.6 Incorporation of Preamble, Recital, Riders and Exhibits. The
preamble, recital, riders and exhibits hereto are hereby incorporated
into this Agreement and made a part hereof.
10.7 Third-Party Consultants. Lender may hire such third-party consultants
as it deems necessary, the reasonable costs of which shall be paid by
Borrower, to provide the following services: (a) review Subdivision Plans
and Specifications; (b) review Subdivision Budgets, Unit Budgets and
Construction Schedules; (c) conduct compliance inspections with respect
to the progress of construction of the Units and Presold Units and approve
each element of a request for disbursement relating to construction costs;
and (d) perform such other services or provide such other advice as may,
from time to time, be required by Lender.
10.8 Payment of Expenses. Borrower shall pay prior to when due all taxes and
assessments and all expenses, charges, costs and fees provided for in this
Agreement or relating to the Loan or construction of the Units and
Presold Units, including all fees, charges, and taxes in connection with
recording or filing any of the Loan Documents, title insurance premiums
and charges, fees of any consultants, fees and costs of Lender's counsel
(which attorneys may include employees of Lender), printing and
duplicating expenses, air freight charges, escrow fees, costs of surveys,
premiums of hazard insurance policies and surety bonds, fees for any
architectural or engineering review, environmental audits, appraisal,
market or feasibility study required by Lender and all other costs incurred
by Lender in connection with the Loan. All such expenses, charges, costs
and fees shall be Borrower's obligation regardless of whether or not
Borrower has requested and met the conditions for a disbursement of the
Loan. This obligation on the part of Borrower shall survive the closing of
the Loan and the repayment thereof. Borrower hereby authorizes Lender,
in its discretion, to pay such expenses, charges, costs and fees at any time
by a disbursement of the Loan.
10.9 Disclaimer by Lender. Lender shall not be liable to any contractor,
subcontractor, supplier, laborer, architect, engineer or any other party for
services performed or materials supplied in connection with the
Subdivision or the construction of any Unit or Presold Unit. Lender shall
not be liable for any debts or claims accruing in favor of any such parties
against Borrower or others or against the Subdivision. Borrower is not
and shall not be an agent of Lender for any purpose. Lender is not a joint
venture partner with Borrower or with the constituent partners of
Borrower in any manner whatsoever. No payment by Lender of funds
directly to a contractor, subcontractor, or provider of services shall be
deemed to create any third party beneficiary status or recognition of same
by Lender. Approvals granted by Lender for any matters covered under
this Agreement shall be narrowly construed to cover only the parties and
facts identified in any written approval or, if not in writing, such
approvals shall be solely for the benefit of Borrower.
10.10 Indemnification. To the fullest extent permitted by law, Borrower agrees
to protect, indemnify, defend and hold harmless Lender, its directors,
officers, agents and employees from and against any and all liability,
expense, loss or damage of any kind or nature and from any suits, claims
or demands, including reasonable attorneys fees and costs, on account of
any matter or thing or action or failure to act by Lender, whether in suit
or not, arising out of this Agreement or in connection herewith, unless
such suit, claim or demand is caused solely by any act, omission or willful
malfeasance of Lender, its directors, officers, agents and employees.
Upon receiving knowledge of any suit, claim or demand asserted by a
third party that Lender believes is covered by this Indemnity, Lender shall
give Borrower notice of the matter and an opportunity to defend it, at
Borrower's sole cost and expense, with legal counsel satisfactory to
Lender. Lender may also require Borrower to so defend the matter. This
obligation on the part of Borrower shall survive the closing of the Loan
and the repayment thereof.
10.11 Inconsistences with Loan Documents. In the event it is impossible to
simultaneously comply with the terms of this Agreement and any of the
terms of any other Loan Document, the terms of this Agreement shall
govern and prevail over the inconsistent term of the other Loan Document
10. 12 Titles and Headings. The titles and headings of sections of this
Agreement are intended for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement.
10.13 Changes, Waivers, Discharge and Modifications in Writing. No
provision of this Agreement may be changed, waived, discharged or
terminated except by an Instrument in writing signed by the party against
whom enforcement of the change, waiver, discharge or termination is
sought.
10.14 Erection of Sign. At Lender's election, Borrower shall erect a sign on the
Subdivision satisfactory to Lender in a conspicuous location indicating
that the construction financing has been arranged through and supplied by
Lender, which sign shall comply with all applicable zoning ordinances
and restrictive covenants. Borrower shall not erect any sign identifying
Lender in connection with the Subdivision or otherwise identify Lender
in any marketing materials or advertisements without the prior written
consent of Lender.
10.15 Choice of Law. THIS AGREEMENT AND THE TRANSACTION CONTEMPLATED HEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA.
10.10 Advances in Excess of Loan Amounts. In the event the total
disbursements by Lender exceed the Maximum Facility Commitment
Amount, to the extent permitted by the laws of the State of California, the
total of all disbursements shall be secured by the Deed of Trust. All other
sums expended by Lender pursuant to this Agreement or any other Loan
Document shall be deemed to have been paid to Borrower and shall be
secured by, among other things, the Deed of Trust.
10.17 Participation. Lender shall have the right at any time to sell, assign or
transfer the Loan or the Note or to sell or grant participation in all or any
part therein, all without notice to or the consent of Borrower. Borrower
hereby acknowledges and agrees that any such disposition will give rise
to a direct obligation of Borrower to each holder of the Note or the Loan
or each participant or assignee of all or any part of the Loan or Note.
Lender may disclose to third parties, including without limitation,
prospective purchasers of the Loan or participation interests therein,
financial or other information in Lender's possession regarding Borrower
or the Property.
10.18 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original and all of which
shall constitute one and the same agreement with the same effect as if all
parties had signed the same signature page. Any signature page of this
Agreement may be detached from any counterpart of this Agreement and
reattached to any other counterpart of this Agreement identical in form
hereto but having attached to it one or more additional signature pages.
10.19 Time is of the Essence. Time is strictly of the essence of this
Agreement.
10.20 Completion of Construction. For purposes of subdivision (6) of Section
9313 of the California Commercial Code, "completion of construction"
shall not be deemed to occur prior to completion of all work, and
installation or incorporation into the Units and Presold Units of all
materials, for which Loan proceeds are disbursed by Lender.
10.21 Submission of Agreement. The submission of this Agreement to
Borrower or its agent or attorney for review or signature does not
constitute a commitment by Lender to make the Loan to Borrower, and
this Agreement shall have no binding force or effect until its execution
and delivery by both Borrower and Lender.
10.22 Attorneys' Fees. For the purpose of this Agreement and the other Loan
Documents, the terms "attorneys' fees" or "attorneys' fees and costs" shall
mean the reasonable fees and expenses of counsel to the parties hereto
(including, without limitation, in-house counsel employed by Lender),
which may include printing, duplicating and other expenses, air freight
charges, and fees billed for law clerks and paralegal. The terms "attorneys'
fees" or "attorneys' fees and costs" shall also include, without limitation,
all such fees and expenses incurred with respect to appeals, arbitrations
and bankruptcy proceedings, and whether or not any action or proceeding
is brought with respect to the manner for which said fees and expenses
were incurred.
10.23 Entire Agreement. This Agreement and the Loan Documents constitute
the entire agreement and understanding of Lender and Borrower with
respect to the matters set forth herein and therein. No representation,
warranty, covenant, promise, understanding or condition shall be
enforceable against any party unless it is contained in this Agreement or
the Loan Document
10.24 Severability. The invalidity or unenforceability of any one or more
provisions of this Agreement or any Loan Document shall not affect
the validity or enforce ability of any other provision.
<PAGE>
In witness hereof, Borrower and lender have caused this Agreement to be
executed and delivered as of the date first above written.
"Lender"
HOUSING CAPITAL COMPANY,
a Minnesota Partnership
BY: DFP Financial Inc., a California
corporation, Its: Managing
General Partner
"Borrower"
TRACY RESIDENTIAL VENTURE PARTNERS,
LLC, a California limited liability company
BY: WESTCO COMMUNITY BUILDERS,
INC., a California corporation Member
Glen Britton Evans, Jr.
Its: Executive Vice President
By: Jerry A. Finch
Its: President
BY: DOVER INVESTMENTS CORP., a
Delaware corporation Member
By: Lawrence Weissberg
Its: President
<PAGE>
EXHIBIT 22.1
SUBSIDIARIES OF THE COMPANY
Glenbriar Joint Venture California General Partnership
Glenbriar Venture #2, LLC California Limited Liability
Company
Tracy Residential Venture Partners, LLC California Limited Liability
Company
