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EXHIBIT 10.16(a)
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L O A N A G R E E M E N T
Between
UNITED SAVINGS ASSOCIATION OF TEXAS FSB
and
NEWMARK HOME CORPORATION
$12,000,000.00 June 28, 1990
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TABLE OF CONTENTS
United Savings Association of Texas FSB
Page
ARTICLE 1 GENERAL TERMS
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Section 1.01 Terms Defined Above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 2 AMOUNT AND TERMS OF LOAN
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Section 2.01 The Loans and Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.02 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.03 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.04 Notice and Manner of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.05 Computation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.06 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.07 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.08 Term and Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.09 Termination of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.10 Payment Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.11 Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
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Section 3.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.02 Corporate Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.03 Binding Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.04 No Legal Bar or Resultant Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.05 No Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.06 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.07 Investments and Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.08 Liabilities; Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.09 Taxes; Governmental Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.10 Titles, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.11 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.12 Casualties; Taking of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.13 Use of Proceeds; Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.14 Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.15 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.16 No Material Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.17 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.18 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.19 Designated Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.21 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.22 Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.23 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.24 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.25 Streets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.26 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.27 No Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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Section 3.28 Affirmation of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.29 Advances and Income as Trust Fund and Fiduciary Property . . . . . . . . . . . . . . . . . 22
Section 3.30 No Financing of Corporate Takeovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.31 Location of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4 AFFIRMATIVE COVENANTS
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Section 4.01 Financial Statements and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.02 Annual Certificates of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.03 Quarterly Certificates of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.04 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.05 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.06 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.07 Performance of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.08 Reimbursement of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.09 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.10 Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.11 Inspection of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.12 Inspection of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.13 Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.14 ERISA Information and Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.15 Collateral Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.16 Down-Date Endorsements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.17 Compliance with Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.18 Correction of Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.19 Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.20 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.21 Compliance with Governmental Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.22 Construction Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.23 Conveyance and Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.24 Inspection Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.25 Sign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.26 Construction of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.27 Application of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.28 Borrower's Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.29 Notices by Governmental Authority; Fire and Casualty Losses, Etc. . . . . . . . . . . . . . 34
Section 4.30 Joint Disbursement and Application by Lender . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.31 Deed of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.32 Flood Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.33 Substantial Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.34 Easements, Encumbrances, Liens and Restrictive Covenants . . . . . . . . . . . . . . . . . 35
Section 4.35 Continued Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.36 Continued Viability of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.37 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.38 Ownership and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.39 Indemnification of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.40 Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.41 Tax and Insurance Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.42 Sales and Operations Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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Section 4.43 Maintenance, Repair and Operation of Units . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.44 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.45 Performance of Designated Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.46 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.47 Streets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.48 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.49 Environmental Cleanup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 5 NEGATIVE COVENANTS
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Section 5.01 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.02 Investments, Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.03 Dividends, Distributions and Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.04 Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.05 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.06 Limitation on Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.07 Mergers, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.08 Proceeds of Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.09 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.10 Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.11 Capital Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.13 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.14 Ratio of Total Liabilities to Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.15 Preservation of Designated Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 6 EVENTS OF DEFAULT
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Section 6.01 Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.03 Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.04 Rights Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 7 CONDITIONS OF LENDING
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Section 7.01 Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.02 All Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.03 Funding of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.04 Limitation on Speculative Starts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.05 Limitation on Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.06 Certain Recordings and Documents After Closing . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.07 Application of Interim Construction Loan Proceeds . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8 PARTIAL RELEASES
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Section 8.01 Conditions to and Procedures for Partial Release . . . . . . . . . . . . . . . . . . . . . 59
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ARTICLE 9 MISCELLANEOUS
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Section 9.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.02 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.03 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.04 Survival of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.06 Renewal, Extension or Rearrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.07 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.08 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.09 Singular and Plural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.10 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.11 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.12 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.13 Taxes, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.14 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.15 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.16 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.17 Titles of Articles, Sections and Subsections . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.18 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.19 Trust Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.20 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.21 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
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LIST OF EXHIBITS
United Savings Association of Texas FSB
EXHIBIT "A" Affidavit
EXHIBIT "B" Budget
EXHIBIT "C" Borrowing Request
EXHIBIT "D" Survey Requirements
EXHIBIT "E" Master Form of Deed of Trust
EXHIBIT "F" Line of Credit Note
EXHIBIT "G" Security Agreement
EXHIBIT "H" Supplemental Deed of Trust
EXHIBIT "I" Schedule of Disclosures
EXHIBIT "J" Form of Compliance Certificate
EXHIBIT "K" Construction Draw Request
EXHIBIT "L" Affidavit of Bills Paid
EXHIBIT "M" Partial Release of Lien
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LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of this 26th day of
June, 1990 between NEWMARK HOME CORPORATION, a Texas corporation with principal
offices at 00000 Xxxxxxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxx 00000, ("Borrower");
and UNITED SAVINGS ASSOCIATION OF TEXAS FSB, with principal offices at 0000
Xxxxxxxxx Xxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 (the "Lender").
WHEREAS, Lender, for the consideration hereinafter set forth and
subject to the terms and conditions herein stated, hereby commits and agrees to
make loans to Borrower totaling, in the aggregate, an amount not to exceed
TWELVE MILLION AND N0/100 DOLLARS ($12,000,000.00). Such loans shall be
secured by the Premises, as hereinafter defined; and
WHEREAS, the loans are to be used by Borrower to finance the
acquisition of the Land, as hereinafter defined, and the construction of
single-family residences thereon in accordance with plans and specifications
and a cost breakdown submitted to and approved by Lender; and
WHEREAS, the loans shall be evidenced by a promissory note to be
executed by Borrower and delivered to Lender, deeds of trust and security
agreements securing the payment thereof, financing statements perfecting the
security interests created in such deeds of trust and security agreements, and
such other documents as set forth in this Agreement or as required by Lender;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and of the loans and commitment hereinafter
referred to, the Borrower and the Lender agree as follows:
ARTICLE I
GENERAL TERMS
Section 1.01 Terms Defined Above. As used in this Loan Agreement,
the terms "Borrower" and "Lender" shall have the meanings indicated above.
Section 1.02 Certain Definitions. As used in this Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
"Advance" shall mean a disbursement by Lender to or for the benefit of
Borrower of any of the proceeds of the Note.
"Affidavit" shall mean that certain Borrower's loan purpose affidavit
executed in connection with each Interim Construction Loan, a pro forma copy of
which is attached hereto as Exhibit "A."
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"Affiliate" shall mean a Person, directly or indirectly, through one
or more intermediaries, controlling, controlled by or under common control with
the Person in question, which, in the case of a Person which is a partnership,
shall include each of the constituent partners thereof. The term "control", as
used in the immediately preceding sentence, shall mean, with respect to a
Person that is a corporation, the right to the exercise, directly or
indirectly, of more than ten percent (10%) of the voting rights attributable to
the shares of the controlled corporation, including without limitation, the
voting power for the election of the directors of such Person or the direct
management or policies of such Person, whether through the ownership of voting
securities, by contract or otherwise, and, with respect to a Person that is not
a corporation, the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of the controlled Person.
Affiliate shall also mean a Person who is related to the Person in question.
The term "related to" in the immediately preceding sentence shall mean a
relation of immediate family including father, mother, brother, sister, son,
daughter, or any such relation created by the occurrence of marriage by any
such Persons.
"Agreement" shall mean this Loan Agreement, as the same may from time
to time be amended or supplemented.
"Appraisal" shall mean, with respect to each Unit, an appraisal, to be
prepared at the sole cost and expense of the Borrower, in form and substance
satisfactory to the Lender stating the anticipated appraised value of such Unit
upon Substantial Completion of a Residence constructed thereon, and the
appraised value of the Lot prior to commencement of construction thereon, such
appraisal to be prepared by an appraiser approved by Lender who is a member of
the American Institute of Real Estate Appraisers or, in the event such Unit is
to be financed by a loan insured by the FHA or guaranteed by the VA, by an
appraiser employed or selected by such administration for which the financing
is being requested. In addition, the Lender shall have the right, at any time
and from time to time, to appoint another appraiser of its choice to inspect,
at the sole cost and expense of the Borrower, any Unit and the Improvements
thereon and to render his appraisal of such Unit and Improvements. In the event
the Lender so elects, the appraisal rendered by such appraiser shall be the
"Appraisal" hereunder for all purposes, including, without limitation,
determination of the Maximum Loan Amount of any Interim Construction Loan.
"Appraised Value" shall mean, with respect to each Unit, an amount
equal to the Appraisal.
"Borrower's Deposit" shall mean such cash sums as Lender may
reasonably deem necessary in accordance with Section 4.28 hereof.
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"Borrowing Request" shall mean a request for an Advance pursuant to
Section 2.01 hereof containing all information set forth in and to be
substantially in the form of Exhibit "C" attached hereto.
"Budget" shall mean the detailed budget in form as attached hereto as
Exhibit "B" or in such other form as shall be acceptable to Lender, prepared by
Borrower in connection with any Interim Construction Loan reflecting the cost
of acquisition, construction and operation of the portion of the Premises
covered thereby which shall not have been changed or modified without the prior
written consent of Lender.
"Business Day" shall mean a day other than a Saturday, Sunday or legal
holiday for federally insured depository institutions under the laws of the
United States of America.
"CMSA" shall mean Consolidated Metropolitan Statistical Area.
"Commitment" shall mean the obligation of the Lender to make Advances
to the Borrower under Section 2.01 hereof, up to the maximum amount therein
stated.
"Completion Date" shall mean, (i) with respect to each Presale and the
Interim Construction Loan in connection therewith, one hundred eighty (180)
days from the date of the initial Advance under such Interim Construction Loan,
(ii) with respect to each Speculative Sale and the Interim Construction Loan in
connection therewith, two hundred seventy (270) days from the date of the
initial Advance under such Interim Construction Loan, and (iii) with respect to
each Model and the Interim Construction Loan in connection therewith, three
hundred sixty (360) days from the date of the initial Advance under such
Interim Construction Loan.
"Construction Contracts" shall mean the contracts between Borrower and
any contractor or subcontractor relating to rendering of services or furnishing
of materials in connection with the construction of all or any portion of the
Improvements, contracts between any general contractor and any subcontractor,
and contracts between any of the foregoing and any other Person or entity
relating to rendering of services or furnishing of materials in connection with
the construction of the Improvements. All of the foregoing contracts shall be
subject to the prior written approval of Lender.
"Current Survey" shall mean a slab survey of a Lot made by a duly
licensed surveyor or civil engineer satisfactory to Lender containing the
information and meeting all of the requirements as set forth in Exhibit "D",
attached hereto.
"Debt" shall mean, for any Person, without duplication: (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of Property or services for which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which such
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Person otherwise assures a creditor against loss; (ii) all obligations under
leases which shall have been, or should have been, in accordance with generally
accepted accounting principles in effect on the date of this Agreement,
recorded as capital leases in respect of which such Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in respect of
which obligations such Person otherwise assures a creditor against loss, and
(iii) unfunded vested benefits under each Plan.
"Deeds of Trust" shall mean the Master Form of Deed of Trust, any and
all Supplemental Deeds of Trust and any one or more other deeds of trust and
security agreements, whether now or hereafter executed, covering one or more
Units and securing the Indebtedness, duly executed by Borrower and such others
(if any) as shall be required to create in favor of Lender, first priority
Liens upon and security interests in all of the Units, and any and all
supplements, modifications, amendments, and/or extensions thereof.
"Default" shall mean the occurrence of any of the events specified in
Section 6.01 hereof, whether or not any requirement for notice or lapse of time
or other condition precedent has been satisfied.
"Designated Contract" shall mean each agreement (whether one or more)
referred to in Section 3.19 hereof.
"Drawdown Termination Date" shall mean June 28, 1991.
"Environmental Complaint" means any complaint, order, citation or
notice by any Person asserting that the Borrower, or any Property of it, is in
violation of or does not comply with any Environmental Law.
"Environmental Laws" means: (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C.A. 9601 et. seq.
("CERCLA"), (ii) the Resource Conservation and Recovery Act, as amended by the
Hazardous and Solid Waste Amendment of 1984, 42 U.S.C.A. 6901 et. seq.
("RCRA"), (iii) the Clean Air Act, 42 U.S.C.A. 7401 et. seq., (iv) the Clean
Water Act of 1977, 33 U.S.C.A. 1251 et. seq., (v) the Toxic Substances Control
Act, 15 U.S.C.A. 2601 et. seq., (vi) the Safe Drinking Water Act, 42 U.S.C.
300(f) et. seq. ; (vii) the Refuse Act, 33 U.S.C. 407 et. seq., (viii) the
Texas Solid waste Disposal Act, Tex. Health and Safety Code, section 361.001
et. seq.; (ix) the Texas Clean Air Act, Tex. Health and Safety Code, Section
382.001 et. seq., (x) the regulations promulgated pursuant to the aforesaid
laws, or any of them, and (xi) all other federal, state or local laws,
ordinances, orders, rules or regulations, new or hereafter existing, that
directly and/or indirectly related to air pollution, water pollution, noise
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control, and/or the presence, storage, escape, seepage, leakage, emission,
release, use, spillage, generation, transportation, handling, discharge,
disposal, or recovery of on-site or off-site hazardous or toxic substances,
wastes or materials and/or underground storage tanks, and as each and any of
the foregoing laws, ordinances, orders, rules or regulations may be amended or
enacted from time to time.
"Environmental Liability" means any claim, demand, obligation, cause
of action, accusation, allegation, order, violation, damage, injury, judgment,
injunction, penalty or fine, cost of enforcement, cost of cleanup, removal,
encapsulation or other remedial action, or any other cost or expense
whatsoever, including, without limitation, reasonable attorneys' fees and
disbursements, resulting from the violation or alleged violation of any
Environmental Law or the existence of Hazardous Material, the imposition of any
Environmental Lien.
"Environmental Lien" means a Lien (as hereinafter defined) in favor of
any Person arising as a result of or securing (i) any liability under an
Environmental Law, or (ii) damages arising from or costs incurred by any Person
in response to any actual or threatened Hazardous Discharge.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which, together with the Borrower, would be treated as a single
employer under Section 4001 of ERISA.
"Event of Default" shall mean the occurrence of any of the events
specified in Section 6.01 hereof, provided that any requirement for notice or
lapse of time or any other condition precedent has been satisfied.
"Excepted Liens" shall mean the following, all of which must be
acceptable to the Lender in the Lender's sole discretion: (i) Liens for taxes,
assessments or other governmental charges or levies not yet due or which are
being contested in good faith by appropriate action; (ii) Liens in connection
with workmen's compensation, unemployment insurance or other social security,
old age pension or public liability obligations; (iii) legal or equitable
encumbrances deemed to exist by reason of negative pledge covenants (such as
that made in Section 5.02 hereof) and other covenants or undertakings of like
nature; and (iv) the outstanding Liens, easements, building lines,
restrictions, security interests and other matters (if any) approved in writing
by Lender relating to any of the Lots.
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"Financial Statements" shall mean the financial statement or
statements of the Borrower described or referred to in Section 3.06 hereof.
"Governmental Authority" includes the United States of America, the
state, county, city or any political subdivision in which all or any portion of
the Premises is located, and any court or political subdivision, agency,
department, commission, board, bureau or instrumentality having jurisdiction
over Borrower, Lender, all or any portion of the Premises or construction
thereon.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, rule, regulation, judgement, decree, injunction, franchise,
permit, certificate, license, authorization or other direction or requirement
now or hereafter existing (including, without limitation, any of the foregoing
which relate to environmental standards or controls, energy regulations and
occupational, safety and health standards or controls) of any (domestic or
foreign) federal, state, county, municipal or other government, department,
commission, board, court, agency or any other instrumentality of any of them,
which exercises jurisdiction over the Borrower or any of its Property.
"Hazardous Discharge" means the happening of any event involving the
presence, disposal, escape, seepage, leakage, emission, release, use, storage,
spillage, discharge, investigation, cleanup, removal or remediation of any
Hazardous Material which violates, or threatens to violate, any Environmental
Law.
"Hazardous Material" shall mean one or more of the following
substances:
(a) Those substances included within the definitions of "hazardous
substances", "hazardous materials", "toxic substances", or "solid waste" in any
one or more of the Environmental Laws, or the Hazardous Materials
Transportation Act (49 U.S.C. or in the regulations promulgated pursuant to
said law);
(b) Those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto);
(c) Such other substances, materials and wastes which are or
become regulated under applicable local, state, or federal law, or the United
States government, or which are classified as hazardous or toxic under federal,
state, or local laws, orders, ordinances, rules or regulations; and
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(d) Any material, waste, or substances which are: (i) asbestos,
(ii) polychlorinated biphenyls; (iii) a substance described in clause (a) of
the definition of "Hazardous Material"; (iv) explosives; (v) radioactive
materials; (vi) gasoline; (vii) petroleum; (viii) petroleum products, or (ix)
related or similar materials or substances.
"Highest Lawful Rate" shall mean the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Note or on other Indebtedness, as
the case may be, under laws applicable to the Lender which are presently in
effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"Impositions" shall mean all real estate and personal property taxes;
water, gas, sewer, electricity and other utility rates and charges; charges
imposed pursuant to any subdivision, planned unit development or condominium
declaration or restrictions; charges for any easement, license or agreement
maintained for the benefit of the Premises, and all other taxes, charges and
assessments and any interest, costs or penalties with respect thereto of any
kind and nature whatsoever which at any time prior to or after the execution
hereof may be assessed, levied or imposed upon all or any portion of the
Premises or the ownership, use, occupancy or enjoyment thereof.
"Improvements" shall mean all Residences and any other improvements,
buildings, structures, equipment and amenities located on the Land and provided
for in the Plans.
"Indebtedness" shall mean any and all amounts owing or to be owing by
the Borrower to the Lender in connection with the Note or any Security
Instruments, including this Agreement, and all other liabilities of the
Borrower to the Lender from time to time existing, whether in connection with
this or other transactions, including without limitation, the Preclosing
Indebtedness referred to in Section 9.19 hereof.
"Insurance Policies" shall mean (a) owner's and contractor's policies
of comprehensive general public liability insurance, including worker's
compensation insurance; (b) hazard insurance against all risks of loss,
including collapse, in an amount not less than the full replacement cost of all
Improvements, including the cost of debris removal, with annual agreed amount
endorsement and sufficient at all times to prevent Borrower from becoming a co-
insurer, such insurance prior to completion of the Improvements to be in
builder's risk form on a nonreporting basis and including coverage for all
materials and equipment, wherever located, intended to be installed in or
utilized in the construction of the Improvements; (c) if any portion of
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the Premises is in a "Flood Hazard Area", a flood insurance policy, or binder
therefor, with respect to that portion of the Premises, in an amount equal to
the portion of the Maximum Loan Amount attributable to such portion of the
Premises or the maximum amount available under the Flood Disaster Protection
Act of 1973 and regulations issued pursuant thereto, as amended from time to
time, whichever is less, in form complying with the "insurance purchase
requirement" of that Act; and (d) such other insurance, if any, as Lender may
require from time to time including but not limited to rent and rental value
insurance (in the sum of rentals of a period specified by Lender, real estate
taxes, special assessments and utility charges, and premiums for all insurance
required to be paid for by Borrower or by tenants), broad form boiler and
machinery insurance on all equipment and objects customarily covered thereby if
there are pressure fired vehicles within any portion of the Premises, and
errors and omissions insurance for architects, engineers and other
professionals involved in the design or construction of any of the
Improvements; in addition, the term "Insurance Policies" shall mean insurance
policies issued and maintained in form, in amounts and by companies
satisfactory to Lender, containing a mortgage clause (without contribution) in
favor of Lender with loss proceeds payable to Lender as its interest may
appear, requiring not less than ten (10) days prior written notice to Lender of
any cancellation or change of coverage, and providing that no act of the
insured or any occupant, and no occupancy or use of any portion of the Premises
for purposes more hazardous than permitted by the terms of the policy, will
affect the validity or enforceability of the insurance as respects Lender.
"Interim Construction Loan" shall mean, with respect to each Unit, the
Advances made and to be made from time to time pursuant to the Commitment.
"Land" shall mean all of the Lots.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the lien or security interest arising from a mortgage, encumbrance,
pledge, Environmental Lien, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes. The term
"Lien" shall include reservations, exceptions, encroachments, easements, rights
of way, covenants, conditions, restrictions, leases and other title exceptions
and encumbrances affecting Property. For the purposes of this Agreement, the
Borrower shall be deemed to be the owner of any Property which it has acquired
or holds subject to a conditional sale agreement, financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
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"Lot" shall mean a fully developed single-family residential lot in a
subdivision, with respect to which all development and construction work has
been completed, (including completion of all public roadways necessary to
provide sufficient access to such Lot and completion of all water, sanitary and
storm sewer facilities in capacities sufficient for single-family residential
use) so that such Lot is ready and of sufficient size for a residence to be
constructed thereon or such other lots as Lender may approve from time to time.
"Margin Percentage" shall mean, with respect to the Note, the percent
per annum which is expressly enumerated in Section 2.02 hereof (before or after
maturity, as appropriate) to be added to the Prime Rate to determine (except as
may be limited by applicable law) the interest rate on the Note.
"Master Form of Deed of Trust" shall mean those certain Master Form of
Deeds of Trust and Security Agreement in the form of Exhibit "E", attached
hereto, and recorded in all counties wherein Lots subject to any Interim
Construction Loan are situated.
"Master Planned Communities" shall mean a planned development,
approved in writing by Lender, which contains within its boundaries
subdivisions and such amenities as shall be determined by Lender.
"Material Adverse Effect" shall mean any material and adverse effect
on (i) the assets, liabilities, financial condition, business, operations,
affairs or circumstances of the Borrower from those reflected in the Financial
Statements or from the facts represented or warranted in this Agreement or any
other Security Instrument, or (ii) the ability of the Borrower to carry out its
business as of the date of this Agreement or as proposed at the date of this
Agreement to be conducted or meet its obligations under the Note, this
Agreement or the other Security Instruments on a timely basis.
"Maximum Loan Amount" shall mean, with respect to each Interim
Construction Loan, in connection with a Unit in the Houston CMSA, an amount
equal to seventy percent (70%) of the lesser of (i) the Appraised Value of the
Unit(s) attributable to such Interim Construction Loan, or (ii) the Sales Price
of the Unit(s) attributable to such Interim Construction Loan and, with respect
to each Interim Construction Loan in connection with a Unit in the Austin CMSA,
an amount equal to sixty percent (60%) of the lesser of (i) the Appraised Value
of the Unit(s) attributable to such Interim Construction Loan, or (ii) the
Sales Price of the Unit(s) attributable to such Interim Construction Loan.
"Model" shall mean a Unit to be used by Borrower in promoting the sale
of other Units offered for sale by Borrower.
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"Note" shall mean the promissory note described in Section 2.01(a)
hereof, executed by Borrower payable to the order of Lender, in the form
attached hereto as Exhibit "F" and all duly authorized renewals, extensions,
modifications, increases, reinstatements and/or rearrangements thereof
expressly agreed to in writing by the Lender.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
Governmental Authority, or any body, authority, agency or political subdivision
thereof, or any other form of entity.
"Plan" shall mean any Plan subject to Title IV of ERISA and maintained
by the Borrower or any such plan to which the Borrower is required to
contribute on behalf of its employees.
"Plans" shall mean the final working drawings and specifications for
the construction of a Residence or Residences (including soil reports and
engineering calculations) prepared by architects and/or engineers and as
modified or supplemented from time to time and approved for each Interim
Construction Loan by Lender, Borrower, and, to the extent necessary, by each
Governmental Authority.
"Premises" shall mean the Land, the Improvements, all fixtures,
equipment, leases, rentals, and personal property of any kind or character now
or hereafter related to, situated on or used in connection with the Land or in
any improvements now or hereafter constructed thereon, and all related parts,
accessions and accessories thereto and all replacements or substitutions
therefor, as well as all other improvements, benefits and appurtenances now or
hereafter placed thereon or accruing thereto.
"Presale" shall mean a Unit for which Borrower has delivered to Lender
a contract for sale with a bona fide third party purchaser not an Affiliate of
Borrower (unless approved in writing by Lender).
"Prime Rate" shall mean the variable rate of interest per annum
established by Texas Commerce Bank National Association ("TCB") from time to
time as its prime rate which shall vary from time to time effective on the same
day as any changes of the announced prime rate of TCB. Such rate is set by TCB
as general rate of interest, taking into account such factors as TCB may deem
appropriate, it being understood that many of TCB's commercial or other loans
are priced in relation to such rate, that it is not necessarily the lowest or
best rate charged to any customer by TCB and that TCB or the Lender may make
various commercial or other loans at rates of interest having no relationship
to such rate.
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"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Release Parcel" shall have the meaning set forth in Section 8.01
hereof.
"Rents" shall mean all of the rents, revenues, income, proceeds,
royalties, profits and/or other benefits paid or payable for using, leasing,
licensing, possessing, operating from or in, residing in, selling, mining,
extracting or otherwise enjoying or using any Unit.
"Residence" shall mean any single-family dwelling constructed or to be
constructed on a Lot from the proceeds of any Interim Construction Loan.
"Sales Price" shall mean, with respect to each Unit, the price
therefor, initially established by Borrower prior to the initial Advance of an
Interim Construction Loan in connection with such Unit.
"Security Agreement" shall mean the Security Agreement duly executed
by Borrower and such others (if any) for the benefit of Lender in the form of
Exhibit "G", attached hereto.
"Security Instruments" shall mean this Agreement, the agreements or
instruments described or referred to in Section 4.15 or Subsection 7.01(e)
hereof, the Deeds of Trust, and any and all other agreements or instruments now
or hereafter executed and delivered by the Borrower, or any other Person (other
than participation or similar agreements between the Lender and any other bank
or creditor with respect to any Indebtedness pursuant to this Agreement) in
connection with, or as security for the payment or performance of, the Note or
this Agreement, as such agreements may be amended, modified, extended,
increased, reinstated, rearranged or supplemented from time to time.
"Speculative Start" shall mean a Unit which is not a Presale.
"Subdivisions" shall mean those certain parcels of lots or
subdivisions located in one or more CMSA's as shall be approved in writing from
time to time by Lender.
"Substantial Completion" shall mean completion of a Residence in
accordance with the Plans in the sole reasonable judgment of the Lender.
"Supplemental Deed of Trust" shall mean a supplemental deed of trust,
security agreement and financing statement substantially in the form attached
hereto as Exhibit "H" executed by the Borrower for the benefit of the Lender
whereby a Lot and the Improvements thereon or to be constructed
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thereon are made subject to the terms and provisions of the Master Form of Deed
of Trust and which creates in favor of Lender, a first priority Lien and
security interest in the Lot and Improvements thereon.
"Title Company" shall mean Xxxxxxx Title Company or such other title
company expressly approved by Lender in writing from time to time.
"Title Insurance Binder" shall mean one or more mortgagee title
insurance policies or binders, as Lender may require, issued in favor of Lender
by the Title Company if and as required by Lender in an amount equal to one
hundred percent (100%) of the amount of each Interim Construction Loan,
insuring or agreeing to insure Lender's Lien in such form as may be prescribed
by applicable Governmental Requirements and as shall be satisfactory to Lender,
certifying that good and indefeasible title to the Lot(s) relating to such
Interim Construction Loan is vested in Borrower, subject only to exceptions
acceptable to Lender, and required by state title insurance regulations.
"Unit" shall mean any Lot and the Residence located thereon covered by
an Interim Construction Loan.
Section 1.03 Accounting Principles. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with generally
accepted accounting principles applied on a basis consistent with those
reflected by the Financial Statements, except where such principles are
inconsistent with the requirements of this Agreement.
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ARTICLE 2
AMOUNT AND TERMS OF LOAN
Section 2.01 The Loans and Commitment.
(a) Subject to the terms and conditions and relying on
the representations and warranties contained in this Agreement and
except as hereinafter provided, the Lender agrees to make to Borrower
Interim Construction Loans in an aggregate principal amount (the
"Commitment Amount") up to but not exceeding at any one time the
lesser of (i) $12,000,000.00 or (ii) the aggregate sum of the Maximum
Loan Amount of all Interim Construction Loans. To evidence the Loans
made by the Lender pursuant to this Section 2.01, the Borrower will
issue, execute and deliver the Note payable to the order of Lender in
the principal amount of the Note, dated as of the date hereof and
payable on the Drawdown Termination Date. Accrued interest is due and
payable on the Note monthly, the first such payment being due and
payable August 1, 1990, and the remaining payments being due and
payable on the first (1st) day of each and every succeeding month
thereafter and at the maturity thereof.
(b) At such time as an Interim Construction Loan shall
have been paid in full and Lender's commitment, duties and obligations
thereunder have terminated, the amount of funds advanced thereunder
shall once again be available to Borrower pursuant to additional
Interim Construction Loans to be made in accordance with the terms and
provisions hereof; that is, the amount available to Borrower under the
Commitment shall increase and decrease in accordance with Advances and
principal repayments by Borrower. The amount of funds available under
the Commitment at any time shall be determined by subtracting the
Maximum Loan Amount of all then existing Interim Construction Loans
(regardless of whether all principal has been advanced thereunder)
from $12,000,000.00. The resulting figure shall be available for
additional Interim Construction Loans under the Commitment.
(c) Notwithstanding anything contained herein to the
contrary at no time during the term of this Agreement shall the sum of
the aggregate Maximum Loan Amount of all Interim Construction Loans
under the Commitment relating to Units located in the Austin CMSA
exceed $2,000,000.00; and notwithstanding anything contained herein to
the contrary, at no time shall the sum of the aggregate Maximum Loan
Amount of all Interim Construction Loans under the Commitment relating
to Units located in the Houston CMSA exceed $10,000,000.00; and
notwithstanding anything contained herein to the contrary, at no time
shall the sum of the aggregate Maximum Loan Amount of all Interim
Construction Loans under the Commitment exceed the Commitment Amount.
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(d) Subject to the foregoing and except as otherwise
herein provided, Borrower may, at any time until the termination of
the Commitment as set forth in Section 2.09 hereof, submit to Lender a
Borrowing Request requesting Lender to make under this Agreement one
or more Interim Construction Loans for the acquisition and
construction of any one or more Units. Such Borrowing Request shall
state the amount of the Interim Construction Loan requested and
identify Subdivision and the Lot or Lots to be acquired out of the
proceeds of such Interim Construction Loan and whether such Lot or
Lots and the Residence or Residences to be located thereon are
Presales or Speculative Starts. Such Borrowing Request shall be
accompanied with a Budget and Plans.
(e) All Interim Construction Loans closed under this
Agreement shall be subject to approval by Lender in accordance with
Lender's usual underwriting guidelines and procedures, consistently
applied, and shall conform in all respects to the rules and
regulations governing Lender as a federally chartered and insured
savings bank. Such underwriting guidelines shall include, but not be
limited to, a quarterly review of Borrower's total inventory of unsold
houses and financial statements.
(f) Notwithstanding Lender's approval of Borrower's
Borrowing Request, Borrower must satisfy all of the conditions
precedent to any Interim Construction Loan and all terms and
conditions set forth in this Agreement before Lender shall be
obligated to make any Interim Construction Loan, or any Advance
thereunder.
Section 2.02 Interest Rate. The Note shall bear interest from
the date thereof until maturity at a varying rate per annum which is one
percent (1%) per annum above the Prime Rate (but in no event to exceed the
Highest Lawful Rate). Past due principal and interest in respect of the Note
shall bear interest at a varying rate per annum which is 5% per annum above the
Prime Rate (but in no event to exceed the Highest Lawful Rate). Adjustments in
the varying interest rate shall be made on the same day as each change in the
Prime Rate and, to the extent allowed by law, on the effective date of any
change in the Highest Lawful Rate.
Section 2.03 Fees.
(a) On the date of execution hereof, Borrower shall pay
to Lender a commitment fee in the amount of one quarter of one percent
(.25%);
(b) On the date of the initial Advance of each Interim
Construction Loan made or to be made hereunder, Borrower shall pay to
Lender an origination fee in the amount of one quarter of one percent
(.25%) of the amount of such Interim Construction Loan;
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(c) With respect to each Interim Construction Loan, for
the period from the Completion Date and continuing through any portion
of the period through and including the ninetieth (90th) day
thereafter, the Borrower may elect to pay to the Lender on the
Completion Date, an extension fee of one-quarter of one percent (.25%)
of the Maximum Loan Amount of such Interim Construction Loan and upon
receipt thereof by the Lender the Completion Date with respect to such
Interim Construction Loan shall be extended ninety (90) days from the
date of the original Completion Date or ninety (90) days from the date
of any prior extension thereof, as applicable. Provided, however,
Borrower shall only be entitled to one such extension unless written
consent for additional extensions shall have been approved in writing
by Lender.
Section 2.04 Notice and Manner of Borrowing. The amount of each
Advance shall be designated by the Borrower's execution of a Borrowing Request
to be received by the Lender at least three but not more than ten (10) Business
Days prior to the date of such Advance, which date shall be a Business Day.
Each such Advance shall be made at the office of the Lender, and shall be
funded in immediately available funds.
Section 2.05 Computation. All payments of interest shall be
computed on the per annum basis of a year of three hundred sixty (360) days and
for the actual number of days (including the first day but excluding the last
day) elapsed unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the per annum basis of a year of three
hundred sixty-five (365) or three hundred sixty-six (366) days, as the case may
be.
Section 2.06 Voluntary Prepayments. The Borrower may at its
option prepay the principal amount of the Note outstanding hereunder at any
time in whole or from time to time in part (but no partial prepayment shall be
less than $10,000.00), without premium or fee upon giving the Lender at least
three (3) Business Days, prior notice of the aggregate principal amount to be
prepaid, and in the event of any such notice being given, the amount so
notified shall be due and payable on the day so notified, together with accrued
interest thereon to the date of prepayment.
Section 2.07 Mandatory Prepayments.
(a) If at any time the outstanding balance under any
Interim Construction Loan exceeds the Maximum Loan Amount, then the
Borrower shall forthwith prepay the amount of such excess for
application towards reduction of the outstanding principal balance of
the Note. Such prepayment shall be without premium or fee, and shall
be made together with the payment of accrued interest on the amount
prepaid.
(b) If, at any time, after the Completion Date of any
Interim Construction Loan, including any extension thereof there shall
remain any outstanding balance owing on such
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Interim Construction Loan, then the Borrower shall forthwith prepay
the amount of such excess for application towards reduction of the
outstanding principal balance of the Note. Such prepayment shall be
without premium or penalty, and shall be made together with the
payment of accrued interest on the amount prepaid.
Section 2.08 Term and Repayment. The entire unpaid principal
and accrued interest of each Interim Construction Loan shall be repaid on or
before the Completion Date.
Section 2.09 Termination of Commitment.
(a) The initial funding of Advances for all Interim
Construction Loans hereunder must take place no later than the
Drawdown Termination Date and this Commitment shall expire on said
date unless the parties hereto mutually agree in writing to extend the
Commitment.
(b) Notwithstanding anything contained herein to the
contrary, the commitment of Lender to make Advances under any Interim
Construction Loan shall terminate on the Drawdown Termination Date
and, unless the parties mutually agree in writing to extend the
Commitment, all unpaid principal and accrued interest shall be due and
payable in full. Notwithstanding termination of Lender's commitment
and obligations thereunder and hereunder, all duties and obligations
of Borrower under this Agreement and all other Security Instruments
shall continue in full force and effect until the full and final
payment of the Note and performance of all obligations in the Security
Instruments.
Section 2.10 Payment Procedure. All payments and prepayments
made by the Borrower under the Note or this Agreement shall be made to the
Lender at its offices described above in immediately available funds before
12:00 noon, Houston time, on the date that such payment is required to be made.
The Borrower hereby authorizes the Lender, if and to the extent payment or
prepayment is not made when due hereunder or under the Note or Security
Instruments, to charge from time to time against the Borrower's account with
the Lender any amount so due. Any payment received and accepted by the Lender
after such time shall be considered for all purposes (including the calculation
of interest, to the extent permitted by law) as having been made on the
Lender's next following Business Day.
Section 2.11 Business Days. If the date for any loan payment or
prepayment or extension fee payment hereunder falls on a day which is not a
Business Day, then for all purposes of the Note and this Agreement the same
shall be deemed to have fallen on the next following Business Day, and such
extension of time shall in such case be included in the computation of payments
of interest or extension fee, as the case may be.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement, the
Borrower represents and warrants to the Lender (which representations and
warranties will survive the delivery of the Note and the making of the Advances
thereunder and shall be continually in full force and effect throughout the
term of this Agreement and any extension or renewals hereof) that:
Section 3.01 Corporate Existence. The Borrower is a
corporation duly organized, legally existing and in good standing under the
laws of the State of Texas, and is duly qualified as a foreign corporation in
all jurisdictions wherein the Property owned or the business transacted by it
makes such qualification necessary.
Section 3.02 Corporate Power and Authorization. The
Borrower is duly authorized and empowered to create and issue the Note; and the
Borrower is duly authorized and empowered to execute, deliver and perform the
Security Instruments, including this Agreement, to which it is a party; and all
corporate action on the Borrower's part requisite for the due creation and
issuance of the Note and for the due execution, delivery and performance of the
Security Instruments, including this Agreement, to which the Borrower is a
party has been duly and effectively taken.
Section 3.03 Binding Indebtedness. This Agreement does, and the
Note and other Security Instruments to which the Borrower is a party upon their
creation, issuance, execution and delivery will, constitute valid and binding
obligations of the Borrower, enforceable in accordance with their terms (except
that enforcement may be subject to any applicable bankruptcy, insolvency or
similar laws generally affecting the enforcement of creditors' rights).
Section 3.04 No Legal Bar or Resultant Lien. The Note and the
Security Instruments, including this Agreement, to which the Borrower is a
party do not and will not violate any provisions of its articles or certificate
of incorporation, bylaws, or any contract, agreement, instrument or
Governmental Requirement to which the Borrower is subject, or result in the
creation or imposition of any Lien upon any Properties of the Borrower, other
than those permitted by this Agreement. Borrower's development, improvement and
sale of the Land and Improvements and any sale or lease of any portion thereof
by Borrower are and shall be exempt from the registration and reporting
requirements of the Interstate Land Sales Full Disclosure Act and regulations
thereunder, as amended from time to time.
Section 3.05 No Consent. The Borrower's execution, delivery
and performance of the Note and the Security Instruments, including this
Agreement, to which the Borrower is a party do not require the consent or
approval of any other Person which has not been obtained, including, without
limitation, any regulatory authority
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or governmental body of the United States of America or any state thereof or
any political subdivision of the United States of America or any state thereof.
Section 3.06 Financial Condition. The audited annual financial
statements of the Borrower for its fiscal year ended December 31, 1989, and the
unaudited interim financial statements of the Borrower for its fiscal quarter
ended March 31, 1990, (including any related schedules or notes) which have
been delivered to the Lender, have been prepared in accordance with generally
accepted accounting principles, consistently applied, and present fairly the
financial condition and changes in financial position of the Borrower as at the
date or dates and for the period or periods stated (subject only to normal
year-end audit adjustments with respect to such unaudited interim statements).
No change, either in any case or in the aggregate, has since occurred in the
condition, financial or otherwise, of the Borrower which would have a Material
Adverse Effect, except as disclosed to the Lender in Exhibit "I" hereto.
Section 3.07 Investments and Guaranties. At the date of this
Agreement, the Borrower has not made investments in, advances to or guaranties
of the obligations of any Person, except as reflected in the Financial
Statements or disclosed to the Lender in Exhibit "I" hereto.
Section 3.08 Liabilities; Litigation. Except for liabilities
incurred in the normal course of business, the Borrower does not have at the
date of this Agreement any material (individually or in the aggregate)
liabilities, direct or contingent, except as disclosed or referred to in the
Financial Statements or as disclosed to the Lender in Exhibit "I" hereto.
Except as disclosed to the Lender in Exhibit "I" hereto, at the date of this
Agreement there is no litigation, legal, administrative or arbitral proceeding,
investigation or other action of any nature pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower which involves the
possibility of any judgment or liability not fully covered by insurance, and
which would have a Material Adverse Effect. No unusual, extraordinary or
unduly burdensome restriction, restraint, or hazard exists by contract, law or
governmental regulation or otherwise relative to the business or Properties of
the Borrower, except as disclosed to the Lender in Exhibit "I" hereto.
Section 3.09 Taxes; Governmental Charges. The Borrower has
filed all tax returns and reports required to be filed and has paid all taxes,
assessments, fees and other governmental charges levied upon it or upon its
Properties or income which are due and payable, including interest and
penalties, or has provided adequate reserves for the payment thereof.
Section 3.10 Titles, etc.. The Borrower has good title to its
material (individually or in the aggregate) Properties, free and clear of all
Liens except (i) Liens referred to in the Financial Statements, (ii) Liens
disclosed to the Lender in
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Exhibit "I" thereto, (iii) Liens and minor irregularities in title which do not
materially interfere with the occupation, use and enjoyment by the Borrower of
its Properties in the normal course of business as presently conducted or
materially impair the value thereof for such business, or (iv) Liens otherwise
permitted or contemplated by this Agreement or the other Security Instruments.
In connection with any Interim Construction Loan, the Borrower is, or will be
subsequent to the initial Advance of such Interim Construction Loan, the legal
and equitable fee simple absolute owner of the Lot attributable thereto and all
Improvements thereon, subject only to title exceptions (specified in the Title
Insurance Policy) which are hereafter accepted by Lender.
Section 3.11 Defaults. The Borrower is not in Default nor
has any event or circumstance occurred which, but for the passage of time or
the giving of notice, or both, would constitute a Default under any loan or
credit agreement, indenture, mortgage, deed of trust, security agreement or
other agreement or instrument evidencing or pertaining to any Debt of the
Borrower, or any under any material agreement or instrument to which the
Borrower is a party or by which it is bound, except as disclosed to the Lender
in Exhibit "I" hereto. No Default or Event of Default hereunder has occurred
and is continuing.
Section 3.12 Casualties; Taking of Properties. Since the
date of the Financial Statements, neither the business nor the Properties of
the Borrower have been materially and adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any domestic or foreign
government or any agency thereof, riot, activities of armed forces or acts of
God or of any public enemy.
Section 3.13 Use of Proceeds; Margin Stock. The proceeds of the
Note will be used by the Borrower for the following purposes: Construction of
Residences in accordance with the terms and provisions hereof. None of such
proceeds will be used for the purpose of purchasing or carrying any "margin
stock" as defined in Regulation U of the Board of Governors of the Federal
Reserve System (12 C.F.R. Part 221), or for the purpose of reducing or retiring
any indebtedness which was originally incurred to purchase or carry a margin
stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation U. The Borrower is not
engaged principally, or as one of the Borrower's important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stocks. Neither the Borrower nor any Person acting on behalf of the Borrower
has taken or will take any action which might cause the Note or any of the
Security Instruments, including this Agreement, to violate Regulation U or any
other regulation of the Board of Governors of the Federal Reserve System or to
violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.
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Section 3.14 Compliance with the Law. The Borrower to its best
knowledge,
(a) is not in violation of any Governmental Requirement;
and
(b) has not failed to obtain any license, permit,
franchise or other governmental authorization necessary to the
ownership of any of its Properties or the conduct of its business;
which violation or failure would have (in the event such violation or failure
were asserted by any Person through appropriate action) a Material Adverse
Effect.
Section 3.15 ERISA.
(a) The Borrower and any ERISA Affiliate are in
compliance in all material respects with the applicable provisions of
ERISA, and no "reportable event," as such term, is defined in Section
4043 of ERISA, has occurred with respect to any Plan of the Borrower.
(b) Neither the Borrower nor any ERISA Affiliate has
incurred or expects to incur any withdrawal liability to any
multi-employer Plan.
(c) Neither the Borrower nor any ERISA Affiliate would be
liable for any amount pursuant to Section 4062, 4063 or 4064 of ERISA
if all Plans terminated as of the most recent valuation dates of such
Plans.
(d) No notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated under Section 4041 of ERISA.
(e) The Pension Benefit Guaranty Corporation (the "PBGC")
has not instituted proceedings to terminate, or appoint a trustee to
administer, a Plan and no event has occurred or condition exists which
might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Plan.
Section 3.16 No Material Misstatements. No information,
exhibit or report furnished to the Lender by the Borrower in connection with
the negotiation of this Agreement contained any material misstatement of fact
or omitted to state a material fact or any fact necessary to make the statement
contained therein not misleading.
Section 3.17 Investment Company Act. The 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.
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Section 3.18 Public Utility Holding Company Act. The
Borrower is not a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 3.19 Designated Contracts. If requested by Lender, the
Borrower has delivered to the Lender true and correct copies of all material
agreements, contracts and understandings, written or oral, between Borrower and
any other Person relating to the Premises, relating to Debts owed or Liens
granted by Borrower to any Person, and/or relating to any Properties of
Borrower. Such agreements have not been modified or terminated, and they are in
full force and effect as of the date hereof. Neither the Borrower nor any other
Person is in Default thereunder, except as disclosed to the Lender in Exhibit
"I" hereto.
Section 3.20 Environmental Matters. Except as disclosed on
Exhibit "I" attached hereto, the Borrower, (a) is unaware of and has not
received notice of, any actual or alleged Environmental Liability which would
individually or in the aggregate have a Material Adverse Effect arising in
connection with (i) any actual or alleged non-compliance with or violation of
the requirements of any Environmental Law or (ii) any actual, alleged, or
threatened Hazardous Discharge, (b) has no threatened or actual liability in
connection with any actual, alleged, or threatened Hazardous Discharge which
would individually or in the aggregate have a Material Adverse Effect, and (c)
is unaware of, and has not received notice of, any inspection, investigation or
evaluation concerning whether any remedial action is needed to respond to any
actual, alleged, or threatened Hazardous Discharge for which the Borrower is or
may be liable. All Property covered by the Security instruments is in
compliance with all Environmental Laws.
Section 3.21 Compliance. The Residences, when completed in
accordance with the Plans, and their intended uses, will comply with all
applicable laws, ordinances, regulations, restrictive covenants and
requirements of Governmental Authorities (including, without limitation,
building ordinances, health ordinances, handicap ordinances, zoning laws and
environmental regulations). Prior to commencement of construction of a
Residence, the Plans will have been approved by all Governmental Authorities
with jurisdiction over the Residences.
Section 3.22 Budget. Each Budget accurately reflects or will
accurately reflect all costs which will be incurred by Borrower in the
acquisition, construction and operation of the portion of the Premises covered
thereby through the maturity of the Note.
Section 3.23 Sufficient Funds. Sufficient funds are
available to Borrower in addition to proceeds of the Note to pay all Costs of
Construction of the Improvements.
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Section 3.24 Utilities. All utility services and permits
(including, without limitation, water and sewage permits) in such capacities as
are necessary for the construction of the Residences and the operation thereof
for their intended purpose are available at the boundary of each Lot, including
water supply, storm and sanitary sewer facilities, gas, electric and telephone
facilities.
Section 3.25 Streets. All streets, roads, and/or
highways necessary for the full utilization of any Residence for its intended
purpose has been completed or the necessary rights-of-way therefor have either
been acquired by the appropriate Governmental Authority or have been dedicated
to the public use and accepted by such Governmental Authority, and all
necessary steps have been taken by Borrower and any such Governmental Authority
to assure the complete construction and installation thereof prior to the
Substantial Completion for the applicable Residence.
Section 3.26 Permits. All zoning, utility, building,
health and operating permits (if any) required for the construction and
operation of each Residence have been obtained or shall be obtained prior to
the commencement of construction of such Residence and copies of same shall
have been delivered to Lender.
Section 3.27 No Work. No work or construction (including
the destruction or removal of any existing improvements, site work, clearing,
grubbing, draining or fencing of the Land) has been or will be commenced on the
Land which is the subject of the Interim Construction Loan, and no contract,
oral or written has been nor will be, executed for the construction of any
Residence, and no materials or supplies to be used in the construction of any
Residence have been delivered to the Land, and no contract or affidavit has
been nor will any contract or affidavit be, filed for record, which (with
respect to any of the foregoing) could result in the imposition of a mechanic's
or materialman's lien on any portion of the Land prior to or on parity with the
lien and security interest evidenced by any Deed of Trust.
Section 3.28 Affirmation of Representations and Warranties.
Receipt of each Advance and each Borrowing Request shall constitute an
affirmation that the representations and warranties of Borrower contained in
this Agreement are true and correct in all material respects as of the date
thereof and, unless Lender is notified in writing to the contrary before the
disbursement of any Advance, will be so on the date thereof.
Section 3.29 Advances and Income as Trust Funds and Fiduciary
Property. All Advances of loan proceeds made or to be made to Borrower and
all rents and other income from the Premises are to be held in trust by
Borrower and distributed and utilized pursuant to the terms of this Agreement.
Borrower agrees to and shall maintain standard of a fiduciary of Lender with
respect to each and every Advance and all income from the Premises, expressly
recognizing that breach of such fiduciary standard could result in a violation
of various federal and state, civil and criminal
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statutes, including, but not limited to, Chapter 32 of the Texas Penal Code and
Chapter 162 of the Texas Property Code.
Section 3.30 No Financing of Corporate Takeovers. No proceeds
of any Advance will be used to acquire any security in any transaction which is
subject to Sections 13 or 14 of the securities Exchange Act of 1934, including
particularly but without limitation Sections 13(d) and 14(d) thereof.
Section 3.31 Location of the Borrower. The Borrower's
principal place of business and chief executive offices are located at the
address stated in the opening recital of this Agreement.
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ARTICLE 4
AFFIRMATIVE COVENANTS
The Borrower will at all times comply with the covenants contained in
this Article 4, from the date hereof and for so long as any part of the
Indebtedness or the Commitment is outstanding.
Section 4.01 Financial Statements and Reports. The
Borrower will promptly furnish to the Lender from time to time upon request
such information regarding the business and affairs and financial condition of
the Borrower as the Lender may reasonably request, and will furnish to the
Lender:
(a) Annual Reports - promptly after becoming available
and in any event within ninety (90) days after the close of each
fiscal year of the Borrower, the audited balance sheet of the Borrower
as at the end of such year, the audited statement of profit and loss
of the Borrower for such year, and the audited statement of
reconciliation of capital accounts of the Borrower for such year,
setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, accompanied by the related
report of Ernst & Young or other independent public accountants
acceptable to the Lender which report shall be to the effect that such
statements have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the period
indicated except for such changes in such principles with which the
independent public accountants shall have concurred; and
(b) Quarterly Reports - promptly after becoming available
and in any event within forty-five (45) days after the end of each of
the first three quarterly periods in each fiscal year of the Borrower,
the balance sheet of the Borrower as at the end of such period, the
statement of profit and loss of the Borrower for such quarter and for
the period from the beginning of the fiscal year to the close of such
quarter, and the statement of reconciliation of capital accounts of
the Borrower for such quarter and for the period from the beginning of
the fiscal year to the close of such quarter, setting forth in each
case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, certified by the
principal financial officer of the Borrower to have been prepared in
accordance with generally accepted accounting principles consistently
followed throughout the period indicated except to the extent stated
therein, subject to normal changes resulting from year-end
adjustments; and
(c) Promptly after becoming available and, in any event,
within twenty-one (21) days after the end of each month in each fiscal
year of the Borrower, the balance sheet of the Borrower as at the end
of such month, the statement of profit
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and loss of the Borrower for such month, and for the period from the
beginning of the fiscal year to the close of such month, and the
statement of reconciliation of capital accounts of the Borrower for
such month and for the period from the beginning of the fiscal year to
the close of such month, setting forth in each case, in comparative
form, the corresponding figures for the corresponding period of the
preceding fiscal year, certified by the principal financial officer of
the Borrower to have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the
period indicated except to the extent stated therein, subject to
normal changes resulting from year end adjustments; and
(d) Audit Reports - promptly upon receipt thereof, one
copy of each other report submitted to the Borrower by independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Borrower; and
(e) Environmental Notices - Notice to the Lender in
writing, immediately delivered to Lender upon Borrower's becoming
aware that Borrower has received any information, notice, advice or of
any claim, demand, action, event, condition, report, or investigation
indicating any potential or actual liability arising in connection
with (i) the noncompliance with or violation of the requirements of
any Environmental Law which individually or in the aggregate might
have a Material Adverse Effect, (ii) the release or threatened release
of any toxic or hazardous material, waste, substance or constituent
into the environment which individually or in the aggregate might have
a Material Adverse Effect or which release or threatened release the
Borrower have a duty to report under any Environmental Law, or (iii)
the existence of any Environmental Lien on any Properties or assets of
the Borrower.
Section 4.02 Annual Certificates of Compliance. Concurrently with
the furnishing of the annual financial statements pursuant to Subsection
4.01(a) hereof, the Borrower will furnish or cause to be furnished to the
Lender certificates of compliance, as follows:
(a) a certificate signed by the principal financial
officer of the Borrower (i) stating that a review of the activities of
the Borrower has been made under his supervision with a view to
determining whether the Borrower has fulfilled all of its obligations
under this Agreement, the other Security Instruments and the Note;
(ii) stating that the Borrower has fulfilled its obligations under
such instruments and that all representations made herein continue to
be true and correct (or specifying the nature of any change), or if
the Borrower shall be in Default, specifying any Default and the
nature and status thereof; (iii) to the extent requested from time to
time by the Lender, specifically affirming
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compliance of the Borrower with any of its representations or
obligations under such instruments; and (iv) containing or accompanied
by such financial or other details, information and material as the
Lender may reasonably request to evidence such compliance; and
(b) a certificate from the independent public accountants
stating that their audit has not disclosed the existence of any
condition which constitutes a Default, or if their audit has disclosed
the existence of any such condition, specifying the nature, period of
existence and status thereof.
Section 4.03 Quarterly Certificates of Compliance. Concurrently
with the furnishing of the quarterly financial statements pursuant to
Subsection 4.01(b) hereof, the Borrower will furnish or cause to be furnished
to the Lender a principal financial officer's certificate in the same form as
the certificate required by Subsection 4.02(a) hereof, including all the
matters referred to in clauses (i) through (iv), inclusive, thereof.
Section 4.04 Payment of Impositions. Borrower will pay and
discharge, or cause to be paid and discharged, any and all Impositions not
later than the due date thereof, or the day any fine, penalty, interest or cost
may be added thereto or imposed or the day any Lien may be filed for the
nonpayment thereof (if such day is used to determine the due date of the
respective item); provided, however, that Borrower may, if permitted by law and
if installment payments would not create or permit the filings of a Lien
against any portion of the Premises, pay the Impositions in installments
whether or not interest shall accrue on the unpaid balance of such Impositions.
Borrower may in good faith, in lieu of paying such Impositions as they become
due and payable, by appropriate proceedings, contest the validity thereof.
During such contest Borrower shall not be deemed in Default hereunder because
of such nonpayment if, prior to delinquency of the asserted tax or assessment,
Borrower furnishes Lender an indemnity bond, conditioned that such tax or
assessment with interest, cost and penalties be paid as herein stipulated,
secured by a deposit in cash or security acceptable to Lender or with surety
acceptable to Lender, in the amount of the tax or assessment being contested by
Borrower and a reasonable additional sum to pay all possible costs, interest
and penalties imposed or incurred in connection therewith. Upon conclusion of
such contest Borrower shall promptly pay any amount adjudged by a court of
competent jurisdiction to be due, with all costs, penalties and interest
thereon prior to the date such judgment becomes final or any writ or order is
issued under which any portion of the Premises may be sold pursuant to such
judgment.
Section 4.05 Maintenance. The Borrower will (i) maintain its
corporate existence, rights and franchises; (ii) observe and comply with all
Governmental Requirements, and (iii) maintain its Properties (and any
Properties leased by or consigned to it or held under title retention or
conditional sales contracts) in good an workable condition at all times and
make all repairs, replacements
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additions, betterments and improvements to its Properties as are needful and
proper so that the business carried on in connection therewith may be conducted
properly and efficiently at all times.
Section 4.06 Further Assurances. The Borrower will promptly
cure any defects in the creation and issuance of the Note and the execution and
delivery of the Security Instruments, including this Agreement. The Borrower at
its expense will promptly execute and deliver to the Lender upon request all
such other and further documents, agreements and instruments in compliance with
or accomplishment of the covenants and agreements of the Borrower in the
Security Instruments, including this Agreement, or to further evidence and more
fully describe the collateral intended as security for the Note, or to correct
any omissions in the Security Instruments, or more fully to state the security
obligations set out herein or in any of the Security Instruments, or to
perfect, protect or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, to file any notices, or obtain any
consents, all as may be necessary or appropriate in connection therewith.
Section 4.07 Performance of Indebtedness. The Borrower will
pay the Note according to the reading, tenor and effect thereof; and the
Borrower will do and perform every act and discharge all of the obligations
provided to be performed and discharged by the Borrower under the Security
Instruments, including this Agreement, at the time or times and in the manner
specified.
Section 4.08 Reimbursement of Expenses. The Borrower will
pay all costs in connection with each Interim Construction Loan and all fees,
charges or taxes for the recording or filing of Security Instruments. The
Borrower will also pay all reasonable out-of-pocket expenses of the Lender in
connection with the administration of this Agreement and the other Security
Instruments. Without limiting the generality of the foregoing, the Borrower
shall pay when due all costs and expenses required by this Agreement,
including, without limitation (a) all taxes, assessments and impositions
applicable to any portion of the Premises; (b) all fees for filing or recording
any Security Instruments; (c) all fees and commissions lawfully due to brokers,
salesmen and agents in connection with the Indebtedness or the Premises; (d)
all reasonable fees and expenses of counsel to Lender in connection with the
negotiation, preparation, interpretation, amendment or enforcement of any of
the Security Instruments, the making of any Advance, or any suit to which
Lender is a party involving this Agreement or any portion of the Premises; (e)
all title insurance and title examination charges, including premiums for the
Title Insurance Binders; (f) all survey costs and expenses, including the cost
of the Current Surveys; (g) all premiums for the Insurance Policies; and (h)
all other reasonable costs and expenses incurred by Lender in connection with
the Premises, including, without limitation, appraisal fees, inspection fees
and costs, closing costs, internal audit fees, audit fees and costs and
expenses to cure any Default hereunder or preserve all or any portion of the
Premises. In the event Borrower shall fail, refuse or neglect to
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pay any costs and expenses specified in this Agreement or any other Security
Instrument when due, then at any time thereafter and without notice to or
demand upon Borrower and without waiving or releasing any other right, remedy
or recourse Lender may have because of the same, Lender may, but shall not be
obligated to, make such payment or payments for the account of and at the
expense of Borrower. The Borrower will, upon request, promptly reimburse the
Lender for all amounts expended, advanced or incurred by the Lender to satisfy
any obligation of the Borrower under this Agreement or any other Security
Instrument, or to collect the Note, or to enforce the rights of the Lender
under this Agreement or any other Security Instrument, which amounts will
include all court costs, attorneys' fees (including, without limitation, for
trial, appeal or other proceedings), fees of auditors and accountants, and
investigation expenses reasonably incurred by the Lender in connection with any
such matters, together with interest at the post-maturity rate specified in
section 2.02 hereof on each such amount from the date of written demand or
request by the Lender for reimbursement until the date of reimbursement to the
Lender.
Section 4.09 Insurance.
(a) The Borrower now maintains and will continue to
maintain with financially sound and reputable insurers, Insurance
Policies with respect to its Properties and the Premises and business
against such liabilities, casualties, risks and contingencies and in
such types and amounts as shall be acceptable to Lender.
(b) Upon request of the Lender, the Borrower will furnish
or cause to be furnished to the Lender from time to time a summary of
the insurance coverage of the Borrower in form and substance
satisfactory to the Lender and if requested will furnish the Lender
copies of the applicable Insurance Policies.
(c) In the case of any fire, accident or other casualty
causing loss or damage to any Properties of the Borrower, the proceeds
of such policies shall be used at the option of Lender (i) to repair
or replace the damaged Property, or (ii) to prepay the Indebtedness.
If Lender elects to make the insurance proceeds available to Borrower
to repair and restore the damaged Unit(s) rather than applying the
proceeds to payment of the Indebtedness, such proceeds will be
deposited with Lender, together with any additional funds of Borrower
which Lender determines are necessary to complete the repairs and
restoration, and such funds will be disbursed by Lender in accordance
with the terms of this Agreement before any additional Advances shall
be made in connection with the applicable Interim Construction Loan.
Borrower agrees to promptly and diligently repair and restore the
Premises.
(d) Borrower shall cooperate with Lender in obtaining for
Lender the benefits of any Insurance Policy or other proceeds lawfully
or equitably payable to Lender in connection
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with the transactions contemplated hereby and the collection of any
Indebtedness of Borrower to Lender incurred hereunder (including
payment by Borrower of the expense of any independent appraisal an
behalf of Lender in case of fire or other casualty affecting any of
the Improvements).
(e) The Borrower will obtain endorsements to the policies
pertaining to all physical Properties in which the Lender shall have a
Lien under the Security Instruments naming the Lender as a loss payee
and containing provisions that such policies will not be canceled
without thirty (30) days' prior written notice having been given by
the insurance company to the Lender.
Section 4.10 Accounts and Records. The Borrower will keep books
of record and account in which full, true and correct entries will be made of
all dealings or transactions in relation to its business and activities, in
accordance with generally accepted accounting principles, consistently applied
except only for changes in accounting principles or practices with which the
Borrower's independent public accountants concur.
Section 4.11 Inspection of Books and Records. The Borrower will
permit any officer, employee or agent of the Lender to visit, inspect, examine
the Borrower's books of record and accounts, take copies and extracts
therefrom, and discuss the affairs, finances and accounts of the Borrower with
the Borrower's officers, accountants and auditors, all at such reasonable times
and as often as the Lender may desire.
Section 4.12 Inspection of Premises. Lender, its employees,
agents and/or representatives, will, at all times, and from time to time, be
permitted to enter upon the Premises, or any portion thereof, and any of the
locations where materials for the Improvements are being stored, to inspect the
Premises, Improvements and all materials to be used in the construction
thereof, and to examine all detailed plans and shop drawings, books, records,
contracts, statements, invoices, bills, reports, lien waivers, and all other
documents of any kind relating to the construction, leasing and operation of
the Premises and/or any of the Improvements, which shall be kept at the
construction site or such other location designated in writing by Borrower to
Lender and approved by Lender in writing. Borrower shall cooperate and shall
cause its agents and employees to cooperate with Lender and its representatives
and agents during such inspection. This provision shall not be deemed to impose
upon Lender any duty or obligations whatsoever to undertake such inspections,
to correct any defects in the Premises or any of the Improvements or to notify
any person with respect thereto nor shall it amount to a waiver of any Defect
which Lender might have discovered by such inspection but failed to notify
Borrower of same.
Section 4.13 Notice of Certain Events. The Borrower shall
promptly notify the Lender if the Borrower learns of the occurrence of (i) any
event which constitutes a Default, together with a
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detailed statement by a responsible officer of the Borrower of the steps being
taken to cure the effect of such Default; or (ii) the receipt of any notice
from, or the taking of any other action by, the holder of any promissory note,
debenture or other evidence of indebtedness of the Borrower of the Borrower
with respect to a claimed Default, together with a detailed statement by a
responsible officer of the Borrower specifying the notice given or other action
taken by such holder and the nature of the claimed Default and what action the
Borrower is taking or proposes to take with respect thereto; or (iii) any
legal, judicial or regulatory proceedings affecting the Borrower or any of its
Properties in which the amount involved is material and is not covered by
insurance or which, if adversely determined, would have a Material Adverse
Effect; or (iv) any dispute between the Borrower and any Governmental Authority
or regulatory body or any other Person which, if adversely determined, would
have a Material Adverse Effect; or (v) any material Default or noncompliance of
any party to any of the Designated Contracts with any of the terms and
conditions of the Designated Contracts, or any notice of termination or other
material proceedings or actions which might adversely affect any of the
Designated Contracts; or (vi) any amendment (whether or not material and
whether or not permitted by this Agreement or by any consent of the Lender to a
deviation from the terms of this Agreement) of any of the Designated Contracts,
together with a copy of such amendment; or (vii) any event or condition having
a Material Adverse Effect.
Section 4.14 ERISA Information and Compliance. The
Borrower will and will use best efforts to cause each ERISA Affiliate to
promptly furnish to the Lender (i) if requested by the Lender, promptly after
the filing thereof with the United States Secretary of Labor or the PBGC,
copies of each annual and other report with respect to each Plan or any trust
created thereunder, (ii) immediately upon becoming aware of the occurrence of
any "reportable event," as such term is defined in Section 4043 of ERISA, or of
any "prohibited transaction," as such term is defined in Section 4975 of the
Internal Revenue Code of 1986, as amended, in connection with any Plan or any
trust created thereunder, a written notice signed by the president or the
principal financial officer of the Borrower (or ERISA Affiliate as the case may
be) specifying the nature thereof, what action the Borrower is taking or
proposes to take with respect thereto, and, when known, any action taken by the
Internal Revenue Service with respect thereto, (iii) at least ten (10) days
prior to the filing by any Plan administrator of a notice of intent to
terminate (a) Plan, a copy of such notice, (iv) promptly upon receipt, and in
no event more than three (3) days after receipt, of a notice by the Borrower or
any ERISA Affiliate or any administrator of any Plan that the PBGC has
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan, a copy of such notice, (v) promptly and in any event
within three (3) days after it knows or has reason to know of any event or
condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, a
statement of the chief financial officer of the Borrower describing such event
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or condition; and (vi) promptly and in no event more than ten (10) days after
receipt thereof by the Borrower or any ERISA Affiliate, each notice received by
the Borrower or any ERISA Affiliate concerning the imposition of any withdrawal
liability under Section 4202 of ERISA. The Borrower will use its best efforts
to cause each ERISA Affiliate to fund all current service pension liabilities
as they are incurred under the provisions of any Plan from time to time in
effect for the benefit of employees of the Borrower, and comply with all
applicable provisions of ERISA.
Section 4.15 Collateral Security. At any time the Lender may
deliver to the Borrower a written demand for collateral security pursuant to
this Section. Upon receipt of such demand, the Borrower will grant to the
Lender, as security for the Note and other Indebtedness under or in connection
with this Agreement, a first-priority Lien (superior to any other Lien except
those permitted under Subsections 5.02(a) or (b) hereof) on such Properties of
the Borrower as the Lender may require. The Liens will be created and perfected
by and in accordance with the provisions of security agreements and financing
statements, deeds of trust or other Security Instruments, all in form and
substance satisfactory to the Lender in sufficient executed (and acknowledged
where necessary or appropriate) counterparts for recording purposes.
Section 4.16 Down-Date Endorsements. Commencing not later than
one hundred twenty (120) days after the initial Advance of each Interim
Construction Loan (the "Applicable Date"), and prior to each Advance thereafter
until Substantial Completion of the Unit covered by a particular Title
Insurance Binder, Borrower will furnish to Lender a certificate issued by the
Title Company reflecting such changes in title to the applicable Lot as may
have occurred since the date of issuance of the Title Insurance Binder.
Commencing on the Applicable Date, Borrower shall deliver to Lender with each
Borrowing Request a satisfactory down-date endorsement to the applicable Title
Insurance Binder, which endorsement shall (i) indicate that since the effective
date of the Title Insurance Binder (or the effective date of the last such
endorsement, if any) there has been no change in the status of title to the
applicable Lot and (ii) have the effect of increasing the coverage of the Title
Insurance Binder by an amount equal to the Advance then being made unless said
Title Insurance Binder expressly provides automatically and without condition
for such increase in coverage upon each such Advance. Any costs in connection
with any of the foregoing shall be paid at the sole cost and expense of
Borrower.
Section 4.17 Compliance with Plans. Borrower will prosecute the
construction of each Residence in accordance with the Plans applicable to that
Residence.
Section 4.18 Correction of Defects. Borrower shall correct or
cause to be corrected (a) any defect in any Residence; (b) any material
departure in the construction of any Residence from the Plans applicable
thereto, Governmental Requirements, or the requirements of any lease, if
applicable; or (c) any encroachment
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by any part of a Residence or any structure located on any Lot on any building
line, easement, property line, or restricted area.
Section 4.19 Survey. Borrower will furnish to Lender at any stage
of construction, upon Lender's reasonable request, a Current Survey for any
Unit. Said Survey must meet the requirements specified on Exhibit "D" attached
hereto.
Section 4.20 Documents. Borrower will deliver and cause to
be delivered to Lender from time to time as required by Lender, all such
statements, receipts and other data and information as Lender may reasonably
require, reflecting (i) payment of bills for architectural services and for
labor and materials used in the construction of the Improvements and (ii)
compliance with any of the provisions and agreements contained in the Security
Instruments. Borrower shall execute and deliver to Lender, from time to time
as required by Lender, such other documents as shall reasonably be necessary to
provide the rights and remedies to Lender granted or provided for by the
Security Instruments. Borrower agrees that, upon request of Lender, that
Borrower shall promptly cure any defects in the execution and delivery of this
Agreement, any Note or any of the Security Instruments given as security for
the payment of the Note. Borrower shall furnish Lender such reports on the
operations of Borrower and on Borrower's Affiliates and associated enterprises,
including details of projects or properties financed by parties other than
Lender, as Lender may reasonably request.
Section 4.21 Compliance with Governmental Requirements.
Borrower shall promptly comply with all Governmental Requirements affecting any
portion of the Premises in all respects and Lender will be furnished, on
demand, evidence of such compliance. Borrower assumes full responsibility for
the compliance of the Plan s, the Land and the Improvements with all
Governmental Requirements and with sound building and engineering practice,
and, notwithstanding any approvals by Lender, Lender shall have no
responsibility or obligation whatsoever for the Plans or any other matter
incident to the Land or the construction of the Improvements.
Section 4.22 Construction Contracts. Upon receipt of written
request from Lender, Borrower agrees to cause major contractors and
subcontractors to subordinate their respective liens, claims, and charges to
the Deed of Trust covering the Units which are subject of such Construction
Contracts and the rights, remedies and recourses of Lender thereunder.
Section 4.23 Conveyance and Encumbrance. Subject to the
provisions of Section 8.01 hereof, Borrower shall not sell, lease, exchange,
assign, convey or transfer possession of, or otherwise dispose of any of the
Units, or any legal or beneficial interests therein without the prior written
consent of Lender, which consent shall be in Lender's sole discretion. However,
except as provided in Section 8.01 hereof, if ownership of a Unit or any part
thereof or any interest therein becomes vested in any Person other than
Borrower, any proceeds of such sale shall constitute a trust fund
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for the benefit of Lender, and Lender may, without notice to Borrower, deal
with such successor or successors with reference to the applicable Deed of
Trust and Indebtedness in the same manner as with Borrower without in any way
discharging Borrower from the Indebtedness, and without waiving any Default or
Event of Default caused by such vesting of title in another Person. No transfer
of any portion of the Premises, no forbearance by Lender and no extension of
the time for the payment of the Indebtedness or the performance of any of the
obligations performed or to be performed by the Borrower granted by Lender
shall release, discharge or affect in any way the liability of Borrower
hereunder.
Section 4.24 Inspection Fee. Borrower shall pay to Lender at the
time of each Advance and at the closing of the sale of each and every Unit
covered by the Deed of Trust a reasonable Inspection Fee, the amount of which
shall be determined by Lender.
Section 4.25 Sign. If required by Lender, Borrower shall
maintain on a suitable site in each Subdivision, a sign indicating that
construction financing is being provided by Lender, all to the reasonable
satisfaction of Lender.
Section 4.26 Construction of Improvements. Borrower agrees
that (i) each Residence shall be constructed entirely on the Lot upon which
such Residence was intended to be located; (ii) until the Interim Construction
Loan is repaid, no future conveyance of any portion of or interest in the
applicable Unit will be made by Borrower which will cause any encroachment
above, on, or under the surface of such Unit; (iii) construction of a Residence
will not encroach upon or overhang any easement or right-of-way upon the land
of others; (iv) each Residence when erected, shall be wholly within the
building restriction lines however established; and (v) upon request, Borrower
shall, from time to time, furnish satisfactory evidence, in the sole judgment
of Lender, of the foregoing. The construction of all Residences shall begin
promptly, but not later than, before forty-five (45) days from the date of the
initial Advance with respect to each Interim Construction Loan relating thereto
and shall be prosecuted with diligence and continuity and in a good and
workmanlike manner, and in accordance with sound building and engineering
practices, all applicable restrictive covenants, Governmental Requirements, and
the Plans. After construction of a Residence has commenced, Borrower shall not
permit work to be stopped on that Residence for a period in excess of ten (10)
consecutive calendar days, and Borrower shall cause Substantial Completion to
occur in accordance with the applicable Plans, on or before the Completion
Date, free and clear of all Liens except the Lien of the applicable Deed of
Trust.
Section 4.27 Application of Loan Proceeds.
(a) Each time Borrower receives an Advance, Borrower
shall promptly apply the same toward the payment of the items covered
by the Borrowing Request in connection therewith and at Lender's
request, shall furnish evidence satisfactory to Lender that all such
items have been paid. No Advance by
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Lender shall ever be used to defray living expenses, to anticipate
profit or to defray any other item not expressly set forth in the
Budget connected with Cost of Construction.
(b) Borrower will hold all Advances of each Interim
Construction Loan as a trust fund to be applied for the sole purpose
of paying the costs of items set forth in the Budget for each Interim
Construction Loan, respectively, and shall apply the same to the
payment of such cost.
Section 4.28 Borrower's Deposit. If from time to time Lender
reasonably determines that the actual cost of Substantial Completion of a Unit
exceeds or appears likely to exceed the amount of the unadvanced portion of an
Interim Construction Loan, then Borrower shall, within five (5) calendar days
following receipt of Lender's request, make a Borrower's Deposit with Lender.
Lender may advance all or a portion of Borrower's Deposit prior to making any
further Advance of the Interim Construction Loan. Borrower shall promptly
notify Lender in writing if and when the actual cost of Substantial Completion
of a Unit exceeds, or appears likely to exceed, the amount of the unadvanced
portion of the Interim Construction Loan relating to such Residences and the
unadvanced portion of any then existing Borrower's Deposit.
Section 4.29 Notices by Governmental Authority; Fire and Casualty
Losses, Etc. Borrower shall timely comply with and promptly furnish to
Lender true and complete copies of any notice or claim by any Governmental
Authority pertaining to any portion of the Premises. Borrower shall promptly
notify Lender of any fire or other casualty or any notice of taking or eminent
domain action or proceeding affecting any portion of the Premises. Borrower
shall maintain the Insurance Policies in full force and effect until the
Indebtedness is fully paid and performed.
Section 4.30 Joint Disbursement and Application by Lender.
Lender shall have the right, but not the obligation, to disburse jointly the
proceeds of any Advance to the satisfaction of any item included in any Budget;
it is agreed by the parties hereto that the foregoing shall authorize Lender to
jointly disburse any Advance in connection with any Interim Construction Loan
to pay any item included in a Budget relating to an Interim Construction Loan
and/or any other Interim Construction Loan. Any Advance by Lender for such
purpose, except Borrower's Deposit, shall be part of the Indebtedness and shall
be governed and secured by the Security Instruments. Borrower hereby authorizes
Lender to hold, use, disburse and apply the Borrower's Deposit for payment of
costs and expenses incident to the Indebtedness and the Premises, and the
payment of the Indebtedness or performance of Borrower's Indebtedness
hereunder. Borrower hereby assigns and pledges the proceeds of Borrower's
Deposit and grants therein a security interest to Lender for such purposes.
Lender may jointly disburse any portion of any Advance in connection with any
Interim Construction Loan at any time, and from time to time, to persons other
than Borrower for the purposes specified in this section irrespective of any
other provision hereof, and the amount of
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Advances to which Borrower shall thereafter be entitled pursuant to such
Interim Construction Loan shall be correspondingly reduced. This authorization
by Borrower shall be irrevocably vested in Lender for the purpose of protecting
Lender's security interest in the Premises created under the Security
Instruments and shall constitute a power coupled with that interest.
Section 4.31 Deed of Trust. Borrower shall deliver to Lender
evidence satisfactory to Lender that (i) each Deed of Trust constitutes a
first, prior and enforceable lien and security interest against the portion of
the Premises covered thereby, and (ii) there shall have been, as of the date of
each Advance under the Note no change in the status of title to the Premises
covered thereby, including without limitation, survey exceptions not
theretofore approved in writing by Lender.
Section 4.32 Flood Area. Prior to the initial Advance
of each Interim Construction Loan Borrower shall deliver to Lender
evidence satisfactory to Lender that the Improvements covered thereby
will not be situated in an area that has been identified by the
Secretary of Housing and Urban Development as an area having special
flood hazards. Should it be determined, however, that any of the
Improvements are to be situated in an area identified as having
special flood hazards, and if Lender agrees to waive such requirement,
Lender may require flood insurance with maximum limits of coverage and
may require that the full premium thereof be paid in full prior to any
advance hereunder. The flood insurance policy or policies shall all be
in form and substance satisfactory to Lender.
Section 4.33 Substantial Compliance. In no event shall Lender be
obligated or committed to make any Advance hereunder in connection with an
Interim Construction Loan unless, in the judgment of Lender, all Improvements
ordinarily completed at the stage of construction when the Advance has been
requested, shall have been completed in a good and workmanlike manner, and all
materials and fixtures usually installed and furnished at such stage of
construction shall have been furnished and installed, and all construction,
materials, and fixtures shall be in substantial conformity with the Plans and
all Governmental Requirements.
Section 4.34 Easements, Encumbrances, Liens and Restrictive
Covenants. Borrower shall not grant any easement, impose any restrictive
covenants upon any of the Land or the Improvements, execute or file any
subdivision plat affecting any of the Land or consent to the annexation thereof
to any city without the prior written consent of Lender, which consent shall
not be unreasonably withheld. Borrower shall not, without the prior written
consent of Lender, create, place, suffer or permit to be created or placed or,
through any act or failure to act, acquiesce in the placing or allow to remain,
any mortgage, pledge, lien (statutory, constitutional or contractual), security
interest, encumbrance or charge on, or conditional sale or other title
retention agreement, regardless of whether same are expressly subordinate to
the liens
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and security interests of the Security Instruments, with respect to any of the
Land, other than the Permitted Encumbrances.
Section 4.35 Continued Existence. Borrower shall maintain its
existence and promptly and properly comply with all Governmental Requirements
applicable to it or to any of its Property, business operations and
transactions, and shall preserve and maintain all licenses, privileges,
franchises, certificates and the like necessary for the operation of its
business.
Section 4.36 Continued Viability of Warranties. Borrower
shall promptly notify Lender of any change in any fact or circumstances
represented or warranted by Borrower in the Security Instruments.
Section 4.37 Transactions with Affiliates. Borrower will not
engage in any transaction with any Affiliate of Borrower on terms less
favorable to Borrower than would be obtainable at the time in comparable
transactions with Persons not Affiliates of Borrower.
Section 4.38 Ownership and Management. Borrower will not
permit any change to occur in the ownership or management of any portion of the
Premises or the capital stock of Borrower. Within ninety (90) days of the end
of each fiscal year of Borrower, Borrower shall furnish to Lender a complete
and accurate list of the names and addresses of the then current stockholders.
Section 4.39 Indemnification of Lender. Borrower hereby
expressly acknowledges and recognizes Borrower's responsibility for and agrees
to indemnify, defend and hold Lender and Lender's officers, directors,
shareholders, agents, employees, successors and assigns (as well as the
officers, directors, shareholders, agents and employees of Lender's successors
and assigns) absolutely harmless from and against all costs, expenses,
liabilities, losses, damages, fines, penalties and/or obligations incurred by
or imposed upon or alleged to be due of Lender or Lender's successors and
assigns in connection with the assertion of (a) any claim for brokerage, agency
or finder's fees or commissions in connection with the Indebtedness or the
Premises not arising by, through or under Lender; or (b) any claim for
reasonable attorneys', appraisal, title insurance, inspection or other fees,
costs and expenses incurred in connection with the administration, collection
or refinancing of the Indebtedness, which arise by, through or on behalf of
Borrower or any agent or representative of Borrower; (c) any claim arising out
of or occurring because of or related to any Default hereunder;(d) the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release, or threatened release of any Hazardous Material on, from, or affecting
the Premises or any other property; (e) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or related to such
Hazardous Material; (f) any lawsuit brought or threatened, settlement reached,
or government order relating to such Hazardous Material; or (g) any violations
of laws, orders, an regulations, requirements, or demands of government
authorities,
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which are based upon or in any way related to such Hazardous Material. Without
limiting the remedies available to Lender with respect to the enforcement of
its indemnification rights as stated herein or as stated in any of the Security
Instruments, in the event any claim or demand is made or any other fact comes
to the attention of Lender in connection with, relating or pertaining to, or
arising out of the transactions contemplated by this Agreement, which Lender
reasonably believes might involve or lead to some liability of Lender, Borrower
shall, immediately upon receipt of written notification of any such claim or
demand, assume in full the personal responsibility for and, to the extent
requested by Lender, the defense of any such claim or demand and pay in
connection therewith any loss, damage, deficiency, liability or obligation,
including without limitation, attorneys' fees and court costs incurred in
connection therewith. In the event of court action in connection with any such
claim or demand Borrower shall assume, to the extent requested by Lender, the
responsibility for the defense of any such action, and shall immediately
satisfy and discharge any final decree or judgment rendered therein. Lender
may, in its sole and uncontrolled discretion, make any payments sustained or
incurred by reason of any of the foregoing, and Borrower shall immediately
repay to Lender in cash the amount of such payment, with interest thereon at
the rate specified in the Note to be applicable to past-due principal. Lender
shall have the right to join Borrower as a party defendant in any legal action
brought against Lender, and Borrower hereby consents to the entry of an order
making Borrower a party defendant to any such action.
Section 4.40 Incumbency. Borrower shall from time to time, at
the request of Lender, certify to Lender the names, signatures, and positions
of all persons authorized to execute and deliver any of the Security
Instruments.
Section 4.41 Tax and Insurance Payments. Upon reasonable
written request from Lender, after the occurrence of an Event of Default,
Borrower shall make monthly escrow payments (hereinafter referred to as the 11
"T&I Payments") to Lender, in advance, on the first day of the month for each
month during the term of the Loan as follows:
(a) Monthly Payments. The amount of each such T&I
Payment shall be (i) one-twelfth (1/12) of the annual real and
personal property taxes assessed against the Premises and/or the use
or ownership thereof (hereinafter referred to as the "Taxes")
estimated if necessary) to become due for the tax year during which
such T&I Payment is being made; plus (ii) one-twelfth (1/12) of the
premiums (hereinafter referred to as the "Premiums") for the
Insurance Policies for the calendar year during which such T&I Payment
is being made, to the extent that such Premiums have not already been
prepaid or fully paid; Lender shall have the right to report
Borrower's tax identification number with respect to the T&I Payments
regardless of the name in which the account is established. The T&I
Payments shall be applied in accordance with subparagraph (e) below
entitled "Application of T&I Payments".
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(b) Initial Catch-Up Payment. In addition to the
foregoing described monthly payments, Borrower shall make an initial
lump sum payment equal to the amount of the T&I Payments attributable
to the months of January through and including the month in which such
request for T&I Payments is made. Such lump sum payment shall be
delivered to Lender upon request therefor and shall be deemed part of
the T&I Payments.
(c) Account. The T&I Payments shall be placed in
a non-interest bearing account in the name of Lender only or, in
Lender's sole and absolute discretion, in the name of Lender and/or
Borrower, and may be commingled with Lender's other funds. Lender
shall have the right to report Borrower's tax identification number
with respect to the T&I Payments regardless of the name in which the
account is established. The T&I Payments shall be applied in
accordance with the provisions of this section entitled "Tax and
Insurance Payments". Provided no Event of Default has occurred and is
continuing, the amount of the T&I Payments due for the month of March
of any calendar year shall be reduced by the amount, if any, by which
the T&I Payments made during the previous calendar year exceed the
actual amount of Taxes and Premiums due for such previous calendar
year.
(d) Additional Payments. If Lender reasonably
determines that any amounts previously paid by Borrower are (or will
be) insufficient for the payment in full of the Taxes and Premiums,
Lender shall notify Borrower of the additional amounts required to
provide a sufficient fund and, within ten (10) days after the date of
Lender's notice, Borrower shall pay to Lender the additional amount
stated in Lender's notice.
(e) Application of T&I Payments. Lender shall apply
the T&I Payments toward the Taxes and the Premiums due from time to
time (or, at Lender's option, Lender may issue a check payable jointly
to Borrower and the party to whom such payments are to be made), upon
the following terms and conditions:
(i) Lender shall have received a written request
from Borrower, specifying the amounts to be paid and to whom
such payments are to be made, which request shall have been
delivered to Lender not more than thirty (30) days and not
less than ten (10) days prior to the time such payments first
become due and payable;
(ii) Lender shall have ten (10) days after receipt
of Borrower's written request in which to make such payments
to the extent of T&I Payments received by Lender and not
previously disposed of pursuant to this section entitled "Tax
and Insurance Payments";
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(iii) Lender shall have received the original tax
statements received by Borrower or its agents with respect to
the Taxes;
(iv) There shall then exist no Event of Default;
(v) Lender shall be under no obligation
whatsoever to pay any of the Taxes or the Premiums except to
the extent of the amount of the T&I Payments, and then only if
the conditions set forth in this paragraph entitled
"Application of T&I Payments" have been met; and
(vi) Even if the conditions set forth in this
paragraph have not been met, and whether or not a Default or
an Event of Default then exists, Lender shall have the right
in Lender's sole and absolute discretion, but shall be under
no obligation whatsoever, to apply the T&I Payments toward
payment of the Taxes and Premiums within thirty (30) days
before the same first become due and payable, or at any time
thereafter.
(f) Additional Provisions. If an Event of Default has
occurred and is continuing hereunder, Lender shall have the additional
option of (i) applying all or any part of the T&I Payments against the
Indebtedness in such order as Lender shall elect, without notice to
Borrower or any other Person; and/or (ii) pre-paying the Taxes and/or
Premiums. Notwithstanding anything to the contrary contained in this
Agreement, Lender hereby reserves the right to waive the payment by
Borrower to Lender of the T&I Payments and, in the event Lender does
so waive such payment in writing, such waiver shall be without
prejudice to Lender's right to insist, at any subsequent time or
times, that such payments be made in accordance herewith. Upon any
assignment of the Deed of Trust, Lender shall have the right to pay
over the balance of the T&I Payments then in Lender's possession to
Lender's assignee, whereupon Lender shall then become completely
released from all liability with respect thereof.
Section 4.42 Sales and Operations Report. Borrower shall
provide or cause to be provided to Lender within ten (10) days after the end of
each calendar month, a certified current sales schedule certified by an officer
of Borrower, operating statement certified by an officer of Borrower, and if
requested by Lender, copies of all contracts executed during the previous
calendar month. The sales schedule shall show, as of the end of such month, the
Units sold or under contract, the name of the purchaser, the terms of the
purchase, and such other information as may be reasonably required by Lender.
The certified operating statement shall set forth a monthly and year-to-date
income and expense statement for each Unit, which shall disclose the source and
amount of all revenues received, the amount of expenditures incurred or paid
and, if required by Lender, the parties to whom any such payments were made as
of the end of such month, with respect to all income and expense attributable
to the Unit for such month, and
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shall contain such other information and supporting documentation as may
required by Lender. Borrower shall provide to Lender, upon request, such other
information pertaining to the Premises, the operations of the Premises or any
other information reasonably requested by Lender.
Section 4.43 Maintenance, Repair and Operation of Units.
Borrower shall maintain the Units in first class order, condition and
appearance; operate the Units properly and efficiently and in compliance with
any and all restrictive covenants affecting any of the Units; protect every
part of the Units and the material stored thereon from removal, destruction,
and damage; not commit or permit any waste of any of the Units; not use,
maintain, operate or occupy, or allow the use, maintenance, operation or
occupancy of any unit in a manner which violates any Governmental Requirement,
or may be dangerous, constitutes a public or private nuisance, or makes void,
voidable or cancelable, or increases the premium of, any insurance then
enforced with respect thereto; upon demand by Lender and at Borrower's sole
expense, correct any defect in any of the Units; and make all repairs,
replacements, renewals, additions, betterments, improvements and alterations
thereof and thereto, interior and exterior, structural or non-structural,
ordinary and extraordinary, foreseen and unforeseen, which are necessary or
reasonably appropriate to keep the Units in such order and condition.
Section 4.44 Condemnation. In the event the Premises or any
portion thereof is taken or damaged by eminent domain powers of any
Governmental Authority, or be transferred in lieu thereof, all damages or other
amounts awarded shall be paid to Lender and applied to payment of the Interim
Construction Loans secured by the portion of the Premises affected after
deducting any costs incurred in connection therewith, and all or any portion of
the Indebtedness, at Lender's option, may be declared immediately due and
payable.
Section 4.45 Performance of Designated Contracts. The
Borrower will perform and observe in all material respects each of the
provisions of the Designated Contracts to which it is a party on its part to be
performed or observed prior to the termination thereof, unless and to the
extent only that the same shall be contested in good faith by appropriate
action by or on behalf of the Borrower.
Section 4.46 Utilities. At the request of Lender, Borrower
shall furnish to Lender a letter from such parties as Lender may reasonably
require indicating that all utility services and permits (including, without
limitation, water and sewage permits) in such capacities as are necessary for
the construction of the Residences and the operation thereof for their intended
purpose are available at the boundary of each Lot, including water supply,
storm and sanitary sewer facilities, gas, electric and telephone facilities.
Section 4.47 Streets. At the request of Lender, Borrower
shall furnish a letter to Lender from a surveyor not disapproved by
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Lender indicating that all streets, roads, and/or highways necessary for the
full utilization of any Residence or its intended purpose has been completed or
the necessary rights-of-way therefor have either been acquired by the
appropriate Governmental Authority or have been dedicated to the public use and
accepted by such Governmental Authority, and all necessary steps have been
taken by Borrower and any such Governmental authority to assure the complete
construction and installation thereof prior to the Substantial Completion of
the applicable Residence and the surveyor shall warrant the truth and accuracy
of the foregoing representations.
Section 4.48 Permits. At the request of Lender, Borrower
shall deliver to Lender, prior to the commencement of construction of any
Residence, certified copies of all zoning, utility, building, health and
operating permits (if any) required for the construction and operation of each
Residence.
Section 4.49 Environmental Cleanup. In the event Borrower or
Lender is or becomes obligated by any of the Environmental Laws or Governmental
Requirements, or otherwise directed by any Governmental Authority, to clean up,
remove, or encapsulate, or cause the cleanup, removal, or encapsulation of any
Hazardous Material from the Premises, the Borrower (i) shall promptly undertake
to arrange for such cleanup, removal and disposal in accordance with all
applicable laws, rules, regulations and guidelines, (ii) shall exercise its
best efforts to ensure that such cleanup and removal shall be conducted in a
timely and diligent manner, and (iii) hereby expressly assumes the cost and
expense of such cleanup, removal and/or encapsulation.
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ARTICLE 5
NEGATIVE COVENANTS
The Borrower will, at all times, comply with the covenants contained
in this Article 5, from the date hereof and for so long as any part of the
Indebtedness or the Commitment is outstanding:
Section 5.01 Debt. The Borrower will not incur, create, assume
or suffer to exist any Debt, or any Lien on its Properties if any such Debt or
Lien would result in a violation of Sections 5.13 or 5.14.
Section 5.02 Investments, Loans and Advances. The Borrower will
not make or permit to remain outstanding any loans or advances to or
investments in any Person, except that the foregoing restriction shall not
apply to:
(a) investments, loans or advances the material details
of which have been set forth in the Financial Statements or are
disclosed to the Lender in Exhibit "I" hereto;
(b) investments in direct obligations of the United
States of America or any agency thereof;
(c) investments in certificates of deposit of maturities
less than one (1) year, issued by commercial banks in the United
States of America having capital and surplus in excess of $50,000,000;
(d) investments in commercial paper of maturities less
than one (1) year if at the time of purchase such paper is rated in
either of the two highest rating categories of Standard & Poors
Corporation, Xxxxx'x Investors Service, Inc., or any other rating
agency selected by the Borrower and satisfactory to the Lender; and
Section 5.03 Dividends, Distributions and Redemptions. The
Borrower will not declare or pay any dividend, purchase, redeem or otherwise
acquire for value any of its stock now or hereafter outstanding, return any
capital to its stockholders, or make any distribution of its assets to its
stockholders as such, except that the Borrower may (i) declare and deliver
stock dividends, (ii) redeem stock with the proceeds received from the issue of
new shares, and (iii) pay dividends to its stockholders and purchase its own
outstanding capital stock, provided that any of such actions described in (i),
(ii) or (iii) shall not result in a violation of any other covenant herein,
including, without limitation, sections 5.13 and 5.14.
Section 5.04 Sales and Leasebacks. The Borrower will not enter
into any arrangement, directly or indirectly, with any Person whereby the
Borrower shall sell or transfer any Property, whether now owned or hereafter
acquired, and whereby the Borrower shall
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then or thereafter rent or lease as lessee such Property or any part thereof or
other Property which the Borrower intends to use for substantially the same
purpose or purposes as the Property sold or transferred.
Section 5.05 Nature of Business. The Borrower will not permit
any material change to be made in the character of its business as carried on
at the date hereof.
Section 5.06 Limitation on Leases. The Borrower will not
create, incur, assume or suffer to exist any obligation for the payment of rent
or hire of Property of any kind whatsoever (real or personal), under leases or
lease agreements (including leases or lease agreements which constitute Debt)
if the creation, incurrence, assumption or sufferance thereof would result in a
violation of Sections 5.13 or 5.14 hereof.
Section 5.07 Mergers, Etc. The Borrower will not merge or
consolidate with, or sell, assign, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all of its
Properties (whether now owned or hereafter acquired) to, any Person.
Section 5.08 Proceeds of Note. The Borrower will not permit
the proceeds of the Note to be used for any purpose other than those permitted
by Section 3.13 hereof.
Section 5.09 ERISA Compliance. Neither the Borrower nor any
ERISA Affiliate will, at any time:
(a) permit any Plan maintained by it to engage in any
"prohibited transaction" as such term is defined in Section 4975 of
the Internal Revenue Code of 1986, as amended;
(b) permit any Plan maintained by it to incur any
"accumulated funding deficiency" as such term is defined in Section
302 of ERISA; or
(c) terminate any such Plan in a manner which could
result in the imposition of a Lien on the Property of the Borrower
pursuant to Section 4068 of ERISA.
(d) file a notice of intent to terminate a Plan under
Section 4041 of ERISA which could, in the opinion of the Lender, have
a Material Adverse Effect of the financial condition of the Borrower.
(e) withdraw from a multi-employer Plan in a manner that,
in the determination of the Lender, could have a Material Adverse
Effect on the financial condition of the Borrower.
Section 5.10 Sale or Discount of Receivables. The Borrower will
not discount or sell with recourse, or sell for less than the
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greater of the face or market value thereof, any of its notes receivable or
accounts receivable.
Section 5.11 Capital Assets. The Borrower will not make
expenditures for capital or fixed assets in any fiscal year of the Borrower if
such expenditure would result in a violation of Sections 5.13 or 5.14 hereof.
Section 5.12 Environmental Matters. The Borrower will not (i)
cause or permit any Hazardous Material to be placed, held, located, or disposed
of on, under, or at any Property now or hereafter owned, leased, or otherwise
controlled directly or indirectly by the Borrower, (ii) cause or permit any
such Property to ever be used (whether by the Borrower, or any other Person) as
a dump site or storage site (whether permanent or temporary) for any Hazardous
Material without first having in place adequate insurance of a sufficient
amount to totally cover (subject to a deductibility clause not to exceed
$25,000.00) any and all potential liability of any nature or amount arising
from said events listed herein. Without limitation of the Lender's rights under
this Agreement, Lender's representatives shall have the right, but not the
obligation, if in the Lender's opinion adequate insurance as aforesaid is not
in place, to enter upon any such Property or take such other actions as the
Lender deems necessary or advisable to cleanup, remove, resolve, or minimize
the impact of, or otherwise deal with, any Hazardous Discharge or Environmental
Complaint which could result in Environmental Liability against the Borrower,
the Lender, or otherwise, or which, in the sole opinion of the Lender would
jeopardize the priority of any of the Lender's present or future Liens against
the Property, the value of any Property or any rights of the Lender under this
Agreement, the Notes, or any other Security Instrument. All costs and expenses
incurred by the Lender and its employees, agents or representatives in the
exercise of any such rights, including, without limitation, the costs and
expenses of any remedial action, attorney and consultant fees, investigation
and laboratory fees, court costs and litigation expenses, shall become part of
the Indebtedness and be payable upon demand, together with interest thereon at
the Highest Lawful Rate.
Section 5.13 Tangible Net Worth. The Borrower will not permit
its tangible net worth to be less than $5,000,000.00 at any time.
As used in this Section "tangible net worth" shall mean the sum of
preferred stock (if any), par value of common stock, capital in excess of par
value of common stock, and retained earnings less treasury stock (if any) less
good will.
Section 5.14 Ratio of Total Liabilities to Net Worth. The
Borrower will not permit its ratio of (i) total liabilities to (ii) tangible
net worth to be greater than 5 to 1 at any time.
As used in this Section "tangible net worth" shall have meaning as
defined in Section 5.13 hereof.
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Section 5.15 Preservation of Designated Contracts. The
Borrower will not agree to any change, modification or amendment to or waiver
of any of the terms or provisions of any of the Designated Contracts. The
Borrower will not take any action or permit any action to be taken by others
which will release any Person from its obligations or liabilities under any of
the Designated Contracts.
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ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. Any of the following events shall be
considered an "Event of Default" as that term is used herein:
(a) Payments - Default is made in the payment or
prepayment when due of any installment of principal or interest on the
Note or other Indebtedness or any of the Preclosing Indebtedness
referred to in Section 9.19 hereof, and such Default continues for
longer than ten (10) days past the due date provided therefor, whether
or not notice of such Default shall have been given by Lender to
Borrower; or
(b) Representations and Warranties - any representation
or warranty by the Borrower herein or in any other Security Instrument
or in any certificate, request or other document furnished pursuant to
or under this Agreement or any other Security Instrument proves to
have been incorrect in any material respect as of the date when made
or deemed made; or
(c) Affirmative Covenants - Default is made in the due
observance or performance by the Borrower of any of the covenants or
agreements contained in Article 4 hereof of this Agreement, and except
with respect to the covenants set forth in Sections 4.11, 4.12, 4.23,
4.31 or 4.34 hereof (for which Sections no cure period shall be
applicable) such Default continues unremedied for a period of thirty
(30) days after the earlier of (i) notice thereof being given by the
Lender to the Borrower, or (ii) such Default otherwise becoming known
to the Borrower; provided, however, in the event that Lender shall
have delivered two (2) such notices in any twelve (12) month period,
the Borrower shall not be entitled to any further notice, grace, or
opportunity to cure, and any subsequent Default shall be an Event of
Default immediately; or
(d) Negative Covenants - Default is made in the due
observance or performance by the Borrower of any of the covenants or
agreements contained in Article 5 hereof of this Agreement; or
(e) Other Security Instrument Indebtedness - Default is
made in the due observance or performance by the Borrower of any of
the covenants or agreements contained in any Security Instrument other
than this Agreement or in any of the Preclosing Security Instruments
referred to in Section 9.19 hereof, and such Default continues
unremedied beyond the expiration of any applicable grace period which
may be expressly allowed under such Security Instrument; or
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(f) Involuntary Bankruptcy or Other Proceedings - an
involuntary case or other proceeding shall be commenced against the
Borrower which seeks liquidation, reorganization or other relief with
respect to it or its debts or other liabilities under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its Property, and
such involuntary case or other proceeding shall remain undismissed or
unstayed for a period of thirty (30) days; or an order for relief
against the Borrower shall be entered in any such case under the
United States Bankruptcy Code; or
(g) Voluntary Petitions, etc. - the Borrower shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts or
other liabilities under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its Property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors,
or shall fail generally to, or shall admit in writing its inability to
pay its Debts generally as they become due, or shall take any
corporate action to authorize or effect any of the foregoing; or
(h) Discontinuance of Business - the Borrower
discontinues its usual business; or
(i) Default on Other Debt - the Borrower fails to make
any payment due on any material Debt, or any event shall occur or any
condition shall exist in respect of any Debt of the Borrower, or under
any agreement securing or relating to such Debt, the effect of which
is to cause or to permit any holder of such Debt to cause (whether or
not such holder elects to cause) such Debt, or a portion thereof, to
become due prior to its stated maturity and such condition continues
unremedied for a period of thirty (30) days after notice thereof being
given by the Lender to the Borrower; or
(j) Undischarged Judgments - the Borrower shall fail
within thirty (30) days to pay, bond or otherwise discharge any
judgment or order for the payment of money in excess of $50,000 that
is not otherwise being satisfied in accordance with its terms and is
not stayed on appeal or otherwise being appropriately contested in
good faith; or
(k) Security Instruments - the Security Instruments or
the Preclosing Security Instruments shall for any reason, except to
the extent permitted by the terms thereof or hereof, cease to be in
full force and effect and valid, binding and enforceable (except as
enforceability may be limited as stated in Section 3.03 hereof) in
accordance with their terms, or cease to create a valid and perfected
Lien of the priority
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required thereby on any of the collateral purported to be covered
thereby, or the Borrower shall so state in writing; or
(1) Construction of any one or more of the Residences
shall not be commenced within forty-five (45) days after the date of
each Interim Construction Loan relating to such Residences or,
construction having been commenced on any Residence, shall cease for a
period of ten (10) consecutive calendar days at any time prior to the
Substantial Completion of such Residences;
(m) A Deed of Trust shall not, in the opinion of counsel
for Lender, constitute a first, prior and enforceable lien upon the
portion of the Premises securing payment of the Indebtedness;
(n) A Current Survey shall show that a Residence or any
part thereof encroaches upon a street, any easement, right-of-way,
set-back lines or any adjoining property or any Residence is not
constructed entirely on the Lot on which it was intended to be
constructed;
(o) Borrower shall attempt to assign its rights under
this Agreement or any portion of the Premises shall be conveyed or
shall be encumbered (except for taxes not yet due);
(p) Borrower neglects, fails, or refuses to keep in full
force and effect any required permit or approval from any appropriate
Governmental Authority with respect to the construction of any
Residence;
(q) Substantial Completion of a Residence fails to occur
on or before the Completion Date for the Residence established in the
Interim Construction Loan;
(r) There is any substantial deviation in the work of
construction from the Plans without the prior written approval of
Lender, or there is incorporated in any Residence any defective
workmanship or materials, which said deviation or defect is not
commenced to be corrected within ten (10) Business Days after the
first to occur of (i) the discovery thereof by Borrower or (ii)
receipt of Lender's notification to Borrower of the existence thereof.
and such removal or correction is not diligently continued to its
conclusion;
(s) Borrower fails to obtain, when required by Government
Requirement, inspections and/or approvals of the Residences from all
Governmental Authorities and requisite certificates of occupancy;
(t) Occurrence of any condition, no matter how caused,
which renders it impossible in the reasonable determination of Lender,
for Borrower timely to comply fully with, or to cause timely full
compliance with, the provisions hereof or of any
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other of the Security Instruments and such condition continues
unremedied for a period of thirty (30) days after notice thereof being
given by the Lender to the Borrower;
(u) Failure of Borrower to permit Lender or its
representatives at all reasonable times, to enter upon the Land,
inspect the Improvements and the construction thereof and all
materials, fixtures and articles used or to be used in such
construction and to examine all detailed plans, shop drawings and
specifications which relate to the Improvements, or the failure of
Borrower to furnish to Lender or its authorized representatives, when
requested, copies of such plans, drawings and specifications;
(v) Execution by Borrower of any conditional contract of
sale, chattel mortgage or other security agreement covering any
materials, fixtures, equipment, appliances or articles intended to be
incorporated in the Improvements or the appurtenances thereto, or the
filing of a financing statement under the Uniform Commercial Code, the
publishing of notice of such security agreement, or the failure to
purchase any such materials, fixtures, equipment, appliances or
articles so that the ownership thereof will vest unconditionally in
Borrower free from all Liens and encumbrances, on delivery to the Land
or the failure of Borrower to produce and deliver to Lender upon
demand the contracts, bills of sale, statements, receipted vouchers or
agreements, or any of them, under which Borrower claims title to such
materials, fixtures, equipment, appliances and articles;
(w) If Borrower shall have (i) concealed, removed or
permitted to be concealed or removed any part of Borrower's Property
with the intent to hinder, delay or defraud any of Borrower's
creditors; or (ii) made or suffered a transfer of any of Borrower's
Property which may be fraudulent under any debtor relief law or
fraudulent conveyance or similar law; or (iii) suffered or permitted,
while insolvent (under any applicable definition of the term), any
creditor to obtain a Lien upon any of Borrower's Property through
legal proceedings or distraint which lien is not permanently vacated
within thirty (30) days from the date thereof.
Section 6.02 Remedies.
(a) Upon the occurrence of any Event of Default described
in Subsection 6.01(f) or (g) hereof, the Commitment and other lending
obligations, if any, of the Lender hereunder shall immediately
terminate, and the entire principal amount of all Indebtedness then
outstanding together with interest then accrued thereon shall become
immediately due and payable, all without written notice and without
presentment, demand, protest, notice of protest or dishonor or any
other notice of Default of any kind, all of which are hereby expressly
waived by the Borrower. Upon the occurrence and at any time during the
continuance of any other Event of Default specified in
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Section 6.01 hereof, the Lender may by written notice to the Borrower
(i) declare the entire principal amount of all Indebtedness then
outstanding together with interest then accrued thereon to be
immediately due and payable without presentment, demand, protest,
notice of protest or dishonor other notice of Default of any kind, all
of which are hereby expressly waived by the Borrower, and/or (ii)
terminate the Commitment and other lending obligations, if any, of the
Lender hereunder unless and until the Lender shall reinstate same in
writing.
(b) Upon an occurrence of an Event of Default, Lender
shall have the right, but not the obligation, to enter upon and take
immediate exclusive possession of all or any part of the Premises,
either with or without process of law, forcibly or otherwise (so long
as such action does not constitute a breach of the peace), expel and
remove any Persons, goods or chattels occupying or upon the same,
employ watchmen and other safeguards to protect the Premises, receive
all rents and issue receipts therefor, manage, control and operate the
Premises as fully as Borrower might do if in possession thereof,
including, without limitation, the making of all repairs and
replacements deemed necessary by Lender, the construction of
Improvements thereon and leasing of the same, or any part thereof,
from time to time, and after deducting all attorneys' fees and all
costs and expenses incurred in the protection, care, maintenance,
management and operation of the Premises, apply the remaining net
income, if any, to the Premises or toward the satisfaction of any
deficiency remaining after any foreclosure proceedings, and/or toward
their satisfaction of any of the Indebtedness as provided herein. At
the option of Lender, such entry and taking of possession shall be
accomplished either by actual entry and possession or by written
notice served personally upon or sent by certified mail to Borrower at
the address of Borrower set forth herein. Borrower agrees to surrender
possession of the Premises to Lender immediately upon the occurrence
of an Event of Default upon the request of Lender. If Borrower shall
remain in physical possession of the Premises, or any part thereof,
after any Event of Default and Lender's request that Borrower
surrender the Premises, such possession shall be as a tenant at
sufferance of Lender, Borrower agrees to pay Lender, or to any
receiver appointed as provided below, after such Event of Default, a
reasonable monthly rental for the Premises, or a part thereof so
occupied by Borrower, to be applied as provided above in the first
sentence of this subparagraph and to be paid in advance on the first
(1st) day of each calendar month, and, in Default of so doing,
Borrower may be dispossessed by the usual summary proceeding. This
covenant shall be effective irrespective of whether any foreclosure
proceeding shall have been instituted and irrespective of any
application for, or appointment of, a receiver.
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(c) Upon the occurrence of an Event of Default hereunder
or under any other Security Instrument, Lender may, at its option,
apply for by ex parte petition and obtain, by appropriate judicial
action, appointment of a receiver or receivers for all or any part of
the Land and the Improvements as a matter or right, without regard to
the sufficiency of the security, without any showing of insolvency,
fraud or mismanagement on the part of Borrower, and without the
necessity of filing judicial proceedings (other than the proceedings
for the appointment of the receiver or receivers) to protect or
enforce the rights of Lender. Borrower hereby consents to any such
appointment.
(d) Upon the occurrence of an Event of Default hereunder
or under any other Security Instrument, Lender may, at its option,
exercise any and all other rights and remedies afforded by the laws of
the State of Texas, or by any and all of the Security Instruments, or
otherwise.
Section 6.03 Right of Set-off. Upon the occurrence and
during the continuance of any Event of Default, or if the Borrower becomes
insolvent, however evidenced, the Lender is hereby authorized at any time and
from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Lender to or for the credit or the
account of the Borrower against any and all of the Indebtedness of the
Borrower, irrespective of whether or not the Lender shall have made any demand
under this Agreement or the Note and although such obligations may be
unmatured. The Lender agrees promptly to notify the Borrower after any such
set-off and application, provided that the failure to give such notice shall
not affect the validity of such set-off and application. The rights of the
Lender under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Lender may
have.
Section 6.04 Rights Vested. The authorization and rights granted
by Sections 6.02 and 6.03 hereof shall be deemed irrevocably vested in Lender
for the purpose of protecting Lender's security interest in the Premises
created under the Security Instruments and shall constitute a power coupled
with that interest, and may not be revoked by Borrower.
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ARTICLE 7
CONDITIONS OF LENDING
The obligations of the Lender to make the loans pursuant to this
Agreement are subject to the conditions precedent stated in this Article 7.
Section 7.01 Initial Advance. The obligations of the
Lender pursuant to the Commitment and under this Agreement are, in addition to
the conditions precedent specified in Section 7.02 hereof, subject to the
following conditions precedent wherein each document to be delivered to the
Lender shall be in form and substance satisfactory to it:
(a) Note - the Borrower shall have duly and validly
issued, executed and delivered the Note to the Lender.
(b) Compliance Certificate - the Lender shall have
received a compliance certificate, which shall be true and correct, in
the form of Exhibit "J" attached hereto, duly and properly executed by
an executive officer of the Borrower, and dated as of the date of such
Advance.
(c) Secretary's Certificates --
(i) the Lender shall have received certificates
of the Secretary or Assistant Secretary of the Borrower in
form and substance satisfactory to the Lender with respect to
the authorization of Borrower to execute and deliver of the
Note, this Agreement and any other Security Instruments
provided herein and authorization of the officers of the
Borrower to sign such instruments, and (B) specimen signatures
of the officers so authorized.
(ii) The Lender shall also have received a copy,
certified as true by the Secretary or Assistant Secretary of
the Borrower, of the articles or certificate of incorporation
and the bylaws of the Borrower.
(d) Opinion of Borrower's Counsel - the Lender shall have
received from Xxxxxx, Xxxxxxx & Xxxxxxx, counsel for the Borrower, a
favorable written opinion as to the matters contained in Sections
3.01, 3.02, 3.03, 3.04, 3.05, 3.17 and 3.18 hereof; and as to such
counsel's knowledge of pending or threatened material litigation or
governmental or regulatory proceedings against the Borrower; and as to
such other matters incident to the transactions herein contemplated as
the Lender may reasonably request.
(e) Other Security Instruments - the Lender shall have
received the following instruments, each duly and validly executed and
delivered by the respective parties thereto (other than the Lender),
and in sufficient executed
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counterparts for recording purposes when applicable, as security for
the Note and other Indebtedness:
(i) the Security Agreement
(ii) financing statements collectively covering
all the Borrower's personal Property in which the Lender shall
have Liens pursuant to the Security Instruments referred to in
clauses (i) and (ii), inclusive, of this Subsection 7.01(e).
(f) Recordings - The Security Instruments mentioned in
Subsections 7.01(e) hereof, or other notices related thereto if
necessary or appropriate, shall have been duly delivered to the
appropriate offices for filing or recording when applicable, and the
Lender shall have received confirmations of receipt thereof from the
appropriate filing or recording offices.
(g) Title Insurance Binder - The Lender shall have
received from the Title Company a Title Insurance Binder with respect
to each Unit for which any Advance has been made or for which any
Borrowing Request has delivered to Lender.
(h) Additional Conditions Precedent - As conditions
precedent to the making of the initial Advance hereunder, Borrower
shall deliver to Lender the following:
(i) A Deed of Trust covering each unit
attributable to an Interim Construction Loan;
(ii) Any releases, agreements, indemnities, or
other documents required by the Title Company as a condition
to issuing the Title Insurance Binder;
(iii) A certified copy of the recorded Subdivision
plat in which the Lots covered by the Deed of Trust are
located, properly filed of record and otherwise complying with
all applicable laws unless Borrower has previously furnished
such plat to Lender;
(iv) Evidence of the Insurance Policies and
delivery of all documents or certificates as Lender may
require with respect thereto;
(i) Each of the Security Instruments executed in
connection herewith and in connection with each Interim Construction
Loan shall be duly executed by Borrower and Borrower shall deliver
evidence to Lender, in form and substance satisfactory to Lender, that
such Security Instruments constitute valid and binding obligations of
Borrower, enforceable in accordance with their respective terms.
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(j) Possession of Collateral Security - To the extent
that such possession is necessary or appropriate for the purpose of
perfecting the Lender's Lien in such collateral security, all Property
in which the Lender shall at any time be entitled to have a Lien
pursuant to this Agreement or any other Security Instrument shall have
been physically delivered to the possession of the Lender or any
bailee accepted by the Lender.
(k) Purpose Statement - the Borrower shall have executed
and delivered a purpose statement on Federal Reserve Form U-1 of the
Board of Governors of the Federal Reserve System, properly completed.
(l) Other - the Lender shall have received such other
documents as it may reasonably have requested.
Section 7.02 All Advances. The obligation of the Lender to make
each Advance (including the initial Advance with respect to each Interim
Construction Loan) pursuant to this Agreement is subject to the following
further conditions precedent:
(a) Borrowing Requests - at least three but not more than
ten (10) Business Days before each Advance hereunder the Lender shall
have received a Borrowing Request which shall be true and correct and
shall be duly and properly executed and completed by the Borrower.
(b) No Default - the fact that immediately after such
Advance, no Default shall have occurred and be continuing.
(c) Representations and Warranties - the fact that the
representations and warranties of the Borrower contained in this
Agreement or any other Security Instrument (other than those
representations and warranties which are by their terms limited to the
date of the Agreement in which they are initially made) are true and
correct in all material respects on and as of the date of such
Advance.
(d) No Material Adverse Change - there shall have
occurred, in the sole reasonable opinion of the Lender, no change,
either in any case or in the aggregate, in the condition, financial or
otherwise, of the Borrower or with respect to the Borrower's
Properties from the facts represented in any Security Instrument,
including this Agreement, which would have a Material Adverse Effect.
(e) Additional Conditions Precedent -
(i) All conditions precedent as may be required
in connection with any Advance pursuant to Section 7.01 hereof
shall have been satisfied in the sole judgment of Lender;
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(xx) Prior to the initial Advance under each
Interim Construction Loan, Borrower shall have delivered to
Lender an Affidavit;
(iii) If required by Lender, Borrower shall deliver
to Lender a Construction Draw Request executed by Borrower in
the form of Exhibit "K" attached hereto and incorporated
herein for all purposes, or in such other form as Lender may
from time to time require;
(iv) If required by Lender, Borrower shall deliver
to Lender down-date endorsements to the Title Insurance Binder
prepared by the Title Company showing that since the date of
issuance of the Title Insurance Policy, no Lien or other
encumbrances have been claimed, granted or otherwise created
with respect to or covering the subject Lot(s);
(v) If required by Lender, Borrower shall deliver
to Lender lien waivers from the subcontractors and materialmen
connected with any items to be paid in connection with said
application for Advance; such lien waivers shall be in form
and substance satisfactory to Lender;
(vi) If required by Lender, Borrower shall deliver
to Lender copies of such billing statements, vouchers or
invoices from the Persons to whom money is owed, as Lender may
require;
(vii) The location of all or any part of a
Residence does not and will not encroach upon any adjoining
properties or interfere with any easement, building setback
line, restrictive covenant or right-of-way, and each Residence
is constructed on the Lot approved by Lender for the
construction of such Residence;
(viii) Borrower shall deliver to Lender current
monthly operating and sales reports, in form and substance
satisfactory to Lender along with copies of any contracts
entered into since the last Advance;
(ix) If required by Lender, Borrower shall deliver
to Lender all subcontracts executed prior to the date of such
Advance in connection with the construction of the Residences
and not previously delivered to Lender;
(x) If required by Lender, Borrower shall deliver
to Lender any and all other supporting documents reasonably
required by Lender;
(xi) All funds previously disbursed by Lender
under all Interim Construction Loans shall have been applied
in accordance with the Budget relating to such Interim
Construction Loans;
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(xii) All construction prior to the date of a
Borrowing Request shall have been done in accordance with the
Plans with no substantial deviations;
(xiii) The amount of undisbursed proceeds from any
Interim Construction Loan attributable to the Unit relating to
such Interim Construction Loan is sufficient to pay the cost
of completing such Unit in accordance with the Plans; and
(xiv) The Borrower shall deliver to the Lender in
connection with each Unit for which an Advance is requested,
an Affidavit of Bills Paid in the form of Exhibit "L",
attached hereto and incorporated herein for all purposes.
(xv) If required by Lender, Borrower shall obtain
and deliver to Lender the following site assessments conducted
and certified by independent qualified environmental
consultant(s) approved by Lender:
(a) a Category 1 or Phase 1
environmental audit assessing the presence of
Hazardous Material, if any, at the Premises;
(b) such further site assessments as
Lender may require due to the results obtained in (a)
above; and
(c) a report from such consultant(s) to
the effect that no Hazardous Materials are present at
the Premises.
The environmental consultant(s), its qualifications, the scope
and methodology of its investigations, its reports and recommendations
and the form, scope and substance of its certifications to Lender
shall be acceptable to Lender in all respects. For purposes of this
Section, a Category 1 or Phase 1 environmental audit refers to what is
commonly known within the industry as a three-phase approach the
purpose of which is to assess the presence or absence of information
that indicates potential contamination and to make recommendations for
further investigation. A Category I or Phase 1 environmental audit
would typically include, but not be limited to: a site history review,
interviews with individuals who are familiar with the site and
regulatory agency personnel, a site visit and off-site research (i.e.,
aerial photographs).
(f) If required by the Lender, the Borrower shall deliver
to Lender the Construction Contract applicable to the Interim
Construction Loan under which the Advance is requested, unless
Borrower has previously furnished such Construction Contract to
Lender;
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(g) The Borrower shall have delivered to Lender within
ten (10) business days after the slab has been poured on each Lot, the
Current Survey applicable to the Interim Construction Loan under which
the Advance is requested, unless Borrower has previously furnished
such Current Survey to Lender;
(h) If required by Lender, the Borrower shall deliver to
Lender the Plans applicable to the Interim Construction Loan under
which the Advance is requested, unless Borrower has previously
furnished such Plans to Lender;
(i) The Lender shall have obtained an Appraisal of the
Unit applicable to the Interim Construction Loan under which the
Advance is requested, unless such Appraisal shall have been already
obtained by Lender;
Section 7.03 Funding of Advances. Within three (3) Business
Days following the fulfillment by Borrower of all conditions precedent to any
Advance, Lender shall at its discretion make such Advance to Borrower or
jointly to the parties entitled to payment.
Section 7.04 Limitation on Speculative Starts.
Notwithstanding any provision contained herein to the contrary, Lender shall
not be obligated to make any Interim Construction Loan to finance any
Speculative Start in any Subdivision if:
(a) the aggregate sum of the Maximum Loan Amount of all
Interim Construction Loans attributable to Speculative Starts exceeds
the sum of $6,000,000.00;
(b) the aggregate sum of the Maximum Loan Amount of all
Interim Construction Loans attributable to Speculative Starts in the
Houston CMSA exceeds the sum of $5,000,000.00;
(c) the aggregate sum of the Maximum Loan Amount of all
Interim Construction Loans attributable to Speculative Starts in
Austin CMSA exceeds in the aggregate, the sum of $1,000,000.00;
(d) the total number of Speculative Starts in Greatwood
Subdivision and New Territory Subdivision approved in writing by
Lender exceeds, in the aggregate, fifteen (15); or
(e) the total number of Speculative Starts in
Subdivisions other than Greatwood Subdivision and New Territory
Subdivision exceeds, in the aggregate, ten (10).
Section 7.05 Limitation on Models. Notwithstanding any
provision contained herein to the contrary, Lender shall not be obligated to
make any Interim Construction Loan to finance any Models in any (a) Subdivision
if the total number of Models in all Subdivisions exceeds in the aggregate
eight (8); or (b) the total number of Models in any one Subdivision exceeds in
the aggregate two (2).
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Section 7.06 Certain Recordings and Documents After Closing.
(a) Recordings - within ten (10) Business Days after the
execution by Borrower of any Deed of Trust provided for hereunder, the
Lender or its counsel shall have mailed or otherwise delivered such
Deed of Trust to the appropriate filing or recording offices except to
the extent that such filings or recordings shall already have been
made in satisfaction of Subsection 7.01(f) hereof.
(b) Confirmations of Recordings and Lien Priority - within
thirty (30) days from the date of execution of each Deed of Trust
provided for hereunder, the Lender shall have received confirmations
of the recording thereof from the appropriate recording offices, and
such offices or the Title Company demonstrate to the satisfaction of
Lender that there are no other intervening filings or recordings
against the Properties described in such Deed of Trust.
(c) Other - the Lender shall have received such other
documents as it may reasonably have requested at any time, including,
without limitation, any documents referred to in Section 7.01 hereof
or for the purposes referred to in Section 4.06 hereof.
(d) Funding - during the term of this Agreement, until
the requirements of Subsections (a), (b), and (c) of this Section
shall have been satisfied in full, the Lender shall not be obligated
to make Advances under the Commitment, notwithstanding anything else
in this Agreement to the contrary.
Section 7.07 Application of Interim Construction Loan Proceeds.
Borrower will hold all Advances of each Interim Construction Loan as a trust
fund to be applied for the sole purpose of paying the cost of construction of
the Units under each such Interim Construction Loan in accordance with the
Budget and shall apply the same to the payment of such costs. Borrower will
apply such Advances by Lender to the payment of material and labor costs in
connection with construction of the Units under each such Interim Construction
Loan pursuant to the request for Advance. Such payment will be made promptly
and Advances will be used for no other purpose so long as any sums of money
remain due by Borrower for the payment of material and labor.
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ARTICLE 8
PARTIAL RELEASES
Section 8.01 Conditions to and Procedures for Partial Release.
Provided (i) no Event of Default exists under the Note, this Agreement, or any
of the Security Instruments; (ii) Lender does not disapprove a proposed
contract of sale for any Release Parcel (as defined hereafter) and said sale is
closed; and (iii) Borrower pays to Lender the Release Price, as hereinafter
defined, Borrower shall be entitled to receive Partial Releases from Lender of
the Liens created by any Deeds of Trust and any other Security Instruments
benefiting Lender on the following basis:
(a) Borrower to Deliver Contracts for Sale and Partial
Releases. Borrower shall deliver to Lender (i) if required by
Lender, a copy of the proposed contract of sale for the Release
Parcel, (ii) the Settlement Statement prepared by the Title Company in
connection with the sale of a Release Parcel, and (iii) a partial
release instrument ("Partial Release") in form and substance identical
to the form attached hereto as Exhibit "M", which shall include a lot
and block legal description of the Unit for which the Partial Release
is requested (the "Release Parcel") . In addition, the Partial Release
shall be accompanied by information necessary for Lender to process
the Partial Release, including, without limitation, the name and
address of the Title Insurance Company to whose attention the Partial
Release should be directed, any applicable order numbers, and the date
on which the Partial Release is to become effective. Borrower also
shall specify the name and address of the prospective purchaser or
transferee of the Release Parcel and such other documents and
information as Lender may reasonably request.
(b) Partial Release Price. Upon satisfaction of all of
the conditions precedent to a Partial Release, in the reasonable
judgment of Lender, Borrower shall pay to Lender the Release Price, as
defined hereafter. The Release Price ("Release Price") for each
Release Parcel shall be an amount equal to the aggregate sum of (i)
all Advances made under the Interim Construction Loan in connection
with the Release Parcel including, without limitation, the pro rata
share of interest paid in connection with the Interim Construction
Loan, and all other fees and charges reasonably required by Lender.
Contemporaneously with the payment to Lender of the Release Price,
Lender shall execute and deliver all documents necessary to effect the
release of its Lien on the Release Parcel, all such documents and
instruments to be prepared, reviewed and recorded at Borrower's sole
cost and expense and to be a part of the Release Price. The Release
Price shall be applied to principal of the Note in inverse order of
maturity.
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(c) Borrower to Pay Expenses Associated with Partial
Releases. Borrower shall pay all reasonable costs and expenses of
Lender arising in connection with any Partial Releases of any portion
of the Premises, including but not limited to reasonable legal fees of
Lender's counsel, title insurance premiums arising as a result of
endorsements required by Lender in connection with such Partial
Release, and all other costs arising in connection with the execution
and delivery of the Partial Release, all such costs and expenses to be
a part of the Release Price in connection with any such Release Parcel
related thereto.
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ARTICLE 9
MISCELLANEOUS
Section 9.01 Notices. Any notice required or permitted to
be given under or in connection with this Agreement, the other Security
Instruments (except as may otherwise be expressly required therein) or the
Note shall be in writing and shall be mailed by first class or express mail,
postage prepaid, or sent by telex, telegram, telecopy or other similar form of
rapid transmission confirmed by mailing (by first class or express mail,
postage prepaid) written confirmation at substantially the same time as such
rapid transmission, or personally delivered to an officer of the receiving
party. All such communications shall be mailed, sent or delivered,
(a) if to the Borrower, to its address shown at the
beginning of this Agreement, or to such other address or to such
individual's or department's attention as it may have furnished the
Lender in writing; or
(b) if to the Lender, to its address shown at the
beginning of this Agreement, or to such other address or to such
individual's or department's attention as it may have furnished the
Borrower in writing.
Any communication so addressed and mailed shall be deemed to be given when so
mailed, except that Borrowing Requests or communications related to Borrowing
Requests shall not be effective until actually received by the Lender; and any
notice so sent by rapid transmission shall be deemed to be given when receipt
of such transmission is acknowledged, and any communication so delivered in
person shall be deemed to be given when receipted for by, or actually received
by, an authorized officer of the Borrower or the Lender, as the case may be.
Section 9.02 Amendments and Waivers. Any provision of this
Agreement, the other Security Instruments or the Note may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Borrower (and/or any other Person which is a party to any Security Instrument
being amended or with respect to which a waiver is being obtained) and the
Lender.
Section 9.03 Invalidity. In the event that any one or more of
the provisions contained in the Note, this Agreement or in any other Security
Instrument shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of the Note, this Agreement or any other Security
Instrument.
Section 9.04 Survival of Agreements. All representations and
warranties of the Borrower herein or in the other Security Instruments, and all
covenants and agreements herein not fully performed before the effective date
or dates of this Agreement and of the other Security Instruments, shall survive
such date or dates.
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Section 9.05 Successors and Assigns. All covenants and agreements
contained by or on behalf of the Borrower in the Note, this Agreement and any
other Security Instrument shall bind its duly authorized successors and assigns
and shall inure to the benefit of the Lender and its successors and assigns.
The Borrower shall not, however, have the right to assign its rights under this
Agreement or any interest herein, without the express prior written consent of
the Lender. In the event that the Lender sells participations in the Note or
other Indebtedness of the Borrower incurred or to be incurred pursuant to this
Agreement, to other lenders, each of such other lenders shall have the rights
of set off against such Indebtedness and similar rights or Liens to the same
extent as may be available to the Lender.
Section 9.06 Renewal, Extension or Rearrangement. All
provisions of this Agreement and of any other Security Instruments relating to
the Note or other Indebtedness shall apply with equal force and effect to each
and all promissory notes hereinafter executed which in whole or in part
represent a renewal, extension for any period, increase or rearrangement of any
part of the Indebtedness originally represented by the Note or of any part of
such other Indebtedness.
Section 9.07 Waivers. No course of dealing on the part of
the Lender, its officers, employees, consultants or agents, nor any failure or
delay by the Lender with respect to exercising any right, power or privilege of
the Lender under the Note, this Agreement or any other Security Instrument
shall operate as a waiver thereof, except as otherwise provided in Section 9.02
hereof.
Section 9.08 Cumulative Rights. Rights and remedies of the
Lender under the Note, this Agreement and each other Security Instrument shall
be cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 9.09 Singular and Plural. Words used herein in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular herein shall apply to
such words when used in the plural where the context so permits and vice versa.
Section 9.10 CONSTRUCTION. THIS AGREEMENT IS, AND THE NOTE
WILL BE, A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA AND THE STATE OF TEXAS, AS
SUCH LAWS ARE NOW IN EFFECT AND, WITH RESPECT TO USURY LAWS, IF ANY, APPLICABLE
TO THE LENDER AND TO THE EXTENT ALLOWED THEREBY, AS SUCH LAWS MAY HEREAFTER BE
IN EFFECT WHICH ALLOW A HIGHER MAXIMUM NONUSURIOUS INTEREST RATE THAN SUCH LAWS
NOW ALLOW. TEX. REV. CIV. STAT. XXX. ART. 0000, XX. 15 (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY
TO THIS AGREEMENT OR THE NOTE.
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Section 9.11 Interest. It is the intention of the parties hereto
to conform strictly to usury laws applicable to the Lender. Accordingly, if the
transactions contemplated hereby would be usurious under applicable law
(including the laws of the United States of America and the State of Texas),
then, in that event, notwithstanding anything to the contrary in the Note, this
Agreement or in any other Security Instrument or agreement entered into in
connection with or as security for the Note, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under law applicable
to the Lender that is contracted for, taken, reserved, charged or received under
the Note, this Agreement or under any of the other aforesaid Security
Instruments or agreements or otherwise in connection with the Note shall under
no circumstances exceed the maximum amount allowed by such applicable law, and
any excess shall be credited by the Lender on the principal amount of the
Indebtedness (or, if the principal amount of the Indebtedness shall have been
paid in full, refunded by the Lender to the Borrower); and (ii) in the event
that the maturity of the Note is accelerated by reason of an election of the
Lender resulting from any Event of Default under this Agreement or otherwise, or
in the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to the Lender may never include
more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be canceled
automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by the Lender on the principal amount of the
Indebtedness (or, if the principal amount of the Indebtedness shall have been
paid in full, refunded by the Lender to the Borrower) . Without limiting the
foregoing, all calculations of the rate of interest taken, reserved, contracted
for, charged, received or provided for under the Note or any of the Security
Instruments which are made for the purpose of determining whether the interest
rate exceeds the Highest Lawful Rate shall be made, to the extent allowed by
law, by amortizing, prorating, allocating and spreading in equal parts during
the period of the full stated term of the loan evidenced hereby, all interest at
any time taken, reserved, contracted for, charged, received or provided for
under the Note or any of the Security Instruments.
To the extent that Article 5069-1.04 of the Texas Revised Civil
Statutes is relevant to the Lender for the purpose of determining the Highest
Lawful Rate, the Lender hereby elects to determine the applicable rate ceiling
under such Article by the indicated (weekly) rate ceiling from time to time in
effect, subject to the Lender's right subsequently to change such method in
accordance with applicable law.
If at any time the sum of the Margin Percentage plus the Prime Rate
exceeds the Highest Lawful Rate, the rate of interest to accrue on the Note
shall be limited to the Highest Lawful Rate, but any subsequent reductions in
the Prime Rate shall not reduce the
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interest to accrue on the Note below the Highest Lawful Rate until the total
amount of interest accrued on the Note equals the amount of interest which
would have accrued if a varying rate per annum equal to the sum of the Margin
Percentage plus the Prime Rate had at all times been in effect. If at maturity
or final payment of the Note the total amount of interest paid or accrued on
the Note under the foregoing provisions is less than the total amount of
interest which would have accrued if a varying rate per annum equal to the sum
of the Margin Percentage plus the Prime Rate had at all times been in effect,
then the Borrower agrees, to the fullest extent permitted by law, to pay to the
Lender an amount equal to the difference between (a) the lesser of (i) the
amount of interest which would have accrued on the Note the Highest Lawful Rate
had at all times been in effect or (ii) the amount of interest which would have
accrued on the Note if a varying rate per annum equal to the sum of the Margin
Percentage plus the Prime Rate had at all times been in effect, and (b) the
amount of interest accrued in accordance with the other provisions of the Note.
Section 9.12 References. The words "herein," "hereof,"
"hereunder" and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular article, section or
subsection.
Section 9.13 Taxes, etc. Any taxes (excluding income taxes)
payable or ruled payable by federal or state authority in respect of the Note,
this Agreement or the other Security Instruments shall be paid by the Borrower,
together with interest and penalties, if any.
Section 9.14 Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, the Lender shall not be obligated to
extend credit to the Borrower in an amount in violation of any limitation or
prohibitation provided by any applicable statute or regulation.
Section 9.15 Entire Agreement. The Note, this Agreement and
the Security Instruments referred to in Subsection 7.01(e) hereof embody the
entire agreement and understanding between the Lender and the Borrower and
supersede all prior agreements and understandings between such parties relating
to the subject matter hereof and thereof.
Section 9.16 Exhibits. The exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein, except that in the event of any
conflict between any of the provisions of such exhibits and the provisions of
this Agreement, the provisions of this Agreement shall prevail.
Section 9.17 Titles of Articles, Sections and Subsections. All
titles or headings to articles, sections, subsections or other divisions of
this Agreement or the exhibits hereto are only for the convenience of the
parties and shall not be construed to have any effect or meaning with respect
to the other content of such
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articles, sections, subsections or other divisions, such other content being
controlling as to the agreement between the parties hereto.
Section 9.18 Jurisdiction. All actions or proceedings with
respect to the Note, this Agreement or the other Security Instruments may be
instituted in the courts of the State of Texas, the United States District
Court for the Southern District of Texas, or elsewhere to the extent that
jurisdiction shall exist apart from the provisions of this Section, as the
Lender may elect, and by execution and delivery of this Agreement, the Borrower
irrevocably and unconditionally submits to the jurisdiction (both subject
matter and personal) of each such court, and irrevocably and unconditionally
waives (i) any objection the Borrower may now or hereafter have to the laying
of venue in any of such courts, and (ii) any claim that any action or
proceeding brought in any of such courts has been brought in an inconvenient
forum.
Section 9.19 Trust Funds. Borrower acknowledges that it is
familiar with chapter 162 Construction Payments, Loan Receipts and
Misapplication of Trust Funds, Property Code, Vernon's Texas Codes Annotated
that makes a portion of the proceeds of the Loan intended to cover costs of
construction trust funds for the benefit of contractors and materialmen for the
Premises, and makes it a criminal offense to divert any of said proceeds to any
other use unless and until all of said beneficiaries are paid in full.
Section 9.20 Counterparts. This Agreement may be executed in
two or more counterparts, and it shall not be necessary that the signatures of
all parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Section 9.21 Effectiveness. This Agreement shall not be
effective until delivered to the Lender at its principal offices in the State
of Texas, indicated at the first page of this Agreement, accepted by the Lender
in such State, and executed by the Lender in such State.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN PARTIES.
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72
A-1
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
BORROWER: NEWMARK HOME CORPORATION
By: /s/ XXXX XXXXXX
------------------------
Name: Xxxx Xxxxxx
-----------------------
Title: President
----------------------
UNITED SAVINGS ASSOCIATION OF
TEXAS FSB
By:
------------------------
Name:
-----------------------
Title:
----------------------
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