FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20680
Concepts Direct, Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1781893
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification No.)
2950 Colorful Avenue, Longmont, CO 80504
(Address of principal executive offices, Zip Code)
(303)772-9171
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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
As of July 22, 1997, 4,949,286 shares of Common Stock, $.10 par value, were
outstanding.
CONCEPTS DIRECT, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets as of June 30, 1997 and December 31, 1996
Statements of Operations for the three and six months ended
June 30, 1997 and June 30, 1996
Statements of Cash Flows for the six months ended June 30, 1997
and June 30, 1996
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II.OTHER INFORMATION
Item 4. Submission of matters to a vote of Security Holders
Item 6. Exhibits and reports on Form 8-K
CONCEPTS DIRECT, INC.
Balance Sheets
(Unaudited)
June 30, December 31,
ASSETS 1997 1996
Current assets
Cash and cash equivalents $ - $ 6,425,137
Restricted cash 500,000 -
Accounts receivable, less allowances 217,973 165,833
Deferred advertising costs 7,566,434 3,818,827
Inventories, less allowances 3,474,990 2,783,999
Prepaid expenses and other 539,872 248,920
Total current assets 12,299,269 13,442,716
Property and equipment, net 6,278,088 792,199
Other assets 367,898 252,068
TOTAL ASSETS $18,945,255 $14,486,983
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,019,629 $ 5,323,278
Current maturities of lease obligations 12,396 59,457
Accrued employee compensation 480,002 584,868
Customer liabilities 1,263,239 762,491
Current and deferred income taxes payable 1,147,643 787,643
Total current liabilities 10,922,909 7,517,737
Commitments
Stockholders' equity
Common Stock, $.10 par value, authorized
6,000,000 shares, issued and
outstanding 4,252,882 and 4,240,216
shares, respectively 425,288 212,111
Additional paid-in capital 4,173,229 4,374,455
Retained earnings 3,423,829 2,382,680
Total stockholders' equity 8,022,346 6,969,246
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $18,945,255 $14,486,983
See notes to financial statements.
CONCEPTS DIRECT, INC.
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Net sales $14,766,280 $ 9,000,393 $30,718,640 $20,584,357
Operating costs and expenses:
Cost of product and delivery 7,814,393 4,907,287 15,773,814 10,848,633
Selling, general and
administrative 6,505,509 4,437,440 13,547,541 9,817,336
Total operating costs and
expenses 14,319,902 9,344,727 29,321,355 20,665,969
Operating income (loss) 446,378 (344,334) 1,397,285 (81,612)
Other income, net 122,607 34,591 223,864 146,638
Income (loss) before income
taxes 568,985 (309,743) 1,621,149 65,026
Provision (credit) for
income taxes 201,000 (90,000) 580,000 19,000
Net income (loss) $ 367,985 $ (219,743) $1,041,149 $ 46,026
Net earnings (loss) per
common share $ 0.08 $ (0.05) $ 0.23 $ 0.01
Weighted average number of
common shares and common
share equivalents
outstanding 4,481,803 4,441,452 4,481,981 4,441,792
See notes to financial statements.
CONCEPTS DIRECT, INC.
Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
1997 1996
OPERATING ACTIVITIES
Net income $1,041,149 $ 46,026
Adjustments to reconcile net income to
net cash used in operations:
Provision for losses on accounts
receivable 1,000 13,000
Provision (credit) for losses in
inventory values 90,701 (37,446)
Depreciation and amortization 164,194 248,595
Current and deferred income taxes 360,000 (101,883)
Changes in operating assets and liabilities:
Accounts receivable (53,140) (38,861)
Deferred advertising costs (3,747,607) 23,939
Inventories (781,692) 763,808
Prepaid expenses and other (290,952) (92,432)
Accounts payable 2,696,351 (201,548)
Accrued employee compensation (104,866) (168,288)
Customer liabilities 500,748 (200,641)
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (124,114) 254,269
INVESTING ACTIVITIES
Cash restricted as collateral (500,000) -
Purchases of property and equipment (5,650,083) (182,318)
Other investing activities (115,830) (67,574)
NET CASH USED IN INVESTING ACTIVITIES (6,265,913) (249,892)
FINANCING ACTIVITIES
Principal payments of lease obligations (47,061) (47,755)
Sale of common stock and stock options 11,951 7,134
NET CASH USED IN FINANCING ACTIVITIES (35,110) (40,621)
DECREASE IN CASH AND CASH EQUIVALENTS (6,425,137) (36,244)
Cash and cash equivalents at beginning of period 6,425,137 3,324,838
Cash and cash equivalents at end of period $ - $ 3,288,594
See notes to financial statements.
CONCEPTS DIRECT, INC.
Notes to Financial Statements
(Unaudited)
1. Accounting Policies
The Company's unaudited interim financial statements have been prepared by
the Company in accordance with generally accepted accounting principles for
interim financial reporting and the regulations of the Securities and
Exchange Commission in regard to quarterly reporting. Accordingly, they do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
the Company, the statements include all adjustments, consisting only of
normal recurring adjustments, which are necessary for a fair presentation of
the financial position, results of operations and cash flows for the interim
periods. Operating results for the three and six month periods ended June
30, 1997 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1997. Seasonal fluctuations in sales of
the Company's products result primarily from the purchasing patterns of the
individual consumer during the Christmas holiday season. These patterns
tend to moderately concentrate sales in the latter half of the year,
particularly in the fourth quarter. For further information refer to the
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1996.
In February, 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute net income per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact
of Statement 128 on the calculation of primary and fully diluted net income
per share, which are currently the same, is not expected to be material.
2. Stockholder's Equity
On February 25, 1997, the Board of Directors approved a two-for-one stock
split, effected in the form of a stock dividend payable March 31, 1997 to
shareholders of record on March 14, 1997. Accordingly, June 30, 1997
balances reflect the split with an increase to common stock and a reduction
in additional paid-in capital of $212,544. Number of shares outstanding and
per share data have been retroactively adjusted to reflect the split.
On July 2, 1997, the Company completed a stock offering for 1.5 million
shares of common stock. As part of the offering, the Company issued 471,404
shares of stock. The remaining 1,028,596 shares were sold by certain
existing shareholders of the Company. An underwriters overallotment option
for an additional 225,000 shares was also exercised on July 9, 1997. The
Company received approximately $10 million net proceeds, after deducting its
pro-rata percentage of the costs of the offering. As of July 9, 1997,
4,949,286 shares of Common Stock were issued and outstanding.
3. Commitments
In January 1997, the Company purchased approximately 139 acres of
undeveloped land near the Company's offices for approximately $1,400,000.
The Company intends to use a portion of this land for a new facility and to
hold the remaining land for sale or expansion.
The Company anticipates completing a new building, costing approximately
$8,600,000 during the summer of 1997. The lease of the Company's current
facility at 1351 South Sunset Street, Longmont, Colorado expires on August
31, 1997. The Company also anticipates significant additions to furniture
and equipment during 1997.
On March 25, 1997, an irrevocable standby letter of credit for $500,000 was
issued by a regional bank. The letter of credit relates to certain
obligations anticipated to be resolved within one year, in connection with
improvements to the building site. The letter of credit is collateralized
by $500,000 of cash held on deposit in an interest bearing account at the
issuing bank.
In May 1997, the Company entered into a $3.7 million credit facility with a
bank, bearing interest at a variable rate equal to the bank's prime rate,
secured by the Company's cash, inventories, accounts receivable and
equipment. The Company must comply with certain financial and performance
covenants contained in the credit facility, including a minimum current
ratio, a minimum tangible net worth, a maximum total debt to equity ratio
and a minimum debt service coverage ratio and maintenance of its primary
deposit accounts with the bank. $700,000 of the credit facility is
available to finance furniture and equipment purchases and, until April,
1998, amounts funded may be converted to a three year term note at a
variable rate equal to the bank's prime rate. The remaining $3 million of
the credit facility is made up of two revolving lines of credit. $1 million
is available for the purchase of paper to be used in future catalog
mailings. $2 million is available for general working capital purposes, at
management's discretion. The credit facility expires in April, 1998, at
which time the Company anticipates being able to renew the arrangements.
In July, 1997, the Company entered into a $5,780,000 credit facility with a
bank, bearing interest at a variable rate equal to the bank's prime rate
plus one percent, secured by the Company's facilities, land, cash,
inventories, accounts receivable and equipment. $4,480,000 of the credit
facility is a construction loan to fund part of the costs of the Company's
new facility. $1,300,000 of the credit facility is a land development loan
to fund part of the costs of purchasing and developing the land purchased in
January and on which the Company is building a new facility. The Company
must comply with certain financial and performance covenants contained in
the credit facility, including a minimum current ratio, a minimum tangible
net worth, a maximum total debt to equity ratio and a minimum debt service
coverage ratio and maintenance of its primary accounts with the bank. The
credit facility expires in April, 1998, prior to which time the Company
anticipates converting the credit facility into permanent financing.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Company's net sales increased by $10.1 million, or 49%, to $30.8 million
for the six month period ended June 30, 1997 from $20.6 million in the same
period in 1996 and increased by $5.8 million, or 64%, to $14.8 million for
the second quarter of 1997 from $9.0 million in the same period in 1996.
These increases resulted primarily from the distribution of a greater
number of catalogs and other advertising media, increased page count of the
catalogs and an increase in the number of products offered. Lower paper
costs for the catalogs contributed to an increase in the number of names
that could be mailed on a cost effective basis. Personalized paper product
sales increased by approximately $2.2 million, or 16%, for the six month
period ended June 30th and increased by $1.7 million, or 29%, for the
quarter period ended June 30, 1997. Personalized paper product sales
decreased as a percentage of total sales for the six month period ended
June 30th to 51% in 1997 from 65% in 1996 and decreased for the second
quarter to 48% in 1997 from 61% in 1996. This decrease occurred primarily
because of advertising and sales of a greater number of gift and merchandise
items.
Cost of product and delivery for the six month period ended June 30th
decreased as a percentage of net sales to 51% in 1997 from 53% in 1996 and
decreased to 53% in the second quarter of 1997 from 55% for the second
quarter of 1996. Gross profit increased by $5.2 million, or 54%, to $14.9
million for the six months ended June 30, 1997 from $9.7 million for the
same period in 1996. Gross profit increased $2.9 million, or 70%, to $7.0
million for the second quarter of 1997 from $4.1 million for the second
quarter of 1996. Gross profit increased as a percentage of sales to 49%
in 1997 from 47% in 1996 for the six month period ended June 30th and
increased to 47% in 1997 from 46% in 1996 for the second quarter. The
increases in gross profit as a percentage of sales occurred primarily
because of improved efficiencies of operations, higher sales over which to
spread fixed costs associated with production and delivery and slightly
lower fulfillment costs on gift and merchandise items as compared to
personalized paper products.
Selling, general and administrative expense increased $3.7 million, or 38%,
to $13.5 million for the first six months of 1997 from $9.8 million for the
same period of 1996 and increased $2.1 million, or 47%, to $6.5 million for
the second quarter of 1997 from $4.4 million for the same quarter in 1996.
Selling, general and administrative costs as a percentage of net sales
decreased to 44% for the first six months of 1997 from 48% for the same
period in 1996 and decreased to 44% for the second quarter of 1997 from 49%
for the same quarter in 1996. These decreases primarily related to lower
paper costs for catalog preparation and distribution and increased sales
over which to spread fixed costs.
Operating income increased by $1,479,000 to $1,397,000 for the six month
period ended June 30, 1997 as compared to an operating loss of $82,000 for
the same period in 1996. The Company had operating income of $446,000 for
the second quarter of 1997 as compared to an operating loss of $344,000
for the same quarter of 1996. Operating income increased as a percentage of
net sales to 4.5% for the six months ended June 30, 1997 from an operating
loss of .4% in the same period of 1996. Operating income increased as a
percentage of net sales to 3.0% for the quarter ended June 30, 1997 from an
operating loss of 3.8% for the same quarter in 1996. Other income,
primarily vendor payment discounts and interest income, was $224,000 for the
six month period ended June 30, 1997 as compared to $147,000 for the same
period in 1996. Other income for the second quarter of 1997 was $123,000 as
compared to $35,000 for the same period in 1996.
The provision for income taxes was $580,000 and $19,000 for the six month
periods ended June 30, 1997 and 1996, respectively. The Company had a
provision for income taxes of $201,000 for the quarter ended June 30, 1997
and had a credit for income taxes of $90,000 for the same quarter in 1996.
The provision for income taxes for 1997 reflects the 36% income tax rate
that management anticipates for the year. The income tax rate was 36% in
the second quarter of 1997 as compared to 29% because of the availability of
research and development credits.
Net income increased by $995,000 to $1,041,000 for the first six months of
1997 from $46,000 for the same period in 1996. Net income increased by
$588,000 to $368,000 for the second quarter of 1997 as compared to net loss
of $220,000 for the same quarter in 1996. Earnings per share increased by
$0.22 to $0.23 for the first six months of 1997 from $0.01 for the same
period in 1996 and increased by $0.13 to $0.08 for the second quarter of
1997 from a loss of $0.05 for the same quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the six month period ended June 30, 1997, cash and cash equivalents
decreased by $6,425,000. Activity in several significant areas which had
the greatest impact on cash and cash equivalents are described below.
Increased advertising over 1996 levels and the forward buying of
approximately $2.5 million of paper for catalogs were the primary factors in
an increase of deferred advertising by $3,748,000. The increase in sales
primarily led to the increase in inventories of $782,000. Increased
advertising, increased inventories and the timing of payment of
construction costs for the Company's new facility were the primary reasons
for an increase of accounts payable of $2,696,000.
Significant items of investing activities during the six months ended June
30, 1997 were purchases of property and equipment of $5,650,000 and the use
of $500,000 to collateralize a letter of credit. The purchases of property
and equipment primarily related to the purchase of undeveloped land and
certain costs of a new facility currently under construction on the
property. The letter of credit relates to certain obligations generally
expected to be resolved within one year, in connection with improvements to
the building site. In early July the Company closed on new credit facilities
of approximately $4.5 million for construction financing and $1.3 million
for land purchase and development associated with the new facility. The
facility, including land, is anticipated to cost approximately $10.0
million. On June 30, 1997, the Company was in compliance with the financial
and performance covenants on its various debt instruments and no balance was
outstanding on any of them.
In early July 1997, the Company completed a secondary offering of 1.5
million shares of its common stock. As part of the offering, the Company
issued and sold 471,404 shares. The underwriters also elected to exercise
their over allotment option for 225,000 additional shares which gave the
Company a total of 4,949,286 shares outstanding as of July 8, 1997. Net
proceeds from the offering were approximately $10 million, which will result
in an increase in cash in the third quarter of 1997.
Management believes that results of operations, continued operational
planning review, current cash balances, financing obtained for construction
of the new facility and proceeds from the stock offering will produce funds
necessary to meet its anticipated working capital requirements for the
current year.
The discussion above contains certain forward-looking statements as such
term is defined in the Private Securities Litigation Reform Act of 1995.
Company statements that are not historical facts, including statements about
management's expectations, beliefs, plans and objectives for 1997, are
forward-looking statements and involve various risks and uncertainties.
Factors that could cause the Company's actual results to differ materially
from management's estimates and expectations include, but are not limited
to, the following: changes in postal rates or the costs of paper; changes in
economic and market conditions; changes in the Company's merchandise product
mix or changes in the Company's customer response to advertising offers; the
Company's ability to complete construction and transfer to the Company's new
facilities by September 1997 thereby avoiding any material decrease in the
Company's efficiency at a time of the year when it historically has received
a significant portion of its orders and related sales; lack of effective
performance of customer service and the Company's order fulfillment system;
and changes in strategy and timing relating to the testing and rollout of
new catalogs.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Documents filed as part of this report:
Exhibit 10: Material Contracts
1. Land Development Loan Agreement dated July 10,
1997 between registrant and Bank One, Colorado, NA
is filed herewith.
2. Construction Loan Agreement dated July 10, 1997
between registrant and Bank One, Colorado, NA is filed
herewith.
Exhibit 27: Financial Data Schedule (Edgar filing only.)
Registrant hereby agrees to furnish the Commission, upon
request, with instruments defining the rights of holders of
long-term debt of the registrant.
(b) Reports on Form 8-K
There were no reports on Form 8-K for the fiscal quarter
ended June 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONCEPTS DIRECT, INC.
(registrant)
Date: August 14, 1997 By: /s/ Phillip A. Wiland
Phillip A. Wiland
Chief Executive Officer
Date: August 14, 1997 By: /s/ H. Franklin Marcus, Jr.
H. Franklin Marcus, Jr.
Chief Financial and Accounting Officer
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<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 217,973
<ALLOWANCES> 0
<INVENTORY> 3,474,990
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<PP&E> 6,278,088
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<COMMON> 425,288
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<TOTAL-LIABILITY-AND-EQUITY> 18,945,255
<SALES> 30,718,640
<TOTAL-REVENUES> 30,718,640
<CGS> 15,773,814
<TOTAL-COSTS> 29,321,355
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<INCOME-PRETAX> 1,621,149
<INCOME-TAX> 580,000
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DEVELOPMENT LOAN AGREEMENT
THIS AGREEMENT is made effective as of July 16 , 1997, is entered into by
and between CONCEPTS DIRECT, INC., a Delaware Corporation, (the "Borrower"),
and BANK ONE, COLORADO, NA (the "Bank").
RECITALS
This Agreement is entered into upon the basis of the following facts and
circumstances:
A. The Borrower owns the real property located in the City of Longmont,
County of Weld, State of Colorado, and described in Exhibit A, which
Borrower proposes to develop into platted parcels for construction of
office, manufacturing and warehouse space. The real property described in
Exhibit A, and all appurtenances thereto, all developmental improvements and
infrastructure, and all other real and personal property used in connection
with development thereof or otherwise a part of the collateral for the Loan
are referred to it collectively as the Property .
B. Borrower proposes to develop the Property and construct certain
improvements and infrastructure in the nature of grading, utility lines,
roads, curbs and gutters and other developmental improvements
("Improvements") in accordance with development plans and specifications to
be prepared by Borrower (the "Plans"), which are subject to approval by the
Bank, in compliance with applicable zoning, subdivision and development laws
and regulations governing the development of property for sale as office,
manufacturing and warehouse space (the "Project").
C. Borrower has applied to the Bank for a loan to finance the development
of the Property and construction of the Improvements thereon in an amount
not to exceed One Million Three Hundred Thousand and no/100ths Dollars
($1,300,000.00) (the "Loan") for payment of the individual costs itemized on
the Approved Budget attached hereto as Exhibit 1, subject to change upon
reasonable approval by the Bank. The Loan is evidenced by the Loan
Documents.
D. The Bank is willing to make the Loan to Borrower for the purposes set
forth above, all upon the terms and conditions as set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and the covenants
and conditions, representations and warranties contained herein, the parties
hereto agree as follows:
The following terms when used in this Agreement shall, except where the
context otherwise requires, have the following meanings (such definitions to
be equally applicable to the singular and the plural forms thereof):
1.1 "Advances" shall mean disbursements under the Loan pursuant to the
terms of this Agreement.
1.2 "Agreement" shall mean this Agreement as originally executed and as
amended, modified or supplemented from time to time.
1.3 "Business Day" shall mean every day except a Saturday, Sunday or
public holiday under the laws of the United States or the State of Colorado.
1.4 "Closing Date" shall mean the day agreed between by the Borrower and
Bank for closing of the Loan; provided, however, that all of the conditions
precedent specified in this Agreement to closing shall have been satisfied.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.6 "Development Funds" shall mean any and all Loan proceeds disbursed in
accordance with the Note and this Agreement.
1.7 "Default" shall mean any event which if continued uncured would, with
notice or lapse of time or both, constitute an Event of Default.
1.8 "Event of Default" shall mean any Event of Default described in
Section 9. 1.
1.9 " GAAP " shall mean generally accepted accounting principles
consistently applied and maintained throughout the period indicated.
Whenever any accounting term is used herein which is not otherwise defined,
it shall be interpreted in accordance with GAAP.
1.10 "Governmental Entity" shall mean any governmental or
quasi-governmental entity, agency, authority, board, commission, or
governing body authorized by federal, state or local laws or regulations as
having jurisdiction over the Property or the development thereof.
1.11 "Liabilities" shall have the meaning given to that term in accordance
with generally accepted accounting principles consistently applied.
1.12 "Loan Documents" shall mean any and all documents evidencing and
securing the Loan and shall include the Note, this Agreement, the Deed of
Trust, Assignment- of Right to Participation Payments, Financing Statements,
Environmental Indemnity Agreement, collateral assignments of the
Construction Contract, Architect's Contract, Subcontracts, Development
Items, the Assignments of Purchase Contracts, and any documents or
instruments executed or delivered to further evidence or secure the Loan.
1.13 "Loan Party" shall mean the Borrower, and each other Person that from
time to time is or becomes obligated to the Bank under any Loan Document.
1.14 "Material Adverse Occurrence" shall mean any change in the assets,
business, financial condition, operations, prospects, or results of
operations of any Loan Party or the Property or any other event or condition
that in the reasonable opinion of Bank (i) could materially affect the
likelihood of performance by any Loan Party of any of the Obligations, (ii)
could materially affect the ability of any Loan Party to perform any of the
Obligations, (iii) could affect the legality, validity, or binding nature of
any of the Obligations or any Lien or Encumbrance securing any of the
Obligations, (iv) could materially impair the economic value of the
Property, or (iv) could affect the priority of any Lien or Encumbrance
securing any of the Obligations.
1.15 "Maturity" shall mean the earlier of (i) the date upon which the Note
is due, or (ii) the date on which the Note is accelerated and declared due
as a result of an Event of Default.
1.16 "Maximum Allowed Development Loan Advances" means the least of (I)
$1,300,000.00; (ii) fifty-five (55 %) of the completed and stabilized value
of the Property as evidenced in the Appraisal and approved by the Bank;
(iii) 47.3% of the total costs of the Project as shown on the Approved
Budget.
1.17 "Note" shall mean the Promissory Note of even date herewith in the
principal amount of $1,300,000.00, made by the Borrower to the order of the
Bank.
1.18 "Obligations" shall mean the obligations in connection with the Loan
as evidenced by the Note, this Agreement, and the Loan Documents.
1.19 "Official Records" shall mean the records of the Clerk and Recorder
of the County in which the Property is located.
1.20 "Person" shall mean any natural person, corporation, firm,
association, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
1.21 "Prime Rate" shall mean the rate of interest announced by Bank One,
Colorado, NA from time to time, as its Prime Rate. The Bank may lend to its
customers at rates which are at, above or below the Prime Rate.
Other terms defined herein shall have the meaning ascribed to them herein.
SECTION 2 LOAN COMMITMENT AND ADVANCES
2.1 Subject to the conditions herein set forth, Bank agrees to make the
Loan available to or for the benefit of Borrower, and Borrower agrees to
draw upon the Loan, in the manner and upon the terms and conditions herein
expressed, amounts that shall not exceed the sum of $1,300,000.00.
2.2 The Loan shall be evidenced by a Promissory Note (the "Note") of
Borrower, executed and delivered simultaneously with the execution of this
Agreement, in the amount of $1,300,000.00, payable to Bank upon the terms
and conditions contained therein which may include, but need not be limited
to, the following:
a. Interest Rate. Interest shall accrue on Advances from the date of
disbursement at the rate of one and one-half percent (I. 5 %) per annum in
excess of the Prime Rate. The interest rate shall change from time to time
on the effective date of, and in conformity with, changes in the Prime Rate.
b. Interest Payments. All accrued interest shall be due and payable on the
first day of each and every month commencing with the first month after the
date of the Note.
C. Principal and Interest Payments. Commencing on December 1, 1997 (the
"Amortization Date") and on the first (lst) day of each month thereafter
until the Note is paid in full, Borrower shall pay to Bank payments
consisting of (i) interest accruing on the outstanding principal balance at
the Interest Rate, adjusted on a daily basis, as and when the Prime Rate
changes, and (ii) principal payments in the amount of $21,668.00 ((i) and
(ii) are collectively referred to as the "P&I Payment") which shall be
applied to the then outstanding balance under the Note; provided, however,
that if less than the Maximum Allowed Development Loan Advances has been
disbursed as of the Amortization Date, the P&I Payment shall be recalculated
to reflect the lower principal amount. In addition, Borrower shall pay to
the Bank in prepayment of the Loan (i) the Release Price (defined in Section
15 below) for all parcels released from the lien of the Deed of Trust, and
(ii) all reimbursements from the City of Longmont pursuant to the Memorandum
of Agreement for Public Improvements dated March 25, 1997. Such prepayments
shall not reduce or postpone the monthly P&I Payment due under the Note.
d. Note Maturity. The entire unpaid principal balance, all accrued and
unpaid interest, and all other amounts payable under the Note shall be due
and payable in full on July 10 , 2000.
2.3 Bank shall make Advances, subject to all of the terms and conditions
provided herein, in the following manner, only in the amounts and for the
cost items set forth in the Approved Budget attached hereto as Schedule "B":
a. Initially, Bank shall make an Advance in an amount not to exceed the
amounts set forth on the Approved Budget for the costs items identified
thereon as Bank Legal, Title and Close, Bank Loan Fee, Appraisal, and such
other amounts as Bank may deem appropriate.
b. The portion of the Loan allocated on the Approved Budget for Interest
Reserve shall be held by Bank as an interest reserve (the "Interest
Reserve"), and Bank shall make Advances thereof to pay interest when due
under the Loan. If funds are not available from the Interest Reserve to pay
interest due under the Loan or if Bank shall deter-nine that Borrower will
have cost overruns, then, upon ten (10) days' prior written notice to
Borrower, Borrower shall pay such interest from its own funds.
C. Bank shall make Advances of the remaining portion of the Loan, allocated
on the Approved Budget for direct and indirect costs and expenses for
construction of the Improvements, in accordance with one or more of the
options described below; upon the occurrence of any event described in
Option Two below, Bank may cease Advances under Option One and thereafter
make Advances under Option Two:
Option One
Upon receipt by Bank of a Disbursement Request described below, together
with all of the items described in Section 7 hereof that are required by
Bank in connection with that Advance, Bank shall make Advances on or before
the date ten (10) days after receipt by Bank of the Disbursement Request and
the satisfaction of all of the conditions to such Advance, no more
frequently than monthly, as construction progresses, in amounts equal to:
(i) expenditures for labor performed and material supplied under the
construction contract for construction of the Improvements in accordance
with the Plans during the period immediately preceding that Advance plus
(ii) indirect construction costs actually paid or incurred by Borrower that
have not been covered by previous Advances. Indirect construction costs
shall mean those costs related to the construction of the Improvements,
other than the cost of labor and materials, and include, but are not limited
to, title insurance premiums, permit fees, architect and engineering fees,
legal fees, loan fees, taxes and interest during construction, but do not
include any profit to Borrower or any affiliate of Borrower. Notwithstanding
the foregoing, at Bank's option, Bank may hold back ten percent (10%) of the
costs of construction (hereinafter called the "Retention Funds") related to
labor but not materials. Subject to the provisions of this Agreement, and
so long as there is no Event of Default hereunder, any remaining Retention
Funds shall be disbursed upon a date to be determined at Bank's discretion
but not later than forty-five (45) days after receipt by Bank of the items
specified above and receipt and approval by Bank of the items described in
Section 3.2 hereof.
Option Two
Upon the occurrence of any Event of Default, or at any time that Bank
determines from its own inspection that the Improvements are not being
constructed according to the Plans and Specifications or in conformity with
cost estimates approved by Bank or that requisite and acceptable standards
of workmanship are not being met, Bank shall have the right, but not the
obligation, to take over and complete construction of the Improvements by or
through any agent, contractor or subcontractor of its selection and may make
Advances and disburse any funds deposited with Bank by Borrower in payment
of the costs, expenses, fees, attorneys' fees and other charges, together
with reasonable allowances for supervision, incurred in connection with such
taking over and completion. In the event proceeds of the Loan and amounts
deposited by Borrower @e insufficient to pay all of the same, the unpaid
amount thereof shall be an indebtedness of Borrower to Bank, payable
immediately without demand or notice, shall bear interest at the highest
rate payable under the Note, and shall be secured by all of the Loan
Documents.
2.4 Loan Advance Rates. Bank shall not be obligated to make any Advance of
the Development Loan, if at any time or from time to time, the Bank, in its
sole and absolute judgment determines that the total of the outstanding
Advances of the Development Loan plus the unadvanced balance of the
Development Loan exceeds the Maximum Allowed Development Uan Advances.
Within ten (10) days following notice from the Bank that such an excess
exists, the Loan Parties shall provide additional Owner's Equity in an
amount necessary to bring the Development Loan into compliance with the
foregoing limit.
2.5 Deadline for Disbursement of all Loan Proceeds. Any other provision
contained in this Agreement to the contrary notwithstanding, if for any
reason the total amount of the Development Funds, together with the Owner's
Equity, has not been fully disbursed prior to the Amortization Date, except
for such amounts as are required or permitted under the Loan Agreement, then
Bank shall not be obligated to approve any further disbursement(s) thereof,
and any then undisbursed Development Funds and undisbursed Owner's Equity
may be applied by Bank in any manner or order, such as: first to any costs
and expenses incurred by Bank in connection with the Loan; then, to unpaid
accrued interest on the Note; and then, to any amounts owing under any of
the Loan Documents, including but not limited to principal owing under the
Note. Any such or other application shall not constitute a waiver or
operate to cure any breach or Default existing under any of the Loan
Documents, nor to invalidate any notice of Default or any act done pursuant
to such notice and shall not prejudice any rights or powers of the Bank
under the Deed of Trust or other Loan Documents.
2.6 Cross-Default and Cross-Collateral. The Borrower and the Bank have
entered into a loan transaction (the "Construction Loan") regarding the
construction of improvements on real property adjacent to the Property
pursuant to which the Borrower has executed and delivered to Bank a
Construction Loan Agreement of even date herewith, (the "Construction Loan
Agreement") and other documents and instruments in connection with the
Construction Loan as described in the Construction Loan Agreement (the
"Construction Loan Documents"). The Construction Loan Documents provide
that the Obligations under the Construction Loan are additionally secured by
the Loan Documents encumbering the Property and that any default under the
Construction Loan Documents shall be a default under the Loan Documents.
Further, repayment of the Loan is additionally secured by the Construction
Loan Documents and any default under the Loan Documents shall be deemed a
default under the Construction Loan Documents.
At such time as the Construction Loan is paid in full, the Borrower and Bank
will either execute a modification of the Loan to extinguish the
cross-default and cross-collateral provisions with respect to the
Construction Loan or the Bank will mark the Construction Note "paid in full
and cancelled, " but will retain the original thereof in order to effect a
release of the Deed of Trust when the Note is paid in full.
SECTION 3 LOAN FEES
3.1 In connection with the Loan, Bank has earned and Borrower has paid or
shall pay to Bank at the time of recording of the Deed of Trust, a
non-refundable Loan fee in the amount of $13,000.00, representing one
percent (1 %) of the principal amount of the Note.
SECTION 4 SALE CONTRACTS
4.1 Borrower will enter into agreements for the sale of developed building
sites ("Sites") within the Project to one or more qualified purchasers
("Contracts"). Borrower has unconditionally assigned to the Bank as
additional security for the Loan its rights as seller under each Contract
(each, an "Assignment of Purchase Contract"), including, without limitation,
Borrower's rights to the cash down payment deposits, if any, deposited by
purchaser into escrow accounts. Borrower shall, subsequent to the Closing
Date, execute any additional documentation as may be required by the Bank in
order to more fully unconditionally assign to the Bank its rights as seller
under each Contract (including the cash down payment escrow deposits).
4.2 Notwithstanding any provision in the Loan Documents to the contrary, in
the event of a default by Purchaser under a Contract, at a time when
Borrower is in default, which default remains uncured after any applicable
cure period under the terms of any of the Loan Documents, or when facts or
circumstances exist which, with the giving of notice or the passage of time,
or both, would constitute an Event of Default under the Loan Documents, any
and all remaining amounts of Purchaser's earnest money deposit shall, upon
forfeiture by Purchaser, become the property of the Bank, and shall be
delivered by Borrower to the Bank upon demand, and shall be applied by the
Bank as a prepayment of principal in accordance with the terms of the Note;
provided, however, that no such prepayment shall apply toward Borrower's
mandatory Site Release Price payment obligations set forth in Section
15.2(c) below, or otherwise reduce or postpone any other payments under the
Loan Documents as the same may become due from time to time.
SECTION 5 SECURITY
5.1 Borrower shall cause the Loan and Borrower's obligations under this
Agreement are secured by the following:
a. A Deed of Trust, Security Agreement, Financing Statement and
Assignment of Rents and Revenues (severally and collectively, the "Deed of
Trust") constituting:
(1) A valid lien on the Property and Improvements, subject only to the lien
of the Construction Loan and such matters as specifically approved by Bank;
(2) A valid and effectual security agreement granting Bank a security
interest in all of the property described below in, to, or under which
Borrower now has or hereafter acquires any right, title or interest, whether
present, future, or contingent: all equipment, inventory, accounts, general
intangibles, instruments, documents, and chattel paper, as those terms are
defined in the Uniform Commercial Code, and all other personal property of
any kind (including without limitation money and rights to the payment of
money), whether now existing or hereafter created, that are now or at any
time hereafter (i) in the possession or control of Bank in any capacity
(except for deposit account funds maintained by Borrower in a fiduciary
capacity, held for the benefit of third parties for purposes unrelated to
this Agreement, in escrow or other fiduciary accounts designated as such);
(ii) erected upon, attached to, or appurtenant to, the Property; (iii)
located or used on the Property or identified for use on the Property
(whether stored on the Property or elsewhere); or (iv) used in connection
with, arising from, related to, or associated with the Property or any of
the personal property described herein, the construction of any improvements
on the Property, the ownership, development, maintenance, leasing,
management, or operation of the Property, the use or enjoyment of the
Property, or the operation of any business conducted on the Property;
together with all products and proceeds of all of the foregoing, in any
form. The security interest of Bank as set forth in this paragraph shall be
subject only to the security interest created by the Construction Loan
Documents;
(3) A valid and effectual assignment of rents and leases covering the
Property and Improvements;
b. Valid and effectual assignments of Borrower's interest in the Plans, all
construction and architects' contracts, all operating, management and
supervision agreements, and all other documents relating to the ownership,
development, construction, maintenance, leasing, management and operation of
the Property and Improvements, if any;
together with any UCC financing statements for filing and/or recording and
any other items required by Bank to fully perfect the liens and security
interests of Bank.
5.2 All of the documents required by Bank to grant and perfect the liens
and security interests required herein shall be in form satisfactory to Bank
and may be referred to herein as the "Loan Documents."
The obligation of Bank to make the Loan, and each and every Advance, is
subject to the following express conditions precedent, all of which, unless
otherwise provided below, or otherwise waived by Bank, shall have been
satisfied prior to the recording of the Deed of Trust:
6.1 The Bank shall have received and approved fully executed copies of the
Loan Documents which shall have been duly authorized, executed (and, where
appropriate, acknowledged), and delivered by the Borrower and any and all
other documents the Bank may deem reasonably necessary with respect to the
Loan;
6.2 Bank shall have received the Loan fee required in paragraph 3.1
hereof.
6.3 Borrower, at its expense, shall have obtained and delivered to Bank
(except that the appraisal required below shall be ordered by Bank at
Borrower's expense) the following items, all of which shall be in form and
content satisfactory to Bank and shall be subject to approval by Bank, which
approval shall not be unreasonably withheld:
(a) Acquisition Documents. A copy of the conveyance deed by which Borrower
acquired the Property and a copy of the fully-executed closing settlement
sheets for the purchase of the Property;
(b) Current Financial Statements. Personally certified current financial
statements of Borrower, less than 180 days old; copy of the extension forms
for 1996 federal tax returns for Borrower including all schedules and
exhibits, and a summary of 1997 cash flow.
(c) Pre-closing Expenses. Evidence reasonably satisfactory to the Bank and
the Title Company that all pre-closing development costs on the Project have
been paid in a timely fashion or will be paid at closing, which evidence
shall include without limitation lien waivers, paid invoices, governmental
inspections and approvals, as applicable;
(d) Plans. Two (2) complete sets of final Plans which have also been
approved by all Governmental Entities having jurisdiction therefor;
(e) Subcontracts. If requested by Bank, copies of all Subcontracts from
all material suppliers, and subcontractors who will be providing materials
or labor for construction of the Improvements.
(f) Subcontract List. If requested by Bank a list of all Subcontractors,
with name of contact person, telephone number and address, required to be
updated when new Subcontracts are made, a general statement of the nature of
the work to be done or materials supplied and the dollar value of the work
to be done, certified by the Borrower;
(g) Soils Report. An engineer's report prepared and certified by a
qualified engineer acceptable to Bank, showing locations and results of all
borings, together with recommendations for the design of the foundations of
the Buildings and certifying in a manner reasonably satisfactory to Bank the
adequacy of the existing soils condition, indicating that the Plans for
construction of the Improvements are satisfactory in view of the condition
of the soil;
(h) Engineer's Certificate. A certificate from Park Engineering certifying
that the Improvements as shown on the Plans, are designed to be in
compliance with all applicable governmental requirements; and
(i) Development Items. Copies of all engineering reports, land planning
maps, or plats, soils tests, environmental reports, surveys prepared for the
orderly planning of the Improvements, marketing materials and brochures,
building pen-nits or licenses, utility taps or supply agreements,
governmental or private agreements, indemnities, waivers, rights to
reimbursements, abatements or benefits of whatsoever nature regarding the
Property, to the extent assignable, and other documents prepared and
existing for the development of the Project available at Closing, with
subsequent submissions to the Bank of reports and studies not required to be
available at Closing, if requested by Bank (collectively called "Development
Items");
0) Development Documents. Receipt of copies of any agreements, existing or
proposed, with Governmental Entities, in the nature of a subdivider's
agreement, public improvements agreement, or annexation agreement affecting
the development of the Project or requiring cash equivalent collateral, or
imposing building restrictions in lieu of collateral, as a condition to
development of the Project (collectively, the "Development Documents");
(k) Budget. Approved Budget attached hereto as Exhibit B, which shall be
based upon executed subcontracts or firm bids satisfactory to the Bank and
its Project Inspector;
(1) Appraisal. The Appraisal;
(m) Environmental Audits. The Phase I Environmental Audit prepared by an
environmental engineering company approved by the Bank and in substance
satisfactory to Bank regarding the Property;
(n) Environmental Reports. Copies of any environmental impact statements,
Material Safety Data Sheets filed or to be filed with OSHA, the State of
Colorado or any local emergency planning commission or the local fire
department ("Environmental Reports"), if any;
(o) Utilities. Receipt of evidence satisfactory to Bank of the
availability to the Property boundaries of all Utilities;
(p) Plats. Three copies of any proposed or existing recorded plat, showing
all easements, ditches, streets, lot lines and proposed location for all
Improvements on the Property and evidence satisfactory to the Bank that the
transfer of ownership of the Property as a consequence of foreclosure or
deed in lieu of foreclosure will not result in a violation of subdivision
laws.
(q) Zoning/PUDS/PDP. Evidence of zoning or a copy of the final approved
preliminary development plan ("PDP") or other development plan for the
Property permitting the construction of the Project, and containing all use
or building conditions or restrictions affecting the Project and approved by
the appropriate Governmental Entity;
(r ) Opinions. Legal opinions of counsel for the Borrower ("Legal
Opinion"), in form and substance reasonably satisfactory to the Bank,
opining that the Borrower is duly organized and in good standing under the
laws of the State of Delaware and the State of Colorado, and has the power
to enter into and perform its obligations under the Loan, that the Loan is
not usurious under any applicable law, that the loan transaction and the
execution and delivery of the Loan Documents have been duly authorized by
all necessary parties, and that the Loan Documents are legal, valid and
binding and enforceable in accordance with their terms, subject to customary
exceptions;
(s) Tax Certificate. A Tax Certificate (defined below);
(t) Special Districts. Identification of any special district affecting
the Property, together with a boundary map of the special district,
financial statements and outline of the debt structure, if requested by the
Bank;
(u) Deposits. Any deposit of money, which may be required pursuant to
this Agreement or the Loan Documents, including, without limitation, the
Owner's Equity (defined below) and/or satisfactory evidence of the
contribution or availability of Owner's Equity to the Project.
(v) Corporation, Limited Liability Company, or Partnership) Documents. If
any Loan Party is a corporation, a limited liability company, or a
partnership, certified copies of (i) resolutions of its board of directors
or, if all managers or all general partners do not sign the Loan Documents,
resolutions of the managers of the limited liability company or partners of
the partnership, as the case may be, authorizing such Loan Party to execute,
deliver, and perform its Loan Documents and to grant to Bank the Liens and
Encumbrances on the Property in the Loan Documents and certifying the names
and signatures of the officer(s), member(s), manager(s), or partner(s), as
the case may be, of such Loan Party authorized to execute the Loan Documents
and, in the case of Borrower, to request Advances on behalf of Borrower,
(ii) the certificate of incorporation and bylaws, limited liability company
operating agreement, or partnership agreement, as the case may be, of such
Loan Party and all amendments thereto, (iii) if any Loan Party is a general
partnership or joint venture, the filed or recorded fictitious name
certificate for such Loan Party and all amendments thereto, (iv) if any Loan
Party is a limited partnership, the filed or recorded certificate of limited
partnership of such Loan Party and all amendments thereto, and (v) a
certificate of good standing as a corporation, limited liability company, or
limited partnership, as the case may be, from the jurisdiction of formation
or organization of such Loan Party, and if such jurisdiction is not the
State of Colorado, a certificate of qualification as a foreign corporation,
limited liability company, or limited partnership, as the case may be,
authorized to transact business in the State of Colorado.
6.4 Fees. All taxes, fees and other charges in connection with the
execution, delivery and recording of the Loan Documents shall have been
paid, and all delinquent taxes, assessments or other governmental charges or
liens affecting the Property, if any, shall have been paid. Borrower shall
provide a treasurer's tax certificate ("Tax Certificate") disclosing that no
general and special taxes or assessments encumbering the Property are
delinquent and that the Property does not lie within any special or general
assessment district except as approved by Bank.
6.5 Title and Other Matters. Title to the Property, the legal description
of the Property, and all documents and other matters relating in any way to
the Loan or to the Property must be to the satisfaction of Bank. At
Borrower's expense, Borrower shall furnish Bank with a 1992 ALTA loan policy
(the "Title Policy"), in the face amount of the Loan, insuring the Deed of
Trust as a valid first lien on the Property, together with all endorsements
as Bank may reasonably require, including without limitation, deletion of
standard exceptions 1 through 3, containing no exceptions other than those
Bank approves, issued in substance and in form by a company or companies
acceptable to Bank. The Title Policy shall contain "pending disbursements"
provisions satisfactory to the Bank, and, as Bank may reasonably require,
reinsurance with companies and in amounts reasonably acceptable to the Bank,
as well as direct access agreements with such reinsurers The Bank hereby
reserves the right to require the mechanic lien endorsement 101 (mechanic
lien disbursement endorsement), the cost of which shall be borne by the
Borrower.
6.6 Zoning, Pen-nits, Approvals. Borrower shall provide to Bank
satisfactory evidence that Borrower has complied with all covenants,
conditions, restrictions and reservations affecting the Property, including
the Covenants, that the Property is duly and validly zoned for the intended
use, and that Borrower has obtained all zoning, subdivision, and
environmental approvals, pen-nits and maps required to be obtained in order
to construct the Improvements ("Zoning Confirmation") and that the Property
meets all applicable requirements of the subdivision zoning regulations and
any local ordinances adopted pursuant thereto, except as specifically
permitted in Section 7.1 hereof to be a condition precedent to Initial
Advance and shall not be a condition precedent to closing. Bank shall
further require proof that all permits, consents and approvals required
pursuant to Section 6 hereof have been obtained, and any condition to such
approvals must be reasonably acceptable to Bank.
6.7 Insurance. In addition to the insurance policies required in Section 4
of the Deed of Trust which shall be provided at Closing, Borrower shall
maintain and deposit with the Bank or cause the Contractor to maintain and
deposit with the Bank original certificates of insurance policies issued by
insurance companies with current Best's Key Ratings of not less than A/V and
written in form and content acceptable to Bank, with appropriate mortgagee
clauses in favor of Bank, providing @e following minimum insurance
coverages:
(a) Comprehensive general public liability insurance in amounts not less
than $1,000,000.00 (combined single limit for bodily injury and property
damage), and an umbrella excess liability coverage in an amount not less
than $5,000,000.00 shall be in effect with respect to Borrower, the
contractors, architect and any engineer, with the Bank named as an
additional insured. In addition, Borrower shall maintain in full force and
effect business auto liability insurance, including any non-owned and hired
automobiles Such policies must be written on an occurrence basis so as to
provide blanket contractual liability, broad form property damage coverage,
and coverage for products and completed operations;
(b) All-risk course of construction insurance with standard
non-contributing mortgage clause, a lender's Loss Payable Endorsement naming
the Bank and/or assigns as loss payee, providing for a deductible not in
excess of $5,000, attached together with a full replacement cost endorsement
(provided that in no event, however, may the amount of coverage to be
maintained by Borrower be less than the amount of coverage necessary to
prevent Borrower's co-insurance of loss) ("Builder's Risk Insurance");
(c) Engineer's professional liability insurance in an amount
satisfactory to the Bank, with the Bank named as an additional insured, if
required by the Bank;
(d) Worker's Compensation Insurance covering all persons engaged in the
construction of the Improvements;
Each of the foregoing policies shall contain a clause requiring thirty (30)
day notice to Bank of cancellation, termination or material modification.
Borrower shall provide proof of premiums paid and, throughout the term of
the Loan, shall provide evidence to Bank no later than thirty (30) days
prior to expiration of each annual policy of payment of renewal premiums and
continuation of insurance coverage.
6.8 Survey. Borrower shall have furnish to Bank, at Borrower's expense, a
current improvement survey plat ("Survey") of the Property acceptable to
Bank and the title insurance company issuing the Title Policy (the "Title
Insurer") indicating, without limitation, that all foundations or other
Improvements currently constructed, if any, are located within the lot
lines, without infringement on established easements or rights-of-way and
not in violation of any ordinance including zoning ordinances which impose
lot line setback requirements and parking requirements ' The survey shall
show the legal description of the Property as it will be insured by the
Title Insurer, the courses and distances of the Property lot lines, all
appurtenant and servient easements, setbacks, building lines and width of
abutting streets, distance to nearest intersecting streets affording ingress
and egress to and from the Property, and the location and dimensions of all
encroachments, improvements, above or below ground easements and utilities,
and designated parking spaces. The survey shall show the proposed location
of all Improvements to be built on the Property as identified by Borrower to
the surveyors, with appropriate notation to distinguish between constructed
Improvements or foundations and proposed Improvements. The surveyor shall
also certify whether or not any portion of the Improvements is located
within a Federal Emergency Management Agency identified flood-prone area of
a community and if located thereon, state the map number and whether or not
the Property appears in the "Flood Hazard Area," or other known flood plain
dimensions affecting the Property. The survey must be certified as accurate
by a licensed surveyor in the State of Colorado and contain a certificate
imprinted thereon in the form approved by the American Land Title
Association stating that the survey is made for the benefit of the Bank and
the Title Insurer. In the event Borrower shall have obtained a replat of
the Property within sixty y (60) days prior to Closing, the Bank may elect
in its reasonable discretion to accept the recorded replat with appropriate
certifications and additional notations from the surveyor in lieu of the
Survey, provided, however, that the recorded replat is sufficient to induce
the Title Company to delete standard exceptions from the Title Policy
regarding matters that would be shown by an ALTA survey.
6.9 Owner's E@l . Prior to closing, Borrower shall provide Bank with
evidence of owner's equity ("Owner's Equity") in the amount of
$1,516,193.00, in the form of cash deposits and/or approved acquisition or
construction cost payments, which shall mean those payments actually made by
Borrower for acquisition of the Property or to third-party contractors or
suppliers for costs described in the Approved Budget, which costs shall be
evidenced by payment receipts (or other proof of payment satisfactory to the
Bank, and executed mechanic lien waivers (for lienable work or materials)
or, in the case of acquisition costs, certified postclosing settlement
sheets. The Loan is intended solely for the funding of the costs, expenses
and fees described in the Approved Budget as allocated from Development
Funds. All other costs, expenses, and fees for development and construction
of the Project, shall be contributed by the Borrower in the form of Owner's
Equity. The amount of Owner's Equity at Closing and subsequently may
increase as a function of the overall Approved Budget, the Appraisal, the
requirements of Sections 7 and 9 and the approval by the Bank of any
non-cash Owner's Equity. The Bank may, in its reasonable judgment, advance
Owner's Equity concurrently with Development Funds in a manner consistent
with the Approved Budget.
6.10 All representations and warranties by Borrower shall remain true and
correct in all material respects and all agreements that Borrower is to have
performed or complied with by the date hereof shall have been performed or
complied with in all material respects.
6.11 No Event of Default exists, and no event has occurred and no condition
exists that, after notice or lapse of time (other than applicable cure
periods), or both, would constitute an Event of Default.
6.12 Notwithstanding any provision hereof to the contrary, Bank shall not
be required to make any Advance until Borrower shall have provided to Bank
all plans and specifications for the construction of the Improvements,
together with any and all other documentation required by Bank, and said
documentation has been reasonably approved by Bank in accordance with its
customary pre-construction review procedure.
SECTION 7
GENERAL PROVISIONS FOR ALL ADVANCES
7.1 Prior to the Initial Advance of Development Funds, Borrower shall
provide the Bank with the following items, all in form reasonably
satisfactory to the Bank:
a. Final approved and recorded Plat of Concepts Direct Phase I;
b. Access permits issued by the Colorado Department of Transportation
consistent with the final recorded Plat;
C. Acquisition of all interests in, or resolution reasonably
satisfactory to the Bank of location of, oil and gas rights to which the
Property is subject;
d. Work in Public Right-of-Way Permit issued by the City of Longmont;
e. Use of Public Places Agreement between the City of Longmont and St.
Vrain Sanitation District;
f. Evidence of exclusion of the Property from Mountain View Fire
Protection District; and
g. Letter from the City acknowledging compliance with or items to be
completed under any Subdivision Agreements or Annexation Agreements or any
other development agreement to which the Property is subject.
7.2 When Borrower believes it is entitled to an Advance, Borrower shall
furnish Bank with the following, all in form reasonably satisfactory to
Bank:
a. At Bank's request, a list of names and material dealers, laborers and
subcontractors with whom written agreements have been made by Borrower with
respect to the construction of the Improvements in question.
b. A Disbursement Request, together with AIA Forms G702 and G703 (or such
other forms as may from time to time be approved or required by Bank),
setting forth such details concerning the construction of the Improvements
as Bank may reasonably require, including the amounts expended to the date
of the Disbursement Request for the Improvements (herein the "Disbursement
Requests"), the amounts then due and unpaid for construction of the
Improvements and an itemized estimate of the amount necessary to complete
the Improvements. Any materials covered by any Disbursement Request must be
suitably stored at the construction site, inventoried, and safeguarded and
insured against loss, damage, and theft.
C. The certification by Borrower, the supervising architect, if any, the
general contractor, if any, and at Bank's option an independent architect or
engineer of Bank's selection, if reasonably required under the
circumstances, that: (i) all work performed is in substantial accordance
with the Plans; (ii) all governmental licenses and pen-nits required for the
Improvements as then completed have been obtained and will be exhibited to
Bank upon request; (iii) the Improvements as then completed do not violate,
and, if further completed in accordance with the Plans, will not violate,
any law, ordinance, rule or regulation; and (iv) the remaining undisbursed
proceeds of the Loan plus the then existing balance of any Borrower's funds
account held by Bank pursuant to Section 9.16 hereof are sufficient to pay
for the movements.
d. The certification by Borrower that no Event of Default exists under the
Loan, and no event has occurred and no condition exists that, after notice
or lapse o Event of Default.
e. Receipted invoices or bills Of sale shall be available for Bank's review
together with unconditional releases and waivers of liens from each material
dealer supplier, laborer and subcontractor who has done work or furnished
materials in connection w the construction of the Improvements in question
for all work through the date of the previous
f. Evidence that any inspection required by any state, city or other
governmental authority has been completed with results satisfactory to that
authority.
g. Such other invoices, bills and statements as may be reasonably required
by Bank substantiate the Disbursement Request.
h. Throughout the course of construction of the Improvements, Bank shall
have the right to employ, at Borrower's sole cost and expense, an inspector
or inspectors who shall review as agent for Bank all construction activities
undertaken in regard to the Improvements.
i. Such other information and documents as Bank may reasonably require.
J. The Owner's Equity required under Section 6.9 hereof.
7.3 Upon completion of the Improvements, Borrower shall furnish Bank
with the following, all in form and content satisfactory to Bank, as a
condition precedent to disbursement of any remaining Retention Funds:
a. Such additional endorsements to the Title Policy (hereinafter defined),
including downdate endorsements, or if the Bank has received Form 101
covering a current ALTA Endorsement No. 10 1. 2 (Mechanic's Lien
Disbursement Endorsement) and additional policies of title insurance with
endorsements thereto as Bank may reasonably require with a liability limit
not less than the Title Policy amount, issued by the title company issue the
Title Policy with coverage and in form reasonably satisfactory to Bank,
insuring Bank's interest under the Deed of Trust (hereinafter defined) as a
valid lien on the Property, except only such items as shall have been
previously approved in writing by -Bank under the provisions of Section 6.5
below, and such additional items as may be approved by Bank in writing;
b. If requested by Bank, the execution of AIA Form G704 or other
document satisfactory to Bank by Borrower's engineer, contractor (if any)
and Borrower;
C. If requested by Bank, a notice of completion on Bank's approved form
executed by Borrower and duly recorded in the county recorder's office where
the Property is located;
d. If requested by Bank, an "as-built" ALTA survey of the Property,or other
satisfactory evidence,showing the location of the completed Improvements,
the location of all points of access to the Property and the Improvements
and the location of all easements affecting the Property and certifying that
there are no encroachments of the Improvements onto any easements affecting
the Property or onto any adjoining property and that all applicable setback
requirements and other restrictions have been complied with;
e. If requested by Bank, "as-built" plans and specifications of the
Improvements, showing the final specifications of all completed
Improvements;
f. If requested by Bank, the execution of AIA Form G706 (Contractor's
Affidavit of Payment of Debts), AIA Form G706A (Contractor's Affidavit of
Release of Liens), and AIA Form G708 (Consent of Surety of Final Payment);
g- Unconditional lien waivers on Bank's approved form from any party that
has recorded a preliminary notice of lien against the Property and
Improvements or such lien shall be bonded over in a manner reasonably
satisfactory to Bank; and
h. Final offsite acceptance letter or other evidence satisfactory to Bank
from the applicable governmental authority as may be reasonably necessary to
evidence completion of the Improvements.
7.4 Borrower shall pay for all reasonable and customary charges for
inspections, whether made by an independent architect, engineer, or other
inspector, or by Bank. To the extent not otherwise provided for in the
Approved Budget, Borrower shall pay such costs from funds other than the
proceeds of the Loan.
7.5 In the event that Borrower fails to make such payments when due, Bank
may in its sole but reasonable discretion require one or more disbursements
of part or all of the Development Funds or Owner's Equity to be paid
directly to any person(s) to whom any amount disbursed is payable,
including, but not limited to, contractors, subcontractors, laborers,
materialmen and/or Bank, or Bank may authorize any such disbursement jointly
to Borrower and such other person(s). Borrower hereby authorizes Bank to so
require the disbursement of the Development Funds and/or the Owner's Equity
by any manner or method to Borrower and/or to any other person(s) to whom
any amount disbursed is payable, and Borrower agrees that any and every
disbursement in any manner to any person(s) hereby authorized shall
constitute disbursement to Borrower.
7.6 Upon notice thereof to Borrower, Bank may withhold from any Advance or,
on account of subsequently discovered evidence, withhold from a later
Advance, or require Borrower to repay to Bank any earlier Advance, as Bank
in its sole but reasonable discretion considers necessary to protect Bank
from loss on account of (i) defective work on the Improvements that has not
been remedied, (ii) any obligation required by this Agreement to have been
performed that has not been performed, (iii) liens filed against the
Property or Improvements or reasonable evidence that such liens will be
filed (other than in connection with work the cost of which is being
properly contested in accordance with Section 9.1 hereof), (iv) failure of
Borrower to make payments to contractors or subcontractors for material or
labor (other than in connection with work the cost of which is being
properly contested in accordance with Section 9.1 hereof), or (v) a
reasonable doubt by Bank that construction of the Improvements can be
completed with the undisbursed proceeds of the Loan, plus any amounts
deposited by Borrower with Bank. Subject to the other provisions of this
Agreement, any amount so withheld shall be disbursed after the basis for
such withholding has been cured or removed or, with respect to the condition
set forth in (v) above, if Borrower demonstrates, to the reasonable
satisfaction of Bank, that all such amounts are, in fact, sufficient to
complete construction of the Improvements.
7.7 Under any option for Advances, Bank, in its reasonable discretion, may
withhold any payment or portion thereof until Bank has received releases of
lien, waivers of lien or paid bills in form reasonably satisfactory to it.
Bank shall have no obligation to require and/or obtain lien waivers or
receipts, and, although Bank requires presentation to it of lien waivers
and/or receipts, Bank shall have no responsibility for the validity thereof
nor for the correctness of the amounts indicated thereon. No Advance by
Bank shall constitute approval of any certification or relieve any person
making such certification of responsibility therefor.
7.8 Bank, from time to time, may, but shall not be obligated to, make
Advances in payment of insurance premiums, taxes, assessments, liens or
encumbrances existing against the Property and Improvements, interest
accrued and payable upon the Loan, and any charges and expenses that are the
obligation of Borrower under this Agreement or any Loan Document and any
charges or matters necessary to preserve the Property and the Improvements
or to cure any Event of Default.
7.9 Although Bank shall have no obligation to make any Advance unless and
until all of the conditions and prior performances set forth herein have
been kept, fulfilled or performed, and until all inspections,
certifications, releases, waivers, or paid bills or other requirements set
forth in Sections 6 or 7, as the case may be, have been made, delivered and
complied with, Bank, at its sole discretion, may make Advances prior to that
time without waiving or releasing any of the requirements or conditions of
this Agreement; but Borrower shall continue to be strictly obligated and
subject thereto, and all such conditions, prior performances and other
requirements shall nevertheless be strictly and punctually complied with,
fulfilled and performed; and, notwithstanding any such disbursement, Bank,
at its sole discretion, may discontinue any further Advances at any time
until all of the conditions, prior performances and other requirements of
this Agreement have been strictly fulfilled, performed and complied with.
7.10 In the event of any dispute that Borrower is unable to resolve upon
ten (10) days' notice from Bank, which, in the good faith opinion of
Bank, may endanger the timely completion of the Improvements or the
fulfillment of any condition precedent or covenant herein, Bank may agree to
make Advances for the account of Borrower without prejudice to Borrower's
rights, if any, to recover such funds from the party to whom paid. Such
agreement or agreements may take any form that Bank in its reasonable
discretion deems proper, including, without limitation, agreements to
indemnify a title insurer against possible assertion of lien claims and
agreements to pay disputed amounts to contractors in the event Borrower is
unable or unwilling to pay the same. All sums paid or agreed to be paid
pursuant to such agreement shall be for the account of Borrower and shall be
charged as an Advance.
7.11 Borrower shall have no right to any Advance other than to have the
same disbursed by Bank in accordance with one or more of the disbursement
provisions contained in this Agreement. Any assignment or transfer,
voluntary or involuntary, of this Agreement or any right hereunder shall not
be binding upon or in any way affect Bank without its written consent; Bank
may make Advances under one or more of the disbursement provisions herein,
notwithstanding any such assignment or transfer.
7.12 As of the date immediately prior to any Advance, the total amount of
the unadvanced Development Funds (not including Retainage for prior work),
together with the required Owner's Equity, shall be sufficient, in
Bank's reasonable opinion, taking into account the Approved Budget, to
complete the Improvements and to pay all costs of the Loan, including
interest, through the balance of the construction phase of the Loan to the
Amortization Date. To the extent the total amount of the unadvanced
Development Funds, together with required Owner's Equity, shall be
insufficient, in the Bank's reasonable opinion, taking into account the
Approved Budget, to complete the Improvements or to satisfy known interest
requirements, Borrower shall, within ten (10) days following written notice
from the Bank, deposit with the Bank an amount equal to such deficiency as
additional Owner's Equity, and such Owner's Equity shall be retained and
disbursed by the Bank as required with any future Advances under this
Agreement until the Improvements are completed and all hard costs and soft
costs incurred in connection with the construction of the Improvements,
including costs incurred in connection with the Loan, are paid and provided
that no Event of Default then exists.
7.13 Borrower shall immediately repay any Advance received by Borrower in
excess of the amount Borrower is entitled to under the provisions of this
Agreement.
7.14 Borrower and Bank shall agree on a day each month on or before which
Borrower shall provide Bank with Disbursement Requests, and Bank shall be
obligated to make Advances no more frequently than once per month.
SECTION 8 REPRESENTATIONS AND WARRANTEES
In order to induce Bank to make the Loan, Borrower represents, warrants and
covenants as follows, which representations, warranties and covenants shall
be true and correct as of the execution hereof and shall survive the
execution and delivery of the Loan Documents:
8.1 The Borrower is a corporation, duly formed and validly in existence
under the laws of the State of Delaware and in good standing under the laws
of the State of Colorado and is authorized to own real property in the State
of Colorado. Borrower is duly qualified to do business and is in good
standing in each jurisdiction where the nature of its business makes such
qualification necessary and where the failure to so qualify permanently
precludes the Borrower from enforcing its contracts. Borrower has the right
and power to occupy and develop the Property, and has full power and
authority to enter into this Agreement, to borrow money as contemplated
herein and to execute and carry out the provisions of the Loan Documents.
The execution, delivery and performance of the Loan Documents have been duly
authorized by all necessary partnership action of the Borrower, and no other
action of the Borrower is required for the execution, delivery and
performance of the Loan Documents. The Loan Documents which have been
executed and delivered pursuant to this Agreement constitute, or, if not yet
executed or delivered, will when so executed and delivered, constitute valid
and binding obligations of the Borrower, each enforceable in accordance with
its respective terms.
8.2 Any loan applications, financial statements, supporting schedules, and
financial reports heretofore delivered to the Bank in connection with the
Loan Documents by or on behalf of each Loan Party are true and correct in
all material respects, and, as to each Loan Party, have been prepared in
accordance with GAAP, consistently applied, and fairly represent the
respective financial conditions of the subjects thereof as of the dates
thereof and for the periods covered thereby, and no Material Adverse
Occurrence has occurred in the financial conditions presented therein since
the respective dates thereof.
8.3 There are no actions, suits or proceedings pending, or to the knowledge
of the Loan Party threatened against or affecting the Loan Party, or any of
the property or assets of the Loan Party, in any court at law or in equity,
or before or by any governmental or municipal authority which might
materially adversely affect the ability of the Loan Party to perform their
respective obligations hereunder or under any of the Loan Documents to which
the Loan Party is a party, or might adversely affect the priority of the
Bank's liens and security interests with respect to the Borrower's property
or assets.
8.4 Borrower has good and marketable title to the Property, free and clear
of all liens and encumbrances, excepting only the lien for general taxes for
the current year and the Permitted Exceptions (as defined in the Deed of
Trust), and subject only to the exceptions, if any, specifically consented
to by Bank and has good and marketable title to all Personalty, which secure
repayment of the Note.
8.5 Borrower has complied and will continue to comply with all applicable
statutes and regulations to be complied with in connection with the
construction of the Improvements, including, without limitation, all
statutes and regulations regarding environmental issues, the Americans with
Disabilities Act, and historical preservation acts and regulations. All
permits, consents, approvals or authorizations by, or registrations,
declarations, withholding of objections or filings with any governmental
body or private entity necessary in connection with the valid execution,
delivery and performance of this Agreement, the Loan Documents, and any and
all other documents executed in connection with any of the foregoing, or
presently necessary for the commencement of construction of the
Improvements, will be obtained prior to the commencement of the construction
of any part of the Improvements and will be valid, adequate and in full
force and effect. Construction of the Improvements and the intended use
thereof will in all respects conform to and comply with all covenants,
conditions, restrictions and reservations affecting the Property, with all
applicable zoning, including parking requirements, subdivision,
environ-mental protection, use and building codes, laws, regulations and
ordinances, including without limitation any covenants and restrictions
recorded in the Official Records (collectively, the "Covenants").
8.6 Borrower represents, warrants, and covenants that the Property, and the
use, occupancy and operation of the Project will strictly comply with all
covenants and agreements of Borrower regarding Hazardous Substances as
defined and contained in the Deed of Trust and the Environmental Indemnity
Agreement during the period of Borrower's ownership and, to the best of
Borrower's knowledge, presently complies.
8.7 All roads, streets, traffic turn lanes, and access ways necessary for
the full utilization of the Property for its intended purposes have either
been completed or the necessary rights of way have either been acquired by
the appropriate Governmental Entity or have been dedicated to public use and
accepted by the appropriate Governmental Entity, and all necessary steps
have been or will be taken by Borrower and the appropriate Govern-mental
Entity to assure the complete construction and installation thereof by the
time needed for construction and/or occupancy and operation of the
Improvements.
8.8 All utility services and facilities ("Utilities") necessary for the
construction of the Improvements and the operation thereof for its intended
purposes, including without limitation, water supply, storm and sewer
facilities, natural gas, electric, cable and telephone facilities, are
either available at the boundaries of the Property, or, if not, all
necessary steps have been taken by Borrower and the local authority or
public utility company which provides such services to assure the complete
installation and availability thereof when needed for construction and/or
occupancy and operation of the Improvements.
8.9 The Plans to be prepared shall include without limitation all waterways
and water features, landscaping, mechanical, electrical, structural and such
other drawings as may be required to complete the Improvements in accordance
with applicable building codes and any recorded plats or the Covenants, and
shall be reasonably acceptable in all respects to Bank and shall be true,
complete and an accurate reflection of the Improvements that Borrower will
construct. Prior to approval by Bank, the Plans shall be satisfactory to
and approved by Borrower, and shall have also been approved by all
governmental bodies or agencies having jurisdiction over the Property and
the Improvements and by any architectural control committee, if any, having
authority over the Property. Borrower represents that the Approved Budget
attached hereto as Exhibit B, is presently a good faith estimate of
necessary costs and expenses to be incurred in the construction of the
Improvements and that until such time as Bank approves a requested change in
the Approved Budget for the construction of the Improvements and the
necessary permits and approvals for the then applicable stage of
construction of the Improvements have been obtained, no Advances will be
made by the Bank. The Approved Budget may be adjusted to correspond to the
Plans; provided, however, the amount of the Loan shall not be adjusted
except as may be approved by the Bank and the Approved Budget shall at all
times be subject to the "in balance" provisions of Section 9.16.
8.10 As of the date hereof and for so long as the Loan Documents remain in
effect, Borrower is and will remain in full compliance with all of the terms
and conditions of this Agreement and the Loan Documents, and no Default has
or shall have occurred or shall have occurred and be continuing, which, with
the lapse of time or the giving of notice, or both, would constitute an
Event of Default under the foregoing.
8.11 The request by the Borrower for any Advance under this Agreement shall
constitute a certification by the Borrower that the representations,
warranties and covenants contained in this Section 8 are true and correct as
of the date of such request, except with respect to financial statements to
the extent that such statements have been prepared with respect to an
earlier date.
8.12 The proceeds of the Loan will be used by the Borrower solely for the
purposes permitted under this Agreement. The proceeds of the Loan shall not
be used to make loans to, or investments in, or purchases of any
corporation, partnership, joint venture, or third party.
8.13 No part of the proceeds of the Loan shall be used at any time by the
Borrower to purchase or carry margin stock (within the meaning of Regulation
U promulgated by the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any margin
stock. The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
purchasing or carrying any such margin stock. No part of the proceeds of
the Loan hereunder will be used by the Borrower for any purpose which
violates, or which is inconsistent with, any regulations promulgated by the
Board of Governors of the Federal Reserve System.
8.14 The fair, salable value of the assets of the Borrower is in excess of
the total amount of its Liabilities as they become absolute and matured, and
the Borrower is able to meet its debts as they become due and payable in
accordance with the Borrower's ordinary business practices.
8.15 Borrower shall promptly comply with all provisions of any construction
contracts, any subcontracts and any other contract, agreement, Plans,
drawings, schedules or other items regarding construction of the
Improvements ("Construction Documents"), which require response or approval
by Borrower in a timely manner to insure completion of the Improvements
within the construction schedule provided in the Construction Documents.
8.16 All representations, warranties and covenants contained in this
Section 8 shall survive the delivery of the Note and the Loan Documents, and
the making of the Loan evidenced thereby and any investigation at any time
made by or on behalf of the Bank shall not diminish its rights to rely on
all of such representations and warranties; provided, however, that
Borrower's representations, warranties and covenants shall not survive the
sale of the Property by the Bank to a third party following foreclosure or
deed in lieu of foreclosure.
SECTION 9 AFFIRMATIVE COVENANTS
So long as Bank has any commitment to lend to Borrower hereunder and until
the Loan and all other indebtedness hereunder have been paid in full and all
of Borrower's obligations hereunder have been fully discharged:
9.1 Borrower shall promptly pay for all labor, materials, equipment and
fixtures used in connection with the construction of the Improvements and
all other costs relating to the Improvements except that Borrower may
contest in good faith the validity or amount thereof provided that Borrower
shall have furnished to Bank a cash deposit or other appropriate security in
an amount and form reasonably satisfactory to Bank to protect Bank against
the creation of any lien on, or any sale or forfeiture of, any property
encumbered by the Loan Documents. Upon the final determination of
Borrower's contest, Borrower shall promptly pay all sums, if any,
deter-mined to be due. Any deposit or security provided by Borrower shall
be promptly returned to Borrower upon the final determination of Borrower's
contest and the payment by Borrower of the sums, if any, deter-mined to be
due.
9.2 Borrower shall commence construction of the Improvements within a
reasonable time (not more than ninety (90) days) after the recording of the
Deed of Trust, proceed without interruption and promptly complete the
Improvements not later than the date six (6) months from the recording of
the Deed of Trust in a good and workmanlike manner according to the Plans,
free from all liens and encumbrances (other than the Permitted Exceptions),
and in accordance with all applicable ordinances and statutes, including
zoning laws, all covenants and restrictions running with the land, and all
regulations and building codes of any governmental or municipal agency
having jurisdiction over the Improvements.
9.3 Borrower warrants that no labor or material has been or will be
furnished for construction of the Improvements until the Deed of Trust has
been recorded and the title company has committed to issue the Title Policy;
or, if construction has commenced, Borrower shall assure that all necessary
indemnification or other agreements are made, in form satisfactory to the
title company, so that Bank receives the Title Policy without exception for
mechanics' or materialmen's liens, if required by Bank.
9.4 Borrower shall use its best efforts to enforce the contracts for the
construction of the Improvements to ensure that the contractors are required
to promptly and diligently perform all of their obligations thereunder and
in such a manner as to preserve Bank's security in the Property and
Improvements. No change, amendment or modification shall be made to such
contracts without the prior written consent of Bank, which consent shall not
be unreasonably withheld or delayed, except changes, amendments or
modifications that are to implement changes to the Plans permitted hereby.
9.5 Borrower, promptly upon request of Bank, shall furnish to Bank correct
lists of the contractor, all subcontractors, suppliers and materialmen
employed or retained in connection with the construction of the
Improvements, together with, if required by Bank, copies of each such
contract. Each such list shall show the name, address and telephone number
of each such person, a general statement of the nature of the work to be
done, the labor and materials to be supplied, the names of materialmen if
known, and the approximate dollar value of such labor or work with respect
to each. Bank shall have the right to telephone or otherwise communicate
with the contractor, each subcontractor and materialman to verify the facts
disclosed by said list or by any disbursement request, or for any other
purpose.
9.6 No materials, equipment, fixtures or any other part of the Improvements
shall be purchased or installed under any security agreement or other
arrangements wherein the seller reserves or purports to reserve the right to
remove or to repossess any such items or to consider them personal property
after their incorporation into the Improvements.
9.7 Borrower shall maintain in full force and effect all rights and
licenses necessary to carry on its business, and all permits, licenses,
consents and approvals necessary for the construction and maintenance of the
Improvements. Borrower shall maintain its present existence and shall
maintain executive personnel and management at a level of experience and
ability equivalent to present personnel and management.
9.8 Borrower shall maintain in full force and effect at all times all
insurance coverages required to be provided as a condition of any Advance.
9.9 Borrower shall make all payments of interest and principal on the Loan
and shall keep and comply with all terms, conditions and provisions of the
Loan Documents.
9.10 Bank, at its option and at Borrower's expense, may erect a sign upon
the Property indicating that Bank is the source of the financing of the
construction of the Improvements.
9.11 Borrower shall pay all of its current obligations before they become
delinquent, including all federal, state and local taxes or file such proper
extensions therefor, and all other payments required under federal, state or
local law. Notwithstanding the foregoing, Borrower shall have the right to
contest any such obligations in good faith, provided that Borrower shall
provide adequate security or other assurances reasonably satisfactory to
Bank, and shall, in any event, pay all such obligations prior to any
foreclosure sale of or execution upon any of the Property.
9.12 Borrower shall maintain, in a safe place, proper and accurate books
and records relating to its operations and its business affairs. Bank
shall, upon written, telephonic or other notice, have the right from time to
time as reasonably necessary during normal business hours to examine, and to
make abstracts from and photocopies of, any and all of Borrower's books and
records which in any way relate to the Property or the financial condition
of Borrower.
9.13 Borrower agrees with the Bank that, so long as the Loan shall be
outstanding, unless the Bank shall otherwise consent in writing, Borrower
covenants and agrees as follows:
Borrower will furnish to the Bank copies of the following financial
statements, reports and information:
(a)(i) As soon as available and in any event within ninety (90) calendar
days after the end of each calendar year a copy of Borrower's audited
financial reports, including balance sheet, related statements of earnings,
income statements and cash flow statement for such calendar year, prepared
in accordance with GAAP, audited by Borrower's independent certified public
accountant; the statements shall be accompanied by a certificate signed by
the officer of the Borrower responsible for financial matters stating that,
in his opinion, such audited financial statements fairly present the
financial position of the Borrower as of the date and for the period
covered, (ii) within thirty (30) days after the end of each calendar
quarter, copies of operating statements for the Property certified without
qualification or exception by the officer of Borrower responsible for
financial matters; (iii) within ninety (90) days after the end of each
fiscal year, a copy of Borrower's federal and state income tax returns or
extensions thereof, with all exhibits and schedules; (iv) within ninety (90)
days after the end of each fiscal year of Borrower, a statement of
Borrower's annual cash flow projections for the succeeding year; and (v)
within twenty (20) days after the end of each month, the certification by
the officer of Borrower responsible for financial matters that Borrower is
in compliance with the provisions of Section 10 below.
9.14 Borrower shall promptly inform Bank of any actions, suits or
proceedings involving Borrower that could materially and adversely affect
the repayment of the Loan, the performance by Borrower under this Agreement,
or the financial condition, business or operations of Borrower. ,
9.15 Borrower shall execute and deliver such additional documents and do
such other acts as Bank may reasonably require in connection with this Loan.
9.16 If at any time or from time to time Bank, in the exercise of its
reasonable business judgment, determines that the remaining undisbursed
proceeds of the Loan plus the then existing balance of any funds deposited
with Bank pursuant to this Section 9.16 and allocated to the Loan, are
insufficient to pay the total cost for the completion of the Improvements,
Borrower shall deposit within thirty (30) days after written demand therefor
by the Bank, an amount equal to such deficiency be deposited with Bank to
insure such completion and payment. Although held in a single account, all
sums deposited pursuant to this Section shall be allocated to the Loan as
appropriate. All funds deposited by Borrower pursuant to this Section 9.16
shall be: (i) held in an account selected by Bank in its sole and absolute
discretion, and (ii) disbursed by Bank in the manner provided herein for
Advances, prior to, in conjunction with or after any or all Advances. All
funds at any time in the Borrower's funds account are hereby assigned to
Bank as additional security for the Loan and all other indebtedness of
Borrower arising hereunder. Unless and until the Borrower deposits the
amount equal to any deficiency as set forth above, the Bank shall have no
obligation to make further Advances of the Development Funds.
9.17 Borrower shall comply with all public and private restrictions,
covenants, and conditions affecting the Property and shall give prompt
notice to the Bank of any notice of default or breach of any of the
foregoing received by Borrower.
9.18 Borrower shall promptly give notice in writing to Bank of (i) the
occurrence of any Event of Default (as defined below), (ii) any change in
the name of Borrower, and in the case of a reorganization, any change in
name, identity or corporate structure, or (iii) any uninsured or partially
insured loss through fire, theft, liability or property damage.
9.20 If the Improvements, or any part thereof, are damaged or destroyed by
fire or any other cause, and Borrower shall desire to restore the
Improvements or shall be required by the Bank to restore the Improvements,
Borrower shall, subject to the provisions of this Section, immediately
proceed with the restoration thereof in accordance with the Plans, and shall
diligently complete the work of restoration, provided that Bank makes
available to Borrower as restoration progresses any insurance proceeds
actually paid to Bank in respect to such damage or destruction. If (i) in
the Bank's reasonable judgment the insurance proceeds are sufficient to
complete the restoration prior to the Maturity Date or such later date as
Bank may elect and within the Approved Budget applicable to the Building to
be restored; and (ii) no Default exists under the Loan Documents
("Restoration Conditions"), the Bank shall advance the insurance proceeds to
Borrower as restoration progresses in the same manner as the Bank disburses
advances of the Loan proceeds hereunder. If any one or more of the
Restoration Conditions does not exist, the Bank shall have no obligation to
authorize further advances of Development Funds or Owner's Equity hereunder,
and may call the Loan immediately due and payable in accordance with the
following paragraph; provided, however, if, in the Bank's judgment the
insurance proceeds are insufficient to complete the restoration, Borrower
may satisfy such condition by depositing with the Bank as additional Owner's
Equity such money as in the Bank's reasonable judgment (based on bids or
estimates of reputable contractors) is sufficient to complete the
restoration in accordance with the Plans in a timely manner and fully pay
the costs thereof.
If in the Bank's reasonable judgment the Improvements cannot be restored in
accordance with the Plans and the Approved Budget in a timely manner as
described above or, if Borrower does not or cannot deposit as additional
Owner's Equity such money or additional money as in the Bank's judgment is
required to complete the restoration and fully pay the cost thereof, or if a
Default exists under the Loan Documents, such event shall be deemed an Event
of Default hereunder, and the Bank's obligations to authorize further
advances of Construction Funds or Owner's Equity hereunder or to make
insurance proceeds available for restoration shall immediately terminate.
The Bank may in such case apply any insurance proceeds and/or undisbursed
Development Funds and Owner's Equity in the manner set forth in Section 14
hereof, to reduce the outstanding indebtedness of Borrower under the Loan
and may exercise any of the other remedies which are described in this
Agreement or in the Loan Documents.
In the case of loss, the Bank is hereby authorized to participate in any
settlement or adjustment of claims under insurance policies, as its interest
may appear, and to collect and receipt for any proceeds. In the event the
Bank elects to apply the proceeds to restoration, in keeping with the
Restoration Conditions, such proceeds shall be made available, from time to
time, under substantially similar terms and conditions as provided in this
Agreement for advances from Development Funds and Owner's Equity.
9.21 If all or any part of the Property is expropriated, condemned, taken
by power of eminent domain, or transferred in anticipation of any such
circumstances by any competent authority, then the proceeds of any such
award or settlement made as compensation or damages for such expropriation,
condemnation, exercise of the power of eminent domain or the transfer in
anticipation of any such circumstance shall be paid to the Bank. The Bank,
at its election, may pay or apply such amount in any one or more of the
following ways and in such order as the Bank shall determine:
(a) to costs of collection thereof;
(b) payment of any expenses and fees of the Bank associated with this
Agreement and the other Obligations of the Borrower hereunder, the payment
of accrued and unpaid interest on the Loan, and the reduction of unpaid
principal of the Loan;
(c) to the payment of obligations incurred by the Bank or the Borrower in
the repair or replacement of damage to the Improvements;
(d) to make payment to the Borrower for the costs of restoration and repair
of the Improvements; or
If the Improvements, or any part thereof, are taken by condemnation or
subject to imminent threat of condemnation, Bank's obligation to authorize
further advances of Development Funds or Owner's Equity hereunder shall
immediately terminate unless, in the Bank's reasonable judgment, the
Improvements can be replaced and restored in a manner which will enable the
Improvements to be functionally and economically utilized and occupied as
originally intended, in which event the condemnation proceeds shall be made
available to Borrower for such purpose. Whether the Bank, in its reasonable
judgment, determines that the Improvements can be so restored and replaced
or not, the rights and obligations of Bank and Borrower thereafter, and the
handling and utilization of any condemnation proceeds actually paid to the
Bank and undisbursed Development Funds and Owner's Equity, shall be the same
as described in the immediately preceding Section 9.20 hereof.
9.23 Borrower shall indemnify and hold the Bank harmless from all liability
for any actual or alleged damage or injury of whatsoever nature arising out
of or in any way connected with the Property and/or the construction of the
Improvements or arising out of Borrower's breach of the provisions of this
Agreement except for the gross negligence or wilful misconduct of the Bank.
The Bank may commence, appear in or defend any action or proceeding
purporting to affect the rights, duties or liabilities of the parties
hereto, or the Property or the Improvements and Borrower shall pay all of
Bank's reasonable costs and expenses incurred thereby on demand. This
Section shall survive execution, delivery and performance of this Agreement,
the Deed of Trust and the Loan Documents.
9.24 Borrower will at any time and from time to time upon request of the
Bank take or cause to be taken any action, execute, acknowledge, deliver or
record any further documents, opinions, mortgages, security agreements,
financing statements or other instruments or obtain such additional
insurance as Bank in its discretion deems reasonably necessary or
appropriate to carry out the purposes of this Agreement and to preserve,
protect and perfect the security interests intended to be created and
preserved in the Property, the Project, the Personalty, and other properties
and assets securing the obligations of the Borrower under this Agreement and
the Loan Documents.
SECTION 10 FINANCIAL COVENANTS
Until the Loan and all indebtedness hereunder has been paid in full and all
Obligations hereunder have been fully discharged, each Borrower covenants
and agrees as follows:
10.1 Special Definitions. With respect to the subject matter of this
Article, the following terms shall have the following meanings:
" Capital Expenditure" shall mean, an expenditure for an asset that must be
depreciated or amortized under GAAP, for goodwill, or for any asset that
under GAAP must be treated as a capital asset, including payments under
Capital Leases.
"Capital Lease" shall mean any lease that has been or should be capitalized
under GAAP.
"Current Assets" shall have the meaning given that term in accordance with
GAAP.
"Current Liabilities" shall mean Liabilities payable within twelve (12)
months (including Mandatory Debt and Interest Payments).
"EBITDA" means, for any period of calculation, an amount equal to the sum of
(i) Net Income, (ii) federal, state and local income tax expense, (iii)
Interest Expense, (iv) losses on the sale or other disposition of assets,
(v) depreciation, (vi) amortization, and (vii) extraordinary losses, minus
(a) gains on the sale or other disposition of assets, and (b) extraordinary
gains, each calculated for such period.
"Funded Debt" shall mean the amount of all Indebtedness and Indirect
Obligations (without duplication) that by its terms or by the terms of any
instrument or agreement relating thereto matures more than on year from, or
is renewable or extendable at the option of guarantor to a date more than
one year from, the date of creation thereof (including without duplication a
line of credit or guaranty thereof whether or not maturing more than one
year from the date of creation), and includes any current maturities of such
Indebtedness and Indirect Obligations (without duplication).
"GAAP" shall mean those generally accepted accounting principles set forth
in Statements of the Financial Accounting Standards Board and in Opinions of
the Accounting Principles Board of the American Institute of Certified
Public Accountants or which have other substantial authoritative support in
the United States and are applicable in the circumstances, as applied on a
consistent basis.
"Indebtedness" shall mean, as to any Person at any particular date, any
contractual obligation enforceable against such Person (i) to repay borrowed
money; (ii) to pay the deferred purchase price of property or services;
(iii) to make payments or reimbursements with respect to letters of credit
whether or not there have been drawings thereunder; (v) with respect to
which there is any security interest in any property of such Person; (vi) to
make any payment or contribution to a Multi-Employer Plan; (vii) that is
evidenced by a note, bond, debenture or similar instrument; and (viii) under
any conditional sale agreement or title retention agreement.
"Indirect Obligation" shall mean, as to any Person, (a) any guaranty by such
Person of any obligation of another Person; (b) any security interest in any
property of such Person that secures any obligation of another person; (c)
any enforceable contractual requirement that such person (i) purchase an
obligation of another Person or any property that is security for such
obligation; (ii) advance or contribute funds to another Person for the
payment of an obligation of such other Person or to maintain the working
capital, net worth or solvency of such other Person as required in any
documents evidencing an obligation of such other Person; (iii) purchase
property, securities or services from another person for the purpose of
assuring the beneficiary of any obligation of such other Person that such
other Person has the ability to timely pay or discharge such obligation;
(iv) grant a security interest in any property of such Person to secure any
obligation of another Person; or (v) otherwise assure or hold harmless the
beneficiary of any obligation of another Person against loss in respect
thereof; and (d) any other contractual requirement enforceable against such
person that has the same substantive effect as any of the foregoing. The
term "Indirect Obligation" does not, however, include the endorsement by a
Person of Instruments for deposit or collection in the ordinary course of
business or the liability of a general partner of a partnership for
obligations of such partnership. The amount of any Indirect Obligation of a
Person shall be deemed to be the stated or determinable amount of the
obligation in respect to which such Indirect Obligation is made or, if not
stated or determinable, the maximum reasonable anticipated liability in
respect thereof as determined by such Person in good faith.
"Intangible Assets" means: (a) patents, copyrights, trademarks, tradename,
franchise, license agreements, goodwill, and other similar intangibles; (b)
unamortized debt discount and expenses; and (c) fixed assets to the extent
of any write-up in the book value thereof resulting from a revaluation
effective after the date of this Loan Agreement.
"Interest Expense" means, for any period of calculation, all interest,
whether paid in cash or accrued as a liability, without duplication, on
Indebtedness or Indirect Obligations of Borrower and any Subsidiary during
such period.
"Liabilities" shall have the meaning given that term in accordance with
GAAP.
"Mandatory Debt and Interest Payments" shall mean, at any date of
determination, the sum of all mandatory payments of principal and interest
(including payments due in connection with any Capital Lease) due during the
period of twelve (12) months from the date of determination.
"Net Income" shall have the meaning given that term under GAAP.
"Tangible Net Worth" means as of any date, total assets of Borrower as
determined in accordance with GAAP, minus the sum of (i) Liabilities and
(ii) Intangible Assets.
10.2 Current Asset Ratio. Prior to December 31, 1997, Borrower shall not
permit the ratio of Current Assets to Current Liabilities to fall below 1. 1
to 1 and, from and after January 1, 1998, Borrower shall not permit the
ratio of Current Assets to Current Liabilities to fall below 1.25 to 1, at
any time.
10.3 Ratio of Liabilities to Tangible Net Worth. Borrower shall not
permit the ratio of combined Liabilities to Tangible Net Worth to exceed
2.25 to 1, at any time.
10.4 Tangible Net Worth. Prior to December 31, 1997, Borrower shall not
permit its Tangible Net Worth to fall below $6,000,000.00 and, from and
after January 1, 1998, Borrower shall not permit its Tangible Net Worth to
fall below $7,000,000.00, at any time.
10.5 EBITDA Borrower shall not permit the ratio between EBITDA and
Funded Debt to fall below 1.30 to 1 as of the end of any fiscal year of
Borrower.
10.6 No Additional Financing. Borrower and its affiliates shall not incur
additional debt in the form of credit obligations from financial
institutions and/or leasing companies, without prior written Bank approval,
provided however, that this test does not include arbitrage line(s) of
credit, that are fully secured by cash or other existing debt acknowledged
by Bank as of the Closing Date.
10.7 Compliance Certificate. Within twenty (20) days after the end of each
month, Borrower shall execute and deliver to Bank a compliance certificate
("Compliance Certificate") in form acceptable to and approved by Bank,
certifying Borrower's continuing compliance with the financial covenants set
forth in this Section.
SECTION 11 NEGATIVE COVENANTS
So long as Bank has any commitment to lend to Borrower hereunder and until
the Loan and all other indebtedness hereunder have been paid in full and all
of Borrower's obligations hereunder have been fully discharged, Borrower
shall not, without receiving the prior written consent of Bank, in its sole
but reasonable discretion:
11.1 Dissolve or liquidate, or merge or consolidate with or into any other
entity, or turn over the management or operation of its property, assets or
business to any other person, firm or corporation.
11.2 Assign, transfer or convey any of its right, title and interest in
any property whether real or personal encumbered by the Loan Documents;
create or suffer to be created any mortgage, pledge, security interest,
encumbrance or other lien on any property encumbered by the Loan Documents
(other than liens arising from work the cost of which is being properly
contested in accordance with Section 9. 1 hereof); or, without obtaining the
prior written consent of the Bank, which consent shall not be unreasonably
withheld or delayed, create or suffer to be created any mortgage, pledge,
security interest, encumbrance or other lien on any other property or assets
which it now owns or hereafter acquires except in consideration of the
contemporaneous receipt by it of benefits equal or greater in value to the
lien created.
11.3 Make or permit any material change in the Plans. Any requested
changes shall be submitted on a form reasonably acceptable to Bank and
accompanied by a copy of the portion of the Plans applicable to the changes.
Prior to implementing any change order, Borrower shall deposit with Bank
sufficient cash to cover the cost of all change orders that increase the
cost of the Improvements. All such funds deposited with Bank shall be held
and disbursed in the manner provided in Section 9.16 hereof and are hereby
assigned to Bank as additional security for the Loan and all other
indebtedness of Borrower arising hereunder.
11.4 Change the times of commencement or termination of its fiscal year or
other accounting periods; or change its methods of accounting other than to
conform to generally accepted accounting principles applied on a consistent
basis.
11.6 Declare or set aside any sums of money or other assets or property for
the payment of any dividends or pay any sum of money or other asset or
property, on or with respect to any share of capital stock or ownership
interest or other equity interest in itself or any subsidiary, whether in
the form-n of equity or debt.
SECTION 12 INSPECTION BY BANK; STOPPAGE OF CONSTRUCTION
12.1 Bank shall have the right, but not the obligation, to enter at any
reasonable time with reasonable notice upon the Property and Improvements to
determine if the construction of the Improvements is in substantial
conformity with the Plans and all other requirements hereof and to examine
and make copies and extracts of any books, records, accounting data and
other documents, including without limitation all permits, licenses,
consents and approvals of governmental authorities having jurisdiction over
Borrower, the Improvements and the contractor and all subcontractors
supplying labor and/or materials in connection with the Improvements.
12.2 Bank shall have no duty to supervise or inspect any construction or to
inspect any books and records; any inspection by Bank shall be for the sole
purpose of protecting Bank's security and preserving Bank's rights
hereunder. Failure by Bank to inspect any work shall not constitute a
waiver of any of Bank's rights hereunder. Inspection not followed by notice
of an Event of Default shall not constitute a waiver of any Event of Default
then existing. Any inspection by Bank shall not be a representation by Bank
that there has been or will be compliance with the Plans or that the
construction is free from defective materials or workmanship, nor shall any
inspection by Bank constitute approval of any certification given to Bank or
relieve any person making such certification of responsibility therefor.
12.3 Upon discovery by Bank of any material deviation from the Plans or of
defective or unworkmanlike labor or materials being used in the construction
of the Improvements, Bank may immediately order stoppage of construction and
demand that any unsatisfactory work be replaced and that the condition be
corrected, whether or not any unsatisfactory work has already been
incorporated into the Improvements. After issuance of such an order in
writing, the condition shall be corrected within thirty (30) days from the
date of stoppage by Bank. Bank shall have the right to withhold all further
Advances until the condition is corrected and no other work shall be done on
the Improvements without the prior written consent of Bank unless, and
until, such condition has been fully corrected.
12.4 After notice thereof to Borrower and Borrower's failure to timely
proceed, within ten (10) days of notice thereof, Borrower irrevocably
appoints, designates, and authorizes Bank as its agent (said agency being
coupled with an interest) to file for record any notices of completion or
any other notice that Bank deems necessary or desirable to protect its
interest hereunder or under the Loan Documents. This power of attorney is
solely for the benefit and protection of Bank, and its successors and
assigns, and Bank shall have no obligation to exercise this power in any
event. This power of attorney is a power coupled with an interest and shall
be irrevocable so long as any part of the Loan or any indebtedness or
obligations of Borrower to Bank arising in connection with the Loan remain
unpaid or unperformed.
SECTION 13 WAIVER
13.1 Borrower waives presentment, demand, protest and notices of protest,
nonpayment and partial payment. Borrower consents to and waives notice of:
(i) the granting of indulgences or extensions of time of payment, (ii) the
taking or releasing of security, and (iii) the addition or release of
persons who may be or become primarily or secondarily liable for the Loan or
any other indebtedness arising in connection with the Loan, or any part
thereof, and all in such manner and at such time as Bank may deem reasonably
advisable.
13.2 No delay or omission by Bank in exercising any right, power or remedy
hereunder, and no indulgence given to Borrower, with respect to any term,
condition or provision set forth herein, shall impair any right, power or
remedy of Bank under this Agreement, or be construed as a waiver by Bank of,
or acquiescence in, any Event of Default.
Likewise, no such delay, omission or indulgence by Bank shall be construed
as a variation or waiver of any of the terms, conditions or provisions of
this Agreement. Any actual waiver by Bank of any Event of Default shall not
be a waiver of any other prior or subsequent Event of Default or of the same
Event of Default after notice to Borrower demanding strict performance.
SECTION 14 DEFAULT
14.1 The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Agreement:
a. The Borrower shall default in the payment when due of any Obligations
owing to Bank under the terms of the Note (giving effect to any grace period
provided therein applicable to the Default).
b. A Default shall occur in the due performance and observance of any of
the covenants and conditions of this Agreement or the Loan Documents, other
than a monetary obligation or other Default described in this section, which
breach is not cured to Bank's satisfaction within the applicable cure period
for breach of such covenant or condition, and, if no specific cure period is
provided, within thirty (30) days of notice of such Default being sent by
the Bank to Borrower; provided, however that if such default is not curable
within such thirty (30) days, then, so long as Borrower delivers to Bank,
within ten (10) days after notice, its written undertaking to cure,
commences to cure such default within such thirty (30) day period and is
diligently pursuing such cure to completion, such default shall not
constitute an Event of Default unless such default remains uncured for such
sixty (60) days after such written notice to Borrower.
C. Any written representation, warranty or disclosure made by Borrower
proves to be materially false or misleading as of the date when made,
whether or not such representation or disclosure appears in this Agreement,
the Loan Documents, or items submitted by Borrower in connection therewith.
d. Any claim or lien shall be filed against the Property or any part
thereof; provided, however, that no Default shall exist hereunder as long as
Borrower has fully complied with any conditions provided herein to permit
Borrower's contest of such claim or lien.
e. Borrower fails to make any deposit of funds required hereunder, or under
the Loan Documents within the time required for payment, which failure shall
continue for five (5) days after written notice from Bank to Borrower.
f. Any material deviation shall occur in the work of construction from the
Plans without the approval of Bank, or the occurrence of defective
workmanship or materials not in accordance with the Plans or completed in
compliance with industry standards for similar projects, which deviations or
defects are not corrected, substantially corrected, or a plan for their
timely correction approved by the Bank within thirty (30) days after receipt
of written notice from Bank to Borrower.
g. The work of construction is delayed or suspended for a period of sixty
(60) calendar days or more beyond the construction schedule given to the
Bank for any reason except those which Bank reasonably determines to be
beyond the reasonable control of Borrower, or the work of construction is
not completed by the Completion Date or such later date as Bank may approve,
and Borrower has not submitted a reasonable plan for completion of
construction which Bank has approved.
h. There occurs any Material Adverse Occurrence.
i. Any of the Improvements encroach over the Property or setback lines or
upon an easement, or any structure upon an adjoining Property encroaches
upon the Property, to an extent reasonably deemed material by Bank, and an
appropriate title insurance endorsement or plans for the cure of which
encroachment are not provided to Bank's satisfaction within thirty (30) days
after written notice thereof from Bank to Borrower or Borrower shall fail to
diligently pursue such cure to completion within a reasonable time (not to
exceed thirty (30) days).
There occurs any event of default in the payment and performance of Borrower
under the Construction Loan or any of the Construction Loan Documents.
Borrower acknowledges and agrees that all material non-monetary defaults are
conclusively deemed to be and are defaults which impair the security of the
Loan Documents, and that Bank shall be entitled to exercise any appropriate
remedy, including without limitation, foreclosure of the Loan Documents upon
the occurrence of any such material non-monetary default after the
expiration of any cure period, if applicable.
14.2 Remedies. Upon the occurrence of any Event of Default and at any
time while such Event of Default is continuing, Bank may do one or more of
the following:
(a) Immediately terminate any further approval of advances of Development
Funds and/or Owner's Equity and use any portion of the Owner's Equity
held by the Bank to reimburse the Bank for any costs incurred under the Note
or this Agreement.
(b) Declare the Obligations under the Note immediately due and payable.
(c) Enter upon the Property and complete construction of the Improvements
in accordance with the Plans and Approved Budget, except as necessarily
increased by additional development and construction costs arising from
Borrower's default or additional costs approved by a court, with such
changes therein as Bank may from time to time and in its reasonable
judgment deem appropriate, all at the risk and expense of Borrower. The
Bank shall have the right at any time to discontinue any work commenced by
it in respect to the Improvements or to change any course of action
undertaken by it and not be bound by any limitations or requirements of
time whether set forth herein or otherwise. Bank shall have the right and
power to assume any construction contract made by or on behalf of Borrower
in any way relating to the Improvements and to take over and use all or any
part of the labor, materials, supplies and equipment contracted for, by or
on behalf of Borrower whether or not previously incorporated into the
Improvements, all in the discretion of Bank. In connection with any work
of construction undertaken by Bank pursuant to the provisions of this
Section, Bank may (i) engage builders, contractors, and others for the
purpose of furnishing labor, materials and equipment in connection with the
work of construction and architects and engineers as reasonably necessary
to complete construction of the Project, (ii) pay, settle or compromise all
bills or claims which may become liens against the Property or which have
been or may be incurred in any manner in connection with completing
construction of the Improvements or for the discharge of liens,
encumbrances or defects in title of the Property, and (iii) take such other
action, including the employment of watchmen to protect the Improvements,
or refrain from taking action under this Agreement as Bank may in its
discretion reasonably determine from time to time. Borrower shall be
liable to Bank for all sums paid or incurred for completing construction of
the Improvements whether the same shall be paid or incurred pursuant to the
provisions of this Section or otherwise, and all payments made or
liabilities incurred by Bank hereunder of any kind whatsoever shall be paid
by Borrower to Bank upon demand with interest at the rate set forth in the
Note, and all of the foregoing shall be deemed and shall constitute
advances under this Agreement and be secured by the Deed of Trust and Loan
Documents. For the purpose of carrying out the provisions and exercising
the rights, powers and privileges granted by this Section 9.2(c) hereof,
Borrower hereby unconditionally and irrevocably constitutes and appoints
Bank its true and lawful attorney-in-fact to enter into such contracts,
perform such acts and incur such liabilities as are referred to in said
Section in the name and on behalf of Borrower which are reasonably
necessary to complete development and construction of the Improvements.
This power of attorney is coupled with an interest. Nothing contained
herein shall relieve the Bank from its obligation to mitigate damages.
(d) Where substantial deviations from the Plans appear which have not been
approved as set forth herein, or defective or unworkmanlike labor or
materials are being used in the development of the Improvements, or upon
receipt of knowledge of encroachments to which there has been no consent,
Bank shall have the right to immediately order stoppage of the construction
and demand that such conditions be corrected. After issuance of such an
order in writing, no further work shall be done on that portion of the
Improvements where there is a substantial deviation from the Plans which has
not been approved as set forth herein or where there is defective or
unworkmanlike labor or materials, without the prior written consent of Bank
unless and until said condition has been fully corrected.
(e) Foreclose on or realize upon any security for the Loan without waiving
its rights to proceed against any other security or other entities or
individuals directly or indirectly responsible for repayment of the
Obligations or waive any and all security for the Obligations as Bank may in
its discretion so determine, and pursue any such other remedy or remedies as
Bank may so determine to be in its best interest as provided herein or in
the Loan Documents. All remedies of Bank provided for herein and in any
other Loan Document are cumulative and shall be in addition to all other
rights and remedies provided by law. The exercise of any right or remedy by
Bank hereunder shall not in any way constitute a cure or waiver of default
hereunder or under any other Loan Document or invalidate any act done
pursuant to any notice of default, or prejudice Bank in the exercise of any
of its rights hereunder or under any other Loan Documents unless, in the
exercise of its rights, Bank realizes all amounts owed to it under such Loan
Documents.
(f) Avail itself of any other relief to which Bank may be legally or
equitably entitled.
14.3 If at any time (a) an Event of Default under the Loan Documents has
occurred (giving effect of applicable cure and notice periods, if any,
contained in the Loan Documents ), (b) the Bank determines, in its sole but
reasonable judgment, that the collateral position of the Bank in relation to
the credit extended for the benefit of the Borrower has adversely changed as
a consequence of material, physical or economic impairment of the pledged
collateral, or (c) the Bank is required by law or regulation to obtain a new
Appraisal, the Bank may require a new Appraisal of the Property in form and
content acceptable to the Bank to be prepared at Borrower's expense.
14.4 Borrower shall pay all of the reasonable costs and expenses, including
without limitation costs of title searches and title policy commitments,
Uniform Commercial Code searches, court costs and reasonable in-house and
outside attorneys' fees, incurred by Bank in enforcing payment and
performance of the Loan and the other indebtedness and obligations of
Borrower hereunder or in exercising the rights and remedies of Bank
hereunder. All such costs and expenses shall be secured by all Loan
Documents. In the event of any court proceedings, court costs and
attorneys' fees shall be set by the court and not by jury and shall be
included in any judgment obtained by Bank.
SECTION 15 PARTIAL RELEASE PROVISIONS
Borrower may request a partial release from the Deed of Trust for a portion
of the Property shown on Exhibit C attached hereto and labeled the
"Construction Parcel" or other portions of the Property, upon the following
terms and conditions:
15.1 Release Conditions for Construction Parcel. Bank shall partially
release the Construction Parcel (defined below) upon the following terms and
conditions:
(a) Final Plat. Borrower shall deliver to the Bank for its approval, which
approval shall not be unreasonably withheld or delayed, three (3) copies of
a recorded plat ("Concepts Direct Filing I Plat") delineating the
dimensions of Lot 1, Block 1, consisting of approximately 10.64 acres and
depicted on Exhibit C on which certain improvements described in the
Construction Loan are to be constructed ("Construction Parcel"), and
satisfactory ingress and egress to and from the Construction Parcel, which
Concepts Direct Filing 1 Plat must show all easements, ditches, streets, lot
lines, rights-of-way, any lot, block and street delineations or designations
affecting the Construction Parcel and satisfactory easements for utility
services, and encroachments, if any, affecting the Construction Parcel.
(b) Development Parcel Legal description@ion. A Survey certified to the
Bank and the Title Company in sufficient detail to identify the balance of
the Property after release of the Construction Parcel (the "Development
Parcel") and containing the legal description of the Development Parcel.
(c) No Consideration. Upon compliance with the terms of this Section 15.1
and Section 15.2, the Bank will release the Construction Parcel for no
additional consideration.
(d) Beneficial Use. Evidence satisfactory to the Bank of all easements
necessary for ingress and egress from the Development Parcel and the
Construction Parcel to a public street or road, and for installation and
maintenance of Utilities and for the beneficial use and enjoyment of the
Improvements for the purpose for which the Improvements were constructed.
15.2 Release Conditions for Other Parcels. Bank shall partially
release other parcels located within the Development Parcel, upon the
following terms and conditions:
(a) Final Plat. Borrower shall deliver to Bank for its approval, which
approval shall not be unreasonably withheld or delayed, the final recorded
plat of parcel to be released ("Release Parcel"), delineating the
dimensions of the Release Parcel and satisfactory ingress and egress to and
from the Release Parcel and the remainder of the Development Parcel, which
plat must show all easements, ditches, streets, lot lines, right-of-way, any
lot, block and street delineations or designations affecting the Release
Parcel and satisfactory easements for utility services and encroachments, if
any, affecting the remaining Development Parcel.
(b) Legal Description. A Survey certified to the Bank and the title
Company in sufficient detail to identify the balance of the Development
Parcel after release of the Release Parcel and a certification of the number
of square feet in the Release Parcel.
(c) Release Price. Borrower shall pay to Bank a release price for any
Release Parcel equal to the greater of (i) eighty-five percent (85 %) of the
net sales proceeds (gross sales proceeds less customary broker's commission,
title insurance premiums, and other seller costs customary in residential
transactions in the State of Colorado, but not including discount or
origination points paid by the seller in connection with purchaser's
financing), or (ii) $.50 per square foot of the Release Parcel (the "Site
Release Price").
15.3 General Release Conditions. With respect to the release of the
Construction Parcel or any Release Parcel, the Borrower shall comply with
the following terms and conditions:
(a) Segregated. The Construction Parcel and any Release Parcel shall be
segregated on the tax roll and assessed separately from the unreleased
portion of the Development Parcel or a reasonably and mutually satisfactory
agreement reached between Borrower and Bank as to the proration of the taxes
until such segregation occurs.
(b) No Default. No Event of Default shall exist at the time of request
for partial release or at the time of release.
(c) Other Documents. Such other standard documents or assurances as may
be required to accomplish the release in a manner satisfactory to Bank and
its counsel.
(d) Title Policy Endorsement. Upon the request of the Bank, Borrower shall
have submitted to Bank an endorsement to Bank's policy of title insurance,
ensuring that the priority of Bank's lien on the unreleased portion of the
Development Parcel is not impaired by reason of the release of the
Construction Parcel or any Release Parcel, and ensuring Bank's interest in
any retained easement and maintenance rights as a first and prior lien.
(e) Costs. Borrower shall directly pay for all costs and expenses
incurred in connection with compliance with the requirements set forth in
this Article 15, including, but not limited to, reasonable attorneys' fees,
title insurance premiums and survey expenses. In the event Bank incurs any
expenses arising out of Borrower's actions to comply with the provisions of
this Article 15, Borrower shall reimburse to Bank all such expenses as a
condition to Bank's obligations to partially release the Construction
Parcel or any Release Parcel.
15.4 Release Procedure. Borrower shall provide Bank with a fully prepared
request for partial release for the Construction Parcel or any Release
Parcel to be released, together with the items described in Section 15.1,
15.2 and 15.3 not less than ten (10) Business Days prior to the requested
release date.
SECTION 16 ACTION UPON AGREEMENT
16.1 This Agreement is made for the sole protection and benefit of the
parties hereto and no other person or organization shall have any right of
action hereon.
16.2 This Agreement embodies the entire Agreement of the parties with
regard to the subject matter hereof. There are no representations,
promises, warranties, understandings or agreements expressed or implied,
oral or otherwise, in relation thereto, except those expressly referred to
or set forth herein. Borrower acknowledges that the execution and delivery
of this Agreement is its free and voluntary act and deed, and that said
execution and delivery have not been induced by, nor done in reliance upon,
any representations, promises, warranties, understandings or agreements made
by Bank, its agents, officers, employees or representatives.
16.3 No promise, representation, warranty or agreement made subsequent to
the execution and delivery of this Agreement by either party hereto, and no
revocation, partial or otherwise, or change, amendment or addition to, or
alteration or modification of, this Agreement shall be valid unless the same
shall be in writing signed by all parties hereto.
16.4 Bank and Borrower each have separate and independent rights and
obligations under this Agreement. Nothing contained herein shall be
construed as creating, forming or constituting any partnership, joint
venture, merger or consolidation of Borrower and Bank for any purpose or in
any respect.
SECTION 17 GENERAL
17.1 Arbitration. The undersigned hereby agree that all controversies and
claims (including the existence of a Default or Event of Default) of any
nature arising directly or indirectly out of any and all loan transactions
between them and any related agreements, instruments or documents, shall at
the written request of any party be submitted to binding arbitration
pursuant to the applicable rules of the American Arbitration Association.
The arbitration shall proceed in Denver, Colorado, shall be governed by
Colorado law and shall be conducted in accordance with the Commercial
Arbitration Rule of AAA. Judgment upon any award rendered by the
arbitrator(s) may be entered in any court having jurisdiction.
(a) A single arbitrator shall have the power to render a maximum award of
one hundred thousand dollars. When any party files a claim in excess of
this amount, the arbitration decision shall be made by the majority vote of
three arbitrators. No arbitrator shall have the power to restrain any act
of any party.
(b) No provision of this Section shall limit the right of any party to
exercise self-help remedies, to foreclose against any real or personal
property collateral, or to obtain any provisional or ancillary remedies
(including but not limited to injunctive relief or the appointment of a
receiver) from a court of competent jurisdiction. At Bank's option, it may
enforce its rights under a mortgage by judicial foreclosure, and under a
deed of trust either by exercise of power of sale or by judicial
foreclosure. The institution and maintenance of any remedy permitted above
shall not constitute a waiver of the right to submit any controversy or
claims to arbitration. The statute of limitations, estoppel, waiver,
laches, and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration proceeding.
17.2 No Waiver. No waiver of any Default or breach by Borrower hereunder
shall be implied from any failure by Bank to take action on account of such
default if such default persists or is repeated, and no express waiver shall
affect any Default other than the default specified in the waiver and shall
be operative only for the time and to the extent therein stated. Waivers of
any covenant, term or condition contained herein shall not be construed as a
waiver of any subsequent breach of the same covenant, term or condition. The
consent or approval by Bank to, or of, any act by Borrower requiring farther
consent or approval shall not be deemed to waive or render unnecessary the
consent or approval to, or of, any subsequent similar act.
17.3 Impounding of Advances. Unless Bank is provided with an
indemnification or other assurance satisfactory to Bank (in Bank's sole
discretion), Bank may impound such Advances as may be required to enable
Bank to comply with the provisions of Colorado Revised Statutes, Section
38-22-126, as amended.
17.4 Successors and Assigns. This Agreement is made and entered into for
the sole protection and benefit of Bank and Borrower, their successors and
assigns, and no other person or persons shall have any right of action
hereunder. The terms hereof shall inure to the benefit of the successors
and assigns of the parties hereto; provided, however, that the Borrower's
interest hereunder cannot be assigned or otherwise transferred without the
prior consent of Bank.
17.5 Notices. Any notice, demand or request required hereunder shall be
given in writing at the addresses set forth below by personal delivery, or
registered or certified, first class mail, return receipt requested. Notice
shall be deemed delivered (i) upon personal delivery, or (ii) twenty-four
(24) hours after deposit with a nationally-recognized overnight courier
service, or (iii) three (3) days after deposit with the U.S. postal service,
registered or certified mail, postage prepaid. The addresses may be changed
by notice to the other party given in the same manner as provided above.
If to Borrower and Guarantors:
Concepts Direct, Inc. 1351 South Sunset Street Longmont, CO 80501 Attn:
Frank Marcus
With Copy to:
McGuire, Woods, Battle and Boothe, LLP 8280 Greensboro Drive, Suite 900
Tysons Comer McLean, VA 22102-3892 Attention: Michael J. Giguere, Esq.
If to Bank:
Bank One, Colorado, NA 1125 - 17th Street Denver, Colorado 80202 Attention:
Greg McCann, Vice President Western Region Real Estate With copy to:
Bank One, Arizona, NA 241 N. Central Ave. 14th Floor, Dept. A909 Phoenix,
AZ 85004 Attention: Western Region Loan Administration
17.6 Authority to File Notices. Borrower irrevocably appoints, designates
and authorizes Bank as its agent (said agency being coupled with an
interest) to send to any third part-y any other notice or documents or take
any other action that Bank deems necessary or desirable to protect its
interest hereunder, or under the Loan Documents, and will upon request by
Bank, execute such additional documents as Bank may require to further
evidence the grant of the aforesaid right to Bank.
17.7 Time. Time is of the essence hereof.
17.8 Amendments, etc. No amendment, modification, termination or waiver of
any provisions of this Agreement or of any of the Loan Documents nor consent
to any departure by Borrower therefrom shall in any event be effective
unless the same shall be in writing and signed by Bank, and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given.
17.9 Headings. The article and section headings in no way define, limit,
extend or interpret the scope of this Agreement or of any particular article
or section.
17.10 Number and Gender. When the context in which the words are used in
this Agreement indicate that such is the intent, words in the singular
number shall include the plural and vice versa. References to any one
gender shall also include the other gender if applicable under the
circumstances.
17.11 Validity. In the event that any provisions of this Agreement shall
be held to be invalid, the same shall not affect in any respect whatsoever
the validity of the remainder of this Agreement.
17.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
17.13 Survival of Warranties. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement and of the Loan Documents and the extension of the Loan hereunder
and continue in full force and effect until the Obligations of Borrower
hereunder evidenced by the Note have been fully paid and satisfied.
17.14 Automatic Acceleration. Should there occur an Event of Default which
would, with the giving of notice, the passage of time, or both, constitute
an Event of Default hereunder and if a petition under the United States
Bankruptcy Code thereafter is filed by or against Borrower while such event
remains uncured and such petition is not dismissed within thirty (30) days
of filing, all obligations hereunder shall be automatically accelerated and
due and payable and the Default Rate of interest provided for in the Note
shall automatically apply as of the date of the first occurrence of the
event which would, with the giving of notice, the passage of time, or both,
constitute an Event of Default, without any notice, demand or action of any
type on the part of Bank (including any action evidencing the acceleration
or imposition of the default rate of interest). The fact that the Bank has,
prior to the filing of the voluntary petition under the United States
Bankruptcy Code, acted in a manner which is inconsistent with the
acceleration and imposition of the default rate of interest provided for in
the Note, shall not constitute a waiver of this Section 10. 14 or estop Bank
from asserting or enforcing Bank's rights hereunder.
17.15 Attorneys Fees and Other Costs. Borrower shall reimburse Bank for
all reasonable attorneys' fees and expenses reasonably incurred by Bank in
connection with the enforcement of Bank's rights under this Agreement and
each of the other Loan Documents, including, without limitation, attorneys'
fees and reimbursements for trial, appellate proceedings, out-of-court
workouts and settlements and for enforcement of rights under any state or
federal statute, including, without limitation, attorneys' fees incurred in
bankruptcy and insolvency proceedings such as in connection with seeking
relief from stay in a bankruptcy proceeding or negotiating and documenting
any amendment or modification of the Loan or reviewing subsequent Loan
submission items. Borrower shall pay all costs, including without
limitation costs of title searches, title commitments, appraisals,
environmental audits, third-party consultants, UCC searches, incurred by the
Bank in enforcing payment and performance of the Loan, exercising rights and
remedies of Bank under the Loan Documents, or reviewing Loan submission
items. Borrower's reimbursement obligation shall be part of the
indebtedness evidenced and secured by the Loan Documents.
17.16 Severability; Titles. If any provision of this Loan Agreement or of
any other Loan Document securing or executed in connection with this Loan
Agreement is, for any reason and to any extent, invalid or unenforceable,
then neither the remainder of the Loan Document in which such provision is
contained, or the application of the provision to other persons, entities or
circumstances, nor any other document referred to in this Loan Agreement,
shall be affected by such invalidity or unenforceability, and there shall be
deemed substituted for the invalid unenforceable provision the most similar
provision which would be valid and enforceable under applicable law.
17.17 Right to Participate or Assign Loan. Bank shall retain the right at
all times, with or without Borrower's consent, to grant participation in or
to assign all of the Note or any portion thereof, together with the
collateral for repayment of the Note, to any other entity acceptable to
Bank, and Borrower acknowledges that Bank shall have the right to share any
and all information concerning Borrower with any prospective loan
participant or assignee. Notwithstanding the foregoing, in the event of a
participation in or assignment of the Loan, Bank One, Colorado, NA, a
national banking association, shall retain the right to make decisions
without the consent of the participant or assignee.
17.18 Waiver of Rights. Borrower for itself, and for all who may claim
through or under it, waives (a) the right to trial by jury on any issues
between Borrower and Bank and to any issues pertaining to the Loan Documents
and as to matters pertaining to the acts of the Bank prior to the date
hereof; and (b) any and all right to have the property and estates
comprising the Property marshalled upon any foreclosure of the lien and
security interests of the Loan Documents and agrees that any court having
jurisdiction to foreclose such lien may order the Property sold as an
entirety.
17.19 Counterparts. This Development Loan Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
shall constitute the same document.
IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement as of the
date first written above by and through their duly authorized
representatives.
BORROWER: CONCEPTS DIRECT, INC., a Delaware corporation _
By: /S/ H. Franklin Marcus, Jr. H. Franklin Marcus, Jr. Chief Financial
Officer
BANK: BANK ONE, COLORADO, NA
By: /S/ Gregg McCann Greg McCann Vice President
CONSTRUCTION LOAN AGREEMENT
THIS AGREEMENT is made effective as of July I0 , 1997 and is entered into by
and among CONCEPTS DIRECT, INC., a Delaware corporation ("Borrower"), and
BANK ONE, COLORADO, NA (the "Bank").
RECITALS
This Agreement is entered into upon the basis of the following facts and
circumstances:
A. The Borrower owns the real property located in the County of Weld, State
of Colorado consisting of approximately 139 acres, and described in Exhibit
A attached hereto and made a part hereof (the "Land"). The Improvements
(defined below), the Land, together with all appurtenances thereto, and all
other real and personal property incorporated or to be incorporated into the
Improvements (excluding personal property owned by a tenant, if any) or
otherwise a part of the collateral for the Loan, defined below, are referred
to collectively as the "Property".
B. Borrower proposes to construct upon the Property certain improvements in
accordance with plans and specifications to be prepared ,)y Borrower, which
are subject to approval by the Bank. The Improvements generally consist of
one 1 17,900 square foot building to be occupied by Borrower and not less
than 398 parking spaces.
C. Borrower has applied to the Bank for a loan to finance construction of
the Improvements on the Property in an amount not to exceed Four Million
Four Hundred Eighty Thousand and 00/100 Dollars ($4,480,000.00) for payment
of the individual costs itemized on the Approved Budget attached hereto as
Exhibit B and made a part hereof. The Approved Budget is subject to change
upon reasonable approval by the Bank. The loan shall be evidenced by the
Loan Documents (defined below).
D. The Bank is willing to make the Loan to Borrower for the purposes set
forth above, all upon the terms and conditions as set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and the covenants
and conditions, representations and warranties contained herein, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used in this Agreement shall, except where the
context otherwise requires, have the following meanings (such definitions to
be equally applicable to the singular and the plural forms thereof):
1.1 "Advances" means disbursements under the Loan pursuant to the terms of
this Agreement.
1.2 "Agreement" means this Agreement as originally executed and as
amended, modified or supplemented from time to time.
1.3 "Appraisal" means a current appraisal of the Property prepared by a
State Certified Appraiser as defined in C.R.S. 12-61-706(3), licensed by
the State of Colorado, engaged by and acceptable to the Bank, which
Appraisal shall determine the market value of the Property both in its
current as-is condition and in its condition as completed and stabilized in
accordance with the Plans.
1.4 "Approvals and Permits" means each and all approvals, authorizations,
bonds, consents, certificates, franchises, licenses, permits, registrations,
qualifications, and other actions and rights granted by or filings with any
Persons necessary, appropriate, or reasonably desirable for the construction
of the Improvements, for occupancy, ownership, and use by Borrower and other
Persons of the Improvements, or for the conduct of the business and
operations of Borrower.
1.5 "Approved Budget" means the overall approved budget for the
Improvements which shall include the Interest Reserve for the Loan, the hard
and soft costs for development of the Improvements, and a contingency amount
for unbudgeted costs, as the same may be amended and approved from time to
time.
1.6 "Architect" means the architect for the Plans.
1.7 "Authorized Officer" means any officer of the Borrower, or any other
authorized agent of Borrower certified in writing by Borrower to the Bank
for the purpose of making certifications required by this Loan Agreement.
1.8 "Building" means the building to be constructed on the Land.
1.9 "Business Day" shall mean every day except a Saturday, Sunday or
public holiday on which banks are required or authorized to close in Denver,
Colorado.
1.10 "Closing Date" means the day agreed upon between the Bank and the
Borrower for closing of the Loan; provided, however, that all of the
conditions precedent specified in this Agreement to closing shall have been
satisfied.
1.11 "Construction Contract" means that certain construction contract
dated May 1, 1997, between Borrower and Saunders Construction, Inc., and any
amendments thereto.
1.12 "Construction Funds" means any and all Loan proceeds disbursed in
accordance with the Note and this Agreement.
1.13 "Construction Loan" means the $4,480,000.00 loan made by the Bank to
the Borrower to finance the development and construction of the Project and
payment of the individual costs itemized on the Approved Budget.
1.14 "Construction Loan Deficiency "means a condition or event, as
determined by the Bank in its reasonable discretion, in which or as a result
of which either (i) the total undisbursed balance of the Loan, together with
cash deposits of Owner's Equity, is insufficient to pay the remaining hard
costs and soft costs that will be incurred in connection with the
construction of the Improvements, or (ii) after giving effect to any
reallocation of loan budget categories that the Bank permits pursuant to
Section 8.5 below, and after giving effect to any disbursement from
Contingency Amounts which the Bank permits pursuant to Section 8.5 below,
the undisbursed balance of any category of the Approved Budget is
insufficient to pay the remaining such hard costs or soft costs that are to
be paid from such category of the Approved Budget.
1.15 "Construction Note" means the Promissory Note Secured By First Real
Estate Lien of even date herewith in the stated principal amount of
$4,480,000.00, made by the Borrower to the order of the Bank.
1.16 "Contingency Amounts" means hard and soft costs which maybe approved
by the Bank for disbursement for the development of the Project, and which
either (i) exceed amounts budgeted for line items included in the Approved
Budget, at a time when the Bank has advanced the full amount of Construction
Loan proceeds which have been approved for payment of such line items, or
(ii) are not included in the Project costs identified in the Approved Budget
at a time when no Construction Loan proceeds are available for payment of
such costs.
1.17 "Contractor" means Saunders Construction, Inc.
1. 18 "Default" means any event which if continued uncured would, with
notice or lapse of time or both, constitute an Event of Default.
1. 19 "Event of Default" means any Event of Default described in Section 9.
1.
1.20 "GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated'. Whenever any
accounting term is used herein which is not otherwise defined, it shall be
interpreted in accordance with GAAP.
1.21 "Governmental Entity" means any governmental or quasi-governmental
entity, agency, authority, board, commission, or governing body authorized
by federal, state or local laws or regulations as having jurisdiction over
the Borrower, any Guarantor, or Property or the development thereof.
1.22 "Improvements" means any and all infrastructure necessary for the
construction of the Building, including without limitation, systems for
water, sewer, storm sewer, electrical, lighting, telephone, cable, streets,
curb gutter, partial sidewalks and those public improvements required to be
completed as a condition to issuance of a building permit or certificate of
occupancy for the Building, together with the Building, and other
improvements on the Property, more particularly described in the Plans.
1.23 "Lien or Encumbrance" and "Liens and Encumbrances" mean, respectively,
each and all of the following: (i) any lease or other right to use; (ii) any
assignment as security, conditional sale, grant in trust, lien, mortgage,
pledge, security interest, title retention arrangement, other encumbrance,
or other interest or right securing the payment of money or the performance
of any other liability or obligation, whether voluntarily or involuntarily
created and whether arising by agreement, document, or instrument, under any
law, ordinance, regulation, or rule (federal, state, or local), or
otherwise; and (iii) any option, right of first refusal, or other interest
or right affecting the Land or Improvements.
1.24 "Loan" shall mean the Construction Loan.
1.25 "Loan Documents" shall mean any and all documents evidencing and
securing the Loan and shall include the Note, this Agreement, the Deed of
Trust, Financing Statements, Environmental Indemnity Agreement, collateral
assignments of the Construction Contract, Architect's Contract,
Subcontracts, Development Items, and any documents or instruments executed
or delivered at Closing or thereafter to further evidence or secure the
Loan.
1.26 "Loan Party" means Borrower, and each other Person that from time to
time is or becomes obligated to Bank under any Loan Document.
1.27 "Material Adverse Occurrence" shall mean any change in the assets,
business, financial condition, operations, prospects, or results of
operations of any Loan Party or the Property or any other event or condition
that in the reasonable opinion of Bank (i) could materially affect the
likelihood of performance by any Loan Party of any of the Obligations, (ii)
could materially affect the ability of any Loan Party to perform any of the
Obligations, (iii) could affect the legality, validity, or binding nature of
any of the Obligations or any Lien or Encumbrance securing any of the
Obligations, (iv) could materially impair the economic value of the
Property, or (iv) could affect the priority of any Lien or Encumbrance
securing any of the Obligations.
1.28 "Maturity Date" means the earlier of (i) April It, 1998, or (ii) the
date of which the Note is accelerated and declared due as a result of an
Event of Default.
1.29 "Maximum Allowed Construction Loan Advances" means the least of (i)
the sum of $4,480,000.00; (ii) eighty percent (80%) of the completed and
stabilized value of the Property as evidenced in the Appraisal and approved
by the Bank; or (iii) sixty percent (60%) of the total costs of the Project
as shown in the Approved Budget.
1.30 "Note" shall mean the Construction Note.
1.31 "Obligations" shall mean the obligations of the Borrower in
connection with the Loan as evidenced by the Note, this Agreement, and the
Loan Documents.
1.32 "Official Records" shall mean the records of the Clerk and Recorder of
the County in which the Property is located.
1.33 "Permanent Lender" shall mean Bank One Corporate Group.
1.34 "Permanent Loan" shall mean the loan to be made by the Permanent
Lender for permanent financing for the Project.
1.35 "Permanent Commitment" shall mean the loan Application/Commitment dated
April 18, 1997, issued by the Permanent Under with regard to the Permanent
Loan.
1.36 "Person" shall mean any natural person, corporation, firm, association,
government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
1.37 "Plans" shall mean the plans and specifications for construction of
the Improvements, all recreational features, and all parking spaces, and all
common improvements to be completed on the Property, prepared by the
Architect, certified by Borrower to Bank, and approved by Bank in its
absolute and sole discretion, together with any amendments or modifications
thereof consented to by Bank in its absolute and sole discretion.
1.38 "Prime Rate" shall mean the rate of interest announced by Bank One,
Colorado, NA, a national banking association, from time to time, as its
Prime Rate. The Bank may lend to its customers at rates which are at, above
or below the Prime Rate.
1.39 "Project" shall mean the Land and the Improvements.
1.40 "Special District" means Special Districts established pursuant to
Title 32, as amended, of Colorado Revised Statutes, General Improvement
Districts established pursuant to Section 31-25-601 et set., Colo. Rev.
Stat., as amended, Special Improvement Districts established pursuant to
Section 31-25-501, et set., Colo. Rev. Stat., as amended, Local
Improvement Districts established pursuant to C.R.S. Section 30-20-601 et
set., Colo. Rev. Stat., as amended, Public Improvement Districts
established pursuant to C.R.S. Section 30-20-501, et set., Colo. Rev.
Stat., as amended, or any other type of district created pursuant to Titles
29, 30, 31, and 32, as amended, of Colorado Revised Statutes, or any similar
governmental or quasi-governmental entities.
1.41 "Subcontract" shall mean any subcontract or purchase order entered
into by Borrower or Contractor for the supply of labor, services or
materials to the Project.
1.42 "Subcontractor" shall mean any party furnishing labor, services or
materials to the Project under a Subcontract.
1.43 "Utilities" shall mean water, sewer, gas, telephone, cable
television and electrical services.
Other terms defined herein shall have the meaning ascribed to them herein.
ARTICLE II
THE LOAN
2.1 The Construction Loan. In reliance upon the representations and
warranties of the Borrower, and subject to the terms and conditions of this
Agreement and the Loan Documents, Bank agrees to loan to the Borrower a sum
of money not to exceed Four Million Four Hundred Eighty Thousand and 00/100
Dollars ($4,480,000.00), or such lesser amount as may be provided by other
loan limitations set forth in this Agreement, for the purposes set forth
herein, to be advanced and disbursed by the Bank in accordance with this
Agreement.
(a) Type of Loan: The Construction Loan is to provide construction
financing only and the Construction Note evidencing the Obligations is to be
satisfied and the Construction Loan retired on or before the Maturity Date.
The Construction Loan is a non-revolving multiple-advance construction loan
to finance the development and construction of the Project. Amounts
advanced under the Construction Loan may not be reborrowed after being
repaid.
(b) Interest and Payment. The Construction Loan shall bear interest at a
rate equal to the Bank's Prime Rate plus one percent (1 %) per annum, to be
adjusted on a daily basis as and when such rate changes, from the date of
disbursement until maturity or the occurrence of an Event of Default, in
which event all Obligations shall bear interest at the Default Rate defined
in the Construction Note. Interest shall be payable monthly in arrears and
shall be calculated on the actual days outstanding over a 360-day year.
(c) Limitation on Advances. Bank shall not be obligated to make any
Advance of the Construction Loan, if at any time or from time to time, the
Bank, in its sole and absolute judgment determines that the total of the
outstanding Advances of the Construction Loan plus the unadvanced balance of
the Construction Loan exceeds the Maximum Allowed Construction Loan
Advances. Within ten (10) days following notice from the Bank that such an
excess exists, the Loan Parties shall provide additional Owner's Equity in
an amount necessary to bring the Construction Loan into compliance with the
foregoing limit.
2.2 Term. The Construction Loan shall have a term which commences as of
the date hereof, and expires on the Maturity Date, at which time the
outstanding principal balance of the Loan, together with accrued and unpaid
interest thereon shall be due and payable in full.
2.3 Loan Fee. Borrower shall upon the execution of this Agreement pay to
the Bank a loan fee of $44,800.00, representing one percent (1 %) of the
initial stated principal amount of the Note, which fee shall be fully earned
and non-refundable upon payment.
2.4 Interest Reserve. The Approved Budget will contain an amount
sufficient to meet anticipated interest requirements under the Loan prior to
the Maturity Date, as estimated by the Bank, which shall be set aside by
Bank as an interest reserve ("Interest Reserve") from which Bank may
disburse funds as necessary to satisfy Borrower's interest obligations under
the Loan. Borrower shall be responsible for any shortfall between the
monthly interest payment due on the Loan and the amount available for
payment of interest from the Interest Reserve after the total Interest
Reserve is exhausted as further provided in Section 8.2. No amounts shall be
drawn from the Interest Reserve in excess of Bank's estimate of interest to
become due on the Construction Loan prior to the Maturity Date.
2.5 Loan Documentation and Security. The Obligations of the Borrower to
the Bank in connection with the Loan are evidenced by the Note and by this
Agreement. In addition, the Obligations shall at all times be evidenced and
secured by the liens, security interests, and covenants created by the
following documents:
(a) a valid first lien deed of trust, security agreement, financing
statement and assignment of rents and revenues (the "Deed of Trust") upon
the fee simple interest in the Property, the Improvements, and any easements
and appurtenances which are or may be established to allow satisfactory
ingress, egress, parking and operation of the Improvements; together with a
first lien security interest in all construction materials, equipment,
furniture, furnishings, fixtures and other personal property, tangible and
intangible, contained or to be contained within or incorporated into the
Improvements or used exclusively in connection with the Property (excluding
personal property owned by any tenant under a lease) now owned or hereafter
acquired by the Borrower (the "Personalty"); and an assignment of all
leases, rents and revenues in connection with the Property;
(b) UCC- 1 financing statement(s) required to perfect Bank's security
interest in the Personalty (the "Financing Statements");
(c) a collateral assignment of the Construction Contract bearing the
consent of the Contractor;
(d) a collateral assignment of architect's contract (the "Architect's
Contract") dated September 4, 1996, by and between Borrower and Intergroup,
Inc. (the "Architect"), bearing the consent of the Architect;
(e) a collateral assignment of each Subcontract for services or materials,
fixtures, equipment or appliances provided to the Improvements, with the
consent of the Subcontractor, as required by the Bank.
(f) a collateral assignment of the Development Items, defined below.
(g) an environmental indemnity agreement ("Environmental Indemnity ")
executed by Borrower;
(h) an assignment of all of Borrower's rights to reimbursement from the
City of Longmont pursuant to the Memorandum of Public Improvements Agreement
dated March 25, 1997.
All documentation evidencing the foregoing shall be in form and substance
satisfactory to Bank and shall include consents from such third parties as
Bank deems necessary or appropriate.
2.6 Cross-Default and Cross-Collateral. The Borrower and the Bank have
entered into a loan transaction (the "Development Loan") regarding the
construction of infrastructure improvements on real property adjacent to the
Property pursuant to which the Borrower has executed and delivered to Bank a
Development Loan Agreement of even date herewith, (the "Development Loan
Agreement") and other documents and instruments in connection with the
Development Loan as described in the Development Loan Agreement (the
"Development Loan Documents"). The Development Loan Documents provide that
the Obligations under the Development Loan are additionally secured by the
Loan Documents encumbering the Property and that any default under the
Development Loan Documents shall be a default under the Loan Documents.
Further, repayment of the Loan is additionally secured by the Development
Loan Documents and any default under the Loan Documents shall be deemed a
default under the Development Loan Documents. At such time as the
Development Loan is paid in full, the Borrower and Bank will either execute
a modification of the Loan to extinguish the cross-default and
cross-collateral provisions with respect to the Development Loan or the Bank
will mark the Development Note "paid in full and cancelled, " but will
retain the original thereof in order to effect a release of the Deed of
Trust when the Note is paid in full.
ARTICLE III
CONDITIONS PRECEDENT TO CLOSING
The Bank's obligation to make the Loan and to enter into and perform its
agreements under this Agreement shall be subject to the full and complete
satisfaction of the following conditions precedent to any advance of
Construction Funds or Owner's Equity, at the time of closing of the Loan
("Closing") and subsequently:
3.1 Documents. The Bank shall have received and approved fully executed
copies of the Loan Documents which shall have been duly authorized, executed
(and, where appropriate, acknowledged), and delivered by the parties thereto
and any and all other documents as Bank may deem reasonably necessary with
respect to the Loan;
3.2 Review Items. The Bank shall have received and approved the
following:
(a) Acquisition Documents. A copy of the conveyance deed by which Borrower
acquired the Property and a copy of the fully-executed closing settlement
sheets for the purchase of the Property;
(b) Current Financial Statements. Personally certified current financial
statements of Borrower, less than 180 days old; copy of the extension forms
for 1996 federal tax returns for Borrower including all schedules and
exhibits, and a summary of 1997 cash flow.
(c) Pre-closing Expenses. Evidence satisfactory to the Bank and the Title
Company that all pre-closing development costs on the Project have been paid
in a timely fashion or will be paid at closing, which evidence shall include
without limitation lien waivers, paid invoices, governmental inspections and
approvals, as applicable;
(d) Plans. Two (2) complete sets of final Plans which have also been
approved by all Governmental Entities having jurisdiction therefor;
(e) Construction Contract. A copy of the Construction Contract, which
shall provide that the Contractor has agreed to construct the Improvements
for the guaranteed maximum price of $6,351,416.00. No terms, conditions or
provisions in the Construction Contract shall be waived, modified or amended
without the Bank's prior written approval which approval shall not be
unreasonably withheld or delayed;
(f) Architect's Contract. A copy of the Architect's Contract, no terms,
conditions or provisions of which shall be waived, modified or amended
without the Bank's prior written approval which approval shall not be
unreasonably withheld or delayed;
(g) Subcontracts. Copies of all Subcontracts from all material suppliers,
and subcontractors who will be providing materials or labor for construction
of the Improvements.
(h) Subcontract List. A list of all Subcontractors, with name of contact
person, telephone number and address, required to be updated when new
Subcontracts are made, a general statement of the nature of the work to be
done or materials supplied and the dollar value of the work to be done,
certified by the Borrower;
(I) Soils Report. An engineer's report prepared and certified by a
qualified engineer acceptable to Bank, showing locations and results of all
borings, together with recommendations for the design of the foundations of
the Buildings and certifying in a manner reasonably satisfactory to Bank the
adequacy of the existing soils condition, indicating that the Plans for
construction of the Improvements are satisfactory in view of the condition
of the soil;
0) Architect's Certificate. A certificate from the Architect certifying
that the Improvements including parking requirements, as shown on the Plans,
are designed to be in compliance with all applicable governmental
requirements; and
(k) Development Items. Copies of all engineering reports, land planning
maps, or plats, soils tests, environmental reports, surveys prepared for the
orderly planning of the Improvements, marketing materials and brochures,
building permits or licenses, utility taps or supply agreements,
governmental or private agreements, indemnities, waivers, rights to
reimbursements, abatements or benefits of whatsoever nature regarding the
Property, to the extent assignable, and other documents prepared and
existing for the development of the Project available at Closing, with
subsequent submissions to the Bank of reports and studies not required to be
available at Closing, if requested by Bank (collectively called "Development
Items");
(1) Development Documents. Receipt of copies of any agreements, existing
or proposed, with Governmental Entities, in the nature of a subdivider's
agreement, public improvements agreement, or annexation agreement affecting
the development of the Project or requiring cash equivalent collateral, or
imposing building restrictions in lieu of collateral, as a condition to
development of the Project (collectively, the "Development Documents");
(m) Budget. Approved Budget attached hereto as Exhibit B, which shall be
based upon executed Subcontracts or firm bids satisfactory to the Bank and
its Project Inspector;
(n) Appraisal. The Appraisal;
(o) Environmental Audits. The Phase I Environmental Audit prepared by an
environmental engineering company approved by the Bank and in substance
satisfactory to Bank regarding the Property;
(p) Environmental Reports. Copies of any environmental impact statements,
Material Safety Data Sheets filed or to be filed with OSHA, the State of
Colorado or any local emergency planning commission or the local fire
department ("Environmental Reports"), if any;
(q) Utilities. Receipt of evidence satisfactory to Bank of the
availability to the Property boundaries of all Utilities;
(r ) Plats. Three copies of any existing recorded plat, showing all
easements, ditches, streets, lot lines and proposed location for all
Improvements on the Property and evidence satisfactory to the Bank that the
transfer of ownership of the Property as a consequence of foreclosure or
deed in lieu of foreclosure will not result in a violation of subdivision
laws.
(s) Zoning/PUDS/PDP. Evidence of zoning, preliminary development plan
("PDP") or other development plan for the Property permitting the
construction of the Project, and containing all use or building conditions
or restrictions affecting the Project and approved by the appropriate
Governmental Entity;
(t) Opinions. Legal opinions of counsel for the Borrower ("Legal
Opinion"), in form and substance reasonably satisfactory to the Bank,
opining that the Borrower is duly organized and in good standing under the
laws of the State of Delaware and the State of Colorado, and has the power
to enter into and perform its obligations under the Loan, that the Loan is
not usurious under any applicable law, that the loan transaction and the
execution and delivery of the Loan Documents have been duly authorized by
all necessary parties, and that the Loan Documents are legal, valid and
binding and enforceable in accordance with their terms, subject to customary
exceptions;
(u) Tax Certificate. A Tax Certificate (defined below);
(v) Special Districts. Identification of any special district affecting
the Property, together with a boundary map of the special district,
financial statements and outline of the debt structure, if requested by the
Bank;
(w) Deposits. Any deposit of money, which may be required pursuant to this
Agreement or the Loan Documents, including, without limitation, the Owner's
Equity (defined below) and/or satisfactory evidence of the contribution of
Owner's Equity to the Project.
(x) Permanent Loan Commitment. Evidence satisfactory to the Bank of the
Permanent Loan Commitment of the Permanent Lender, containing terms and
conditions satisfactory to the Bank.
(y) Corporation, Limited Liability Company, or Partnership Documents. If
any Loan Party is a corporation, a limited liability company, or a
partnership, certified copies of (i) resolutions of its board of directors
or, if all managers or all general partners do not sign the Loan Documents,
resolutions of the managers of the limited liability company or partners of
the partnership, as the case may be, authorizing such Loan Party to execute,
deliver, and perform its Loan Documents and to grant to Bank the Liens and
Encumbrances on the Property in the Loan Documents and certifying the names
and signatures of the officer(s), member(s), manager(s), or partner(s), as
the case may be, of such Loan Party authorized to execute the Loan Documents
and, in the case of Borrower, to request Advances on behalf of Borrower,
(ii) the certificate of incorporation and bylaws, limited liability company
operating agreement, or partnership agreement, as the case may be, of such
Loan Party and all amendments thereto, (iii) if any Loan Party is a general
partnership or joint venture, the filed or recorded fictitious name
certificate for such Loan Party and all amendments thereto, (iv) if any Loan
Party is a limited partnership, the filed or recorded certificate of limited
partnership of such Loan Party and all amendments thereto, and (v) a
certificate of good standing as a corporation, limited liability company, or
limited partnership, as the case may be, from the jurisdiction of formation
or organization of such Loan Party, and if such jurisdiction is not the
State of Colorado, a certificate of qualification as a foreign corporation,
limited liability company, or limited partnership, as the case may be,
authorized to transact business in the State of Colorado.
3.3 Taxes. All taxes, fees and other charges in connection with the
execution, delivery and recording of the Loan Documents shall have been
paid, and all delinquent taxes, assessments or other governmental charges or
liens affecting the Property, if any, shall have been paid. Borrower shall
provide a treasurer's tax certificate ("Tax Certificate") disclosing that no
general and special taxes or assessments encumbering the Property are
delinquent and that the Property does not lie within any special or general
assessment district except as approved by the Bank.
3.4 Title and Other Matters. Title to the Property, the legal description
of the Property, and all documents and other matters relating in any way to
the Loan or to the Property must be to the satisfaction of Bank. At
Borrower's expense, Borrower shall furnish Bank with a 1992 ALTA loan policy
(the "Title Policy"), in the face amount of the Loan, insuring the Deed of
Trust as a valid first lien on the Property, together with all endorsements
as Bank may reasonably require, including without limitation, deletion of
standard exceptions I through 3, containing no exceptions other than those
Bank approves, issued in substance and in form by a company or companies
acceptable to Bank. The Title Policy shall contain "pending disbursements"
provisions satisfactory to the Bank, and, as Bank may reasonably require,
reinsurance with companies and in amounts reasonably acceptable to the Bank,
as well as direct access agreements with such reinsurers The Bank hereby
reserves the right to require the mechanic lien endorsement 101 (mechanic
lien disbursement endorsement), the cost of which shall be borne by the
Borrower.
3.5 Zoning, Permits, Approvals. Borrower shall provide to Bank
satisfactory evidence that Borrower has complied with all covenants,
conditions, restrictions and reservations affecting the Property, including
the Covenants, that the Property is duly and validly zoned for the intended
use, and that Borrower has obtained all zoning, subdivision, and
environmental approvals, permits and maps required to be obtained in order
to construct the Improvements ("Zoning Confirmation") and that the Property
meets all applicable requirements of the subdivision zoning regulations and
any local ordinances adopted pursuant thereto. Bank shall further require
proof that all permits, consents and approvals required pursuant to Section
3.6 hereof have been obtained, and any condition to such approvals must be
acceptable to Bank.
3.6 Insurance. In addition to the insurance policies required in Section 4
of the Deed of Trust which shall be provided at Closing, Borrower shall
maintain and deposit with the Bank or cause the Contractor to maintain and
deposit with the Bank original certificates of insurance policies issued by
insurance companies with current Best's Key Ratings of not less than A/V and
written in form and content acceptable to Bank, with appropriate mortgagee
clauses in favor of Bank, providing the following minimum insurance
coverages:
(a) Comprehensive general public liability insurance in amounts not less
than $1,000,000.00 (combined single limit for bodily injury and property
damage), and an umbrella excess liability coverage in an amount not less
than $5,000,000.00 shall be in effect with respect to Borrower, the
contractors, architect and any engineer, with the Bank named as an
additional insured. In addition, Borrower shall maintain in full force and
effect business auto liability insurance, including any non-owned and hired
automobiles Such policies must be written on an occurrence basis so as to
provide blanket contractual liability, broad form property damage coverage,
and coverage for products and completed operations;
(b) All-risk course of construction insurance with standard
non-contributing mortgage clause, a lender's Loss Payable Endorsement naming
the Bank and/or assigns as loss payee, providing for a deductible not in
excess of $5,000, attached together with a full replacement cost endorsement
(provided that in no event, however, may the amount of coverage to be
maintained by Borrower be less than the amount of coverage necessary to
prevent Borrower's co-insurance of loss) ("Builder's Risk Insurance");
(c) Engineer's professional liability insurance in an amount
satisfactory to the Bank, with the Bank named as an additional insured, if
required by the Bank;
(d) Architect's design liability insurance in an amount satisfactory to
the Bank, with the Bank named as an additional insured, if required by the
Bank;
(e) Worker's Compensation Insurance covering all persons engaged in the
construction of the Improvements;
Each of the foregoing policies (except 3.6(e)) shall contain a clause
requiring thirty (30) day notice to Bank of cancellation, termination or
material modification. Borrower shall provide proof of premiums paid and,
throughout the term of the Loan, shall provide evidence to Bank no later
than thirty (30) days prior to expiration of each annual policy of payment
of renewal premiums and continuation of insurance coverage.
3.7 Survey. Borrower shall have furnished to Bank, at Borrower's expense, a
current improvement survey plat ("Survey") of the Property acceptable to
Bank and the title insurance company issuing the Title Policy (the "Title
Insurer") indicating, without limitation, that all foundations or other
Improvements currently constructed, if any, are located within the lot
lines, without infringement on established easements or rights-of-way and
not in violation of any ordinance including zoning ordinances which impose
lot line setback requirements and parking requirements. The survey shall
show the legal description of the Property as it will be insured by the
Title Insurer, the courses and distances of the Property lot lines, all
appurtenant and servient easements, setbacks, building lines and width of
abutting streets, distance to nearest intersecting streets affording
ingress and egress to and from the Property, and the location and
dimensions of all encroachments, improvements, above or below ground
easements and utilities, and designated parking spaces. The survey shall
show the proposed location of all Improvements to be built on the Property
as identified by Borrower to the surveyors, with appropriate notation to
distinguish between constructed Improvements or foundations and proposed
Improvements. The surveyor shall also certify whether or not any portion
of the Improvements is located within a Federal Emergency Management Agency
identified flood-prone area of a community and if located thereon, state
the map number and whether or not the Property appears in the "Flood Hazard
Area," or other known flood plain dimensions affecting the Property. The
survey must be certified as accurate by a licensed surveyor in the State of
Colorado and contain a certificate imprinted thereon in the form approved
by the American Land Title Association stating that the survey is made for
the benefit of the Bank and the Title Insurer. In the event Borrower shall
have obtained a replat of the Property within sixty (60) days prior to
Closing, the Bank may elect in its reasonable discretion to accept the
recorded replat with appropriate certifications and additional notations
from the surveyor in lieu of the Survey, provided, however, that the
recorded replat is sufficient to induce the Title Company to delete
standard exceptions from the Title Policy regarding matters that would be
shown by an ALTA survey.
3.8 Owner's Equity!y. Prior to any Advance, Borrower shall provide Bank
with evidence of owner's equity ("Owner's Equity") in the amount of
$2,943,573.00, in the form of cash deposits and/or approved acquisition or
construction cost payments, which shall mean those payments actually made by
Borrower for acquisition of the Property or to third-party contractors or
suppliers for costs described in the Approved Budget, which costs shall be
evidenced by payment receipts (or other proof of payment satisfactory to the
Bank, and executed mechanic lien waivers (for lienable work or materials)
or, in the case of acquisition costs, certified post-closing settlement
sheets. The Loan is intended solely for the funding of the costs, expenses
and fees described in the Project Budget. All other costs, expenses, and
fees for development and construction of the Project, shall be contributed
by the Borrower in the form of Owner's Equity. The amount of Owner's Equity
at Closing and subsequently may increase as a function of the overall
Project Budget, the Appraisal, the requirements of Section 2. l(c) and the
approval by the Bank of any non-cash Owner's Equity.
3.9 Development Obligations. Evidence reasonably satisfactory to the Bank
that any obligations of Borrower, as developer, regarding development in
connection with the Project arising under the Development Documents or
agreements with providers of Utility Services or governmental regulations
which could become a lien against property located in the Project or a
restriction against the issuance of building permits in the Project or the
certificate of occupancy for the Building (collectively, "Development
Obligations") have been or will be satisfied or performance of the
Development Obligations has been or will be secured by adequate financial
security such as bonds, letters of credit or certificates of deposit
pursuant to the agreements creating the Development Obligations or the
requirements of the utility provider.
3.10 Loan Costs. Borrower shall provide evidence satisfactory to Bank of
the payment of or availability of funds, in the Approved Budget or
otherwise, for payment of all fees, real property taxes and assessments,
personal property taxes and other taxes, assessments and charges incurred
under the Loan and the construction of the Improvements and in connection
with the negotiation, documentation, analysis or funding of the Loan,
including, but not limited to, the loan fees, agreed herein or by separate
agreement to be paid to the Bank; interest charges; service and inspection
fees; attorneys fees, survey costs, title insurance and endorsement
premiums, if any; environmental audit; appraisal fees; engineering
inspection fees; recording fees required to be paid upon the recording of
any instruments to be made and delivered hereunder and insurance premiums
(the "Loan Costs").
ARTICLE IV
CONDITIONS PRECEDENT TO ADVANCES
4.1 Conditions Precedent to Initial Advance of Construction Funds. The
Bank's obligation to disburse the initial advance ("Initial Advance") of
Construction Funds pursuant to the terms hereof shall, in addition to the
requirement of compliance with the terms of Article III hereof, be subject
to receipt of the following documents by the Bank in form and substance
reasonably acceptable to the Bank and satisfaction of the following
conditions precedent:
(a) Bank shall have reviewed and approved any requests for changes in the
Plans or in the Construction Documents which changes shall have been
approved by the Bank prior to submission of the Advance Request by Borrower
(b) Any amendment to the final Approved Budget, approved by the Bank in
accordance with its customary procedures.
(c) Receipt of evidence satisfactory to Bank that Borrower has complied
with all Covenants affecting the Property, that the Property is duly and
validly zoned for the intended use, and that Borrower has obtained all
zoning, use, subdivision, and environmental approvals, permits and maps
required to be obtained in order to commence construction of the
Improvements.
(d) Receipt by Bank of any deposit of money or evidence of the contribution
into the Project of any funds which may be required pursuant to this
Agreement or the Loan Documents, including, without limitation, the Owner's
Equity.
(e) Receipt by Bank of any other documents and assurances as it may
reasonably request to comply with the provisions of this Agreement.
(f) Receipt and approval by Bank of all building and other permits required
for construction of the applicable stage of the Improvements in accordance
with the Plans, if not otherwise delivered at Closing.
(g) Receipt by Bank of:
(i) a request for advance ("Advance Request"), certified by an Authorized
Officer on behalf of Borrower, together with AIA forms G702 and G703 (and
such other forms as may from time to time be approved or required by
Lender), setting forth such details concerning the nature and amount of work
and materials furnished to the date of such request, including
identification of the parties performing such work and providing such
materials and concerning the use of the requested Advance as Bank may
reasonably require together with invoices or other appropriate documentation
for all expenses to be paid out of the requested Advance, the amounts
expended to the date of the Advance Request for the Improvements, the
amounts then due and unpaid for construction of the Improvements and an
itemized estimate of the amount necessary to complete the Improvements. Any
materials covered by an Advance Request must be suitably stored at the
construction site, inventoried,and safeguarded and insured against loss,
damage and theft.
(ii) paid invoices and lien waivers relating to all construction through the
date of the previous Advance-Request, if any, if requested by the Bank;
(iii) full, unconditional lien waivers from all persons or entities for all
labor performed and materials supplied in connection with the construction
of any Improvements for which construction was completed prior to the date
of the previous Advance Request and for which final invoices were paid out
of the previous Advance Request, if any;
(iv) if requested by the Bank, checks drawn on Borrower's construction draw
account at the Bank to the order of Contractor, subcontractors, laborers,
and materialmen identified in the Advance Request;
(v) the certification by Borrower, Borrower's Architect, the Contractor and
at Bank's option an independent architect or engineer of Bank's selection,
that: (a) all work performed is in substantial accordance with the Plans;
(b) all governmental licenses and permits required for the Improvements as
then completed have been obtained and will be exhibited to Bank upon
request; (c) the Improvements as then completed do not violate, and, if
further completed in accordance with the Plans, will not violate, any law,
ordinance, rule or regulation; and (d) the remaining undisbursed proceeds of
the Loan plus the then existing balance of any Owner's Equity held by Bank
are sufficient to pay for the completion of the Improvements;
(vi) the certification by Borrower that no Event of Default exists, and no
event has occurred and no condition exists that, after notice or lapse of
time, or both, would constitute an Event of Default;
(vii) evidence that any inspection required by any statute, city or other
governmental authority has been completed with results satisfactory to that
authority; and -
(viii) such other information and documents as Bank may reasonably require.
The amount of the Advance Request shall be reduced by Bank to permit the
holdback of ten percent (10%) of the hard costs incurred in connection with
the construction of the Improvements as retainage ("Retainage") until the
Final Advance. Borrower shall provide two additional copies of the Advance
Request and copies of all supporting invoices and lien waivers to the Bank
for delivery to the Bank's Project Inspector and Bank's disbursing agent, if
applicable. When an Advance Request includes a disbursement request for
materials that are stored offsite, the Borrower shall provide the Bank with
an identification of the storage site and satisfactory evidence that such
materials are adequately insured. The Bank shall disburse the Construction
Funds pursuant to an Advance Request only to pay or reimburse Borrower for
costs, expenses and fees (i) actually incurred by Borrower, (ii) directly
connected with the construction of the Improvements and (iii) included in
the Approved Budget.
(h) Any additional Subcontracts and other Construction Documents not
previously submitted to Bank and an updated Subcontract List must be
submitted to and reasonably approved by Bank and collectively assigned to
the Bank.
(i) At Bank's request, prior to each Advance subsequent to the Initial
Advance, require receipt of a current ALTA Endorsement No. 107.12 (Downdate
Endorsement) or, if the Bank has required Form 101 coverage, a current ALTA
Endorsement No. 101.2 (Mechanics' Lien Disbursement Endorsement), and such
other endorsements as Bank may, in its discretion, determine are necessary.
All such endorsements must be reasonably satisfactory to Bank and are the
sole cost and expense of Borrower.
4.2 Conditions Precedent to Subsequent Advances of Construction
Funds/Owner's Equity. In addition to continued compliance with the
conditions precedent set forth in Article III and Section 4.1 hereof, Bank's
obligation to authorize any advance of Construction Funds, or Owner's
Equity, after the Initial Advance shall be subject to the Bank's
satisfaction of the following conditions precedent:
(a) Bank shall have received an Advance Request, in the form specified
in Section 4. 1 (g).
(b) At Bank's request, prior to each disbursement, require receipt of a
current ALTA Endorsement No. 107.12 (Downdate Endorsement) or ALTA
Endorsement No. 101.2 (Mechanics' Lien Disbursement Endorsement) to the
Title Policy and such other endorsements as Bank may, in its discretion,
determine are necessary. All such endorsements must be reasonably
satisfactory to Bank and are the sole cost and expense of Borrower.
(c) Neither the improvements, to the extent then constructed, nor the
Property nor any part thereof shall have been materially damaged, destroyed,
condemned or threatened with condemnation, provided, however, that in any of
such events, if Borrower shall have made satisfactory arrangements with Bank
pursuant to the provisions of Section 7.4 hereof, Bank may continue to
authorize Advances hereunder.
(d) No order or notice shall have been made by, or received from, any
Governmental Entity stating that the work of construction is or will be in
violation of any law, ordinance, code or regulation affecting the Property.
(e) No lien or notice of intent to file a lien for work or services
performed in or on the Property or Improvements or materials or equipment
delivered thereto, shall have been recorded, filed or delivered to Borrower,
disbursing agent, or the Bank, subject to Borrower's right to contest under
Section 7.4.
(f) Any additional Subcontracts, or other Construction Documents relating
to the Improvements not previously approved by Bank and an updated
Subcontract List must be submitted to and reasonably approved by Bank.
4.3 Conditions Precedent to Final Advance of Construction Funds/Owner's
Equity. In addition to continued compliance with the conditions set forth
in Article III and Sections 4. 1 and 4.2 hereof, Bank's obligation to
disburse the final advance of Construction Funds or Owner's Equity for
construction purposes (the "Final Advance") shall be subject to the
satisfaction of the following conditions precedent, each of which Borrower
shall satisfy as promptly as is reasonably possible:
(a) Completion of construction of the Improvements in accordance with the
Plans as evidenced by a certificate from the Architect certifying that the
Improvements have been completed substantially in accordance with the Plans
and in compliance with the Covenants and all applicable governmental
regulations and a report from the Project Inspector regarding the same
items.
(b) Receipt by Bank of a final Certificate(s) of Occupancy or inspection
approvals or temporary certificate(s) of occupancy with punchlist items
acceptable to Bank, as applicable, for the Building issued by the
appropriate Governmental Entity.
(c) At Bank's option, receipt by Bank of the certification on AIA Form G704
by the architect or engineer selected by Bank, if any, that the Improvements
have been fully completed in accordance with the Plans.
(d) Receipt by Bank of full, unconditional lien waivers from the
Contractor, and at Bank's option, from all subcontractors and all other
persons or entities for all labor performed and/or materials supplied in
connection with the construction of the
Improvements. -
(e) Receipt by Bank of an affidavit of payment of debts and claims
executed by the Contractor;
(f) Receipt by Bank of written certification on AIA Forms G706, 706A or 707
from the Borrower's Architect that each final punch list item for the
Improvements has been completed.
(g) Receipt by Bank of copies of all special inspection reports,
certificates or any similar items as required by any political subdivision
relating to the Improvements.
(h) Receipt by Bank of an ALTA "as built" survey, as required herein.
(i) If required by Bank, receipt by Bank of copies of all guaranties for
workmanship, and all warranties and maintenance agreements relating to the
completed Improvements.
j) Receipt by Bank of "as-built" record drawings and specifications that
include all modifications and changes that have been included in the Plans;
and
(k) Receipt by Bank of a copy of a "Notice of Completion" on Bank's
approved form executed by Borrower which has been properly recorded in the
county recorder's office where the Property is located.
4.4 Conditions Precedent to All Advances. The obligation of Bank to make
any advance of Construction Funds or Owner's Equity shall be further subject
to the satisfaction of each of the following conditions at the time of each
requested Advance:
(a) Borrower shall be in full compliance and shall not be in default
hereunder or under any of the Loan Documents, including this Agreement,
provided, however, that Bank may, in its discretion, elect to authorize
Advances notwithstanding the existence of a Default, and any Advance
authorized shall be deemed to have been made pursuant to this Agreement and
shall be secured by the Loan Documents and shall not be deemed a cure of
Borrower's Defaults.
(b) The representation, warranties, and covenants set forth in Article V of
this Agreement are true and correct on the date of the advance in all
material respect, except that the representations and warranties set forth
in Section 5.2 referring to the financial statements, supporting schedules,
and financial reports, as the case may be, shall be deemed a reference to
such statements, schedules and reports then most recently delivered to the
Bank;
(c) No Event of -Default and no Material Adverse Occurrence shall then
have occurred and be continuing on the date of the request or the date of
the Advance;
(d) No litigation, arbitration or governmental investigation or proceeding
shall be pending, or to the knowledge of any Loan Party threatened, against
any Loan Party or affecting the operations of any Loan Party which, if
determined adversely to any Loan Party, would constitute a Material Adverse
Occurrence;
(e) No Event of Default shall result from the making of the
Advance;
(f) No written order or written notice shall have been made by, or received
from, any Governmental Entity having jurisdiction stating that the
construction is or will be in violation of any law, ordinance, code or
regulation affecting the Property; and
(g) As of the date immediately prior to any Advance, the total amount of
the unadvanced Construction Funds (not including Retainage for prior work),
together with any cash deposit of Owner's Equity held by the Bank, if any,
shall be sufficient, in Bank's reasonable opinion, taking into account the
Approved Budget, to complete the Improvements and to pay all Loan Costs,
including interest, through the balance of the term of the Loan to the
Completion Date. To the extent the total amount of the unadvanced
Construction Funds, together with required Owner's Equity, shall be
insufficient, in the Bank's reasonable opinion, taking into account the
Approved Budget, to complete the Improvements or to satisfy known interest
requirements, Borrower shall, within ten (10) days following written notice
from the Bank, deposit with the Bank an amount equal to such deficiency as
additional Owner's Equity, and such Owner's Equity shall be retained and
disbursed by the Bank as required with any future advances under this
Agreement until the Improvements are completed and all hard costs and soft
costs incurred in connection with the construction of the Improvements,
including costs incurred in connection with the Loan, are paid and provided
that no Event of Default then exists.
(h) In no event shall the Bank be required to disburse any Loan proceeds
which, in the Bank's good faith judgment, will result in a Construction Loan
Deficiency. Borrower hereby agrees that if the Bank determines that a
Construction Loan Deficiency exists, Borrower shall, upon five (5) days'
written notice from the Bank, at the Bank's sole option, either (i) deposit
with the Bank the amount that the Bank, in its good faith opinion, deems
reasonably necessary to eliminate such Construction Loan Deficiency, or (ii)
furnish the Bank with paid invoices, bills and receipts indicating that
Borrower has paid, from Borrower's own funds and not from the Loan, costs of
completing the construction of the Improvements in an amount sufficient to
eliminate such Construction Loan Deficiency. All amounts deposited by
Borrower pursuant hereto shall be disbursed in accordance with the terms of
this Agreement for the payment of the hard costs and soft costs incurred in
connection with the construction of the Improvements prior to any further
disbursement of the Loan.
(i) If the Bank, in its sole and reasonable judgment, determines that the
total of the outstanding Advances of the Construction Loan plus the
unadvanced balance of the Construction Loan exceeds the Maximum Allowed
Construction Loan Advances, Bank shall not be obligated to make any Advance
of the Construction Loan proceeds.
0) The Bank shall have received a report from the Project Inspector
verifying that all work relating to the invoices to be paid is complete on
the job site and conformed to the Plans, a copy of which report shall be
given to Borrower at its request.
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS
In order to induce Bank to make the Loan, each Loan Party, for itself,
represents, warrants and covenants as follows, which representations,
warranties and covenants shall be true and correct as of the execution
hereof and shall survive the execution and delivery of the Loan Documents:
5.1 Organization of Borrower; Authority to Enter into Agreement. The
Borrower is a corporation, duly formed and validly in existence and in good
standing under the laws of the State of Delaware and qualified to do
business in the State of Colorado. Borrower is duly qualified to do
business and is in good standing in each jurisdiction where the nature of
its business makes such qualification necessary and where the failure to so
qualify permanently precludes the Borrower from enforcing its contracts.
Borrower has the right and power to purchase, occupy and develop the
Property, and has full power and authority to enter into this Agreement, to
borrow money as contemplated herein and to execute and carry out the
provisions of the Loan Documents. Each Loan Party has full power and
authority to enter into this Agreement, to borrow money as contemplated
herein and to execute and carry out the provisions of the Loan Documents.
The execution, delivery and performance of the Loan Documents have been duly
authorized by all necessary action of each Loan Party and no other action of
any Loan Party is required for the execution, delivery and performance of
the Loan Documents. The Loan Documents which have been executed and
delivered pursuant to this Agreement constitute, or, if not yet executed or
delivered, will when so executed and delivered, constitute valid and binding
obligations of each Loan Party, respectively, each enforceable in accordance
with its respective terms.
5.2 Financial Statements. Any loan applications, financial statements,
supporting schedules, and financial reports heretofore delivered to the Bank
in connection with the Loan Documents by or on behalf of Borrower are true
and correct in all material respects, and have been prepared in accordance
with GAAP, and fairly represent the respective financial conditions of the
subjects thereof as of the dates thereof and for the periods covered
thereby, and no Material Adverse Occurrence has occurred in the financial
conditions presented therein since the respective dates thereof.
5.3 No Litigation. There are no actions, suits or proceedings pending, or
to the knowledge of the Borrower threatened against or affecting the
Borrower, or any of the property or assets of the Borrower, in any court at
law or in equity, or before or by any governmental or municipal authority
which might materially adversely affect the ability of the Borrower to
perform its respective obligations hereunder or under any of the Loan
Documents, or might adversely affect the priority of the Bank's liens and
security interests with respect to the Borrower's property or assets, except
as disclosed to Bank in writing prior to the date of this Agreement.
5.4 Marketable Title. Borrower has good and marketable title to the
Property, free and clear of all Liens and Encumbrances, excepting only the
lien for general taxes for the current year and Permitted Exceptions (as
defined in the Deed of Trust, and subject only to the Covenants, defined
below, and has good and marketable title to all of its property and assets,
real and personal, which secure repayment of the Note.
5.5 Covenants, Zoning and Codes. Borrower has complied and will continue
to comply with all applicable statutes and regulations to be complied with
in connection with the construction of the Improvements, including, without
limitation and to the extent applicable, all statutes and regulations
regarding environmental issues, the Americans with Disabilities Act, and
historical preservation acts and regulations. All permits, consents,
approvals or authorizations by, or registrations, declarations, withholding
of objections or filings with any governmental body or private entity
necessary in connection with the valid execution, delivery and performance
of this Agreement, the Loan Documents, and any and all other documents
executed in connection with any of the foregoing, or presently necessary for
the commencement of construction of the Improvements, will be obtained prior
to the commencement of the construction of any part of the Improvements and
will be valid, adequate and in full force and effect. Construction of the
Improvements and the intended use thereof will in all respects conform to
and comply with all covenants, conditions, restrictions and reservations
affecting the Property, with all applicable zoning, including parking
requirements, subdivision, environmental protection, use and building codes,
laws, regulations and ordinances, with the Internal Revenue Code
(collectively, the "Covenants").
5.6 Compliance with Hazardous Substance Covenants. Borrower represents,
warrants, and covenants that the Property, and the use, occupancy and
operation of the Property will strictly comply with all covenants and
agreements of Borrower regarding Hazardous Substance as defined and
contained in the Deed of Trust and the Environmental Indemnity Agreement
during the period of Borrower's ownership and, to the best of Borrower's
knowledge, presently complies.
5.7 Access to the Property. All roads, streets, traffic turn lanes, and
access ways necessary for the full utilization of the Property for its
intended purposes have either been completed or the necessary rights of way
have either been acquired by the appropriate Governmental Entity or have
been dedicated to public use and accepted by the appropriate Governmental
Entity, and all necessary steps have been or will be taken by Borrower and
the appropriate Governmental Entity to assure the complete construction and
installation thereof by the time needed for construction and/or occupancy
and operation of the Improvements.
5.8 Utilities. All utility services and facilities ("Utilities") necessary
for the construction of the Improvements and the operation thereof for its
intended purposes, including without limitation, water supply, storm and
sewer facilities, natural gas, electric, cable and telephone facilities, are
either available at the boundaries of the Property, or, if not, all
necessary steps have been taken by Borrower and the local authority or
public utility company which provides such services to assure the complete
installation and availability thereof when needed for construction and/or
occupancy and operation of the Improvements.
5.9 Approval of Plans and Budgets. The Plans prepared by Borrower shall
include without limitation all infrastructure and utility systems, waterways
and water features, landscaping, mechanical, electrical, structural and such
other drawings as may be required to complete the Improvements in accordance
with applicable building codes and any recorded plats, and any private
declaration of covenants, shall be acceptable in all respects to Bank and
shall be true, complete and an accurate reflection of the Improvements that
Borrower will construct. Prior to approval by Bank, such Plans shall be
satisfactory to and approved by Borrower and shall have also been approved
by all Governmental Entities and by any architectural control committee, if
any, having authority over the Property. Borrower represents that the
approved budget (the "Approved Budget") attached hereto as Exhibit B is
presently a good faith estimate of necessary costs and expenses to be
incurred in the construction of the Improvements and that until such time as
Bank approves a requested change in the Approved Budget pursuant to Section
8.5, for the construction of the Improvements and the necessary permits and
approvals for the then-applicable stage of construction of the Improvements
have been obtained no Construction Funds will be disbursed by the Bank for
costs and expenses which are not specifically provided for in the Approved
Budget.
5.10 Compliance With Documents. As of the date hereof and for so long as
the Loan Documents remain in effect, Borrower is and will remain in full
compliance with all of the terms and conditions of this Agreement and the
Loan Documents, and no Default has or shall have occurred or shall have
occurred and be continuing, which, with the lapse of time or the giving of
notice, or both, would constitute an Event of Default under the foregoing.
5.11 Incorporation of Representations and Warranties. The request by the
Borrower for any advance of Construction Funds or Owner's Equity under this
Agreement shall constitute a certification by the Borrower that the
representations, warranties and covenants contained in this Article V are
true and correct as of the date of such request, except with respect to
financial statements to the extent that such statements have been prepared
with respect to an earlier date and except as otherwise disclosed in writing
to the Bank, prior to the date of this Agreement.
5.12 Margin Stock. No part of the proceeds of the Loan shall be used at
any time by the Borrower to purchase or carry margin stock (within the
meaning of Regulation U promulgated by the Board of Governors of the Federal
Reserve System) or to extend credit to others for the purpose of purchasing
or carrying any margin stock. The Borrower is not engaged principally, or
as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying any such margin stock. No part of the
proceeds of the Loan hereunder will be used by the Borrower for any purpose
which violates, or which is inconsistent with, any regulations promulgated
by the Board of Governors of the Federal Reserve System.
5.13 Solvency. The fair, salable value of the assets of the Borrower is in
excess of the total amount of its liabilities as they become absolute and
matured, and the Borrower is able to meet its debts as they become due and
payable in accordance with the Borrower's ordinary business practices.
5.14 Compliance With Construction Documents. Borrower shall promptly
comply with all provisions of the Construction Contract, Architect's
Contract and any other contract or agreement, public or private, regarding
the construction of the Improvements (collectively the "Construction
Documents") which require approval or action by Borrower in a timely manner
to insure completion of the Improvements within the construction schedule
provided in the Construction Documents and in construction schedules
submitted to the Bank.
5.15 Survival of Representations. All representations, warranties and
covenants contained in this Article V shall survive the delivery of the Note
and the Loan Documents, and the making of the Loan evidenced thereby and any
investigation at any time made by or on behalf of the Bank shall not
diminish its rights to rely on all of such representations and warranties;
provided, however, that Borrower's representations, warranties and covenants
shall not survive the sale of the Property by the Bank to a third party
following foreclosure or deed in lieu of foreclosure.
ARTICLE VI
GENERAL COVENANTS
Until the Obligations are paid and performed in full, the Borrower agrees
that, unless Bank otherwise agrees in writing in Bank's absolute and sole
discretion:
6.1 Financial Information. Each Loan Party will furnish to the Bank copies
of such financial statements, reports and information as may be reasonably
requested by the Bank, including without limitation the following financial
statements, reports and information for which no additional request shall be
required:
(a) (i) As soon as available and in any event within ninety (90) calendar
days after the end of each calendar year a copy of Borrower's audited
financial reports, including balance sheet, related statements of earnings,
income statements and cash flow statement for such calendar year, prepared
in accordance with GAAP, audited by Borrower's independent certified public
accountant; the statements shall be accompanied by a certificate signed by
the officer of the Borrower responsible for financial matters stating that,
in his opinion, such audited financial statements fairly present the
financial position of the Borrower as of the date and for the period
covered, (ii) within thirty (30) days after the end of each calendar
quarter, copies of operating statements for the Property certified without
qualification or exception by the officer of Borrower responsible for
financial matters; (iii) within ninety (90) days after the end of each
fiscal year, a copy of Borrower's federal and state income tax returns with
all exhibits and schedules; and (iv) within ninety (90) days after the end
of each fiscal year of Borrower, a statement of Borrower's annual cash flow
projections for the succeeding year.
6.2 Payment of Taxes. Unless paid by Bank pursuant to Section 4.4(b) of
the Deed of Trust, the Borrower shall pay and discharge, prior to
delinquency, all taxes, assessments and other governmental charges, levies
or impositions against or on any of its properties and assets, as well as
claims of any kind, which, if unpaid, might become a lien upon any of its
properties. The Borrower shall make all required withholding deposits.
6.3 Notices. Borrower, as soon as practicable, shall give notice to the
Bank of:
(a) The commencement of any uninsured litigation relating to any Loan
Party or relating to the transactions contemplated by this Agreement;
(b) The commencement of any material arbitration or governmental
investigation or proceeding not previously disclosed by the Borrower to the
Bank in writing which has been instituted or, to the knowledge of the
Borrower, threatened against the Borrower or to which its properties or
assets are subject which, if determined adversely to the Loan Party would
constitute a Material Adverse Occurrence;
(c) Any adverse development which occurs in any litigation, arbitration or
governmental investigation or proceeding previously disclosed by the
Borrower to the Bank which, if determined adversely to the Borrower would
constitute a Material Adverse Occurrence;
(d) Any Event of Default under this Agreement or the Loan
Documents.
6.4 Books and Records, Periodic Audits. The Borrower shall keep books and
records concerning the Property reflecting all of its business affairs and
transactions in accordance with GAAP and permit the Bank, and its
representatives and agents at reasonable times and intervals and upon
reasonable notice to the Borrower, to visit all of its offices, discuss its
financial matters with officers of the Borrower and its independent public
accountant (and by this provision the Borrower authorizes its independent
public accountants to participate in such discussions) and examine any of
its books and other corporate records. Such audits shall be at the expense
of the Bank.
6.5 Inconsistent Agreements. The Borrower shall not enter into any
agreement containing any provision which would be violated or breached by
the Borrower in the performance of its obligations under any Loan Document.
6.6 Accuracy of Information. All factual information heretofore or
herewith furnished by or on behalf of the Borrower to the Bank for purposes
of or in connection with this Agreement or any transaction contemplated
hereby is, and all other such factual information hereafter furnished by or
on behalf of the Borrower to the Bank will be true and accurate in every
material respect on the date as of which such information is dated or
certified and no such information contains any misstatement of fact or omits
to state a fact or any fact necessary to make the statements contained
therein not misleading.
6.7 Compliance with Laws. The Borrower shall carry on its business
activities in substantial compliance with all applicable federal or state
laws and all applicable rules, regulations and orders of all governmental
bodies and offices having power to regulate or supervise its business
activities.
6.8 Conduct of Business. The Borrower shall maintain and keep its assets,
property and equipment in good repair, working order and condition and from
time to time make or cause to be made all needed renewals, replacements and
repairs.
6.9 Maintain Business. The Borrower shall continue to engage primarily in
the business being conducted on the date of this Agreement until it shall
receive the written consent of the Bank to do otherwise, such consent shall
not be unreasonably withheld.
6.10 Consolidation, Merger, Sale or Disposal of Assets. The Borrower shall
not without the consent of the Bank, which consent shall not be unreasonably
withheld or delayed: -
(a) consolidate or merge into or with any other entity; or
(b) sell, (other than sales of inventory in the ordinary course of
business) transfer, lease, except for residential tenant leases, or
otherwise dispose of all, or substantially all, of its assets during the
term of this Agreement.
6.11 Compliance with Permanent Commitment. Borrower shall comply with all
requirements under the Permanent Commitment in order to maintain the
Permanent Commitment in full force and effect and shall give the Bank prompt
notice of any notice of alleged default under or termination of the
Permanent Commitment.
6.12 Prohibition Against Distribution. The Borrower shall not declare or
set aside any sums of money or other asset or property for the payment of
any dividends or pay any sum of money or other asset or property, on or with
respect to any share of capital stock or ownership interest or other equity
interest in itself or any subsidiary, whether in the form of equity or debt,
without the prior written approval of the Bank in its sole discretion.
ARTICLE VII COVENANTS REGARDING CONSTRUCTION OF THE IMPROVEMENTS
In addition to the covenants set forth in the Loan Documents and those set
forth in other sections of this Agreement, Borrower covenants and agrees as
follows with respect to construction of the Improvements:
7.1 Construction Start and Completion. Borrower has commenced or will
promptly commence construction of the Improvements and shall diligently
proceed with such construction of the Improvements in accordance with the
Plans, in good and workmanlike manner and shall complete construction of the
Building and Improvements in accordance with the Plans on or before nine
months from the date hereof (the "Completion Date"); provided however, such
date shall be advanced for the period of time in which construction is
delayed by acts of God, war, riot, fire, strike, lockout, or other causes
beyond Borrower's reasonable control (which shall not include inability for
any reason to meet its financial obligations). Borrower will, upon
completion, cause the Improvements to be inspected by each appropriate
Governmental Entity, and shall correct any defects and deficiencies which
may be disclosed by any such inspection and shall cause to be duly issued
all occupancy certificates and other licenses, permits, and authorizations
necessary for the operation and occupancy of the Property. Borrower shall
comply with any and all provisions of the Construction Documents regarding
Borrower's obligations to review and approve items in order that
construction and equipping of the Improvements may be completed on or before
scheduled completion under the Construction Documents. In any event,
Borrower shall do and perform all of th6 foregoing and cause to be issued
and executed all such occupancy certificates, licenses and authorizations on
or before the Completion Date.
7.2 Changes to Plans. There shall be no material change of any of the
Plans or working drawings whether by change order or otherwise which will
increase the hard costs included in the Approved Budget without the prior
written approval of Bank, which approval shall not be unreasonably withheld,
and, to the extent that such approvals may be required, the appropriate
Governmental Entities. As a condition to its approval of any change, Bank
may require verification that the change will not increase the total cost of
constructing the Improvements or the time required to complete construction
of the Improvements. If the proposed change may affect the Approved Budget,
Borrower shall follow the procedure described in this Agreement in
requesting Bank to approve such change. Borrower shall provide Bank with
notices of all written change orders, whether or not Bank's written approval
thereof is required under this Section. Notwithstanding the provisions of
this Section 7.2, Borrower shall not be required to obtain Lender's consent
to any individual change order of $25,000.00 or less, provided the aggregate
of all other change orders does not exceed $100,000.00.
7.3 Compliance with Laws. All work performed in connection with the
Project shall comply with all applicable laws, ordinances, rules and
regulations of federal, state, county or municipal governments or agencies
now in force or which may be enacted hereafter, and with all directions,
rules and regulations of the fire department, health department, building
department or other departments of every governmental agency now having or
hereafter acquiring jurisdiction over the Property or construction of the
Improvements.
7.4 Protection Against Liens. Borrower agrees to pay and discharge all
claims for labor performed and material and services furnished in connection
with construction of the Improvements, and to take all other steps necessary
to forestall the assertion of claims or liens either against the Property,
the Improvements, or any part thereof or right or interest appurtenant
thereto, or of claims against the Bank. Nothing herein contained shall
require Borrower to pay any claims for labor, materials or services which
Borrower or Contractor (or a Subcontractor) in good faith disputes and which
Borrower or Contractor, at its (or their) own expense, is currently and
diligently contesting, provided, however, that Borrower shall, not later
than thirty (30) days after the notice of the filing of any claim or lien
against the Property or notice of intent to file such a lien, or the
Improvements which is disputed or contested by Borrower, either file a
surety bond sufficient to release said claim or lien and promptly give
notice of such filing to the lienholder or claimant, all as permitted by
Colorado statute, or make other arrangements therefor reasonably
satisfactory to the Bank. The Bank shall not be required to extend the
Maturity Date of the Loan by reason of Borrower's failure to pay such
claims.
7.5 Construction Ins]2ections.
(a) Bank and its representatives or agents shall have the right at all
reasonable times during regular business hours (and at any time in the event
of an emergency) to enter upon the Property and inspect the work of
construction to determine that the same is in substantial conformity with
the Plans and all of the requirements hereof and to verify directly with
Subcontractors the information given to the Bank regarding the Subcontract
or the amounts shown on the Advance Request. Bank shall from time to time,
retain an independent engineer or consultant ("Project Inspector"), at
Borrower's expense, to review the Plans, Approved Budget, Advance Requests,
and any other documents or information relating to construction of the
Improvements, and inspect the work and verify compliance by Borrower with
the provisions hereof. If Borrower does not reimburse Bank for the cost of
such services within a reasonable time after Bank's request, the cost of
such services may be deemed to be an advance of credit under the Loan and,
at Bank's option, shall be added to the principal balance of the Note;
provided, however, that Bank shall not be required to undertake such
inspections or reviews, and the making of any such inspection or review
shall not create or impose any responsibility or liability of the Bank for
the quality of construction or for the compliance of the Improvements with
the Plans or any governmental requirements, and Borrower releases and holds
Bank harmless from any responsibility or liability with respect to any such
inspection or review.
(b) Borrower understands and agrees that said inspections are for the
sole purpose of protecting the advances under the Loan and Bank's
security for the Loan and are made solely for the Bank's benefit; that
such inspections may be superficial and general in nature, primarily to
inform Bank of the progress of construction of the Improvements and, that
in any event, Borrower shall not be entitled to rely on any such
inspection(s) as constituting Bank's approval, satisfaction or acceptance
with respect to materials, workmanship, conformance to Plans or otherwise.
Borrower hereby agrees to make its own inspections of the construction to
determine that the quality of the Improvements and all other requirements
of the work of construction financed hereby are being performed in a manner
satisfactory to Borrower, and to immediately notify Bank in writing should
the same show any work to be unsatisfactory in any manner. Without
limiting the foregoing, Borrower shall permit Bank to examine and copy all
books and account records and other papers relating to the Property and the
construction of the Improvements, and Borrower will cause all contractors,
subcontractors and materialmen to cooperate with Bank.
(c) Borrower shall pay for all inspections, whether made by an independent
architect, engineer, or other inspector, or by Bank. Borrower shall pay to
Lender $5,475.00 on the date of closing to defray the cost of such
inspection of the Project, whether such inspection is performed by an
independent inspector or by Bank. To the extent not otherwise provided for
in the Approved Budget, Borrower shall pay such costs from funds other than
the proceeds of the Loan.
7.6 Damage or Destruction.
(a) If the Improvements, or any part thereof, are damaged or destroyed by
fire or any other cause, and Borrower shall desire to restore the
Improvements or shall be required by the Bank to restore the Improvements,
Borrower shall, subject to the provisions of this Section, immediately
proceed with the restoration thereof in accordance with the Plans, and shall
diligently complete the work of restoration, provided that Bank makes
available to Borrower as restoration progresses any insurance proceeds
actually paid to Bank in respect to such damage or destruction. If (i) in
the Bank's reasonable judgment the insurance proceeds are sufficient to
complete the restoration prior to the Maturity Date or such later date as
Bank may elect and within the Approved Budget applicable to the Building to
be restored; and (ii) no Default exists under the Loan Documents
("Restoration Conditions"), the Bank shall advance the insurance proceeds to
Borrower as restoration progresses in the same manner as the Bank disburses
advances of the Loan proceeds hereunder. If any one or more of the
Restoration Conditions does not exist, the Bank shall have no obligation to
authorize further advances of Construction Funds or Owner's Equity
hereunder, and may call the Loan immediately due and payable in accordance
with the following paragraph; provided, however, if, in the Bank's judgment
the insurance proceeds are insufficient to complete the restoration,
Borrower may satisfy such condition by depositing with the Bank as
additional Owner's Equity such money as in the Bank's reasonable judgment
(based 'on bids or estimates of reputable contractors) is sufficient to
complete the restoration in accordance with the Plans in a timely manner and
fully pay the costs thereof.
(b) If in the Bank's reasonable judgment the Improvements cannot be
restored in accordance with the Plans and the Approved Budget in a timely
manner as described above or, if Borrower does not or cannot deposit as
additional Owner's Equity such money or additional money as in the Bank's
judgment is required to complete the restoration and fully pay the cost
thereof, or if a Default exists under the Loan Documents, such event shall
be deemed an Event of Default hereunder, and the Bank's obligations to
authorize further advances of Construction Funds or Owner's Equity hereunder
or to make insurance proceeds available for restoration shall immediately
terminate. The Bank may in such case apply any insurance proceeds and/or
undisbursed Construction Funds and Owner's Equity in the manner set forth in
Section 9.2(a) hereof, to reduce the outstanding indebtedness of Borrower
under the Loan and may exercise any of the other remedies which are
described in Section 9.2 hereof or in the Loan Documents.
(c) In the case of loss, the Bank is hereby authorized to participate in
any settlement or adjustment of claims under insurance policies, as its
interest may appear, and to collect and receipt for any proceeds. In the
event the Bank elects to apply the proceeds to restoration, in keeping with
the Restoration Conditions, such proceeds shall be made available, from time
to time, under substantially similar terms and conditions as provided in
this Agreement for advances from Construction Funds and Owner's Equity.
7.7 Condemnation.
(a) If all or any part of the Property is expropriated, condemned, taken by
power of eminent domain, or transferred in anticipation of any such
circumstances by any competent authority, then the proceeds of any such
award or settlement made as compensation or damages for such expropriation,
condemnation, exercise of the power of eminent domain or the transfer in
anticipation of any such circumstance shall be paid to the Bank. The Bank,
at its election and subject to the provisions of Section 7.7(b), may pay or
apply such amount in any one or more of the following ways and in such order
as the Bank shall determine:
(i) to costs of collection thereof;
(ii) payment of any expenses and fees of the Bank associated with this
Agreement and the other Obligations of the Borrower hereunder, the payment
of accrued and unpaid interest on the Loan, and the reduction of unpaid
principal of the Loan;
(iii) to the payment of obligations incurred by the Bank or the Borrower
in the repair or replacement of damage to the Improvements;
(iv) to make payment to the Borrower for the costs of restoration and
repair of the Improvements; or
(b) If the Improvements, or any part thereof, are taken by condemnation or
subject to imminent threat of condemnation, Bank's obligation to authorize
further advances of Construction Funds or Owner's Equity hereunder shall
immediately terminate unless, in the Bank's reasonable judgment, the
Improvements can be replaced and restored in a manner which will enable the
Improvements to be functionally and economically utilized and occupied as
originally intended, in which event the condemnation proceeds shall be made
available to Borrower for such purpose. Whether the Bank, in its reasonable
judgment, determines that the Improvements can be so restored and replaced
or not, the rights and obligations of Bank and Borrower thereafter, and the
handling and utilization of any condemnation proceeds actually paid to the
Bank and undisbursed Construction Funds and Owner's Equity, shall be the
same as described in the immediately preceding Section 7.6 hereof.
7.8 Indemnify Bank. Borrower shall indemnify and hold the Bank harmless
from all liability for any actual or alleged damage or injury of whatsoever
nature arising out of or in any way connected with the Property and/or the
construction of the Improvements or arising out of Borrower's breach of the
provisions of this Agreement except for the gross negligence or wilful
misconduct of the Bank. The Bank may commence, appear in or defend any
action or proceeding purporting to affect the rights, duties or liabilities
of the parties hereto, or the Property or the Improvements and Borrower
shall pay all of Bank's reasonable costs and expenses incurred thereby on
demand. This Section shall survive execution, delivery and performance of
this Agreement, the Deed of Trust and the Loan Documents.
7.9 Personal Property Incorporation. Prior to completion of the
Improvements and at Bank's request, Borrower shall provide to the Bank, when
requested but no more frequently than upon Advance Requests, an inventory of
the Personalty and shall execute such financing statements as may be
reasonably required to perfect the Bank's lien on the same. No Personalty
shall be purchased or installed in the Improvements by Borrower under any
security agreement, conditional sales contract or other agreement wherein
the seller reserves a security interest in, or the right to remove or to
repossess, such items or to consider them personal property after their
incorporation into the Improvements. Any construction material for which
Bank authorizes the advance of Construction Funds or Owner's Equity is to be
stored on the Property or, with the Bank's prior consent, stored off-site
and identified to the Construction Contract, and/or the Property and in the
Bank's judgment must be reasonably secure from damage and theft and fully
insured at all times.
7.10 Further Assurances. Borrower will at any time and from time to time
upon request of the Bank take or cause to be taken any action, execute,
acknowledge, deliver or record any further documents, opinions, mortgages,
security agreements, financing statements or other instruments or obtain
such additional insurance as Bank in its discretion deems reasonably
necessary or appropriate to carry out the purposes of this Agreement and to
preserve, protect and perfect the security interests intended to be created
and preserved in the Property, the Project, the Personalty, and other
properties and assets securing the obligations of the Borrower under this
Agreement and the Loan Documents.
ARTICLE VIII DISBURSEMENT OF CONSTRUCTION FUNDS
8.1 Disbursement Schedule and Construction Disbursement Account. Upon at
least five (5) business days' prior written request by Borrower in the form
of an Advance Request, made no more often than once per calendar month, and
delivery of all items required thereunder including without limitation (a)
invoices equal to the amount of funds requested for construction costs for
each and every disbursement; (b) appropriate unconditional mechanic lien
waivers from each party as to work and materials previously paid; (c) a
vendor payee listing showing the name and the amount currently due each
party to whom Borrower is obligated for labor, materials and/or services
supplied for the applicable Advance Request; (d) checks drawn on the
Construction Account made payable to each vendor payee signed by Borrower;
and (e) pre-stamped addressed envelopes to each vendor payee. Funds
requested by Borrower shall be listed by line item with the total of
corresponding amounts being equal to the Advance Request. The total funds
requested shall represent the total amount of the approved invoices. Except
as otherwise expressly provided herein, all disbursements of the
Construction Funds and Owner Equity shall be made into Borrower's
construction disbursement account maintained at the Bank ("Construction
Account").
8.2 Interest Reserve. Included in the Approved Budget is an Interest
Reserve estimated to be sufficient to meet interest requirements accruing
under the Loan prior to the Maturity Date. Subject to the conditions to
disbursement set forth in this Agreement, Bank shall use the Interest
Reserve to allow Borrower to pay unpaid accrued interest on the Loan in one
of the methods selected by Bank. Without limiting the foregoing, as one of
the methods available to Bank, Bank may, for each and every calendar month,
record on and then enter into its books or records an additional advance of
principal of the Construction Funds in the amount of the unpaid accrued
interest to then become due, on and effective as of the first day of the
calendar month, or such day as the Bank shall elect, and Bank may
simultaneously record and enter the receipt by it of such accrued interest,
on and effective the same day. Every such recordation and entry of
principal advance and receipt of interest payment shall be deemed to be made
on the first day of the calendar month, notwithstanding that the actual
recordation or entry may occur at a later date. No separate fund or account
shall be created for the Interest Reserve. Bank may in its sole discretion
refuse to allow interest to be paid from the Interest Reserve by any method,
if (a) an Event of Default has occurred, or (b) disbursements under the Loan
have been suspended for any reason for a period of thirty (30) days or more.
If Bank determines not to pay interest in the event any of the foregoing
conditions exist, or if the amount available for payment of interest from
the Interest Reserve is insufficient to pay any accrued interest when due,
the Bank shall so notify Borrower and thereupon Borrower shall be obligated
to pay such interest to Bank when due, without the use of any Construction
Funds therefor.
8.3 Direct Payments. In the event that Borrower fails to make such
payments when due, Bank may in its sole but reasonable discretion require
one or more disbursements of part or all of the Construction Funds or
Owner's Equity to be paid directly to any person(s) to whom any amount
disbursed is payable, including, but not limited to, contractors,
subcontractors, laborers, materialmen and/or Bank, or Bank may authorize any
such disbursement jointly to Borrower and such other person(s). Borrower
hereby authorizes Bank to so require the disbursement of the Construction
Funds and/or the Owner's Equity by any manner or method to Borrower and/or
to any other person(s) to whom any amount disbursed is payable, and Borrower
agrees that any and every disbursement in any manner to any person(s) hereby
authorized shall constitute disbursement to Borrower.
8.4 Discretionary Disbursements. In the event that Borrower fails to make
such payments when due, Bank may in its sole discretion, but shall not be
obligated to, upon ten (10) days' written notice thereof to Borrower,
approve disbursements from the Construction Funds or Owner's Equity to pay
(a) part or all of any or all mortgages or deeds of trust recorded after the
date Borrower acquires title to the Property (no permission of the Bank
hereby applied); (b) except to the extent the taxes or assessments are for
the period prior to the date Borrower acquires title to the Property, any or
all assessments and taxes of any kind or character, including but not
limited to any withholding tax and any real estate taxes and/or special
assessments affecting the Property, whether delinquent or not; (c) claims,
liens and/or judgments against or affecting Borrower or claims, liens or
judgments affecting the Property based on actions after the date Borrower
acquires title to the Property; (d) any and all other additional costs,
expenses or items appropriate to maintain or place the Deed of Trust in a
first lien priority position, or (e) such other costs, expenses and sums as
may be owing from time to time by Borrower to Bank under or with respect to
any of the Loan Documents, including but not limited to any amounts owing
for insurance required thereunder, and (f) any amounts necessary to complete
construction of the Improvements as provided in Section 9.2(c).
8.5 Approved Budget. All disbursements shall be based upon the most
current Approved Budget then in existence which has been approved by Bank in
writing. Borrower agrees that, in the event of any change which would
increase the hard costs or soft costs, as stated in the initial Approved
Budget (or in any subsequent, revised Approved Budget approved by Bank in
writing), including but not limited to any change in the amount or type of
any such cost or expense, reallocation of line items in the Approved Budget
and reallocation from the Contingency Amounts to other budget categories,
whether or not any such change would or would not increase the total overall
costs and expenses, Borrower shall then immediately notify Bank thereof in
writing, and unless the Bank approves the Revised Plans as provided in
Section 7.2., Bank shall not have any obligation to approve any disbursement
or further disbursement of any Construction Funds and/or Owner's Equity
unless and until such proposed revised Approved Budget is approved by Bank
in writing. Bank reserves the right to approve or disapprove any proposed
revised Approved Budget in its sole but reasonable discretion. Borrower
agrees that the Approved Budget shall be based on signed contracts or firm
bids available to Borrower or such allowances as set forth in the
Construction Contract. Notwithstanding the foregoing, Borrower shall not be
required to obtain Bank's consent to any individual change order of
$25,000.00 or less, provided the aggregate of all other change orders does
not exceed $100,000.00.
8.6 Obligatory Disbursements to Be Used Solely for Improvements. Except as
otherwise expressly provided in this Agreement the Bank shall approve the
disbursement of the Construction Funds solely to provide funds for the
development and construction of the Improvements, including such soft costs
as are outlined in the Approved Budget as allocated from Construction Funds.
8.7 No Waiver. The Bank shall not have made or be deemed to have made any
waiver of any condition to any disbursement as provided herein, unless
expressly made in a writing signed by an authorized officer of the Bank. The
approval of any disbursement by the Bank shall not constitute approval by
the Bank of any work, costs or expenses for which such disbursement is made,
or of any design, manufacturing, structural or other defect in any such work
or of any departure from the Plans not approved in writing by Bank. The
approval of any disbursement prior to fulfillment of one or more conditions
thereof shall not be construed as a waiver of any such condition, and Bank
reserves the right to require fulfillment of any and all such conditions
prior to approving any subsequent disbursement.
8.8 Ownership of Advances. It is acknowledged and agreed that Borrower
shall not own, possess or control any Construction Funds and/or cash
deposits of Owner's Equity or any disbursement thereof, any interest or
other reserve and/or any right in or to any of the foregoing, specifically
including amounts that may or are to be deposited in or allocated to any
loan in process account or reserved from time to time by either Borrower,
Bank and/or any other person(s), except to have the same used by Borrower in
accordance with this Agreement, the Loan Documents and Borrower hereby
irrevocably and unconditionally assigns to Bank all of Borrower's rights,
title and interest therein and thereto. Borrower further agrees that all
Construction Funds and Owner's Equity and any disbursements thereof received
by Borrower shall be received by it as a trust and trust fund, and that the
same shall be used and applied by Borrower solely in accordance with this
Agreement and the Loan Documents and shall not be diverted or otherwise used
in any manner.
8.9 All Disbursements Secured by Loan Documents. It is expressly
understood and agreed that any and all disbursements, payments- or advances
made by the Bank, from time to time pursuant to the terms of the Loan
Documents, for whatever purposes, no matter to whom made, and whether or not
the Bank is then obligated to make any disbursement, and whether or not the
Bank has approved such disbursements, or an Event of Default exists under
any of the Loan Documents, including but not limited to disbursements for
any unpaid costs or expenses refereed to in Section 8.4 of this Agreement
shall, as and when made, be deemed authorized by Borrower and made pursuant
to this Agreement, and shall become and remain secured by the Loan Documents
and considered part of the Obligations secured thereby, provided that such
disbursements are made pursuant to the terms of the Loan Documents.
8.10 Deadline for Disbursement of All Loan Proceeds. Any other provision
contained in this Agreement to the contrary notwithstanding, if for any
reason the total amount of the Construction Funds, together with the Owner's
Equity, has not been fully disbursed prior to the Completion Date, except
for such amounts as are required or permitted under the Loan Agreement, then
Bank shall not be obligated to approve any further disbursement(s) thereof,
and any then undisbursed Construction Funds and undisbursed Owner's Equity
may be applied by Bank in any manner or order, such as: first, to any costs
and expenses incurred by Bank in connection with the Loan; then, to unpaid
accrued interest on the Note; and then, to any amounts owing under any of
the Loan Documents, including but not limited to principal owing under the
Note. Any such or other application shall not constitute a waiver or
operate to cure any breach or Default existing under any of the Loan
Documents, nor to invalidate any notice of Default or any act done pursuant
to such notice and shall not prejudice any rights or powers of the Bank
under the Deed of Trust or other Loan Documents.
ARTICLE IX
DEFAULT AND REMEDIES
9.1 Event of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
(a) The Borrower shall default in the payment when due of any payment of
principal or interest owing to Bank under the terms of the Note (giving
effect to any grace period provided therein applicable to the default).
(b) A default shall occur in the due performance and observance of any of
the covenants and conditions of this Agreement or the Loan Documents, other
than a monetary obligation, which breach is not cured to Bank's satisfaction
within the applicable cure period for breach of such covenant or
condition, and, if no specific cure period is provided, within thirty (30)
days of notice of such default being sent by the Bank to Borrower; provided,
however, that if such default is not curable within such thirty (30) days,
then, so long as Borrower delivers to Bank, within ten (10) days after
notice, its written undertaking to cure, commences to cure such default
within such thirty (30) day period and is diligently pursuing such cure to
completion, such default shall not constitute an Event of Default unless
such default remains uncured for such sixty (60) days after such written
notice to Borrower.
(c) Any written representation, warranty or disclosure made by Borrower
proves to be materially false or misleading as of the date when made,
whether or not such representation or disclosure appears in this Agreement,
the Loan Documents, or items submitted by Borrower in connection therewith.
(d) Any claim or lien shall be filed against the Property or any part
thereof; provided, however, that no default shall exist hereunder as long as
Borrower has fully complied with any conditions provided herein to permit
Borrower's contest of such claim or lien.
(e) Borrower fails to make any deposit of funds including additional
Owner's Equity required hereunder, or under the Loan Documents within the
time required for payment which failure shall continue for five (5) days
after written notice from the Bank to Borrower.
(f) Any material deviation shall occur in the work of construction from the
Plans without the approval of Bank, or the occurrence of defective
workmanship or materials not in accordance with the Plans or completed in
compliance with industry standards for similar projects, which deviations or
defects are not corrected, substantially corrected, or a plan for their
timely correction approved by the Bank within thirty (30) days after receipt
of written notice from Bank to Borrower.
(g) The work of construction is delayed or suspended for a period of sixty
(60) calendar days or more beyond the construction schedule in the
Construction Documents or as submitted to the Bank for any reason except
those which are beyond the reasonable control of Borrower, or the work of
construction is not completed by the Completion Dates or such later dates as
Bank may approve, and Borrower has not submitted a reasonable plan for
completing construction which Bank has approved.
(h) There occurs any Material Adverse Occurrence.
(I) Any of the Improvements encroach over the Property or setback lines or
upon an easement, or any structure upon an adjoining Property encroaches
upon the Property, to an extent reasonably deemed material by Bank, and an
appropriate title insurance endorsement or plans for the cure of which
encroachment are not provided to Bank's satisfaction within thirty (30) days
after written notice thereof from Bank to Borrower or Borrower shall fail to
diligently pursue such cure to completion within a reasonable time (not to
exceed thirty (30) days).
0) There occurs an Event of Default in the payment and performance of
Borrower under the Development Loan or any of the Development Loan
Documents.
(k) There occurs a failure of Restoration Conditions upon damage or
destruction as provided in Section 7.6.
(1) There shall be existing any Event of Default beyond applicable cure
periods under the Permanent Commitment permitting the Permanent Lender to
cancel or terminate the Permanent Commitment or the Permanent Lender shall
have exercised any right contained in the Permanent Commitment to cancel or
terminate the Permanent Commitment.
Borrower acknowledges and agrees that all material non-monetary defaults are
conclusively deemed to be and are defaults which impair the security of the
Loan Documents, and that Bank shall be entitled to exercise any appropriate
remedy, including without limitation, foreclosure of the Loan Documents upon
the occurrence of any such material non-monetary default after the
expiration of any cure period, if applicable.
9.2 Remedies. Upon the occurrence of an Event of Default, Bank may, in
addition to any other remedies which Bank may have hereunder or under the
Loan Document or by law, at its option and without prior demand or notice
take any or all of the following actions:
(a) Immediately terminate any further approval of advances of Construction
Funds and/or Owner's Equity and use any portion of the Owner's Equity held
by the Bank to reimburse the Bank for any costs incurred under the Note or
this Agreement.
(b) Declare the Obligations under the Note immediately due and payable.
(c) Enter upon the Property and complete construction of the Improvements
in accordance with the Plans and Approved Budget, except as necessarily
increased by additional development and construction costs arising from
Borrower's default or additional costs approved by a court, with such
changes therein as Bank may from time to time and in its reasonable
judgment deem appropriate, all at the risk and expense of Borrower. The
Bank shall have the right at any time to discontinue any work commenced by
it in respect to the Improvements or to change any course of action
undertaken by it and not be bound by any limitations or requirements of
time whether set forth herein or otherwise. Bank shall have the right and
power to assume any construction contract made by or on behalf of Borrower
in any way relating to the Improvements and to take over and use all or any
part of the labor, materials, supplies and equipment contracted for, by or
on behalf of Borrower whether or not previously incorporated into the
Improvements, all in the discretion of Bank. In connection with any work
of construction undertaken by Bank pursuant to the provisions of this
Section, Bank may (i) engage builders, contractors, and others for the
purpose of furnishing labor, materials and equipment in connection with the
work of construction and architects and engineers as reasonably necessary
to complete construction of the Project, (ii) pay, settle or compromise all
bills or claims which may become liens against the Property or which have
been or may be incurred in any manner in connection with completing
construction of the Improvements or for the discharge of liens,
encumbrances or defects in title of the Property, and (iii) take such other
action, including the employment of watchmen to protect the Improvements,
or refrain from taking action under this Agreement as Bank may in its
discretion reasonably determine from time to time. Borrower shall be
liable to Bank for all sums paid or incurred for completing construction of
the Improvements whether the same shall be paid or incurred pursuant to the
provisions of this Section or otherwise, and all payments made or
liabilities incurred by Bank hereunder of any kind whatsoever shall be paid
by Borrower to Bank upon demand with interest at the rate set forth in the
Note, and all of the foregoing shall be deemed and shall constitute
advances under this Agreement and be secured by the Deed of Trust and Loan
Documents. For the purpose of carrying out the provisions and exercising
the rights, powers and privileges granted by this Section 9.2(c) hereof,
Borrower hereby unconditionally and irrevocably constitutes and appoints
Bank its true and lawful attorney-in-fact to enter into such contracts,
perform such acts and incur such liabilities as are referred to in said
Section in the name and on behalf of Borrower which are reasonably
necessary to complete development and construction of the Improvements.
This power of attorney is coupled with an interest. Nothing contained
herein shall relieve the Bank from its obligation to mitigate damages.
(d) Where substantial deviations from the Plans appear which have not been
approved as set forth herein, or defective or unworkmanlike labor or
materials are being used in the development of the Improvements, or upon
receipt of knowledge of encroachments to which there has been no consent,
Bank shall have the right to immediately order stoppage of the construction
and demand that such conditions be corrected. After issuance of such an
order in writing, no further work shall be done on that portion of the
Improvements where there is a substantial deviation from the Plans which has
not been approved as set forth herein or where there is defective or
unworkmanlike labor or materials, without the prior written consent of Bank
unless and until said condition has been fully corrected.
(e) Foreclose on or realize upon any security for the Loan without waiving
its rights to proceed against any other security or other entities or
individuals directly or indirectly responsible for repayment of the
Obligations or waive any and all security for the Obligations as Bank may in
its discretion so determine, and pursue any such other remedy or remedies as
Bank may so determine to be in its best interest as provided herein or in
the Loan Documents. All remedies of Bank provided for herein and in any
other Loan Document are cumulative and shall be in addition to all other
rights and remedies provided by law. The exercise of any right or remedy by
Bank hereunder shall not in any way constitute a cure or waiver of default
hereunder or under any other Loan Document or invalidate any act done
pursuant to any notice of default, or prejudice Bank in the exercise of any
of its rights hereunder or under any other Loan Documents unless, in the
exercise of its rights, Bank realizes all amounts owed to it under such Loan
Documents.
9.3 Recertified Appraisal. If at any time (a) an Event of Default under
the Loan Documents has occurred (giving effect to applicable cure and notice
periods, if any, contained in the Loan Documents), (b) the Bank determines,
in its sole but reasonable judgment, that the collateral position of the
Bank in relation to the credit extended for the benefit of the Borrower has
adversely changed as a consequence of material, physical or economic
impairment of the pledged collateral, or (c) the Bank is required by law or
regulation to obtain a new Appraisal, the Bank may require a new Appraisal
of the Property in for-m and content acceptable to the Bank to be prepared
at Borrower's expense.
ARTICLE X
PARTIAL RELEASE PROVISIONS
Borrower may request a partial release from the Deed of Trust for the
portion of the Property identified on Exhibit C attached hereto as the
"Development Parcel" (the "Development Parcel"), upon the following terms
and conditions:
10.1 Release Conditions for Development Parcel. Bank shall partially
release the Development Parcel, defined below upon the following terms and
conditions:
(a) Final Plat. Borrower shall deliver to the Bank for its approval, which
approval shall not be unreasonably withheld or delayed, three (3) copies of
a recorded plat ("Concepts Direct Filing 1 Plat") delineating the dimensions
of Lot 1, Block 1, consisting of approximately 10.64 acres and depicted on
Exhibit C on which the Improvements shall be constructed ("Construction
Parcel"), and satisfactory ingress and egress to and from the Construction
Parcel, which Concepts Direct Filing I Plat must show easements, ditches,
streets, lot lines, rights-of-way, any lot, block and street delineations or
designations affecting the Construction Parcel and satisfactory easements
for utility services, and encroachments, if any, affecting the Construction
Parcel.
(b) Development Parcel Legal Description. A Survey certified to the Bank
and the Title Company in sufficient detail to identify the Development
Parcel and containing the legal description of the Development Parcel.
(c) No Consideration. Upon compliance with the terms of this Section 10. 1
and Section 10.2, the Bank will release the Development Parcel for no
additional consideration.
(d) Beneficial Use. Evidence satisfactory to the Bank of all easements
necessary for ingress and egress from the Construction Parcel to a public
street or road, and for installation and maintenance of Utilities and for
the beneficial use and enjoyment of the Improvements on the Construction
Parcel for the purpose for which the Improvements were constructed.
10.2 General Release Conditions. With respect to the release of the
Development Parcel, the Borrower shall comply with the following terms and
conditions:
(a) Segregated. The Development Parcel shall be segregated on the tax roll
and assessed separately from the Construction Parcel or a reasonable and
mutually satisfactory agreement reached between Borrower and Bank as to the
proration of the taxes until such segregation occurs.
(b) No Default. No Event of Default shall exist at the time of request
for partial release or at the time of release.
(c) Other Documents. Such other standard documents or assurances as may be
reasonably required to accomplish the release in a manner reasonably
satisfactory to Bank and its counsel.
(d) Title Policy Endorsement. Upon the request of the Bank, Borrower shall
have submitted to Bank an endorsement to Bank's policy of title insurance,
ensuring that the priority of Bank's lien on the Construction Parcel is not
impaired by reason of the release and ensuring Bank's interest in any
retained easement and maintenance rights as a first and prior lien.
(e) Costs. Borrower shall directly pay for all costs and expenses incurred
in connection with compliance with the requirements set forth in this
Article 10, including, but not limited to, reasonable attorneys fees, title
insurance premiums and survey expenses. In the event Bank incurs any
expenses arising out of Borrower's actions to comply with the provisions of
this Article 10, Borrower shall reimburse to Bank all such expenses as a
condition to Bank's obligations to partially release the Development Parcel.
10.3 Release Procedure. Borrower shall provide Bank with a fully prepared
request for partial release for the Development Parcel to be released,
together with the items described in Section 10.1 and 10.2 not less than ten
(10) Business Days prior to the requested release date.
ARTICLE XI
MISCELLANEOUS
11.1 Arbitration. The undersigned hereby agree that all controversies and
claims (including the existence of an Event of Default) of any nature
arising directly or indirectly out of any and all loan transactions between
them and any related agreements, instruments or documents, shall at the
written request of any party be submitted to binding arbitration pursuant to
the applicable rules of the American Arbitration Association. The
arbitration shall proceed in Denver, Colorado, shall be governed by Colorado
law and shall be conducted in accordance with the Commercial Arbitration
Rule of AAA. Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction.
(a) A single arbitrator shall have the power to render a maximum award of
one hundred thousand dollars. When any party files a claim in excess of
this amount, the arbitration decision shall be made by the majority vote of
three arbitrators. No arbitrator shall have the power to restrain any act
of any party.
(b) No provision of this Section shall limit the right of any party to
exercise self-help remedies, to foreclose against any real or personal
property collateral, or to obtain any provisional or ancillary remedies
(including but not limited to injunctive relief or the appointment of a
receiver) from a court of competent jurisdiction. At Bank's option, it may
enforce its rights under a mortgage by judicial foreclosure, and under a
deed of trust either by exercise of power of sale or by judicial
foreclosure. The institution and maintenance of any remedy permitted above
shall not constitute a waiver of the right to submit any controversy or
claim to arbitration. The statute of limitations, estoppel, waiver, laches,
and similar doctrines which would otherwise be applicable in an action
brought by a party shall be applicable in any arbitration proceeding.
11.2 No Waiver. No waiver of any Default or breach by Borrower hereunder
shall be implied from any failure by Bank to take action on account of such
default if such default persists or is repeated, and no express waiver shall
affect any Default other than the default specified in the waiver and shall
be operative only for the time and to the extent therein stated. Waivers of
any covenant, term or condition contained herein shall not be construed as a
waiver of any subsequent breach of the same covenant, term or condition. The
consent or approval by Bank to, or of, any act by Borrower requiring further
consent or approval shall not be deemed to waive or render unnecessary the
consent or approval to, or of, any subsequent similar act.
11.3 Impounding of Advances. Unless Bank is provided with an
indemnification or other assurance satisfactory to Bank (in Bank's sole
discretion), Bank may impound such Advances as may be required to enable
Bank to comply with the provisions of Colorado Revised Statutes, Section
38-22-126, as amended.
11.4 Successors and Assigns. This Agreement is made and entered into for
the sole protection and benefit of Bank and Borrower, their successors and
assigns, and no other person or persons shall have any right of action
hereunder. The terms hereof shall inure to the benefit of the successors
and assigns of the parties hereto; provided, however, that the Borrower's
interest hereunder cannot be assigned or otherwise transferred without the
prior consent of Bank.
11.5 Notices. Any notice, demand or request required hereunder shall
be given in writing at the addresses set forth below by personal delivery,
or registered or certified, first class mail, return receipt requested.
Notice shall be deemed delivered (i) upon personal delivery, or (ii)
twenty-four (24) hours after deposit with a nationally-recognized overnight
courier service, or (iii) three (3) days after deposit with the U.S. postal
service, registered or certified mail, postage prepaid. The addresses may
be changed by notice to the other party given in the same manner as provided
above.
If to Borrower and Guarantors:
Concepts Direct, Inc. 1351 South Sunset Street Longmont, CO 80501 Attn:
Frank Marcus
With Copy to:
McGuire, Woods, Battle and Boothe, LLP 8280 Greensboro Drive, Suite 900
Tysons Comer McLean, VA 22102-3892 Attention: Michael J. Giguere, Esq.
If to Bank:
Bank One, Colorado, NA 1125 - 17th Street Denver, Colorado 80202 Attention:
Greg McCann, Vice President Western Region Real Estate With copy to:
Bank One, Arizona, NA 241 N. Central Ave. 14th Floor, Dept. A909 Phoenix,
AZ 85004 Attention: Western Region Loan Administration
11.6 Authority to File Notices. Borrower irrevocably appoints, designates
and authorizes Bank as its agent (said agency being coupled with an
interest) to send to any third party any other notice or documents or take
any other action that Bank deems necessary or desirable to protect its
interest hereunder, or under the Loan Documents, and will upon request by
Bank, execute such additional documents as Bank may require to further
evidence the grant of the aforesaid right to Bank.
11.7 Time. Time is of the essence hereof.
11.8 Amendments, etc. No amendment, modification, termination or waiver of
any provisions of this Agreement or of any of the Loan Documents nor consent
to any departure by Borrower therefrom shall in any event be effective
unless the same shall be in writing and signed by Bank, and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given.
11.9 Headings. The article and section headings in no way define,
limit, extend or interpret the scope of this Agreement or of any particular
article or section.
11.10 Number and Gender. When the context in which the words are used in
this Agreement indicate that such is the intent, words in the singular
number shall include the plural and vice versa. References to any one
gender shall also include the other gender if applicable under the
circumstances.
11.11 Validity. In the event that any provisions of this Agreement shall
be held to be invalid, the same shall not affect in any respect whatsoever
the validity of the remainder of this Agreement.
11.12 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado.
11.13 Survival of Warranties. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement and of the Loan Documents and the extension of the Loan hereunder
and continue in full force and effect until the Obligations of Borrower
hereunder evidenced by the Note have been fully paid and satisfied.
11.14 Automatic Acceleration. Should there occur an Event of Default which
would, with the giving of notice, the passage of time, or both, constitute
an Event of Default hereunder and if a petition under the United States
Bankruptcy Code thereafter is filed by or against Borrower while such event
remains uncured and such petition is not dismissed within thirty (30) days
of filing, all obligations hereunder shall be automatically accelerated and
due and payable and the Default Rate of interest provided for in the Note
shall automatically apply as of the date of the first occurrence of the
event which would, with the giving of notice, the passage of time, or both,
constitute an Event of Default, without any notice, demand or action of any
type on the part of Bank (including any action evidencing the acceleration
or imposition of the default rate of interest). The fact that the Bank has,
prior to the filing of the voluntary petition under the United States
Bankruptcy Code, acted in a manner which is inconsistent with the
acceleration and imposition of the default rate of interest provided for in
the Note, shall not constitute a waiver of this Section 10. 14 or estop Bank
from asserting or enforcing Bank's rights hereunder.
11.15 Attorneys Fees and Other Costs. Borrower shall reimburse Bank for
all reasonable attorneys fees and expenses reasonably incurred by Bank in
connection with the enforcement of Bank's rights under this Agreement and
each of the other Loan Documents, including, without limitation, attorneys
fees and reimbursements for trial, appellate proceedings, out-of-court
workouts and settlements and for enforcement of rights under any state or
federal statute, including, without limitation, attorneys fees incurred in
bankruptcy and insolvency proceedings such as in connection with seeking
relief from stay in a bankruptcy proceeding or negotiating and documenting
any amendment or modification of the Loan or reviewing subsequent Loan
submission items. Borrower shall pay all costs, including without
limitation costs of title searches, title commitments, appraisals,
environmental audits, third-party consultants, UCC searches, incurred by the
Bank in enforcing payment and performance of the Loan, exercising rights and
remedies of Bank under the Loan Documents, or reviewing Loan submission
items. Borrower's reimbursement obligation shall be part of the
indebtedness evidenced and secured by the Loan Documents.
11.16 Severability, Titles. If any provision of this Loan Agreement or of
any other Loan Document securing or executed in connection with this Loan
Agreement is, for any reason and to any extent, invalid or unenforceable,
then neither the remainder of the Loan Document in which such provision is
contained, or the application of the provision to other persons, entities or
circumstances, nor any other document referred to in this Loan Agreement,
shall be affected by such invalidity or unenforceability, and there shall be
deemed substituted for the invalid unenforceable provision the most similar
provision which would be valid and enforceable under applicable law.
11.17 Right to Participate or Assign Loan. Bank shall retain the right at
all times, with or without Borrower's consent, to grant participation in or
to assign all of the Note or any portion thereof, together with the
collateral for repayment of the Note, to any other entity acceptable to
Bank, and Borrower acknowledges that Bank shall have the right to share any
and all information concerning Borrower with any prospective loan
participant or assignee. Notwithstanding the foregoing, in the event of a
participation in or assignment of the Loan, Bank One, Colorado, NA, a
national banking association, shall retain the right to make decisions
without the consent of the participant or assignee.
11.18 Waiver of Rights. Borrower for itself, and for all who may claim
through or under it, waives (a) the right to trial by jury on any issues
between Borrower and Bank and to any issues pertaining to the Loan Documents
and as to matters pertaining to the acts of the Bank prior to the date
hereof; and (b) any and all right to have the property and estates
comprising the Property marshalled upon any foreclosure of the lien and
security interests of the Loan Documents and agrees that any court having
jurisdiction to foreclose such lien may order the Property sold as an
entirety.
11.19 Counterparts. This Construction Loan Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
shall constitute the same document.
IN WITNESS WHEREOF, Borrower, Guarantors and Bank have executed this
Agreement as of the date first written above by and through their duly
authorized representatives.
BORROWER:
CONCEPTS DIRECT, INC., a Delaware corporation
By /S/ H. Franklin Marcus, Jr. Title: H. Franklin Marcus, Jr. Chief
Financial Officer
BANK:
BANK ONE, COLORADO, NA
By: /S/ Greg McCann Greg McCann, Vice President
