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EXHIBIT 10.5(a)
AMENDED AND RESTATED
LOAN AGREEMENT BY AND BETWEEN
NEWMARK HOME CORPORATION
and
BANK ONE, TEXAS, N.A.
Dated the 30th day of April, 1996
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TABLE OF CONTENTS
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Section 1. General Terms . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Certain Definitions; Use of Defined Terms; Accounting Terms;
Singular or Plural . . . . . . . . . . . . . . . . . . . . . 1
1.3 Revolving Line of Credit . . . . . . . . . . . . . . . . . . 10
1.4 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . 11
1.5 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 12
Section 2. Representations and Warranties . . . . . . . . . . . . . . . . 12
2.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Financial Condition . . . . . . . . . . . . . . . . . . . . 12
2.4 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Liabilities and Litigation . . . . . . . . . . . . . . . . . 13
2.6 Titles and Encumbrances . . . . . . . . . . . . . . . . . . 13
2.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.8 Patents, etc . . . . . . . . . . . . . . . . . . . . . . . . 13
2.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.10 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.11 Margin Securities . . . . . . . . . . . . . . . . . . . . . 14
2.12 Utilities, Access and Construction . . . . . . . . . . . . . 14
Section 3. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . 14
3.1 Reporting Requirements . . . . . . . . . . . . . . . . . . . 14
3.2 Taxes and Other Liens . . . . . . . . . . . . . . . . . . . 16
3.3 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . 16
3.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . 17
3.5 Performance of Obligations . . . . . . . . . . . . . . . . . 17
3.6 Payment of Expenses . . . . . . . . . . . . . . . . . . . . 17
3.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.8 Certificate of Compliance . . . . . . . . . . . . . . . . . 19
3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.10 Security . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.11 Residential Subdivisions . . . . . . . . . . . . . . . . . . 20
3.12 Surveys and Appraisals . . . . . . . . . . . . . . . . . . . 20
3.13 Plans; Construction in Compliance with Plans . . . . . . . . 20
3.14 Construction Contracts; Commencement of Construction . . . . 21
3.15 Governmental Permits . . . . . . . . . . . . . . . . . . . . 21
3.16 Compliance with Legal Requirements . . . . . . . . . . . . . 21
3.17 Use Violations; Notifications . . . . . . . . . . . . . . . 21
3.18 Construction of Improvements . . . . . . . . . . . . . . . . 22
3.19 Continuing Compliance with Requirements for Advances . . . . 22
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3.20 Correction Work . . . . . . . . . . . . . . . . . . . . . . 22
3.21 Continuous Construction of the Improvements . . . . . . . . 23
3.22 Inspections . . . . . . . . . . . . . . . . . . . . . . . . 23
3.23 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . 25
4.1 Dividends and Redemptions . . . . . . . . . . . . . . . . . 25
4.2 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . 25
4.3 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . 26
4.4 Utility Rights . . . . . . . . . . . . . . . . . . . . . . . 27
4.5 Alterations . . . . . . . . . . . . . . . . . . . . . . . . 27
4.6 Restrictions on Speculative Homes, Model Homes, Single
Family Houses in Austin and Inventoried Lots . . . . . . . . 27
4.7 Limitation on Aggregate Deed of Trust Amount . . . . . . . . 28
4.8 Flood Plain . . . . . . . . . . . . . . . . . . . . . . . . 28
4.9 Financial Covenants . . . . . . . . . . . . . . . . . . . . 28
4.10 Loans and Advances to Employees, Etc. . . . . . . . . . . . 29
4.11 Investments, Loans and Advances . . . . . . . . . . . . . . 29
4.12 Merger and Consolidation . . . . . . . . . . . . . . . . . . 29
4.13 Restrictions on Undeveloped Land . . . . . . . . . . . . . . 29
Section 5. Commitment to Lend; Conditions to the Bank's
Obligations to Make Advances . . . . . . . . . . . . . . . . . 29
5.1 Bank's Commitment . . . . . . . . . . . . . . . . . . . . . 29
5.2 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . 29
5.3 Guidance Line . . . . . . . . . . . . . . . . . . . . . . . 31
5.4 Bank's Discretion . . . . . . . . . . . . . . . . . . . . . 31
5.5 Involuntary Borrowings . . . . . . . . . . . . . . . . . . . 31
Section 6. Events of Default and Remedies . . . . . . . . . . . . . . . . 32
6.1 Events of Default . . . . . . . . . . . . . . . . . . . . . 32
6.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7. Additional Agreements . . . . . . . . . . . . . . . . . . . . . 34
7.1 Change of Ownership or Control . . . . . . . . . . . . . . . 34
7.2 Change in Management . . . . . . . . . . . . . . . . . . . . 35
Section 8. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1 Counsel to Bank . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Required Documents . . . . . . . . . . . . . . . . . . . . . 35
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Section 9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.1 Survival of Various Matters . . . . . . . . . . . . . . . . 36
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . 36
9.4 Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.5 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 37
9.7 Non-Subordination . . . . . . . . . . . . . . . . . . . . . 37
9.8 Consent to Deviation . . . . . . . . . . . . . . . . . . . . 37
9.9 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.10 Payment on Non-Business Days . . . . . . . . . . . . . . . . 37
9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . 38
9.12 Controlling Document . . . . . . . . . . . . . . . . . . . . 38
9.13 Savings Clause . . . . . . . . . . . . . . . . . . . . . . . 38
9.14 Participations and Assignments . . . . . . . . . . . . . . . 38
9.15 Set Off . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.16 Form and Substance of Surveys, Appraisals and Other
Documents . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.17 Concerning the Revolving Line of Credit . . . . . . . . . . 39
9.18 Concerning Representations and Warranties . . . . . . . . . 39
9.19 Renewal and Extension of Existing Indebtedness . . . . . . . 40
9.20 No Oral Agreements . . . . . . . . . . . . . . . . . . . . . 40
EXHIBITS
"A" - Form of Note
"B" - Form of Deed of Trust
"C" - Form of Supplement
"D" - Form of Loan Application
"E" - Form of Certificate of Compliance
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AMENDED AND RESTATED
LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT made and entered into as of the
30th day of April, 1996, by and between NEWMARK HOME CORPORATION, a Nevada
corporation, with offices and place of business at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "Company") and BANK ONE, TEXAS, N.A., a national
banking association, with offices and banking quarters at ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Attention: Real Estate Group (hereinafter called the "Bank").
W I T N E S S E T H:
WHEREAS, the Company and the Bank executed that certain Amended and
Restated Loan Agreement dated the 31st day of August, 1993 (said Amended and
Restated Loan Agreement, as amended or modified from time to time, is referred
to herein as the "Prior Loan Agreement"); and
WHEREAS, the Company and the Bank desire to amend and restate, pursuant
to the terms of this Agreement, the terms and provisions of the Prior Loan
Agreement, and to provide for further advances from the Bank to the Company
pursuant to the terms of this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, the Company and the Bank hereby agree as follows:
Section 1. General Terms
1.1 Indebtedness. Upon the terms and conditions hereinafter set
forth, the Bank agrees to lend the Company an aggregate of up to
$20,000,000.00, as evidenced by a Revolving Line of Credit to be extended to
the Company by the Bank, as more specifically described in Section l.3 hereof.
1.2 Certain Definitions; Use of Defined Terms; Accounting Terms;
Singular or Plural.
(a) As used herein:
"Aggregate Deed of Trust Amount" shall mean, at any given time,
the sum of (i) all Deed of Trust Amounts for all Single Family Houses
and (ii) all Deed of Trust Amounts for all Inventoried Lots.
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"Agreement" shall mean this Loan Agreement as it may be amended
or supplemented from time to time.
"Appraisal" shall mean (i) with respect to a Single Family House,
an appraisal prepared by an appraiser selected, commissioned and paid by
the Bank (but which shall be subject to reimbursement by the Company
pursuant to Section 3.6 of this Agreement), in form and substance
satisfactory to the Bank stating the appraised value of each Lot upon
completion of the Improvements thereon and (ii) with respect to an
Inventoried Lot, an appraisal prepared by an appraiser selected,
commissioned and paid by the Bank (but which shall be subject to
reimbursement by the Company pursuant to Section 3.6 of this Agreement),
in form and substance satisfactory to the Bank, stating the appraised
value of such Inventoried Lot, without taking into consideration any
improvements to be constructed thereon.
"Appraised Value" shall mean the value, or projected value, of a
Single Family House upon completion of the construction thereof (whether
or not such construction has been completed), or the value of an
Inventoried Lot, as the case may be, determined in each case by the
Appraisal thereof.
"Architect" shall mean any fully licensed architect or engineer
engaged by the Company to design Single Family Houses.
"Base Rate" shall mean the variable rate of interest announced by
the Bank from time to time as its Base Rate and, without notice to the
Company or any other person, such rate shall change as and when changes
in that Base Rate are announced. The Base Rate is set by the Bank as a
general reference rate of interest, taking into account such factors as
the Bank may deem appropriate, it being understood that many of the
Bank's commercial or other loans are priced in relation to such rate,
that it is not necessarily the lowest or best rate of interest actually
charged on any loan, and that the Bank may make various commercial or
other loans at rates of interest having no relationship to the Base
Rate.
"Borrowing Base" shall mean the collection or group or assets
satisfying the requirements set forth in Section 3.23(a) hereof.
"Borrowing Base Report" shall have the meaning set forth in
Section 3.23(b) hereof.
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"Borrowing Base Value" shall mean, as of any given date, the
Aggregate Deed of Trust Amount reflected on the most current Borrowing
Base Report delivered to the Bank by the Company and not disapproved by
the Bank pursuant to the provisions of Sections 3.22, 4.6 or 4.7 hereof.
"Borrowing Date" shall mean the date on which all conditions
contained in Section 5 of this Agreement are met.
"Business Day" shall mean any day except a Saturday, Sunday or
other day on which the Bank is authorized or required by law to close.
"Certificate of Compliance" shall mean each certificate described
in Section 3.8 of this Agreement.
"Change of Ownership or Control" shall mean the event described
in Section 7.1.
"Collateral" shall mean the property described in Section 3.10 of
this Agreement, securing payment of the Indebtedness and performance of
the obligations of the Company under this Agreement and the other
Security Instruments.
"Construction Contracts" shall mean any and all contracts or
agreements, written or oral, between either Company and any other person
in any way relating to the construction of any Improvements by such
other person.
"Cost of Construction" shall mean and include the cost of
purchasing the Lots (including costs needed to release any liens on a
Lot prior to the lien created by the applicable Deed of Trust) and the
following costs of construction of the Improvements: demolition costs
of any existing buildings; cost of labor, material and site
improvements; and amounts paid to contractors to construct the
Improvements and landscaping. In order for materials to constitute a
Cost of Construction, they must be delivered to the Company and be
installed or stored on a Lot; provided that material stored by the
Company elsewhere may constitute a Cost of Construction if (i)
identified as off-site material and (ii) assurances are furnished
satisfactory to the Bank that the security interest created by the
applicable Deed of Trust has attached and has been perfected as to such
material and there is no other security interest relating to such
material.
"Debt" shall mean all items of indebtedness, obligation or
liability, whether matured or unmatured,
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liquidated or unliquidated, direct or contingent, joint or several,
including, but without limitation:
(a) All indebtedness guaranteed, directly or
indirectly, in any manner, or endorsed (other than for collection
or deposit in the ordinary course of business) or discounted with
recourse;
(b) All indebtedness in effect guaranteed, directly or
indirectly, through agreements, contingent or otherwise: (l) to
purchase such indebtedness; or (2) to purchase, sell or lease (as
lessee or lessor) property, products, materials or supplies or to
purchase or sell services, primarily for the purpose of enabling
the debtor to make payment of such indebtedness or to assure the
owner of the indebtedness against loss; or (3) to supply funds to
or in any other manner invest in the debtor;
(c) All indebtedness secured by (or for which the
holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance upon
property owned or acquired subject to such mortgage, deed of
trust, pledge, lien, security interest, charge or encumbrance,
whether or not the liabilities secured thereby have been assumed;
and
(d) All indebtedness incurred as the lessee of goods or
services under leases that, in accordance with generally accepted
accounting principles, should not be reflected on the lessee's
balance sheet.
"Deeds of Trust" shall mean, collectively, the Initial Deeds of
Trust and the Supplements.
"Deed of Trust Amount" shall mean (i) with respect to a Single
Family House, the lesser of (a) seventy percent (70%) of the Appraised
Value of such Single Family House, (b) seventy percent (70%) of the
Sales Price of such Single Family House, (iii) ninety percent (90%) of
the Cost of Construction of such Single Family House and soft costs
approved by the Bank with respect thereto, (d) with respect to a Model
Home, $225,000.00 and (e) with respect to any other Single Family House,
$300,000.00, and (ii) with respect to an Inventoried Lot, the lesser of
(x) seventy percent (70%) of the sales price of such Inventoried Lot set
by the Company, (y) seventy percent (70%) of Appraised Value of such
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Inventoried Lot and (z) ninety percent (90%) of the cost to the Company
of purchasing such Inventoried Lot.
"Default" shall mean an event which with the giving of notice,
the lapse of time, or both, would constitute an Event of Default.
"Event of Default" shall mean any event specified in Section 6 of
this Agreement provided that any requirement for the giving of notice,
the lapse of time, or the happening of any condition, event or act has
been satisfied.
"FHA" shall mean the Federal Housing Administration.
"Financial Statements" shall mean the audit report, annual
financial statements, and interim statements described or referred to in
Section 3.1 of this Agreement.
"Governmental Authority" shall mean any and all courts, boards,
agencies, commissions, offices or authorities of any nature whatsoever
for any governmental ▇▇▇▇ (▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ or otherwise) whether now or hereafter in existence, and any and
all providers of water, gas or electricity.
"Governmental Permits" shall mean all authorizations,
certificates, licenses, permits, correspondence and any other evidence
from any Governmental Authority regarding compliance with or performance
or satisfaction of any Legal Requirement.
"Improvements" shall mean the improvements described in the
applicable Plans, consisting of a single family residence for sale, to
be constructed on the applicable Lot as required by the Plans.
"Indebtedness" shall mean all sums owed or to be owed by the
Company to the Bank, whether principal or interest, including principal
and interest on the Note and reimbursement of monies advanced by the
Bank pursuant to Sections 3.6, 3.13 or 5.6 hereof.
"Initial Deeds of Trust" shall mean those Deeds of Trust,
Security Agreement and Assignment of Rents and Leases, executed by the
Company for the benefit of Bank and recorded in the real property
records of Brazoria, ▇▇▇▇▇▇, Fort Bend, Galveston, Travis, Dallas,
Collin and ▇▇▇▇▇▇▇▇▇▇ Counties, Texas, and any other Deed of Trust,
Security Agreement and Assignment of Rents and Leases executed by the
Company for the benefit of the Bank in
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the form attached hereto as Exhibit "B" and to be recorded in Tarrant
County, Texas and other counties approved by the Bank, each of which
shall cover (i) the first set of Lots in each such county which are
added to the Borrowing Base, and the Improvements to be constructed
thereon, and (ii) the Collateral described in Section 3.10 relating to
such Lots and Improvements.
"Inventoried Lot" shall mean a single family residential lot
meeting the requirements of clauses (i) through (iv), but not clause
(v), of the definition of "Lot" set forth herein.
"Legal Requirements" shall mean (a) any and all present and
future judicial decisions, statutes, rulings, rules, regulations,
permits, certificates or ordinances of any Governmental Authority in any
way applicable to the Company or any Lot or Improvements, including the
ownership, use, occupancy, possession, operation, maintenance,
alteration, repair or reconstruction thereof, (b) the Company's
presently or subsequently effective corporate charter and bylaws, (c)
any and all covenants, conditions or restrictions applicable to the Lots
or the Improvements or the ownership, use or occupancy thereof, (d) any
and all leases or contracts (written or oral) of any nature that relate
in any way to the Lots or the Improvements or to which the Company may
be bound, and (e) any requirement necessary to satisfy any conditions
imposed upon the Company necessary to comply with the requirements of
any permanent financing obtained through either the FHA or VA.
"Loan Application" shall mean a certificate of the chief
financial officer of the Company in the form attached hereto as Exhibit
"D," requesting approval of an advance under the Revolving Line of
Credit from the Bank to the Company.
"Lot" shall mean any single family residential lot (i) included
in the Borrowing Base, (ii) which is located in a residential
subdivision which has not been disapproved by the Bank pursuant to
Section 3.11 hereof, (iii) with respect to which all development and
construction work has been completed (including (A) completion of all
public roadways necessary to provide sufficient access to such Lot and
(B) completion of all water, sanitary and storm sewer facilities in
capacities sufficient for single family residential use) so that such
Lot is ready for a Single Family House to be constructed thereon, (iv)
which shall be of sufficient size for the construction of a Single
Family House thereon and (v) upon which the Company intends to
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commence construction of a Single Family House promptly after the first
advance under the Revolving Line of Credit with respect thereto.
"Maximum Outstanding Amount" shall mean, at any given time, the
lesser of (i) the Borrowing Base Value at such time and (ii)
$20,000,000.00.
"Maximum Rate" shall have the meaning given thereto in the Note.
"Model Home" shall mean a Single Family House constructed by the
Company to be used in promoting the sale of homes being built with the
proceeds of the Revolving Line of Credit.
"Note" shall mean the promissory note of the Company issued
pursuant to Section 1.3 of this Agreement in the form attached as
Exhibit "A" to this Agreement.
"Pacific Realty Group" shall mean Pacific Realty Group, Inc.,
which owns all of the issued and outstanding capital stock of the
Company.
"Pacific USA" shall mean Pacific USA Holdings Corp.
"Permitted Encumbrances" shall mean those outstanding liens,
easements, building lines, restrictions, mineral interests and other
matters affecting a Lot which are described in the Title Commitment
issued with respect to such Lot and are acceptable to the Bank, except
those described in printed exceptions 2, 3 and 4 of the Texas standard
mortgagee's policy and any other similar matters, however designated.
"Person" or "person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, court, government or political subdivision
or agency thereof.
"Plans" shall mean the final plans and specifications, in form
and content satisfactory to the Bank, for the construction of the
Improvements on the Lot with which they are submitted in the Loan
Application, and all amendments and modifications thereof.
"Plot Plan" shall mean, with respect to each Single Family House,
the final drawing or plan and related specifications, in form and
content satisfactory to the Bank, showing the location of such Single
Family House on
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the Lot on which it is to be constructed, and all easements, setback
lines and other applicable matters.
"Prior Financial Statements" shall mean the consolidated
financial statements for the Company for the period ended March 31,
1996, and as at such date.
"Prior Loan Agreement" shall have the meaning set forth in the
Recitals hereto.
"Released Portion" shall have the meaning set forth in Section
4.3(b) hereof.
"Required Report" shall mean a report, certified by the chief
financial officer of the Company, setting forth (1) a summary of all
single family houses (whether or not such single family houses
constitute Single Family Houses) under construction by the Company,
constructed and still owned by the Company or sold since the date of the
last Required Report, indicating the status, location and value (both
current and projected as completed) of each such single family house;
(2) a "sales and closings" report indicating the sales of single family
houses (whether or not such single family houses constitute Single
Family Houses) closed by the Company since the date of the last Required
Report, listing the gross sales price and net sales price of such
closings, any cancellations, and a summary of the then existing closings
and contracts backlog by subdivision; and (3) a "speculative and models
inventory by subdivision" report reflecting, on a subdivision by
subdivision basis, the number of Speculative Homes and Model Homes in
the Company's inventory and the date of completion (or anticipated date
of completion) of each Speculative Home and Model Home.
"Revolving Line of Credit" shall mean the line of credit pursuant
to Section 1.3.
"Sales Contract" shall mean an executed bona fide sale and
purchase contract pursuant to the terms of which a Person other than an
affiliate of the Company has contracted to purchase a lot or single
family house.
"Sales Price" shall mean the sales price of a Single Family House
set by the Company, such price to be updated monthly. For purposes of
determining the Deed of Trust Amount with respect to a Single Family
House, if the Bank determines that there exists patterns of sales with
actual sales prices below the sale prices set therefore by the Company
under this paragraph, then the Bank shall have the right to adjust such
sales prices to amounts
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which the Bank believes accurately reflect the true sales price for each
Single Family House.
"Security Instruments" shall mean this Agreement, the Note, the
Deeds of Trust, the Certificates of Compliance, and any and all other
instruments now or hereafter executed in connection with or as security
for the Note.
"Single Family House" shall mean any single family residence (i)
included in the Borrowing Base, (ii) which is located on a Lot, (iii)
which is the only single family residence located on such Lot and (iv)
which has been completely constructed, or is then under construction, by
the Company in compliance with the Plans therefor and all Legal
Requirements.
"Specified Property" shall have the meaning set forth in Section
3.23(a) hereof.
"Speculative Home" shall mean any Single Family House which is
not the subject of a Sales Contract.
"Supplement" shall mean a Supplemental Deed of Trust, Security
Agreement and Financing Statement to be executed by the Company in the
form attached hereto as Exhibit "C" whereby a Lot and the Improvements
thereon or to be constructed thereon, and the Collateral described in
Section 3.10 relating to such Lot and Improvements, are made subject to
the liens created by the Initial Deed of Trust previously filed in the
county in which such Lot is located.
"Survey" shall mean an accurate on-the-ground survey consisting
of field notes (if the applicable property has not been platted)
prepared by a licensed surveyor not disapproved by the Bank and (a)
showing the location of any easements, rights-of-way, setback lines,
encroachments, fences, ditches or overlaps thereon or thereover, at the
outside boundary lines of the applicable tract of land and all
applicable Improvements, (b) identifying all easements, setback lines
and other matters referred to on the related Title Commitment or Title
Insurance, (c) including such surveyor's registered number and seal and
the date of such survey and (d) reflecting whether such tract of land
has access to and from a publicly dedicated street or road.
"Title Commitment" shall mean the commitment to issue an owner's
and/or mortgagee's title insurance policy in the form promulgated by the
State Board of Insurance of the State of Texas issued by the Title
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Insurer and pertaining to the Lot for which a Loan Application is
submitted to the Bank.
"Title Insurance" shall mean a paid mortgagee's title insurance
policy binder on interim construction loan or paid mortgagee's title
insurance policy, as the Bank, in its sole discretion, may require prior
to the advance hereunder for the acquisition of or commencement of
construction on a Lot for which a Loan Application is being made, in
form and substance satisfactory to the Bank, issued by the Title Insurer
in the amount of the Deed of Trust Amount of such Lot and the
Improvements to be constructed thereon in accordance with the Plans
therefor (which policy may include a rider or endorsement limiting the
binder or policy to the aggregate amounts actually advanced) covering
the lien on the interest of the Company described therein.
"Title Insurer" shall mean such title insurer as the Bank, in its
sole discretion, may approve.
"VA" shall mean the Veterans Administration.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any Note, certificate, report, or other document made or
delivered pursuant to this Agreement, unless specifically required otherwise.
(c) Terms in the singular shall include the plural and those in the
plural shall include the singular unless the context shall otherwise require.
1.3 Revolving Line of Credit. The Bank, during the period from the
date of this Agreement until the date that is twelve (12) months after the date
of this Agreement for the initial advance with respect to any Lot or the
Improvements thereon or to be constructed thereon, and until the earlier to
occur of (i) the date that is twelve (12) months after the date of the initial
advance with respect to any Lot or Improvements and (ii) the maturity date of
the Note (whether occurring by the terms of the Note, by acceleration or
otherwise) for subsequent advances for such Lot and Improvements, subject in
all instances to (a) the terms and conditions of this Agreement, (b) the
condition that at the time of each borrowing hereunder, the condition of the
Company, financial and otherwise, and the condition of the Collateral, are
satisfactory to the Bank, and (c) the condition that no Default or Event of
Default has occurred and is then continuing to occur, agrees to make advances
to the Company pursuant to a Revolving Line of Credit up to but not in excess
of the Maximum Outstanding Amount upon compliance by the Company with the
provisions of Section 5.2 hereof. The Company's obligation to repay the
Revolving Line of Credit shall be evidenced by the Note. The Note shall bear
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interest at the rate or rates set forth in Section 1.5 hereof. Accrued and
unpaid interest on the Note shall be due and payable on the first day of each
month, commencing June 1, 1996. All unpaid principal and accrued and unpaid
interest on the Note shall be due and payable on January 31, 1998.
1.4 Prepayments.
(a) If at any time the outstanding balance under the Revolving Line
of Credit is in excess of the Maximum Outstanding Amount, or if required by any
other provision of this Agreement, the Company shall, immediately and without
demand, make a mandatory prepayment on the Note in an amount sufficient to
reduce the outstanding balance under the Revolving Line of Credit to the
Maximum Outstanding Amount.
(b) If any Single Family House has not been sold in a bona fide sales
transaction to a Person other than an affiliate of the Company on or before the
date that is one (1) year after the date of execution of the Deed of Trust for
such Single Family House, the Company shall make a mandatory prepayment on the
Note in an amount equal to ten percent (10%) of the Deed of Trust Amount of
such Single Family House.
(c) If any Single Family House has not been sold in a bona fide sales
transaction to a Person other than an affiliate of the Company on or before the
date that is two (2) years after the date of execution of the Deed of Trust for
such Single Family House, the Company shall make a mandatory prepayment on the
Note in an amount equal to the amount of unpaid advances made under the
Revolving Line of Credit with respect to such Single Family House.
(d) Notwithstanding any provision of Section 1.4(b) or (c) above to
the contrary, upon the maturity of the Note (whether occurring by the terms of
the Note, by acceleration or otherwise) all unpaid amounts under the Note shall
become immediately due and payable upon such maturity date.
(e) The Company shall have the right to prepay without premium at any
time, upon two (2) Business Days written notice to the Bank, any amount owing
on the Note. Such voluntary prepayments shall be limited to one (1) per
calendar week. Any prepayment made pursuant to this Section 1.4 shall be
applied first to principal.
1.5 Interest. The Note shall bear interest as follows:
(a) Subject to the provisions of paragraphs (b) and (c) of
this Section 1.5, the Company shall pay interest on the outstanding
principal amount of the Note at one-half percent (1/2%) per annum over
the Base Rate.
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(b) In the event that, and for so long as any Event of Default
shall have occurred and be continuing, then and in any such event, the
outstanding principal amount of the Note shall bear interest at the
Maximum Rate.
(c) Notwithstanding anything contained herein to the contrary,
in no event shall the interest rate payable with respect to the Note
exceed the Maximum Rate.
1.6 Use of Proceeds. Advances under the Revolving Line of Credit
shall be used for Costs of Construction and for the acquisition of Inventoried
Lots, and no other purpose.
Section 2. Representations and Warranties
The Company represents and warrants to the Bank that, except as set
forth on Schedule 1 hereof:
2.1 Existence. The Company is a corporation duly organized, legally
existing and in good standing under the laws of the State of Nevada and duly
qualified as a foreign corporation in the State of Texas and in all other
jurisdictions wherein the property owned or the business transacted by it makes
such qualification necessary.
2.2 Authority. The Company is duly authorized and empowered to
create and issue the Note, and to execute and deliver the Security Instruments,
and all other instruments referred to or mentioned herein, and all corporate
action requisite for the due creation, issuance and delivery of the Note and
the due execution and delivery of the Security Instruments has been duly and
effectively taken. This Agreement, the Note, and the other Security
Instruments, when executed and delivered, will be valid and binding obligations
of the Company enforceable in accordance with their terms (subject to any
applicable bankruptcy, insolvency or other laws generally affecting the
enforcement of creditors' rights). This Agreement, the Note, and the other
Security Instruments do not violate any provisions of the Company's corporate
charter or bylaws or any contract, agreement, law or regulation to which the
Company is subject, and the same do not require the consent or approval of any
regulatory authority or governmental body of the United States of America or
any state.
2.3 Financial Condition. The Prior Financial Statements which have
been delivered to the Bank are complete and correct, have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, and fully and accurately reflect the financial
condition and results of the operations of the Company as at the dates and for
the periods stated. No material adverse change has occurred since
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the date of the Prior Financial Statements in the condition, financial or
otherwise, of the Company.
2.4 Full Disclosure. Neither this Agreement nor any certificate or
statement or any other data furnished by the Company or any of its officers in
connection with the negotiation of this Agreement or the transactions
contemplated hereby contains any untrue statement of a material fact or omits a
material fact known to the Company necessary to make the statements contained
herein or therein not misleading. There is no material fact known to the
Company which the Company has failed to disclose to the Bank in writing which
affects the business, operations, assets, prospects or condition, financial or
otherwise, of the Company.
2.5 Liabilities and Litigation. The Company has no liabilities, and
no litigation, legal or administrative proceedings, investigation or other
action is pending or, to the best knowledge of the Company, threatened against
or affecting the Company or any Lot or Improvements, and involving the
possibility of any judgment or liability not fully covered by insurance, or
which may affect any Lot or Improvements any other business or assets of the
Company or the Company's ability to carry on business as now conducted, except
as disclosed in the Prior Financial Statements and liabilities incurred in the
ordinary course of business. To the best knowledge of the Company, no unusual
or unduly burdensome restriction, restraint or hazard exists by contract, law,
governmental regulation or otherwise relative to the business or the assets of
the Company.
2.6 Titles and Encumbrances. The Company has good title to the Lots
and Improvements for which advances are made to it under the Revolving Line of
Credit, free and clear of all mortgages, liens and encumbrances, except those
referred to in Section 4.2 hereof.
2.7 No Default. No Default or Event of Default exists under this
Agreement and the Company is not in default in any material respect under any
contract, agreement or instrument to which the Company is a party or by which
the Company or any of its property may be bound, or in any respect under any
material contract, agreement or instrument to which the Company is a party or
by which the Company or any of its property may be bound.
2.8 Patents, etc. The Company has all patents, patent rights or
licenses, trademarks, trademark rights, trade names, trade name rights,
copyrights, permits and franchises which are required in order for it to
conduct its business as now conducted without known conflict with the rights of
others. The Company is not aware of any fact or condition which might cause
any of such foregoing not to be renewed in due course.
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2.9 Taxes. The Company has filed all federal and state income tax
returns which are required to be filed as of the date of this Agreement and has
paid all taxes shown on said returns and on all assessments received by it to
the extent such taxes have become due. Neither the Company nor any of such
returns is currently the subject of, or has been threatened with, an audit
relating to such tax matters.
2.10 Compliance. The Company has complied with all material valid and
applicable statutes, rules and regulations of each jurisdiction to which it may
be subject.
2.11 Margin Securities. The Company does not own any "margin
security" or "margin stock" as defined in Regulations G, U or X of the Board of
Governors of the Federal Reserve System (12 C.F.R. Parts 207, 221 and 224,
respectively).
2.12 Utilities, Access and Construction. All utility services,
including water supply, storm and sanitary sewer facilities, electric and
telephone facilities and related services necessary for the construction of the
Improvements on Lots currently owned by the Company, and the use thereof for
their intended purposes, are available for such Lots and Improvements. Each
Lot currently owned by the Company has adequate access to public streets and
roads. The Company has not made any oral or written contract or arrangement of
any kind, the performance of which by the other party thereto would give rise
to a lien on any Lot or Improvements of equal or greater priority than the
liens created under the Security Instruments.
Section 3. Affirmative Covenants
Until the Indebtedness of the Company to the Bank has been paid or while
the Bank has a commitment to the Company hereunder:
3.1 Reporting Requirements. The Company will promptly furnish to the
Bank from time to time the following information regarding the business affairs
and financial condition of the Company:
(a) as soon as possible and in any event within five (5) days
after the occurrence of each Default or Event of Default, the statement
of the chief financial officer of the Company setting forth details of
such Default or Event of Default and the action which the Company
proposes to take with respect thereto;
(b) as soon as available, and in any event within forty-five
(45) days after the end of each calendar month, the balance sheet of the
Company, as of the end of such month, the statement of income of the
Company for such month and the statement of cash flow of the Company for
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such month, all in reasonable detail and certified by the chief
financial officer of the Company;
(c) as soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Company, the balance sheet
of the Company as at the end of such year and the statement of income,
statement of cash flow and statement of equity and changes in financial
position of the Company for such year, together with comparative figures
for the preceding fiscal year, and certified, without qualification, by
independent certified public accountants acceptable to the Bank;
(d) as soon as available, and in any event within thirty (30)
days after the last day of each month, the Required Report;
(e) concurrently with the financial statements required by
Sections 3.1(b) and 3.1(c), a Certificate of Compliance;
(f) as soon as available and in any event within ninety (90)
days after the end of each fiscal year of Pacific USA, the balance sheet
of Pacific USA and its subsidiaries as at the end of such year and the
statement of income, statement of cash flow and statement of
shareholders' equity and changes in financial position of such companies
for such year, together with comparative figures for the preceding
fiscal year, and audited by independent certified public accountants
acceptable to the Bank;
(g) as soon as available, and in any event within two (2)
Business Days following the last day of each calendar week, a Borrowing
Base Report certified by the chief financial officer of the Company;
(h) concurrently with the financial statements required by
Section 3.1(c), the report of insurance required by Section 3.7;
(i) as soon as possible, and in any event, within five (5)
days of knowledge thereof, the notice of litigation required by Section
3.9 of this Agreement; and
(j) such other information the Bank may reasonably request
from time to time.
The Company shall use its best efforts to obtain, within one hundred
twenty (120) days after the end of each fiscal year of Pacific Electric Wire &
Cable Co., Ltd., the balance sheet of such
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company as at the end of such year and the statement of income, statement of
cash flow and statement of shareholders' equity and changes in financial
position for such company for such year, together with comparative figures for
the preceding fiscal year.
The Financial Statements and other reports shall be complete and
correct, and prepared in accordance with generally accepted accounting
principles consistently applied. Each balance sheet delivered to the Bank
shall include all contingent liabilities of the Company.
The Company grants to the Bank the right to send the Bank's own
representatives and/or employees to inspect, copy, and/or audit the books of
the Company.
3.2 Taxes and Other Liens. The Company will promptly pay and
discharge, prior to the date when any interest or penalty shall accrue thereon,
all taxes, assessments, governmental charges, impositions, water and sewer
rents, claims for labor, supplies, rent and other obligations which if unpaid,
might become a lien against the property of the Company. The Company will
promptly pay and discharge all taxes, assessments and other governmental
charges or levies imposed upon the Company on the income, profits or assets of
the Company or upon any of its property (real, personal or mixed) or upon any
part thereof, not later than the due date thereof. The Company shall not
place, or permit to be placed, a lien upon, or otherwise mortgage, hypothecate
or encumber all or any portion of the Lots or Improvements (other than vendor's
liens and purchase money liens reserved by suppliers of appliances and other
similar items placed in the Improvements and which are purchased by the Company
on open account) regardless of whether same is allegedly or expressly inferior
to the Bank's liens and, if any such lien is placed or asserted against any
portion of the Lots or the Improvements, the Company shall promptly, at its own
cost and expense, (i) pay the underlying claim in full, take such other action
so as to cause the same to be released, or bond around such claim to the Bank's
satisfaction and (ii) within five (5) days after the date such lien is
asserted, give the Bank notice of the placing or assertion of such lien. Upon
request of the Bank, the Company will furnish to the Bank satisfactory evidence
to indicate the Company's compliance with this Section 3.2.
3.3 Maintenance. The Company will maintain its corporate existence
and remain in or become a corporation in good standing in each jurisdiction in
which it is required to be qualified. The Company will maintain all patents,
trademarks, franchises and licenses necessary in its business, and comply with
all Legal Requirements, and it will maintain or cause to be maintained its
properties in good and workable condition at all times. The Company shall
continue to conduct, operate and manage its business substantially as its
business is currently being conducted, managed and operated.
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3.4 Further Assurances. The Company will promptly cure any defects
in the execution and delivery of this Agreement, the Note, the other Security
Instruments and any other instrument or instruments referred to or mentioned
herein. The Company will immediately execute and deliver to Bank upon request
all security agreements, financing statements, certificates of title, deeds of
trust, mortgages and other instruments to accomplish the covenants and
agreements of the Company under this Agreement and the other Security
Instruments. Upon the request of the Bank, the Company shall deliver to the
Bank:
(a) an endorsement from the Title Insurer in form and
substance satisfactory to the Bank (or other evidence satisfactory to
the Bank), reflecting that there have been no changes to the status of
title to a Lot or the Improvements thereon since the time the Title
Insurance with respect to such Lot or Improvements was issued;
(b) a certificate from the Architect stating that, in his or
their opinion, as the case may be, the construction of any Improvements
relating to any Lot theretofore performed has been in substantial
accordance with the Plans and all Legal Requirements;
(c) lien waivers or releases from all contractors contracting
directly with the Company in connection with the construction of any
Improvements; and
(d) such other certifications or evidence as the Bank may
request.
The Company shall, without request, on or before the date that is eleven (11)
months after the date of the issuance of each mortgagee's title insurance
policy binder on interim construction loan with respect to a Lot, and every six
(6) months thereafter until the Lot and Improvements thereon have been sold
pursuant to a Sales Contract, cause the Title Insurer to issue and deliver to
the Bank an extension of such title binder.
3.5 Performance of Obligations. The Company will pay the Note
according to the reading, tenor and effect thereof and will do and perform
every act and discharge all of the obligations provided to be performed and
discharged under this Agreement, the Note, the Security Instruments and any and
all of the instruments referred to or mentioned herein at the time or times and
in the manner therein and herein specified. The Company will perform all
obligations to be performed by it pursuant to the terms of each indenture,
agreement, contract, and other instrument by which the Company or its
properties are bound.
3.6 Payment of Expenses. The Company shall pay all out-of-pocket
costs and expenses, including, without limitation, all
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attorneys', accountants', engineers', architects', inspectors' and other
professionals' or contractors' fees and recording costs incurred by the Bank in
connection with the preparation, negotiation, execution and perfection of the
Security Instruments and the creation of the liens created thereby and the
monitoring and other administration of the Revolving Line of Credit. The
Company shall, upon request, promptly reimburse the Bank for all amounts
expended, advanced or incurred by the Bank (i) for fees of Appraisals
commissioned by the Bank, (ii) to satisfy any obligation of the Company under
the Security Instruments, (iii) to protect the lien or security interest of the
Bank on or in any of the Collateral, (iv) to collect payments due under the
Note or (v) to enforce the rights of the Bank under the Security Instruments or
any other instrument referred to or mentioned herein or executed or to be
executed in connection herewith, which amounts will include, without
limitation, all court costs, attorneys' fees, fees of auditors and accountants
and investigation expenses reasonably incurred by the Bank in connection with
any such matters, together with interest at the rate of ten percent (10%) per
annum, not to exceed the maximum non-usurious interest rate permitted by
applicable law, on each such amount from the date the same was expended,
advanced or incurred by the Bank until the date it is repaid to the Bank. A
certificate of the Bank setting forth any such amount shall be conclusive
evidence of the matters set forth therein in the absence of manifest error.
The Company shall pay all costs and expenses required to satisfy the conditions
of this Agreement and the other Security Instruments, including, without
limitation, taxes and recording expenses and fees and commissions, if any,
lawfully due to brokers in connection with the sale of any Lots or
Improvements. All amounts advanced in connection herewith shall be secured by
the Collateral.
3.7 Insurance. The Company will maintain with financially sound and
reputable insurers acceptable to the Bank, insurance with respect to its
properties and business against such liabilities, casualties, risks and
contingencies and in such types and amounts as is customary in the case of
corporations engaged in the same or similar businesses and similarly situated,
including, without limitation (a) a policy or policies of Builder's All Risk-
Completed Value fire and extended insurance, with coverage for the risks of
earthquake and collapse, covering all the Lots and Improvements for which
advances are made under the Revolving Line of Credit, (b) all insurance
required under any Deed of Trust, (c) flood insurance as may be necessary in
order for the Bank and the Revolving Line of Credit to be in full compliance
with applicable law, including the provisions of 42 U.S.C. Section 4012a and
all regulations promulgated thereunder, including a policy of flood insurance
issued pursuant to the Flood Protection Act of 1973, covering any Lot and the
Improvements constructed thereon lying within the 100-year flood plain, (d) an
owner's and contractor's liability policy or policies (including workmen's
compensation insurance) in such amounts and on such terms as the Bank may
approve or (e) from and after the date
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on which the Improvements are completed, fire and extended insurance coverage
for the full replacement cost of such Improvements (including contents
insurance). Annually, concurrently with delivery of the audited financial
statements, or upon the written request of the Bank, the Company will furnish
the Bank from time to time a summary of the insurance coverage of the Company
in form and substance satisfactory to the Bank and if requested will furnish
the Bank copies of the applicable policies. The Company will cause any and all
insurance policies insuring the Collateral, or any part thereof, to (a) name
the Bank as an additional insured and a loss payee thereunder, (b) with respect
to any hazard, casualty or Builder's All-Risk insurance maintained by the
Company on any Lot or Improvements, (i) cause the insurance policy relating to
any such insurance to name the Bank as an additional insured and loss payee and
(ii) pay, or cause the issuer of such policy to pay, the proceeds thereunder to
the Bank if, prior to the disbursement of any such proceeds, the Bank has
notified such issuer of the existence of a Default or an Event of Default, and
(c) contain a provision requiring at least ten (10) days prior notice of
cancellation to the Bank. As soon as possible, and in any event, within five
(5) days thereafter, the Company will notify the Bank of the cancellation of
any insurance coverage, whether or not the Bank is an additional insured or a
loss payee under the affected policy.
3.8 Certificate of Compliance. At the times set forth in Section
3.1(e) of this Agreement, the Company shall deliver to the Bank a certificate
in the form attached as Exhibit "E" hereto, which certificate shall be signed
by the chief financial officer of the Company and shall state that he has
reviewed the activities of the Company during the previous calendar month with
a view to determining whether the Company has kept, observed, performed and
fulfilled all of its obligations under this Agreement, the Note and the other
Security Instruments, and that the Company has kept, observed, performed and
fulfilled each and every covenant and condition contained in the Note, this
Agreement and the other Security Instruments and is not at the time in default
in the observance, performance or fulfillment of any such covenants and
conditions or if the Company shall be in default, specifying any such default,
the nature and status thereof, and what action, if any, has been taken to
remedy the default or defaults.
3.9 Litigation. As soon as possible and in any event, within five
(5) days of knowledge thereof, the Company shall give written notice to the
Bank of all litigation (other than litigation being defended by an insurance
carrier without reservation as to coverage claiming amounts within said
coverage) in which the Company may have liability in excess of $300,000.00 (or
as to which no specified amount of damages is alleged) and of all proceedings
before any governmental or regulatory agency affecting the Company.
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3.10 Security. The Indebtedness and obligations of the Company under
this Agreement, the Note and the other Security Instruments shall be secured by
a lien in favor of the Bank prior to any other lien or encumbrance on all of
the Company's right, title and interest in and to each Lot and the Improvements
thereon or to be constructed thereon, together with a security interest in
favor of the Bank with respect to the following items located on, used in
connection with, or arising out of each Lot and the Improvements thereon or to
be constructed thereon: (i) all equipment now owned or hereafter acquired; (ii)
all accounts receivable now or hereafter existing; (iii) all chattel paper,
documents and instruments now owned or hereafter acquired; (iv) all inventory
now owned or hereafter acquired; (v) all general intangibles now owned or
hereafter acquired; (vi) all Sales Contracts; (vii) all Construction Contracts;
and (viii) the proceeds, products and accessions of and to any and all of the
foregoing.
3.11 Residential Subdivisions. Advances may not be made with respect
to any Lot or the Improvements to be constructed thereon if such Lot is located
outside the greater metropolitan area of Houston, Dallas-Fort Worth or Austin,
or in any residential subdivision which the Bank disapproves in writing. The
Company shall not be entitled to any advances with respect to any Lot or
Improvements located in a residential subdivision if the Company has not
obtained, received and approved, in accordance with prudent and reasonable
industry standards, a Phase I Environmental Audit prepared with respect to such
Lot. If requested by the Bank, the Company shall deliver to the Bank a Phase I
Environmental Audit prepared with respect to any Lot, a Title Commitment with
respect to any Lot, legible copies of all documents, instruments and plats
described in each such Title Commitment and any other documents, instruments or
information which the Bank may request with respect to such Lot.
3.12 Surveys and Appraisals. As and when requested by the Bank, the
Company shall deliver to the Bank an Appraisal and/or a Survey with respect to
any Lot and the Improvements thereon.
3.13 Plans; Construction in Compliance with Plans. All Plans shall be
in accordance with sound engineering principles, and shall otherwise be
sufficient for the construction of the Improvements. All construction
performed on the Improvements will be performed in accordance with the Plans.
No construction of any Improvements shall be commenced or performed unless and
until (a) the Plans therefor have been submitted to and approved by all
requisite Governmental Authorities and are in compliance with all applicable
Legal Requirements, (b) all requisite Governmental Permits have been obtained,
(c) all applicable Legal Requirements have been fulfilled and (d) if requested
by the Bank, the Plans therefor have been approved by the Bank. No changes
shall be made in the Plans by the Company or any other person without the prior
written
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approval of all requisite Governmental Authorities and the prior compliance
with all applicable Legal Requirements and, if such changes will result in an
increase of the Sales Price of such Improvements of more than ten percent
(10%), without the prior written approval of the Bank.
3.14 Construction Contracts; Commencement of Construction. No
Construction Contract, or an affidavit or memorandum thereof, shall be entered
into or recorded, and no operations incident to the proposed Improvements shall
begin, until the applicable Deed of Trust has been executed, acknowledged and
recorded in the real property records of the county where such Improvements are
located. At the Bank's option and the Company's expense, the Bank's inspector
shall perform a site inspection of each Lot on the date the Deed of Trust with
respect to such Lot is recorded in order to determine the Company's compliance
or non-compliance with the provisions of this Section 3.14. If requested by
the Bank, prior to the commencement of the construction of any Improvements,
the Company will submit for the Bank's approval all Construction Contracts
relating to such Improvements.
3.15 Governmental Permits. All necessary Governmental Permits shall
be obtained in a timely manner in order to permit the expeditious commencement,
prosecution and completion of the construction of all Improvements. Upon the
Bank's request, the Company shall deliver to the Bank a copy of any such
Governmental Permit and evidence of the Company's compliance therewith.
3.16 Compliance with Legal Requirements. The Company shall promptly
and faithfully comply with, conform to and obey all present and future Legal
Requirements, whether or not the same shall necessitate structural changes in,
improvements to or interfere with the use or enjoyment of the Lots or
Improvements. Upon the request of the Bank, the Company shall furnish
satisfactory evidence to the Bank of its compliance with all Legal
Requirements.
3.17 Use Violations; Notifications. The Company shall not use,
maintain, operate or occupy, or allow the use, maintenance, operation or
occupancy of, the Lots or the Improvements in any manner which (a) violates any
Legal Requirements, (b) may be dangerous, unless safeguarded as required by
law, (c) constitutes a public or private nuisance, (d) makes void, voidable or
cancelable any insurance then in force with respect thereto or (e) makes void,
voidable, or cancelable any Governmental Permit. Upon the request of the Bank,
the Company shall furnish satisfactory evidence to the Bank of its compliance
with this Section 3.17. The Company will comply with and furnish the Bank with
any official notice or claim made by any Governmental Authority. The Company
will also promptly notify the Bank of any substantial fire, casualty, or notice
of any taking by eminent domain affecting any Lots or Improvements. Any such
event shall conclusively be deemed
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substantial if the cost of the repair or restoration of the property taken
shall exceed $10,000.
3.18 Construction of Improvements. The construction of Improvements
shall be commenced promptly after the acquisition by the Company of the Lot
upon which such Improvements are to be constructed. The construction of all
Improvements shall be prosecuted by the Company, with diligence, continually to
completion and shall be completed by the Company in a good and workmanlike
manner in accordance with the Plans therefor, all Legal Requirements, the other
provisions of this Agreement and the other Security Instruments and all usual
and customary construction and development standards relating to the
construction and operation of such Improvements, free and clear of all liens,
or claims for liens, other than the liens specifically permitted hereunder.
The Company shall file or record all requisite plats and other instruments
necessary or desirable in connection with the construction and operation of the
Improvements to the extent such plats and other instruments have not previously
been filed or recorded. At all times during construction of any Improvements,
the Company shall (a) comply strictly with any and all Legal Requirements
required to be complied with incidental to such construction, (b) deliver to
the Bank, or its representatives, immediately upon demand, counterparts of any
and all Construction Contracts executed in connection with the construction of
such Improvements and (c) permit the Bank to erect and maintain a sign in a
conspicuous location on one or more Lots stating that construction financing
has been furnished by the Bank. Within ten (10) days after the pouring of the
concrete slab within each Lot, the Company shall deliver to the Bank a form
slab survey showing the location of such slab, and whether or not the location
thereof is entirely within the property lines of such Lot and whether or not
the same encroaches upon, breaches or violates any building line, easement or
other restriction or encroachment (and if the location thereof is not entirely
within the property lines of such Lot or encroaches upon, breaches or violates
any building line, easement or other restriction or encroachment, then the
Company shall either (A) cure or remove such encroachment, breach or violation
or (B) deliver to the Bank, along with such Survey, appropriate waivers from
the appropriate persons).
3.19 Continuing Compliance with Requirements for Advances. All of the
conditions and requirements which need to be satisfied or fulfilled in order
for the Company to receive any advance under the Revolving Line of Credit shall
continue to be achieved, satisfied and fulfilled at all times during which such
Lot or Improvements are subject to a lien in favor of the Bank.
3.20 Correction Work. The Company shall immediately correct any
structural defect in any of the Improvements or any substantial or material
departure from the Plans therefor not approved by the Bank. Any advance under
the Revolving Line of Credit shall not
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constitute a waiver of the Bank's right to require compliance with this
covenant with respect to any such defects or departures from the Plans.
3.21 Continuous Construction of the Improvements.
(a) Once construction of any Improvements has commenced, construction
shall not cease prior to completion of such Improvements for any cause other
than a cause beyond the control of the Company unless consented to by the Bank.
For purposes of this Section 3.21 only, construction of any Improvements shall
be deemed complete if the only work remaining unfinished consists of
construction or installation of purchaser selected items and other items
customarily installed at the time of purchaser move-in.
(b) Once construction of any Improvements has commenced with respect
to any Lots under a Construction Contract, construction shall not cease with
reference to such Construction Contract prior to the substantial completion of
the work contemplated by such Construction Contract for any cause other than a
cause beyond the control of the Company unless consented to by the Bank.
Additionally, the time period commencing on the date construction of any such
Improvements relating to a particular Construction Contract ceases and the
first day of construction of such Improvements relating to such Lot commences
pursuant to another Construction Contract shall not exceed ninety (90) days for
any cause other than a cause beyond the control of the Company unless consented
to by the Bank.
3.22 Inspections.
(a) The Company shall permit the Bank, the Independent Supervising
Architect or any of the Bank's other representatives, to enter upon or into any
of the Lots or Improvements or any office or place of business of the Company
for the purpose of examining the Lots, the Improvements, any part thereof, all
materials to be used in construction thereof, all Plans and shop drawings, and
any of the Company's books and records including, but not limited to, the
Company's books and records in reference to such Lots, Improvements, the sale
and disposition thereof, the disposition of the proceeds thereof and for the
purpose of making copies of any such books and records. The Company shall
reimburse the Bank, on demand, for all expenses incurred by the Bank in
connection with any such inspections.
(b) If through such inspections or otherwise, the Bank, in comparing
(i) the actual amount of work completed on any Lot or Improvements to (ii) the
amount of work stated by the Company to have been completed on the Lot or
Improvements, and for which advances under the Revolving Line of Credit have
been made, determines that there exists a variance between (x) the work which
should have been completed for such Improvements and (y) the costs
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associated with such Improvements which were taken into account in determining
the Borrowing Base, and that such variance resulted in a Borrowing Base Value
which, in the Bank's judgment, is higher than that indicated by the work in
place, then the Bank shall determine a new Deed of Trust Amount for such
Improvements which shall be in effect until such variance terminates. The Bank
shall also have the right, at all times, to not make any initial advance under
the Revolving Line of Credit with respect to any Lot or Improvements if, in the
determination of the Bank in its sole discretion, there does not exist under
the Revolving Line of Credit unadvanced funds in an amount at least equal to
the amount necessary to complete all Single Family Houses for which advances
are outstanding under the Revolving Line of Credit.
3.23 Borrowing Base.
(a) Inclusion in Borrowing Base. Single Family Houses and Lots (each
such property to be included in the Borrowing Base pursuant to this Section
3.23 herein being called a "Specified Property") shall be included in the
Borrowing Base only upon the full compliance with and achievement of the
following conditions and requirements to the satisfaction of the Bank:
(i) All documents and instruments (in form and
substance satisfactory to the Bank) necessary or otherwise requested by
the Bank to create in favor of the Bank a lien against the Specified
Property, including without limitation the applicable Deed of Trust,
subject only to the Permitted Encumbrances, have been fully executed,
acknowledged, recorded or filed in the appropriate offices (where
applicable) and certified copies thereof delivered to the Bank by the
Title Insurer or its agent. The Company shall cause the recorded
originals of such instruments to be delivered to the Bank by the Title
Insurer or its agent immediately after recording.
(ii) The Title Insurance covering the Specified Property
has been issued by the Title Insurer and delivered to the Bank.
(iii) The Plans of the Specified Property have not been
disapproved by the Bank.
(iv) An Appraisal covering the Specified Property has
been delivered to the Bank and not disapproved by the Bank.
(v) The inclusion of the Specified Property in the
Borrowing Base will not give rise to a Default or an Event of Default
including, without limitation, any breach of any of the Company's
representations,
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warranties or covenants set forth in this Agreement or any of the other
Security Instruments.
(vi) The Company shall have delivered to the Bank such
other matters, certifications and assurances that the Bank may request.
(b) Determination of Borrowing Base; Borrowing Base Reports. At the
times required by Section 3.1(g) hereof, the Company shall deliver to the Bank
a report (a "Borrowing Base Report"), in form satisfactory to the Bank, which
sets forth the Aggregate Deed of Trust Amount, and all component parts giving
rise thereto, all as the last day of the immediately preceding calendar week.
For purposes of determining the Aggregate Deed of Trust Amount as of such date,
the Company shall use the procedures set forth in this Section 3.23.
Section 4. Negative Covenants
A deviation from the provisions of this Section 4 shall not constitute
an event of default under this Agreement if such deviation is consented to in
writing (in the manner hereinafter provided) by the Bank. In the absence of
such a written consent, so long as any part of the Indebtedness shall remain
unpaid or the Bank has a commitment to the Company hereunder:
4.1 Dividends and Redemptions. The Company will not declare or pay
dividends (other than a dividend payable solely in stock of the Company) or
make any other distribution on account of, or purchase, acquire, redeem or
retire any stock of the Company, whether now or hereafter outstanding, if such
declaration, payment, purchase, acquisition or redemption results or will
result in the occurrence of a Default or an Event of Default hereunder.
4.2 Encumbrances. The Company will not create, incur, assume or
permit to exist any mortgage, pledge, lien or encumbrance on any Lots or
Improvements, nor acquire or agree to acquire any Lots or Improvements under
any conditional sale agreement or title retention contract, except that the
foregoing restrictions shall not apply to:
(a) liens for taxes not yet due or which are being diligently
contested in good faith by appropriate proceedings;
(b) pledges or deposits in connection with or to secure
workmen's compensation, unemployment insurance, pensions or other
employee benefits;
(c) liens required by this Agreement;
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(d) Permitted Encumbrances;
(e) liens incurred in the ordinary course of the Company's
business which are not placed upon any Collateral; and
(f) lot option contracts and other similar ▇▇▇▇▇▇▇ money
contracts entered into by the Company in the ordinary course of its
business.
As to the liens and encumbrances permitted pursuant to paragraph (a)
above, the Company's right to contest diligently in good faith by appropriate
proceedings is conditioned upon the Company's setting up appropriate reserves
under generally accepted accounting principles and upon stay of levy and
execution thereon.
4.3 Sale of Assets.
(a) The Company will not sell, transfer, lease or otherwise dispose
of any Lots or Improvements on which the Bank has a lien unless the Company
complies with the provisions set forth in this Section 4.3.
(b) The Company shall be entitled to releases of Lots and
Improvements from the liens thereon in favor of the Bank (each such Lot and
Improvements released is herein called a "Released Portion") upon the sale of
such Released Portion pursuant to a Sales Contract, subject to and in
accordance with the following provisions:
(i) The Company shall have delivered to the Bank, for
payment against the principal amount outstanding under the Note, the
aggregate amount of advances under the Note made by the Bank with
respect to the Released Portion, together with all accrued and unpaid
interest thereon;
(ii) At the time of the release, no Default or Event of
Default exists;
(iii) The release of the Released Portion from the liens
thereon in favor of the Bank will not result or give rise to a Default
or an Event of Default;
(iv) The instruments or documents evidencing such
release shall be prepared at the cost of the Company and shall be in
form and substance satisfactory to the Bank; and
(v) Such other documentation and information requested
by the Bank in connection with such release shall be delivered to the
Bank.
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(c) Upon the occurrence of a Default or Event of Default, or in the
event the Bank is no longer allowing the Company to receive advances under the
Revolving Line of Credit, the Bank shall have the right, at its option and in
its sole discretion, to increase the amount required under Section 4.3(b)(i)
hereof to any amount up to the full sales price of the Released Portion set
forth in the applicable Sales Contract. All such amounts in excess of the
sales price of such Released Portion shall be applied as a prepayment against
the Note.
4.4 Utility Rights. The Company shall not, without the specific
written consent of the Bank, transfer, sell, assign, or convey, either in whole
or in part, for use in connection with other property, even though such
property may be owned by the Company or otherwise, (a) any of the rights to
utility availability applicable to any Lot or Improvements granted by any
municipal utility district, other Governmental Authority or any other person,
or (b) any other utility capacity which may in the future be available to any
Lot or Improvements.
4.5 Alterations. The Company shall not commit or permit any waste of
any Lot or Improvements and shall not, without the prior written consent of the
Bank, make or permit to be made, any alterations or additions to any Lot or
Improvements other than construction of the Improvements as contemplated
herein.
4.6 Restrictions on Speculative Homes, Model Homes, Single Family
Houses in Austin and Inventoried Lots.
(a) The Company shall not, at any time during the term of this
Agreement, allow:
(i) the aggregate Deed of Trust Amounts for all
Speculative Homes (regardless of location) to be greater than
$10,000,000.00;
(ii) the number of all single family houses (other than
model homes) under construction by, or which have been completed and are
still owned, by the Company (whether or not such houses constitute
Single Family Houses) for which the Company does not have an executed
Sales Contract to constitute more than sixty percent (60%) of the number
of all single family houses (other than model homes) under construction
by, or which have been completed and are still owned by, the Company;
(iii) more than ten (10) Speculative Homes in any
residential subdivision to be included in the Borrowing Base;
(iv) the number of Model Homes included in the Borrowing
Base to be more than sixteen (16), or the
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number of Model Homes in any residential subdivision included in the
Borrowing Base to be more than two (2);
(v) the aggregate Deed of Trust Amounts for all Single
Family Houses within the greater metropolitan area of Austin, Texas to
be greater than $5,000,000.00;
(vi) the aggregate Deed of Trust Amounts for all
Inventoried Lots to exceed $2,000,000.00; or
(vii) the value (calculated at the greater of cost or
appraised value) of all lots (other than lots upon which the Company
intends to promptly commence construction of a Single Family House)
owned by the Company (whether or not such lots constitute Inventoried
Lots) to exceed $4,000,000.00.
(b) In the event of a breach of any of the provisions of subsection
(a)(i), (v) or (vi) of this Section 4.6, the Company shall immediately make a
mandatory prepayment under Section 1.4 of this Agreement on the Note in an
amount necessary to bring the Company into compliance with the provisions of
this Section 4.6. For purposes of this Section 4.6, a Single Family House
shall be deemed to be a Speculative Home unless the Bank has received a copy of
an executed Sales Contract with respect to such Single Family House.
4.7 Limitation on Aggregate Deed of Trust Amount. The Company shall
not, at any time during the term of this Agreement, allow the Aggregate Deed of
Trust Amount to exceed the Maximum Outstanding Amount. In the event, at any
time, the Aggregate Deed of Trust Amount exceeds the Maximum Outstanding
Amount, the Company shall immediately make a mandatory prepayment under Section
1.4 of this Agreement on the Note in an amount necessary to bring the Company
into compliance with the provisions of this Section 4.7.
4.8 Flood Plain. No Lots or Single Family Houses shall be located
within the 100-year flood plain.
4.9 Financial Covenants. The Company shall not, at any time during
the term of this Agreement, allow:
(a) its Tangible Net Worth to be less than $9,000,000.00;
(b) its Debt to Worth Ratio to be greater than 5.0 to 1.0; or
(c) its capital expenditures during any fiscal year to exceed
$500,000.00 (exclusive of expenditures to acquire lots and construct single
family houses in the ordinary course of its business).
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4.10 Loans and Advances to Employees, Etc. The Company shall not at
any time allow more than an aggregate amount of $200,000.00 in loans and
advances to be outstanding to its employees, officers, directors and
shareholders.
4.11 Investments, Loans and Advances. The Company shall not make any
investment in, make any loan or advance to, or sell, transfer or otherwise
dispose of any assets to, any Person (including, without limitation Pacific USA
or any subsidiary or other affiliate of Pacific USA) except sales of assets
permitted by Section 4.3 of this Agreement and loans and advances permitted by
Section 4.10 of this Agreement. The Company will maintain separate bank
accounts for its operations, and will not commingle any of its funds with the
funds of any other Person.
4.12 Merger and Consolidation. The Company shall not merge or
consolidate with any Person, enter into any partnerships or joint ventures, or
acquire any other entity.
4.13 Restrictions on Undeveloped Land. The Company shall not own or
acquire any undeveloped land or undeveloped lots other than Lots and
Inventoried Lots.
Section 5. Commitment to Lend;
Conditions to the Bank's
Obligations to Make Advances
5.1 Bank's Commitment. Subject to the terms and provisions hereof,
the Bank agrees to lend to the Company, and the Company may borrow from the
Bank, from time to time during the term hereof, amounts not to exceed the
Maximum Outstanding Amount. The Company may borrow, repay and re-borrow
amounts under the Revolving Line of Credit as herein provided.
5.2 Borrowing Procedure.
(a) Each advance under this Agreement shall be in an aggregate
principal amount of at least $10,000.00. Any advance may be made directly to
an account maintained by the Company with the Bank or, if the Company so
requests and the Bank agrees, to any person on behalf of the Company, including
a Title Insurer or its agent acting as escrow agent in connection with the
purchase of a Lot. If requested by the Bank, the Company shall maintain a
special checking account with the Bank into which all advances hereunder shall
be deposited and against which only checks for Costs of Construction shall be
drawn.
(b) In order for the Company to obtain an advance hereunder, the
Company shall deliver to the Bank at least one (1) Business Day before the
requested date of such advance, a Loan Application in which the Company shall
specify or certify the following:
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(i) the amount of such advance requested;
(ii) the date of such requested advance, which shall be
a Business Day;
(iii) the Maximum Outstanding Amount, the Aggregate Deed
of Trust Amount and the outstanding balance of the Revolving Line of
Credit, all as of the date on which such notice is given;
(iv) that no Default or Event of Default is then
existing;
(v) that the advance by the Bank of the requested
advance will not result in or give rise to a Default or an Event of
Default; and
(vi) that the representations and warranties of the
Company contained in this Agreement are true and correct as of the date
on which such notice is given.
(c) Simultaneously with the funding by the Bank of the initial
advance with respect to any Lot or Improvements, the Company shall cause a
Title Insurer to (i) record in the Official Public Records of Real Property of
the appropriate county, a Deed of Trust with respect to such Lot and the
Improvements to be constructed thereon and (ii) issue the Title Insurance.
(d) (i) Simultaneously with the funding by the Bank of the
initial advance with respect to any Inventoried Lot, the Company shall
pay to the Bank a fee in the amount of one-fourth percent ( 1/4%) of the
Deed of Trust Amount of such Inventoried Lot.
(ii) Simultaneously with the funding by the Bank of the
initial advance with respect to any Lot or Improvements (including any
lot which was previously an Inventoried Lot), the Company shall pay to
the Bank a fee in the amount of one-fourth percent ( 1/4%) of the Deed
of Trust Amount of such Lot or Improvements.
(e) Notwithstanding any provision to the contrary contained in this
Agreement or in any other Security Instrument, in no event shall the Company be
entitled to an advance hereunder, and the Bank shall have no obligation to
advance any amount hereunder, unless at the time of such advance (i) the
Company is in full compliance with all of the provisions of this Section 5.2,
(ii) no Default or Event of Default is then existing and (iii) such advance
will not result in the outstanding balance of the Revolving Line of Credit
being in excess of the Maximum Outstanding Amount. Once the Bank has received
notice of a requested advance, such notice shall not thereafter be revocable.
The Bank shall not be required to make
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more than four (4) advances under the Revolving Line of Credit to the Company
during any calendar week.
5.3 Guidance Line. Notwithstanding anything contained in this
Agreement, the Note or any other Security Instrument to the contrary, the Bank,
in its sole discretion, shall have the right, prior to the initial advance
under the Revolving Line of Credit with respect to any Lot or Improvements, to
disapprove of the inclusion by the Company of such Lot or Improvements in the
Borrowing Base. Upon such disapproval, such Lot or Improvement shall be
ineligible for inclusion in the Borrowing Base and shall not be used in the
calculation of the Borrowing Base Value. In deciding whether to disapprove of
the inclusion of any Lot or Improvements in the Borrowing Base, the Bank may
consider, among other matters, (i) the condition, financial or otherwise,
existing or potential, of the Company, (ii) the existing or potential condition
of the single family house construction business generally, (iii) the type of
floor plan or specifications to which the Improvements are to be built and (iv)
the residential subdivision in which the Lot is to be located. The rights of
the Bank under this Section 5.3 are in addition to any other rights the Bank
may have under this Agreement or any other Security Instrument to not make
advances under the Revolving Line of Credit, including, without limitation, any
right that may exist as a result of the Company's failure to comply with the
provisions of Section 5.2 hereof.
5.4 Bank's Discretion. All conditions precedent to the inclusion of
any Lot or Improvements in the Borrowing Base are imposed solely and
exclusively for the benefit of the Bank and are to be enforced and monitored
solely and exclusively by the Bank in accordance with the provisions of the
Security Instruments. No Person (including the Company) other than the Bank
shall have any standing to require satisfaction of any such conditions. Any
and all of such conditions may be freely waived (in whole or in part) by the
Bank, at any time or times, at the Bank's sole discretion.
5.5 Involuntary Borrowings.
(a) If the Company shall fail, refuse or neglect to make any payment
or perform any act required by the Security Instruments, then at any time after
the Bank gives five (5) days written notice of the Bank's intention to take
such action (except in case the Bank determines that an emergency exists, or
its security is imminently threatened, in which event the Bank shall not be
required to give any notice to or demand upon the Company), without waiving or
releasing any other right, remedy or recourse the Bank may have because of
same, the Bank may (but shall not be obligated to) make such payment or perform
such act for the account of and at the expense of the Company, and shall have
the right to enter upon any Lot and into any Improvements thereon for such
purpose and to take all such action thereon and with respect to such Lots and
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Improvements as it may deem necessary or appropriate. If the Company shall
elect not to pay any real estate or personal property tax, or any other tax,
charge or assessment with respect to any Lot or any Improvements, the Bank may
do so in reliance on any ▇▇▇▇, statement or assessment procured from the
appropriate Governmental Authority or other issuer thereof without inquiring
into the accuracy or validity thereof. Similarly, in making any payments to
protect the security intended to be created by the Security Instruments, the
Bank shall not be bound to inquire into the validity of any apparent or
threatened adverse title, lien, encumbrance or claim before making an advance
for the purpose of preventing or removing the same.
(b) THE COMPANY HEREBY AGREES TO INDEMNIFY THE BANK FOR ALL LOSSES,
EXPENSES, DAMAGES, CLAIMS AND CAUSES OF ACTION, INCLUDING ATTORNEYS' FEES,
INCURRED OR ACCRUING BY REASON OF ANY ACTS PERFORMED BY THE BANK PURSUANT TO
THE PROVISIONS OF THIS SECTION 5.5 OR BY REASON OF ANY OTHER SIMILAR PROVISION
IN ANY OTHER SECURITY INSTRUMENT. ALL SUMS PAID BY THE BANK PURSUANT TO THIS
SECTION 5.5 OR SUCH OTHER PROVISIONS OF THE SECURITY INSTRUMENTS, AND ALL OTHER
SUMS EXPENDED BY THE BANK TO WHICH IT SHALL BE ENTITLED TO BE INDEMNIFIED,
TOGETHER WITH INTEREST THEREON AT THE MAXIMUM RATE, SHALL CONSTITUTE ADVANCES
UNDER THE REVOLVING LINE OF CREDIT, SHALL BE SECURED BY THE LIENS CREATED BY
THE SECURITY INSTRUMENTS AND SHALL BE PAID BY THE COMPANY TO THE BANK
IMMEDIATELY UPON DEMAND.
Section 6. Events of Default and Remedies
6.1 Events of Default. Any of the following events which shall occur
and be continuing shall be considered an Event of Default as that term is used
herein:
(a) The Company does not pay when due any payment, whether a
regularly scheduled installment or a mandatory prepayment, required on
the Note or any other Indebtedness, if such payments remains unpaid five
(5) days after the Bank gives written notice thereof to the Company;
(b) The Company does not pay within sixty (60) days after the
originally scheduled maturity (but after expiration of any grace period
applicable to such maturity) or when due whether by acceleration or
otherwise of all or any part of any Debt of the Company to any other
Person, except that the foregoing shall not apply to indebtedness on
open account which is being disputed in good faith by the Company;
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(c) The Company is unable to satisfy any condition of the
right to receive an advance hereunder for a period in excess of thirty
(30) calendar days; and
(d) The Company does not comply with or fails in the
performance of any covenant contained in Section 3.1(a), 4.6, 4.9 or
4.10 of this Agreement;
(e) The Company does not comply with or fails in the
performance of any other covenant contained in this Agreement or in any
of the other Security Instruments to be kept or performed by the Company
if such failure continues for fifteen (15) days after the Bank gives
written notice thereof to the Company;
(f) Any representation or warranty made by the Company herein
or in any of the other Security Instruments proves to have been untrue
in any material respect as of the date hereof, or any representation,
statement (including financial statements), certificate or data
furnished or made by the Company (or any officer, accountant or attorney
of the Company) hereunder proves to have been untrue in any material
respect, as of the date as of which the facts therein set forth were
stated or certified, and the same is not remedied, to the Bank's
satisfaction, in its sole discretion, within fifteen (15) days after the
Bank gives written notice thereof to the Company;
(g) The Company shall (i) discontinue business, (ii) make a
general assignment for the benefit of creditors, (iii) apply for or
consent to the appointment of a receiver, a trustee or liquidator of
itself or of all or a substantial part of its assets, (iv) be
adjudicated a bankrupt or insolvent, (v) file a voluntary petition in
bankruptcy or file a petition or answer seeking reorganization or an
arrangement with creditors or seeking to take advantage of any other law
(whether federal or state) relating to relief of debtors, or admit (by
answer, by default or otherwise) the material allegations of a petition
filed against it in any bankruptcy, reorganization, arrangement,
insolvency or other proceedings (whether federal or state) relating to
relief of debtors, (vi) suffer or permit to continue unstayed and in
effect for thirty (30) consecutive days any judgment, decree or order,
entered by a court of competent jurisdiction, which approves a petition
seeking reorganization of it or appoints a receiver, trustee or
liquidator of it or of all or a substantial part of its assets, or (vii)
take or omit to take any action for the purpose or with the result of
effecting or permitting any of the foregoing;
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(h) The Company shall discontinue construction of any of the
Improvements or not carry on the construction of all of the Improvements
with reasonable dispatch and without interruption to such an extent that
it is unlikely, in the Bank's sole judgment, that the Improvements will
be completed within a reasonable period of time following the
commencement of construction thereof; or
(i) The Company is unable to satisfy any condition of the
right to receive an advance hereunder for in excess of thirty (30)
calendar days.
6.2 Remedies. Upon the happening of any Default, at the option of
the Bank, without notice to the Company, any commitment hereunder shall be
canceled. Upon the happening of an Event of Default specified in Section
6.1(g), immediately and without notice, and upon the happening of any other
Event of Default specified in Section 6.1, at the option of the Bank, without
notice to the Company, the entire aggregate principal amount of the Note then
outstanding hereunder and the interest accrued thereon shall thereupon become
and be immediately due and payable without notice and without presentment,
demand, protest, notice of protest or other notice of default or dishonor of
any kind, all of which are hereby expressly waived by the Company. In addition
to all other remedies provided herein, the Bank may, at its option, (1)
institute appropriate proceedings to specifically enforce performance hereof,
(2) institute proceedings to appoint a receiver, as a matter of strict right
without regard to the solvency of the Company, for the purpose of preserving
the Lots and Improvements, or any part thereof, prevent waste, and to protect
all rights accruing to the Bank by virtue of this Agreement and the other
Security Instruments, (3) make any and all further improvements, whether on-
site or off-site, as may be determined by the Bank for the purpose of
completing the development and construction of the Improvements in accordance
with this Agreement and (4) exercise any and all other rights, remedies and
recourses granted under the Security Instruments or otherwise now or hereafter
existing, in equity, at law, by virtue of statute or otherwise. All expenses
incurred in connection with the appointment of a receiver, or in protecting,
preserving or improving the Lots or Improvements, or any part thereof, shall be
chargeable against the Company and shall be enforced as a lien against the Lots
and Improvements.
Section 7. Additional Agreements
7.1 Change of Ownership or Control. If at any time while the Note
shall be outstanding or the Bank has a commitment hereunder, Pacific Realty
Group shall own less than all of the issued and outstanding capital stock of
the Company, a "Change of Ownership or
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Control" shall be deemed to have occurred. The Company shall immediately give
written notice to the Bank upon obtaining knowledge of an event which is or
would constitute the occurrence of a Change of Ownership or Control. The Bank
shall, upon the happening of a Change of Ownership or Control, have the
privilege of declaring the Note to be due and payable on a date not earlier
than thirty (30) days from the date of the exercise of said privilege. The
Note shall thereupon become due and payable on the date specified in the notice
sent to the Company by the Bank including the principal amount thereof plus
accrued interest thereon to the accelerated maturity date and any amounts owed
by the Company to the Bank pursuant to this Agreement or any of the other
Security Instruments.
7.2 Change in Management. If at any time while the Note shall be
outstanding or the Bank has a commitment hereunder, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ceases to
hold his current position with the Company or to perform the functions and
services for the Company which he currently performs, other than as a result of
a dismissal of ▇▇. ▇▇▇▇▇▇▇ by the Company for cause, the Company shall
immediately give written notice of such occurrence to the Bank and the Bank
shall, upon such an occurrence, have the privilege of declining to make any
further advances under the Revolving Line of Credit other than advances with
respect to Lots and Improvements thereon, the initial advances for which were
made by the Bank prior to such occurrence.
Section 8. Closing
The commencement of advances pursuant to the Revolving Line of Credit
contemplated hereby shall be subject to the satisfaction of the following
conditions:
8.1 Counsel to Bank. All legal matters incident to the transactions
herein contemplated shall be satisfactory to Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇,
L.L.P., counsel to the Bank.
8.2 Required Documents. The Bank shall have received executed copies
of:
(a) this Agreement, with all exhibits;
(b) the Note;
(c) a certificate of the Secretary of the Company certifying
(1) the Certificate of Incorporation of the Company, (2) the Bylaws of
the Company and (3) the resolutions of the Board of Directors of the
Company, in form and substance satisfactory to the Bank, with respect to
authorization of this Agreement, the Note and the other Security
Instruments and the other corporate
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instruments provided for herein, which certificate shall also contain
the names of officers of the Company authorized to sign this Agreement,
the Note, the other Security Instruments, and certificates related
thereto together with the true signatures of such officers, all of which
shall be in form and substance satisfactory to the Bank;
(d) a Notice of Final Agreement;
(e) a written legal opinion from attorneys satisfactory to the
Bank, which legal opinion shall cover such matters, and be in a form, as
required by the Bank and its counsel;
(f) such Certificates of Insurance as the Bank may require;
and
(g) such other documents and instruments as the Bank may
require.
Section 9. Miscellaneous
9.1 Survival of Various Matters. All representations and warranties
of the Company herein, and all covenants and agreements herein not fully
performed before the date of this Agreement, shall survive the execution of
this Agreement, delivery of the Note to the Bank and the making of advances
hereunder.
9.2 Notices. All notices, requests and communications hereunder
shall be in writing and shall be sufficient in all respects if delivered or
sent by registered or certified mail to the Company or the Bank, as the case
may be, at their respective addresses set forth on the first page of this
Agreement. Any party may, by proper written notice hereunder to the other
party, change the address to which notices shall thereafter be sent to it.
9.3 Successors and Assigns. All covenants and agreements herein
contained by or on behalf of the Company shall bind its successors and assigns
and shall inure to the benefit of the Bank and its successors and assigns.
9.4 Renewals. All provisions of this Agreement relating to the Note
shall apply with equal force and effect to each and all promissory notes
hereafter executed which in whole or in part represent a renewal, extension or
rearrangement of any part of the Indebtedness originally represented by the
Note.
9.5 No Waiver. No course of dealing on the part of the Bank or its
officers or employees, or any failure or delay by the Bank with respect to
exercising any right, power or privilege of the
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Bank under this Agreement, the Note, or the other Security Instruments, shall
operate as a waiver thereof. The rights and remedies of the Bank under this
Agreement, the Note, and the other Security Instruments 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. No advance under the Revolving Line
of Credit shall constitute a waiver of any of the conditions of the Bank's
obligation to make further advances nor, in the event the Company is unable to
satisfy any such condition, shall any such waiver have the effect of precluding
the Bank from thereafter declaring such inability to be an Event of Default as
herein provided.
9.6 Governing Law. This Agreement and the Note which may be issued
hereunder shall be deemed to be contracts made under and shall be construed in
accordance with and governed by the laws of the State of Texas.
9.7 Non-Subordination. The Note shall never be in a position
subordinate to any indebtedness owing to any other creditor of the Company,
except to the extent that such other creditor may hold a lien or liens on
specific assets of the Company which do not constitute Collateral, or with the
knowledge and written consent of the Bank.
9.8 Consent to Deviation. The procedure to be followed by the
Company to obtain the consent of the Bank to any deviation from the negative
covenants in Section 4 shall be as follows:
(a) The Company shall send a written notice to the Bank
setting forth (i) the covenant(s) of Section 4 relevant to the matter,
(ii) the requested deviation from the covenant(s) involved, and (iii)
the reason for the Company's request to deviate from the covenant(s);
and
(b) The Bank, within ten (10) days after receiving the
request, shall send a written notice to the Company, signed by the
President, Vice-President or other senior officer of the Bank,
permitting or refusing the request. Failure to send said notice in such
time period shall be deemed refusal of said request.
9.9 Exhibits. The Exhibits attached to this Agreement are
incorporated herein for all purposes, and shall be considered a part of this
Agreement. Those exhibits are: Form of Note - Exhibit "A"; Form of Initial
Deed of Trust - Exhibit "B"; Form of Supplement - Exhibit "C"; Form of Loan
Application -
Exhibit "D"; and Form of Certificate of Compliance - Exhibit "E".
9.10 Payment on Non-Business Days. Except to the extent otherwise set
forth herein, whenever (i) any payment to be made hereunder or under the Note
or (ii) any certificate, report or
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financial statement is due on a day that is not a Business Day, such payment
shall be made or such document shall be delivered on the next succeeding
Business Day and such extension of time shall be included in the computation of
interest due with any such payment.
9.11 Severability. In the event any one or more of the provisions
contained in this Agreement, the Note, or the other Security Instruments, or in
any other instrument referred to herein or executed in connection with or as
security for the Note shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, the Note, or the other
Security Instruments, or any other instrument referred to herein or executed in
connection with or as security for the Note. Furthermore, in lieu of such
invalid, illegal or unenforceable provision, there shall automatically be added
a provision as similar in terms to such invalid, illegal or unenforceable
provision as may be possible and as may be valid, legal and enforceable.
9.12 Controlling Document. Should a direct conflict exist between the
specific terms of the Note, this Agreement or any of the other Security
Instruments, the Note shall control over this Agreement and the other Security
Instruments, and this Agreement shall control over the other Security
Instruments and the exhibits attached to this Agreement.
9.13 Savings Clause. Nothing contained in this Agreement or in the
Note or in any other agreement or undertaking relating hereto shall be
construed to obligate the Company, under any circumstances whatsoever, to pay
interest in excess of the Maximum Rate. In the event that any sums received
from the Company are at any time under applicable law deemed or held to provide
a rate of interest in excess of the Maximum Rate, the effective rate of
interest on the loans hereunder shall be deemed reduced to and shall be the
Maximum Rate and the Company and all sureties, endorsers and guarantors shall
accept as their sole remedy under such circumstances either the return of any
sums of interest which may have been collected and which produced a rate in
excess of the Maximum Rate, or the application of those sums as a credit
against the unpaid principal amount of the Indebtedness, whichever remedy may
be elected by the Bank. In addition, in the event that the Note is prepaid or
the maturity of the Note is accelerated by reason of election by the Bank
hereunder, then all unearned interest shall either be canceled or, if
theretofore paid, shall either be returned to the Company or credited on the
unpaid principal amount due under the Note, whichever action may be elected by
the Bank.
9.14 Participations and Assignments. The Bank shall have the right,
at its sole discretion, at any time and from time to time,
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to assign its entire interest in, or to invite any Person to participate in
portions of, the Revolving Line of Credit.
9.15 Set Off. Upon the occurrence and during the continuance of any
Default, the Bank is hereby authorized at any time and from time to time,
without notice to the Company (any such notice being expressly waived by the
Company) to apply an administrative hold or similar action against any and all
deposits (general or special, time or demand, provisional or final) at any time
held by the Bank for the credit or the account of the Company, it being agreed
that the Company shall not be entitled to access to any of such deposits until
such time, if at all, that such Default is cured. In addition to the
foregoing, upon the occurrence and during the continuance of any Event of
Default, the Bank is hereby authorized at any time and from time to time,
without notice to the Company (any such notice being expressly waived by the
Company), 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 Bank to or for the credit or the account of the Company
against any and all of the Indebtedness, irrespective of whether or not the
Bank shall have made any demand under this Agreement and although such
obligations may be unmatured. The Bank agrees promptly to notify the Company
after any such set off and application made by the Bank, provided that the
failure to give such notice shall not affect the validity of such set off and
application. The rights of the Bank under this Section 9.15 are in addition to
other rights and remedies (including, without limitation, other rights of set
off) which the Bank may have.
9.16 Form and Substance of Surveys, Appraisals and Other Documents.
All proceedings taken in connection with the transactions provided for herein,
such as the preparation of Surveys, Appraisals and other documents required or
contemplated by this Agreement, the other Security Instruments or otherwise,
and the persons responsible for the execution and preparation thereof, all
subcontractors, sureties, insurers and the forms of Construction Contracts,
Sales Contracts and policies of insurance shall be satisfactory in form,
substance and coverage to the Bank and the Company shall deliver to the Bank
certified copies of all documents which it may request in connection herewith.
9.17 Concerning the Revolving Line of Credit. The Revolving Line of
Credit is (i) a "Business Loan" as that term is used in the Depository
Institutions Regulation and Monetary Control Act of 1980, as amended, and (ii)
for business, commercial, investment or similar purposes and not primarily for
personal, family, household or agricultural use, as such terms are used in
Chapter One of the Texas Credit Code.
9.18 Concerning Representations and Warranties. No investigation at
any time made by or on behalf of the Bank shall diminish its rights to rely
upon the representations and warranties
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contained herein. All statements contained in any certificate or other
instrument delivered by the Company or by any Person on behalf of the Company
under or pursuant to this Agreement or in connection with the transactions
contemplated hereby, shall constitute additional representations and warranties
made by the Company. The representations and warranties contained herein shall
be true and correct at all times during the term hereof including, without
limitation, at the time each Financial Statement is submitted by the Company to
the Bank and at the time of each advance hereunder.
9.19 Renewal and Extension of Existing Indebtedness. The Company
hereby acknowledges that a portion of the aggregate principal amount the Bank
is advancing to the Company pursuant to the Note constitutes a renewal and
rearrangement of the indebtedness of the Company to the Bank arising pursuant
to the Prior Loan Agreement, and all the terms and conditions of this Agreement
shall hereafter apply to all indebtedness arising pursuant to the Prior Loan
Agreement, provided that all liens, mortgages and security interests held by
the Bank securing any of said indebtedness, whether directly or indirectly, are
hereby ratified, renewed, extended and carried forward and all such security
shall continue in full force and effect as security for payment of the
Indebtedness and in the performance of all obligations pursuant to this
Agreement and the other Security Instruments.
9.20 No Oral Agreements. THIS LOAN AGREEMENT AND THE OTHER SECURITY
INSTRUMENTS REPRESENT THE FINAL AGREEMENTS BETWEEN THE BANK AND THE COMPANY AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE BANK AND THE COMPANY. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE BANK AND THE COMPANY.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the day and year first above written.
NEWMARK HOME CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Title: SVP
--------------------------
BANK ONE, TEXAS, N.A.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Title: Vice President
--------------------------
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