FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 1997 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from ____________ to _____________
Commission File Number: 33-58934
LUNDGREN BROS. CONSTRUCTION, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0970679
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
935 East Wayzata Boulevard
Wayzata, Minnesota 55391
(Address of principal executive offices) (Zip Code)
(612)473-1231
(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 ___
On May 12, 1997, there were 594 voting shares and 10,031 nonvoting shares of the
registrant's no par value common stock outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
LUNDGREN BROS. CONSTRUCTION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
------- -------
(UNAUDITED)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 2,239 $ 1,253
Restricted cash 1,031 1,072
Receivables 1,303 1,276
Deposits and prepaid expenses 4,209 3,663
Inventories 37,724 37,828
Income taxes receivable 193 32
Land option and earnest money deposits 835 795
Property and equipment, net 1,489 1,564
Deferred income taxes 130 130
Other assets 4,290 4,082
------- -------
Total assets $53,443 $51,695
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Obligations under bank lines of credit $ 6,365 $ 2,987
Debt obligations 30,498 30,673
Obligations under capital leases 468 499
Accounts payable 5,551 5,996
Cost to complete sold homes 745 995
Customer deposits 1,260 1,249
Accrued expenses 1,402 1,900
------- -------
Total liabilities 46,289 44,299
Commitments - -
Stockholders' equity:
Common stock, no par value; authorized, 12,000
shares; 594 shares voting and 10,031
shares nonvoting issued and outstanding 99 99
Retained earnings 7,055 7,297
------- -------
7,154 7,396
------- -------
Total liabilities and stockholders' equity $53,443 $51,695
======= =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
LUNDGREN BROS. CONSTRUCTION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
-------- --------
<S> <C> <C>
Revenues $ 12,096 $ 9,924
Cost of revenues 10,595 8,324
-------- --------
Gross profit 1,501 1,600
Operating expenses:
Selling 562 494
General and administrative 785 883
-------- --------
154 223
Other income (expense):
Interest expense (579) (466)
Other, net 22 134
-------- --------
Loss from continuing operations before income taxes (403) (109)
Income tax benefit (161) (43)
-------- --------
Loss from continuing operations (242) (66)
Loss from discontinued operations, net of income taxes - (53)
-------- --------
Net loss (242) (119)
Retained earnings, beginning of period 7,297 6,286
-------- --------
Retained earnings, end of period $ 7,055 $ 6,167
======== ========
Net loss per share:
Continuing operations $ (23) $ (6)
Discontinued operations - (5)
-------- --------
$ (23) $ (11)
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
LUNDGREN BROS. CONSTRUCTION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (242) $ (119)
Loss from discontinued operations - 53
------- -------
Loss from continuing operations (242) (66)
Adjustments to reconcile loss from continuing
operations to net cash used in operating activities:
Depreciation and amortization 113 110
Gain on disposal of property and equipment (4) -
Gain on sale of investment - (123)
Changes in operating assets and liabilities (1,712) (2,566)
------- -------
Net cash used in continuing operating activities (1,845) (2,645)
Net cash used in discontinued operations (100) (107)
------- -------
Net cash used in operating activities (1,945) (2,752)
Cash flows from investing activities:
Expenditures for property and equipment (36) (13)
Proceeds on disposal of property and equipment 12 -
Proceeds on sale of investment - 159
Other 5 14
Increase in cash surrender value of
life insurance (213) (231)
------- -------
Net cash used in investing activities (232) (71)
Cash flows from financing activities:
Proceeds from bank lines of credit 8,378 7,718
Payment of principal on bank lines of credit (5,000) (7,705)
Proceeds from debt obligations 8,094 7,527
Payment of principal on debt obligations (8,248) (6,249)
Payment of principal on capital lease obligations (31) (2)
Payment of debt issuance costs (30) -
------- -------
Net cash provided by financing activities 3,163 1,289
------- -------
Increase (decrease) in cash and cash equivalents 986 (1,534)
Cash and cash equivalents, beginning of the period 1,253 2,984
------- -------
Cash and cash equivalents, end of the period $ 2,239 $ 1,450
======= =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
LUNDGREN BROS. CONSTRUCTION, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 1. GENERAL
INTERIM FINANCIAL STATEMENTS
The interim financial statements are unaudited but, in the opinion of
management, reflect all adjustments necessary for a fair presentation of
financial position, results of operations and cash flows for the periods
presented. These adjustments consist of normal, recurring items. The results of
operations for any interim period are not necessarily indicative of results for
the full year. The financial statements and notes are presented as permitted by
the requirements for Form 10-Q and do not contain certain information included
in the Company's annual financial statements and Notes. This Form 10-Q should be
read in conjunction with the Company's financial statements and notes included
in its 1996 Annual Report on Form 10-K.
PER SHARE AMOUNTS
Per share amounts are computed by dividing by the weighted average number of
shares of voting and nonvoting common stock outstanding during each period. The
number of outstanding shares of common stock for the three months ended March
31, 1997 and 1996 was 10,625. In February 1997, the Financial Accounting
Standards Board issued statement No. 128, "Earnings Per Share." This statement
establishes standards for computing and presenting basic and diluted earnings
per share (EPS) for financial statements issued for periods ending after
December 15, 1997. The adoption of this statement will not effect the Company's
reported EPS.
NOTE 2. SELECTED FINANCIAL DATA
March 31, 1997 December 31, 1996
------ ------
(UNAUDITED)
RECEIVABLES
Trade $ 861 $ 961
Escrows 366 202
Contracts and notes 18 18
Employees and officers 32 11
Other 81 139
------ ------
1,358 1,331
Less allowance for doubtful accounts 55 55
------ ------
$1,303 $1,276
====== ======
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
------- -------
(UNAUDITED)
<S> <C> <C>
INVENTORIES
Homes under construction $14,386 $11,939
Model homes 3,624 3,783
Lots held for sale 13,178 15,069
Land under development - 337
Land held for future development 6,536 6,700
------- -------
$37,724 $37,828
======= =======
ACCRUED EXPENSES
Payroll, bonuses and payroll taxes $ 319 $ 958
Other 1,083 942
------- -------
$ 1,402 $ 1,900
======= =======
DEBT OBLIGATIONS
Construction loans on single family homes $12,112 $10,692
Promissory notes 4,896 5,231
Development loans 5,070 6,243
Subordinate debenture series 5,945 5,951
Street, sewer and water assessments on land
under development and lots held for sale 1,379 1,471
Installment loans 994 978
Unsecured demand notes payable, stockholders 102 107
------- -------
$30,498 $30,673
======= =======
</TABLE>
NOTE 3. DISCONTINUED OPERATIONS:
In November 1996, the Company discontinued operations of its remodeling
division. An estimated loss on disposal of $41 was accrued in the fourth quarter
of 1996. The consolidated statements of operations and retained earnings and
consolidated statement of cash flows for the first quarter ended March 31, 1996
have been restated to report separately the net assets and operating results of
this discontinued business. This discontinued business had revenues of $906
during the quarter ended March 31, 1996. There were no revenues related to the
discontinued business in the quarter ended March 31, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Revenues for the three months ended March 31, 1997 increased $2.2 million or
21.9% from the same period in 1996. The Company closed on sales of 34 homes in
the first three months of 1997 as compared to 27 closings in the same period in
1996. The average selling price of homes closed in the first three months of
1997 decreased by 1.4% from the average selling price of homes closed in the
same period in 1996. The Company believes that the increase in homes closed was
due to a special promotion offered in late 1996 through the first quarter of
1997. The decrease in average selling price is due to changes in the mix of
homes closed in the first three months of 1997 compared to the same period in
1996 and the effect of the special promotion on pricing.
Gross profit for the three months ended March 31, 1997 was $1.5 million, a
decrease from $1.6 million in the same period in 1996. The Company's gross
profit margin in the three months ended March 31, 1997 decreased to 12.4% as
compared to 16.1% in the same period in 1996. This decrease in gross profit
margin is primarily due a lower average sales price as a result of the special
promotion on sales of the Company's completed house inventories, changes in the
mix of homes sold and increases in the cost of land developed by the Company due
to competition for, and reductions in the availability of, raw land within the
Twin Cities metropolitan area.
Operating expenses (which include selling, general and administrative expenses)
for the three months ended March 31, 1997 were approximately the same as in
1996. As a percentage of total revenues, these expenses decreased to 11.1% in
1997 as compared to 13.9% in 1996, as most are fixed in nature.
OTHER INCOME (EXPENSE), NET
Interest expense for the three months ended March 31, 1997 increased $113,000 or
24.2% from the same period in 1996. This increase is mainly due to higher
interest rates and increased borrowings on the Company's lines of credit for
working capital as well as an increase in finished home inventory.
Other income (expense), net decreased $112,000 in the three months ended March
31, 1997 from the same period in 1996. The decrease is mainly due to a $123,000
gain in 1996 on the sale of an investment in a land development partnership.
NET INCOME (LOSS)
Net loss in the three months ended March 31, 1997 was $242,000, compared to a
$119,000 net loss in the same period in 1996. The increased loss is primarily
due to a decrease in gross profit margins and increased interest expense in
1997, and a gain in 1996 on the sale of an investment in a land development
partnership.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used in operating activities were $1.9 million for the three months
ended March 31, 1997, a decrease of $807,000 from the same period in 1996,
during which operating activities used $2.7 million of cash. In 1997, cash was
used for a $546,000 increase in deposits and prepaid expenses, principally for
costs incurred in research of potential land projects; a $498,000 decrease in
accrued expenses, principally for payment of bonuses to employees other than
stockholders; a $293,000 reduction in accounts payable, a $242,000 loss from
operations and $366,000 related to other changes in operating assets and
liabilities.
Cash flows used in investing activities increased by $161,000 from $71,000 for
the three months ended March 31, 1996 to $232,000 for the same period in 1997.
The increase was primarily due to proceeds from the sale of an investment in a
land development partnership in 1996.
Cash flows provided by financing activities increased approximately $1.9 million
to $3.2 million for the three months ended March 31, 1997 from $1.3 million in
the same period in 1996. The increase was primarily due to increased net
borrowings on the Company's bank lines of credit as a result of a temporary
increase in cash and cash equivalents in 1997 compared to 1996 and use of cash
for costs incurred in research of potential land projects.
Financing
The Company believes that internally generated funds, amounts available under
its four lines of credit and borrowing arrangements entered into in the ordinary
course of business will continue to be the primary sources of capital for
liquidity.
The Company's financing needs depend primarily upon sales volume, asset
turnover, land acquisition and inventory balances. The Company presently
finances substantially all of its land acquisition and development and home
construction activities through borrowing arrangements for individual projects
or homes under construction. The borrowing arrangements for each individual
project evolve as the project matures from land acquisition, to development, to
construction of a home and, and finally, to sale of the home and lot.
The Company also utilizes secured lines of credit to finance its operations. The
Company has an approved aggregate credit of $10.4 million, subject to a
borrowing base. At March 31, 1997, the aggregate maximum credit available under
the lines of credit was $9.6 million, of which $6.4 million was utilized and
$3.2 million was available.
The Company's outstanding indebtedness as of March 31, 1997 included $23.4
million due within one year. The Company has historically operated with a
substantial amount of its outstanding indebtedness due within one year,
historically paying such debt out of earnings or through refinancing, where
applicable. The Company believes that the amounts available under its credit and
amounts generated from operations will be sufficient to satisfy its debt
obligations due in the next year. However, there can be no assurance that the
Company will be able to continue to obtain adequate short-term financing,
including bank financing, in the future.
The forward-looking statements contained in this quarterly report on Form 10-Q,
including without limitations forward-looking statements contained in
Management's Discussion and Analysis, are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Certain
important factors could cause results to differ materially from those
anticipated by some statements made herein. You are cautioned that all
forward-looking statements involve risks and uncertainties. Among the factors
that could cause results to differ materially are the following: Cyclical
economic conditions; fluctuations in operating results; continuing need to
acquire land for future development; substantial leverage; reliance on financing
and no assurance of availability of credit; extensive government regulation; and
environmental factors. Reference is also made to the risk factors contained in
the Company's Registration Statement on Form S-1, as filed with the Securities
and Exchange Commission on October 18, 1996.
PART II. OTHER INFORMATION
Items 1 through 5.
Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are hereby incorporated by reference or filed
herewith as indicated.
(1) 3.1 Articles of Incorporation of Lundgren in effect on the date
hereof.
(1) 3.2 Bylaws of Lundgren on the date hereof.
(1) 4.1 Form of Debenture (included as Sections 202(A) and (B) of
Indenture filed as Exhibit 4.2 hereto).
(1) 4.2 Form of Indenture by and between Lundgren and National City
Bank Minnesota, as Trustee, including a Form of Debenture.
(7) 4.3 Form of Debenture (included as Sections 2.2(A) and (B) of
Indenture filed as Exhibit 4.4 hereto).
(7) 4.4 Form of Indenture by and between Lundgren and National City
Bank Minnesota, National Association, as Trustee, including
a Form of Debenture.
(1) 10.1 Lease by and among Lundgren, as lessor, Glenbrook Office
Building Partnership, and Peter Pflaum and Patrick C. Wells,
general partners, dated September 28, 1978.
(1) 10.2 Amended and Restated Stock Purchase Agreement, dated
February 1, 1993, by and among Lundgren, Peter Pflaum,
Patrick Wells, Edmund M. Lundgren, Gerald T. Lundgren and
Allan D. Lundgren.
(3) 10.3 Revolving Credit Line Agreement between the Company and
Builders Development & Finance, Inc., dated March 18, 1994.
(3) 10.4 Mortgage Note, dated March 18, 1994, of the Company payable
to Builders Development & Finance, Inc.
(3) 10.5 Combination Mortgage, Security Agreement and Fixture
Financing Statement between the Company and Builders
Development & Finance, Inc., dated March 18, 1994, including
all amendments thereto.
(1) 10.6 Guaranty by Peter Pflaum, Patrick C. Wells, Allan D.
Lundgren, Edmund M. Lundgren and Gerald T. Lundgren for the
benefit of Builders Development & Finance, Inc., dated July
27, 1990.
(1) 10.7 Demand Discretionary Revolving Credit Agreement between the
Company and Norwest Bank Minnesota, National Association,
dated November 30, 1990.
(1) 10.8 First Amended and Restated Revolving Note, dated May 1,
1992, of the Company payable to Norwest Bank Minnesota,
National Association.
(1) 10.9 Assignment of Life Insurance Policy as Collateral by the
Company in favor of Norwest Bank Minnesota, National
Association, dated November 30, 1990.
(1) 10.10 Assignment of Life Insurance Policy as Collateral by the
Company in favor of Norwest Bank Minnesota, National
Association, dated May 1, 1992.
(1) 10.11 Guaranty by Peter Pflaum, Patrick C. Wells, Allan D.
Lundgren, Edmund M. Lundgren and Gerald T. Lundgren for the
benefit of Norwest Bank Minnesota, National Association,
dated November 5, 1990 and all extensions thereof.
(5) 10.12 Commercial Lease, dated June 1, 1995, by and between
Koecheler & Olson Leasing and Lundgren Bros. Plumbing.
(5) 10.13 Lease Agreement, dated April 10, 1995, by and between B.M.
Acquisitions Corporation (Brush Masters, Inc.) and John J.
Day.
(1) 10.14 Loan Agreement, dated as of May 8, 1992, by and between the
Company and Builders Development & Finance, Inc.
(1) 10.15 First Mortgage Note, dated May 8, 1992, of the Company
payable to Builders Development & Finance, Inc.
(1) 10.16 Second Mortgage Note, dated May 8, 1992, of the Company
payable to Builders Development & Finance, Inc.
(1) 10.17 First Mortgage, dated May 8, 1992, by the Company in favor
of Builders Development & Finance, Inc.
(1) 10.18 Second Mortgage, dated May 8, 1992, by the Company in favor
of Builders Development & Finance, Inc.
(1) 10.19 Guaranty, dated as of May 8, 1992, by Peter Pflaum, Edmund
M. Lundgren, Gerald T. Lundgren, Allan D. Lundgren and
Patrick C. Wells for the benefit of Builders Development &
Finance, Inc.
(1) 10.20 Construction Loan Agreement, dated as of July 22, 1992, by
and between the Company and Scherer Bros. Financial Services
Co.
(1) 10.21 Mortgage and Security Agreement, dated July 22, 1992,
between the Company and Scherer Bros. Financial Services Co.
(1) 10.22 Promissory Note, dated July 22, 1992, of the Company payable
to Scherer Bros. Financial Services Co.
(1) 10.23 Guaranty, dated as of July 22, 1992, by Allan Lundgren for
the benefit of Scherer Bros. Financial Services Co.
(1) 10.24 Guaranty, dated as of July 22, 1992, by Patrick Wells for
the benefit of Scherer Bros. Financial Services Co.
(1) 10.25 Guaranty, dated as of July 22, 1992, by Peter Pflaum for the
benefit of Scherer Bros. Financial Services Co.
(1) 10.26 Guaranty, dated as of July 22, 1992, by Edmund Lundgren for
the benefit of Scherer Bros. Financial Services Co.
(1) 10.27 Guaranty, dated as of July 22, 1992, by Gerald Lundgren for
the benefit of Scherer Bros. Financial Services Co.
(1) 10.28 Development Loan Agreement, dated May 15, 1992, by and
between the Company and Construction Mortgage Investors Co.
(1) 10.29 First Mortgage Note, dated May 15, 1992, of the Company
payable to Construction Mortgage Investors Co.
(1) 10.30 First Mortgage, dated May 15, 1992, by the Company in favor
of Construction Mortgage Investors Co.
(1) 10.31 Guaranty, dated May 15, 1992, by Peter Pflaum, Patrick C.
Wells, Allan D. Lundgren, Edmund M. Lundgren and Gerald T.
Lundgren for the benefit of Construction Mortgage Investors
Co.
(1) 10.32 Contribution Agreement, dated as of February 17, 1993, by
and among the Company, Peter Pflaum, Patrick C. Wells, Allan
D. Lundgren, Edmund M. Lundgren and Gerald T. Lundgren.
(5) 10.33 Shopping Center Lease, dated February 9, 1994, by and
between Oakdale Mall Associates and Lundgren Bros.
Construction, Inc. d/b/a Lundgren Bros. Remodeling.
(1) 10.34 Form of Option to Purchase Land.
(1) 10.35 Form of Contingent Purchase Agreement.
(5) 10.36 Amendment No. 1 to Amended and Restated Stock Purchase
Agreement, dated April 1, 1993.
(2) 10.37 Amended and Restated Demand Discretionary Revolving Credit
Agreement, dated March 18, 1994, by and between Norwest Bank
Minnesota, National Association and Lundgren Bros.
Construction, Inc.
(4) 10.38 Fourth Amended and Restated Revolving Note (Demand), dated
March 14, 1995, of the Company payable to Norwest Bank
Minnesota, National Association.
(4) 10.39 Consent and Reaffirmation of Guaranty, dated March 14, 1995,
by Peter Pflaum, Patrick C. Wells, Edmund M. Lundgren, Allan
D. Lundgren and Gerald T. Lundgren in favor of Norwest Bank
Minnesota, National Association.
(3) 10.40 Satisfaction of Combination Mortgage, Security Agreement and
Fixture Financing Statement executed by Builders Development
& Finance, Inc. on March 29, 1994.
(3) 10.41 Letter Agreement, dated February 17, 1994, between Builders
Funding Corporation and Lundgren Bros. Construction, Inc.
(4) 10.42 Amendment, Extension and Reaffirmation Agreement, dated
March 14, 1995, by and among Lundgren Bros. Construction,
Inc., Patrick C. Wells, Peter Pflaum, Edmund M. Lundgren,
Allan D. Lundgren and Gerald T. Lundgren and Norwest Bank
Minnesota, National Association.
(4) 10.43 Supplemental Assignment of Life Insurance Policies as
Collateral, dated March 14, 1995, by Lundgren Bros.
Construction, Inc. in favor of Norwest Bank Minnesota,
National Association.
(4) 10.44 Second Supplemental Assignment of Life Insurance Policies as
Collateral, dated March 16, 1995, by Lundgren Bros.
Construction, Inc. in favor of Norwest Bank Minnesota,
National Association.
(5) 10.45 Third Amendment to Combination Mortgage, Security Agreement
and Fixture Financing Statement and Amendment to Revolving
Credit Line Agreement, dated January 25, 1995, by Lundgren
Bros. Construction, Inc. and Builders Development & Finance,
Inc.
(6) 10.46 Second Amended and Restated Mortgage Note, dated May 20,
1996, of Lundgren Bros. Construction, Inc. payable to
Builders Development & Finance, Inc.
(6) 10.47 Eighth Amendment to Combination Mortgage, Security Agreement
and Fixture Financing Statement and Second Amendment to
Revolving Credit Line Agreement and Reaffirmation Agreement,
dated May 20, 1996, by Lundgren Bros. Construction, Inc. and
Builders Development & Finance, Inc.
(6) 10.48 Promissory Note, dated March 21, 1996, of Lundgren Bros.
Construction, Inc. payable to First Bank National
Association.
(6) 10.49 Letter Agreement, dated March 21, 1996, by Lundgren Bros.
Construction, Inc. and First Bank National Association.
(6) 10.50 Pledge Agreement, dated March 21, 1996, by Lundgren Bros.
Construction, Inc. for the benefit of First Bank National
Association.
(6) 10.51 Control Agreement (With Broker or other Securities
Intermediary), dated March 21, 1996, by Lundgren Bros.
Construction, Inc., First Bank National Association and FBS
Investment Services, Inc.
(6) 10.52 Guaranty, dated March 12, 1996, by Edmund M. Lundgren for
the benefit of First Bank National Association.
(6) 10.53 Guaranty, dated March 12, 1996, by Allan Lundgren for the
benefit of First Bank National Association.
(6) 10.54 Guaranty, dated March 12, 1996, by Peter Pflaum for the
benefit of First Bank National Association.
(6) 10.55 Guaranty, dated March 12, 1996, by Patrick C. Wells for the
benefit of First Bank National Association.
(6) 10.56 Guaranty, dated March 12, 1996, by Gerald Lundgren for the
benefit of First Bank National Association.
(8) 10.57 Fifth Amended and Restated Revolving Note (Demand), dated
February 24, 1997, of the Company payable to Norwest Bank
Minnesota, National Association.
(8) 10.58 Consent and Reaffirmation of Guaranty, dated February 24,
1997, by Peter Pflaum, Patrick C. Wells, Edmund M. Lundgren,
Allan D. Lundgren and Gerald T. Lundgren in favor of Norwest
Bank Minnesota, National Association.
(8) 10.59 Second Amendment, Extension and Reaffirmation Agreement,
dated February 24, 1997, by and among Lundgren, Patrick C.
Wells, Peter Pflaum, Edmund M. Lundgren, Allan D. Lundgren,
Gerald T. Lundgren and Norwest Bank Minnesota, National
Association.
(8) 10.60 Ninth Amendment to Combination Mortgage, Security Agreement
and Fixture Financing Statement, dated November 25, 1996, by
Lundgren Bros. Construction, Inc. and Builders Development &
Finance, Inc.
10.61 Revolving Construction and Development Loan Agreement, dated
April 18, 1997, by and between Lundgren Bros. Construction,
Inc. and First Bank National Association.
10.62 Revolving Credit Note, dated April 18, 1997, by Lundgren
Bros. Construction, Inc. in favor of First Bank National
Association
10.63 Mortgage and Security Agreement and Fixture Financing
Statement, dated April 18, 1997, by Lundgren Bros.
Construction, Inc. in favor of First Bank National
Association.
10.64 Guaranty, dated April 18, 1997, by and among Edmund M.
Lundgren, Allan D. Lundgren, Peter Pflaum, Patrick C. Wells
and Gerald T. Lundgren to First Bank National Association.
10.65 Indemnity Agreement, dated April 18, 1997, by and among
Lundgren Bros. Construction, Inc., Edmund M. Lundgren, Allan
D. Lundgren, Peter Pflaum, Patrick C. Wells, and Gerald T.
Lundgren, and First Bank National Association.
10.66 Amendment and Restatement of Promissory Note, including
Consent, dated March 21, 1997, by Lundgren Bros.
Construction, Inc. in favor of First Bank National
Association.
(4) 18.1 Letter on accounting change, Coopers & Lybrand, LLP, dated
May 12, 1995.
27 Financial Data Schedule.
(1) Incorporated by reference to the Exhibit of the same number to the
Company's Registration Statement on Form S-1, Registration No. 33-58934.
(2) Incorporated by reference to the Exhibit of the same number to the
Company's Annual Report on Form 10-K for the year ended December 31, 1993.
(3) Incorporated by reference to the Exhibit of the same number to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1994.
(4) Incorporated by reference to the Exhibit of the same number to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.
(5) Incorporated by reference to the Exhibit of the same number to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
(6) Incorporated by reference to the Exhibit of the same number to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996.
(7) Incorporated by reference to the Exhibit of the same number to the
Company's Registration Statement on Form S-1, Registration No. 333-12137.
(8) Incorporated by reference to the Exhibit of the same number to the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
(b) Reports on Form 8-K.
The Registrant filed no reports on Form 8-K during the quarter ended March
31, 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.
LUNDGREN BROS. CONSTRUCTION, INC.
Date: May 12, 1997 By:/s/ Peter Pflaum
-----------------------------------------------------
Peter Pflaum
President, Chief Executive Officer and Principal
Financial Officer
REVOLVING CONSTRUCTION AND DEVELOPMENT LOAN AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ day of April,
1997, by and between LUNDGREN BROS. CONSTRUCTION, INC., a Minnesota corporation
(hereinafter referred to as "Borrower"), whose address is 935 East Wayzata
Boulevard, Wayzata, Minnesota 55391; and FIRST BANK NATIONAL ASSOCIATION, a
national banking association (hereinafter referred to as "Lender"), whose
address is 601 Second Avenue South, Minneapolis, Minnesota 55402-4302.
WITNESSETH THAT, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
following meanings:
Acquisition Costs: All costs of acquiring Project Land, including the
purchase price and reasonable and customary closing costs; provided, however,
that Acquisition Costs with respect to any Project Land shall be deemed never to
exceed the lesser of (a) the actual cost of the Project Land, or (b) the value
of the unimproved Project Land in "as-is" condition as shown by an Appraisal (to
the extent that an Appraisal is required by this Agreement with respect to such
Project Land).
Advance: Any portion of the Loan advanced by Lender to or for the
benefit of Borrower in accordance with the terms hereof.
Advance Date: The date on which an Advance of Loan proceeds requested
by Borrower hereunder is funded.
Affiliate: When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns or
holds, directly or indirectly, five percent (5%) or more of any class of voting
stock of the Person referred to (or if the Person referred to is not a
corporation, five percent (5%) or more of the equity interest therein), (c) each
Person, five percent (5%) or more of the voting stock (or if such Person is not
a corporation, five percent (5%) or more of the equity interest therein) of
which is beneficially owned or held, directly or indirectly, by the Person
referred to, and (d) each of such Person's officers, directors, joint venturers
and partners. The term control (including the terms "controlled by" and "under
common control with") means the possession directly or indirectly, of the power
to direct or cause the direction of the management and policies of the Person in
question.
Agreement: This Revolving Construction and Development Loan Agreement
including all Project Addenda and any other amendments hereof and supplements
hereto executed by Borrower and Lender.
Amendment of Mortgage: The Amendment of Mortgage to be executed at the
time that an additional Project is approved by Lender for the purpose of
subjecting such Project to the lien of the Mortgage. The form of the Amendment
of Mortgage shall be as set forth in Exhibit "A" attached hereto with the
insertion of the applicable legal description being added for such Project.
Applicable Margin: One and one-quarter percent (1.25%).
Application and Certificate For Payment: The Application and
Certificate for Payment in the form of that attached hereto as Exhibit "B" which
shall be used in connection with all Advances for Development Loans.
Appraisal: A third-party appraisal of the value of a Project setting
forth the value of the unimproved Project Land in an "as is" condition and the
value of the improved Project Land based on the retail sales value of the
finished lots in the case of a Development Project and the retail sales value of
the finished lot and the home to be constructed thereon in the case of a
Construction Project commissioned and/or approved by, and addressed to, Lender,
and prepared at the expense of Borrower by a qualified and licensed MAI
appraiser acceptable to Lender, which complies with all applicable Governmental
Requirements and the requirements of Lender and its chief review appraiser.
Board: The Board of Governors of the Federal Reserve System or any
successor thereto.
Borrowing Base Certificate: The Borrowing Base Certificate in the form
of that attached hereto as Exhibit "C".
Budget: An itemized, certified statement of actual and estimated Costs,
including all Acquisition Costs, Construction Costs and Soft Costs, of a
Project, in Lender's form, signed and sworn to by Borrower, as the same may be
amended or supplemented with approval of Lender from time to time.
Business Day: Any day (other than a Saturday, a Sunday or a legal
holiday in the State of Minnesota) on which national banks are permitted to be
open.
City: The municipality, village, township or other applicable
governmental entity in which the Project is located and from which governmental
approvals or permits are required.
Closing Date: The date of this Agreement.
Code: The Internal Revenue Code of 1986, as amended.
Completion Date: The date on which Completion of a Project occurs, but
in no event later than (a) the date specified therefor on the Project Addendum
relating to a Development Project, and (b) the date specified in Column I of the
Borrowing Base Certificate.
Consolidated Indebtedness: All Indebtedness of Borrower and its
Consolidated Subsidiaries (excluding intercompany items and all Shareholders
Subordinated Debt), after making appropriate deductions for any minority
interests.
Consolidated Net Income: For any period shall mean the amount of
consolidated net income (or loss) of Borrower and its Consolidated Subsidiaries
for such period determined on a consolidated basis in accordance with generally
accepted accounting principles, after eliminating all intercompany items and
portions of earnings properly attributable to minority interests, if any, in the
Consolidated Subsidiaries; provided, however, that there shall not be included
in Consolidated Net Income any net income (or net loss) of a Consolidated
Subsidiary for any period during which it was not a Consolidated Subsidiary, or
any net income (or net loss) of any business, properties or assets acquired (by
way of merger, consolidation, purchase or otherwise) by Borrower or any
Consolidated Subsidiary for any period prior to the acquisition thereof.
Consolidated Subsidiary: A Subsidiary of Borrower whose financial
statements are included in the most recent annual consolidated financial
statements of Borrower and its Subsidiaries.
Consolidated Tangible Net Worth: The dollar amount of:
(a) the tangible assets of Borrower and its Consolidated
Subsidiaries (excluding intercompany items) after deducting
for minority interests and adequate reserves in each case
where, in accordance with generally accepted accounting
principles, a reserve is proper, in excess of
(b) the aggregate amount of Consolidated Indebtedness and
Shareholders Subordinated Debt;
provided, however, that (i) inventory shall be taken into account on the basis
of the cost or current market value, whichever is lower, (ii) in no event shall
there be included as such tangible assets (a) any assets typically classified as
intangible assets, including but not limited to patents, trademarks, trade
names, copyrights, licenses, goodwill and debt issuance costs, or (b) treasury
stock or any securities or Indebtedness of Borrower or a Consolidated
Subsidiary, or any other equity, convertible or unsecured debt securities unless
the same are readily marketable in the United States of America or entitled to
be used as a credit against Federal income tax liabilities, and (iii) securities
included as such tangible assets shall be taken into account at their current
market price or cost, whichever is lower, and (iv) any write-up in the book
value of any assets subsequent to December 31, 1995, shall not be taken into
account. The Consolidated Tangible Net Worth as of December 31, 1995 was
$5,968,000.
Construction Costs: All hard costs of constructing Project
Improvements, including site preparation costs and the costs of all materials,
labor and equipment.
Construction Project: The construction of a single-family home or a two
to eight-unit multifamily structure on Construction Project Land, all as
approved by Lender in accordance with Section 2.4 hereof.
Construction Project Completion: All Construction Project Improvements
included within a Construction Project are completed in accordance with the
Plans therefor and paid for in full, free of all mechanics', laborers',
materialmen's and other similar lien claims; a certificate of substantial
completion for the Project Improvements has been signed by Borrower and Borrower
has received a certificate of occupancy from the City and has otherwise complied
with all Governmental Requirements with respect to completion of construction of
the Construction Project.
Construction Project Improvements: New single-family homes or two to
eight-unit multifamily structures and related improvements to be constructed
upon Construction Project Land and owned by Borrower.
Construction Project Land: Land owned in fee simple by Borrower to be
used for a Construction Project and upon which Construction Improvements are
located or are to be constructed.
Construction Project Loan. A Construction Project Loan made pursuant to
Section 2.4.
Consultants: Third party experts retained by Lender to assist it in
connection with approving, closing, advancing or administering the Project
Loans.
Contingency Reserve: A reserve of Development Project Loan proceeds to
pay Costs which are in excess of the amounts thereof anticipated on the date of
approval of the Development Project, whether as a result of price increases,
changes in the Plans or otherwise, in an amount equal to a percentage of all
Construction Costs of a Development Project as mutually agreed to by Borrower
and Lender.
Contractor: Any Person, party or entity which has a contract or
subcontract under which payment may be required for any work done, material
supplied or services furnished in connection with acquiring, constructing,
financing, equipping and/or developing a Project.
Costs: All Acquisition Costs, Construction Costs and Soft Costs of a
Project.
Debt Restricted Cash: The unborrowed portion of any land development
loans to Borrower held in restricted bank accounts under financing arrangements
substantially similar to such loans made to Borrower in the past.
Default Rate: The Default Rate of interest specified in Section 1.2(b)
hereof.
Development Project: The acquisition and development of Development
Project Land into (a) single family housing subdivisions, or (b) two to eight
unit multi-family housing subdivisions, all as approved by Lender in accordance
with Section 2.2 hereof.
Development Project Completion: All Development Project Improvements
included within a Development Project (except for final paving or other similar
items, the completion of which is secured by a Letter of Credit deposited with
the City) are completed in accordance with the Plans therefor, as approved by
Lender, and paid for in full, free of all mechanics', laborers', materialmen's
and other similar lien claims; said completion has been approved and certified
by the General Contractors and by the Inspecting Architect; a certificate of
substantial completion for the Project Improvements has been signed by Borrower
and the General Contractors and delivered to Lender, and no punch-list items
remain to be completed; Lender has received acceptable evidence that all
Governmental Requirements and all private restrictions and covenants relating to
the Project have been complied with or satisfied; Lender has received copies of
all warranties, if any, from suppliers covering materials included within the
Development Project; Lender has received an as-built survey of the Project which
conforms with Lender's requirements.
Development Project Improvements: All improvements, including all
improvements required by the City, which are necessary for the completion of a
Development Project including, but not limited to, the construction of roads,
utilities, curbs, gutters, signage, grading and landscaping, all in accordance
with Plans approved by Lender and Inspecting Architect.
Development Project Land: Land owned or acquired in fee simple by
Borrower to be used for a Development Project and upon which Development Project
Improvements are located or are to be constructed.
Development Project Loan: A Project Loan made pursuant to Sections 2.2
and 2.3.
Draw Request: A written request by Borrower for an Advance of
Construction Project Loan proceeds under this Agreement, in the form Exhibit "E"
attached hereto and with the certifications set forth therein, including the
Borrowing Base Certificate.
Environmental Audit: A written Phase I environmental review, audit,
assessment or report commissioned and/or approved by, and currently addressed
and certified to, Lender, or accompanied by a reliance letter addressed which
complies with ASTM Practice E 1527 and which is otherwise acceptable to Lender,
setting forth the results of an investigation of a Development Project,
including an historical investigation of the uses and ownership of the
Development Project Land included therein, contacts with appropriate
governmental agencies and any Tests which may be requested by Lender, prepared
by a competent, qualified environmental engineer or consultant which is
acceptable to Lender and is licensed, bonded and insured in accordance with all
applicable statutes, and all supplements, updates and recertifications thereof
required by Lender.
Funded Debt: The sum of Senior Indebtedness, the Senior Subordinated
Debentures, Parity Indebtedness and Subordinated Indebtedness (except
Shareholders Subordinated Debt) less Debt Restricted Cash.
GAAP: Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of any date of
determination.
General Contractor: The general contractor or construction manager
(whether one or more) retained by Borrower and approved by Lender, which
approval shall not be unreasonably withheld with respect to any Project, if
different from Borrower. Borrower may act as its own general contractor with
respect to any Construction Project.
Governmental Requirements: All laws, statutes, codes, ordinances and
governmental rules, regulations and requirements applicable to Borrower, Lender,
Guarantors and/or the Projects.
Guarantors: Edmund M. Lundgren, Allan D. Lundgren, Peter Pflaum,
Patrick Wells and Gerald T. Lundgren (each of whom is herein sometimes called a
"Guarantor").
Guaranty: An absolute, unconditional, irrevocable, joint and several
guaranty of full payment and performance of the obligations of Borrower under
all of the other Loan Documents, executed by Guarantors, including any
amendments thereof and supplements thereto executed by Guarantors and Lender.
Immediately Available Funds: Funds with good value on the day and in
the city in which payment is received.
Improvements: The buildings and other improvements which are to be
placed or constructed upon the Project Land as a part of any Project, all of
which shall be owned by Borrower.
Indebtedness: With respect to any Person at any date means and includes
all items of indebtedness which, in accordance with generally accepted
accounting principles, would be included in determining total liabilities as
shown on the liabilities side of a balance sheet of such Person at such date,
and in addition shall include (i) all indebtedness guaranteed or endorsed (other
than for purposes of collection in the ordinary course of business), directly or
indirectly, in any manner by such Person, and contingent obligations of such
Person in respect of, or to purchase or otherwise acquire, indebtedness of
others, (ii) all lease obligations of such Person required under generally
accepted accounting principles to be capitalized and reflected as a liability on
the balance sheet of such Person, and (iii) all indebtedness secured by any
mortgage, lien, pledge, charge or encumbrance upon property owned by such
Person, whether or not the indebtedness so secured has been assumed by such
Person.
Indemnification Agreement: Lender's form of joint and several
indemnification agreement relating to environmental matters and executed by
Borrower and Guarantors, in favor of Lender, including any amendments thereof
and supplements thereto executed by Borrower and Guarantors which agreement as
amended will cover all Project Land.
Inspecting Architect: The independent architect, engineer or consultant
(whether one or more) selected by Lender to advise Lender with respect to any
Project.
Lender Debt: Any indebtedness of Borrower, of any Guarantor or of any
Affiliate of Borrower or of any Guarantor to the Lender or to any Affiliate of
Lender, whether recourse or nonrecourse, except the Loan.
Letter of Credit: A performance letter of credit required to be issued
by a City or a public utility in connection with a Development Project.
Letter of Instructions: The Letter of Instructions in the form of that
attached hereto as Exhibit "F".
Loan: The aggregate of all Project Loans made by Lender to Borrower
pursuant to the terms of this Agreement in an amount of up to Five Million and
00/100 Dollars ($5,000,000.00) outstanding at any given time (subject to the
limitations set forth in Section 1.1).
Loan Documents: The documents which evidence, secure or otherwise
relate to the Loan including, but not limited to, the Note, this Agreement, the
Mortgage, all Amendments to Mortgage, the Indemnification Agreement and the
Guaranty, and including any amendments thereof and supplements thereto executed
by Lender and Borrower (and/or any other party thereto).
Loan to Value Ratio: The ratio calculated by dividing the maximum
principal amount of a Project Loan by the market value less special assessments
of the related Project (a) as set forth in the most recent Appraisal thereof, or
(b) as set forth in the purchase agreement less special assessments in the case
of Construction Project Loans of less than Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00) which are secured by Pre-Sold Homes.
Loan Year: A period consisting of twelve (12) consecutive months
commencing on the first calendar month subsequent to the date hereof or on any
anniversary thereof, the first Loan Year being a Loan Year commencing on the
first day of May, 1997.
Management Bonuses: Management Bonuses shall have the meaning set forth
in Section 10.12 of that certain Indenture dated as of October 18, 1996 by and
between Borrower and National City Bank of Minneapolis, National Association as
Trustee.
Maturity Date: May 1, 2000 unless extended as set forth in Section 1.8
herein.
Model Home: A Construction Project which (a) is a single family home or
a unit in a two to eight unit multifamily structure, (b) not a Pre-Sold Home,
and (c) will be used as a model home by Borrower.
Mortgage: A first Mortgage and Security Agreement and Fixture Financing
Statement, dated of even date herewith, executed and delivered by Borrower in
favor of Lender to secure the Loan, including all amendments thereof and
supplements thereto, which Mortgage shall be a first lien on all Project Land.
Note: The Revolving Note, dated of even date herewith, executed and
delivered by Borrower to Lender in the face principal amount of Five Million and
00/l00 Dollars ($5,000,000.00), to evidence the Loan, as the same may be
amended, modified or replaced from time to time.
Parity Indebtedness: Any and all Indebtedness of Borrower created,
incurred, assumed, or guaranteed by Borrower before, at, or after the date of
execution of this Agreement which (a) matures by its terms, or is renewable at
the option of Borrower to a date, more than one year after the date of the
original creation, incurrence, assumption, or guaranty of such Indebtedness by
Borrower, (b) contain covenants, conditions and restrictions on Borrower which
are not inconsistent with nor violate any of the covenants, conditions and
restrictions in this Agreement, and (c) is neither Senior Indebtedness nor
Subordinated Indebtedness. Parity Indebtedness shall include, without
limitation, the Senior Subordinated Debentures.
Permitted Encumbrances: The liens, charges and encumbrances on title to
a Project approved as such by Lender prior to any Advance of proceeds of the
Project Loan therefor.
Person: Any natural person, corporation, limited liability company,
partnership (general or limited), limited liability partnership, joint venture,
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting
in an individual, fiduciary or other capacity.
Plans: The final working plans for Project Improvements, including
drawings, specifications, details and manuals (which in the case of Development
Projects shall have been approved by Lender).
Pollutant: Any hazardous or toxic substance, waste or material, or
other pollutant or contaminant (including, but not limited to, radioactive
materials, gasoline, asbestos, dioxin, methane, radon, urea-formaldehyde and
polychlorinated biphenyls), as those terms are defined or used in any
Governmental Requirement.
Pre-Sold Home: A Construction Project that is subject to a
non-cancelable and non-contingent purchase agreement with a bona fide third
party buyer.
Project: The Project Land and the Project Improvements which
collectively make up either a Development Project or a Construction Project.
Project Addendum: An addendum to this Agreement between Borrower and
Lender for each Development Project approved by Lender pursuant to Section 2.2,
identifying and describing the approved Development Project in detail,
supplementing this Agreement as it applies to said Development Project, setting
forth the amount of the Development Project Loan allocated thereto, setting
forth the date by which construction of the Development Project must begin
("Commencement Date") and the outside Completion Date therefor, setting forth
the estimated Costs of the Development Project and adding to this Agreement any
requirements, representations and covenants which are required by Lender as a
condition to its approval of said Development Project.
Project Improvements: All Construction Project Improvements and
Development Project Improvements.
Project Land: All Development Project Land and Construction Project
Land.
Project Loan: The portion of the Loan set aside to fund an approved
Development Project pursuant to Section 2.2 or an approved Construction Project
pursuant to Section 2.4.
Project Loan Maturity Date: The earlier of (a) the Maturity Date, or
(b) one of the following dates depending upon the type of Project: (i) thirty
(30) months after the date on which the first Advance of the proceeds of a
Development Project Loan is made, (ii) twelve (12) months after the date on
which the first Advance of proceeds of a Construction Project Loan is made if
the Project Improvement is a Pre-Sold Home (or, if earlier, the closing date
stipulated in the Purchase Agreement), (iii) thirty (30) months after the date
on which the first Advance of proceeds of a Construction Project Loan is made if
the Project Improvement is a Model Home, or (iv) fifteen (15) months after the
date on which the first Advance of proceeds of a Construction Project Loan is
made if the Project Improvement is a Speculative Home.
Purchase Agreement: A purchase agreement for the purchase of the
Project Land to be acquired for a Development Project or a Construction Project.
Reference Rate: The rate of interest from time to time publicly
announced by Lender as its "reference rate". Lender may lend to its customers at
rates that are at, above or below the Reference Rate. For purposes of
determining any interest rate hereunder or under any Loan Document which is
based on the Reference Rate, such interest rate shall change as and when the
Reference Rate shall change.
Regulatory Change: Any change after the date hereof in federal, state
or foreign laws or regulations or the adoption or making after such date of any
interpretations, directives or requirements applying to a class of banks
including Lender under any federal, state or foreign laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
Reimbursement Agreement: A reimbursement agreement in form and content
acceptable to Lender which governs the terms upon which a letter of credit will
be issued to a City in connection with a Development Loan.
Release Price: With respect to (a) a lot which is part of a Development
Project and which is being sold to a third party buyer or which Borrower
requests be released, unless such lot is being transferred to, and will become
part of a Construction Project pursuant to Section 3.6 hereof, the Release Price
shall equal one hundred twenty-five percent (125%) of the Transfer Price for
such lot as established by the terms of this Agreement, and (b) a lot which is a
Construction Project but which was originally part of a Development Project, the
Release Price shall equal one hundred eight percent (108%) of the amount of the
maximum approved Construction Project Loan, whether funded or not, (with the
excess proceeds, i.e., the eight percent (8%) being applied as a prepayment of
the Development Loan from which such lot was transferred), and (c) a lot which
is a Construction Project, but which was not originally part of a Development
Project, the Release Price shall equal one hundred percent (100%) of the amount
of the Construction Project Loan.
Revolving Commitment: The obligation of Lender to make Project Loans to
Borrower in an aggregate principal amount outstanding at any time not to exceed
the Revolving Loan Amount upon the terms and subject to the conditions and
limitations set forth in this Agreement.
Revolving Commitment Ending Date: November 1, 1999 unless extended
pursuant to the terms of Section 1.8 hereof.
Revolving Loan Amount: Five Million and 00/100 Dollars ($5,000,000.00).
Senior Indebtedness: The principal of, premium (if any) and interest on
any and all Indebtedness of Borrower (other than the Senior Subordinated
Debentures, Parity Indebtedness and Subordinated Indebtedness) incurred in
connection with (i) the borrowing of money (whether secured or unsecured) from
or guaranteed to banks, trust companies, insurance companies and other financial
institutions, (ii) all Indebtedness to specialized industry lenders to the
extent it is secured by real estate and/or assets of Borrower (including the
cash value of life insurance) evidenced by bonds, debentures, mortgages, notes
or other securities or other instruments, (iii) obligations under capitalized
leases as determined by GAAP, and (iv) other non-recourse obligations to third
parties in connection with the acquisition of land (but excluding option
agreements or contingent purchase agreements which Borrower has the right to
terminate unilaterally) incurred, assumed or guaranteed by Borrower before, at
or after the date of execution of this Agreement, and all renewals, extensions
and refundings thereof, unless in the instrument creating or evidencing any such
Indebtedness or pursuant to which such Indebtedness is outstanding, it is
provided that such Indebtedness, or such renewal, extension or refunding
thereof, is junior or is not superior in right of payment to the Senior
Subordinated Debentures.
Senior Subordinated Debentures: Both (a) the Senior Subordinated
Debentures, Series Ten Percent, in the amount of $3,000,000.00 and due in the
year 2003 as described in and governed by that certain Indenture dated May 14,
1993, by and between Borrower and National City Bank of Minneapolis, National
Association as Trustee, and (b) the Senior Subordinated Debentures, Series
Eleven Percent, in the amount of $3,000,000.00 and due 2004 as described in and
governed by that certain Indenture dated as of October 18, 1996, by and between
Lundgren Brothers Construction, Inc., and National City Bank of Minneapolis,
National Association as Trustee.
Shareholders Subordinated Debt: Any borrowing by Borrower from its
shareholders which is evidenced by a note or other instrument and expressly made
Subordinated Indebtedness as required by Section 10.11 of that certain Indenture
dated as of October 18, 1996 by and between Borrower and National City Bank of
Minneapolis, National Association, as Trustee, and which has a stated maturity
which is later than the stated maturity of the Senior Subordinated Debentures
described in such Indenture.
Soft Costs: Costs of a Project not attributable to Acquisition Costs or
Construction Costs, including interest on the Project Loan, fees payable to
Lender pursuant hereto, fees of Borrower's and Lender's counsel, fees of outside
accountants, costs of feasibility studies, environmental studies, permit fees,
inspection fees, fees of the Inspecting Architect and other Consultants, ad
valorem taxes, insurance premiums, recording and filing fees and taxes, title
insurance premiums and fees, surveyor's fees and costs of internal and outside
appraisals.
Speculative Home: A Construction Project which is a single family home,
or a unit in a two to eight multifamily structure, not a Pre-Sold Home and not
anticipated to be used as a Model Home.
Subordinated Indebtedness: Any and all Consolidated Indebtedness of
Borrower created, incurred, assumed, or guaranteed by Borrower before, at, or
after the date of execution of this Agreement in which, by the terms of the
instrument (or any supplemental instrument) creating or evidencing such
Consolidated Indebtedness or pursuant to which such Indebtedness is outstanding
(a) it is provided that such Consolidated Indebtedness, or any renewal,
extension, or refunding thereof, is expressly subordinate and junior in right of
payment to the Senior Subordinated Debentures (whether or not subordinated to
any other Indebtedness of Borrower), or (b) it is not, by its terms, Senior
Indebtedness or Parity Indebtedness.
Subsidiary: Any corporation of which at least a majority of the
outstanding voting stock is owned, at the time, directly or indirectly, by
Borrower, or by one or more Subsidiaries of Borrower. For purposes of this
definition, "voting stock" means stock which ordinarily has voting power for the
election of directors, whether at all times or only so long as no senior class
of stock has such voting power by reason of any contingency.
Sworn Construction Cost Statement: An itemized, certified statement of
actual and estimated Construction Costs of a Project, in Lender's form, signed
and sworn to by Borrower and the General Contractor (if any), as the same may be
amended or supplemented with the approval of Lender from time to time.
Termination Date: The earlier of (a) the Maturity Date, or (b) the date
on which the Note is declared to be immediately due and payable pursuant to the
terms hereof or of the Note.
Tests: Such soil tests, water tests, chemical tests, materials tests
and other tests and analyses as are appropriately required to confirm, with
relative certainty, the absence of Pollutants from a Project.
Title Company: Chicago Title Insurance Company, a Missouri corporation.
Title Policy: A loan policy of title insurance in favor of Lender
issued by the Title Company together with such endorsements as are necessary to
evidence the addition of Projects, as approved, as additional security for the
Loan and complying with Lender's standard requirements therefor.
Total Revolving Outstandings: As of any date of determination, the sum
of the aggregate unpaid principal balance of Advances outstanding on such date
plus any amounts not yet funded for an approved Project Loan.
Transfer Price: The price designated for each lot within a Development
Project which will be used as the Acquisition Cost for such lot when
transferring such lot to a Construction Project. The transfer price for each
such lot shall be established by Borrower and Lender in the Project Addendum
provided that in determining such Transfer Prices the total of all Transfer
Prices for all lots with a Development Project shall equal the amount of the
applicable Development Loan.
Unused Revolving Commitment: As of any date of determination, the
amount by which the Revolving Loan Amount exceeds the Total Revolving
Outstandings.
1. LOAN
1.1 Principal Advances
Upon the terms and subject to the conditions set forth in this
Agreement, Lender agrees to make Project Loans to Borrower on a revolving basis,
in Advances, at any time and from time to time, in accordance with the terms
hereof, from the Closing Date to the Termination Date, during which period
Borrower may borrow, repay and reborrow in accordance with the terms hereof, for
the purpose of acquiring, developing and constructing Projects; provided,
however, that (a) at no time shall Lender be obligated to lend to Borrower more
than the total amount of proceeds of the Loan which Borrower has then qualified
to receive hereunder, and (b) the aggregate unpaid principal balance of all
Total Revolving Outstandings shall never exceed the Revolving Loan Amount. All
Advances shall be evidenced by the Note. Lender shall enter in its ledgers and
records the amount of each such Advance and of each payment made upon such
Advances, and Lender is authorized by Borrower to enter on a schedule attached
to the Note a record of Advances and payments; provided, however, that the
failure by Lender to make any such entry or any error by Lender in making such
entry shall not limit or otherwise affect the obligations of Borrower hereunder
and under the Note. Notwithstanding the expressed principal amount of the Note,
Borrower shall not at any time be obligated to repay more or less than the total
of all Advances made by Lender pursuant hereto, together with interest thereon
at the rates specified below and in the Note, computed on each Advance from the
date it is so made by Lender, and all other advances made by Lender pursuant to
the terms of the Loan Documents, with interest thereon as therein provided, less
all payments of principal of and interest on the Note, and of such advances and
interest thereon, made by Borrower. The entire unpaid principal amount of the
Loan shall be due and payable on the Termination Date, and the entire unpaid
principal amount of each Project Loan shall be due and payable on the Project
Loan Maturity Date therefor.
1.2 Interest Rate, Interest Payments and Default Interest
Interest shall accrue and be payable on the Advances from the date made
as follows:
(a) Each Advance shall bear interest on the unpaid principal
amount thereof at a varying rate per annum equal to the sum of
(i) the Reference Rate, plus (ii) the Applicable Margin.
(b) Any Advance not paid when due, whether at the date scheduled
therefor or earlier upon acceleration, shall bear interest
until paid in full at a rate per annum equal to the sum of (A)
the Reference Rate, plus (B) the Applicable Margin, plus (C)
five percent (5%) (herein called the "Default Rate").
(c) Interest shall be payable (i) with respect to each Advance, on
the first Business Day of each calendar month, commencing on
the first Business Day of the next calendar month after the
calendar month in which the first Advance is made and on the
Termination Date; (ii) with respect to any portion of an
Advance which is prepaid in accordance with the terms hereof,
on the date of such prepayment; and (iii) with respect to
interest at the Default Rate, on demand at Lender's option.
Interest on the Loan shall be computed on the basis of actual days elapsed and a
year of three hundred sixty (360) days.
1.3 Prepayments
Borrower may prepay Advances, in whole or in part, at any time after
three (3) Business Days' prior written notice of said prepayment from Borrower
to Lender, without premium or penalty. Any such prepayment must be accompanied
by payment, in full, of all unpaid, accrued interest on the amount prepaid.
Amounts so prepaid shall be applied to such Project Loan or Project Loans as
designated by Borrower unless a default or event of default then exists
hereunder, in which event said amounts shall be applied as Lender may elect. If
no default or event of default exists hereunder, amounts so prepaid may be
reborrowed from time to time as parts of other Project Loans (but not the same
Project Loan) in accordance with the terms of this Agreement.
1.4 Optional Termination of Revolving Commitment
Borrower may, at any time, upon not less than three (3) Business Days'
prior written notice to Lender, terminate the Revolving Commitment in its
entirety. Upon termination of the Revolving Commitment pursuant to this Section,
Borrower shall pay to Lender the full amount of all outstanding Advances, all
accrued and unpaid interest thereon, and all other amounts then owing from
Borrower to Lender pursuant to the Loan Documents, and Lender shall have no
further obligation to make Advances hereunder.
1.5 Fees
Borrower shall pay to Lender the following fees as and when hereinafter
provided: (a) a commitment fee in the amount of Twenty-five Thousand and 00/100
Dollars ($25,000.00), payable on the Closing Date; (b) a collateral fee in the
amount of one percent (1%) of the amount set aside from the Revolving Commitment
to fund each Development Project Loan, payable with respect to each Development
Project within forty-eight (48) hours after Lender gives Borrower written notice
that Lender has accepted and approved said Development Project ("Collateral
Fee"); (c) an annual Letter of Credit fee for each Letter of Credit issued
pursuant to Section 2.2 hereof in an amount equal to two percent (2%) per annum
of the outstanding amount of such Letter of Credit payable quarterly, in
advance, commencing on the date of issuance of the Letter of Credit and (d) an
annual fee in the amount of one-half of one percent (1/2%) per annum of the
Revolving Loan Amount minus (i) the outstanding principal balances of all
Development Project Loans, and (ii) the aggregate amount that Lender remains
obligated to fund with respect to each such Development Project Loan as of the
first day of each Loan Year which fee shall be due and payable on the first day
of each Loan Year beginning May 1, 1998.
1.6 Payments
Payments and prepayments of principal of, and interest on, the Note and
all fees, expenses and other obligations under this Agreement payable to Lender
shall be made without setoff or counterclaim in Immediately Available Funds not
later than 1:00 P.M. (Minneapolis time) on the dates called for under this
Agreement and the Note to the Lender at its main office in Minneapolis,
Minnesota. Funds received after such time shall be deemed to have been received
on the next Business Day. Whenever any payment to be made hereunder or on the
Note shall be stated to be due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time, in the case of a payment of principal, shall be included in the
computation of any interest on such principal payment.
1.7 Capital Adequacy
In the event that any Regulatory Change reduces or shall have the
effect of reducing the rate of return on Lender's capital or the capital of its
parent corporation (by an amount Lender deems material) as a consequence of the
Loan to a level below that which Lender or its parent corporation could have
achieved but for such Regulatory Change (taking into account Lender's policies
and the policies of its parent corporation with respect to capital adequacy),
then Borrower shall, within ten (10) days after written notice and demand from
Lender, pay to Lender additional amounts sufficient to compensate Lender, or its
parent corporation, for such reduction. Any determination by Lender under this
Section and any certificate as to the amount of such reduction given to Borrower
by Lender shall be final, conclusive and binding for all purposes, absent error.
1.8 Extensions
Not more than ninety (90) days and not less than sixty (60) days prior
to (a) a date two (2) years after the Closing Date, and (b) each subsequent
annual anniversary of the Closing Date (if all previous extension options
available under this Section 1.8 have been exercised by Borrower), and if no
default or event of default then exists hereunder, Borrower may, at its option,
request that Lender extend the Revolving Commitment Ending Date and the Maturity
Date for an additional period of one (1) year. Any such request shall be
accompanied by an extension fee in the amount of Twenty-five Thousand and 00/100
Dollars ($25,000.00) ("Extension Fee"). Lender may grant or deny said request,
in its sole and absolute discretion, or may condition its granting of said
request upon such matters as it may, in its sole discretion, elect. Borrower
shall have fifteen (15) days after receipt of a written list of said conditions
from Lender to agree thereto, in writing. If Borrower does not so agree to the
same within said fifteen (15) day period, Borrower's request for said extension
shall be deemed to have been denied. If Lender denies said request for an
extension, or said request is deemed to be denied pursuant to the terms hereof,
Lender shall return the Extension Fee, less any reasonable out-of-pocket costs
incurred by Lender in reviewing and evaluating Borrower's request therefor
including, but not limited to, any appraiser's fees (including the fees of
Lender's own internal review appraiser). Otherwise Lender shall retain the
Extension Fee as consideration for extending the Revolving Commitment Ending
Date and the Maturity Date.
1.9 Term Out
Notwithstanding anything to the contrary herein set forth, if Lender
ever does not extend the Revolving Commitment Ending Date (and the Maturity
Date) pursuant to Section 1.8 hereof, (i) the Revolving Loan Amount shall be
reduced to an amount equal to the amount of the then Total Revolving
Outstandings on the Revolving Commitment Ending Date, and (ii) the Total
Revolving Outstandings shall be repaid or reduced by Borrower on the last day of
each month after the Revolving Commitment Ending Date in six (6) equal
installments, so that the Total Revolving Outstandings shall be zero (0) on the
Maturity Date.
During the period between the Revolving Commitment Ending Date and the
Maturity Date, (a) no new Project shall be approved by Lender, (b) Lender will
continue to make Advances with respect to existing approved Project Loans
subject to the reduced Total Revolving Outstandings set forth above, and (c) the
Revolving Loan Amount shall be reduced simultaneously with any reduction in the
amount of the Total Revolving Outstandings to an amount equal to the reduced
amount of the Total Revolving Outstandings.
2. CONDITIONS OF BORROWING
Lender shall not be required to make any Advances hereunder until the
pre-closing requirements, conditions and other requirements set forth below have
been completed and fulfilled to the satisfaction of Lender, with respect to said
Advance, at Borrower's sole cost and expense. It is agreed, however, that Lender
may, in its discretion, make such Advances prior to completion and fulfillment
of any or all of such pre-closing requirements, conditions and other
requirements, without waiving its right to require such completion and
fulfillment before any additional Advances are made.
2.1 Prerequisites to Effectiveness of Agreement
The obligations of Lender to make Advances and the effectiveness of
this Agreement are subject to delivery by Lender of the following documents,
certificates and opinions, each in form and substance acceptable to Lender:
(a) This Agreement duly executed by Borrower and Lender; the Note,
Mortgage and Indemnity Agreement duly executed by Borrower;
and the Guaranty and Indemnity Agreement duly executed by
Guarantors;
(b) A copy of the Articles of Incorporation of Borrower, together
with all amendments thereto, and a Certificate of Good
Standing for Borrower, each currently certified by the
Secretary of State of Minnesota; Borrower's By-Laws and
Resolutions of Borrower's Board of Directors authorizing the
transactions described herein, and an incumbency certificate
for Borrower (including the names, titles and specimen
signatures of officers thereof authorized to execute Loan
Documents), all currently certified by Borrower's corporate
secretary and upon which Lender may rely until revoked by
written notice to Lender;
(c) A Certificate from a duly authorized officer of Borrower
setting forth the names, titles, specimen signatures and
telephone numbers of all Persons authorized to (i) sign Draw
Requests and/or other documents, instruments, certificates and
agreements to be delivered by Borrower to Lender hereunder,
and/or (ii) give instructions to Lender hereunder, which
Certificate shall be deemed to be in full force and effect
until receipt by Lender of an amendment thereof duly executed
by said duly authorized officer of Borrower;
(d) A signed, written opinion from Borrower's and Guarantors'
counsel, addressed to Lender and currently dated, as to the
due organization, existence, qualification and good standing
of Borrower; as to the legal capacity of Guarantors; as to the
due authorization, validity, legality, binding nature and
enforceability of the Loan Documents listed in Section 2.1(a);
that, to such counsel's knowledge, the execution, delivery and
performance by Borrower and Guarantors of the Loan Documents
to which each is a party will not violate any contracts or
agreements of Borrower or Guarantors or any applicable
Governmental Requirements; as to the absence, to such
counsel's knowledge, of litigation or governmental proceedings
which could adversely affect Borrower or Guarantors; and such
other matters as may be required by Lender;
(e) The most current available annual audited financial statements
for Borrower and the most current available annual personally
certified financial statements for each Guarantor, as well as
financial statements for each of the three (3) full fiscal
years of each immediately preceding the time period covered by
said current financial statements, and Borrower and each
Guarantor shall also certify that there has been no material
adverse change in the financial condition of Borrower and each
Guarantor (respectively) since the dates of such financial
statements.
Lender may advance to itself, pursuant to the provisions of Sections
3.1 and 5.5, proceeds of the Loan sufficient to pay all reasonable costs and
expenses incurred by Lender in connection with preparation, negotiation and
extension of the Loan Documents and the review of the foregoing, even though no
Project Loan has yet been approved by Lender.
2.2 Conditions Precedent to Approval of a Development Project
If and when Borrower wishes to have Lender approve a Development
Project, so that it will be eligible for a Development Project Loan, Borrower
shall submit to Lender a written request for such approval, which request shall
be accompanied by the following documentation (the "Development Project Approval
Prerequisites"), all of which shall be acceptable in form and content to Lender:
(a) A written description of the Development Project, including
the size, legal description and location of the Development
Project Land and the proposed Development Project Improvements
to be constructed.
(b) A copy of the signed Purchase Agreement covering the
Development Project Land pursuant to which Borrower has
acquired or is acquiring the same.
(c) A Sworn Construction Cost Statement setting forth in detail
all Construction Costs of the Development Project.
(d) A Budget setting forth in detail all Costs of the Development
Project, including all Acquisition Costs, Construction Costs
and Soft Costs associated with the Development Project.
(e) Lender has obtained an Appraisal of the Development Project at
the cost of Borrower.
(f) A commitment for a Title Policy from the Title Company
covering the Development Project, together with copies of each
document referred to therein and together with searches for
state and federal tax liens, bankruptcies and judgments
against the Borrower, the Guarantors and any other Person or
entity which may have an interest in the Development Project.
(g) A current, certified ALTA/ACSM Land Title Survey of the
Development Project Land, which shall also be prepared in
accordance with Lender's standard requirements therefor.
(h) Two (2) complete sets of the Plans for the Development
Project, approved by the City and including a copy of the site
plan with respect to the Development Project.
(i) Soil reports on the Development Project Land, showing that the
soil will adequately support the Development Project
Improvements when constructed in accordance with the Plans.
(j) The construction contract for each General Contractor, a
schedule listing all contracts and subcontracts relating to
the Development Project, and copies of such subcontract as
Lender may require, specifically identifying those which are
with Borrower or Guarantors (or Affiliates thereof). In
addition, Borrower will obtain a conditional assignment of the
construction contract and an agreement from the general
contractor to honor and perform the same for Lender in the
event of default under the Loan Documents.
(k) Lender has obtained an Environmental Audit which indicates
that no Pollutant is present above, on, in or under the
Development Project, together with all reports, data and other
information produced in connection with the Tests at the cost
of Borrower.
(l) Insurance policies and/or certificates of insurance written by
insurers satisfactory to Lender and in amounts satisfactory to
Lender and which comply with the requirements of this
Agreement.
(m) A flood zone certification from Flood Data Services, Inc. (or
another Consultant acceptable to Lender), indicating that the
Development Project is not located in a flood plain or any
other flood prone area, as designated by any governmental
agency; provided, however, that if the Development Project is
so located, Borrower shall provide evidence of flood insurance
acceptable to Lender.
(n) Borrower's estimated time schedules for construction of the
Development Project Improvements and for disbursement of the
Development Project Loan proceeds.
(o) A current letter, prepared in accordance with Lender's
standard form therefor, addressed to Lender from an
appropriate City officer regarding the zoning status and
classification of the Development Project, certifying that the
Development Project Land may be used for construction and
operation of the Development Project Improvements without
violation of any applicable Governmental Requirements.
(p) Letters addressed to Lender from the utility companies
confirming the availability of water, storm and sanitary
sewer, gas, electric and telephone utilities for the
Development Project, prepared in accordance with Lender's
standard requirements therefor.
(q) UCC chattel lien searches from the appropriate office(s) in
the jurisdictions in which the Development Project is located,
covering the Borrower, the Guarantors and of each other owner
of the Development Project Land during the previous five (5)
years (if Lender determines that the same are required).
(r) Information concerning current ad valorem property taxes and
special assessments to which the Development Project is
subject, including copies of tax statements, tax parcel
number(s) and payment dates.
(s) A preliminary plat of the Development Project Land with a copy
of the proposed final plat prepared in accordance with the
Development Agreement, and resulting in the creation of the
individual lots contemplated in the Development Agreement to
be fully executed and in recordable form. The Plats shall be
recorded immediately prior to the recording of the Mortgage or
the Amendment of Mortgage, as the case may be, and certified
copies of the same provided to Lender.
(t) Evidence that construction will commence within sixty (60)
days of the execution of the Project Addendum for the
Development Project.
(u) Any other documents and items which Lender, in its sole
discretion, reasonably requires to evaluate a proposed
Development Project.
Upon receipt of the above-mentioned written request and the Development
Project Approval Prerequisites, Lender may engage an Inspecting Architect to
work on the Development Project, and legal counsel and/or a Consultant to review
the Environmental Audit, title commitment and related documents, all at
Borrower's sole cost and expense. If all of the Development Approval
Prerequisites are acceptable to Lender, in its sole discretion, and if the
proposed Development Project complies with all of the terms, provisions,
requirements and conditions of this Agreement, Lender may, in its sole
discretion, approve the proposed Development Project. In the event Lender
approves the Development Project, an amount equal to the lesser of (a) seventy
percent (70%) of the Costs of the Development Project, or (b) sixty-five percent
(65%) of the market value of the Development Project, as shown by the Appraisal
prepared for the benefit of the Lender, shall be set aside from the Revolving
Commitment to fund the Development Project Loan for said Development Project.
Once so set aside, said amount may be used only to fund said Development Project
Loan, until said Development Project Loan has been repaid in full. Development
Project Loans are term loans, each of which shall mature on its respective
Project Loan Maturity Date, and are not themselves revolving loans, i.e., sums
prepaid upon a Development Project Loan may not be reborrowed as a part of the
same Development Project Loan, but may be reborrowed only as part of another
Project Loan in accordance with the terms of this Agreement.
Upon approval of a Development Loan, Borrower and Lender shall enter
into a Project Addendum which shall describe the Development Project, set forth
the amount of the Development Project Loan, set forth the commencement date, the
Completion Date and the Project Loan Maturity Date for the Development Project
Loan, and the Release Price and the Transfer Price for each lot within the
Development Project.
A portion of each Development Project Loan may be used for the issuance
by Lender of Letters of Credit required by the City or any public utility in
connection with a Development Loan provided that no more than Seven Hundred
Fifty Thousand and 00/100 Dollars ($750,000.00) may be reserved for such
purpose, in the aggregate, for all Development Projects. The amount of a Letter
of Credit shall be added to and constitute a part of the applicable Development
Project Loan and the Total Revolving Outstandings. Any such Letter of Credit
shall be evidenced by a Reimbursement Agreement, in form and content acceptable
to the Lender, and Borrower shall pay an annual Letter of Credit Fee as forth in
Section 1.5 hereof.
2.3 Development Project Loan Pre-Funding Requirements
(a) In order to qualify for the first Advance of proceeds with
respect to an approved Development Project Loan, the following
conditions shall be satisfied:
(i) Borrower shall have delivered to Lender an Amendment
of Mortgage which shall have been fully executed and
notarized.
(ii) Borrower has paid the Collateral Fee as set forth in
Section 1.5 hereof.
(iii) Lender shall have delivered a fully executed copy of
the Amendment to Mortgage to the Title Company.
(iv) Lender shall have issued the Letter of Instructions
to the Title Company which shall include instructions
to record the Amendment to Mortgage and to issue an
endorsement to the Title Policy whereby the
Development Project is added as part of the insured
property under the Title Policy, subject only to such
Permitted Exceptions as are acceptable to the Lender.
(v) Upon recording of the Amendment to Mortgage,
execution of the Letter of Instructions and issuance
to Lender of an acceptable endorsement to the Title
Policy and submission to Lender of all items
referenced in Section 2.2 above, in form and content
acceptable to Lender, and upon receipt and approval
of the items set forth in Section 2.3(b) and 2.3(c)
herein Borrower shall be entitled to obtain Advances
with respect to the Development Project Loan.
(vi) Lender has received evidence that Borrower has paid
in cash at least thirty percent (30%) of all Costs of
the Project.
(b) At least five (5) days prior to the first Advance of funds
from each Development Project Loan or such later date as is
approved by Lender, Borrower shall provide to Lender each of
the following, in form and substance acceptable to Lender, not
previously supplied to and approved by Lender:
(i) An Application and Certificate for Payment.
(ii) Copies of all grading and building permits required
to complete construction of the Development Project
Improvements.
(iii) Copies of all insurance policies and certificates
required under Section 5.10 below.
(iv) If applicable an Assignment of General Contract in
the form attached hereto as Exhibit "G".
(v) A copy of the Development Agreement duly executed by
Borrower and the City.
(vi) Evidence of access to the Development Project by
publicly dedicated streets.
(vii) A certified copy of the final plat of the Development
Project Land ("Final Plat") showing recording
information or if not yet recorded, a copy of the
Final Plat as approved by the City which plat is to
be recorded immediately after the first Advance of
Funds.
(viii) A certified copy of the resolutions adopted by the
city council of the City indicating the City's
approval of the plats, the Development Agreement, the
plans and the construction of the Development Project
Improvements.
(c) At least ten (10) days prior to any additional Advances with
respect to each Development Loan, Borrower shall provide to
Lender the following, in form and substance acceptable to
Lender:
(i) An Application and Certificate for Payment.
(ii) A certificate signed by Borrower and the General
Contractor, if applicable, certifying as to the
Development Project Improvements completed at the
time; that Borrower or the General Contractor and any
subcontractor specified in the relevant Application
and Certificate for Payment has satisfactorily
completed the work or furnished the materials for
which payment is requested in accordance with the
applicable contracts; that all work for which an
Application and Certificate for Payment is made
conforms to the applicable contracts and any approved
changes and is in place and sufficient Development
Project Loan proceeds remain undisbursed to complete
the Development Project and that all Development Loan
Project proceeds previously disbursed have been
applied as per the previously submitted applications
for payment.
(iii) A certificate by the Inspecting Architect stating
that all work done as specified in the Application
and Certificate for Payment conforms to the contract
documents, the amount requested for the work done and
the materials furnished reasonably approximates the
value of such work or materials and is in place and
that the undisbursed Development Project Loan
proceeds hereunder are then, in its opinion,
sufficient to complete the Development Project.
(iv) Waivers of mechanics' liens and materialmen's liens
executed by Borrower and General Contractor, if
applicable and all subcontractors for all work done
and all materials furnished to the Development
Project and included in the previous Application and
Certificate for Payment.
(v) Such other supporting evidence, including invoices
and receipts as may be requested by Lender to
substantiate all payments which are to be made out of
the disbursement of Development Loan Project proceeds
or to substantiate all payments then made in respect
to the Development Project.
2.4 Conditions Precedent to Approval of a Construction Project
If and when Borrower wishes to have Lender approve a Construction
Project, so that it will be eligible for a Construction Project Loan, Borrower
shall submit to Lender a written request for such approval, accompanied by the
following documentation (the "Construction Project Approval Prerequisitions"),
all of which shall be acceptable in form and content to Lender:
(a) An Amendment of Mortgage completed with respect to the
Construction Project.
(b) A written description of the Construction Project, including
the size, legal description and location of the Construction
Project Land and the Construction Project Improvements to be
constructed.
(c) In the case of a Pre-Sold Home, a copy of the signed
non-cancelable and non-contingent purchase agreement covering
the Construction Project pursuant to which Borrower is selling
the same.
(d) A commitment for a Title Policy covering the Construction
Project, together with copies of each document referred to
therein.
(e) Insurance policies and/or certificates of insurance written by
insurers satisfactory to Lender and in amounts satisfactory to
Lender and which comply with the requirements of this
Agreement.
(f) A flood zone certification from Flood Data Services, Inc. (or
another Consultant acceptable to Lender), indicating that the
Construction Project is not located in a flood plain or any
other flood prone area, as designated by any governmental
agency; provided, however, that if the Construction Project is
so located, Borrower shall provide evidence of flood insurance
acceptable to Lender.
(g) Lender will obtain at Borrower's cost an Appraisal with
respect to all Construction Projects except those involving a
Pre-Sold Home with a Construction Project Loan of $250,000.00
or less. If a Construction Project Loan of $250,000.00 or less
is secured by a Pre-Sold Home, then no Appraisal will be
required. In this event, Lender will lend an amount equal to
seventy-five percent (75%) of the amount of the purchase
agreement described in subsection 2.4(b) above but not to
exceed $250,000.00. In the event the Pre-Sold Home sale does
not close by the date specified in such purchase agreement,
then Lender will require that the home be appraised and that
the Loan to Value Ratio be reduced by Borrower to seventy
percent (70%) of the appraised value. It is anticipated that
the standard units for each home style built by Borrower will
be appraised. In addition, a value will be assigned to
pre-approved options and upgrades. It is the Lender's intent,
on a project by project basis, that Borrower will not have to
obtain a separate Appraisal for each single family home
financed as a Construction Project. Rather, it is anticipated
that a single Appraisal will be used for all homes of the same
style in a particular project. Lender may, in its sole
discretion, deny approval for any Construction Project which
is not a Pre-Sold Home, which has an appraised value in excess
of $450,000.00.
(h) A Sworn Construction Cost Statement setting forth in detail
all Construction Costs of the Construction Project.
(i) A Budget setting forth all Costs of the Construction Project,
including all Acquisition Costs, Construction Costs and Soft
Costs associated with the Construction Project, together with
evidence that Borrower has paid, in cash, all Costs of the
Construction Project in excess of the Construction Project
Loan unless the Construction Project Improvement to be
constructed is a Pre-Sold Home. In such event Borrower shall
not be required to pay such costs until the Construction
Project Loan has been fully disbursed.
(j) If so requested by Lender, a copy of the Plans for the
Construction Project.
(k) Any other documents and items which Lender, in its sole
discretion, reasonably requires to evaluate a proposed
Construction Project.
If all of the Construction Project Approval Prerequisites are
acceptable to Lender, in its sole discretion, and if the proposed Construction
Project complies with all of the terms, provisions, requirements and conditions
of this Agreement, Lender may, in its sole discretion, approve the proposed
Construction Project, in writing. In the event Lender approves the Construction
Project, an amount equal to (a) seventy-five percent (75%) of the appraised
value if a Pre-Sold Home (or seventy-five percent (75%) of the amount of the
non-cancelable and non-contingent purchase agreement for such Pre-Sold Home if
the applicable Construction Project Loan is $250,000.00 or less), or (b) seventy
percent (70%) of the appraised value if a Model Home or a Speculative Home, as
shown by the Appraisal, shall be set aside from the Revolving Commitment to fund
the Construction Project Loan for said Construction Project. In no event shall
the amount set aside for a Construction Project Loan be greater than one hundred
percent (100%) of the cost of the Construction Project as set forth in the
budget. Once so set aside, said amount may be used only to fund said
Construction Project Loan, until said Construction Project Loan has been repaid
in full. Construction Project Loans are term loans, each of which shall mature
on its respective Project Loan Maturity Date, and are not themselves revolving
loans, i.e., sums prepaid upon a Construction Project Loan may not be reborrowed
as a part of the same Construction Project Loan, but may be reborrowed only as
part of another Project Loan in accordance with the terms of this Agreement.
Approved Construction Projects for Model Homes and Speculative Homes will be
limited to a maximum of fifty percent (50%) of the Total Revolving Outstandings
for Construction Project Loans with respect to approved Construction Projects.
2.5 Construction Project Loan Pre-Funding Requirements
(a) In order to qualify for the first Advance of proceeds with
respect to a Construction Project Loan, the following
conditions shall be satisfied:
(i) Lender has received evidence that Borrower has paid,
in cash, all Costs of this Construction Project in
excess of the Construction Project Loan for any Model
Home or Speculative Home. Such equity contribution
shall not be required with respect to Pre-Sold Homes
until the Construction Project Loan is fully
advanced.
(ii) Lender shall deliver the Amendment to Mortgage to the
Title Company which shall have been executed and
notarized by Borrower and Lender.
(iii) Lender shall issue a Letter of Instructions to the
Title Company which shall include instructions to
record the Amendment to Mortgage and to issue an
endorsement to the Title Policy whereby the
Construction Project is added as part of the insured
property under the Title Policy, subject only to such
Permitted Exceptions as are acceptable to the Lender.
(iv) Upon recording of the Amendment to Mortgage,
execution of the Letter of Instructions and issuance
to Lender of an acceptable endorsement to the Title
Policy and submission to Lender of all items
referenced in Section 2.4 above, in form and content
acceptable to Lender, the Construction Project shall
be entered by Borrower on the Borrowing Base
Certificate as an approved Construction Project Loan.
(b) Upon submission to Lender of the revised Borrowing Base
Certificate in which all of the requirements set forth in
subsections 2.5(a)(i), (ii), (iii) and (iv) above have been
complied with, the Borrower shall be entitled to obtain
Advances with respect to such Construction Project Loan in
accordance with the provisions of this Agreement.
3. ADVANCES OF PROJECT LOAN PROCEEDS
3.1 Procedure for Advances
(a) Each Advance shall be made pursuant to (i) a Draw Request with
respect to Construction Project Loans, and (ii) an Application
and Certificate for Payment with respect to Development
Project Loans, which shall be submitted by Borrower to Lender
and to the Inspecting Architect. With respect to each
Development Project, Borrower shall not submit more than one
(1) Application and Certificate for Payment during any thirty
(30) day period. With respect to Construction Projects,
Borrower shall be entitled to make unlimited Draw Requests
during any thirty (30) day period.
(b) Borrower shall deliver to Lender an updated Borrowing Base
Certificate on the first (1st) day of each month. Borrower
shall also deliver to Lender a revised Borrowing Base
Certificate with each request for an Advance with respect to
each Construction Project Loan.
(c) On each Advance Date, if all the terms and conditions of this
Agreement have been complied with by Borrower to the
satisfaction of Lender, if no default or event of default
exists hereunder, and if Lender has approved (i) each Draw
Request for each Construction Project for which Borrower has
submitted a Draw Request, and (ii) each Application and
Certificate for Payment for each Development Project for which
Borrower has submitted an Application and Certificate for
Payment, Lender shall advance to Borrower the principal amount
of each requested Advance by wire transfer of funds for the
amount set forth in the applicable Draw Request or Application
and Certificate of Payment (less any required retainage, which
retainage shall not be deemed to be advanced hereunder and
shall not bear interest until actually advanced, and less any
amounts so advanced by Lender to itself). All Advances
actually so made shall be deemed to be loans to Borrower,
shall reduce the available amount of the Revolving Loan and of
the Project Loan for the related Project (if any), and shall
bear interest at the rates provided herein from the date so
advanced.
(d) Lender may take such steps as it may deem appropriate, at its
option, to verify the application of Project Loan proceeds to
Costs of the related Project, and to vary the advancement
procedures herein set forth if the same becomes necessary or
desirable to assure the proper application of Project Loan
proceeds and/or to preserve the first lien status of the
Mortgage covering the Project with respect to Advances made
pursuant hereto including, but not limited to, making Advances
directly to the General Contractors and/or subcontractors, and
the amount of Advances to be made to the Borrower hereunder
shall be correspondingly reduced. However, Lender shall not be
obligated to conduct any such verification or to so vary said
procedures.
(e) In the event that Lender shall determine, in its reasonable
judgment, that proper documentation to support a given
Advance, as required by this Agreement, has not been
furnished, it may withhold payment of such Advance, or of such
portion of such Advance as shall not be so supported by proper
documentation, and shall promptly notify Borrower of the
discrepancy in or omission of such documentation. Until such
time as such discrepancy or omission is corrected to the
satisfaction of Lender, it may withhold such funds.
(f) At the time of each Advance, there shall exist no default or
event of default hereunder, and all representations and
warranties made herein shall be true and correct on and as of
each Advance Date with the same effect as if made on that
date.
3.2 Inspections
Lender, Inspecting Architects, Consultants and their representatives
shall have access to each Project at all reasonable times and shall have the
right to enter each Project and to conduct such inspections thereof as they
shall deem necessary or desirable for the protection of Lender's interests.
However, Lender shall not be obligated to conduct any inspection of any Project.
With respect to Construction Projects, Lender shall retain an
Inspecting Architect at Borrower's expense to make inspections of all existing
Projects prior to the first draw and then every sixty (60) days, commencing on
May 1, 1997, and to review all Draw Requests relating to such Projects for the
purpose of confirming that (a) each Project has been completed to date in a good
and workerlike manner, and (b) that the percentages of completion certified to
by the Borrower in the most recent Draw Request are accurate. The Inspecting
Architect shall issue a written report to Lender with respect to such matters
for approved Construction Projects on a bi-monthly basis.
With respect to Development Projects, Lender shall also retain an
Inspecting Architect and any other Consultants deemed necessary or desirable by
Lender, at Borrower's expense, to inspect the Development Project and review the
Plans, Contracts and Sworn Construction Cost Statements for each Development
Project and to review all change orders relating to said Development Project.
Such inspection and reviews shall be completed prior to approval of each
Application and Certificate for Payment made with respect to a Development
Project Loan.
Neither Borrower nor any third party shall have the right to use or
rely upon the reports of the Inspecting Architect or any other reports generated
by Lender or its Consultants for any purpose whatsoever, whether made prior to
or after commencement of construction. Borrower shall be responsible for making
its own inspections of each Project during the course of construction,
renovation or expansion and shall determine to its own satisfaction that the
work done and materials supplied are in accordance with applicable contracts
with its Contractors. By advancing funds after any inspection of any Project by
Lender or an Inspecting Architect, Lender shall not be deemed to waive any event
of default, waive any right to require construction defects to be corrected, or
acknowledge that all construction conforms with the Plans.
Notwithstanding any provision of this Agreement to the contrary, in the
event that Lender should determine that (a) the actual quality or value of the
work performed or the materials furnished does not correspond with the quality
or value of the work required by the Plans for any Project, or (b) the
percentage of completion certified to in any Draw Request is inaccurate, or (c)
any Project Loan is not in balance, Lender shall notify Borrower of its
objections thereto, and, upon demand, Borrower shall correct the conditions to
which Lender objects.
3.3 Project Loans In Balance
Lender shall not be obligated to make any Advance of any Project Loan
proceeds unless and until Borrower has certified that the Project Loan is in
Balance: i.e., (a) Borrower has paid, in cash, Costs of a Development Project
equal to at least thirty percent (30%) of the total Costs of the Development
Project or all Costs of Construction Project, in excess of the Construction
Project Loan as shown on the most current Budget and Sworn Construction Cost
Statement for the Project approved by Lender (provided, however, that Borrower,
for the purposes of this clause, if a Construction Project consists of a
Pre-Sold Home, Borrower shall not be obligated to pay such costs until the
Project Loan has been fully advanced); and (b) all remaining unpaid Costs, as
determined by Lender, including the Contingency Reserve, with respect to a
Development Loan, where applicable, do not exceed the amount of the Loan
proceeds not yet advanced by Lender. The amount of the Contingency Reserve for
any Development Project Loan shall be designated in the Sworn Construction Cost
Statement, and shall be included in the Development Project Addendum, for the
Development Project. The required amount of the Contingency Reserve shall
decline as Construction Costs for which it is maintained are paid therefrom;
provided, however, that the amount of the Contingency Reserve shall never
decline below an amount sufficient to pay all costs and payments for which it is
maintained which then remain unpaid, as determined by Lender, and shall equal a
mutually agreed upon percentage of all Construction Costs of the Development
Project. If the Contingency Reserve becomes depleted, such depletion shall not
limit Borrower's obligation hereunder to pay all sums which otherwise would have
been payable from the Contingency Reserve.
Notwithstanding any provision of this Agreement to the contrary, in the
event that Lender or Borrower determines that the unadvanced balance of any
Project Loan proceeds is insufficient to cover any category of Costs set forth
on the Budget and the Sworn Construction Cost Statement for the Project and/or
to complete the Project, and to pay all costs and expenses of completion and to
pay interest on the Project Loan, through the Project Loan Maturity Date, it
shall notify the other party hereto of such determination, and Borrower shall,
at Lender's option, either (a) be ineligible for further Advances of the
proceeds of said Project Loan until Borrower has directly paid (without any
right to reimbursement therefor hereunder) sufficient Costs, or (b), within
three (3) Business Days, deposit with Lender funds equal to said insufficiency,
in order to bring the Project Loan back into balance. All sums so deposited may
be advanced by Lender to pay Costs in the same manner as, and prior to, Advances
of Project Loan proceeds hereunder.
3.4 General
The Project Loan proceeds shall be advanced by Lender, to or for the
benefit of Borrower, in accordance with the terms and conditions set forth in
this Article 3. All monies advanced by Lender (including amounts payable to
Lender and advanced by Lender to itself pursuant to the terms hereof) shall
constitute loans made to Borrower under this Agreement, evidenced by the Note
and secured by the other Loan Documents, and interest shall be computed thereon
as prescribed by this Agreement and the Note, from the date advanced to or for
the benefit of Borrower.
Borrower may not reallocate Project Loan proceeds to payment of
different items in the Sworn Construction Cost Statement for the Project in
question without the prior written consent of Lender. Lender reserves the right
to make Advances for payment of amounts which are allocated to any of the
designated items in any Sworn Construction Cost Statement for such other
purposes or in such different proportions as Lender may, in its sole discretion,
deem necessary or advisable.
No Advance shall constitute a waiver of any condition precedent to the
obligation of Lender to make any further Advance or preclude Lender from
thereafter requiring Borrower to satisfy any such condition precedent with
respect to any prior or further Advance. No Advance shall constitute a waiver of
any default or event of default hereunder which may exist at the time of said
Advance, whether or not the same is known to Lender. All conditions precedent to
the obligation of Lender to make any Advance are imposed hereby solely for the
benefit of Lender, and no other party may require satisfaction of any such
condition precedent or shall be entitled to assume that Lender will make or
refuse to make any Advance in the absence of strict compliance with such
condition precedent. All requirements of this Agreement may be waived by Lender,
in whole or in part, at any time.
Lender may, but shall not be obligated to, advance to itself, when due,
from the proceeds of the Loan, without further order or request from Borrower,
all interest payable to Lender under the terms hereof or of the Note, and may,
at Lender's option, without any obligation to do so, advance to itself all other
sums due or to become due to Lender under this Agreement or under any of the
other Loan Documents including, but not limited to, its reasonable fees,
administration fees, attorneys' fees, appraisal fees, internal appraisal review
fees, engineer's and Inspecting Architect's fees, Consultant's fees and all
out-of-pocket expenses incurred by Lender in connection with this Agreement and
with the Loan, whether or not any Project Loan has yet been approved by Lender
pursuant to Section 2.2 or 2.4. Lender shall also have the right, but not the
obligation, after the occurrence of an event of default, to advance and directly
apply the proceeds of the Loan to the satisfaction of any of Borrower's other
obligations hereunder or under any of the other Loan Documents. Borrower hereby
assigns and pledges the proceeds of each Project Loan and funds deposited by
Borrower pursuant to Section 3.3 hereof (if any) to Lender for such purposes.
Lender may advance such funds and incur such expenses as Lender deems necessary
for the completion of construction of all Project Improvements and to preserve
the Projects and any security for the Project Loans, and such expenses, even
though causing the amount of the Loan to exceed the Revolving Commitment Amount
or the amount of any Project Loan to exceed the amount of the Project Loan
Commitment therefor, shall be secured by any and all documents securing the
Loan, shall be evidenced by the Note and shall be payable to Lender upon demand.
In the event that the total amount of any Project Loan exceeds the
amount needed to fully pay all Costs set forth on the Sworn Construction Cost
Statement for the Project approved by Lender (after subtracting Borrower's
equity contribution required by Section 3.3), Lender shall not be required to
advance, and Borrower shall not be entitled to receive, the excess.
3.5 Releases of Projects
If no event of default exists hereunder, Lender agrees to release the
Mortgage from any lot located within a Project upon payment to the Lender of the
Release Price designated for such lot in either the Project Addendum, with
respect to a Development Project Loan, or the Borrowing Base Certificate, with
respect to a Construction Project Loan.
3.6 Transfers of Projects
If no event of default exists hereunder, Lender agrees that lots
contained within an approved Development Project may be transferred from the
Development Project Loan to a Construction Project Loan at such time as the
Borrower desires to construct Construction Project Improvements on such lot. The
Borrower shall follow the procedure for approval of a Construction Project Loan
with respect to such lot. At such time as approval has been obtained in
accordance with the terms of Section 2.4 of this Agreement, the amount of the
Development Project Loan shall be reduced by an amount equal to the Transfer
Price designated for such lot in the applicable Project Addendum.
3.7 Lender Responsibility
It is expressly understood and agreed that Lender assumes no liability
or responsibility for the sufficiency of Project Loan proceeds to complete the
related Project, for protection of any Project, for the satisfactory completion
of any Project, for inspection during construction, for the adequacy of the
Contingency Reserve, for the adequacy or accuracy of any Sworn Construction Cost
Statement, for any representations made by Borrower, or for any acts on the part
of Borrower or its Contractors to be performed in the construction of any
Project.
4. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants to Lender that:
4.1 Legal Status of Borrower
Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota, and has all power, authority,
permits, consents, authorizations and licenses necessary to carry on its
business, to acquire, develop, construct, equip, own and operate each Project
and to execute, deliver and perform this Agreement and the other Loan Documents;
and this Agreement and the other Loan Documents executed to date by Borrower
have been duly authorized, executed and delivered by and on behalf of Borrower
so as to constitute this Agreement and said other Loan Documents the valid and
binding obligations of Borrower, enforceable in accordance with their terms.
4.2 No Breach of Applicable Agreements or Laws
The consummation of the transactions contemplated hereby and the
execution, delivery and/or performance of this Agreement and the other Loan
Documents will not result in any breach of or constitute a default under any
mortgage, deed of trust, lease, bank loan, credit agreement, guaranty or other
instrument or violate any Governmental Requirements, to which Borrower or any
Guarantor is a party, or by which Borrower or any Guarantor may be bound or
affected.
4.3 No Litigation or Defaults
There are no actions, suits or proceedings pending or, to the knowledge
of Borrower, threatened against or affecting Borrower or any Guarantor, in which
an adverse result would have a material adverse impact upon Borrower or any
Guarantor or involving the validity or enforceability of the Loan Documents or
the priority of the lien thereof, at law or in equity; and neither Borrower nor
any Guarantor is in default under any order, writ, injunction, decree or demand
of any court or any administrative body having jurisdiction over Borrower or any
Guarantor.
4.4 Financial and Other Information
The financial statements of, and other financial and cash flow
information for, Borrower and each Guarantor previously or hereafter delivered
to Lender fairly and accurately present, or will fairly and accurately present,
the financial condition of Borrower and each Guarantor, respectively, as of the
dates of such statements and information, and the cash flows of Borrower and
each Guarantor for the periods covered by such information, and neither this
Agreement nor any document, financial statement, financial, cash flow or credit
information, certificate or statement referred to herein or furnished to Lender
by Borrower or any Guarantor contains, or will contain, any untrue statement of
a material fact or omits, or will omit, a material fact, or is or will be
misleading in any material respect. There has been no material adverse change in
the financial condition of Borrower or any Guarantor since the most recent
financial statements for each heretofore delivered to Lender.
4.5 No Defaults under Loan Documents or Other Agreements
There is, and, until Lender has been fully repaid the entire
indebtedness evidenced or to be evidenced by the Note, there will be, no default
or event of default on the part of Borrower under the Loan Documents or under
any other document to which Borrower is a party and which relates to the
acquisition, ownership, occupancy, use, development, construction or management
of a Project; and neither Borrower nor any Guarantor is or will be in default in
the payment of the principal of or interest on any of its indebtedness for
borrowed money, including any Lender Debt, and neither Borrower nor any
Guarantor is or will be in default under any instrument or agreement under and
subject to which any indebtedness for borrowed money, including any Lender Debt,
has been issued or is secured, and no event has occurred, or will occur, which,
with the lapse of time or the giving of notice or both, would constitute an
event of default thereunder.
4.6 Fiscal Years
The fiscal years of Borrower and of each Guarantor end on December 31.
4.7 Guarantors
Guarantors are individual persons who are citizens and residents of the
State of Minnesota, are under no legal disability and have all power and
authority necessary to execute, deliver and perform the Guaranty, the Indemnity
Agreement and any other Loan Documents to which they are parties; and the
Guaranty, the Indemnity Agreement and such other Loan Documents have been duly
authorized, executed and delivered by and on behalf of Guarantors so as to
constitute the valid, binding, joint and several obligations of Guarantors,
enforceable in accordance with their terms.
4.8 Miscellaneous
Borrower is not:
(a) Engaged principally or as one of its important activities in
the business of extending credit for the purpose of purchasing
or carrying margin stock (as defined in Regulation U of the
Board), and the value of all margin stock owned by Borrower
does not constitute more than twenty-five percent (25%) of the
value of the assets of Borrower.
(b) An "investment company" or a company "controlled" by an
investment company within the meaning of the Investment
Company Act of 1940, as amended.
(c) A "holding company" or a "subsidiary company" of a holding
company or an "affiliate" of a holding company or a subsidiary
company of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
THE WARRANTIES AND REPRESENTATIONS IN THIS ARTICLE 4, AND ANY
ADDITIONAL WARRANTIES AND REPRESENTATIONS CONTAINED HEREIN AND IN THE OTHER LOAN
DOCUMENTS, SHALL BE DEEMED TO HAVE BEEN RENEWED AND RESTATED BY BORROWER AT THE
TIME OF EACH REQUEST BY BORROWER FOR AN ADVANCE.
5. COVENANTS OF BORROWER
While this Agreement is in effect, and until Lender has been paid in
full the principal of and interest on all Advances made by Lender hereunder and
under the other Loan Documents:
5.1 Completing Construction
Borrower shall commence construction of each Project on or before the
Commencement Date specified in the Project Addendum with respect to Development
Projects and the Borrowing Base Certificate with respect to Construction
Projects, and shall expeditiously complete and fully pay for the development and
construction of each Project in a good and workmanlike manner and in accordance
with the contracts, subcontracts and Plans (which in the case of Development
Contracts shall be submitted to and approved by Lender), and in compliance with
all applicable Governmental Requirements, and any covenants, conditions,
restrictions and reservations applicable thereto, so that Completion of the
Project Improvements occurs on or before the Completion Date specified for said
Project in the Project Addendum with respect to Development Projects and the
Borrowing Base Certificate with respect to Construction Projects. Borrower
assumes full responsibility for the compliance of the Plans for each Project and
of each Project itself with all applicable Governmental Requirements, and with
sound building and engineering practices, and, notwithstanding any approvals by
Lender, Lender shall have no obligation or responsibility whatsoever for such
Plans or any other matter incident to any Project or the construction of the
Project Improvements. In the case of a Development Contract, Borrower shall
become a party to no General Contractor's contract, for the performance of any
work on any Development Project except upon such terms and with such parties as
shall be approved, in writing, by Lender. No approval by Lender of any contract
relating to any Project or of any change order shall make Lender responsible for
the adequacy, form or content of such contract or change order. Borrower shall
correct or cause to be corrected (a) any defect in the Project Improvements, (b)
any departure in the construction of the Project Improvements from the Plans
therefor or applicable Governmental Requirements, and (c) any encroachment by
any part of the Project Improvements or any other structure located on the
Project Land on or over any building setback line, easement, property line or
restricted area, unless expressly permitted by appropriate easements, licenses
or other instruments. Borrower shall cause all roads necessary for the
utilization of each Project for its intended purposes to be completed and
dedicated, the bearing capacity of the soil on all Project Land to be made
sufficient to support the Project Improvements situated or to be situated
thereon, and sufficient local utilities to be made available to each Project and
installed at Costs (if any) set out in the Sworn Construction Cost Statement
therefor, on or before the Completion Date therefor.
5.2 Borrowing Base Certificate.
Borrower shall deliver to Lender a completed fully executed Borrowing
Base Certificate on the first day of each month during the term of the Loan.
Borrower shall also deliver to Lender a fully executed Borrowing Base
Certificate at the time of submitting each Draw Request.
5.3 Changing Costs, Scope or Timing of Work
Borrower shall deliver to Lender revised Budgets and/or Sworn
Construction Cost Statements for each Construction Project, showing changes in
or variations from the current Budget and/or Sworn Construction Cost Statement
therefor which involve changes in the costs of five percent (5%) or more for any
single change, or if the aggregate amount of all changes exceeds five percent
(5%) or more, as soon as such changes are known to Borrower. Borrower shall
deliver to Lender a revised construction schedule for any Construction Project,
if and when any target date set forth therein has been delayed by ten (10)
consecutive days or more, or when the aggregate of all such delays equals thirty
(30) days or more.
Borrower shall promptly furnish Lender with two (2) copies of each new
change or modification in the design or style of the Construction Project or
change or modification in the Plans, contracts or subcontracts for any
Construction Project, as approved by Lender, prior to incorporation of any such
change or modification into the Construction Project, whether or not Lender's
consent to such change or modification is required hereby. Borrower shall not
make or consent to any change or modification in the Plans, contracts or
subcontracts, and no work shall be performed with respect to any such change or
modification, without the prior written consent of Lender, if such change or
modification would in any way alter the design or structure of the Construction
Project or increase or decrease Costs of said Construction Project by five
percent (5%) or more for any single change or modification, or if the aggregate
amount of all changes and modifications in Costs of said Construction Project
exceeds five percent (5%) of such Costs.
Borrower shall deliver to Lender revised Budgets and/or Sworn
Construction Cost Statements for each Development Project, showing changes in or
variations from the current Budget and/or Sworn Construction Cost Statement
therefor which involve amounts of $20,000 or more for any single change, or if
the aggregate amount of all changes exceeds $50,000, as soon as such changes are
known to Borrower. Borrower shall deliver to Lender a revised construction
schedule for any Development Project, if and when any target date set forth
therein has been delayed by ten (10) consecutive days or more, or when the
aggregate of all such delays equals thirty (30) days or more.
Borrower shall promptly furnish Lender with two (2) copies of each new
change or modification in the Plans, contracts or subcontracts for any
Development Project, as approved by Lender, prior to incorporation of any such
change or modification into the Development Project, whether or not Lender's
consent to such change or modification is required hereby. Borrower shall not
make or consent to any change or modification in the Plans, contracts or
subcontracts, and no work shall be performed with respect to any such change or
modification, without the prior written consent of Lender, if such change or
modification would in any way alter the design or structure of the Development
Project or increase or decrease Costs of said Development Project by $20,000 or
more for any single change or modification, or if the aggregate amount of all
changes and modifications in Costs of said Development Project exceeds $50,000.
5.4 Balancing Project Loans
Borrower shall furnish to Lender, as and when requested by Lender, at
Lender's option (a) satisfactory evidence of Borrower's ability to pay all
unpaid Costs of completing and operating the Project through the Project
Maturity Date, and/or (b) cash equal to any difference between such unpaid Costs
and the proceeds of the Project Loan which have not yet been advanced hereunder,
which shall be held and advanced by Lender pursuant to the terms hereof.
5.5 Paying Costs of Loan, Projects and Project Loans
Borrower shall pay and discharge, as and when required by the Mortgage,
all taxes, assessments and other governmental charges upon a Project, as well as
all claims for labor and materials which, if unpaid, might become a lien or
charge upon said Project; provided, however, that Borrower shall have the right
to bond off, to remove or to contest the amount, validity and/or applicability
of any of the foregoing in strict accordance with the terms of the Mortgage.
Borrower shall also pay all reasonable costs and expenses of Lender and
all costs and expenses of Borrower in connection with the Project, the
preparation and review of the Loan Documents and the evaluation, making,
closing, administration, transfer and/or repayment of the Loan and of each
Project Loan including, but not limited to, the fees of Lender's attorneys, the
Inspecting Architect and Consultants (including preliminary cost review,
construction progress inspection reports, engineers' fees and environmental
Consultants' fees), costs of Environmental Audits, appraisal fees, internal
appraisal review fees, administration fees, title insurance costs, filing and
recording fees, mortgage registration or similar taxes, and all other costs and
expenses payable to third parties incurred by Lender or Borrower in connection
with the Loan. Such costs and expenses shall be so paid by Borrower whether or
not the Loan or any particular Project Loan is fully advanced.
5.6 Using Project Loan Proceeds
Borrower shall use the Project Loan proceeds solely to pay, or to
reimburse Borrower for paying, Costs shown on the Budget and the Sworn
Construction Cost Statement for the relevant Project. Borrower shall take all
steps necessary to assure similar use of Project Loan proceeds by its
Contractors and subcontractors.
5.7 Keeping of Records
Borrower shall set up and maintain accurate and complete books,
accounts and records pertaining to each Project and the development and
construction thereof in a manner reasonably acceptable to Lender. Borrower will
permit representatives of Lender and the Inspecting Architect to have free
access to and to inspect and copy all books, records and contracts of Borrower
relating to each Project and the acquisition, development and construction
thereof, and will permit representatives of Lender to have free access to and to
inspect and copy all other books, records and contracts of Borrower. Any such
inspection shall be for the sole benefit and protection of Lender, and Lender
shall have no obligation to disclose the results thereof to Borrower or to any
third party.
5.8 Providing Financial Information
Borrower and each Guarantor shall furnish to the Lender at the times
set forth below the following financial statements, reports and certificates:
(a) As soon as available, but in any event within ninety (90) days
after each fiscal year end, an audited financial statement of
the Borrower consisting of a balance sheet, profit and loss
statement and sources of cash flow prepared and certified to
by an independent certified public accountant satisfactory to
the Lender together with a copy of Borrower's applicable 10K
Report;
(b) As soon as available, but in any event within thirty (30) days
after the last day of each fiscal quarter, a balance sheet and
profit and loss statement of the Borrower dated as of the last
business day of such fiscal quarter in form and detail as
required by the Lender certified by the Chief Financial
Officer of the Borrower together with a copy of Borrower's
applicable 10Q Report;
(c) As soon as available, but in any event within ninety (90) days
after the end of each calendar year, the personal financial
statements of each of the Guarantors prepared and certified
personally by each of the Guarantors, including a contingent
obligation listing for each of the Guarantors;
(d) On the first (1st) Business Day of each month, a copy of the
updated Borrowing Base Certificate, together with a report
regarding sales of all lots located within any Development
Project for which a Development Project Loan has been made;
and
(e) Such other information concerning the business, operations and
condition (financial or otherwise) of the Borrower and the
Guarantors as the Lender may reasonably request.
All financial statements shall be prepared in reasonable detail, shall
be prepared for partnerships and corporations in accordance with GAAP and for
individuals in accordance with accounting principles consistently applied and
shall be signed and certified by the party to which they apply as true, correct
and complete. In the event the Borrower fails to furnish any of the above
statements or information or upon the occurrence of an event of default
hereunder, the Lender may cause an audit to be made of the respective books and
records of the Borrower and the Guarantors at the sole cost and expense of the
Borrower. The Lender also shall have the right to examine at their place of
safekeeping all books, accounts and records relating to the operation of the
Projects and make copies thereof or extracts therefrom and to discuss the
affairs, finances or accounts with the employees and officers of the Borrower
and the Borrower's independent accountants. Said examinations shall be at the
Lender's expense unless the Borrower's statements are found to contain
significant discrepancies, in which case the examination shall be at the
Borrower's expense.
5.9 Providing Evidence of Completion
Upon Completion of each of the Project Improvements included within
each Project, and, unless the Project Improvement is a Construction Project
Improvement which is a Pre-Sold Home, prior to the final advance of Project Loan
proceeds to pay for Construction Costs thereof including, but not limited to,
any retainage therefor, and as a condition of the same, Borrower shall furnish
Lender with all items required to evidence either Development Project Completion
or Construction Project Completion as set forth herein in the definition of
those terms.
5.10 Maintaining Insurance Coverage; Collection and Application of
Insurance Proceeds
Borrower shall, at all times until Lender has been fully repaid all
indebtedness evidenced by the Note, maintain, or cause to be maintained, in
effect, the following insurance with respect to each Project for the benefit of
Lender:
(a) Builder's risk insurance, written on an "all-risk", completed
value, nonreporting basis, covering one hundred percent (100%)
of the replacement cost of all Project Improvements under
construction at any time upon the Project Land;
(b) Insurance upon all completed Project Improvements against loss
or damage by fire, lightning and other risks customarily
covered by standard "all risk" (or special form cause of loss)
and extended coverage endorsements, together with theft,
vandalism, malicious mischief, collapse, earthquake,
replacement cost, agreed amount (if there is co-insurance),
and restoration in conformance with applicable laws and
ordinances endorsements, all in such amounts as may be from
time to time required by Lender, but in no event less than the
full replacement cost of the completed Project Improvements at
any time erected or placed upon the Project Land, including
the cost of debris removal, including the value of all Project
Improvements which cannot be replaced due to changes in
applicable laws, codes, ordinances and/or regulations since
the original construction thereof, and, in any event, in an
amount not less than the unpaid principal balance of the
Project Loan;
(c) Comprehensive commercial general public liability insurance
against claims for bodily injury, personal injury, death
and/or property damage occurring in, on or about the Project,
with coverage limits satisfactory to Lender (which shall
initially be at least equal to $1,000,000.00 with respect to
any one (1) Person, accident or occurrence, with at least
$10,000,000.00 in umbrella excess-liability coverage), and
including contractual liability coverage for the tort
liability with respect to the Project assumed by Borrower
hereunder and under any other Loan Document;
(d) Flood insurance upon any Project in such form and amount as
may from time to time be required by Lender, if such Project
or any portion thereof is located in a designated flood zone,
flood plain or other flood hazard or danger area; and
(e) Insurance upon the Project against such other casualties and
contingencies as Lender may from time to time require
including, but not limited to, workers' compensation in
amounts acceptable to Lender, all in such manner and form as
may be satisfactory to Lender.
Borrower shall, at its sole cost and expense, from time to time and at
any time when Lender shall so request, provide Lender with evidence of the full
replacement cost of a Project in a form acceptable to Lender. Borrower shall
promptly notify Lender and the appropriate insurer in writing of any loss
covered by any of the insurance required hereby.
All insurance provided for in this Section 5.10 shall be in effect
under a valid and enforceable policy or policies of insurance in form and
substance approved by Lender, shall be issued by insurers of recognized
responsibility, which are licensed to do business in the state in which the
Project is located, and which are acceptable to Lender, and shall be
satisfactory to Lender in all other respects.
All hazard and casualty insurance policies maintained by Borrower
pursuant to the foregoing provisions of this Section 5.10 shall (i) provide that
any losses payable thereunder shall (pursuant to a standard first mortgagee
clause in favor of, and acceptable to, Lender, to be attached to each such
policy) be payable to Lender and assigns, (ii) include effective waivers by the
insurer of all claims for insurance premiums against Lender, (iii) provide that
any losses shall be payable notwithstanding (A) any act of negligence by
Borrower or Lender, (B) any foreclosure or other proceedings or notice of sale
relating to the Project, (C) any waiver of subrogation rights by the insured, or
(D) any change in the title to or ownership of the Project or any portion
thereof, and (iv) be written in amounts sufficient to prevent Borrower from
becoming a co-insurer under said policies. All liability insurance policies
maintained by Borrower pursuant to this Section 5.10 shall name Lender as an
additional insured and shall waive contribution from any other insurance carried
by Lender in the event of loss. Borrower shall furnish Lender with evidence that
each Project is insured without interruption as required hereunder and, upon
request, Borrower shall cause the originals or certified copies of the policies
of all such insurance to be deposited with Lender or to be otherwise held as
directed by Lender. At least fifteen (15) days prior to the date on which the
premiums on each such policy shall become due and payable, Borrower shall
furnish Lender with proof reasonably satisfactory to Lender of payment thereof.
Each of such policies shall contain an agreement by the insurer that the same
shall not be amended, modified, canceled, reduced or terminated for any reason
including, but not limited to, a failure to pay premiums and/or expiration by
its terms, without at least thirty (30) days' prior written notice to Lender. If
the Mortgage covering any Project is foreclosed, the purchaser at the
foreclosure sale shall, after the expiration of any statutory period of
redemption become the sole and absolute owner of any and all such policies, with
the sole right to collect and retain all unearned premiums thereon, and, for
this purpose, Borrower hereby assigns and grants a security interest in said
policies and unearned premiums to Lender.
In the event of loss, Borrower shall immediately give written notice
thereof to Lender, and Borrower shall promptly make proof of loss and shall in
good faith and with due diligence file, prosecute, settle, adjust or compromise
any claims for insurance proceeds and cause the same to be paid to Lender;
provided, however, that Borrower agrees not to finally settle, adjust or
compromise any such claims without the prior written consent of Lender. If
Borrower does not itself promptly do so, or if any event of default exists
hereunder, Lender is authorized and empowered (but not obligated or required) to
make proof of loss, to settle, adjust or compromise any claims for loss, damage
or destruction under, to appear in, prosecute, settle and compromise any suit or
proceeding relating to, and to collect and receive all proceeds of, any policies
of hazard and casualty insurance maintained pursuant hereto. Borrower shall
reimburse Lender, on demand, for all reasonable costs and expenses including,
but not limited to, court costs and attorneys fees, incurred by Lender in
connection therewith, plus interest thereon from the date incurred at the
Default Rate. All proceeds of such insurance are hereby absolutely and
unconditionally assigned, and shall be paid, to Lender. Such proceeds shall, at
Lender's option, be applied first to the payment of all costs and expenses
incurred by Lender in obtaining such proceeds, and the remainder ("Net Insurance
Proceeds") shall be applied, at Lender's option, either to the reduction of the
indebtedness secured by the Mortgage covering the damaged or destroyed Project
in such order as Lender may elect, whether then due and payable or not, or to
the restoration or repair of said Project, without affecting the lien of said
Mortgage or the obligations of Borrower hereunder or thereunder. Interest upon
the entire indebtedness secured thereby shall continue until any such proceeds
are received and applied to such indebtedness by Lender. Pending a decision as
to the proper use and application of any insurance proceeds, and during any such
restoration or repair, Lender shall not be liable for interest on such proceeds.
If Lender elects to apply any such insurance proceeds to the restoration or
repair of a Project, such disbursement shall proceed in accordance with the
procedures set forth in this Agreement governing disbursement of the proceeds of
Project Loans. In such event, Borrower shall, prior to commencing any such
restoration or repair, deposit with Lender the amount, if any, by which the cost
of such restoration or repair, as determined by Lender, exceeds the amount of
the Net Insurance Proceeds, which amount shall be disbursed to pay costs of such
restoration and repair prior to, and in the same manner as, such Net Insurance
Proceeds. Any surplus which may remain after payment of all costs of restoration
or repair and/or all indebtedness evidenced hereby shall be paid to Borrower,
its successors, transferees or assigns, as their interests may appear.
Notwithstanding any provision contained in this Section to the
contrary, in the event that no event of default then exists hereunder, Lender
shall, at Borrower's written request, permit the Net Insurance Proceeds to be
deposited in an interest bearing escrow account at Lender or at another
financial institution acceptable to Lender, or to be otherwise invested in
liquid, secure investments acceptable and pledged to Lender, with Borrower
bearing all risk of loss thereof, and Lender shall further permit such proceeds
and all interest accrued thereon ("Insurance Interest") to be drawn upon to pay
the costs of restoration, rebuilding or repair of the Project in accordance with
all of the terms of this Agreement applicable to the original construction of
the Project Improvements; provided that (i) the Project Improvements can be
restored, rebuilt or repaired substantially to the condition, and can then
continue to be operated for the purposes, required by this Agreement; (ii) the
restoration, rebuilding or repair of the Project Improvements shall be in strict
accordance with the Plans there for approved by Lender, pursuant to which such
Project Improvements were originally constructed, or Borrower has obtained the
prior written approval by Lender of any other plans and specifications for such
restoration, rebuilding and repair; (iii) the restoration, rebuilding or repair
shall be commenced within sixty (60) days after the date of the loss; (iv) all
restoration, rebuilding and repair shall be performed in a good and workmanlike
manner and in accordance with all applicable Plans, Governmental Requirements
and private restrictions; (v) Borrower has, prior to the commencement of any
restoration, rebuilding or repair, deposited with Lender the amount by which the
Net Insurance Proceeds and Insurance Interest will be insufficient to cover the
total Costs of the planned restoration, rebuilding or repair, as evidenced by a
Sworn Construction Cost Statement acceptable to Lender, which shall be submitted
by Borrower to Lender and shall be signed and sworn to by Borrower and by the
General Contractor for the planned restoration, rebuilding or repair, who must
both be acceptable to Lender; (vi) there is sufficient time for Borrower to
complete said restoration, rebuilding or repair and repay the Project Loan prior
to the Project Loan Maturity Date for said Project, and (vii) Borrower proceeds
diligently to complete said restoration, rebuilding or repair prior to said
Project Loan Maturity Date. If at any time during the course of any such
restoration, rebuilding or repair, the amount so deposited is not sufficient, in
Lender's judgment, to pay the cost of said restoration, rebuilding or repair,
Borrower shall deposit additional funds in an amount equal to the amount of such
insufficiency. Borrower hereby grants to Lender a security interest in all Net
Insurance Proceeds, in all Insurance Interest and in all sums deposited pursuant
to this Section 5.10, to secure payment and performance by Borrower of all of
its obligations hereunder and under the other Loan Documents. In the event that
the Net Insurance Proceeds, plus the Insurance Interest, exceed the cost of said
restoration, rebuilding or repair, and if no event of default exists hereunder,
said excess shall be paid to Borrower.
5.11 Transferring Conveying or Encumbering Projects
Borrower shall not voluntarily or involuntarily agree to, cause, suffer
or permit (a) any sale, transfer or conveyance of any interest of Borrower,
legal or equitable, in any Project (as defined on page 8 herein) or any part or
portion thereof; (b) any transfer of stock in Borrower; or (c) any mortgage,
pledge, encumbrance or lien to be imposed or remain outstanding against any
Project, or any security interest to exist therein, except as created by the
Loan Documents, without, in each instance, the prior written consent of Lender.
Borrower shall maintain its existence as a duly organized and qualified
corporation, in good standing under the laws of the State of Minnesota and the
laws of each state in which any Project is located, and shall not be dissolved,
merged, wound up or terminated. Notwithstanding the above restrictions and
provided no default or Event of Default has occurred and is continuing
hereunder, stock in Borrower may be transferred so long as such Transfer is not
a Change in Control as defined in that certain Indenture dated as of October 18,
1996 by and between Borrower and National City Bank of Minneapolis, National
Association as Trustee and so long as Peter Pflaum shall, at all times, own at
least a fifty (50%) voting and controlling interest in Borrower and so long as
Peter Pflaum shall continue to be the President of Borrower and shall continue
to be in control of the day-to-day operations of Borrower.
5.12 Complying with the Loan Documents and Contracts
Borrower shall comply with and perform all of its agreements and
obligations under the Loan Documents, and under all other contracts and
agreements to which Borrower is a party relating to the ownership, occupancy,
use, development or construction of the Projects and shall comply with all
requests by Lender which are consistent with the terms thereof. No contract or
other agreement which has been or is required hereby to be assigned by Borrower
to Lender as security for the Loan, shall be changed, modified, amended, revoked
or terminated without the prior written consent of Lender.
5.13 Agreements with Affiliates
Any development, management, leasing or other agreement relating to any
Project between Borrower or any Guarantor (or any Affiliate of Borrower or of
any Guarantor), relating to the Project, which requires Borrower to pay any fee,
commission or other compensation of any kind to Borrower, any Guarantor or any
such Affiliate, must be approved by Lender, in writing, and all such agreements
shall be subordinate to the Mortgage covering the Project as to lien and time of
payment.
5.14 Updated Appraisals
Borrower agrees that Lender shall have the right to obtain, once during
the term of each Development Project Loan and each Construction Project Loan, at
Borrower's expense, an updated Appraisal of any Project for which an Appraisal
is required under the terms hereof, acceptable to Lender's internal appraisal
group, in the event that (a) an event of default shall have occurred hereunder,
(b) Lender determines in its reasonable opinion that the security for the
Project Loan for said Project has been physically or financially impaired in any
material respect, or (c) such Appraisal is required by then current Governmental
Requirements applicable to Lender. In the event that Lender shall elect to
obtain such an Appraisal, Lender may immediately commission an appraiser
acceptable to Lender, at Borrower's cost and expense, to prepare the Appraisal,
and Borrower shall fully cooperate with Lender and the appraiser in obtaining
the necessary information to prepare such an Appraisal. In the event that
Borrower fails to cooperate with Lender in obtaining such an Appraisal, or in
the event that Borrower shall fail to pay for the cost of such an Appraisal,
within ten (10) days following demand, such event shall constitute an event of
default hereunder, and Lender shall be entitled to exercise all remedies
therefor available to it hereunder. In the event that any such Appraisal shall
conclude that the Loan to Value Ratio for any Project is greater than that
required hereunder for a particular Project, and Borrower fails to prepay,
within thirty (30) days after written notice from Lender to Borrower, the
outstanding principal balance of the Project Loan, including any amounts which
Lender is obligated to Fund, to the extent necessary to reduce the Loan to Value
Ratio down to that required hereunder, such event shall constitute an event of
default hereunder, and Lender shall be entitled to exercise all remedies
therefor available to it hereunder.
5.15 Limitation on Additional Indebtedness
Borrower shall not, nor shall it permit its Subsidiaries to, create,
incur, assume or issue other Indebtedness if, immediately after the incurrance
thereof, the ratio of Funded Debt to Consolidated Tangible Net Worth, plus
Shareholder Subordinated Debt of the Borrower, would exceed 7 to 1. Compliance
with this covenant shall be measured on the last day of March, June, September
and December of each year, and Borrower shall provide Lender with a detailed
calculation with accompanying Certificate in the form attached hereto as Exhibit
H of the Funded Debt to Consolidated Tangible Net Worth as of each quarter
within forty-five (45) days of each calendar quarter except December 31 for
which Borrower shall have seventy-five (75) days to provide the calculation.
Borrower shall have thirty (30) days to cure any default in this Funded Debt
covenant, and Borrower shall be prohibited from incurring any additional Funded
Debt from the date of measurement until such default is cured. In the event of
any non-compliance with this covenant, Borrower shall deliver to Lender a
certificate from Borrower's independent public accountants as to subsequent
compliance to cure any such default.
5.16 Minimum Consolidated Tangible Net Worth
Borrower will maintain, at all times until the maturity of all Project
Loans, a Consolidated Tangible Net Worth, determined as of December 31 of each
year, based upon the annual audited financial statements, of at least Five
Million and 00/100 Dollars ($5,000,000.00) plus fifty percent (50%) of the
Consolidated Net Income earned after December 31, 1995, assuming for purposes of
this Consolidated Tangible Net Worth calculation only that the maximum
Management Bonuses permitted pursuant to Section 10.12 of that certain Indenture
dated as of October 18, 1996 by and between Borrower and National City Bank of
Minneapolis, National Association, as Trustee, are paid as of December 31 of
each year and taxes are then determined based upon the assumed Consolidated Net
Income level. Compliance with this covenant shall be determined quarterly but
the net worth utilized each calendar quarter in March, June and September shall
be the Consolidated Tangible Net Worth amount as determined on the previous
December 31.
Compliance with this covenant shall be measured on the last day of
March, June, September and December of each year, and Borrower shall provide
Lender with a detailed calculation of the Consolidated Tangible Net Worth as of
each quarter within forty-five (45) days of each calendar quarter except
December 31 for which Borrower shall have seventy-five (75) days to provide the
calculation. Borrower shall have thirty (30) days to cure any default in this
Consolidated Tangible Net Worth covenant. In the event of any non-compliance
with this covenant, Borrower shall deliver to Lender a certificate from
Borrower's independent public accountants as to subsequent compliance to cure
any such default.
5.17 Miscellaneous
Borrower shall also:
(a) Maintain its qualification to transact business in its state
of incorporation, in each state in which a Project is located,
and in each jurisdiction where failure so to qualify would
permanently preclude Borrower from enforcing its rights with
respect to any material asset or would expose Borrower to any
material liability.
(b) File all tax returns and reports which are required by law to
be filed by it and pay before they become delinquent all
taxes, assessments and governmental charges and levies imposed
upon it and all claims or demands of any kind which, if
unpaid, might result in the creation of a lien upon its
property; provided that the foregoing items need not be paid
if they are being contested in good faith by appropriate
proceedings in accordance with applicable terms of the
Mortgage covering said property, and as long as the Borrower's
title to its property is not materially adversely affected,
its use of such property in the ordinary course of its
business is not materially interfered with, and adequate
reserves with respect thereto have been set aside on the
Borrower's books in accordance with GAAP.
(c) Give prompt written notice to Lender of the commencement of
any action, suit or proceeding before any court or arbitrator
or any governmental department, board, agency or other
instrumentality affecting Borrower or any Guarantor or any
property of Borrower or any Guarantor or to which Borrower or
any Guarantor is a party in which an adverse determination or
result could have a material adverse effect on the business,
operations, property or condition (financial or otherwise) of
Borrower or any Guarantor or on the ability of any of them to
perform its obligations under this Agreement and the other
Loan Documents, stating the nature and status of such action,
suit or proceeding.
6. DEFAULTS
6.1 Events of Default
Any of the following events shall constitute an event of default under
this Agreement:
(a) Borrower shall default in the payment of principal due
according to the terms hereof or of the Note.
(b) Borrower shall default in the payment of interest on Advances
made by Lender, or in the payment of fees or any other amounts
payable hereunder, under the Note or under any of the other
Loan Documents.
(c) Borrower shall default in the performance or observance of any
other agreement, covenant or condition required to be
performed or observed by Borrower under the terms of this
Agreement, which default, if curable, is not cured within
thirty (30) days after Lender gives Borrower written notice
thereof; provided, however, that if said curable default
cannot reasonably be cured within said thirty (30) day period,
but Borrower commences the cure thereof within said thirty
(30) day period and thereafter prosecutes such cure
diligently, continuously and in good faith, said thirty (30)
day period shall be extended by the period of time reasonably
required to cure the same, not to exceed an additional sixty
(60) days.
(d) Any representation or warranty made by Borrower or any
Guarantor in this Agreement or in any of the other Loan
Documents, or in any certificate or document furnished under
the terms of this Agreement or in connection with the Loan,
shall be untrue or incomplete in any material respect.
(e) An event of default shall exist under the terms of any other
Loan Document.
(f) Work on any Project shall be substantially abandoned, or
shall, by reason of Borrower's fault, be delayed or
discontinued for an unreasonably long period or for no valid,
good faith business reason, or such construction shall be
delayed for any reason to the extent that Completion of the
Project cannot, in the reasonable judgment of Lender, be
accomplished prior to the Completion Date for the Project.
(g) Borrower, any Guarantor or any Affiliate of Borrower or any
Guarantor shall become insolvent or shall commit an act of
bankruptcy; or shall apply for, consent to or permit the
appointment of a receiver, custodian, trustee or liquidator
for it or any of its property or assets; or shall fail to, or
admit in writing its inability to, pay its debts as they
mature; or shall make a general assignment for the benefit of
creditors or shall be adjudicated bankrupt or insolvent; or
shall take other similar action for the benefit or protection
of its creditors; or shall give notice to any governmental
body of insolvency or pending insolvency or suspension of
operations; or shall file a voluntary petition in bankruptcy
or a petition or an answer seeking reorganization or an
arrangement with creditors, or to take advantage of any
bankruptcy, reorganization, insolvency, readjustment of debt,
rearrangement, dissolution, liquidation or other similar
debtor relief law or statute; or shall file an answer
admitting the material allegations of a petition filed against
it in any proceeding under any such law or statute; or shall
be dissolved, liquidated, terminated or merged without
Lender's prior written consent; or shall effect a plan or
other arrangement with creditors; or a trustee, receiver,
liquidator or custodian shall be appointed for it or for any
of its property or assets and shall not be discharged within
sixty (60) days after the date of his appointment; or a
petition in involuntary bankruptcy or similar proceedings is
filed against it and is not dismissed within sixty (60) days
after the date of its filing.
(h) A judgment or judgments for the payment of money in excess of
the sum of $25,000.00 in the aggregate shall be rendered
against Borrower or any Guarantor, and said party shall not
(i) discharge the same or provide for the discharge thereof in
accordance with the terms thereof, or (ii) procure a stay of
execution thereof, prior to any execution on such judgment by
the judgment creditor, within sixty (60) days from the date of
entry thereof, and within said period of sixty (60) days, or
such longer period during which execution of such judgment
shall be stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal.
(i) The maturity of any Lender Debt of Borrower, any Guarantor, or
any Affiliate of Borrower or any Guarantor (other than
indebtedness under this Agreement) shall be accelerated, or
Borrower, any Guarantor or any such Affiliate shall fail to
pay any such Lender Debt when due (after the lapse of any
applicable grace period) or, in the case of such indebtedness
payable on demand, when demanded (after the lapse of any
applicable grace period), or any event shall occur or
condition shall exist and shall continue for more than the
period of grace, if any, applicable thereto hand shall have
the effect of causing, or permitting the holder of any such
indebtedness or any trustee or other Person, party or entity
acting on behalf of such holder to cause, such or Lender Debt
to become due prior to its stated maturity or to realize upon
any collateral given as security therefor.
(j) An Event of Default occurs under the terms of the Senior
Subordinated Debentures.
(k) Borrower shall be terminated, dissolved, liquidated or
wound-up.
(l) Any default by any Guarantor occurs under the terms of the
Guaranty.
(m) Peter Pflaum shall die or shall become legally incompetent.
The default described in this Section 6.1(m) may be cured by
the immediate implementation of the Term-Out provisions set
forth in Section 1.9 hereof, with the then Total Revolving
Outstandings reduced to zero (0) within six (6) months from
the date of such death or legal incompetence.
(n) Borrower shall fail to comply with the convenants set forth in
Section 5.15 and 5.16 hereof.
6.2 Rights and Remedies
Upon the occurrence of an event of default, unless such event of
default is subsequently waived in writing by Lender, Lender shall be entitled,
at the option of Lender, to exercise any or all of the following rights and
remedies, consecutively or simultaneously, and in any order:
(a) Lender may make one (1) or more further Advances, without
liability to make any subsequent Advances.
(b) Lender may suspend its obligation to make Advances under this
Agreement, without notice to Borrower.
(c) Lender may terminate its obligation to make Advances under
this Agreement, and may declare the entire unpaid principal
balance of the Advances made under this Agreement to be
immediately due and payable, together with accrued and unpaid
interest on such Advances, without notice to or demand on
Borrower.
(d) Lender may exercise any or all remedies specified herein
and/or in the other Loan Documents, including (without
limiting the generality of the foregoing) the right to
foreclose the Mortgage or to sell the property covered thereby
pursuant to the terms thereof, and/or any other remedies which
it may have therefor at law, in equity or under statute.
(e) Lender may cure the event of default on behalf of Borrower,
and, in doing so, may enter upon any Project, and may expend
such sums as it may deem desirable, including attorneys' fees,
all of which shall be deemed to be Advances hereunder, even
though causing the Loan to exceed the face amount of the Note,
shall bear interest at the Default Rate and shall be payable
by Borrower on demand.
(f) Borrower hereby irrevocably authorizes Lender to set off any
sum due to or incurred by Lender against all deposits and
credits of Borrower with, and any and all claims of Borrower
against, Lender. Such right shall exist whether or not Lender
shall have made any demand hereunder or under any other Loan
Document, whether or not said sums, or any part thereof, or
deposits and credits held for the account of Borrower is or
are matured or unmatured, and regardless of the existence or
adequacy of any collateral, guaranty or any other security,
right or remedy available to Lender. Lender agrees that, as
promptly as is reasonably possible after the exercise of any
such setoff right, it shall notify Borrower of its exercise of
such setoff right; provided, however, that the failure of
Lender to provide such notice shall not affect the validity of
the exercise of such setoff rights. Nothing in this Agreement
shall be deemed a waiver or prohibition of or restriction on
Lender to all rights of banker's lien, setoff and counterclaim
available pursuant to law.
In addition, upon the occurrence of any event described in Section
6.1(g) hereof which will not become an event of default prior to the expiration
of some period of time, Lender may suspend its obligations to fund Advances
hereunder immediately upon the occurrence of said event.
6.3 Completion of a Project by Lender
In addition, in case of the occurrence of an event of default specified
in Section 6.1(f) hereof, or any event of default caused by, or which results
in, Borrower's failure, for any reason, to continue with construction of a
Project as required by this Agreement, then Lender may (but shall not be
obligated to), in addition to, or in concert with, the other remedies referred
to above, take over and complete construction of the Project in accordance with
the Plans, with such changes therein as Lender may, in its discretion, deem
appropriate, all at the risk, cost and expense of Borrower. Lender may assume or
reject any contracts entered into by Borrower in connection with the Project,
may enter into additional or different contracts for work, services, labor and
materials required, in the judgment of Lender, to complete the Project, and may
pay, compromise and settle all claims in connection with the Project. All sums,
including reasonable attorneys' fees, and charges or fees for supervision and
inspection of the construction and for any other necessary or desirable purpose
in the discretion of Lender expended by Lender in completing or attempting to
complete the Project (whether aggregating more, or less, than the face amount of
the Note), shall be deemed Advances made by Lender to Borrower hereunder, and
Borrower shall be liable to Lender, on demand, for the repayment of such sums,
together with interest on such sums from the date of their expenditure at the
Default Rate. Lender may, in its discretion, at any time abandon work on the
Project, after having commenced such work, and may recommence such work at any
time, it being understood that nothing in this Section shall impose any
obligation on Lender either to complete or not to complete the Project. For the
purpose of carrying out the provisions of this Section, Borrower irrevocably
appoints Lender its attorney-in-fact, with full power of substitution, to
execute and deliver all such documents, to pay and receive such funds, and to
take such action as may be necessary, in the judgment of Lender, to complete the
Project. This power of attorney is coupled with an interest and is irrevocable.
Lender, however, shall have no obligation to undertake any of the foregoing,
and, if Lender does undertake any of the same, it shall have no liability for
the adequacy, sufficiency or completion thereof.
7. MISCELLANEOUS
7.1 Binding Effect; Waivers; Cumulative Rights and Remedies
The provisions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, personal representatives, legal representatives, successors and
assigns, subject to the provisions of Section 5.11; provided, however, that
neither this Agreement nor the proceeds of the Loan may be assigned by Borrower
voluntarily, by operation of law or otherwise, without the prior written consent
of Lender. No delay on the part of Lender in exercising any right, remedy, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder
constitute such a waiver or exhaust the same, all of which shall be continuing.
The rights and remedies of Lender specified in this Agreement shall be in
addition to, and not exclusive of, any other rights and remedies which Lender
would otherwise have at law, in equity or by statute, and all such rights and
remedies, together with Lender's rights and remedies under the other Loan
Documents, are cumulative and may be exercised individually, concurrently,
successively and in any order.
7.2 Survival
All agreements, representations and warranties made in this Agreement
shall survive the execution of this Agreement, the making of the Advances by
Lender, and the execution of the other Loan Documents, and shall continue until
Lender receives payment in full of all indebtedness of Borrower incurred under
this Agreement, under the Indemnification Agreements and under the other Loan
Documents and Lender has no obligation to make any further Advances hereunder.
7.3 Governing Law; Waiver of Jury Trial; Venue
THIS AGREEMENT, THE RIGHTS OF THE PARTIES HEREUNDER, AND THE
CONSTRUCTION, INTERPRETATION, VALIDITY AND ENFORCEABILITY HEREOF SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT
GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES RELATING TO NATIONAL BANKS.
BORROWER AND LENDER HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING RELATING TO THE LOAN, THE LOAN DOCUMENTS AND/OR THE TRANSACTIONS
CONTEMPLATED THEREBY. AT THE OPTION OF LENDER, THIS AGREEMENT MAY BE ENFORCED IN
ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN OR RAMSEY COUNTY,
MINNESOTA; AND BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT
AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE
EVENT BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY
TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, LENDER, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE
CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF
SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
7.4 Counterparts
This Agreement may be executed in any number of counterparts, all of
which shall constitute a single Agreement.
7.5 Notices
Any notice required or permitted to be given by any party hereto to the
other under the terms of this Agreement, or documents related hereto, shall be
in writing and shall be sent by manual delivery, telegram, facsimile
transmission, overnight courier, or United States registered or certified mail,
return receipt requested (postage prepaid), addressed to such party at the
address specified on the signature page(s) hereof, or at such other address in
the United States of America as such party shall have specified to the other
party hereto in writing, at least ten (10) days prior to the effective date of
said change of address. All periods of notice shall be measured from the date of
delivery thereof if manually delivered, from the date of sending thereof if sent
by telegram or facsimile transmission, from the first Business Day after the
date of sending if sent by overnight courier, or from four (4) days after the
date of mailing if so mailed.
7.6 Lender's Signs
Lender may, if it so desires, at Borrower's cost and expense, place a
sign of reasonable size on any Project Land, indicating that Lender is providing
financing for the Project to be constructed thereon, and/or may otherwise
publicize its involvement with said Project including, but not limited to,
issuing press releases.
7.7 No Third Party Reliance
No third party shall be entitled to rely upon this Agreement or to have
any of the benefits of Lender's interest hereunder, unless such third party is
an express assignee of all or a portion of Lender's interest hereunder.
7.8 Time of the Essence
Time is of the essence hereof with respect to the dates, terms and
conditions of this Agreement.
7.9 Entire Agreement: No Oral Modifications
This Agreement, the Guaranty, the other Loan Documents and the other
documents mentioned herein set forth the entire agreement of the parties with
respect to the Loan and supersede all prior written or oral understandings and
agreements between them with respect thereto. No modification or waiver of any
provision of this Agreement shall be effective unless set forth in writing and
signed by the parties hereto.
7.10 Captions
The headings or captions of the Articles and Sections set forth herein
are for convenience only, are not a part of this Agreement and are not to be
considered in interpreting this Agreement.
7.11 Borrower-Lender Relationship
The relationship between Borrower and Lender created hereby and by the
other Loan Documents shall be that of a borrower and a lender only, and in no
event shall Lender be deemed to be a partner of, or a joint venturer with,
Borrower.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Address: LUNDGREN BROS. CONSTRUCTION, INC.,
a Minnesota corporation
935 East Wayzata Boulevard
Wayzata, Minnesota 55391 By:
-------------------------------
Peter Pflaum
Its: President
Address: FIRST BANK NATIONAL ASSOCIATION
First Bank Place - MPFPO8O2
601 Second Avenue South By:
Minneapolis, Minnesota 55402-4302 -------------------------------
Attention: Real Estate Banking Its:
Division Head -------------------------------
EXHIBIT "A"
AMENDMENT TO MORTGAGE
AMENDMENT OF MORTGAGE AND SECURITY AGREEMENT
AND FIXTURE FINANCING STATEMENT
This Amendment to Mortgage and Security Agreement and Fixture Financing
Statement is made and entered into as of the ______ day of ________________,
19____, by and between FIRST BANK NATIONAL ASSOCIATION, a national banking
association ("Mortgagee"), whose post office address is 601 Second Avenue South,
MPFP0802, Minneapolis, Minnesota 55402-4302, Attn: Real Estate Banking Group and
LUNDGREN BROS. CONSTRUCTION, INC., a Minnesota corporation (hereinafter referred
to as the "Mortgagor"), whose post office address is 935 East Wayzata Boulevard,
Wayzata, Minnesota 55391.
R E C I T A L S
7.12 Mortgagee has made a revolving construction and development loan
("Loan") to Mortgagor in the sum of Five Million and No/100 Dollars
($5,000,000.00).
7.13 To evidence the Loan, the Mortgagor executed and delivered to
Mortgagee a Revolving Credit Note dated April ______, 1997, in the original sum
of Five Million and No/100 Dollars ($5,000,000.00) ("Note") payable to the order
of Lender.
7.14 The Note was secured by a Mortgage and Security Agreement and
Fixture Financing Statement dated April _____, 1997, filed in the office of the
Hennepin County Recorder on April ______, 1997, as Document No. ______________
and in the office of the Hennepin County Registrar of Titles on April __, 1997
as Document No. _______ and in the offices of the Dakota County Recorder on
April __, 1997 as Document No. _______ ("Mortgage"), on certain property located
in Hennepin and Dakota Counties, Minnesota, and legally described therein.
7.15 Mortgagor has requested that the Mortgagee agree to amend and
modify the Note. Mortgagee has agreed to such amendment and modification upon
the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the above recitals and other good
and valuable consideration, the receipt of which is hereby acknowledged,
Mortgagor and Mortgagee do hereby amend the terms of the Mortgage as follows:
(a) Exhibit "A" attached to the Mortgage and the real property
conveyed therein, is hereby amended and supplemented and the
real property described in Exhibit "A" attached hereto shall
become a part thereof. All references in the Mortgage to
Exhibit "A" and/or the Premises shall refer to Exhibit "A" and
the Premises as amended hereby.
(b) All references in the Mortgage to the county wherein the
Premises shall is located shall be amended to include the
County of _________________.
(c) Except as amended hereby, all provisions of the Mortgage shall
remain in full force and effect and are not further modified,
and the liens securing the Note are continued and carried
forward in full force and effect in accordance with their
terms.
IN WITNESS WHEREOF, the parties hereto have executed the foregoing
instrument as of the date first above written.
FIRST BANK NATIONAL
ASSOCIATION, a national banking
association
By:
---------------------------------
Its:
---------------------------------
LUNDGREN BROS. CONSTRUCTION,
INC., a Minnesota corporation
By:
---------------------------------
Its:
---------------------------------
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _______ day of
__________, 199___, by ____________________________, the _______________________
of First Bank National Association, a national banking association, on behalf of
said association.
----------------------------------
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _______ day of
__________, 199___, by ____________________________, the _______________________
of Lundgren Bros. Construction, Inc., a Minnesota corporation, on behalf of said
corporation.
----------------------------------
Notary Public
THIS DOCUMENT DRAFTED BY
Oppenheimer Wolff & Donnelly (MES)
3400 Plaza VII
45 South Seventh Street
Minneapolis, Minnesota 55402
Telephone: (612) 344-9300
EXHIBIT "A"
LEGAL DESCRIPTION
Parcel I:
Lot 9, Block 2, Plum Tree 2nd Addition, according to the recorded plat thereof,
Hennepin County, Minnesota.
Abstract property and Torrens Certificate Number: 843902
Parcel II:
Lot 8, Block 1, The Woodwinds 4th Addition, according to the recorded plat
thereof, Dakota County, Minnesota.
Abstract.
Parcel III:
Lot 10, Block 2, The Woodwinds 5th Addition according to the recorded plat
thereof, Dakota County, Minnesota.
Abstract.
EXHIBIT "B"
APPLICATION AND CERTIFICATE FOR PAYMENT
EXHIBIT "C"
BORROWING BASE CERTIFICATE
LUNDGREN BROS. CONSTRUCTION, INC. -- FIRST BANK NATIONAL
ASSOCIATION
BORROWING BASE CERTIFICATE _____________, 199___
The undersigned hereby certifies to First Bank National Association ("Bank")
that (a) all information set forth on this Borrowing Base Certificate and the
attached Borrowing Base Certificate Exhibit A is true, correct, complete and
accurate on the date set forth below; (b) no uncured Event of Default (as that
term is defined in the Revolving Construction and Development Loan Agreement
("Loan Agreement"), dated April ____, 1997, between the Bank and Lundgren Bros.
Construction, Inc.) exists on the date set forth below, except as set forth
below or in previous notices sent, or certificates delivered to the Bank as set
forth below; and (c) this Certificate complies with all of the terms and
provisions of the Loan Agreement.
Unit Summary
Number of Units Amount of
Construction
Project Loans
Total Housing Units Under Construction ________________ _____________
Presold Units ________________ _____________
Models ________________ _____________
Spec Units ________________ _____________
Models and Specs Maximum = 50% of Revolver
Amount allocated to Construction Portion ________________ _____________
Notices The following notices have been provided to First Bank
National Association and remain effective as of the date
hereof:
None.
Certified: Lundgren Bros. Construction, Inc.
By: ______________________________ Date: _____________________
Its: _____________________________
EXHIBIT "D"
Intentionally deleted.
EXHIBIT "E"
DRAW REQUEST CERTIFICATION
DRAW REQUEST
In accordance with the attached Collateral Certificate and Borrowing Base
Certificate, Borrower has requested a draw in the amount of $_______________ as
of ________________, 1997.
BORROWER
LUNDGREN BROS. CONSTRUCTION, INC.,
a Minnesota corporation
By:
---------------------------------
Its:
---------------------------------
EXHIBIT "F"
LETTER OF INSTRUCTIONS
__________________, 1997
BY OVERNIGHT COURIER
Chicago Title Insurance Company
2740 West 80th Street, Suite 120
Bloomington, Minnesota 55431
Attention: _________________
Re: $5,000,000.00 Revolving Single Family Residential
Development Loan from First Bank National
Association ("Bank") to Lundgren Bros. Construction, Inc., (Borrower")
Mortgage and Security Agreement and Fixture Financing Statement by
and between Bank and Borrower dated April ____, 1997, ("Mortgage")
Your Mortgagee's Policy of Title Insurance No. ____________ ("Policy)
Dear _______________:
Enclosed please find a fully completed, dated, executed and acknowledged
Amendment of Mortgage and Security Agreement and Fixture Financing Statement
("Amendment of Mortgage"), covering real property located in ____________
County, Minnesota ("Subject Property").
Please record the Amendment of Mortgage in the office of the County Recorder
(Registrar of Titles) in and for said County, at the sole cost and expense of
the Borrower named therein at such time as you are prepared to issue to the Bank
an Endorsement under the Policy in the same form and amount as, including the
same endorsements as are attached to, and with the same deletions from the
Standard Printed Exceptions and Standard Exclusions from Coverage as are made
in, the Policy, covering the Subject Property and insuring that the Mortgage, as
amended and supplemented by the Amendment of Mortgage, is a first lien on the
Subject Property, free and clear of all mortgages, liens, exceptions,
encumbrances or objections to title except (a) the liens of unpaid taxes which
are not yet delinquent and (b) the items numbered _____, ______, and _______ of
Schedule B of your Commitment to Insure covering the Order Number _____________;
Effective Date: _____________, 1997, a copy of which is attached hereto and is
hereby made a part hereof. Please have an appropriate, authorized officer of
Chicago Title Insurance Company date, sign and return to the undersigned by
facsimile transmission (at 612/973-0830) and by overnight air courier, the
enclosed copy of this letter. Notwithstanding our failure to receive a copy of
this letter executed by an authorized agent of Chicago Title Insurance Company,
your recordation of the Mortgage and issuance of the Endorsement shall
constitute evidence of your agreement with these instructions.
All premiums and other costs associated with the issuance of the Endorsement and
compliance with these instructions must be paid by the Borrower.
If you have any questions concerning any of these instructions, please contact
the undersigned before acting thereon.
Sincerely,
Greg Fiedorow
Loan Administrator
GF:
Attachment
cc: Kyle Hansen
ACKNOWLEDGMENT AND ACCEPTANCE
The undersigned hereby acknowledges receipt of the foregoing letter of
instructions, agrees to comply therewith and agrees to issue the Endorsement in
accordance with the terms thereof.
CHICAGO TITLE INSURANCE COMPANY
By:
---------------------------------
Its:
---------------------------------
EXHIBIT "G"
ASSIGNMENT OF GENERAL CONTRACT
ASSIGNMENT OF GENERAL CONTRACT
THIS ASSIGNMENT is made this _____ day of April, 1997, by LUNDGREN
BROS. CONSTRUCTION, INC., a Minnesota corporation (hereinafter collectively
referred to as the "Borrower"), whose address is c/o Peter Pflaum, 935 East
Wayzata Boulevard, Wayzata, Minnesota 55391, to FIRST BANK NATIONAL ASSOCIATION,
a national banking association (hereinafter referred to as the "Lender"), whose
address is First Bank Place, 601 Second Avenue South, Minneapolis, Minnesota
55402-4302.
RECITALS
A. The Borrower is the owner of certain real property and the
improvements thereon located in the City of ______________,
County of ____________, State of Minnesota (hereinafter
referred to as the "Premises").
B. The Borrower has executed and delivered to and with
______________ ______________________, a _____________________
(hereinafter referred to as the "Contractor") a certain
agreement dated as of _____________, 19 ____ (hereinafter
referred to as the "Contract") providing that Contractor will
act as general contractor in connection with the construction
of certain improvements upon the Premises (hereinafter
referred to as the "Improvements").
C. The Lender has made to the Borrower a $5,000,000.00 revolving
and development construction loan (hereinafter referred to as
the "Loan") pursuant to a certain Revolving Construction and
Development Loan Agreement of even date herewith (hereinafter
referred to as the "Loan Agreement") for the purpose of
financing a portion of the costs of the construction of the
Improvements, and as a condition of making certain advances
under the Loan, the Lender requires the assignment to it of
the Contract and certain subcontracts and the consent of the
Contractor and certain subcontractors thereto as herein set
forth.
D. The Loan is evidenced by a Revolving Credit Note (hereinafter
referred to as the "Note") and secured by a Mortgage and
Security Agreement and Fixture Financing Statement
(hereinafter referred to as the "Mortgage"), both dated April
____, 1997 (the Note, the Mortgage and all other documents
securing the Loan are hereinafter collectively referred to as
the "Loan Documents").
NOW, THEREFORE, to secure the Loan and all advances to and obligations
of the Borrower under the Loan Agreement and the Loan Documents for the
Improvements, the Borrower hereby sells, assigns and transfers and sets over
unto the Lender and its successors and assigns, and grants a security interest
in all of the right, title and interest of the Borrower in and to the Contract
and in and to any and all subcontracts (hereinafter referred to as the
"Subcontracts") now or hereafter entered into by Contractor in connection with
the construction of the Improvements, and the Borrower hereby represents,
warrants and agrees as follows:
1. The copy of the Contract attached hereto as Exhibit "A" is a
true, correct and complete copy of the Contract; there have
been no prior assignments of the Contract; the Contract is
valid, enforceable and in full force and effect and has not
been amended or modified in any manner; neither party to the
Contract is in default under the terms of the Contract; and
all covenants, conditions and agreements contained in the
Contract have been performed as required therein, except those
not due to be performed until after the date hereof.
2. The Borrower agrees not to further assign, sell, pledge,
mortgage or otherwise transfer or encumber its interest in the
Contract so long as this Assignment is in effect. The Borrower
agrees that it shall not amend or modify the terms of the
Contract without the prior written approval of the Lender.
3. This Assignment shall constitute a perfected, absolute and
present assignment provided that the Lender shall have no
right under this Assignment to enforce the provisions of the
Contract until an Event of Default shall have occurred under
the terms of the Construction Loan Agreement. Upon the
occurrence of such an Event of Default, the Lender may,
without affecting any of its rights or remedies against the
Borrower under any other instrument, document or agreement,
exercise its rights under this Assignment as the Borrower's
attorney-in-fact in any manner permitted by law, and in
addition, the Lender shall have the right to exercise and
enforce any or all rights and remedies available to a secured
party under the Uniform Commercial Code.
4. The Borrower hereby irrevocably constitutes and appoints the
Lender as its attorney-in-fact upon the occurrence of an Event
of Default under the Construction Loan Agreement to demand,
receive and enforce the Borrower's rights with respect to the
Contract, to make payments under the Contract and to give
appropriate receipts, releases and satisfactions for and on
behalf of and in the name of the Borrower or, at the option of
the Lender, in the name of the Lender, with the same force and
effect as if the Lender had originally executed the Contract.
5. The Lender does not assume any of the obligations or duties of
the Borrower under or with respect to the Contract unless and
until the Lender shall have given the Contractor written
notice that it is exercising its right to complete or cause
the completion of the construction of the Improvements
following the occurrence of an Event of Default under the
Construction Loan Agreement. If the Lender does not undertake
to complete or cause the completion of the construction of the
Improvements, the Lender shall have no liability whatsoever
for the performance of any of the obligations or duties under
the Contract. The Lender may reassign, in its sole discretion,
and for the purpose of completing the Improvements, its right,
title and interest in the Contract and Subcontracts upon
notice to the Contractor and Subcontractors, but without any
requirement for the consent of the Borrower.
6. The Borrower agrees to pay all costs and expenses, including
attorney's fees, which the Lender may incur by exercising any
of its rights under this Assignment.
7. Neither this Assignment nor any provision hereof may be
changed, waived, discharged or terminated, except by an
instrument in writing signed by the Borrower and the Lender.
IN WITNESS WHEREOF, the Borrower has executed this Assignment as of the
day and year first written above.
LUNDGREN BROS. CONSTRUCTION,
INC., a Minnesota corporation
By:
--------------------------------
Peter Pflaum
Its: President
CONTRACTOR'S CONSENT
The undersigned, ____________________________________, a
__________________ (hereinafter referred to as the "Contractor"), does hereby
consent to the above Assignment and acknowledges and agrees with FIRST BANK
NATIONAL ASSOCIATION, a national banking association (hereinafter referred to as
the "Lender") as follows:
1. The Contractor acknowledges that it has entered into a certain
construction and development contract with the Borrower
(hereinafter referred to as the "Contract") dated
_____________, 19 ____, a true and correct copy of which is
attached hereto as Exhibit "A", and that it is the Contractor
under the Contract referred to in the foregoing Assignment.
The Contract is valid, enforceable and in full force and
effect and has not been amended or modified in any respect.
2. The Contractor acknowledges that the rights of the Borrower
under the Contract have been collaterally assigned by the
Borrower to the Lender.
3. Upon the occurrence of an Event of Default under the terms of
the Loan Agreement, the Contractor shall, at the Lender's
written request, continue performance on the Lender's behalf
under the Contract in accordance with the terms thereof,
conditioned only upon receipt by the Contractor of payment on
account of its compensation in accordance with the terms and
provisions of the Contract.
4. The disbursement provisions contained in the Loan Agreement
shall control the disbursement of Loan proceeds to the
Borrower notwithstanding any conflicting provisions contained
in the Contract.
5. The Lender may enforce the obligations of the Contractor under
the Contract with the same force and effect as if enforced by
the Borrower and may perform the obligations of the Borrower.
The Contractor will accept such performance in lieu of
performance by the Borrower in satisfaction of the Borrower's
obligations thereunder.
6. The Contractor will give the Lender prompt written notice of
any default by the Borrower under the Contract. The Contractor
will not terminate the Contract on account of any default of
the Borrower thereunder without written notice of such default
to the Lender and will give the Lender thirty (30) days to
cure the default. In the event the Lender elects to cure the
default and does, in fact, cure such default within the time
period set forth herein, the Contractor agrees not to
terminate the Contract. If, however, the Lender elects not to
enforce the Contract against the Contractor, the Lender shall
have no obligation to cure any default of the Borrower under
the Contract.
7. The Contractor has full authority under all state and local
laws and regulations to perform all of its obligations under
the Contract in accordance with the terms thereof and the
Contractor will comply with all applicable local, state and
federal laws and regulations. Upon completion of the
Improvements, the Contractor will certify to the Lender or its
successors or assigns that the Improvements have been
completed in substantial accordance with the Plans and
Specifications as prepared by _________________________, a
______________________ and all applicable building, fire,
health, zoning, environmental and energy legislation,
ordinances, rules and regulations.
8. The Contractor hereby collectively assigns to the Lender as
collateral security for the Loan all of Contractor's right,
title and interest under the Subcontracts under the same terms
and conditions as contained herein with reference to the
Contract which assignment shall become operative upon the
occurrence of an event of default by the Contractor under the
terms of the Contract or the Subcontracts and the written
assumption by Lender of the Contractor's obligations under the
Subcontracts.
9. The Contractor agrees not to modify or amend the Contract or
any Subcontracts or give effect to any change order without
the Lender's specific written consent.
10. All terms defined in the foregoing Assignment shall have the
same meanings when used in this Consent.
Dated: April ____, 1997
CONTRACTOR:
-----------------------------------,
a
----------------------------------
By:
--------------------------------
Its:
--------------------------------
EXHIBIT "A"
CONTRACT
EXHIBIT "H"
CERTIFICATE REGARDING CONSOLIDATED
NET WORTH AND LEVERAGE RATIO
The undersigned, being the Borrower or an authorized representative of the
Borrower, delivers this certificate pursuant to the terms of Sections 5.15 and
5.16 of the Revolving Construction and Development Loan Agreement dated as of
___________, 1997, and hereby certifies that for the quarter immediately
preceding the date of this Certificate:
(1) Consolidated Tangible Net Worth $______________ *
(2) Leverage Ratio _________ *
BORROWER
LUNDGREN BROS. CONSTRUCTION,
INC., a Minnesota corporation
By:
----------------------------------
Its:
----------------------------------
Date:
--------------------------------
*Calculations attached
REVOLVING CREDIT NOTE
$5,000,000.00 Minneapolis, Minnesota
April _____, 1997
FOR VALUE RECEIVED, the undersigned, LUNDGREN BROS. CONSTRUCTION, INC.,
a Minnesota corporation (the "Borrower"), promises to pay to the order FIRST
BANK NATIONAL ASSOCIATION, a national banking association (the "Lender"), its
successors and assigns, at its office at 601 Second Avenue South, Minneapolis,
Minnesota 55402-4302, or such other place as the holder hereof may designate in
writing from time to time, the principal sum of Five Million and 00/100 Dollars
($5,000,000.00), or so much thereof as may be advanced from time to time
pursuant to that certain Revolving Construction and Development Loan Agreement
dated of even date herewith between the Borrower and the Lender (as originally
executed and as may be amended, modified, supplemented or restated from time to
time, the "Loan Agreement"), in lawful money of the United States, together with
interest from the date hereof on the unpaid principal balance hereof from time
to time outstanding at a variable annual rate at all times equal to one and
one-fourth percent (1.25%) per annum plus the prevailing Reference Rate of
interest established and announced by the Lender as the same may change from
time to time. The "Reference Rate" means the rate of interest established and
publicly announced by the Lender from time to time as its reference rate. The
Lender may make loans to its customers at, above or below the Reference Rate. In
the event that the Lender ceases to establish and announce a Reference Rate at
any time during the term of this Note, the Lender shall be entitled to designate
a reasonably comparable substitute index for the calculation of the interest
rate hereon so long as any amount remains outstanding hereunder. All changes in
the rate of interest rate applicable hereto shall become effective on the same
day that a change in the Reference Rate is announced. Interest hereon shall be
computed on the actual number of days elapsed and a 360-day year.
This Note is the Revolving Credit Note issued pursuant to the terms and
provisions of the Loan Agreement and this Note and the Lender are entitled to
all of the benefits provided for in the Loan Agreement. Reference is made to the
Loan Agreement for a statement of the terms and conditions under which this
indebtedness was incurred, is to be advanced and is to be repaid and under which
the due date of this Note may be accelerated. The provisions of the Loan
Agreement are hereby incorporated by reference with the same force and effect as
if fully set forth herein. Capitalized terms used in this Note shall have the
meanings ascribed to them in the Loan Agreement.
Accrued interest on the unpaid principal balance hereof shall be due
and payable on the first (1st) day of each calendar month, commencing May 1,
1997, until all indebtedness evidenced hereby is paid in full. Advances of
principal shall be disbursed for individual Project Loans and shall be repaid,
all in accordance with the terms and conditions of the Loan Agreement. All
outstanding principal and accrued and unpaid interest shall be due and payable
on May 1, 2000 (the "Maturity Date") unless the Maturity Date is extended as set
forth in the Loan Agreement.
Borrower may prepay principal, in whole or in part, at any time after
three (3) Business Days' prior written notice of said prepayment from Borrower
to Lender, without premium or penalty. Any such prepayment must be accompanied
by payment, in full, of all unpaid, accrued interest on the amount prepaid.
Amounts so prepaid shall be applied to such Project Loan or Project Loans as
designated by Borrower unless a default or Event of Default then exists
hereunder, in which event said amounts shall be applied as Lender may elect. If
no default or Event of Default exists hereunder, amounts so prepaid may be
reborrowed from time to time as parts of other Project Loans (but not the same
Project Loan) in accordance with the terms of the Loan Agreement.
Upon the occurrence of an Event of Default hereunder the interest rate
shall thereafter increase and shall be payable on the whole of the unpaid
principal balance at a floating rate equal to five percent (5%) per annum in
excess of the rate which would otherwise be payable under the terms of this Note
(hereinafter referred to as the "Default Rate"), which Default Rate shall be
effective as of the date of the occurrence of such Event of Default. The above
increase in the interest rate upon the occurrence of an Event of Default shall
be applicable whether or not the Lender has exercised its option to accelerate
the maturity of this Note and declared the entire unpaid principal indebtedness
to be due and payable. The Default Rate shall continue until such Event of
Default is cured, payment in full of all indebtedness evidenced by this Note, or
completion of all foreclosure proceedings and redemption periods, whichever
shall occur first.
This Note is secured by (i) a Mortgage and Security Agreement and
Fixture Financing Statement dated of even date herewith (the "Mortgage"), which
Borrower has granted to the holder a first mortgage lien on and security
interest in the Premises, as therein defined (the "Premises"), (ii) the Loan
Agreement, (iii) a Guaranty (the "Guaranty") from Edmund Lundgren, Allan
Lundgren, Peter Pflaum, Patrick Wells and Gerald Lundgren (the "Guarantors")
dated of even date herewith guaranteeing Borrower's obligations under this Note,
the Mortgage and the Loan Agreement, and (iv) other collateral security
agreements (the "Security Documents") given by Borrower or the Guarantors to
Lender, all dated of even date herewith.
The occurrence of an Event of Default, as defined in the Loan
Agreement, shall constitute an Event of Default hereunder ("Event of Default"),
and upon the occurrence of such an Event of Default, the entire unpaid principal
balance, together with accrued interest at the Default Rate, shall become,
without notice, immediately due and payable at the option of the Lender.
The Borrower agrees that if, and as often as, this Note is placed in
the hands of an attorney for collection or to defend or enforce any of the
Lender's rights hereunder or under the Mortgage, the Loan Agreement or any other
Security Document securing payment of this Note, the Borrower will pay to the
Lender its attorneys' fees and all court costs (including attorney's fees and
court costs prior to trial, at trial and on appeal, or in any bankruptcy
proceeding) and other expenses incurred in connection therewith.
Time is of the essence. No delay or omission on the part of the Lender
or other holder hereof in exercising any right or remedy hereunder shall operate
as a waiver of such right or of any other right or remedy under this Note or any
other document or agreement executed in connection herewith. All waivers by the
Lender must be in writing to be effective and a waiver on any occasion shall not
be construed as a bar to or a waiver of any similar right or remedy on a future
occasion.
The Borrower, endorsers, sureties, guarantors and all other persons
liable for all or any part of the indebtedness evidenced by this Note jointly
and severally waive presentment for payment, protest, notice of nonpayment and
notice of dishonor. Such parties hereby consent without affecting their
liability to any extension or alteration of the time or terms of payment hereof,
any renewal, any release of all or any part of the security given for the
payment hereof, any acceptance of additional security of any kind, and any
release of, or resort to any party liable for payment hereof and such parties
shall remain bound in the same capacities as prior thereto upon each such event.
Any payment due on any day which is not a Business Day shall be due
upon (and interest shall accrue to) the next Business Day.
This Note represents a loan negotiated, executed and to be performed in
the State of Minnesota and shall be construed, interpreted and governed by the
law of said state.
The Borrower hereby consents to the personal jurisdiction of the state
and federal courts located in the State of Minnesota in connection with any
controversy related to this Note, waives any argument that venue in such forums
is not convenient and agrees that any litigation instigated by the Borrower
against the Lender in connection with this Note shall be venued in either the
District Courts of Hennepin County, Minnesota, or the United States District
Court for the District of Minnesota.
THE LENDER BY ITS ACCEPTANCE HEREOF AND THE BORROWER HEREBY
VOLUNTARILY, KNOWINGLY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING UNDER THIS NOTE OR CONCERNING THE
INDEBTEDNESS EVIDENCED THEREBY AND/OR ANY COLLATERAL CONTEMPLATED THEREBY,
REGARDLESS OF WHETHER SUCH ACTION OR PROCEEDING CONCERNS ANY CONTRACTUAL OR
TORTIOUS OR OTHER CLAIM. THE BORROWER ACKNOWLEDGES THAT THIS WAIVER OF JURY
TRIAL IS A MATERIAL INDUCEMENT TO THE LENDER IN EXTENDING CREDIT TO THE
BORROWER, THAT THE LENDER WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY
TRIAL WAIVER, AND THAT SUCH BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS
HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY
TRIAL WAIVER AND UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.
IN WITNESS WHEREOF, the Borrower has executed and delivered this Note
to the Lender as of the day and year first above written.
LUNDGREN BROS. CONSTRUCTION, INC.,
a Minnesota corporation
By: _________________________________
Peter Pflaum
Its: President
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _____ day of
April, 1997, by Peter Pflaum, the President of Lundgren Bros. Construction,
Inc., a Minnesota corporation, on behalf of the corporation.
___________________________
Notary Public
MORTGAGE
AND
SECURITY AGREEMENT
AND
FIXTURE FINANCING STATEMENT
THIS INDENTURE (hereinafter referred to as the "Mortgage"), made this
_____ day of April, 1997, between LUNDGREN BROS. CONSTRUCTION, INC., a Minnesota
corporation (hereinafter referred to as the "Mortgagor"), whose post office
address is c/o Peter Pflaum, 935 East Wayzata Boulevard, Wayzata, Minnesota
55391, and FIRST BANK NATIONAL ASSOCIATION, a national banking association
(hereinafter referred to as the "Mortgagee"), whose post office address is First
Bank Place, 601 Second Avenue South, Minneapolis, Minnesota 55402-4302.
WITNESSETH, that the Mortgagor in consideration of the debt hereinafter
described and the sum of One and 00/100 Dollars ($1.00) to the Mortgagor in hand
paid by the Mortgagee, the receipt whereof is hereby acknowledged, does hereby
MORTGAGE, GRANT, BARGAIN, SELL AND CONVEY unto the Mortgagee, its successors and
assigns, forever, AND GRANTS TO THE MORTGAGEE A SECURITY INTEREST IN the
following properties (all of the following being hereafter collectively referred
to as the "Premises"):
GRANTING CLAUSE
A
REAL PROPERTY
All the tracts or parcels of real property lying and being in
the Counties of Hennepin and Dakota, State of Minnesota, all as more fully
described in Exhibit "A" attached hereto and made a part hereof, together with
all the estates and rights in and to the real property and in and to lands lying
in streets, alleys and roads adjoining the real property and all buildings,
structures, improvements, fixtures and annexations, access rights, easements,
rights of way or use, servitudes, licenses, tenements, hereditaments and
appurtenances now or hereafter belonging or pertaining to the real property and
all proceeds derived therefrom; and
GRANTING CLAUSE
B
IMPROVEMENTS, FIXTURES, EQUIPMENT
PERSONAL PROPERTY
All buildings, equipment, fixtures, improvements, building
supplies and materials and personal property now or hereafter attached to,
located in, placed in or necessary to the use, operation or maintenance of the
improvements on the Premises including, but without being limited to, all
machinery, fittings, fixtures, apparatus, equipment or articles used to supply
heating, gas, electricity, air conditioning, water, light, waste disposal,
power, refrigeration, ventilation, and fire and sprinkler protection, and all
draperies, maintenance and repair equipment, floor coverings, screens, storm
windows, blinds, awnings, shrubbery and plants, stoves, ranges, ovens,
refrigerators, air conditioners, dishwashers, clothes dryers, washing machines,
disposals and compactors including all plans, specifications and drawings
relating to the improvements located on the Premises (it being understood that
the enumeration of any specific articles of property shall in no way be held to
exclude any items of property not specifically enumerated), as well as renewals,
replacements, proceeds, additions, accessories, increases, parts, fittings,
insurance payments, awards and substitutes thereof, together with all interest
of the Mortgagor in any such items hereafter acquired, all of which personal
property mentioned herein shall be deemed fixtures and accessory to the freehold
and a part of the realty and not severable in whole or in part without material
injury to the Premises, but excluding therefrom the trade fixtures, inventory,
equipment and removable personal property of any tenant of the Premises; and
GRANTING CLAUSE
C
RENTS, LEASES AND PROFITS
All rents, issues, income, revenue, receipts, fees and
profits now due or which may hereafter become due under or by virtue of and
together with all right, title and interest of the Mortgagor in and to any
lease, license, sublease, contract or other kind of occupancy agreement, whether
written or verbal, for the use or occupancy of the Premises or any part thereof;
and
GRANTING CLAUSE
D
JUDGMENTS, CONDEMNATION AWARDS
AND INSURANCE PROCEEDS
All awards, compensation or settlement proceeds made by any
governmental or other lawful authorities for the threatened or actual taking or
damaging by eminent domain of the whole or any part of the Premises, including
any awards for a temporary taking, change of grade of streets or taking of
access, together with all insurance proceeds resulting from a casualty to any
portion of the Premises; and
GRANTING CLAUSE
E
LICENSES, PERMITS, EQUIPMENT LEASES
AND SERVICE AGREEMENTS
All right, title and interest of the Mortgagor in and to any
licenses, permits, regulatory approvals, government authorizations, franchise
agreements and equipment or chattel leases, service contracts or agreements and
all proceeds therefrom, arising from, issued in connection with or in any way
related to the use, occupancy, operation, maintenance or security of the
Premises, together with all replacements, additions, substitutions and renewals
thereof, which may be assigned pursuant to agreement or law; and
GRANTING CLAUSE
F
CONSTRUCTION CONTRACTS
All right, title and interest of the Mortgagor in and to all
construction contracts entered into in connection with the construction of any
improvements on the Premises, as well as all plans and specifications prepared
in connection with such construction which may be assigned pursuant to agreement
or law.
AND THE MORTGAGOR for the Mortgagor, the Mortgagor's heirs,
administrators, personal representatives, successors and assigns, covenants with
the Mortgagee, its successors and assigns, that the Mortgagor is lawfully seized
of the Premises and has good right to sell and convey the same; that the
Premises are free from all encumbrances except as may be set forth in the
schedule of exceptions to coverage in any policy of title insurance insuring
Mortgagee's interest in the Premises (hereinafter referred to as the "Permitted
Encumbrances"); that the Mortgagee, its successors and assigns, shall quietly
enjoy and possess the Premises; and that the Mortgagor will WARRANT AND DEFEND
the title to the same against all lawful claims not specifically excepted in
this Mortgage.
TO HAVE AND TO HOLD THE SAME, together with the possession and right of
possession of the Premises, unto the Mortgagee, its successors and assigns,
forever.
PROVIDED NEVERTHELESS, that if the Mortgagor, the Mortgagor's heirs,
administrators, personal representatives, successors or assigns, shall pay to
the Mortgagee, its successors or assigns, the sum of Five Million and No/100
Dollars ($5,000,000.00) including all advances, payments and readvances which
may be made from time to time and be due and owing according to the terms of
that certain Revolving Credit Note in said principal amount (hereinafter
referred to as the "Note") of even date herewith, the terms and conditions of
which are incorporated herein by reference and made a part hereof, together with
any extensions or renewals thereof, due and payable with interest thereon at the
adjustable rate set forth therein, executed by the Mortgagor and payable to the
Mortgagee, the balance of said principal sum together with interest thereon
being due and payable in any event on May 1, 2000, and shall repay to the
Mortgagee, its successors or assigns, at the times demanded and with interest
thereon at the same rate as specified in the Note, all sums advanced in
protecting the lien of this Mortgage, including taxes, assessments, charges,
claims, fines, impositions, insurance premiums, amounts due upon prior or
superior mortgages and other prior or superior liens, encumbrances and
interests, and legal expenses and attorney's fees and all sums advanced for any
other purpose authorized herein (the Note and all such sums, together with
interest thereon, being hereinafter collectively referred to as the
"Indebtedness Secured Hereby"), and shall keep and perform all of the covenants
and agreements herein contained, then this Mortgage shall become null and void,
and shall be released at the Mortgagor's expense.
AND IT IS FURTHER COVENANTED AND AGREED AS FOLLOWS:
1.
GENERAL REPRESENTATIONS AND WARRANTIES
1.1 Representations And Warranties. The Mortgagor represents and
warrants as follows:
(a) The Mortgagor is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Minnesota, and has all requisite power and authority to own
and operate the Premises, to enter into the Note, this
Mortgage, the Loan Agreement (as defined in Section 2.10
below) and any other document securing the Note and to borrow
the monies and otherwise assume and perform as contemplated
thereunder, and is in compliance with all laws, regulations,
ordinances and orders of public authorities applicable to it.
(b) Neither the borrowing of the monies nor the execution,
delivery of the Note, this Mortgage, Loan Agreement or any
other document securing the Note nor the performance of the
provisions of the agreements therein contained on the part of
the Mortgagor will contravene, violate or constitute a default
under the Articles of Incorporation or By-Laws of the
Mortgagor, or any agreement with the shareholders of the
Mortgagor, or any creditors of the Mortgagor, or any law,
ordinance, governmental regulation, agreement or indenture to
which the Mortgagor is a party or by which the Mortgagor or
the Mortgagor's properties are bound.
(c) There are no (i) bankruptcy proceedings involving the
Mortgagor; (ii) dissolution proceedings involving the
Mortgagor; (iii) unsatisfied judgments of record against the
Mortgagor; or (iv) tax liens filed against the Mortgagor.
(d) The Note, this Mortgage, the Loan Agreement and all other
documentation executed in connection with the loan evidenced
by the Note have been duly executed and delivered by the
Mortgagor and constitute the legal, valid and binding
obligations of the Mortgagor, enforceable in accordance with
their terms, except as to enforcement of remedies, as may be
limited by bankruptcy, insolvency or similar laws affecting
generally the enforcement of creditor's remedies.
(e) There are no judgments, suits, actions or proceedings at law
or in equity or by or before any governmental instrumentality
or agency now pending against or, to the best of Mortgagor's
knowledge, threatened against the Mortgagor or its properties,
or both, nor has any judgment, decree or order been issued
against the Mortgagor or its properties, or both, which would
have a material adverse effect on the Premises or the
financial condition of the Mortgagor or Mortgagor's
properties.
(f) No consent or approval of any regulatory authority having
jurisdiction over Mortgagor is necessary or required by law as
a prerequisite to the execution, delivery and performance of
the terms of the Note, this Mortgage, the Loan Agreement or
any other document securing the Note.
(g) Any and all balance sheets, net worth statements and other
financial statements and data which have heretofore been given
to Mortgagee with respect to Mortgagor fairly and accurately
represent the financial condition of the Mortgagor as of the
date hereof, and, since the effective date of such materials,
there has been no material adverse change in the financial
condition of the Mortgagor.
(h) The Mortgagor is not, as of the date hereof, in default in
the payment of any of the Mortgagor's obligations.
(i) The Premises is free from any mechanics' or materialmen's
liens or claims. There has been no labor or materials
furnished to the Premises that has not been paid for in full.
(j) The Mortgagor has no notice, information or knowledge of any
change contemplated in any applicable law, ordinance,
regulation or restriction, or any judicial, administrative,
governmental or quasi-governmental action, or any action by
adjacent land owners, or natural or artificial condition
existing upon the Premises which would limit, restrict, or
prevent the contemplated or intended use and purpose of the
Premises.
(k) There is no pending condemnation or similar proceeding
affecting the Premises, or any portion thereof nor, to the
best knowledge of the Mortgagor, is any such action being
presently contemplated.
(l) No part of the Premises is being used or will be used
principally, or at all, for agricultural or farming purposes.
(m) The Premises complies with all zoning ordinances, energy and
environmental codes, building and use restrictions and codes,
and any requirements with respect to licenses, permits and
agreements necessary for the lawful use and operation of the
Premises.
1.2 Continuing Obligation. All statements made hereunder are true
and correct and all information provided to Mortgagee by the Mortgagor relating
to this transaction has not and does not contain any statement which, at the
time and in the light of the circumstances under which it was made, would be
false and misleading with respect to any material fact, or would omit any
material fact necessary in order to make any such statement contained therein
not false or misleading in any material respect. Should the Mortgagor
subsequently obtain knowledge that such representation was or is untrue, the
Mortgagor shall immediately notify Mortgagee as to the untrue nature of said
representation and agrees to take such action as may be necessary to cause such
representation to become true.
2.
COVENANTS AND AGREEMENTS
2.1 Payment Of Indebtedness: Observance Of Covenants. The Mortgagor
will duly and punctually pay each and every installment of principal and
interest on the Note and all other Indebtedness Secured Hereby, as and when the
same shall become due, and shall duly and punctually perform and observe all of
the covenants, agreements and provisions contained herein, in the Note and any
other instrument given as security for the payment of the Note.
2.2 Maintenance: Repairs. The Mortgagor agrees that it will keep
and maintain the Premises in good condition, repair and operating condition free
from any waste or misuse, and will comply with all requirements of law,
municipal ordinances and regulations, restrictions and covenants affecting the
Premises and their use, and will promptly repair or restore any buildings,
improvements or structures now or hereafter on the Premises which may become
damaged or destroyed to their condition prior to any such damage or destruction.
The Mortgagor further agrees that without the prior written consent of the
Mortgagee it will not make any material alterations in any improvements which
will adversely affect the market value or change the existing architectural
character of the Premises, and will promptly complete any buildings now or at
any time in the process of erection on the Premises. The Mortgagor agrees not to
acquiesce in any rezoning classification, modification or restriction affecting
the Premises without the written consent of the Mortgagee. The Mortgagor agrees
that it will not abandon or vacate the Premises. The Mortgagor agrees that it
will provide, improve, grade, surface and thereafter maintain, clean, repair and
adequately light all parking areas within the Premises, together with any
sidewalks, aisles, streets, driveways and sidewalk cuts and sufficient paved
areas for ingress and right-of-way to and from the adjacent public thoroughfare
necessary or desirable for the use thereof.
2.3 Payment Of Operating Costs; Liens; And Indebtedness. The
Mortgagor agrees that it will pay all operating costs and expenses of the
Premises; keep the Premises free from mechanics' liens, materialmen's liens,
judgment liens and other liens, executions, attachments or levies (hereinafter
collectively referred to as "Liens"); and will pay when due all permitted
indebtedness which may be secured by mortgage, lien or charge on the Premises
and upon request will exhibit to the Mortgagee satisfactory evidence of such
payment and discharge.
2.4 Payment Of Impositions. The Mortgagor will pay when due and
before any penalty or interest attaches thereto because of delinquency in
payment, all taxes, installments of assessments, water charges, sewer charges
and other fees, taxes, charges and assessments of every kind and nature
whatsoever assessed or charged against or constituting a lien on the Premises or
any interest therein or the Indebtedness Secured Hereby (hereinafter referred to
as the "Impositions"); and will furnish to the Mortgagee proof of the payment of
any such Impositions. In the event of a court decree or an enactment after the
date hereof by any legislative authority of any law imposing upon a mortgagee
the payment of the whole or any part of the Impositions herein required to be
paid by the Mortgagor, or changing in any way the laws relating to the taxation
of mortgages or debts secured by mortgages or a mortgagee's interest in
mortgaged premises, so as to impose such Imposition on the Mortgagee or on the
interest of the Mortgagee in the Premises, then, in any such event, the
Mortgagor shall bear and pay the full amount of such Imposition, provided that
if for any reason payment by the Mortgagor of any such Imposition would be
unlawful, or if the payment thereof would constitute usury or render the
Indebtedness Secured Hereby wholly or partially usurious, the Mortgagee, at its
option, may declare the whole sum secured by this Mortgage with interest thereon
to be immediately due and payable, without prepayment premium, or the Mortgagee,
at its option, may pay that amount or portion of such Imposition as renders the
Indebtedness Secured Hereby unlawful or usurious, in which event the Mortgagor
shall concurrently therewith pay the remaining lawful and non-usurious portion
or balance of said Imposition.
2.5 Contest Of Liens And Impositions. The Mortgagor shall not be
required to pay, discharge or remove any Liens or Impositions so long as the
Mortgagor shall in good faith contest the same or the validity thereof by
appropriate legal proceedings which shall operate to prevent the collection of
the Liens or Impositions so contested and the sale of the Premises, or any part
thereof to satisfy the same, provided that the Mortgagor shall, prior to any
such contest, have given such security as may be demanded by the Mortgagee to
insure such payments and prevent any sale or forfeiture of the Premises by
reason of such nonpayment. Any such contest shall be prosecuted with due
diligence and the Mortgagor shall promptly after final determination thereof pay
the amount of any such Liens or Impositions so determined, together with all
interest and penalties, which may be payable in connection therewith.
Notwithstanding the provisions of this Section, the Mortgagor shall (and if the
Mortgagor shall fail so to do, the Mortgagee, may but shall not be required to)
pay any such Liens or Impositions notwithstanding such contest if in the opinion
of the Mortgagee, the Premises shall be in jeopardy or in danger of being
forfeited or foreclosed.
2.6 Protection Of Security. The Mortgagor agrees to promptly notify
the Mortgagee of and appear in and defend any suit, action or proceeding that
affects the value of the Premises, the Indebtedness Secured Hereby or the rights
or interest of the Mortgagee hereunder. The Mortgagee may elect to appear in or
defend any such action or proceeding and the Mortgagor agrees to indemnify and
reimburse the Mortgagee from any and all loss, damage, expense or cost arising
out of or incurred in connection with any such suit, action or proceeding,
including costs of evidence of title and attorney's fees.
2.7 Annual Statements. Mortgagor will furnish to Mortgagee the
annual statements and other financial information as set forth in Section 5.8 of
the Loan Agreement.
2.8 Additional Assurances. The Mortgagor agrees to be bound by and
upon a request by the Mortgagee to execute and deliver such further instruments,
financing statements under the Uniform Commercial Code and assurances and will
do such further acts as may be necessary or proper to carry out more effectively
the purposes of this Mortgage and, without limiting the foregoing, to make
subject to the lien hereof any property agreed to be subjected hereto or covered
by the granting clause hereof, or intended so to be. The Mortgagor agrees to pay
any recording fees, filing fees, stamp taxes or other charges arising out of or
incident to the filing, the issuance and delivery of the Note, the filing or
recording of the Mortgage or the delivery of such further assurances and
instruments as may be required pursuant to the terms of this Section.
2.9 Due On Sale Or Mortgaging, Etc. In the event that (a) the
Mortgagor sells, conveys, transfers, further mortgages, changes the form of
ownership or encumbers or disposes of the Premises, or any part thereof, or any
interest therein, or agrees so to do; or (b) except as set forth in the Loan
Agreement, any corporate ownership interest in the Mortgagor is sold, conveyed,
transferred, pledged or encumbered or there is an agreement so to do, without
the written consent of the Mortgagee being first obtained, whether such event is
voluntary, involuntary or by operation of law, then at the sole option of the
Mortgagee, the Mortgagee may declare the Indebtedness Secured Hereby due and
payable in full and call for payment of the same at once, then in effect under
the terms of the Note.
2.10 Revolving Construction and Development Loan Agreement. This
Mortgage is the Mortgage referred to in and is also given as security for the
due and punctual performance, observance and payment by the Mortgagor of the
terms and conditions set forth in that certain Revolving Construction and
Development Loan Agreement of even date herewith between the Mortgagor and the
Mortgagee ("Loan Agreement") concerning the acquisition, development and
construction of certain improvements on the Premises, the terms and conditions
of which are incorporated herein by reference. In the event the Mortgagor fails
to comply with any of such terms and conditions, such failure shall be an Event
of Default under this Mortgage, and the Mortgagee shall be entitled to all of
the remedies available to it on the occurrence of an Event of Default. In
addition, the Mortgagee may, but shall not be required to avail itself of any or
all of the rights and remedies available to it under the Loan Agreement, and any
sums expended by the Mortgagee in availing itself of such rights and remedies
shall bear interest thereon at the rate specified in the Note and the Loan
Agreement and shall constitute additional Indebtedness Secured Hereby, and shall
be payable to the Mortgagee immediately upon demand; provided that no such
payment by the Mortgagee shall be considered as waiving the Event of Default.
2.11 Maintenance Of Existence. Mortgagor agrees to maintain its
existence as a corporation under the laws of the State of Minnesota and not to
dissolve, liquidate, wind-up, consolidate or merge during the term hereof,
without the prior written consent of Mortgagee.
3.
INSURANCE AND ESCROWS
3.1 Insurance. The Mortgagor shall obtain and keep in full force
and effect during the term of this Mortgage at its sole cost and expense the
insurance required by Section 5.10 of the Loan Agreement.
4.
UNIFORM COMMERCIAL CODE
4.1 Security Agreement. This Mortgage shall constitute a security
agreement as defined in the Uniform Commercial Code (hereinafter referred to as
the "Code"), and the Mortgagor hereby grants to the Mortgagee a security
interest within the meaning of the Code in favor of the Mortgagee on the
Improvements, Fixtures, Equipment and Personal Property, the Rents, Leases and
Profits, the Judgments, Condemnation Awards and Insurance Proceeds, the
Licenses, Permits, Equipment Leases and Service Agreements, and the Accounts
Receivable and General Intangibles described in Granting Clauses B, C, D, E and
F of this Mortgage (hereinafter referred to as the "Collateral").
4.2 Fixture Filing. As to those items of Collateral described in
this Mortgage that are, or are to become fixtures related to the real estate
mortgaged herein, it is intended as to those items that THIS MORTGAGE SHALL BE
EFFECTIVE AS A FINANCING STATEMENT FILED AS A FIXTURE FILING from the date of
its filing in the real estate records of the County where the Premises are
situate. The name of the record owner of said real estate is the Mortgagor set
forth in page one to this Mortgage. Information concerning the security interest
created by this instrument may be obtained from the Mortgagee, as secured party,
at its address as set forth in page one of this Mortgage. The address of the
Mortgagor, as debtor, is as set forth in page one to this Mortgage. This
document covers goods which are or are to become fixtures. The Mortgagor's
Federal Tax Identification Number is 41-0970679.
4.3 Representations And Agreements. (a) The Mortgagor is and will
be the true and lawful owner of the Collateral, subject to no liens, charges,
security interest and encumbrances other than the lien hereof and the Permitted
Encumbrances; (b) the Collateral is to be used by the Mortgagor solely for
business purposes; (c) the Collateral will not be removed from the Premises
without the consent of the Mortgagee except in accordance with Section 4.4
hereof; (d) unless stated otherwise in this Mortgage the only persons having any
interest in the Collateral are the Mortgagor and the Mortgagee and no financing
statement covering any such property and any proceeds thereof is on file in any
public office except pursuant hereto; (e) the remedies of the Mortgagee
hereunder are cumulative and separate, and the exercise of any one or more of
the remedies provided for herein or under the Uniform Commercial Code shall not
be construed as a waiver of any of the other rights of the Mortgagee including
having such Collateral deemed part of the realty upon any foreclosure thereof;
(f) if notice to any party of the intended disposition of the Collateral is
required by law in a particular instance, such notice shall be deemed
commercially reasonable if given at least ten (10) days prior to such intended
disposition and may be given by advertisement in a newspaper accepted for legal
publications either separately or as part of a notice given to foreclose the
real property or may be given by private notice if such parties are known to the
Mortgagee; (g) the Mortgagor will from time to time provide the Mortgagee on
request with itemizations of all such Collateral on the Premises; (h) the filing
of a financing statement pursuant to the Code shall never impair the stated
intention of this Mortgage that all Improvements, Fixtures, Equipment and
Personal Property described in Granting Clause B hereof are, and at all times
and for all purposes and in all proceedings both legal or equitable shall be
regarded as part of the real property mortgaged hereunder irrespective of
whether such item is physically attached to the real property or any such item
is referred to or reflected in a financing statement; (i) the Mortgagor will on
demand deliver all financing statements that may from time to time be required
by the Mortgagee to establish and perfect the priority of the Mortgagee's
security interest in such Collateral; (j) the Mortgagor shall give advance
written notice of any proposed change in the Mortgagor's name, identity, address
or structure and will execute and deliver to the Mortgagee prior to or
concurrently with such change all additional financing statements that the
Mortgagee may require to establish and perfect the priority of the Mortgagee's
security interest; and (k) the Mortgagor shall renew and pay all expenses of
renewing the financing statement covering the Collateral in the event the
security interest in such Collateral will expire by reason of statutory law
prior to the end of the term of this Mortgage.
4.4 Maintenance Of Property. Subject to the provisions of this
Section, in any instance where the Mortgagor in its discretion determines that
any item subject to a security interest under this Mortgage has become
inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary for the
operation of the Premises, the Mortgagor may, at its expense, remove and dispose
of it and substitute and install other items of comparable quality to that being
replaced, not necessarily having the same function, provided, that such removal
and substitution shall not impair the operating utility and unity of the
Premises. All substituted items shall become a part of the Premises and subject
to the lien of the Mortgage. Any amounts received or allowed the Mortgagor upon
the sale or other disposition of the removed items of property shall be applied
only against the cost of acquisition and installation of the substituted items.
5.
APPLICATION OF INSURANCE AND AWARDS
5.1 Damage Or Destruction Of The Premises. The Mortgagor will give
the Mortgagee prompt notice of any damage to or destruction of the Premises.
Collection and use of insurance proceeds shall be governed by the provision of
Section 5.10 of the Loan Agreement.
5.2 Condemnation. The Mortgagor will give the Mortgagee prompt
notice of any action, actual or threatened, in condemnation or eminent domain
and hereby assigns, transfers and sets over to the Mortgagee the entire proceeds
of any award or claim for damages for all or any part of the Premises taken or
damaged under the power of eminent domain or condemnation, the Mortgagee being
hereby authorized to intervene in any such action and to collect and receive
from the condemning authorities and give proper receipts and acquittances for
such proceeds. The Mortgagor will not enter into any agreements with the
condemning authority permitting or consenting to the taking of the Premises
unless prior written consent of the Mortgagee is obtained. Any expenses incurred
by the Mortgagee in intervening in such action or collecting such proceeds
(including the cost of any independent appraisal) shall be reimbursed to the
Mortgagee first out of the proceeds. The proceeds or any part thereof shall be
applied upon or in reduction of the Indebtedness Secured Hereby then most
remotely to be paid, whether due or not, or to the restoration or repair of the
Premises, the choice of application to be solely at the discretion of the
Mortgagee.
6.
LEASES AND RENTS
6.1 Leases. The Mortgagor represents and warrants that there are
currently no leases in existence in connection with any portion of the Premises.
The Mortgagor further covenants and warrants that it shall not enter into leases
for any portion of the Premises without obtaining the prior written consent of
the Mortgagee. With reference to any leases executed in accordance with this
Section 6.1, the Mortgagor will, at its own cost and expense, perform, comply
with and discharge all of the obligations of the Mortgagor under any leases and
use its best efforts to enforce or secure the performance of each obligation and
undertaking of the respective tenants under any such leases and will appear in
and defend, at its own cost and expense, any action or proceeding arising out of
or in any manner connected with the Mortgagor's interest in any leases of the
Premises. The Mortgagor will not modify, extend, renew, terminate, accept a
surrender of, or in any way alter the terms of the leases, nor borrow against,
pledge or assign any rentals due under the leases nor consent to a subordination
or assignment of the interest of the tenants thereunder to any party other than
the Mortgagee, nor anticipate the rents thereunder for more than one (1) month
in advance or reduce the amount of rents and other payments thereunder, nor
waive, excuse, condone or in any manner release or discharge the tenants of or
from their obligations, covenants, conditions and agreements to be performed.
6.2 The Mortgagee's Right To Perform Under Leases. Should the
Mortgagor fail to perform, comply with or discharge any obligations of the
Mortgagor under any lease or should the Mortgagee become aware of or be notified
by any tenant under any lease of a failure on the part of the Mortgagor to so
perform, comply with or discharge its obligations under said lease, the
Mortgagee may, but shall not be obligated to, and without further demand upon
the Mortgagor, and without waiving or releasing the Mortgagor from any
obligation in this Mortgage contained, remedy such failure, and the Mortgagor
agrees to repay upon demand all sums incurred by the Mortgagee in remedying any
such failure together with interest at the Default Rate, as defined under the
terms of the Note. All such sums, together with interest as aforesaid shall
become so much additional Indebtedness Secured Hereby, but no such advance shall
be deemed to relieve the Mortgagor from any default hereunder.
6.3 Assignment Of Leases And Rents. The Mortgagor does hereby sell,
assign and transfer unto the Mortgagee all of the leases, rents and profits now
due and which may hereafter become due under or by virtue of any lease, whether
written or verbal, or any agreement for the use or occupancy of the Premises,
whether presently in existence or entered into at any time during the term of
this Mortgage, it being the intention of this Mortgage to establish an absolute
transfer and assignment of all such leases and agreements and all of the rents
and profits from the Premises unto the Mortgagee and the Mortgagor does hereby
appoint irrevocably the Mortgagee its true and lawful attorney in its name and
stead, which appointment is coupled with an interest, to collect all of said
rents and profits; provided, the Mortgagor shall have the right to collect and
retain such rents and profits unless and until an Event of Default exists under
this Mortgage.
6.4 Remedies. Upon an Event of Default and whether before or after
the institution of legal proceedings to foreclose the lien hereof or before or
after sale thereunder or during any period of redemption, the Mortgagee, without
regard to waste, adequacy of the security or solvency of the Mortgagor, may
revoke the privilege granted the Mortgagor hereunder to collect the rents and
profits, and may, at its option, without notice, either: (a) in person or by
agent, with or without taking possession of or entering the Premises, with or
without bringing any action or proceeding, give, or require the Mortgagor to
give, notice to any or all tenants under any lease authorizing and directing the
tenant to pay such rents and profits to the Mortgagee; collect all of the rents
and profits; enforce the payment thereof and exercise all of the rights of the
landlord under the leases and all of the rights of the Mortgagee hereunder; may
enter upon, take possession of, manage and operate said Premises, or any part
thereof; may cancel, enforce or modify the leases, and fix or modify rents, and
do any acts which the Mortgagee deems proper to protect the security hereof with
or without taking possession of the Premises; or (b) apply for the appointment
of a receiver in accordance with the statutes and law made and provided for,
which receivership the Mortgagor hereby consents to, who shall collect the rents
and profits, and all other income of any kind; manage the Premises so to prevent
waste; execute leases within or beyond the period of receivership, and perform
the terms of this Mortgage and apply the rents and profits as hereinafter
provided.
The entering upon and taking possession of the Premises, the
appointment of a receiver, the collection of such rents and profits and the
application thereof as aforesaid shall not cure or waive any Event of Default
under this Mortgage nor in any way operate to prevent the Mortgagee from
pursuing any other remedy which it may now or hereafter have under the terms of
this Mortgage nor shall it in any way be deemed to constitute the Mortgagee a
mortgagee-in-possession. The rights and powers of the Mortgagee hereunder shall
remain in full force and effect both prior to and after any foreclosure of the
Mortgage and any sale pursuant thereto and until expiration of the period of
redemption from said sale, regardless of whether a deficiency remains from said
sale. The purchaser at any foreclosure sale, including the Mortgagee, shall have
the right, at any time and without limitation as provided in Minn. Stat. Section
582.03, to advance money to any receiver appointed hereunder to pay any part or
all of the items which the receiver would otherwise be authorized to pay if cash
were available from the Premises and the sum so advanced, with interest at the
rate then in effect under the terms of the Note, shall be a part of the sum
required to be paid to redeem from any foreclosure sale. The rights hereunder
shall in no way be dependent upon and shall apply without regard to whether the
Premises are in danger of being lost, materially injured or damaged or whether
the Premises are adequate to discharge the Indebtedness Secured Hereby.
6.5 Application Of Rents. Any rents collected pursuant to the terms
of Section 6.4 hereof shall be applied in the following order: (a) to payment of
all fees of any receiver appointed hereunder; (b) to application of tenant's
security deposits as required by Minn. Stat. Section 504.20; (c) to payment when
due of prior or current real estate taxes or special assessments with respect to
the Premises or, if this Mortgage so requires, to the periodic escrow for
payment of the taxes or special assessments then due; (d) to payment when due of
premiums for insurance of the type required by this Mortgage or, if this
Mortgage so requires, to the periodic escrow for the payment of premiums then
due; and (e) to payment of all expenses for normal maintenance of the Premises.
Any rents remaining after application of the above items shall be applied to the
Indebtedness Secured Hereby on a monthly basis. If the Premises shall be
foreclosed and sold pursuant to a foreclosure sale, then:
(a) (if the Mortgagee is the purchaser at the foreclosure sale,
the rents shall be paid to the Mortgagee to be applied to the
extent of any deficiency remaining after the sale, the balance
to be retained by the Mortgagee, and if the Premises be
redeemed by the Mortgagor or any other party entitled to
redeem, to be applied as a credit against the redemption price
with any remaining excess rents to be paid to the Mortgagor,
provided, if the Premises not be redeemed, any remaining
excess rents to belong to the Mortgagee, whether or not a
deficiency exists.
(b) (if the Mortgagee is not the purchaser at the foreclosure
sale, the rents shall be paid to the Mortgagee to be applied
first, to the extent of any deficiency remaining after the
sale, the balance to be retained by the purchaser, and if
the Premises be redeemed by the Mortgagor or any other party
entitled to redeem, to be applied as a credit against the
redemption price with any remaining excess rents to be paid
to the Mortgagor, provided, if the Premises not be redeemed
any remaining excess rents shall be paid first, to the
purchaser at the foreclosure sale in an amount equal to the
interest accrued upon the sale price pursuant to Minn. Stat.
Section 580.23 or Section 581.10, then to the Mortgagee to
the extent of any deficiency remaining unpaid and the
remainder to the purchaser.
7.
RIGHTS OF THE MORTGAGEE
7.1 Right To Cure Event Of Default. If the Mortgagor shall fail to
comply with any of the covenants or obligations of this Mortgage, the Mortgagee
may, but shall not be obligated to, without demand upon the Mortgagor, and
without waiving or releasing the Mortgagor from any obligation in this Mortgage
contained, remedy such failure, and the Mortgagor agrees to repay upon demand
all sums incurred by the Mortgagee in remedying any such failure together with
interest at the Default Rate, as defined under the terms of the Note. All such
sums, together with interest as aforesaid shall become so much additional
Indebtedness Secured Hereby, but no such advance shall be deemed to relieve the
Mortgagor from any failure hereunder.
7.2 No Claim Against The Mortgagee. Nothing contained in this
Mortgage shall constitute any consent or request by the Mortgagee, express or
implied, for the performance of any labor or services or for the furnishing of
any materials or other property in respect of the Premises or any part thereof,
nor as giving the Mortgagor or any party in interest with the Mortgagor any
right, power or authority to contract for or permit the performance of any labor
or services or the furnishing of any materials or other property in such fashion
as would create any personal liability against the Mortgagee in respect thereof
or would permit the making of any claim that any lien based on the performance
of such labor or services or the furnishing of any such materials or other
property is prior to the lien of this Mortgage.
7.3 Inspection. The Mortgagor will permit the Mortgagee's
authorized representatives to enter the Premises at all times during normal
business hours for the purpose of inspecting the same; provided the Mortgagee
shall have no duty to make such inspections and shall not incur any liability or
obligation for making or not making any such inspections.
7.4 Waivers; Releases; Resort To Other Security, Etc. Without
affecting the liability of any party liable for payment of any Indebtedness
Secured Hereby or performance of any obligation contained herein, and without
affecting the rights of the Mortgagee with respect to any security not expressly
released in writing, the Mortgagee may, at any time, and without notice to or
the consent of the Mortgagor or any party in interest with the Premises or the
Note: (a) release any person liable for payment of all or any part of the
Indebtedness Secured Hereby or for performance of any obligation herein; (b)
make any agreement extending the time or otherwise altering the terms of payment
of all or any part of the Indebtedness Secured Hereby or modifying or waiving
any obligation, or subordinating, modifying or otherwise dealing with the lien
or charge hereof; (c) accept any additional security; (d) release or otherwise
deal with any property, real or personal, including any or all of the Premises,
including making partial releases of the Premises; or (e) resort to any security
agreements, pledges, contracts of guarantee, assignments of rents and leases or
other securities, and exhaust any one or more of said securities and the
security hereunder, either concurrently or independently and in such order as it
may determine.
7.5 Rights Cumulative. Each right, power or remedy herein conferred
upon the Mortgagee is cumulative and in addition to every other right, power or
remedy, express or implied, now or hereafter arising, available to the
Mortgagee, at law or in equity, or under the Uniform Commercial Code, or under
any other agreement, and each and every right, power and remedy herein set forth
or otherwise so existing may be exercised from time to time as often and in such
order as may be deemed expedient by the Mortgagee and any such exercise shall
not be a waiver of the right to exercise at any time thereafter any other right,
power or remedy. No delay or omission by the Mortgagee in the exercise of any
right, power or remedy arising hereunder or arising otherwise shall impair any
such right, power or remedy or the right of the Mortgagee to resort thereto at a
later date or be construed to be a waiver of any Event of Default under this
Mortgage or the Note.
7.6 Subsequent Agreements. Any agreement hereafter made by the
Mortgagor and the Mortgagee pursuant to this Mortgage shall be superior to the
rights of the holder of any intervening lien or encumbrance.
7.7 Waiver Of Appraisement, Homestead, Marshaling. The Mortgagor
hereby waives to the full extent lawfully allowed the benefit of any homestead,
appraisement, evaluation, stay and extension laws now or hereinafter in force.
The Mortgagor hereby waives any rights available with respect to marshaling of
assets so as to require the separate sales of any portion of the Premises, or as
to require the Mortgagee to exhaust its remedies against a specific portion of
the Premises before proceeding against the other and does hereby expressly
consent to and authorize the sale of the Premises or any part thereof as a
single unit or parcel.
7.8 Business Loan Representation. The Mortgagor represents and
warrants to the Mortgagee that the loan evidenced by the Note is a business loan
transacted solely for the purpose of carrying on the business of the Mortgagor
and the Premises does not constitute the homestead of the Mortgagor.
8.
EVENTS OF DEFAULT AND REMEDIES
8.1 Events of Default. Any of the following events shall constitute
an Event of Default under this Mortgage:
(a) Mortgagor shall default in the payment of principal due
according to the terms of the Note or the Loan Agreement.
(b) Mortgagor shall default in the payment of interest on
principal advances made by Mortgagee, or in the payment of
fees or any other amounts payable under the Note, this
Mortgage, the Loan Agreement or under any other security
document.
(c) Mortgagor shall default in the performance or observance of
any other agreement, covenant or condition required to be
performed or observed by Mortgagor under the terms of this
Mortgage, which default, if curable, is not cured within
thirty (30) days after Mortgagee gives Mortgagor written
notice thereof; provided, however, that if said curable
default cannot reasonably be cured within said thirty (30)
day period, but Mortgagor commences the cure thereof within
said thirty (30) day period and thereafter prosecutes such
cure diligently, continuously and in good faith, said thirty
(30) day period shall be extended by the period of time
reasonably required to cure the same, not to exceed an
additional sixty (60) days.
(d) Any representation or warranty made by Mortgagor or any
guarantor in this Mortgage, the Note, the Loan Agreement or
any other security document, shall be untrue or incomplete in
any material respect.
(e) An event of default shall exist under the terms of the Note,
the Loan Agreement or any other security document.
(f) Mortgagor, any guarantor or any affiliate of Mortgagor or
any guarantor shall become insolvent or shall commit an act
of bankruptcy; or shall apply for, consent to or permit the
appointment of a receiver, custodian, trustee or liquidator
for it or any of its property or assets; or shall fail to,
or admit in writing its inability to, pay its debts as they
mature; or shall make a general assignment for the benefit
of creditors or shall be adjudicated bankrupt or insolvent;
or shall take other similar action for the benefit or
protection of its creditors; or shall give notice to any
governmental body of insolvency or pending insolvency or
suspension of operations; or shall file a voluntary petition
in bankruptcy or a petition or an answer seeking
reorganization or an arrangement with creditors, or to take
advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, rearrangement, dissolution,
liquidation or other similar debtor relief law or statute;
or shall file an answer admitting the material allegations
of a petition filed against it in any proceeding under any
such law or statute; or shall be dissolved, liquidated,
terminated or merged without Mortgagee's prior written
consent; or shall effect a plan or other arrangement with
creditors; or a trustee, receiver, liquidator or custodian
shall be appointed for it or for any of its property or
assets and shall not be discharged within sixty (60) days
after the date of his appointment; or a petition in
involuntary bankruptcy or similar proceedings is filed
against it and is not dismissed within sixty (60) days after
the date of its filing.
(g) A judgment or judgments for the payment of money in excess of
the sum of $25,000.00 in the aggregate shall be rendered
against Mortgagor or any guarantor, and said party shall not
(i) discharge the same or provide for the discharge thereof in
accordance with the terms thereof, or (ii) procure a stay of
execution thereof, prior to any execution on such judgment by
the judgment creditor, within sixty (60) days from the date of
entry thereof, and within said period of sixty (60) days, or
such longer period during which execution of such judgment
shall be stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal.
(h) The maturity of any Bank Debt, as that term is defined in
the Loan Agreement, of Mortgagor, any guarantor, or any
affiliate of Mortgagor or any guarantor (other than
indebtedness evidenced by the Note) shall be accelerated, or
Mortgagor, any guarantor or any such affiliate shall fail to
pay any such Bank Debt when due (after the lapse of any
applicable grace period) or, in the case of such
indebtedness payable on demand, when demanded (after the
lapse of any applicable grace period), or any event shall
occur or condition shall exist and shall continue for more
than the period of grace, if any, applicable thereto and
shall have the effect of causing, or permitting the holder
of any such indebtedness or any trustee or other person,
party or entity acting on behalf of such holder to cause,
such or Bank Debt to become due prior to its stated maturity
or to realize upon any collateral given as security
therefor.
(i) An Event of Default occurs under the terms of the Senior
Subordinated Debentures, as that term is defined in the Loan
Agreement.
(j) Mortgagor shall be terminated, dissolved, liquidated or
wound-up.
(k) Any default by any guarantor occurs under the terms of that
certain Guaranty dated of even date herewith (the "Guaranty")
from Edmund Lundgren, Allan Lundgren, Peter Pflaum, Patrick C.
Wells and Gerald G. Lundgren (collectively, the "Guarantors").
(l) Peter Pflaum shall die or shall become legally incompetent.
8.2 The Mortgagee's Right To Accelerate. If an Event of Default
shall occur the Mortgagee may immediately and without notice to the Mortgagor
declare the entire unpaid principal balance of the Note together with all other
Indebtedness Secured Hereby to be immediately due and payable and thereupon all
such unpaid principal balance of the Note together with all accrued interest
thereon, and all other Indebtedness Secured Hereby shall be and become
immediately due and payable.
8.3 Remedies Of The Mortgagee And Right To Foreclose. If an Event
of Default shall occur the Mortgagee shall have the right to enforce the
provisions of this Mortgage and may, either with or without entry or taking
possession, proceed by suit or suits at law or in equity or by any other
appropriate proceedings or remedy to enforce payment of the Indebtedness Secured
Hereby or the performance of any other term hereof or any other right and the
Mortgagor hereby authorizes and fully empowers the Mortgagee to foreclose this
Mortgage by judicial proceedings or by advertisement with full authority and
power to sell the Premises at public auction and convey the same to the
purchaser in fee simple, either in one parcel or separate lots and parcels, all
in accordance with and in the manner prescribed by law, and out of the proceeds
arising from sale and foreclosure to retain the principal and interest due on
the Note and the Indebtedness Secured Hereby together with all such sums of
money as the Mortgagee shall have expended or advanced pursuant to this Mortgage
or pursuant to statute together with interest thereon as herein provided and all
costs and expenses of such foreclosure, including lawful attorney's fees, with
the balance, if any, to be paid to the persons entitled thereto by law.
8.4 Receiver. Upon the occurrence of an Event of Default, the
Mortgagee shall be entitled as a matter of right without notice and without
giving bond and without regard to the solvency or insolvency of the Mortgagor,
or waste of the premises or adequacy of the security of the Premises, to apply
for the appointment of a receiver under any statute or law who shall have all
the rights, powers and remedies as provided by such statute or law, including
without limitation the rights of receiver pursuant to Minn. Stat. Section
576.01, as amended, and who shall from the date of his appointment through any
period of redemption existing at law collect the rents, and all other income of
any kind; manage the Premises so as to prevent waste; execute leases within or
beyond the use of receivership; and perform the terms of this Mortgage and apply
the rents, issues and profits to the payment of the expenses enumerated in Minn.
Stat. Section 576.01, Subd. 2 in the priority mentioned therein and to all
expenses for maintenance of the Premises and to the costs and expenses of the
receivership, including attorney's fees, to the repayment of the Indebtedness
Secured Hereby and as further provided in any assignment of leases and rents
executed by the Mortgagor to the Mortgagee whether contained in this Mortgage or
in a separate instrument. The Mortgagor does hereby irrevocably consent to such
appointment.
8.5 Rights Under Uniform Commercial Code. In addition to the rights
available to a mortgagee of real property, the Mortgagee shall also have all the
rights, remedies and recourse available to a secured party under the Uniform
Commercial Code including the right to proceed under the provisions of the
Uniform Commercial Code governing default as to any Collateral as defined in
Section 4.1 of this Mortgage which may be included in the Premises or which may
be deemed nonrealty in a foreclosure of this Mortgage or to proceed as to such
Collateral in accordance with the procedures and remedies available pursuant to
a foreclosure of real estate.
8.6 Right To Discontinue Proceedings. In the event the Mortgagee
shall have proceeded to invoke any right, remedy or recourse permitted under
this Mortgage and shall thereafter elect to discontinue or abandon the same for
any reason, the Mortgagee shall have the unqualified right to do so and in such
event the Mortgagor and the Mortgagee shall be restored to their former
positions with respect to the Indebtedness Secured Hereby. This Mortgage, the
Premises and all rights, remedies and recourse of the Mortgagee shall continue
as if the same had not been invoked.
8.7 Acknowledgment Of Waiver Of Hearing Before Sale. The Mortgagor
understands and agrees that if an Event of Default shall occur, the Mortgagee
has the right, inter alia, to foreclose this Mortgage by advertisement pursuant
to Minn. Stat. Chapter 580, as hereafter amended, or pursuant to any similar or
replacement statute hereafter enacted; that if the Mortgagee elects to foreclose
by advertisement, it may cause the Premises, or any part thereof, to be sold at
public auction; that notice of such sale must be published for six (6)
successive weeks at least once a week in a newspaper of general circulation and
that no personal notice is required to be served upon the Mortgagor. The
Mortgagor further understands that upon the occurrence of an Event of Default,
the Mortgagee may also elect its rights under the Uniform Commercial Code and
take possession of the Collateral and dispose of the same by sale or otherwise
in one or more parcels provided that at least ten (10) days' prior notice of
such disposition must be given, all as provided for by the Uniform Commercial
Code, as hereafter amended or by any similar or replacement statute hereafter
enacted. The Mortgagor further understands that under the Constitution of the
United States and the Constitution of the State of Minnesota it may have the
right to notice and hearing before the Premises may be sold and that the
procedure for foreclosure by advertisement described above does not insure that
notice will be given to the Mortgagor and neither said procedure for foreclosure
by advertisement nor the Uniform Commercial Code requires any hearing or other
judicial proceeding. THE MORTGAGOR HEREBY EXPRESSLY CONSENTS AND AGREES THAT THE
PREMISES MAY BE FORECLOSED BY ADVERTISEMENT AND THAT THE PERSONAL PROPERTY MAY
BE DISPOSED OF PURSUANT TO THE UNIFORM COMMERCIAL CODE, ALL AS DESCRIBED ABOVE.
THE MORTGAGOR ACKNOWLEDGES THAT IT IS REPRESENTED BY LEGAL COUNSEL; THAT BEFORE
SIGNING THIS DOCUMENT THIS SECTION AND THE MORTGAGOR'S CONSTITUTIONAL RIGHTS
WERE FULLY EXPLAINED BY SUCH COUNSEL AND THAT THE MORTGAGOR UNDERSTANDS THE
NATURE AND EXTENT OF THE RIGHTS WAIVED HEREBY AND THE EFFECT OF SUCH WAIVER.
9.
HAZARDOUS MATERIALS
9.1 Definitions. The term "Hazardous Materials or Wastes" shall
mean any hazardous or toxic materials, pollutants, chemicals, or contaminants,
including without limitation asbestos, polychlorinated biphenyls (PCBs) and
petroleum products as defined, determined or identified as such in any Laws, as
hereinafter defined. The term "Laws" means any federal, state or local laws,
rules or regulations (whether now existing or hereinafter enacted or
promulgated) including, without limitation, the Clean Water Act, 33 U.S.C.
ss.ss. 1251 et seq. (1972), the Clean Air Act, 42 U.S.C. ss.ss. 7401 et seq.
(1970), the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, 42 U.S.C. ss. 1802, and the Resource Conservation and
Recovery Act, 42 U.S.C. ss. 6901 et seq., the Toxic Substances Control Act, or
other similar laws, as well as implementing regulations enacted or promulgated
to protect the public health, welfare or the environment, including state or
local laws, regulations or ordinances, as well as any judicial or administrative
interpretation thereof, including any judicial or administrative orders or
judgments.
9.2 Representations By The Mortgagor. The Mortgagor hereby
represents to the Mortgagee that the Mortgagor has made a diligent inquiry and
to the best of its knowledge except as disclosed to the Mortgagee in writing
prior to the date hereof: (a) all or any part of the Premises has never been
used either by previous owners or occupants or by the Mortgagor or current
occupants to generate, manufacture, refine, transport, treat, store, handle or
dispose of any Hazardous Materials or Wastes and no such Hazardous Material or
Waste currently exists on the Premises or in its soil or groundwater; (b) no
portion of the improvements on the Premises has been constructed with asbestos,
asbestos-containing materials, urea formaldehyde insulation or any other
chemical material or substance that may be a hazard to health or the
environment; (c) there are no transformers, capacitors or other electrical or
hydraulic equipment which have dielectric fluid-containing PCBs located in, on
or under the Premises; (d) the Premises has never contained any underground
storage tanks; and (e) neither the Mortgagor nor its predecessor in interest has
received nor has any knowledge of any summons, citation, directive, letter or
other communication, written or oral, from any local, state or federal
governmental agency concerning (i) the existence of Hazardous Materials or
Wastes on the Premises or in the immediate vicinity or (ii) any releasing,
spilling, leaking, pumping, pouring, emitting, emptying, or dumping of Hazardous
Materials or Wastes, whether intentional, unintentional or otherwise, onto the
Premises or into waters or other lands at any time.
9.3 Covenants Of The Mortgagor. The Mortgagor hereby covenants to
the Mortgagee that: (a) the Mortgagor shall (i) comply with all federal, state
and local laws, rules, regulations and orders with respect to the discharge,
generation, removal, transportation, storage and handling of Hazardous Materials
or Wastes (ii) remove any Hazardous Materials or Wastes immediately upon
discovery of same, and (iii) pay or cause to be paid all costs associated with
such removal; (b) the Mortgagor shall keep the Premises free of any lien imposed
pursuant to any state or federal law, rule, regulation or order in connection
with the presence or removal of Hazardous Materials or Wastes on the Premises;
(c) the Mortgagor shall not install or permit to be installed or to exist in or
on the Premises any asbestos, asbestos-containing materials, urea formaldehyde
insulation or any other chemical or substance which may be a hazard to health or
the environment; (d) the Mortgagor shall not cause or permit to exist, as a
result of an intentional or unintentional act or omission on the part of the
Mortgagor or any occupant of the Premises, a releasing, spilling, leaking,
pumping, emitting, pouring, emptying or dumping of any Hazardous Materials or
Wastes onto the Premises or into waters or other lands; and (e) the Mortgagor
shall perform all notifications and reporting of any Hazardous Materials or
Wastes on or released or emitted from the Premises as required by Laws.
9.4 Events Of Default And Remedies. It shall constitute an Event of
Default hereunder and the Mortgagee shall be entitled to exercise all remedies
available to it hereunder if: (a) any of the Mortgagor's representations
contained in Section 9.2 hereof prove to be false, inaccurate or misleading; (b)
the Mortgagor shall fail to comply with the covenants contained in Section 9.3
hereof; (c) any Hazardous Materials or Wastes are hereafter found to exist on
the Premises or in its soil or groundwater and Mortgagor has failed to remove
such Hazardous Materials or Wastes within thirty (30) days of notice thereof as
set forth in Section 8.1(c) hereof; or (d) any summons, citation, order,
directive, letter or other communication, written or oral, shall be issued by
any local, state or federal governmental agency or court concerning the matters
described in Sections 9.2 and 9.3 above. The Mortgagor hereby grants the
Mortgagee and its employees and agents an irrevocable and non-exclusive license
to enter the Premises, in order to inspect, conduct testing and remove Hazardous
Materials or Wastes. All costs of such inspection, testing and removal shall
immediately become due and payable to the Mortgagee, shall be secured by this
Mortgage and shall constitute additional Indebtedness Secured Hereby.
9.5 Indemnification. The Mortgagor hereby agrees to defend,
indemnify and hold harmless the Mortgagee, its directors, officers, employees,
agents, contractors, subcontractors, licensees, invitees, successors and assigns
("Indemnified Parties") from and against any and all claims, losses, damages,
liabilities, judgments, costs and expenses (including, without limitation,
attorney's fees and costs incurred in the investigation, defense and settlement
of claims or remediation of contamination) incurred by the Indemnified Parties
as a result of or in connection with the presence or removal of any Hazardous
Materials or Wastes or as a result of or in connection with activities
prohibited under this Article. The Mortgagor shall bear, pay and discharge, as
and when the same become due and payable, any and all such judgments or claims
for damages, penalties or otherwise, against the Indemnified Parties, shall hold
the Indemnified Parties harmless against all claims, losses, damages,
liabilities, costs and expenses, and shall assume the burden and expense of
defending all suits, administrative proceedings, and negotiations of any
description with any and all persons, political subdivisions or government
agencies arising out of any of the occurrences set forth in this Article. This
indemnification shall remain in full force and effect and shall survive the
repayment of the Indebtedness Secured Hereby and the satisfaction of the
documents securing the same, as well as the exercise of any remedy by the
Mortgagee hereunder or under the other documents securing this Mortgage,
including a foreclosure of the Mortgage or the acceptance of a deed in lieu of
foreclosure.
10.
MISCELLANEOUS
10.1 Release Of Mortgage. When all Indebtedness Secured Hereby has
been paid, this Mortgage and all assignments herein contained shall be void and
this Mortgage shall be released by the Mortgagee at the Mortgagor's expense.
10.2 Choice Of Law. This Mortgage is made and executed under the
laws of the State of Minnesota and is intended to be governed by the laws of
said State.
10.3 Successors And Assigns. This Mortgage and each and every
covenant, agreement, indemnity and other provision hereof shall be binding upon
the Mortgagor and its successors and assigns including without limitation each
and every from time to time record owner of the Premises or any other person
having an interest therein, shall run with the land and shall inure to the
benefit of the Mortgagee and its successors and assigns. As used herein the
words "successors and assigns" shall also be deemed to include the heirs,
representatives, administrators and executors of any natural person who is a
party to this Mortgage.
10.4 Unenforceability Of Certain Clauses. The unenforceability or
invalidity of any provisions hereof shall not render any other provision or
provisions herein contained unenforceable or invalid.
10.5 Captions And Headings. The captions and headings of the
various sections of this Mortgage are for convenience only and are not to be
construed as confining or limiting in any way the scope or intent of the
provisions hereof. Whenever the context requires or permits the singular shall
include the plural, the plural shall include the singular and the masculine,
feminine and neuter shall be freely interchangeable.
10.6 Notices. Any notice which any party hereto may desire or may
be required to give to any other party shall be in writing and given in
accordance with the terms of the Loan Agreement.
10.7 Waiver Of Jury Trial. NO PARTY TO THIS MORTGAGE OR ANY
ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF A PARTY SHALL SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION
PROCEEDINGS BASED UPON OR ARISING OUT OF THIS MORTGAGE, ANY RELATED AGREEMENT OR
INSTRUMENT, ANY OTHER COLLATERAL FOR THE INDEBTEDNESS SECURED HEREBY OR THE
DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG THE PARTIES, OR ANY OF THEM. NO
PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN
WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY
HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS
OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
10.8 Partial Releases. Partial Releases of this Mortgage shall be
made as set forth in the Loan Agreement.
10.9 REVOLVING LINE OF CREDIT MORTGAGE. THIS MORTGAGE SECURES A
REVOLVING LINE OF CREDIT UNDER WHICH ADVANCES, PAYMENTS AND READVANCES MAY BE
MADE FROM TIME TO TIME. THE MAXIMUM AMOUNT OF THE LINE OF CREDIT WHICH MAY BE
SECURED AT ANY ONE TIME UNDER THIS MORTGAGE IS FIVE MILLION AND 00/100 DOLLARS
($5,000,000.00). THE PROVISIONS OF MINN. STATS. SECTION 507.325 SHALL
ACCORDINGLY APPLY TO THIS MORTGAGE.
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be
executed as of the date first above written.
LUNDGREN BROS. CONSTRUCTION, INC.,
a Minnesota corporation
By: _________________________________
Peter Pflaum
Its: President
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _____ day of
April, 1997, by Peter Pflaum, the President of Lundgren Bros. Construction,
Inc., a Minnesota corporation, on behalf of the corporation.
_____________________________
Notary Public
THIS DOCUMENT WAS DRAFTED BY:
Mary E. Senkus
OPPENHEIMER WOLFF & DONNELLY
45 South Seventh Street
Suite 3400
Minneapolis, Minnesota 55402
(612) 344-9300
EXHIBIT "A"
LEGAL DESCRIPTION
Parcel I:
Lot 9, Block 2, Plum Tree 2nd Addition, according to the recorded plat thereof,
Hennepin County, Minnesota.
Abstract property and Torrens Certificate Number: 843902
Parcel II:
Lot 8, Block 1, The Woodwinds 4th Addition, according to the recorded plat
thereof, Dakota County, Minnesota.
Abstract.
Parcel III:
Lot 10, Block 2, The Woodwinds 5th Addition according to the recorded plat
thereof, Dakota County, Minnesota.
Abstract.
GUARANTY
Minneapolis, Minnesota
THIS GUARANTY, made and entered into as of this _____ day of April,
1997, by EDMUND LUNDGREN, ALLAN LUNDGREN, PETER PFLAUM, PATRICK C. WELLS and
GERALD LUNDGREN, jointly and severally (hereinafter collectively referred to as
the "Guarantors"), to FIRST BANK NATIONAL ASSOCIATION, a national banking
association (hereinafter referred to as the "Lender"), whose post office address
is First Bank Place, 601 Second Avenue South, Minneapolis, Minnesota 55402-4302.
RECITALS
A. The Guarantors are shareholders of LUNDGREN BROS. CONSTRUCTION,
INC., a Minnesota corporation (hereinafter referred to as the "Debtor"), which
is or will be the owner of certain real estate and the improvements thereon
located in the State of Minnesota (hereinafter referred to as the "Premises").
B. The Debtor and the Lender have agreed that the Lender will make
a revolving construction and development loan (hereinafter referred to as the
"Loan") to the Debtor in the principal amount of Five Million and No/100 Dollars
($5,000,000.00) to finance the acquisition, development and construction of
single family homes, multifamily homes and single family developments as set
forth in the Loan Agreement as defined below.
C. The Loan is evidenced by a Revolving Credit Note dated of even
date herewith from the Debtor to the Lender (hereinafter referred to as the
"Note").
D. The Lender has agreed to disburse the proceeds of the Loan to
the Debtor, pursuant to the terms of a certain Revolving Construction and
Development Loan Agreement of even date herewith, entered into between the
Lender and the Debtor (hereinafter referred to as the "Loan Agreement").
E. To secure payment of the Note, the Debtor has executed and
delivered to the Lender a Mortgage and Security Agreement and Fixture Financing
Statement dated of even date herewith (hereinafter referred to as the
"Mortgage"), covering the Premises and such other documents as Lender has
required (the Note, the Mortgage, the Loan Agreement and such other documents
are hereinafter collectively referred to as the "Loan Documents").
F. In order to induce the Lender to make the Loan enter into the
Loan Agreement and accept the Note and the other Loan Documents, and as
additional security for the Loan and all other monies to be advanced under the
Note and the other Loan Documents, the Guarantors have agreed to give this
Guaranty.
G. The Lender has refused to make the Loan or to make any advances
under the Loan Agreement unless this Guaranty is executed by the Guarantors and
delivered to Lender.
NOW, THEREFORE, in consideration of the recitals and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Guarantors hereby, jointly and severally, covenant and agree
with the Lender as follows:
1. The Note, the Mortgage, the Loan Agreement and the other
Loan Documents are hereby made a part of this Guaranty by
reference thereto with the same force and effect as if fully
set forth herein and all representations and warranties made
by the Debtor in the Loan Documents are true and correct.
2. The Guarantors hereby, jointly and severally, irrevocably,
unconditionally and absolutely, guarantee to Lender the due
and prompt payment, and not just the collectibility, of the
principal of, and interest and late charges and all other
indebtedness, if any, on the Note when due, whether at
maturity, pursuant to mandatory or optional prepayments, by
acceleration or otherwise all at the times and places and at
the rates described in, and otherwise according to the terms
of the Note, the Loan Agreement and the Loan Documents.
3. The Guarantors further hereby, jointly and severally,
irrevocably, unconditionally and absolutely guarantee to
Lender the due and prompt performance by the Debtor of all
duties, agreements and obligations of the Debtor contained
in the Note, the Loan Agreement and the Loan Documents, and
the due and prompt payment of all costs incurred, including
attorneys' fees, in enforcing the payment and performance of
the Note, the Loan Agreement and the Loan Documents and this
Guaranty (the payment and performance of the items set forth
in Paragraphs 2 and 3 of this Guaranty being hereinafter
collectively referred to as the "Indebtedness Guaranteed").
4. The Guarantors hereby agree that the Lender may from time to
time without notice to or consent of the Guarantors and upon
such terms and conditions as the Lender may deem advisable
without affecting this Guaranty: (a) release any maker,
surety or other person liable for payment of all or any part
of the Indebtedness Guaranteed; (b) make any agreement
extending or otherwise altering the time for or the terms of
payment of all or any part of the sums due under the Note,
the other Loan Documents or the Indebtedness Guaranteed; (c)
modify, waive, compromise, release, subordinate, resort to,
exercise or refrain from exercising any right the Lender may
have hereunder, under the Note or any other Loan Documents;
(d) accept additional security or guarantees of any kind;
(e) endorse, transfer or assign the Note and other Loan
Documents to any other party; (f) accept from Debtor or any
other party partial payment or payments on account of the
Indebtedness Guaranteed; (g) from time to time hereafter
further loan monies or give or extend credit to or for the
benefit of the Debtor; or (h) release, settle or compromise
any claim of the Lender against the Debtor, or against any
other person, firm or corporation whose obligation is held
by the Lender as collateral security for repayment of the
Note or for the Indebtedness Guaranteed.
5. The Guarantors hereby unconditionally and absolutely waive:
(a) any obligation on the part of the Lender to protect,
secure or insure any of the security given for the payment
of the sums due under the Note and the other Loan Documents
or for payment of the Indebtedness Guaranteed; (b) the
invalidity or unenforceability of the Indebtedness
Guaranteed; (c) the release of any of the security given for
the payment of the Note; (d) notice of acceptance of this
Guaranty by the Lender; (e) notice of presentment, demand
for payment, notice of non-performance, protest, notices of
protest and notices of dishonor, notice of non-payment or
partial payment; (f) notice of any defaults under the Note,
the Loan Agreement or in the performance of any of the
covenants and agreements contained therein or in any other
Loan Document given as security for the Note; (g) any
limitation or exculpation of liability on the part of the
Debtor whether contained in the Note or otherwise; (h) the
transfer or sale by the Debtor of any security given for the
Note, the other Loan Documents or the Indebtedness
Guaranteed or the diminution in value thereof; (i) any
failure, neglect or omission on the part of the Lender to
realize on or protect any security given for the Note, the
other Loan Documents or the Indebtedness Guaranteed; (j) any
right to insist that the Lender prosecute collection of the
Note or resort to any instrument or security given to secure
the Indebtedness Guaranteed or to proceed against the Debtor
or against any other guarantor or surety prior to enforcing
this Guaranty; provided, however, at its sole discretion the
Lender may either in a separate action or an action pursuant
to this Guaranty pursue its remedies against the Debtor or
any other guarantor or surety, without affecting its rights
under this Guaranty; (k) notice to the Guarantors of the
existence of or the extending to the Debtor of the
Indebtedness Guaranteed; (l) any order, method or manner of
application of any payments on the Indebtedness Guaranteed;
or (m) any right to insist Lender disburse the full
principal amount of the Note to Debtor or the order, method,
manner or amounts disbursed under the Note.
6. Without limiting the generality of the foregoing, the
Guarantors will not assert against the Lender any defense of
waiver, release, discharge in bankruptcy, statute of
limitations, res judicata, statute of frauds,
anti-deficiency statute, fraud, ultra vires acts, usury,
illegality or unenforceability which may be available to the
Debtor in respect of the Note or any other Loan Document, or
any setoff available against the Lender to the Debtor
whether or not on account of a related transaction, and the
Guarantors expressly agree that they shall be and remain
liable for any deficiency remaining after foreclosure of any
mortgage or security interest securing the Note,
notwithstanding provisions of law that may prevent the
Lender from enforcing such deficiency against the Debtor.
The liability of the Guarantors shall not be affected or
impaired by any voluntary or involuntary dissolution, sale
or other disposition of all or substantially all the assets,
marshalling of assets and liabilities, receivership,
insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or
readjustment of, or other similar event or proceeding
affecting the Debtor or any of its assets and that upon the
institution of any of the above actions, at the Lender's
sole discretion and without notice thereof or demand
therefor, the Guarantors' obligations shall become due and
payable and enforceable against the Guarantors, whether or
not the Indebtedness Guaranteed is then due and payable. The
Guarantors further agree that no act or thing, except for
payment in full, which but for this provision might or could
in law or in equity act as a release of the liabilities of
the Guarantors hereunder shall in any way affect or impair
this Guaranty and the Guarantors agree that this shall be a
continuing, absolute and unconditional Guaranty and shall be
in full force and effect until all sums due on the Note and
the other Loan Documents as well as all Indebtedness
Guaranteed has been paid in full.
7. The Guarantors agree that all indebtedness, liability or
liabilities now or at any time or times hereafter owing by
Debtor to the Guarantors are hereby subordinated to the
Indebtedness Guaranteed and any payment of indebtedness of
the Debtor to the Guarantors, if the Lender so requests,
shall be received by the Guarantors as trustee for the
Lender on account of the Indebtedness Guaranteed. The
Guarantors agree that the payment of any amount or amounts
by the Guarantors pursuant to this Guaranty shall not in any
way entitle the Guarantors whether at law, in equity or
otherwise to any right to participate in any security held
by the Lender for the payment of the Indebtedness
Guaranteed, any right to direct the application or
disposition of any such security or any right to direct the
enforcement of any such security. Performance by the
Guarantors under this Guaranty shall not entitle the
Guarantors to be subrogated to any of the Indebtedness
Guaranteed or to any security therefor, unless and until the
full amount of the Indebtedness Guaranteed has been fully
paid.
8. Each Guarantor hereby warrants and represents unto Lender
that (a) any and all balance sheets, net worth statements
and other financial statements and data which have
heretofore been given to Lender with respect to said
Guarantor fairly and accurately represent the financial
condition of said Guarantor as of the date hereof, and,
since the date thereof, there has been no material adverse
change in the financial condition of said Guarantor and (b),
except as may be set out on any exhibit attached hereto, (i)
there are no legal proceedings, material claims or demands
pending against, or to the knowledge of said Guarantor
threatened against, said Guarantor or any of said
Guarantor's assets, (ii) said Guarantor is not in breach or
default of any obligation to pay money, and (iii) no event
(including specifically said Guarantor's execution and
delivery of this Guaranty) has occurred which, with or
without the lapse of time or action by a third party,
constitutes or could constitute a material breach or
material default under any document evidencing or securing
any obligation to pay money or under any other contract or
agreement to which said Guarantor is a party and (c) said
Guarantor has knowledge of Debtor's financial condition and
affairs and of all other circumstances which bear upon the
risk assumed by said Guarantor under this Guaranty (each
Guarantor hereby agreeing to continue to keep itself
informed thereof while this Guaranty is in force and
agreeing that Lender does not have and will not have any
obligation to investigate the financial condition or affairs
of Debtor for the benefit of said Guarantor or to advise
said Guarantor of any fact respecting, or any change in, the
financial condition or affairs of Debtor or any other
circumstance which may bear upon Guarantor's risk hereunder
which come to the knowledge of Lender, its directors,
officers, employees or agents of any time, whether or not
Lender knows, believes or has reason to know or to believe
that any such fact or change is unknown to any Guarantor or
might or does materially increase the risk of any Guarantor
hereunder). Guarantors shall not transfer any of their
assets for the purpose of preventing Lender from satisfying
any judgment rendered under this Guaranty therefrom, either
before or after the entry of any such judgment. Guarantors
shall promptly deliver to Debtor all financial statements of
Guarantors, if any, which Debtor is required by the Mortgage
to deliver to Lender, in time for Debtor to deliver the same
to Lender on or before the date provided for the delivery
thereof under the Mortgage.
9. The Guarantors agree this Guaranty is executed in order to
induce the Lender to make and disburse the Loan and with the
intent that it be relied upon by the Lender in making and
disbursing the Loan. Disbursement of any part of the Loan
without any further action or notice, shall constitute
conclusive evidence of the reliance hereon by the Lender.
This Guaranty shall run with the Note, the Loan Agreement
and other Loan Documents and without the need for any
further assignment of this Guaranty to any subsequent holder
of the Note or the need for any notice to the Guarantors
thereof. Upon endorsement or assignment of the Note to any
subsequent holder, said subsequent holder of the Note may
enforce this Guaranty as if said holder had been originally
named as Lender hereunder.
10. The Guarantors submit and consent to personal jurisdiction
in the State of Minnesota for the enforcement of this
Guaranty and waive any and all personal rights under the
laws of any state or the United States of America to object
to jurisdiction in the State of Minnesota for the purposes
of litigation to enforce this Guaranty. Litigation may be
commenced either in the court of general jurisdiction of
such state or the United States District Court for the
district in that state, at the election of the Lender. In
the event that such litigation is commenced in lieu of
personal service, service of process may be made, and
personal jurisdiction over the Guarantors obtained, by the
mailing of a copy of any summons and complaint, U.S. Mail,
Certified Mail, Return Receipt Requested, or any other
method provided under the laws of the jurisdiction for
service of process in a civil action, to the Guarantors at
their last known addresses. Nothing contained herein shall
prevent Lender from bringing any action or exercising any
rights against any security given to Lender by the
Guarantors, or against the Guarantors personally, or against
any property of the Guarantors, within any other state.
Commencement of any such action or proceeding in any other
state shall not constitute a waiver of the agreement as to
the laws of the state which shall govern the rights and
obligations of the Guarantors and Lender hereunder or of the
submission made by the Guarantors to personal jurisdiction
within the State of Minnesota. The aforesaid means of
obtaining personal jurisdiction and perfecting service of
process are not intended to be exclusive but are cumulative
and in addition to all other means of obtaining personal
jurisdiction and perfecting service of process now or
hereafter provided by the laws of the state where an action
on this Guaranty is commenced.
11. No right or remedy herein conferred upon or reserved to the
Lender is intended to be exclusive of any other available
remedy or remedies but each and every remedy shall be
cumulative and shall be in addition to every other remedy
given under this Guaranty or now or hereafter existing at
law or in equity. No waiver, amendment, release or
modification of this Guaranty shall be established by
conduct, custom or course of dealing, but only by an
instrument in writing duly executed by the Lender.
12. This Guaranty is delivered in and made in and shall in all
respects be construed pursuant to the laws of the State of
Minnesota.
13. This Guaranty, and each and every part hereof, shall be
binding upon the Guarantors and upon their heirs,
administrators, representatives, executors, successors and
assigns and shall inure to the benefit of each and every
future holder of the Note, including the heirs,
administrators, representatives, executors, successors and
assigns of the Lender.
14. Any notice which any party hereto may desire or may be
required to give to any other party shall be in writing and
the mailing thereof by certified mail to their respective
addresses as set forth herein, or to such other places any
party hereto may hereafter by notice in writing designate,
shall constitute service of notice hereunder. The Guarantors
hereby represent and warrant to the Lender that the
addresses of the Guarantors as specified below are true and
correct and until the Lender shall have actually received a
written notice specifying any such change of address and
specifically requesting that notices be issued to such
changed address, the Lender may rely on the addresses stated
as being accurate. The Guarantors hereby agree to provide
the Lender with written notice of any change of address of
the Guarantors within fifteen (15) days of such change.
Edmund Lundgren
_______________________________
_______________________________
Telephone No.: ________________
Facsimile No.: _________________
Allan Lundgren
_______________________________
_______________________________
Telephone No.: ________________
Facsimile No.: _________________
Peter Pflaum
_______________________________
_______________________________
Telephone No.: ________________
Facsimile No.: _________________
Patrick C. Wells
_______________________________
_______________________________
Telephone No.: ________________
Facsimile No.: _________________
Gerald Lundgren
_______________________________
_______________________________
Telephone No.: ________________
Facsimile No.: _________________
15. The promises and agreements herein shall be construed to be
and are hereby declared to be joint and several in each and
every particular and shall be fully binding upon and
enforceable against any or all of such parties or persons,
and neither the death nor release of any person or party to
this Guaranty shall affect or release the joint and several
liability of any other person or party.
16. The Guarantors agree that if, at any time, all or any part
of any payment previously applied by the Lender to any of
the Indebtedness Guaranteed must be returned by the Lender
for any reason, whether by court order, administrative order
or settlement, the Guarantors shall remain liable for the
full amount returned as if said amount had never been
received by the Lender, notwithstanding any term of this
Guaranty or the cancellation or return of any note or other
agreement evidencing the Indebtedness Guaranteed.
17. THE LENDER BY ITS ACCEPTANCE HEREOF AND THE GUARANTORS
HEREBY VOLUNTARILY, KNOWINGLY AND INTENTIONALLY WAIVE ANY
AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING ARISING UNDER THIS GUARANTY OR CONCERNING THE
INDEBTEDNESS GUARANTEED AND/OR ANY COLLATERAL CONTEMPLATED
THEREBY, REGARDLESS OF WHETHER SUCH ACTION OR PROCEEDING
CONCERNS ANY CONTRACTUAL OR TORTIOUS OR OTHER CLAIM. THE
GUARANTORS ACKNOWLEDGE THAT THIS WAIVER OF JURY TRIAL IS A
MATERIAL INDUCEMENT TO THE LENDER IN EXTENDING CREDIT TO THE
DEBTOR, THAT THE LENDER WOULD NOT HAVE EXTENDED SUCH CREDIT
WITHOUT THIS JURY TRIAL WAIVER, AND THAT SUCH GUARANTORS
HAVE BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN
OPPORTUNITY TO CONSULT WITH AN ATTORNEY IN CONNECTION WITH
THIS JURY TRIAL WAIVER AND UNDERSTANDS THE LEGAL EFFECT OF
THIS WAIVER.
IN WITNESS WHEREOF, the Guarantors have executed this
Guaranty as of the day and year first above written.
------------------------------------
Edmund Lundgren
------------------------------------
Allan Lundgren
------------------------------------
Peter Pflaum
------------------------------------
Patrick C. Wells
-----------------------------------
Gerald Lundgren
INDEMNITY AGREEMENT
The undersigned, LUNDGREN BROS. CONSTRUCTION, INC., a Minnesota
corporation ("Lundgren"), EDMUND M. LUNDGREN, ALLAN D. LUNDGREN, PETER PFLAUM,
PATRICK C. WELLS and GERALD T. LUNDGREN (hereinafter collectively referred to as
the "Indemnitors"), jointly and severally, in consideration of FIRST BANK
NATIONAL ASSOCIATION, a national banking association ("Indemnitee"), agreeing to
make a revolving construction and development loan ("Loan") in the amount of
Five Million and No/100 Dollars ($5,000,000.00) to Lundgren Bros. Construction,
Inc., and for the purpose of inducing the Indemnitee to make the Loan and with
knowledge that Indemnitee intends to rely upon the certifications and
undertakings set forth herein agree as follows:
1. For purposes of this Agreement, (a) the term "Hazardous
Materials or Wastes" shall mean any hazardous or toxic
materials, pollutants, chemicals, or contaminants, including
without limitation asbestos, polychlorinated biphenyls (PCBs)
and petroleum products as defined, determined or identified as
such in any Laws, as hereinafter defined, and (b) the term
"Laws" means any federal, state or local laws, rules or
regulations (whether now existing or hereinafter enacted or
promulgated) including, without limitation, the Clean Water
Act, 33 U.S.C.ss.ss. 1251 et seq. (1972), the Clean Air Act,
42 U.S.C.ss.ss. 7401 et seq. (1970), the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C.ss. 1802, and the Resource
Conservation and Recovery Act, 42 U.S.C.ss. 6901 et seq., the
Toxic Substances Control Act, or other similar laws, as well
as implementing regulations enacted or promulgated to protect
the public health, welfare or the environment, including state
or local laws, regulations or ordinances, as well as any
judicial or administrative interpretation thereof, including
any judicial or administrative orders or judgments.
2. Indemnitors hereby agree to indemnify Indemnitee and hold
Indemnitee harmless from and against all loss, liability,
damage and expense, including attorneys' fees, suffered or
incurred by the Indemnitee as a result of the existence of
Hazardous Materials or Wastes upon that certain real estate
and the improvements located thereon described in Exhibit "A"
attached hereto and made a part hereof together with any
additional real estate and the improvements thereon
which Lundgren owns or acquires and which is or becomes a
Construction Project or a Development Project as defined in
that certain Revolving Construction and Development Loan
Agreement of even date herewith by and between Lundgren and
Indemnitee (hereinafter all such real estate and improvements
shall be referred to as the "Premises"), including any loss of
value of the Premises as a result of the foregoing, whether as
holder of the Loan, as mortgagee in possession or as
successor-in-interest fee owner to Lundgren Bros.
Construction, Inc., by foreclosure proceedings or deed in lieu
of foreclosure.
3. It is understood and agreed that the foregoing undertaking to
indemnify Indemnitee shall include but not be limited to the
assertion against Indemnitee of any claim, whenever raised:
(a) relating to the presence of Hazardous Materials or Wastes
upon the Premises first occurring prior to the date on which
Lundgren Bros. Construction, Inc., is no longer fee owner of
the Premises, or (b) relating to the failure to comply with
any local, state, or federal statutes and/or regulations
regarding Hazardous Materials or Wastes which were present
upon the Premises prior to the date on which Lundgren Bros.
Construction, Inc., is no longer fee owner of the Premises,
and shall continue in full force and effect as long as
Indemnitee retains an estate or interest in the Premises or so
long as Indemnitee shall have liability by reason of having
held such estate or interest in the Premises. Such undertaking
to indemnify Indemnitee shall in no event be limited,
terminated or extinguished by, or merged into, the exercise of
any of Indemnitee's remedies under the documents evidencing
and securing the Loan (hereinafter collectively referred to as
the "Security Documents"). Except as may be otherwise
expressly agreed in writing, the liability of any party under
this Agreement shall in no way be limited or impaired by any
amendment or modification of the provisions of any Security
Documents to or with Indemnitee, Indemnitors or any person who
succeeds Lundgren Bros. Construction, Inc., as owner of the
Premises. In addition, the liability of any party under this
Agreement shall in no way be limited or impaired by (i) any
extensions of time for performance required by any of the
Security Documents, (ii) any sale, assignment or foreclosure
of any Security Documents or any sale or transfer of all or
any part of the Premises, (iii) any exculpatory provision in
any of the Security Documents limiting Indemnitee's recourse
to property encumbered by the Security Documents or to any
other security, or limiting Indemnitee's rights to a
deficiency judgment against the Indemnitors except as
otherwise expressly provided in the Security Documents, (iv)
the release of the Indemnitors or any other person from
performance or observance of any of the agreements, covenants,
terms or conditions contained in any of the Security Documents
by operation of law, Indemnitee's voluntary act, or otherwise,
(v) the release or substitution in whole or in part of any
security for the Loan, (vi) Indemnitee's failure to record or
file any Security Document (or Indemnitee's improper recording
or filing of any thereof) or to otherwise perfect, protect,
secure or insure any security interest or lien given as
security for the Loan; and, in any such case, whether with or
without notice of Indemnitors and with or without
consideration, (vii) any limitation of liability language in
any Security Documents, unless such limitation of liability
language expressly limits liability hereunder or with respect
hereto, or (viii) repayment of the Loan.
4. No provision of this Agreement may be changed, waived,
discharged or terminated verbally or by any other means except
by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is
sought.
5. Except as herein provided, this Agreement shall be binding
upon the Indemnitors and their respective successors and
assigns and shall inure to the benefit of Indemnitee and its
successors and assigns. The indemnity of the Indemnitors
hereunder shall be binding on all successors in interest of
Indemnitors and on each and every transferee of the Premises.
6. This Agreement and the rights and obligations of the parties
hereunder shall in all respects be governed by, and construed
and enforced in accordance with, the laws of the State of
Minnesota.
7. Any notice which any party hereto may desire or may be
required to give to any other party shall be in writing and
either (a) mailed by certified mail, return receipt requested,
or (b) sent by an overnight carrier which provides for a
return receipt. Any such notice shall be sent to the
respective party's addresses as set forth below or to such
other address as such party may, by notice in writing,
designate as its address. Any such notice shall constitute
service of notice hereunder three (3) days after the mailing
thereof by certified mail or one (1) day after the sending
thereof by overnight carrier.
8. The indemnities given in this Agreement are in addition to and
separate from those set forth in the Security Documents. The
indemnities given in this Agreement are not given as security
for repayment of the Loan and shall fully survive repayment of
the Loan.
9. The indemnities, promises and agreements herein shall be
construed to be and are hereby declared to be joint and
several in each and every particular and shall be fully
binding upon and enforceable against any or all of such
parties or persons, and neither the dissolution, the death nor
release of any person or party to this Agreement shall affect
or release the joint and several liability of any other person
or party.
IN WITNESS WHEREOF, Indemnitors have executed this Agreement as of the
_____ day of April, 1997.
LUNDGREN BROS. CONSTRUCTION, INC.,
a Minnesota corporation
By: _________________________________
Peter Pflaum
Its: Chief Executive Officer
Address: 935 East Wayzata Boulevard
Wayzata, Minnesota 55391
Telephone No.:______________________________
___________________
Edmund M. Lundgren
Home Address:___________________
__________________
Home Telephone No.:_____________
___________________
Allan T. Lundgren
Home Address:___________________
__________________
Home Telephone No.:_____________
___________________
Peter Pflaum
Home Address:___________________
__________________
Home Telephone No.:_____________
___________________
Patrick C. Wells
Home Address:___________________
__________________
Home Telephone No.:_____________
___________________
Gerald T. Lundgren
Home Address:___________________
__________________
Home Telephone No.:_____________
EXHIBIT "A"
LEGAL DESCRIPTION
Parcel I:
Lot 9, Block 2, Plum Tree 2nd Addition, according to the recorded plat thereof,
Hennepin County, Minnesota.
Abstract property and Torrens Certificate Number: 843902
Parcel II:
Lot 8, Block 1, The Woodwinds 4th Addition, according to the recorded plat
thereof, Dakota County, Minnesota.
Abstract.
Parcel III:
Lot 10, Block 2, The Woodwinds 5th Addition according to the recorded plat
thereof, Dakota County, Minnesota.
Abstract.
AMENDMENT AND RESTATEMENT
OF PROMISSORY NOTE
THIS AMENDMENT AND RESTATEMENT OF PROMISSORY NOTE, effective as of the
21st day of March, 1997, between LUNDGREN BROS. CONSTRUCTION, INC., a Minnesota
corporation (the "Borrower"), whose post office address is 935 East Wayzata
Boulevard, Wayzata, Minnesota 55391 and FIRST BANK NATIONAL ASSOCIATION, a
national banking association (the "Bank"), whose post office address is 601
Second Avenue South, Minneapolis, Minnesota 55402-4302.
PRELIMINARY RECITALS:
A. The Borrower has executed and delivered a Promissory Note ("Note")
dated March 21, 1996 in the original principal amount of One Million and 00/100
Dollars ($1,000,000.00), made payable to the order of the Bank.
B. The parties hereto desire to amend and fully restate the terms of
the Note in its entirety.
NOW, THEREFORE, in consideration of the above recitals and other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Borrower and the Bank do hereby amend and fully restate the terms of the Note in
its entirety as follows:
PROMISSORY NOTE
$1,500,000.00 Minneapolis, Minnesota
March 21, 1997
FOR VALUE RECEIVED, on March 21, 1998, LUNDGREN BROS. CONSTRUCTION,
INC. (the "Borrower"), promises to pay to the order of FIRST BANK NATIONAL
ASSOCIATION (the "Bank"), at its office in Minneapolis, Minnesota, or at such
other place as any present or future holder of this Note may designate from time
to time, the principal sum of (i) One Million Five Hundred Thousand and 00/100
Dollars ($1,500,000.00), or (ii) the aggregate unpaid principal amount of all
advances of credit made by the Bank to the Borrower pursuant to this Note as
shown in the records of any present or future holder of this Note, whichever is
less, plus interest thereon from the date of each advance in whole or in part
included in such amount until this Note is fully paid, computed on the basis of
the actual number of days elapsed and a 360-day year, at an annual rate that
shall always be 1.00% per annum in excess of the Reference Rate and that shall
change when and as the Reference Rate shall change. Interest is due and payable
on the last day of each month commencing March 31, 1997, and at maturity. The
term "Reference Rate" means the rate established by the Bank from time to time
in its sole discretion as its Reference Rate; the Bank may lend to its customers
at rates that are at, above or below the Reference Rate. Notwithstanding the
foregoing, after an Event of Default this Note shall bear interest until paid at
2% per annum in excess of the rate otherwise then in effect, which rate shall
continue to vary based on further changes in the Reference Rate.
All or any part of the unpaid balance of this Note may be prepaid at
any time without penalty. At the option of the then holder of this Note, any
payment under this Note may be applied first to the payment of other charges,
fees and expenses under this Note and any other agreement or writing in
connection with this Note, second to the payment of interest accrued through the
date of payment, and third to the payment of principal. Amounts may be advanced
and readvanced under this Note, provided the principal balance outstanding shall
not exceed the amount first above written.
This Note is secured by (i) a Pledge Agreement (the "Pledge Agreement")
dated March 21, 1996 between the Borrower and the Bank, and (ii) a Control
Agreement (the "Control Agreement") dated March 21, 1996 between the Borrower,
the Bank and FBS Investment Services, Inc. The terms of the Pledge Agreement and
the Control Agreement are incorporated herein by reference and made a part
hereof.
The occurrence of any of the following events shall constitute an Event
of Default under this Note: (i) any breach or default in the payment of this
Note, and such breach or default continues for a period of 5 days; or (ii) any
breach or default under the terms of any other note, debenture, indenture,
obligation, mortgage, guaranty, other agreement, or other writing heretofore,
herewith or hereafter existing to which any maker, endorser, guarantor or surety
of this Note or any other person providing security for this Note or for any
guaranty of this Note is a party including, but not limited to, the Pledge
Agreement and the Control Agreement; or (iii) the insolvency, death,
dissolution, liquidation, merger or consolidation of any such maker, endorser,
guarantor, surety or other person; or (iv) any appointment of a receiver,
trustee or similar officer of any property of any such maker, endorser,
guarantor, surety or other person; or (v) any assignment for the benefit of
creditors of any such maker, endorser, guarantor, surety or other person; or
(vi) any commencement of any proceeding under any bankruptcy, insolvency,
receivership, dissolution, liquidation or similar law by or against any such
maker, endorser, guarantor, surety or other person; or (vii) the sale, lease or
other disposition (whether in one transaction or in a series of transactions) to
one or more persons of all or a substantial part of the assets of any such
maker, endorser, guarantor, surety or other person; or (viii) any such maker,
endorser, guarantor, surety or other person takes any action to revoke or
terminate any agreement, liability or security in favor of the Bank; or (ix) the
entry of any final judgment or other final order for the payment of money in the
amount of $25,000.00 or more against any such maker, endorser, guarantor, surety
or other person, which judgment or order is not or is no longer subject to a
stay pending appeal; or (x) the issuance or levy of any writ, warrant,
attachment, garnishment, execution or other process against any property of any
such maker, endorser, guarantor, surety or other person; or (xi) the attachment
of any tax lien to any property of any such maker, endorser, guarantor, surety
or other person; or (xii) any statement, representation or warranty made by any
such maker, endorser, guarantor, surety or other person (or any representative
of any such maker, endorser, guarantor, surety or other person) to any present
or future holder of this Note at any time shall be incorrect or misleading in
any material respect when made; or (xiii) there is a material adverse change in
the condition (financial or otherwise), business or property of any such maker,
endorser, guarantor, surety or other person; or (xiv) any present or future
holder of this Note shall in good faith believe that the prospect of due and
punctual payment or performance of this Note or the due and punctual payment or
performance of any other note, obligation, mortgage, guaranty, or other
agreement heretofore, herewith or hereafter given to or acquired by any present
or future holder of this Note in connection with this Note is impaired.
Upon the commencement of any proceeding under any bankruptcy law by or
against any such maker, endorser, guarantor, surety or other person, this Note
automatically shall become immediately due and payable for the entire unpaid
principal balance of this Note plus accrued interest and other charges, fees and
expenses under this Note without any declaration, presentment, demand, protest,
or other notice of any kind. Upon the occurrence of any other Event of Default
and at any time thereafter, the then holder of this Note may, at its option,
declare this Note to be immediately due and payable and thereupon this Note
shall become due and payable for the entire unpaid principal balance of this
Note plus accrued interest and other charges, fees and expenses under this Note
without any presentment, demand, protest or other notice of any kind.
The Borrower (i) waives demand, presentment, protest, notice of
protest, notice of dishonor and notice of nonpayment of this Note; (ii) agrees
to promptly provide all present and future holders of this Note from time to
time with financial statements of the Borrower and such other information
respecting the financial condition, business and property of the Borrower as any
such holder of this Note may request, in form and substance acceptable to such
holder of this Note; (iii) agrees that when or at any time after this Note
becomes due the then holder of this Note may offset or charge the full amount
owing on this Note against any account then maintained by the Borrower with such
holder of this Note without notice; (iv) agrees to pay on demand all fees, costs
and expenses of all present and future holders of this Note in connection with
this Note and any security and guaranties for this Note, and any transactions
and matters relating to this Note and to any security and guaranties for this
Note, including but not limited to audit fees and expenses and reasonable
attorneys' fees and legal expenses, plus interest on such amounts at the rate
set forth in this Note; and (v) consents to the personal jurisdiction of the
state and federal courts located in the State of Minnesota in connection with
any controversy related in any way to this Note or any security or guaranty for
this Note, or any transaction or matter relating to this Note or to any security
or guaranty for this Note, waives any argument that venue in such forums is not
convenient, and agrees that any litigation initiated by the Borrower against the
Bank or any other present or future holder of this Note relating in any way to
this Note or any security or guaranty for this Note, or any transaction or
matter relating to this Note or to any security or guaranty for this Note, shall
be venued in either the District Court of Hennepin County, Minnesota, or the
United States District Court, District of Minnesota, Fourth Division. Interest
on any amount under this Note shall continue to accrue, at the option of any
present or future holder of this Note, until such holder receives final payment
of such amount in collected funds in form and substance acceptable to such
holder.
No waiver of any right or remedy under this Note shall be valid unless
in writing executed by the holder of this Note, and any such waiver shall be
effective only in the specific instance and for the specific purpose given. All
rights and remedies of all present and future holders of this Note shall be
cumulative and may be exercised singly, concurrently or successively. This Note
shall bind the Borrower and the successors and assigns of the Borrower. This
Note shall be governed by and construed in accordance with the laws of the State
of Minnesota.
THE BORROWER REPRESENTS, CERTIFIES, WARRANTS AND AGREES THAT THE
BORROWER HAS READ ALL OF THIS NOTE AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS
NOTE. THE BORROWER ALSO AGREES THAT COMPLIANCE BY ANY PRESENT OR FUTURE HOLDER
OF THIS NOTE WITH THE EXPRESS PROVISIONS OF THIS NOTE SHALL CONSTITUTE GOOD
FAITH AND SHALL BE CONSIDERED REASONABLE FOR ALL PURPOSES.
IN WITNESS WHEREOF, the Borrower and the Bank have executed this
Amendment and Restatement of Promissory Note effective as of the day and year
first above written.
BORROWER: LUNDGREN BROS. CONSTRUCTION, INC.,
a Minnesota corporation
By:_______________________________________
Its:______________________________________
BANK: FIRST BANK NATIONAL ASSOCIATION,
a national banking association
By:_______________________________________
Its:______________________________________
CONSENT OF GUARANTORS
The undersigned, having each executed a separate Guaranty in favor of
First Bank National Association each dated March 21, 1996 (collectively referred
to as the "Guaranties"), hereby consent to the terms of the attached Amendment
and Restatement of Promissory Note and agree that (a) all indebtedness evidenced
thereby shall become part of the Indebtedness as that term is defined in the
Guaranties, and (b) the undersigned hereby jointly and severally ratify all of
their respective obligations under the terms of the Guaranties.
Effective as of March 21, 1997.
------------------------------------------
Edmund Lundgren
------------------------------------------
Allan Lundgren
------------------------------------------
Peter Pflaum
------------------------------------------
Patrick C. Wells
------------------------------------------
Gerald Lundgren
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,239
<SECURITIES> 0
<RECEIVABLES> 1,303
<ALLOWANCES> 55
<INVENTORY> 37,724
<CURRENT-ASSETS> 0
<PP&E> 3,280
<DEPRECIATION> 1,791
<TOTAL-ASSETS> 53,443
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 99
<OTHER-SE> 7,055
<TOTAL-LIABILITY-AND-EQUITY> 53,443
<SALES> 12,096
<TOTAL-REVENUES> 12,096
<CGS> 10,595
<TOTAL-COSTS> 10,595
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 579
<INCOME-PRETAX> (403)
<INCOME-TAX> (161)
<INCOME-CONTINUING> (242)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (242)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
