Exhibit 10.1

 

DEVELOPMENT LOAN AGREEMENT

 

This Development Loan Agreement (“Agreement”) is made and entered into effective
as of September 22, 2020 (the “Effective Date”), among BOKF, NA dba Bank of
Albuquerque (the “Lender”); and Lomas Encantadas Development Company, LLC, a New
Mexico limited liability company (the “Borrower”), with reference to the
following:

 

(a)       Borrower has requested that Lender lend to Borrower up to Two Million
Four Hundred Thousand and No/100 Dollars ($2,400,000.00), to partially finance
Borrower’s development of at least 75 residential Lots (defined below) within
Lomas Encantadas Unit 2B (Phase 3) on the real property more particularly
described on Exhibit “A” attached hereto and made a part hereof (the “Mortgaged
Property”).

 

(b)       Subject to the terms, provisions, covenants and agreements hereinafter
set forth, Lender has agreed to make the requested extension of credit.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and
the loan to be made hereunder, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, Lender and Borrower
hereby covenant and agree as follows:

 

1.       LENDING AGREEMENT: Subject to the terms, provisions, covenants and
agreements set forth in this Agreement, Lender agrees to lend to Borrower, and
the Borrower agrees to borrow from Lender, up to the principal sum of Two
Million Four Hundred Thousand and No/100 Dollars ($2,400,000.00), to be used by
Borrower for the purposes of: (a) paying contractors, mechanics, materialmen,
and suppliers pursuant to the terms of contracts for services in fact performed
and materials purchased for and either incorporated into the development of the
Mortgaged Property or suitably stored on the Mortgaged Property for later
incorporation (such development work and the Mortgaged Property are hereinafter
collectively referred to as the “Development”); (b) reimbursing Lender for
reasonable expenses incurred by Lender pursuant to this Agreement; and (c)
paying other reasonable costs that are incidental or related to the cost of
completing or financing the Development to the extent included in the
Development Budget (defined below).

 

2.       BORROWER’S NOTE: The loan shall be evidenced by a Non-Revolving Line of
Credit Promissory Note (the “Note”) in the principal amount of Two Million Four
Hundred Thousand and No/100 Dollars ($2,400,000.00), which Note shall bear
interest at the rate specified in the Note.

 

3.       COLLATERAL SECURITY: The performance of all covenants and agreements
contained in this Agreement and in the other documents executed or delivered as
a part of this transaction and the payment of the Note shall be secured as
follows:

 

3.1.       Security Documents Covering Mortgaged Property: Borrower shall grant
to Lender a first-lien mortgage covering all of the Mortgaged Property and a
security interest in all personal property relating to such Mortgaged Property
and owned by Borrower, which mortgage lien and security interest are evidenced
by a Mortgage, Security Agreement and Financing Statement dated the same day as
this Agreement made by Borrower in favor of Lender (the “Mortgage”).

 

   

 

 

3.2.       Hazardous Substances Indemnification Agreement: Borrower and
Guarantor shall sign and deliver to Lender a Hazardous Substances
Indemnification Agreement in the form required by Lender (the “HSIA”).

 

3.3.       Guaranty: AMREP Southwest Inc. (the “Guarantor”) shall sign and
deliver to Lender a Guaranty Agreement in the form required by Lender (the
“Guaranty”).

 

3.4.       Collateral Assignment of Contracts: The Borrower shall assign to
Lender and grant a security interest to Lender in all contracts with
contractors, architects and engineers (the “Assignment”).

 

3.5.       Additional Documents: Borrower shall also sign and deliver such
Closing Certificates, Lien Affidavits, Closing Statements and other documents
that Lender may reasonably request (collectively, the “Additional Documents”).
Further, any and all collateral documents executed by Borrower in favor of
Lender as security for any indebtedness of Borrower to Lender shall also
expressly secure Borrower’s obligations hereunder and under the Note and all
documents that secure payment of the Note.

 

4.       CONDITIONS OF LENDING: The obligation of Lender to perform this
Agreement and to make an initial or any future advance or extension of credit
hereunder is subject to the performance and existence of the following
conditions precedent:

 

4.1.       No Events of Default: There shall not have occurred and be continuing
any Event of Default, and the representations and warranties set forth in the
Loan Documents shall be true and accurate in all material respects.

 

4.2.       Loan Documents: This Agreement, the Note, the Mortgage, the
Assignment, the Guaranty, the HSIA, and the Additional Documents (collectively,
the “Loan Documents”) shall be duly authorized, executed and delivered to
Lender.

 

4.3.       Recording of Security Documents: The Mortgage and a Uniform
Commercial Code Financing Statement naming Borrower as debtor and Lender as
secured party shall be recorded in the appropriate county or state offices.

 

4.4.       Title Evidence: Borrower shall provide to Lender a loan policy of
title insurance with pending disbursements clause, issued by a title insurance
company acceptable to Lender (the “Title Company”), evidencing that Borrower has
good and indefeasible fee simple title to the Mortgaged Property and that the
Mortgage constitutes a valid first mortgage lien on the Mortgaged Property,
subject only to those matters waived by Lender. The title policy shall not
include an exception based upon mechanics’ and materialmen’s liens. The premiums
for the title policy shall be paid by Borrower.

 

4.5.       Appraisal: Borrower shall pay for an independent appraisal evaluation
of the Mortgaged Property by an appraiser selected and approved by Lender, which
appraisal must comply with the standards set forth by the Comptroller of the
Currency of National Banks.

 

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4.6.       Survey or Plat: Borrower shall deliver to Lender and the Title
Company a plat of the Mortgaged Property in a form which is acceptable to Lender
and the Title Company and will enable the issuer of the required loan policy of
title insurance to delete all survey exceptions.

 

4.7.       Insurance: Borrower shall obtain and maintain the insurance required
to be maintained by the Mortgage.

 

4.8.       Zoning and Use: If requested by Lender, Borrower shall furnish Lender
satisfactory evidence that the Mortgaged Property is presently zoned for its
intended use and that the Mortgaged Property is in full compliance with all
municipal ordinances, codes, rules or regulations.

 

4.9.       Permits: Borrower shall obtain and deliver to Lender copies of all
permits required to commence, and thereafter to continue, work on the
Development or any part thereof, including, without limitation, permits issued
by the City of Rio Rancho, New Mexico.

 

4.10.       Cost Breakdown and Budget: The Borrower shall submit, for approval
by Lender, complete plans for the Development and a detailed cost breakdown and
budget of the work entailed in the Development showing the total costs involved
(both direct and indirect) (collectively, the “Development Budget”), which
approval shall not be unreasonably withheld or delayed. Following approval by
Lender, the Development Budget shall not be changed in any material respect
without the prior written consent of Lender.

 

4.11.       Existence and Authority: If requested by Lender, Borrower shall
provide to Lender true and correct copies of the documents that created and
evidence Borrower and all amendments thereto including: (i) filed Articles of
Organization and Certificate of Organization from the New Mexico Secretary of
State (“NMSOS”); (ii) a Certificate of Good Standing issued by the NMSOS; (iii)
authorization from Borrower to enter into this agreement, and any other Loan
Documents required by Lender in connection with this Agreement; and (iii) the
operating agreement of Borrower and all amendments thereto.

 

4.12.       Cash Equity. In addition to any other equity or loan to value
requirements Borrower shall have provided evidence reasonably satisfactory to
Lender that Borrower has invested cash equity in the Development, as determined
by Lender, of not less than fifteen percent (15%) of the “as completed”
appraised value of the Development as of the date of the initial advance under
the Note. Borrower’s equity in the Mortgaged Property, including without
limitation its investment in the offsite infrastructure supporting the Mortgaged
Property, shall be included in any calculation of the cash equity required by
this Section 4.12.

 

4.13.       Loan Origination Fee: At the time the Note is signed, Borrower shall
remit to Lender a fully earned, non-refundable loan origination fee of Twelve
Thousand and No/100s Dollars ($12,000.00).

 

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5.       REPRESENTATIONS AND WARRANTIES: In addition to all other
representations and warranties of Borrower to Lender, Borrower represents and
warrants that:

 

5.1.       Existence; Compliance with Law: Borrower (i) is duly organized or
formed, as applicable, validly existing and (if relevant) in good standing under
the laws of the jurisdiction of its organization or formation, as the case may
be, (ii) has the limited liability company power and authority and the legal
right, to own and operate its property and assets, to lease the property and
assets it leases and causes to be operated as lessee, and to conduct the
business in which it is currently engaged under the governmental requirements of
each jurisdiction in which it owns, leases and/or operates its property or
assets, (iii) is duly qualified as a foreign limited liability company, and (if
relevant) in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or assets or the conduct of its
business requires such qualification, (iv) is in material compliance with its
applicable organizational documents, and (v) is in compliance with all
governmental requirements, except to the extent that the failure to comply
therewith could not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on Borrower.

 

5.2.       Entity Power; Authorization; Enforceable Obligations: Borrower has
the power and authority, and the legal right, to make, deliver and perform the
Loan Documents and to borrow hereunder, and has taken all necessary limited
liability company or other action to authorize the execution, delivery and
performance of the Loan Documents and to authorize the borrowings on the terms
and conditions of this Agreement and the other Loan Documents. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
governmental authority or any other person is required in connection with the
borrowings hereunder or the execution, delivery, performance, validity or
enforceability of this Agreement or any of the other Loan Documents, except
consents, authorizations, filings and notices which have been obtained or made
and are in full force and effect. Each Loan Document has been duly executed and
delivered on behalf of Borrower. This Agreement constitutes, and each other Loan
Document upon execution shall constitute, a legal, valid and binding obligation
of Borrower, enforceable against Borrower in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

 

5.3.       No Legal Bar: The execution, delivery and performance of this
Agreement, the other Loan Documents, the borrowings hereunder and the use of the
proceeds thereof shall not violate any governmental requirement or any
contractual or other obligation of Borrower and shall not result in, or require,
the creation or imposition of any lien on any of Borrower’s assets, properties
or revenues pursuant to any governmental requirement or any such contractual or
other obligation (other than the liens created by the Loan Documents). No
governmental requirement or contractual or other obligation applicable to
Borrower or Borrower’s properties or assets could reasonably be expected to have
a material adverse effect on Borrower. No performance of a contractual or other
obligation by Borrower, either unconditionally or upon the happening of an
event, would result in the creation of a lien (other than a permitted lien) on
the property, assets or revenues of Borrower.

 

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5.4.       No Conflicting Agreements: There is no provision of any existing
agreement, mortgage, indenture, instrument, document or contract binding on
Borrower or affecting any property or asset of Borrower, which would conflict
with or in any way prevent the execution, delivery or carrying out of the terms
of this Agreement and the other Loan Documents.

 

5.5.       Ownership of Properties; Liens: Borrower has good and indefeasible
title to the Mortgaged Property, and the Mortgaged Property is not subject to
any deed of trust, mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, excluding only: (a) deposits to secure payment of worker’s
compensation (if any), unemployment insurance and other similar benefits; (b)
liens for property taxes not yet due; (c) statutory liens, against which there
are established reserves in accordance with generally accepted accounting
principles, and which arise in the ordinary course of business and secure
obligations of Borrower which are not yet due and not in default; (d)
encumbrances in favor of Lender and (e) matters reflected in the loan policy of
title insurance.

 

5.6.       Financial Condition: The financial statements, information and
materials of Borrower heretofore delivered to Lender fairly and accurately
present in all material respects Borrower’s consolidated financial condition
(including its assets and liabilities) as of the date or dates thereof (subject,
in the case of the interim financial statements, to normal year-end adjustments
and the absence of notes), and there have been no material adverse changes in
Borrower's financial condition or operations since the date or dates thereof.
Borrower does not currently have material guarantee obligations, contingent
liabilities and liabilities for taxes, or any long-term leases or unusual
forward or long-term commitments, which are not reflected in the most recent
financial statements, information and materials referred to in this section.

 

5.7.       Licenses, Permits, Etc.: Borrower possesses or will possess prior to
the commencement of construction and construction of each subsequent phase of
the Development, all licenses, permits, consents, approvals, franchises and
intellectual property (or otherwise possesses the right to use such intellectual
property without violation of the rights of any other person) which are
necessary for the completion of the Development, except for those licenses,
permits, consents, approvals, franchises and intellectual property the failure
of which to possess could not reasonably be expected to have a material adverse
effect on Borrower. Borrower is not in violation in any material respect of the
terms under which it possesses any such licenses, permits, consents, approvals,
franchises and intellectual property or the right to use such licenses, permits,
consents, approvals, franchises and intellectual property.

 

5.8.       Contractual Default: Borrower is not in default under or with respect
to any of their respective contractual obligations in any respect that could
reasonably be expected to have a material adverse effect on Borrower.

 

 

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5.9.       No Change: Since January 1, 2020, there has been no development or
event that has had or could reasonably be expected to have a material adverse
effect on the Mortgaged Property or Borrower.

 

5.10.       Litigation: There is no litigation, investigation or proceeding of
or before any arbitrator, mediator or any governmental authority or, to
Borrower’s knowledge, threatened by or against Borrower or against any of any
Borrower’s assets, properties or revenues: (a) with respect to any of the Loan
Documents or any of the transactions contemplated hereby, or (b) that could
reasonably be expected to have a material adverse effect on the Mortgaged
Property or Borrower.

 

5.11.       Employee Retirement Income Security Act of 1994 (ERISA): Other than
as disclosed in the filings of AMREP Corporation made to the Securities and
Exchange Commission, (a) Borrower has not incurred any “accumulated funding
deficiency” within the meaning of Section 302(a)(2) of ERISA as amended from
time to time with respect to any employee pension or other benefit plan or trust
maintained by or related to Borrower, and Borrower has not incurred any material
liability to the Pension Benefit Guaranty Corporation (PBGC) as established
pursuant to Section 4002 of ERISA in connection with any such plan, and (b) no
reportable event described in Sections 4042(a) or 4043(b) of ERISA with respect
to any such plan has occurred.

 

5.12.       Insurance: All policies of insurance of any kind or nature of any
Borrower, including policies of fire, theft, product liability, public
liability, property damage, other casualty, employee fidelity, workers’
compensation and employee health and welfare insurance, if and as applicable,
are in full force and effect as of the date of this Agreement and are of a
nature and provide such coverage as is customarily carried by businesses of the
size and character of Borrower. Borrower has not been refused insurance for any
material coverage for which it has applied or has had any policy of insurance
terminated (other than at Borrower’s request).

 

5.13.       Taxes: Borrower has timely filed or requested appropriate extensions
(or caused to be timely filed or extended) all federal, state and other tax
returns, reports and statements (collectively, “Tax Returns”) that are required
to be filed by Borrower with the appropriate governmental authorities in all
jurisdictions in which such Tax Returns are required to be filed; all such Tax
Returns are true and correct in all material respects; Borrower has timely paid,
prior to the date on which any fine, penalty, interest, late charge or loss may
be added thereto for non-payment thereof, all taxes shown to be due and payable
on said Tax Returns or on any assessments made against Borrower or any of
Borrower’s properties or assets, and all other taxes, fees or other charges
imposed on Borrower or any of Borrower’s properties or assets by or otherwise
due and payable to any governmental authority (other than any for which the
amount or validity of which are currently being contested in good faith by
appropriate proceedings); and no tax lien has been filed against the property or
assets of Borrower and, to Borrower’s knowledge, no claim is being asserted,
with respect to any such tax, fee or other charge. No Tax Return is under audit
or examination by any governmental authority and no notice of such an audit or
examination or any assertion of any claim for taxes has been given or made by
any governmental authority. Proper and accurate amounts have been withheld by
Borrower (if and to the extent any such withholdings are so required) for all
periods in full and complete compliance with the tax, social security, health
care and unemployment withholding provisions of applicable governmental
requirements, and such withholdings (if any) have been timely paid to the
respective governmental authorities. Borrower (i) does not intend to treat the
Loan or any other transaction contemplated hereby as being a “reportable
transaction” (within the meaning of Treasury Regulation 1.6011-4), and (ii) is
not aware of any facts or events that would result in such treatment. Due to
Borrower’s date of organization, Borrower has not yet filed any Tax Returns.

 

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5.14.       Margin Regulations: No part of the proceeds of the Loan shall be
used for buying or “carrying” any “margin stock” within the respective meanings
of each of the quoted terms under Regulation U (as defined within the applicable
governmental requirements promulgated by the applicable governmental authorities
from time to time) as now and from time to time hereafter in effect or for any
purpose that violates the provisions of any governmental authority. If requested
by Lender, Borrower shall furnish to Lender a statement to the foregoing effect
in conformity with the requirements of FR Form G-3 or FR Form U-1, as
applicable, referred to in Regulation U.

 

5.15.       Investment Company Act: Borrower is not an “investment company”, or
a company “controlled” by an “investment company”, within the meaning of the
Investment Company Act of 1940, as amended. Borrower is not subject to
regulation under any governmental requirement which limits its ability to incur
Indebtedness, other than Regulation X (as defined within the applicable
governmental requirements promulgated by the applicable governmental authorities
from time to time).

 

5.16.       Patriot Act: Borrower and its affiliates are in compliance, in all
material respects, with the Patriot Act. No part of the proceeds of the Loan
shall be used, directly or indirectly, for any payments to any (i) governmental
authority’s officials or employees, (ii) political party, (ii) official of any
political party, (iv) candidate for political office, or (v) anyone other person
acting in an official capacity, in order to obtain, retain or direct business or
obtain any improper advantage, in violation of the United States Foreign Corrupt
Practices Act of 1977, as amended.

 

5.17.       OFAC: None of Borrower or any affiliate of any Borrower: (a) is a
sanctioned person; (b) owns assets in sanctioned entities; or (c) derives any of
its operating income from investments in, or transactions with sanctioned
persons or sanctioned entities. None of the proceeds of any Loan shall be used
or have been used to fund any operations in, finance any investments or
activities in, or make any payments to, a sanctioned person or a sanctioned
entity.

 

5.18.       No Default: No Event of Default has occurred and is continuing.

 

5.19.       Adverse Circumstances: To Borrower’s knowledge, neither the business
nor any property or asset of any Borrower is presently affected by any fire,
explosion, accident, strike, lockout, or other dispute, embargo, act of God, act
of public enemy or terrorism, or similar event or circumstance, nor has any
other event or circumstance relating to any Borrower's business, affairs,
properties or assets occurred, any of which could have a material adverse effect
on Borrower.

 

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5.20.       Accuracy of Information: To Borrower's knowledge, all factual
information provided to Lender in connection with the Loan evidenced by the Note
is and shall be true, accurate and complete in all material respects on the date
as of which such information was delivered to Lender and was not and shall not
be incomplete by the omission of any material fact necessary to make such
information not misleading, provided that, with respect to projected financial
information, prospect information, geological and geophysical data and
engineering projections, Borrower only represents that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time.

 

5.21.       Environmental: To Borrower’s knowledge, the conduct of Borrower's
business operations and the condition of Borrower's properties or assets owned,
operated or managed by Borrower does not violate any Environmental Law (as
defined in the HSIA between Borrower and Lender of even date herewith). Borrower
has not received notice of, nor, to Borrower’s knowledge are there presently
existing, any judicial, administrative, arbitral or other proceeding (including
any notice of violation or alleged violation) under or relating to any
Environmental Law or any environmental permit to which any Borrower is, or to
Borrower’s knowledge, shall be, named as a party that is pending or, to any
Borrower’s knowledge, threatened. Borrower has not received any written request
for information, or been notified that any Borrower is a potentially responsible
party under or relating to any Environmental Law. Borrower has not entered into
or agreed to any consent decree, order, or settlement or other agreement or
undertaking, and Borrower is not subject to any judgment, decree, or order or
other agreement, in any judicial, administrative, arbitral or other forum for
dispute resolution, relating to compliance with or liability under any
Environmental Law. Borrower has not assumed or retained, by contract, operation
of law or otherwise, any liabilities of any kind, fixed or contingent, known or
unknown, under any Environmental Law. Borrower has made available to Lender
copies of all significant reports, correspondence and other documents, if any,
in its possession, custody or control regarding compliance by Borrower with, or
potential liability of Borrower under, Environmental Laws or environmental
permits.

 

5.22.       Compliance with Laws: To Borrower’s knowledge, Borrower is presently
in compliance in all material respects with all applicable governmental
requirements to which Borrower, or any of Borrower's assets or properties, is
subject, except where the failure to so comply could not reasonably be expected
to have a material adverse effect on Borrower.

 

5.23.       Solvency; Compliance with Financial Covenants: Borrower is, and
after giving effect to the incurrence of all Indebtedness and obligations being
incurred in connection herewith shall be and shall continue to be, solvent.

 

5.24.       Availability of Utility Service: All utility services necessary for
the maintenance and use of the Mortgaged Property are or will be available to
the Mortgaged Property, including water supply, storm and sanitary sewer
facilities, electric and gas utilities and cable television lines.

 

5.25.       No Commencement of Work: Prior to recordation of the Mortgage, no
work of any kind incident to the Development (other than design and engineering
work) shall have commenced, no equipment or material shall have been delivered
to or stored upon the Mortgaged Property for any purpose whatsoever, and no
contracts (or memorandum or affidavit thereof) for the supplying of labor or
materials for the Development nor affidavit of commencement of construction
shall have been recorded in the real property records of the county in which the
Mortgaged Property is located.

 

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5.26.       Continuation of Representations and Warranties; Borrower’s
Knowledge: All representations and warranties made under this Agreement shall be
deemed to be made at and as of the closing date and each funding date. Whenever
used in this Agreement, the phrase “to Borrower’s knowledge” means to the actual
knowledge of Borrower’s President as of the Effective Date, without independent
inquiry and without review of any files.

 

6.       BORROWER’S AFFIRMATIVE COVENANTS: Until payment in full of the Note and
performance of all obligations owing to Lender under this Agreement and the
instruments executed pursuant hereto, unless the Lender shall otherwise consent
in writing, Borrower agrees to perform or cause to be performed the following:

 

6.1.       Performance of Obligations: Borrower will promptly and punctually
perform all of the obligations hereunder, and under all other instruments
executed or delivered pursuant thereto and under the terms of any other contract
or agreement entered into by the Borrower in connection with the Development.

 

6.2.       Financial Information: Borrower will maintain adequate and accurate
books and records of account. Lender shall have the right to examine and copy
such books and records, including all books and records relating to the
Development, to discuss the affairs, finances and accounts of Borrower and to be
informed as to the same from time to time as Lender might reasonably request.
Borrower will provide Lender with: (a) quarterly unaudited and without footnotes
financial statements within sixty (60) days of each quarter end, beginning with
the quarter ending October 31, 2020; and (b) annual unaudited and without
footnotes financial statements within one hundred twenty (120) days of fiscal
year end. All financial information provided to Lender will be in form and
content acceptable to Lender in its sole discretion.

 

6.3.       Notification of Liens: Other than items identified in the title
policy required hereunder, Borrower will notify Lender of the existence or
asserted existence of any mortgages, pledge, lien, charge or encumbrance on the
Mortgaged Property, personal or real, tangible or intangible, forthwith upon
Borrower’s obtaining knowledge thereof, excluding only: (a) encumbrances in
favor of Lender; (b) deposits to secure payment of worker’s compensation,
unemployment insurance and similar benefits; (c) statutory liens arising in the
ordinary course of Borrower’s business which secure current obligations of
Borrower which are not in default.

 

6.4.       Payment of Taxes: All taxes, assessments and governmental charges or
levies imposed on the Borrower or on Borrower’s assets, income or profits, will
be paid prior to delinquency. Notwithstanding the foregoing, the Borrower shall
not be required to pay any tax, assessment, charge or levy which is being
contested in good faith by proper proceedings; provided, however, at any time
after a tax lien, of any type, is filed or notice thereof is received, upon
request of Lender, Borrower shall deposit with Lender the amount so contested
and unpaid together with all interest that may or might be assessed or be a
charge on the Mortgaged Property or any part thereof.

 

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6.5.       Lender’s Access: Upon one (1) business day’s written notice, Borrower
will, during normal business hours and as often as Lender may reasonably request
but not exceeding once per month during the term of this Agreement so long as
Borrower is not in default hereunder, permit any of Lender’s officers or any
authorized representatives of Lender to visit and inspect the Development, to
enter upon the Mortgaged Property, to inspect the Development progress thereof
and all materials to be used in the Development, and to examine the current
plans and specifications.

 

6.6.       Compliance with Laws: Borrower will comply with all statutes, laws,
rules and regulations in all material respects to which the Borrower is subject
or by which its properties are bound or affected, including, without limitation,
(a) ERISA; (b) those pertaining or relating to environmental standards and
controls; (c) those pertaining to occupational health and safety standards (d)
those pertaining to equal employment and credit practices and civil rights, and
(e) those pertaining to the ownership, operation and use of the Development.

 

6.7.       Maintenance: Borrower will maintain its existence, remain in good
standing in each jurisdiction in which it is required to be qualified or
licensed, maintain all franchises, permits, intellectual properties and licenses
necessary or useful in the operation of its business heretofore operated and as
to be operated as contemplated hereby, and Borrower will maintain or cause to be
maintained its properties in good and workable condition, repair, and
appearance, and protect the same from deterioration, other than normal wear and
tear, at all times.

 

6.8.       Further Assurances: Borrower will, from time to time, promptly cure
any defects or omissions in the execution and delivery of, or the compliance
with the Loan Documents, or the conditions described herein, including the
execution and delivery of additional documents reasonably requested by Lender.

 

6.9.       Events with Respect to ERISA: As soon as possible and in any event
within thirty (30) days after Borrower knows or has reason to know that any
reportable event described in Sections 4042(a) or 4043(b) of ERISA with respect
to any employee pension or other benefit plan or trust maintained by or related
to Borrower has occurred, or that PBGC has instituted or will institute
proceedings under ERISA to terminate any such plan, Borrower will deliver to
Lender (a) a certificate of an officer of Borrower setting forth details as to
such event and the action which Borrower proposes to take with respect thereto,
and (b) a copy of any notice delivered by PBGC evidencing its intent to
institute such proceedings. For all purposes of this covenant, Borrower shall be
deemed to have all knowledge or knowledge of all facts attributable to the plan
administrator of such plan under ERISA. Borrower will furnish to Lender (or
cause such plan administrator to furnish to Lender) the annual report for each
plan covered by ERISA maintained by or related to Borrower as filed with the
Secretary of Labor not later than ten (10) days after the receipt of a request
from Lender in writing for such report.

 

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6.10.       Other Notifications: Borrower will notify Lender as soon as
practicable, but in any event within five (5) business days after Borrower knows
or has reason to know that any of the following has occurred: (a) an Event of
Default; (b) any material adverse change in the nature of or property comprising
the Mortgaged Property; and (c) any change in the accounting practices and
procedures of Borrower, including a change in the financial conditions, business
or operations of Borrower.

 

6.11.       Compliance with Organizational Documents: Borrower shall timely
perform all of its responsibilities and obligations under the Borrower’s
Articles of Organization, Operating Agreement and any other documents now or
hereafter evidencing Borrower.

 

6.12.       Completion of Development: Borrower shall complete the work of the
Development on or before May 17, 2022.

 

6.13.       Regulatory Compliance: Borrower shall at all times cause the
Development to remain in full compliance with all required equity thresholds and
capital retention obligations set forth in Part 217 of Chapter II of title 12 of
the Code of Federal Regulations (HVCRE regulations) such that the Development
would not, in the determination of Lender need to be classified as High
Volatility Commercial Real Estate.

 

6.14.       Continuity of Construction: Borrower shall prosecute with diligence
and continuity the construction of the work and improvements and will not
suspend or cease construction for a period longer than thirty (30) days.
Borrower’s obligation under this provision shall be subject to exception due to
events of Force Majeure Delay. "Force Majeure Delay" shall mean a delay in
progress of construction due to weather, act of God, unavailability or shortage
of labor or materials, national emergency, fire or other casualty, natural
disaster, war, delays or actions of governmental authorities or utilities,
riots, acts of violence, labor strike, injunctions in connection with
litigation, or other cause which is not within the reasonable control of
Borrower. Force Majeure Delay does not include the failure to order and obtain
materials in a timely fashion for the continuous development of the Development
and does not include financial difficulties of the Borrower.

 

7.       BORROWER’S NEGATIVE COVENANTS: Until payment in full of the Loan and
unless Lender shall otherwise consent in writing, Borrower will not perform or
permit to be performed any of the following acts:

 

7.1.       Creation or Existence of Liens: Borrower shall not create, assume or
suffer to exist any mortgage, pledge, lien, charge or encumbrance on the
Mortgaged Property without the prior approval of Lender, excluding only: (a)
encumbrances in favor of the Lender; (b) deposits to secure payment of workmen’s
compensation, unemployment insurance and similar benefits; (c) statutory liens,
against which there are established reserves in accordance with generally
accepted accounting principles, and which arise in the ordinary course of
Borrower’s business and secure current obligations of Borrower which are not in
default; (d) liens for property taxes not yet due; and (e) such matters
reflected in the mortgagee policy of title insurance and in the Mortgage. Lender
understands and approves Borrower recording on the Mortgaged Property: (i) one
or more Final Plats (as defined below) of the Mortgaged Property which may
contain grants of easements, dedications of right-of-way and other encumbrances
necessary to create the subdivided Lots (as defined below); (ii) one or more
Supplemental Declarations of Covenants, Conditions and Restrictions bringing the
Mortgaged Property into the Lomas Encantadas Master Homeowners Association, Inc.
and Subsidiary Declarations associated therewith; and (iii) one or more Notices
of Levy in connection with the Lomas Encantadas Public Improvement District.

 

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7.2.       Transfer of Mortgaged Property: Borrower shall not sell, transfer or
convey all or any portion of the Mortgaged Property except as permitted by this
Agreement; and the Borrower shall not transfer, whether voluntarily or
involuntarily, sell or assign more than 50% of the ownership interest of
Borrower without the prior consent of Lender. If Borrower transfers, whether
voluntarily or involuntarily, sells or assigns any of the ownership interest of
Borrower, Borrower will give written notice to Lender of the percentage of
ownership interest transferred, sold or assigned and the parties to whom the
ownership interest was transferred, sold or assigned within ten (10) days of the
effective date of the transfer, sale or assignment.

 

7.3.       Use of Loan Proceeds: Borrower shall not use or permit any related
person, association or entity to use any funds advanced to Borrower under this
Agreement to (a) defray living expenses, (b) anticipate profit, or (c) defray
any other items not directly connected with the costs of the Development and
payable to unrelated third parties.

 

7.4.       Modification of Organizational Documents: Borrower shall not
participate in, suffer or permit the material amendment, modification,
restatement, cancellation or termination of any document now or hereafter
evidencing Borrower, including, without limitation, the Borrower’s Articles of
Organization or Operating Agreement, without the prior consent of Lender, which
consent will not be unreasonably withheld.

 

7.5.       Limitation on Distributions: Except as otherwise provided herein, and
if no Default or Event of Default has occurred and is continuing, Borrower may
make distributions of cash or property to its partners or otherwise make
distributions on the account of equity interests in the Borrower, provided,
however, that no such distribution would (a) cause Borrower to be in default of
any covenant contained herein or in the Loan Documents, or (b) cause Borrower’s
net equity investment in the Development, as determined by Lender, to be less
than fifteen percent (15%).

 

8.       ADMINISTRATION OF LOAN: NOTWITHSTANDING ANY LANGUAGE IN THIS AGREEMENT
SEEMINGLY TO THE CONTRARY, BORROWER SHALL NOT BE ENTITLED TO ANY DISBURSEMENT OF
LOAN PROCEEDS HEREUNDER UNLESS AND UNTIL BORROWER HAS SATISFIED ALL OF THE
CONDITIONS OF LENDING SET FORTH THIS AGREEMENT. LENDER SHALL MAKE DISBURSEMENTS
UNDER THE LOAN IN THE FOLLOWING MANNER:

 

8.1.       Purpose: The principal sum to be disbursed under the Note shall be
used only to pay development costs as shown in the Development Budget (the
“Development Costs”).

 

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8.2.       Compliance with Development Budget: Notwithstanding any language in
this Agreement seemingly to the contrary, all disbursements under this Agreement
and the Note shall be made in accordance with the Development Budget. Deviations
from the Development Budget must be approved in advance in writing by Lender,
which approval shall not be unreasonably withheld. The Development Budget will
be monitored monthly on a category-by-category basis. If Development Costs in an
individual category exceed the amount budgeted therefore (plus ten percent (10%)
thereof as contained in the contingency line item) in the Development Budget,
then Borrower shall pay from sources other than the Loan the entire excess,
unless a budgetary savings in the same or greater amount is realized in a
different category as reasonably determined by Lender.

 

8.3.       Request for Funds: Borrower shall deliver to Lender a request for
funds (a “Request for Funds”) stating the amount of disbursement requested under
the Note. The Request for Funds shall be made on the AIA form G702 Application
and Certificate for Payment, and as applicable, an AIA form G703 Continuation
Sheet and shall be delivered to Lender at least five (5) business days before
the requested date of disbursement, properly completed and signed by Borrower’s
contractor and reviewed by Huitt-Zollars, Inc. (the “Engineer/Inspector”). At
the option of Lender, all Requests for Funds shall be supported by copies of
bills or statements for all expenses for which a disbursement is requested.
Borrower agrees that Lender may disburse automatically from the Loan an amount
sufficient to pay each payment of interest required by the Note, on its due date
or any date thereafter as Lender may choose, provided that such payment of
interest has not been theretofore paid by Borrower.

 

8.4.       Information: The Request for Funds shall be accompanied by:

 

8.4.1.       a Development Budget spreadsheet detailing the requested
disbursement and remaining balance to fund;

 

8.4.2.       if Lender requires, a list of Hard Costs, broken down by
subcontractor, to be paid from the requested disbursement and copies of all
invoices for each Hard Cost item in excess of Five Thousand and No/100 Dollars
($5,000). “Hard Costs” are all of the costs for the visible improvements,
including without limitation grading, excavation, concrete, sidewalks, roads,
utilities, and landscaping;

 

8.4.3.       a list of Soft Costs to be paid from the requested disbursement and
copies of the invoices for each Soft Cost item in excess of Five Thousand and
No/100 Dollars ($5,000). “Soft Costs” are all costs that are not Hard Costs;

 

8.4.4.       copies of all current and pending change orders (AIA Form G701 or
equivalent);

 

8.4.5.       copies of executed conditional lien waivers from the general
contractor for the current disbursement. In cases where the general contractor
is owned/controlled by the Borrower, conditional lien waivers for the current
disbursement are required for each major subcontractor;

 

 13 

 

 

8.4.6.       copies of executed unconditional lien waivers from the general
contractor for previous disbursements. In cases where the general contractor is
owned/controlled by the Borrower, unconditional lien waivers for previous
disbursements are required for each major subcontractor;

 

8.4.7.       if requested by Lender, a report by the Engineer/Inspector which
shall specify the estimated percentage of completion of the Development,
together with detailed comments on the specific work performed since the date of
the last report rendered to Lender;

 

8.4.8.       an endorsement to the title insurance policy, extending the
effective date of the policy to the date of the endorsement, showing no liens of
record or additional encumbrances not acceptable to the Lender, and increasing
the effective amount of the coverage to the total amount outstanding under the
Note;

 

8.4.9.       unless provided with a previous Request for Funds, a copy of the
permit applicable to the work covered by the Request for Funds issued by the
City of Rio Rancho, New Mexico or other governmental authority; and

 

8.4.10.       Such other information as Lender may reasonably request.

 

8.5.       Lender’s Inspection: Lender shall engage the Engineer/Inspector, at
Borrower’s sole cost and expense, to review each Request for Funds and make an
examination of the Development for the benefit of Lender prior to Lender making
any advance. Regardless of inspections by the Engineer/Inspector or Lender’s
representatives, Lender shall have no responsibility, obligation or liability to
Borrower or any other individual or entity based on, arising from or relating to
any such inspections, and Borrower shall at all times have exclusive control
over work on the Development and sole responsibility for compliance with all
governmental, quasi-governmental and private laws, ordinances, rules,
regulations, codes, covenants, restrictions, easements and other matters which
control, burden, apply to or otherwise affect the Mortgaged Property and/or the
Development.

 

8.6.       Disbursements: The Lender shall, on the date the requested advance is
to be made or as soon thereafter as all conditions precedent to such advance
have been satisfactorily met in all material respects, deposit into an account
at Lender designated by Borrower such advance. Advances under the Note may, at
the option of the Lender, be recorded on the Note and/or by deposits to the
foregoing account, and such records shall be conclusive evidence of all advances
made under the Note. Notwithstanding the foregoing disbursement procedure, upon
the occurrence of an Event of Default (defined below), the Lender may, at its
discretion, until such Event of Default is cured or for so long as required by
the title company issuing the loan title insurance required hereunder, make
disbursements to itself for all sums payable by Borrower to Lender, make
disbursements to the appropriate taxing authority to pay all unpaid taxes, make
payments directly to insurers for all premiums due on insurance policies
required hereunder, and make all other disbursements to a title company escrow
account, and such title company will draw checks on such account for payment of
the items approved by Lender. Any expense incurred because of the disbursement
through a controlled title company escrow account shall be paid by Borrower.

 

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8.7.       Development Budget Overrun: In the event the Lender determines, at
any time, that the total cost of completing the Development free of liens and
encumbrances, other than those in favor of the Lender contemplated hereby will,
in the reasonable judgment of the Lender, exceed the available and undisbursed
balance of the loan described herein, the Lender may cease making advances
and/or require further security for the payment of the indebtedness evidenced by
the Note by requiring the Borrower to post additional collateral satisfactory to
Lender, and/or by requiring Borrower to make cash deposits with Lender to be
held in an account with Lender sufficient in amount to cover such estimated
excess cost of completing the Development. For the purpose of this paragraph,
the cost of completion shall be deemed to include, without limitation the
following: costs of labor and materials, site and off-site improvements, amounts
paid to contractors, landscaping, professional fees, taxes on the Mortgaged
Property, premiums for bonds, if any, survey costs, appraisal fees, recording
costs, interest on the Note, all amounts reimbursable to the Lender for
reasonable expenses incurred hereunder, and the costs of all items necessary to
the proper completion of the Development.

 

8.8.       Termination of Advances: At the option of the Lender, monthly
advances shall not be made unless: (a) the Loan Documents are in full force and
effect; and (b) an Event of Default does not exist and would not exist but for
the giving of notice or the passage of time under the terms of the Loan
Documents.

 

9.       [RESERVED]

 

10.       DEFAULT: The Events of Default listed in the Mortgage are incorporated
in this Agreement by reference and made a part of this Agreement and shall
constitute “Events of Default” hereunder and under each of the other Loan
Documents executed pursuant to this Agreement. In addition, the failure by
Guarantor to provide the financial statements required by the Guaranty within
thirty (30) days from the date of written notice from Lender or the failure by
Guarantor to maintain the net worth required by the Guaranty shall each be an
“Event of Default” under this Agreement and under each of the other Loan
Documents.

 

11.       REMEDIES: Upon the occurrence of an Event of Default and continuation
thereof and the failure by Borrower to cure such Event of Default after such
notice of the Event of Default and such opportunity to cure the Event of Default
as may be required by the Mortgage, Lender may, at its option:

 

11.1.       Acceleration of the Note: Declare the Note to be immediately due and
payable whereupon the Note shall become forthwith due and payable without
presentment, demand, protest or further notice of any kind, and the Lender shall
be entitled to proceed simultaneously or selectively and successively to enforce
its rights under the Note, this Agreement and any of the Loan Documents executed
pursuant to the terms hereof, or any note or all of them. Nothing contained
herein shall limit Lender’s rights and remedies available under applicable laws.

 

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11.2.       Selective Enforcement: In the event the Lender shall elect to
selectively and successively enforce its rights under any of the Loan Documents,
such action shall not be deemed a waiver or discharge of any other lien,
encumbrance or security instrument securing payment of the Note until such time
as the Lender shall have been paid in full all sums advanced under the Note. The
foreclosure of any lien provided pursuant to this Agreement without the
simultaneous foreclosure of all such liens shall not merge the liens granted
which are not foreclosed with any interest which the Lender might obtain as a
result of such elective and successive foreclosure.

 

12.       GENERAL PROVISIONS: Lender and Borrower further agree as follows:

 

12.1.       Expenses: Borrower agrees to pay all reasonable fees, expenses and
charges in respect to the Loan contemplated by this Agreement, including,
without limiting the generality thereof, the following: reasonable fees and
expenses of counsel employed by Lender in connection with drafting and
negotiating documents and closing of the Loan up to $4,000, plus New Mexico
Gross Receipts Tax, and all reasonable fees and expenses of counsel employed by
Lender in regard to any litigation arising out of or relating to this
transaction in which Lender is the prevailing party; title insurance premiums
and all expenses incidental to title insurance and title evidence; recording and
filing fees; reasonable fees and expenses of any appraiser who appraises the
Mortgaged Property for Lender limited, in the absence of an Event of Default, to
not more than twice during the term of the Loan; reasonable fees and expenses of
the environmental engineering firm which provides the required environmental
assessment report to Lender at the closing of the Loan up to a maximum of two
thousand dollars ($2,000.00) and any environmental assessment report required by
federal law; reasonable fees and expenses of the Engineer/Inspector in
connection with the construction phase of the Development; and other reasonable
fees and expenses involved in the closing of this loan and the reasonable fees
and expenses payable by Lender which are incidental to the enforcement or
defense of this Agreement or any of the other Loan Documents.

 

12.2.       Notices: Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally via a national
overnight delivery service or sent by registered or certified mail, postage
prepaid, return receipt requested and addressed as listed below or to such other
address as the party concerned may substitute by written notice to the other.
All notices shall be deemed received: (i) on the date of delivery if personally
delivered; (ii) on the day following timely deposit with an overnight delivery
service; or (iii) within three (3) days (excluding Saturdays, Sundays and
holidays recognized by national banking associations) after being mailed:

 

To Borrower: Lomas Encantadas Development Company, LLC   333 Rio Rancho Drive,
Suite 202   Rio Rancho, New Mexico 87124   Attention: Vice President     To
Lender: BOKF, NA dba Bank of Albuquerque   100 Sun Avenue NE, Suite 500  
Albuquerque, New Mexico 87109   Attention: Jordan Herrington, Sr. Vice President

 

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12.3.       Amendment and Waiver: This Agreement may not be amended or modified
in any way, except by an instrument in writing executed by both parties hereto;
provided, however, Lender may, in writing: (a) extend the time for performance
of any of the obligations of Borrower; (b) waive any Event of Default by
Borrower; and (c) waive the satisfaction of any condition that is precedent to
the performance of Lender’s obligations under this Agreement. In the event of
Lender’s waiver of an Event of Default, such specific Event of Default shall be
deemed to have been cured and not continuing, but no such waiver shall extend to
any subsequent or other Event of Default or impair any consequence of such
subsequent or other Event of Default.

 

12.4.       Non-Waiver; Cumulative Remedies: No failure on the part of Lender to
exercise and no delay in exercising any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any right
hereunder preclude any other or further right of exercise thereof. The remedies
herein provided are cumulative and not alternative.

 

12.5.       Assignment: Neither this Agreement, nor the loan proceeds hereunder,
shall be assignable by Borrower without the prior written consent of Lender.

 

12.6.       Applicable Law: THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT, AND ALL
MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN
CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW MEXICO,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. BORROWER AND LENDER HEREBY
CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
COUNTY OF SANDOVAL, STATE OF NEW MEXICO, AND IRREVOCABLY AGREE THAT ALL ACTIONS
OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER AND LENDER EXPRESSLY
SUBMIT AND CONSENT TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY
DEFENSE OF FORUM NON CONVENIENS.

 

12.7.       Descriptive Headings: The descriptive headings of the paragraphs of
this Agreement are for convenience only and shall not be used in the
construction of the terms hereof.

 

12.8.       Terms: As used in this Agreement the singular shall be deemed to
include the plural and the plural shall be deemed to include the singular.

 

12.9.       Integrated Agreement: THIS AGREEMENT AND OTHER LOAN DOCUMENTS EMBODY
THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO.

 

 17 

 

 

12.10.       Time of Essence: Time is of the essence of this Agreement.

 

12.11.       Binding Effect: This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, legal
representatives and assigns. The obligations of Borrower under this Agreement
are joint and several.

 

12.12.       Third Party Beneficiary: Nothing in this Agreement, express or
implied, is intended to confer upon any person other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.

 

12.13.       Right to Defend: Lender shall have the right, but not the
obligation, at Borrower’s expense, to commence, to appear in or to defend any
action or proceeding (initiated by a third party against Borrower) purporting to
affect the rights or duties of the parties hereunder and in connection therewith
pay out of the funds of the Loan all necessary expenses, including reasonable
fees of counsel, if Borrower fails to so commence, appear in or defend any such
action or proceeding with counsel satisfactory to Lender.

 

12.14.       Indemnification: Borrower agrees to indemnify, defend and hold
Lender harmless from and against any loss, cost or expense (including interest,
penalties, reasonable attorneys’ fees and amounts paid in settlement) caused by
Borrower’s negligence, breach or wrongful actions arising out of or based upon
the Loan Documents or the Loan, except and to the extent caused by Lender’s
negligence, breach, wrongful actions, gross negligence or willful misconduct.

 

12.15.       Waiver of Jury Trial. EACH OF BORROWER AND LENDER HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY. EACH OF BORROWER AND LENDER ACKNOWLEDGE
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP
THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS, AND THAT EACH SHALL CONTINUE TO RELY ON THIS WAIVER IN THEIR
RELATED FUTURE DEALINGS. EACH OF BORROWER AND LENDER WARRANT AND REPRESENT THAT
EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL,
AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

12.16.       Joint and Several Obligations. If Borrower consists of more than
one party, all representations, warranties, covenants, agreements and
undertakings of such parties under this Agreement shall be deemed joint and
several. Whenever the context requires, the representations, warranties,
liabilities, covenants, agreements and undertakings contained in this Agreement
shall be deemed to have been individually given by each of the parties
constituting Borrower.

 

 18 

 

 

13.       PARTIAL RELEASES. From time to time, after the recording of the Final
Plats (defined below) in the real property records of Sandoval County, New
Mexico until the Maturity Date (defined in the Note), Lender shall release one
or more Lots (defined below) from the lien of the Mortgage and from the UCC
Financing Statement as provided in this Agreement. A request for release (a
“Request”) must identify the Lot or Lots to be released and be made to Lender
not less than five (5) Business Days prior to the requested release date. A
“Business Day” is any day in which the Lender is open for business. The release
price (the “Release Price”) for each Lot shall be Forty-Four Thousand and No/100
Dollars ($44,000.00). The Release Price must be delivered to the Lender in
immediately available funds no later than 1:00 p.m. New Mexico time on the
requested release date. In addition, Borrower has received approval for one or
more preliminary plats for the Mortgaged Property from the City of Rio Rancho
(the “City”), which plats the Lender has previously reviewed and approved (the
“Lender Approved Preliminary Plats”) and which will become final plats (the
“Final Plats”). Borrower will not materially change the Lender Approved
Preliminary Plats without the prior written approval of Lender. Upon substantial
completion of the Lots, Borrower shall record one or more Final Plats for the
Mortgaged Property. Each Final Plat may contain land dedicated to the City or
other governmental entity. To the extent any Final Plat contains land dedicated,
granted or conveyed to a governmental entity, the Lender shall execute a partial
release with regard to such land without charge. As used in this Agreement, the
term “Lot” means a lot shown on the Lender Approved Preliminary Plats.
Notwithstanding anything to the contrary contained in this Agreement or in any
of the Loan Documents, Lender shall not be required or obligated to release any
Lot if an Event of Default Exists or would exist but for the giving of notice or
the lapse of time. Unless an Event of Default exists or would exist but for the
giving of notice of the passage of time, the Release Price shall be applied to
the outstanding principal balance of the Note.

 

14.       REAPPRAISAL. If, as determined in Lender’s reasonable discretion,
there has been a material deterioration in the value of the Mortgaged Property,
Lender shall be entitled, at the expense of Borrower, not more frequently than
once every twelve (12) months, to obtain a re-appraisal of the Mortgaged
Property. If such re-appraisal confirms a material deterioration in the value of
the Mortgaged Property compared with the value shown in the previous appraisal
on file with Lender, which deterioration causes Borrower to be in violation of
any covenants contained in the Loan Documents, Lender may, at Lender’s option,
require Borrower to make an additional payment of principal sufficient to bring
Borrower into compliance with such covenants.

 

15.       WAIVER OF SET-OFF. Lender hereby waives all rights of set-off Lender
has under New Mexico law or the Loan Documents against any and all deposits held
by Lender in the name of Borrower. Lender does not waive any other rights or
remedies of Lender under New Mexico law or the Loan Documents.

 

 

[SIGNATURES ON NEXT PAGE]

 

 19 

 

 

IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed
effective as of (but not necessarily on) the day and year first above written.

 

 “BORROWER”: LOMAS ENCANTADAS DEVELOPMENT COMPANY, LLC,   a New Mexico limited
liability company               By /s/ Carey A. Plant     Carey A. Plant, Vice
President             “LENDER”: BOKF, NA dba BANK OF ALBUQUERQUE              
By /s/ Jordan Herrington     Jordan Herrington, Senior Vice President

 

 

 

 

 

 

 

 

 20 

 

 

EXHIBIT “A”
Legal Description

 

Tract numbered Nine-A (9-A) of LOMAS ENCANTADAS UNIT 2-B PHASES I & II, as the
same is shown and designated on the Plat entitled, "LOMAS ENCANTADAS UNIT 2-B
PHASES I & II, A SUBDIVISION OF TRACT 9, UNIT TWENTY, WITHIN SECTION 26, T. 13
N., R. 3 E., N.M.P.M., CITY OF RIO RANCHO, SANDOVAL COUNTY, NEW MEXICO, AUGUST
2018", filed in the office of the County Clerk of Sandoval County, New Mexico on
October 17, 2018 in Vol. 3, folio 4303 (Rio Rancho Estates Plat Book No. 28,
Pages 30-33).

 

LESS AND EXCEPTING:

 

A certain Parcel of land located within Section 26, Township 13 North, Range 3
East, N.M.P.M., within a portion of Tract 9A as shown on the Subdivision Plat of
Lomas Encantadas Unit 2B Phase I & II in Unit Twenty Rio Rancho Estates recorded
in the Office of the County Clerk of Sandoval County on November 11, 2005 in
Volume 3, Folio 4339 (R.R.E. Book 28, Pages 30 - 33), Rio Rancho, Sandoval
County, New Mexico, said Parcel being more particularly described as follows:

 

Commencing at the Brass Cap NM44-R1B, from whence the Brass Cap NM44-R1A bears
S.52°35’50”E. 7580.63 feet; thence, S.05°26’59”W. 9686.35 feet to the Southwest
corner of the Plat of Lomas Encantadas Unit 2B Phase I & II as recorded in the
Office of the County Clerk of Sandoval County on January 17, 2019 in Volume 3,
Folio 4339 (R.R.E. Book 28, Pages 30 – 33) being the Point of Beginning of the
Parcel herein described; thence, N.46°43’44”E. along the west line of said Lomas
Encantadas Unit 2B Phase I & II, 1834.18; S. 43°16’15”E. 135.01 feet thence, S.
46°43’45”W. 20.00 feet; thence, S. 43°16’15”E. 210.30 feet to a point of
curvature; thence, Southeasterly 76.96 feet along a curve to the right (said
curve having a radius of 175.00 feet, a delta angle of 25°11’53” and a chord
which bears S.30°40’19”E., 76.34 feet) to a point of tangency; thence, S.
18°04’22”E. 21.11 feet to a point of curvature; thence, Southeasterly 98.95 feet
along a curve to the left (said curve having a radius of 225.00 feet, a delta
angle of 25°11’53” and a chord which bears S.30°40’19”E., 98.16 feet) to a point
of tangency; thence, S. 43°16’15”E. 26.92 feet to a point of curvature; thence,
Southeasterly 13.56 feet along a curve to the right (said curve having a radius
of 25.00 feet, a delta angle of 31°05’06” and a chord which bears S.27°43’43”E.,
13.40 feet) to a point of tangency; thence, S.12°11’10”E. 389.83 feet; thence,
S.09°56’25”W. 83.91 feet; thence, S. 23°18’20”E. 139.99 feet to a point on the
east line of said Lomas Encantadas Unit 2B Phase I & II; thence, S.66°41’39”W.
along the east line of said Lomas Encantadas Unit 2B Phase I & II, 124.60 feet;
thence, S. 73°14’31”W. continuing along the east line of said Lomas Encantadas
Unit 2B Phase I & II, 1151.51 feet to a point of curvature; thence,
Northwesterly continuing along the east line of said Lomas Encantadas Unit 2B
Phase I & II, 456.82 feet along a curve to the right (said curve having a radius
of 400.00 feet, a delta angle of 65°26’03” and a chord which bears
N.74°02’28”W., 432.39 feet) to a point of tangency; thence, N.41°19’26”W.
continuing along the east line of said Lomas Encantadas Unit 2B Phase I & II,
83.93 feet; thence, N.89°23’58”W. continuing along the east line of said Lomas
Encantadas Unit 2B Phase I & II, 112.89 feet to the Point of Beginning of the
Parcel of land herein described.