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EXHIBIT 10.9
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CONSTRUCTION LOAN AGREEMENT
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April 23, 1997
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Between
BANKTEXAS N.A.,
as Lender
and
NEWMARK HOMES, L.P.,
a Limited Partnership,
as Borrower
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CONSTRUCTION LOAN AGREEMENT
This LOAN AGREEMENT (the "Agreement") dated as of April 23, 1997,
between NEWMARK HOMES, L.P., a Limited Partnership ("Borrower"), and BANKTEXAS
N.A. ("Lender").
ARTICLE I.
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings assigned to them:
"Advance" shall mean a disbursement by Lender, to or for the benefit
or account of Borrower, of any of the proceeds of the Loan.
"Affidavit of Borrower" shall mean a sworn affidavit of Borrower, in
form and substance satisfactory to Lender, to the effect that all statements,
invoices, bills, and other expenses incident to the acquisition of a Lot and
the construction of the Improvements incurred to a specified date, whether or
not specified in the Approved Budget, have been paid in full, except for (a)
amounts retained by Borrower pursuant to the terms of any Construction
Contract, and (b) items to be paid from the proceeds of an Advance then being
requested by Borrower or in any other manner satisfactory to Lender.
"Agreement" shall mean this Loan Agreement, as the same may hereafter
be modified, amended, supplemented and/or restated.
"Application for Advance" shall mean a written application by Borrower
to Lender, in form and substance satisfactory to Lender, requesting an Advance
for the payment or reimbursement of Approved Expenses.
"Approved Budget" shall mean a budget or cost itemization on a Unit
by Unit basis, prepared by Borrower, specifying the cost by line item of (a)
all costs and expenses approved by Lender to be advanced to or on behalf of
Borrower for the purchase of a Lot, (b) all labor, materials, and services
necessary for the construction of the Improvements on such Lot in accordance
with the Plans and all Governmental Requirements, and (c) all other expenses
anticipated by Borrower incident to the Loan, the acquisition of the Lot, and
the construction of the Improvements thereon.
"Approved Expenses" shall mean all reasonable costs and expenses
incurred by Borrower for the acquisition of the Lots, the construction of the
Improvements and the borrowing of the Loan, but only to the extent and for no
more than the respective amounts allocated to each line item in the Approved
Budget; provided, however, if there is a "Contingency" line item in the
Approved Budget, Borrower shall, with the prior written approval of Lender, be
entitled to draw from such "Contingency" line item to cover cost overruns.
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"Architectural Contracts" shall mean each contract entered into by
Borrower relating to the design of the Improvements.
"Available Facility" shall have the meaning given such term in Exhibit
"A" attached hereto.
"Borrower's Deposit" shall have the meaning given such term in Section
2.7.
"Business Day" shall mean any day other than a Saturday or Sunday on
which national banking associations in Houston, Texas are open for business.
"Code" shall mean the Uniform Commercial Code of Texas, as amended.
"Collateral" shall mean the Lots, the Improvements and any other
collateral which may, from time to time, secure the Loan.
"Commitment Expiration Date" shall mean May 31, 1998; provided,
however, if Lender has made at least one Advance with respect to a particular
Unit(s) prior to the Commitment Expiration Date, the Commitment Expiration Date
for such Unit(s) only shall be deemed extended to the date 270 days from the
date of the Initial Advance for such Unit(s), but in no event beyond the
Maturity Date.
"Construction Contracts" shall mean each contract entered into by
Borrower relating to the construction of the Improvements.
"Contractor" shall mean each person with whom Borrower enters into a
contract relating to the construction of the Improvements.
"Contracts of Purchase" shall mean any and all agreements now existing
or hereafter created relating to the purchase of Lots by Borrower.
"Contracts of Sale" shall mean any and all agreements now existing or
hereafter created relating to the sale of Units by Borrower.
"Debt" shall mean, at any date, all liabilities and contingent
liabilities which would be reflected on a balance sheet of Borrower prepared as
of such date in accordance with generally accepted accounting principles.
"Debtor Relief Laws" shall mean all applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization or similar debtor relief Laws affecting the rights of creditors
generally.
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"Event of Default" shall mean any of the events specified in Section
8.1 of this Agreement, provided there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "Default" shall mean
any such event whether or not any such requirement has been satisfied.
"Financial Statements" shall mean such balance sheets, profit and loss
statements, cash flow statements, changes in financial condition, schedules of
sources and applications of funds, and other financial information of Borrower
as may from time be required pursuant to any of the Loan Papers. Such
Financial Statements shall be prepared in accordance with generally accepted
accounting principles, consistently applied, and shall, without limitation,
disclose all contingent liabilities.
"Financing Statements" shall mean the Form UCC-1 Code financing
statements to perfect all security interest securing the Loan, to be filed with
the appropriate offices for the perfection of a security interest in any of the
Collateral.
"Funding Date" shall mean, with respect to each Advance, the date on
which such Advance is or is to be funded by Lender to or on behalf of Borrower.
"Governmental Authority" shall mean the United States, the State, the
County, the City, or any other political subdivision in which the Project is
located or exercising jurisdiction over Borrower or all or any portion of the
Project.
"Governmental Requirements" shall mean all Laws of any Governmental
Authority applicable to Borrower, or all or any portion of the Units.
"Guarantor" INTENTIONALLY OMITTED
"Guaranty" INTENTIONALLY OMITTED
"Highest Lawful Rate" shall mean at the particular time in question
the maximum rate of interest which, under Applicable Law, Lender is then
permitted to charge on the Indebtedness. If the maximum rate of interest
which, under Applicable Law, Lender is permitted to charge on the Indebtedness
shall change after the date hereof, the Highest Lawful Rate shall be
automatically increased or decreased, as the case may be, from time to time as
of the effective time of each change in the Highest Lawful Rate without notice
to Borrower.
"Improvements" shall mean single-family detached housing units to be
constructed upon Lots, including all utility hookups, landscaping and finish
work required by the Plans.
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"Indebtedness" shall mean all present and future obligations,
indebtedness and liabilities, and all renewals and extensions of all or any
part thereof, of Borrower to Lender arising from, by virtue of, or pursuant to
any of the Loan Papers, including the Note and any and all renewals and
extensions thereof, or any part thereof, or future amendments thereto, all
interest accruing on all or any part thereof and the Origination Fee,
attorney's fees, appraisal fees, environmental inspection fees and other costs
reasonably incurred in the enforcement or the collection of all or any part
thereof, whether such obligations, indebtedness and liabilities are direct,
indirect, fixed, contingent, joint, several, or joint and several.
"Inspector" shall mean such architect or other person as from time to
time may be designated by Lender to inspect the Work on behalf of the Lender.
"Insurance Policies" shall mean the insurance policies required by
Section 5.14.
"Intangible Assets" shall mean those assets of Borrower which are (i)
deferred assets, other than prepaid insurance and prepaid taxes; (ii) patents,
copyrights, trademarks, tradenames, franchises, goodwill, and other similar
intangibles, and (iii) unamortized debt discount and expenses.
"Laws" shall mean all constitutions, treaties, statutes, laws,
ordinances, regulations, orders, writs, injunctions, or decrees of any
Governmental Authority.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give or not
to give any of the foregoing), any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement or other similar form of public notice under the
Laws of any jurisdiction.
"Litigation" shall mean any proceeding, claim, lawsuit and/or
investigation conducted by or before any court, governmental board or agency or
any other judicial authority.
"Loan" shall mean the loan made or to be made by Lender to Borrower as
described in this Agreement in a total principal amount not to exceed the
Available Facility, together with such other funds which Lender deems necessary
to advance to maintain and protect the Units and to preserve and protect
Lender's Liens against the Collateral.
"Loan Papers" shall mean this Agreement, the Note, the Security
Documents, and all other documents executed by Borrower pursuant to or in
connection with the terms of this Agreement.
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"Lot" shall mean a subdivided parcel in a platted subdivision on which
single-family detached residential units are to be constructed.
"Maturity Date" shall mean the date on which the total outstanding
Indebtedness evidenced by the Note shall be due and payable in full. Unless
earlier accelerated pursuant to the terms of the Loan Papers, the Maturity Date
shall be March 5, 1999.
"Maximum Amount" shall mean the maximum amount of interest which,
under Applicable Law, Lender is permitted to charge on the Indebtedness.
"Mortgage" shall mean that certain Master Form Deed of Trust and
Security Agreement of even date herewith from Borrower to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as
trustee, as hereinafter supplemented, extended and amended, pursuant to which
Borrower shall grant to Lender a Lien on the Units to secure the Indebtedness,
subject only to the Permitted Liens.
"Note" shall mean that certain Promissory Note of even date herewith
in the original principal amount of Ten Million and No/100 Dollars
($10,000,000.00) executed by Borrower and payable to the order of Lender,
evidencing loans made hereunder for the acquisition of Lots and the
construction of Improvements thereon.
"Origination Fee" shall mean the fee described in Section 3.3.
"Permitted Liens" shall mean the following:
(a) Encumbrances against a Unit consisting of zoning ordinances,
restrictive covenants, easements and other restrictions on the
use of real property approved by Lender in writing;
(b) The following, if the validity or amount thereof is being
contested in good faith and by appropriate and lawful
proceedings and so long as (i) levy and execution thereon have
been stayed and continue to be stayed, (ii) they do not in the
aggregate materially detract from the value of the Unit, or
materially impair the development or use of the Unit for its
intended purposes, (iii) Borrower shall furnish to Lender an
indemnity bond with corporate surety satisfactory to Lender or
other security acceptable to Lender in an amount equal to 150%
of the amount being contested plus a reasonable additional sum
to cover possible costs, interest, and penalties, (iv) no
contested Lien shall appear as an exception on the Title
Policy, and (v) Borrower shall pay such Tax, charge or claim
before any property subject thereto shall be sold to satisfy a
Lien; (A) claims and Liens for Taxes not yet
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due and payable; (B) claims and Liens of mechanics,
materialmen, warehousemen, or carriers, or other like Liens;
and (C) adverse judgements on appeal;
(c) Liens securing the Indebtedness; and
(d) Those easements, encumbrances and other exceptions to title
described or to which reference is made in the Title Policy.
"Plans" shall mean the final working drawings and specifications for
the construction of the Improvements on a given Lot which have been approved in
writing by Lender, as the same may be modified with the prior written approval
of Lender.
"Security Documents" shall mean the Mortgage and such other
instruments securing all or any portion of the Indebtedness as shall, from time
to time, be executed and delivered by Borrower to Lender pursuant to this
Agreement.
"Subcontractor" shall mean each person engaged directly by a
Contractor, or any person engaged directly or indirectly by any person engaged
directly by the Contractor, to provide labor and/or materials for the
construction of the Improvements or otherwise in connection with the Work.
"Tangible Assets" shall mean, as of any date, the aggregate book value
of the assets which would be reflected on a balance sheet of Borrower as of
such date in accordance with generally accepted accounting principles, less the
aggregate book value of Borrower's Intangible Assets as of such date.
"Tangible Net Worth" shall mean, as of any date, the amount by which
Borrower's Tangible Assets as of such date exceed Borrower's Debt as of such
date.
"Taxes" shall mean all taxes, assessments, fees or other charges from
time to time or at any time imposed by any Laws or by any Governmental
Authority, except income and franchise taxes of Lender.
"Title Company" shall mean a title company acceptable to Lender.
"Title Policy" shall mean a Mortgagee's Policy of Title Insurance or a
Binder for a Mortgagee's Policy of Title Insurance from the Title Company in
the amount of a Note insuring or committing to insure that the Mortgage
securing a given Note constitutes a valid first lien upon the Unit(s) covered
by such Mortgage, subject only to those exceptions and encumbrances approved by
Lender and otherwise satisfying the requirements of Lender.
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"Unit" shall mean a Lot together with all Improvements now or
hereafter located thereon, with respect to which Lender has agreed to make or
has made Advances of the Loan.
"Work" shall mean all labor, materials and equipment necessary to
cause the Improvements to be completed substantially in accordance with the
Plans.
ARTICLE II.
THE LOAN
2.1. Commitment of Lender. Lender agrees, upon and subject to the
terms and conditions of this Agreement, to make Advances to Borrower from time
to time prior to the Commitment Expiration Date for the purpose of paying
and/or reimbursing Borrower for Approved Expenses actually paid or incurred by
Borrower, which Advances Borrower may repay and reborrow from time to time
prior to the Commitment Expiration Date in accordance with the terms and
conditions of this Agreement.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, LENDER SHALL NOT BE
DEEMED TO HAVE COMMITTED TO MAKE ADVANCES FOR A PARTICULAR UNIT(S) UNLESS AND
UNTIL LENDER SHALL HAVE APPROVED, IN ITS SOLE DISCRETION, A BUDGET FOR SUCH
UNIT(S) AND THE MORTGAGE (OR A SUPPLEMENT THERETO) COVERING SUCH UNIT(S) SHALL
HAVE BEEN FILED IN THE REAL PROPERTY RECORDS OF THE COUNTY WHERE THE UNIT(S) IS
LOCATED.
2.2. Manner of Funding the Advances. Advances for the payment of
Approved Expenses shall be made by Lender upon compliance by Borrower with the
terms of this Agreement. From time to time Borrower may submit an Application
for Advance to Lender requesting an Advance for the payment of Approved
Expenses and specifying the requested Funding Date. Lender may, as a condition
precedent to any Advance, require an inspection and favorable report on the
Unit(s) by the Inspector prior to making such Advance. Each Application for
Advance shall be submitted by Borrower to Lender a reasonable time (but not
less than five (5) Business Days) prior to the Funding Date on which an
Advance is desired by Borrower. Borrower shall be entitled to Advances only to
the extent of Approved Expenses. Provided that all conditions to such Advance
have been satisfied by Borrower on the Funding Date requested by Borrower,
Lender shall fund such Advance as provided in Section 2.3 below. Borrower
shall receive all such proceeds in trust for the sole purpose of immediately
paying the Approved Expenses described in Borrower's Application for Advance.
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2.3. Advances to or for the Benefit of Borrower. Any Advances may be
disbursed to Borrower, or at Lender's election, directly to the persons
furnishing labor and/or materials, or to either or both. Lender shall have no
obligation to see that the payments made by it to Borrower or to any designee of
Borrower are actually used by said party to pay for labor and materials
furnished and used in the construction of the Improvements. Borrower assumes
all risks in connection with any disbursement to such designee. Disbursements
by Lender pursuant to any disbursement request of Borrower shall be conclusively
presumed to be a proper disbursement under this Agreement.
2.4. Partial Releases. Borrower shall have the right to obtain
partial releases of the Units subject to the following terms and conditions:
(i) No Default or Event of Default shall exist under this
Agreement;
(ii) Borrower shall submit a prepared partial release
instrument (the "Partial Release") in form and
substance satisfactory to Lender, together with a lot
and block description of the Unit or Units to be
released. In addition, the Partial Release shall be
accompanied by such information as shall be necessary
for Lender to process the Partial Release, including
the name and address of the title insurance company, if
any, to whose attention the Partial Release should be
directed and the date when the Partial Release is to
become effective. Borrower shall also specify the name
and address of the proposed purchaser of the Unit being
released; and
(iii) Payment to Lender of an amount in cash equal to the
amount of all Advances actually disbursed by Lender in
connection with such Unit(s), plus all accrued but
unpaid interest thereon.
The net proceeds received by Lender in connection with any partial
release shall be applied first toward accrued but unpaid interest and then to
principal on the Note and then to the remaining Indebtedness in such order of
priority as Lender shall determine.
Borrower shall pay all costs and expenses of Lender arising in
connection with any Partial Release, including but not limited to, reasonable
legal fees of Lender's counsel, all title insurance premiums arising as a
result of endorsements which may be required by Lender to the Title Policy in
connection with such Partial Release and all other costs arising in connection
with the execution and delivery of the Partial Release.
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2.5. Reallocation of Approved Budget. Borrower may not
reallocate or increase any line item in the Approved Budget without the prior
written consent of Lender. Lender reserves the right to make Advances which
are allocated to designated line items in the Approved Budget for such other
purposes or in such different proportions as Lender may, in its sole
discretion, deem necessary or advisable.
2.6. Borrower's Deposit. If at any time, or from time to time,
Lender, in the exercise of its reasonable discretion, determines that the total
of the remaining undisbursed Loan proceeds are less than one hundred (100%)
percent of the costs of completing the Work and all fees, charges, costs and
contingencies which are the obligation of Borrower pursuant to the terms of the
Loan Papers, then Lender may demand in writing that the amount which, when
added to the undisbursed Loan proceeds, will be sufficient to complete the Work
and satisfy such obligations, shall be deposited with Lender to ensure such
completion and the performance of such obligations. Borrower shall, within ten
(10) days after demand by Lender, deposit with Lender the amount of such
deficiency as determined by Lender in an interest bearing account. Until such
funds have been deposited with Lender, Lender shall have no duty to make any
further disbursements of any proceeds of the Loan. All funds so deposited by
Borrower pursuant to this Section 2.6 shall be disbursed by Lender in the
manner provided herein for disbursement of the Loan proceeds and in such order
as Lender may select. All such funds are hereby assigned to Lender as
additional security for the Indebtedness, and may be applied in satisfaction of
Borrower's obligations to Lender on the occurrence of an Event of Default.
ARTICLE III.
CONCERNING THE LOANS
3.1. Note. Each Advance of the proceeds of the Loan made by Lender
to Borrower pursuant to Article II shall be advanced pursuant to and evidenced
by the Note. The Loan shall be due and payable as provided in the Note.
3.2. Interest on the Loans. The principal balance of the Loan from
time to time outstanding shall bear interest as provided in the Note.
3.3. Origination Fee. Upon approval of a Budget for a particular
Unit(s) by Lender and as a condition to the initial Advance related to such
Unit(s), Borrower shall pay to Lender a loan origination fee in an amount equal
to .25% of the maximum amount which Lender has committed to lend to Borrower
with respect to such Unit(s).
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3.4. Prepayments. Borrower shall have the right on any Business Day
to prepay the Loan in whole or in part without premium or penalty, provided,
that any prepayment made in connection with a partial release shall be applied
as provided in Section 2.4 and any other prepayment shall first be applied to
accrued and unpaid interest and then to principal.
3.5. Collateral.
(a) Collateral for the Indebtedness. In order to secure the full
and timely payment and performance of the Indebtedness, Borrower shall, on or
before the first Advance of each Unit, grant to Lender a Lien on the subject
Unit (subject only to Permitted Liens).
(b) Perfection. Borrower shall promptly execute, acknowledge and
deliver the Security Documents in order to create, grant, evidence, perfect and
maintain such Liens and the priority thereof.
(c) Evidence of Perfection. Borrower shall deliver to Lender,
from time to time, such certificates, and other evidence of the validity,
enforceability, priority and perfection of the Liens of the Security Documents,
all in form and substance satisfactory to Lender, as Lender may reasonably
request and which are obtainable from the Title Company or any Governmental
Authority.
(d) Application of Proceeds upon Foreclosure. Upon foreclosure or
other exercise of remedies with respect to the Collateral by Lender, the
proceeds of any sale of, or other realization upon, all or any part thereof
shall be applied by Lender in the following order of priorities:
First, to the payment of the expenses of such sale or other
realization, including reasonable fees and expenses of attorneys and
trustees, and all expenses, liabilities, and advances incurred or made
by Lender in connection therewith, including, without limitation,
appraisal fees, environmental inspection fees and other costs
reasonably incurred by Lender;
Second, to the payment and/or prepayment of the Indebtedness in such
manner, amounts and order of priority as Lender shall determine in its
sole discretion until the Indebtedness has been paid in full; and
Third, to payment to Borrower or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
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ARTICLE IV.
CONDITIONS PRECEDENT
4.1. Initial Advance. In addition to the requirements and
conditions precedent stated elsewhere in this Agreement, the obligation of
Lender to make the initial Advance related to any Unit is subject to the
satisfaction, occurrence and/or existence of each of the conditions set forth
in Exhibit "B" attached hereto on or prior to the first Advance for such Unit.
Lender may make the initial Advance notwithstanding the fact that one or more
of such conditions have not been satisfied, have not occurred or does not
exist, but such action by Lender shall not be deemed to be a waiver of the
requirement that any such condition precedent be satisfied, have occurred
and/or exist as a condition to any subsequent Advance.
4.2 Final Advance. In addition to the requirements and
conditions precedent stated elsewhere in this Agreement, Lender shall not be
obligated to make the final Advance for any Unit unless and until, on or prior
to the date of such Advance, each of the conditions set forth in Exhibit "C"
hereto shall have occurred or been satisfied or exist at the date of such
Advance, and, if required by Lender, Borrower shall have delivered to Lender
evidence of such occurrence, satisfaction or existence.
4.3 All Advances. In addition to the requirements and conditions
precedent stated elsewhere in this Agreement, Lender shall not be obligated to
make any Advance unless and until, on or prior to the date of such Advance,
each of the conditions set forth in Exhibit "D" hereto shall have occurred or
been satisfied or exist at the date of such Advance, and, if required by
Lender, Borrower shall have delivered to Lender evidence of such occurrence,
satisfaction or existence.
4.4 Condition. Notwithstanding anything contained herein to the
contrary, Lender shall not advance Loan proceeds for additional Units if more
than fifty percent (50%) of the total Available Facility shall consist of Units
which are not subject to bona fide Contracts of Sale, copies of which have been
received by Lender.
4.5 Continuing Representation. Each request by Borrower for an
Advance shall constitute a representation and warranty by Borrower that the
representations and warranties set forth in the Loan Papers are true and
correct in all material respects as of the date of such Advance and that all
conditions precedent to the obligations of the Lender to make such Advance will
be satisfied on the date such Advance is made.
4.6 No Waiver. No Advance shall constitute a waiver of any
condition precedent to the obligation of Lender to make any further
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Advance, nor, if Borrower is unable to satisfy any condition precedent to the
obligation of Lender to make any Advance, shall Lender be precluded from
thereafter declaring that the satisfaction of such condition precedent shall be
a condition precedent to the obligation of Lender to make any further Advance.
4.7. Conditions Precedent for the Benefit of Lender. All conditions
precedent to the obligation of Lender to make any Advance are imposed hereby
solely for the benefit of Lender, and no other person may require satisfaction
of any such condition precedent or be entitled to assume that Lender will
refuse to make any Advance in the absence of strict compliance with such
conditions precedent. All requirements of this Agreement may be waived by
Lender, in whole or in part, temporarily or permanently, at any time.
4.8 Direct Disbursement and Application by Lender. During the
continuance of an Event of Default, Lender shall have the right, but not the
obligation, to disburse and directly apply the proceeds of any Advance to the
satisfaction of any of Borrower's obligations hereunder. Any Advance by Lender
for such purpose, shall be part of the Loan and shall be secured by the
Security Documents. Borrower hereby authorizes Lender to hold, use, disburse,
and apply the loan for payment of costs of construction of the Improvements,
expenses incident to the Loan and the Units, and the payment or performance of
any obligation of Borrower hereunder. Borrower hereby assigns and pledges the
proceeds of the Loan to Lender for such purposes. During the continuance of an
Event of Default, Lender may advance and incur such expenses as Lender deems
necessary to complete construction and preserve the Units, and any other
security for the Loan, and such expenses shall be secured by the Security
Instruments, and payable to Lender upon demand. During the continuance of an
Event of Default, Lender may disburse any portion of any Advance at any time,
and from time to time, to persons other than Borrower for the purposes
specified in this Section 4.8 irrespective of any other provisions of this
Agreement, and the amount of Advances to which Borrower shall thereafter be
entitled shall be correspondingly reduced.
ARTICLE V.
AFFIRMATIVE COVENANTS
From the date hereof, and so long as this Agreement is in effect and
until payment in full of the Indebtedness and the performance of all other
obligations of Borrower under this Agreement:
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5.1. General Covenants. Borrower covenants and agrees that it will:
(a) Payment of Taxes and Claims. Cause to be paid and discharged
all lawful Taxes imposed upon the Units before the same shall be delinquent,
and all lawful claims for labor, materials and supplies which, if unpaid, might
become a Lien upon the Units or any part thereof; provided, however, Borrower
may contest any such Tax or claim in the manner and upon the terms and
conditions, if any, set forth herein;
(b) Maintenance of Existence. Cause to be done all things necessary
to preserve and keep in full force and effect the existence of Borrower;
(c) Compliance with Applicable Laws. Comply with the requirements
of all Applicable Laws and orders of any Governmental Authority, and obtain any
licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its properties or to the conduct of its business; and
(d) Furnish Estoppel Certificate. Borrower will deliver to
Lender, within five (5) Business Days after request therefor, estoppel
certificates or written statements duly acknowledged, stating, to Borrower's
knowledge, the amount advanced to Borrower under this Agreement and the amount
due on the Note and whether any offsets or defenses exist hereunder or against
the Note.
5.2. Accounts, Reports and Other Information. Borrower shall furnish
to Lender the following:
(a) Monthly Reports. As soon as practicable after the end of each
month (but in any event by the 20th day of each month), a report, in form and
substance satisfactory to Lender, detailing the following information:
(i) a production status report reflecting progress of work
on all Units;
(ii) a closings and revenues report indicating the status
of scheduled closings and sales closed or to be closed by
Borrower since Borrower's submission of its previous monthly
report;
(b) Notice of Default. Promptly upon Borrower's knowledge of the
happening of any condition or event which constitutes a Default, a written
notice specifying the nature and period of existence thereof and what action
Borrower is taking and proposes to take with respect thereto;
(c) Notice of Litigation. Promptly upon becoming aware of the
existence of any material Litigation involving Borrower or any Unit, where the
amount in controversy exceeds or is reasonably expected to exceed $100,000.00,
a written notice specifying the nature thereof and whether Borrower will
contest such proceeding;
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(d) Notice from Regulatory Agencies. Promptly upon receipt
thereof, information with respect to and copies of any notices received from
any Governmental Authority relating to an order, ruling, statute or other Law
or information which might result in the payment of money by Borrower to such
Governmental Authority or which might have an adverse affect upon any Unit; and
(e) Requested Information. With reasonable promptness, such other
data and information as from time to time may be reasonably requested by Lender
with respect to any Unit and/or the financial condition of Borrower.
5.3. Inspection. Borrower shall permit representatives of Lender to
examine Borrower's books of account, records, reports and other papers, and to
make copies and extracts therefrom, and to discuss the affairs, finances and
accounts with its respective officers, employees and accountants (and by this
provision Borrower authorizes its accountants to discuss with Lender's
representatives the finances and affairs of Borrower) as often as may be
reasonably requested by Lender.
5.4. Compliance with Governmental Requirements. Borrower will
timely comply with all Governmental Requirements and deliver to Lender evidence
thereof. If the construction of the Improvements or the use of all or any
portion of the Units shall, pursuant to any Governmental Requirement, be
permitted only so long as any special requirement, condition or agreement shall
be kept by Borrower, Borrower shall promptly advise Lender in writing of such
condition and shall thereafter at all times cause such Governmental Requirements
to be continuously met or satisfied. Borrower assumes full responsibility for
the compliance of the Plans and the Units with all Governmental Requirements and
with sound building and engineering practices and, notwithstanding any approvals
or inspections by or for the benefit of Lender, Lender shall have no obligation
or responsibility whatsoever for the Plans or any other matter incident to the
Units or the construction of the Improvements.
5.5. Financial Covenants. Borrower shall at all times during the
term of this Agreement maintain a Tangible Net Worth of no less than
$9,000,000.00 and a Debt to Tangible Net Worth Ratio of no greater than 5.0 to
1.
/s/ TW
----------
Borrower
Initial
5.6. Construction of the Improvements. Borrower shall, unless
otherwise prohibited by the terms of this Agreement, commence construction of
the Improvements upon a Lot within fifteen (15) days following its acquisition
and shall cause the construction of the Improvements to be prosecuted with
diligence
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16
and continuity, in a good and workmanlike manner, and in accordance with sound
building and engineering practices, all applicable Governmental Requirements,
and in substantial accordance with the Plans, and shall complete such
Improvements within the time required under any applicable Contract of Sale,
free and clear of Liens for labor and/or materials, except Permitted Liens.
Borrower will not permit cessation of work for a period in excess of fifteen
(15) consecutive days.
5.7. Correction of Defects. Borrower will correct or cause to be
corrected (a) any defect in the Improvements, and (b) any departure in the
construction of the Improvements from the Plans or any Governmental
Requirements.
5.8. Storage of Materials. Borrower will cause all materials
supplied for, or intended to be utilized in, the construction of the
Improvements, but not affixed to or incorporated into the Improvements, to be
stored at the site of the Improvements or at such other location as may be
reasonably approved by Lender in writing, with adequate safeguards, as required
by Lender, to prevent loss, theft, damage, or commingling with other materials
or projects.
5.9. Inspection of the Units. Lender may require monthly
construction inspection reports to be prepared by the Inspector and the cost
associated with said reports shall be paid directly by the Borrower. In
addition to the monthly inspection reports and at all times during the term of
this Agreement and so long as any Indebtedness remains unpaid and outstanding,
Borrower shall permit Lender, Inspector and their respective agents and
representatives, to enter upon any Unit and any location where materials
intended to be utilized in the construction of the Improvements are stored for
the purpose of inspection of the Units and such materials. Borrower shall pay
all expenses of the Inspector in order to enable the Inspector to perform its
duties to Lender, cooperate with the Inspector, cause the Contractors to
cooperate with the Inspector, and, upon request, will furnish the Inspector
with whatever the Inspector may consider necessary or useful in connection with
the performance of its duties hereunder. Borrower acknowledges that the duties
of the Inspector run solely to Lender and that the Inspector shall have no
obligations or responsibilities whatsoever to Borrower or to any of Borrower's
contractors, agents or employees.
5.10. Advertising by Lender. Borrower agrees that during the term
of this Agreement, Lender may erect and maintain on any Unit one or more
advertising signs indicating that financing has been provided by Lender.
5.11. Costs and Expenses. Borrower shall pay when due all costs and
expenses required by this Agreement, including, without
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17
limitation, (a) all Taxes applicable to the Units, (b) all fees for filing or
recording the Security Documents, (c) all fees and commissions lawfully due to
brokers, salesmen, and agents in connection with the Units, (d) all title
insurance and title examination charges, including premiums for the Title
Policy, (e) all survey costs and expenses, (f) all premiums for the Insurance
Policies, (g) all costs and expenses incurred by Lender, including all
reasonable fees and expenses of counsel to Lender (said fees and expenses not
to exceed $3,000.00), all appraisal and environmental inspection fees, all fees
and expenses of the Inspector, (h) any other fees negotiated between Borrower
and Lender, including, but not limited to, a .25% loan origination fee,
assessed by Unit and payable at the closing of the Loan, and all fees and
expenses incurred by Lender in connection with the negotiation, preparation and
execution of Loan Papers (and any amendments thereto and any waivers and
releases requested with respect thereto), the enforcement of Lender's rights
thereunder, and the occurrence of any Default or Event of Default hereunder.
5.12. Additional Documents. Borrower shall execute and deliver to
Lender, from time to time as reasonably required by Lender, such other
documents as shall reasonably be necessary to provide the rights and remedies
to Lender granted or provided for by the Security Documents.
5.13. Defense of Actions. If Borrower fails timely to do so, Lender
may (but shall not be obligated to) commence, appear in, or defend any action
or proceeding purporting to affect the Units or the respective rights and
obligations of Lender and Borrower pursuant to this Agreement. Lender may (but
shall not be obligated to) pay all necessary expenses, including reasonable
attorneys' fees and expenses incurred in connection with proceedings or
actions, which Borrower agrees to repay to Lender upon demand.
5.14 Insurance. Borrower will obtain and maintain the following
coverages:
(a) comprehensive general liability insurance, including blanket
contractual liability, for not less than $500,000.00 arising out of
any one occurrence or in any increased amount required by Lender and
naming Lender as an additional insured;
(b) as to each Unit, all risks course of construction insurance
covering the Improvements in an amount acceptable to Lender,
containing a loss payable or other endorsement satisfactory to Lender
insuring Lender as mortgagee; and
(c) such other insurance as Lender may reasonably require.
5.15 Policies. All policies of insurance referred to in Section
5.14 above shall be issued by companies rated "A" or better in Best's Insurance
Reports and shall contain such provisions and
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18
endorsements as Lender deems necessary or desirable to protect the interests of
Lender, including an agreement by the insurer that the policy shall not be
cancelled, endorsed, altered, reissued or materially changed without at least
fifteen (15) days' prior written notice to Lender.
5.16. Delivery of Policies; Payment of Premiums. Prior to the making
of the first Advance hereunder and as a condition thereto, originals of the
policies of insurance required pursuant to Section 5.14, or certificates with
certified copies of the same, shall be provided to the Lender by Borrower's
insurance carrier, and, at least fifteen (15) days prior to the expiration
dates of each policy, new policies or renewal policies, or certificates with
certified copies of the same, shall be delivered to Lender by Borrower's
insurance carrier. Additionally, Borrower shall provide Lender with monthly
Builder's Risk Reports which shall clearly list all of Borrower's properties
financed by Lender and the amount of coverage for each.
5.17. Safety. Borrower shall cause to be erected and maintained at
and in the area of each Unit, as required by existing conditions and progress
of the Work, and in all events as required by Applicable Law and any
Governmental Requirements, all necessary safeguards for safety and protection,
both as to persons involved in the Work and as to the public at large,
including, without limitation, danger signs and other warnings against hazards
and shall promulgate and enforce safety regulations with respect to the Work
consistent with the highest standards of the industry.
5.18. Financial Statements. Within thirty (30) days after the end of
each month, Borrower shall furnish to Lender a balance sheet, a statement of
profit and loss and a sources and uses of funds statement together with a
certificate executed by a responsible officer of Borrower confirming compliance
by Borrower with the terms of this Agreement. Within one hundred twenty (120)
days after the end of each calendar year, Borrower shall furnish to Lender the
same such statements, but audited and prepared by an independent certified
public accountant satisfactory to Lender in accordance with generally accepted
accounting principles consistently applied, together with a certificate
executed by a responsible officer of Borrower confirming compliance by Borrower
with the terms of this Agreement.
ARTICLE VI.
NEGATIVE COVENANTS
From the date hereof and so long as this Agreement is in effect and
until payment in full of the Indebtedness, and the performance of all other
obligations of Borrower under this Agreement:
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19
6.1. Limitation on Liens. Borrower shall not create or suffer to be
created or to exist, any Lien upon any Unit except Permitted Liens.
6.2. Mergers, etc. Borrower shall not dissolve or be a party to any
merger or consolidation.
6.3. Assignment. Borrower shall not, directly or indirectly, assign
or transfer, or attempt to do so, any rights, duties or obligations under the
Loan Papers. Within ten (10) days after any transfer of any stock or ownership
interest, Borrower shall give Lender written notice of the same.
6.4. Use of Proceeds. Borrower shall not use any of the proceeds of
the Loan for any purpose other than the payment or reimbursement of Approved
Expenses.
6.5. Conveyances Prohibited. Subject to Section 2.4 hereof, Borrower
will not, without the prior written consent of Lender, transfer, convey, lease
or otherwise dispose of any Lot, the Improvements, any personal property located
or to be located thereon or used in connection with the operation of any Unit,
or any part thereof or any interest therein, so long as any part of the
Indebtedness is outstanding.
6.6. Modification of Plans. Borrower will not amend, modify,
change or deviate from the Plans in a manner which will increase the cost to
Borrower of the Improvements described in such Plans by a sum in excess of
$10,000.00 without the prior written consent of Lender.
6.7. Restrictions and Annexation. Borrower shall not impose or
consent to any restrictive covenants upon any Unit, execute, grant or consent
to any easements with respect to any Unit, file, amend or consent to any
subdivision plat affecting any Unit, or form or consent to the creation of any
homeowner's association affecting any Unit, without the prior written consent
of Lender, which consent shall not be unreasonably withheld.
6.8. Disposal of Assets. Borrower shall not dispose of any of its
assets outside of the ordinary course of business.
6.9. Lines of Business. Borrower will not, directly or indirectly,
engage in any business other than home construction, or discontinue any of its
existing lines of business or substantially alter its method of doing business.
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20
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents, warrants and covenants as follows:
7.1. Compliance With Laws and Other Matters. Borrower is not, and
the execution, delivery and performance and compliance with the terms of the
Loan Papers will not cause Borrower to be: (a) in violation of any Law; or (b)
in default under any agreement or instrument to which Borrower is a party or
under which Borrower or the Project is bound. There is no Litigation pending
against or, to the knowledge of Borrower, threatened against or affecting
Borrower or any Unit. There are no outstanding or unpaid final judgments
against Borrower.
7.2. Title to Units. Borrower has or will have (a) full power,
authority and legal right to own each Unit, and (b) good and indefeasible title
in fee simple to each Unit, subject to no Lien of any kind except Permitted
Liens.
7.3. Authorization; Validity. The execution and delivery of this
Agreement, the Note and the other Loan Papers and the performance of their
respective terms have been duly authorized by all requisite action on behalf of
Borrower. No consent of any other person is required as a prerequisite to the
validity and enforceability of this Agreement or any document contemplated
herein. This Agreement is, and the Note and each of the other Loan Papers to
be executed by Borrower will on due execution and delivery thereof be, the
legal, valid and binding obligation of Borrower enforceable in accordance with
their respective terms, subject as to enforcement of remedies to any Debtor
Relief Laws.
7.4. Possession of Franchises, Licenses, Etc. Borrower possess all
franchises, certificates, licenses, permits and other authorizations from
Governmental Authorities that are necessary for the ownership of the Lots and
construction of the Improvements, and to Borrower's knowledge, Borrower is not
in violation of any thereof.
7.5. Disclosure. Neither this Agreement nor any other document,
certificate or statement furnished by or on behalf of Borrower to Lender
pursuant to the Loan Papers or Borrower's application therefor contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein not misleading.
7.6. Plans. The Plans fully and completely describe the Improvements
and comply with all Applicable Laws and restrictive covenants and have been
approved, to the extent required, by all Governmental Authorities, and the
beneficiary of any restrictive covenants.
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21
7.7. Construction. Construction of the Improvements will be
performed within the perimeter of the Lot and in accordance with the Plans and
all restrictive covenants applicable to the Lot; there are, and will be, no
structural defects in the Improvements, no violation of any Law exists or will
exist with respect thereof, and the anticipated use of the Units complies or
will comply with all applicable zoning ordinances, plats, regulations and
restrictive covenants affecting the Units and all Laws for such use have been
satisfied.
7.8. Utilities. All utility services necessary for the
construction of the Improvements and the sale of Units to the public are
available for connection at the boundaries of each Lot, including water supply,
storm and sanitary sewer facilities, proper drainage facilities, and gas,
electric and telephone facilities.
7.9. Commencement of Construction. Prior to the recordation of the
Mortgage covering a Unit, no work of any kind (including the destruction or
removal of any existing improvements, site work, clearing, grubbing, draining
or fencing) shall have commenced or shall have been performed on such Lot, no
equipment or material shall have been delivered to or upon such Lot for any
purpose whatsoever, and no contract (or memorandum or affidavit thereof) for
the supplying of labor, materials, or services for the construction of the
Improvements shall have been recorded in the Real Property Records of the
county where the Lot is located.
7.10. Environmental Matters.
(a) Borrower has duly complied with, and each Unit is in
compliance with, the provisions of all applicable federal, state and local
environmental, health and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder.
(b) Borrower has been issued and will maintain all required
federal, state or local permits, licenses, certificates and approvals relating
to (i) air emissions, (ii) discharges to surface or ground water, (iii) noise
emissions, (iv) solid or liquid waste disposal, (v) the use, generation,
storage, transportation or disposal of toxic or hazardous substances or wastes
(intended hereby and hereafter to include any and all such materials listed in
any applicable federal, state or local law, code or ordinance and all rules and
regulations promulgated thereunder, as hazardous or potentially hazardous), and
(vi) other applicable environmental, health or safety matters.
(c) Borrower has received no notice of, and neither knows of nor
suspects, facts which might constitute any violations of any applicable
federal, state or local environmental, health or safety
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laws, codes or ordinances and any rules and regulations promulgated thereunder
with respect to any Unit.
(d) To the best of Borrower's knowledge, there has been no
material emission, spill, release or discharge into or upon (i) the air, (ii)
soils or any improvements located thereon, (iii) surface water or ground water,
or (iv) the sewer, septic system or waste treatment, storage or disposal system
servicing any Unit, of any toxic or hazardous substance or wastes at or from
any Unit (any of which is hereafter referred to as a "Hazardous Discharge"),
and each Unit is free of any levels of such toxic or hazardous substances or
wastes which would be in violation of any applicable federal, state or local
environmental, health or safety laws, codes or ordinances. Borrower has no
knowledge that there has ever been any event which would be deemed a release or
a disposal of any hazardous, toxic or dangerous substance, waste or material
at, on, or in connection with any Unit defined as such in, or for the purpose
of, the Comprehensive Environmental Response, Liability and Compensation Act,
42 U.S.C. 9601, et seq., any so-called "Superfund" or "Superlien" law, or any
other federal, state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or standard of
conduct concerning any hazardous material.
(e) To the best of Borrower's knowledge, there has been no
complaint, order, directive, claim, citation or notice by any governmental
authority or any person or entity with respect to (i) air emissions, (ii)
spills, releases or discharges to soils or improvements located thereon,
surface water, ground water or the sewer, septic system or waste treatment,
storage or disposal systems servicing any Unit, (iii) noise emissions, (iv)
solid or liquid waste disposal, (v) the use, generation, storage,
transportation or disposal of toxic or hazardous substances or waste, or (vi)
other environmental, health or safety matters affecting the Borrower or any
Unit (any of which is hereafter referred to as an "Environmental Complaint").
(f) Borrower shall promptly provide to Lender true, accurate and
complete copies of any and all documents, including reports, submissions,
notices, orders, directives, findings and correspondence made by Borrower to
the United States Environmental Protection Agency ("EPA"), the United States
Occupational Safety and Health Administration ("OSHA") or any other federal,
state or local authority which require informational submissions concerning
environmental, health or safety matters which would materially affect the Unit.
(g) Borrower shall give to Lender immediate oral and written
notice of any Hazardous Discharge or Environmental Complaint. Such notices
shall include, among other information, the name of the party who filed the
claim, the nature of the claim and the actual
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or estimated potential amount of the claim if known. Borrower shall promptly
comply with its obligations under applicable environmental law with regard to
such Hazardous Discharge or Environmental Complaint.
(h) Without limitation upon the rights of Lender set forth
elsewhere in this Agreement, in the event Borrower fails to take reasonable and
appropriate action with respect to a Hazardous Discharge or Environmental
Complaint, Lender shall have the right, but not the obligation, to enter onto
any Unit and/or to take such actions as it reasonably deems necessary or
advisable to remediate, remove, resolve, minimize the impact of, or otherwise
deal with, any Hazardous Discharge or Environmental Complaint. All costs and
expenses reasonably and actually incurred by Lender in the exercise of any such
rights shall be secured by the Collateral and shall be payable by the Borrower
upon demand.
(i) Borrower hereby agrees to defend, indemnify and hold Lender
harmless from and against any and all claims, losses, liabilities, damages and
expenses (including, without limitation, reasonably incurred remediation costs
and reasonable attorneys' fees) arising directly or indirectly from, out of or
by reason of a Hazardous Discharge or Environmental Complaint caused by
Borrower.
7.11. The Financial Statements. The Financial Statements are (and
shall be) true, correct, and complete as of the date specified therein and
fully and accurately present the financial condition of Borrower as of the date
specified. No material adverse change has occurred in the financial condition
of Borrower since the date of the most recent financial statements provided to
Lender.
ARTICLE VIII
DEFAULT
8.1. Events of Default. The term "Event of Default" as used
herein, means the occurrence and continuance of any one or more of the
following events (including the passage of time, if any, specified therefor):
(a) Payments. The failure or refusal of Borrower to pay
principal, interest, or any other portion of the Indebtedness, including the
Origination Fee, whether created pursuant to this Agreement, or evidenced by
the Note, or owing under or by reason of any of the other Loan Papers or
otherwise, on the date such payment is due; provided, however, Borrower shall
have ten (10) days after written notice is given by Lender to Borrower with
respect to the payment of interest to cure said failure.
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(b) Certain Covenants. The failure by or refusal of Borrower
punctually and promptly to perform, observe and comply with any of the
covenants, agreements and conditions contained in any of the Loan Papers [other
than covenants as to which a breach would constitute an Event of Default under
Section 8.1(a)], and, if such failure is capable of being cured, the
continuation of such failure for a period of twenty (20) days after written
notice specifying such failure is given by Lender to Borrower.
(c) Voluntary Debtor Relief. Borrower shall (i) execute an
assignment for the benefit of creditors, or (ii) admit in writing its
inability, or be generally unable, to pay its debts generally as they become
due, or (iii) voluntarily seek the benefit or benefits of any Debtor Relief
Law, or (iv) voluntarily become a party to any proceeding provided for by any
Debtor Relief Law that could suspend or otherwise affect any of the rights of
Lender granted in the Loan Papers.
(d) Involuntary Proceedings. Borrower shall involuntarily (i)
have an order, judgment or decree entered against it pursuant to any Debtor
Relief Law that could suspend, delay or otherwise affect the enforcement of any
of the rights granted to Lender in any of the Loan Papers, and such order,
judgment or decree is not stayed or reversed within sixty (60) days after the
entry thereof, or (ii) have a petition filed against it seeking the benefit or
benefits provided for by any Debtor Relief Law, and such petition is not
discharged within sixty (60) days after the filing thereof.
(e) Judgments. Borrower shall have rendered against it a final
money judgment, and the same shall remain in effect and unstayed for a period
of thirty (30) consecutive days.
(f) Misrepresentation. The discovery by Lender that any statement,
representation or warranty in the Loan Papers or in any writing ever delivered
to Lender by Borrower pursuant to the Loan Papers, including, without
limitation, in any Application for Advance, is false, misleading or erroneous
in any material respect.
(g) Cessation of Construction. The cessation of the construction
of any Improvements for more than fifteen (15) days without the written consent
of the Lender.
(h) Failure to Comply. Failure of any Improvements to comply with
the Plans or any Governmental Requirements.
(i) Dissolution, etc. The liquidation, termination, dissolution,
or death of Borrower.
(j) Loan Papers. A default or event of default shall occur under
any of the other Loan Papers.
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8.2. Certain Rights of Lender.
(a) Remedies Upon Default. Should an Event of Default occur and
be continuing, Lender may, at its election, do any one or more of the
following:
(i) Acceleration. Declare the entire unpaid balance of the
Indebtedness, or any part thereof, immediately due and
payable, whereupon it shall be due and payable. If an Event
of Default specified in subparagraph (d) or (e) of Section
8.1 occurs, the aggregate unpaid principal balance of and
accrued interest on the Indebtedness shall thereupon become
due and payable concurrently therewith, without any action by
Lender and without diligence, presentment, demand, protest,
notice of protest, intent to accelerate or notice of
acceleration, or notice of any other kind, all of which are
hereby expressly waived.
(ii) Termination. Terminate the commitment to lend hereunder.
(iii) Judgment. Reduce any claim to judgment.
(iv) Rights. Exercise any and all rights afforded by the Laws of
the State of Texas or any other jurisdiction, as Lender shall
deem appropriate, including, but not limited to, the Code, or
by any of the Loan Papers, or by Law or in equity, or
otherwise.
(v) Offset. Exercise the rights of offset against the interest of
Borrower in and to any property of Borrower maintained with or
in the possession of Lender to the extent of the full amount
of the Indebtedness.
(b) Performance by Lender. Should any covenant, duty or agreement
of Borrower fail to be performed in all material respects in accordance with
the terms of the Loan Papers, Lender may, after an Event of Default has
occurred and so long as the same continues, at its option, perform, or attempt
to perform, such covenant, duty or agreement on behalf of Borrower. In such
event, Borrower shall, at the request of Lender, promptly pay any reasonable
amount expended by Lender in such performance or attempted performance to
Lender, together with interest thereon at the rate specified in Section 11.8
from the date of such expenditure by Lender until paid. Notwithstanding the
foregoing, it is expressly understood that Lender does not assume, and shall
never have, except by express written consent of Lender, any liability or
responsibility for the performance of any duties of Borrower hereunder.
(c) Lender Not In Control. None of the covenants or other
provisions contained in this Agreement shall, or shall be deemed to, give
Lender the rights or power to exercise control over the
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26
affairs and/or management of Borrower, the power of Lender being limited to the
right to exercise the remedies provided in the other subparagraphs and
subsections of this Section.
(d) Waivers. The acceptance by Lender at any time and from time
to time of part payment on the Indebtedness shall not be deemed to be a waiver
of any Event of Default then existing. No waiver by Lender of any particular
Event of Default shall be deemed to be a waiver of any Event of Default other
than said particular Event of Default. No delay or omission by Lender in
exercising any right or remedy under the Loan Papers shall impair such right or
remedy or be construed as a waiver thereof or an acquiescence therein, nor
shall any single or partial exercise of any such right or remedy preclude other
or further exercise thereof, or the exercise of any other right or remedy under
the Loan Papers or otherwise.
(e) Cumulative Rights. All rights or remedies available to Lender
under the Loan Papers shall be cumulative of and in addition to all other
rights or remedies granted to Lender at Law or in equity, whether or not the
Indebtedness be due and payable and whether or not Lender shall have instituted
any suit for collection or other action in connection with the Loan Papers.
(f) With Respect to Units. During the continuance of any Event of
Default, Lender shall have the right, but not the obligation, to enter into
possession of the Units, to perform all work necessary to complete the
construction of the Improvements, and to employ watchmen and other safeguards
to protect the Units. Borrower hereby appoints Lender as the attorney-in-fact
of Borrower, with full power of substitution, and in the name of Borrower, if
Lender elects to do so, upon the occurrence of an Event to Default, to (a) use
such sums as are necessary, including any remaining proceeds of the Loan, make
such changes or corrections in the Plans, and employ such architects,
engineers, and contractors as may be required for the purpose of completing the
construction of the Improvements, (b) execute all applications and certificates
in the name of Borrower which may be required for completion of construction of
the Improvements, (c) endorse the name of Borrower on any checks or instruments
payable to Borrower with respect to the Units, including, without limitation,
checks representing proceeds from the Insurance Policies, and to receive and
use the proceeds thereof to complete the construction of the Improvements or to
reimburse Lender for funds, including the Loan, theretofore advanced by Lender
to or for the benefit or account of Borrower, (d) do every act with respect to
the construction of the Improvements which Borrower may do, and (e) prosecute
or defend any action or proceeding incident to the Units. The
power-of-attorney granted hereby is a power coupled with an interest and is
irrevocable and shall be binding upon Borrower's heirs, executors,
administrators, legal representatives, successors and assigns.
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Lender shall have no obligation to undertake any of the foregoing actions, and
if Lender should do so, it shall have no liability to Borrower for the
sufficiency or adequacy of any such actions taken by Lender.
ARTICLE IX.
ASSIGNMENTS
9.1. Assignment of Contracts of Sale and Contracts of Purchase. As
additional security for the payment of the Loan, Borrower hereby transfers and
assigns to Lender all of Borrower's rights and interest, but not its
obligations, in, under and to the Contracts of Sale and Contracts of Purchase,
upon the following terms and conditions:
(a) Borrower represents and warrants that the copies of the
Contracts of Sale and Contracts of Purchase, if any, it has furnished to Lender
are true and complete copies thereof and that Borrower's interest therein is
not subject to any claim, setoff, or encumbrance other than Permitted Liens.
(b) Neither this assignment nor any action by Lender shall
constitute an assumption by Lender of any obligations under the Contracts of
Sale or the Contracts of Purchase and Borrower shall continue to be liable for
all obligations of Borrower thereunder, Borrower hereby agreeing to perform in
a timely manner all of its obligations under the Contracts of Sale and
Contracts of Purchase. Borrower agrees to indemnify and hold Lender harmless
against and from any loss, cost, liability or expense (including but not
limited to, reasonable attorneys' fees) resulting from any failure of Borrower
to so perform.
(c) During the continuance of an Event of Default, Lender shall
have the right at any time (but shall have no obligation) to take in its name
or in the name of Borrower such action as Lender may at any time determine to
be necessary or advisable to cure any default under the Contracts of Sale or
the Contracts of Purchase or to protect the rights of Borrower or Lender
thereunder. Except for its negligence or misconduct, Lender shall incur no
liability if any action so taken by it or in its behalf shall prove to be
inadequate or invalid, and Borrower agrees to hold Lender free and harmless
against and from any loss, cost, liability or expense (including but not
limited to, reasonable attorneys' fees) incurred in connection with any such
action.
(d) Borrower hereby irrevocably constitutes and appoints Lender as
Borrower's attorney-in-fact, in Borrower's name or in Lender's name, to enforce
all rights of Borrower under the Contracts of Sale and Contracts of Purchase
during the continuance of an Event of Default.
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(e) Prior to an Event of Default, Borrower shall have the right to
exercise its rights under the Contracts of Sale and Contracts of Purchase
provided that Borrower shall not commit any act which would impair the security
constituted by this assignment without the prior written consent of Lender.
(f) This assignment shall inure to the benefit of Lender, its
successors and assigns, including any purchaser upon foreclosure of the
Mortgage, any receiver in possession of any Units, and any corporation formed
by or on behalf of Lender which assumes Lender's rights and obligations under
this Agreement.
9.2 Assignment of Construction Contracts, Architectural Contracts
and Other Contracts. As additional security for the payment of the Loan,
Borrower hereby transfers and assigns to Lender all of Borrower's rights and
interest, but not its obligations, in, under and to the Construction Contracts,
the Architectural Contracts and any other contracts relating to the design or
construction of the Improvements (the "Other Contracts") upon the following
terms and conditions:
(a) Borrower represents and warrants that the copies of the
Construction Contracts, the Architectural Contracts and the Other Contracts it
has furnished to Lender are true and complete copies thereof and that
Borrower's interest therein is not subject to any claim, setoff, or
encumbrance.
(b) Neither this assignment nor any action by Lender shall
constitute an assumption by Lender of any obligations under the Construction
Contracts, the Architectural Contracts of the Other Contracts, and Borrower
shall continue to be liable for all obligations of Borrower thereunder,
Borrower hereby agreeing to perform in a timely manner all of its obligations
under the Construction Contracts, the Architectural Contracts and the Other
Contracts. Borrower agrees to indemnify and hold Lender harmless against and
from any loss, cost, liability, or expense (including but not limited to,
reasonable attorney's fees) resulting from any failure of Borrower to so
perform.
(c) During the continuance of an Event of Default, Lender shall
have the right at any time (but shall have no obligation) to take in its name
or in the name of Borrower such action as Lender may at any time determine to
be necessary or advisable to cure any default under the Construction Contracts,
the Architectural Contracts or the Other Contracts or to protect the rights of
Borrower or Lender thereunder. Except for its negligence or misconduct, Lender
shall incur no liability if any action so taken by it or in its behalf shall
prove to be inadequate or invalid, and Borrower agrees to hold Lender free and
harmless against and from
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any loss, cost, liability or expense (including but not limited to, reasonable
attorneys' fees) incurred in connection with any such action.
(d) Borrower hereby irrevocably constitutes and appoints Lender as
Borrower's attorney-in-fact, in Borrower's name or in Lender's name, to enforce
all rights of Borrower under the Construction Contracts, the Architectural
Contracts or the Other Contracts during the continuance of an Event of Default.
(e) Prior to an Event of Default, Borrower shall have the right to
exercise its rights under the Construction Contracts, the Architectural
Contracts and the Other Contracts provided that Borrower shall not cancel or
amend the Construction Contracts, the Architectural Contracts or the Other
Contracts or do any act which would impair the security constituted by this
assignment without the prior written consent of Lender.
(f) This assignment shall inure to the benefit of Lender, its
successors and assigns, including any purchaser upon foreclosure of the
Mortgage, any receiver in possession of any Unit, and any corporation formed by
or on behalf of Lender which assumes Lender's rights and obligations under this
Agreement.
9.3 Assignment of Plans. As additional security for the Loan,
Borrower hereby transfers and assigns to Lender all of Borrower's right, title,
and interest in and to the Plans and hereby represents and warrants to and
agrees with Lender as follows:
(a) The Plans are complete and adequate in all material respects
for the construction of the Improvements and there have been no modifications
thereof.
(b) Lender may utilize the Plans for purposes of conducting
inspections of the Units and related purposes incidental to its administration
of the Loan, and, after the occurrence of an Event of Default, for any purpose
relating to the construction and the completion of the Improvements.
(c) Lender's acceptance of this assignment shall not constitute
approval of the Plans by Lender. Lender has no liability or obligation
whatsoever in connection with the Plans and no responsibility for the adequacy
thereof or for the constructions of the Improvements contemplated by the Plans.
Lender has no duty to Inspect the Improvements, and if Lender should inspect
the Improvements, and if Lender should inspect the improvements, Lender shall
have no liability or obligation to Borrower arising out of such inspection. No
such inspection nor any failure by Lender to make objections after any such
inspection shall constitute a representation by Lender that the Improvements
are in accordance
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with the Plans or constitute a waiver of Lender's rights thereafter to insist
that the Improvements be constructed in substantial accordance with the Plans.
(d) This assignment shall inure to the benefit of Lender, its
successors and assigns, including any purchaser upon foreclosure of the
Mortgage, any receiver in possession of any Unit, and any corporation formed by
or on behalf of Lender which assumes Lender's rights and obligations under this
Agreement.
ARTICLE X.
MISCELLANEOUS
10.1. Number and Gender of Words. Wherever herein the singular
number is used, the same shall include the plural where appropriate, and words
of any gender shall include each other gender where appropriate.
10.2. Headings. The headings, captions and arrangements used in any
of the Loan Papers are, unless specified otherwise, for convenience only and
shall not be deemed to limit, amplify or modify the terms of the Loan Papers,
nor affect the meaning thereof.
10.3. Notices. Unless otherwise provided herein, all notices,
requests, consents and demands shall be in writing and shall be mailed, postage
prepaid, to the respective addresses for notice specified below, or, as to any
party, to such other address as may be designated by it in written notice to
all other parties. All notices, requests, consents and demands hereunder will
be effective when mailed by certified mail, postage prepaid, addressed as
aforesaid.
(a) If to Lender: BankTEXAS N.A.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Real Estate Lending
(b) If to Borrower: Newmark Homes, L. P.
---------------------------------
1200 Soldiers Field Drive
---------------------------------
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
10.4. Place of Payment. All sums payable to Lender hereunder, under
the Note and/or any one or more of the Loan Papers shall be due and payable at,
and shall be paid to Lender at such
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location as shall be specified by Lender not later than 1:00 p.m., central
standard time, on the date due, in immediately available funds. If any payment
falls due on a day other than a Business Day, then such due date shall be
extended to the next succeeding Business Day, and interest on such amount shall
be payable in respect to such extension.
10.5. Survival of Agreements. All covenants, agreements,
representations and warranties made herein shall survive the execution and the
delivery of this Agreement and the Loan Papers. All statements contained in
any certificate or other instrument delivered by or on behalf of Borrower
hereunder shall be deemed to constitute representations and warranties made by
Borrower.
10.6. Parties in Interest. All covenants and agreements contained
in this Agreement and all other Loan Papers shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto, except that
Borrower may not assign its rights hereunder without the prior written consent
of Lender.
10.7. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
10.8. Interest After Event of Default. All amounts payable with
respect to the Indebtedness after the occurrence of an Event of Default shall
bear interest from the date due until paid at the lesser of (a) the Highest
Lawful Rate, or (b) the rate specified in the Note for past due principal and
interest.
10.9. Controlling Provision. It is not the intention of any of the
parties to this Agreement to make an agreement violative of the Laws of any
applicable jurisdiction relating to usury. Regardless of any provision in any
of the Loan Papers, Lender shall never be entitled to receive, collect or
apply, as interest on the Indebtedness, any amount in excess of the Maximum
Amount. If Lender ever receives, collects or applies, as interest, any such
excess, such amount which would be excessive interest shall be deemed a partial
repayment of principal and treated hereunder as such; and if principal is paid
in full, any remaining excess shall be paid to Borrower. In determining
whether or not the interest paid or payable, under any specific contingency,
exceeds the Maximum Amount, Borrower and Lender shall, to the maximum extent
permitted under applicable Law, (i) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effect thereof, and (iii) amortize, prorate, allocate and
spread, the total amount of interest throughout the entire contemplated term of
the Indebtedness; provided that if the Indebtedness is paid and performed in
full prior to the end of the full contemplated term thereof, and if the
interest received for the actual period of existence thereof exceeds the
Maximum Amount, Lender shall refund
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to Borrower, as appropriate, the amount of such excess or credit the amount of
such excess against the total principal amount owing, and, in such event,
Lender shall not be subject to any penalties provided by any Laws for
contracting for, charging or receiving interest in excess of the Maximum
Amount. This Section 10.9 shall control every other provision of all
agreements among the parties to this Agreement. Said Agreement shall control
every other provision of the transactions contemplated by or contained in the
Loan papers. In the event of a conflict between any of the terms of this
agreement and any of the terms of any of the other loan papers, the terms of
this agreement shall control.
10.10. Indemnity. Borrower agrees to, and does indemnify and hold
harmless Lender against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against Lender in any way relating to, or arising out of, any of the
Loan Papers or any other transaction contemplated therein, and which are caused
by Borrower, provided that the same are not founded upon the negligence or
misconduct of Lender. The obligation of Borrower under this Section 10.10
shall survive any termination of this Agreement.
10.11. Severability. If any provision of any of the Loan Papers is
held to be illegal, invalid or unenforceable under present or future Laws
during the term thereof, such provision shall be fully severable, the
appropriate Loan Paper shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part thereof, and the
remaining provision thereof shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance therefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as a part of such
Loan Paper a provision as similar in terms to the illegal, invalid or
unenforceable provision as may be possible and legal, valid and enforceable.
10.12. Amendment. The provisions of this Agreement may not be
amended, modified or waived except by the written agreement of Borrower and
Lender. This Agreement embodies the entire agreement among the parties,
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof, and may be amended only as provided above.
10.13. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, but in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
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10.14. No Third Party Beneficiaries. This Agreement is for the sole
benefit of Lender and Borrower and is not for the benefit of any third party.
All conditions precedent to the obligation of Lender to make any Advance are
imposed hereby solely for the benefit of Lender, and no other party may require
satisfaction of any such condition precedent or be entitled to assume that
Lender will refuse to make any Advance in the absence of strict compliance with
such conditions precedent. All requirements of this Agreement may be waived by
Lender, in whole or in part, at any time and from time to time. In no event
shall this Agreement be construed so as to make Lender liable to any
Contractor, or any Subcontractor, materialmen or laborers for goods and
materials supplied or work and labor furnished in connection with the
construction of the Improvements or any debts to such persons incurred by
Borrower. Lender shall have no liability, obligation, or responsibility
whatsoever with respect to the construction of the Improvements. Lender shall
not be obligated to inspect any Unit or the construction of any Improvements,
nor be liable for the performance or default of Borrower, or any other party,
or for any failure to construct, complete, protect, or insure the Improvements,
or for the payment of costs of labor, materials, or services supplied for the
construction of the Improvements, or for the performance of any obligation of
Borrower whatsoever. Nothing, including without limitation any Advance or
acceptance of any document or instrument, shall be construed as a
representation or warranty, express or implied, to any party by Lender.
10.15. Legal Fees. In the event it becomes necessary for either
party to employ legal counsel or to bring an action at law or other proceeding
to enforce any of the terms, covenants or conditions of this Agreement, the
prevailing party shall be entitled to recover its costs and reasonable
attorneys fees, but in no event to exceed ten percent (10%) of the outstanding
unpaid balance of the loan or loans, whichever may apply.
10.16. No Agency or Partnership. Lender is not the agent or
representative of Borrower, and Borrower is not the agent or representative of
Lender and nothing in this Agreement shall be construed to make Lender liable
to anyone for goods delivered or services performed upon the Project or for
debts or claims accruing against Borrower. Nothing herein nor the acts of the
parties hereto shall be construed to create a partnership or joint venture
between Borrower and Lender. The relationship of Borrower and Lender is debtor
and creditor, respectively.
10.17. Time of Essence. Time is of the essence in performance of
this Agreement by Borrower.
10.18. Participation. Lender shall have the right, at its sole
discretion, to invite participants to participate in or to purchase all or
portions of the Loan, and Borrower agrees to
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34
execute any documents reasonably requested by Lender in connection with any
such participation or purchase.
10.19. DISCLAIMER OF PERMANENT FINANCING. BORROWER ACKNOWLEDGES AND
AGREES THAT LENDER HAS NOT MADE ANY COMMITMENTS, EXPRESS OR IMPLIED, TO EXTEND
THE TERM OF THE LOAN PAST ITS STATED MATURITY DATE OR TO PROVIDE BORROWER OR
THE PURCHASER OF ANY UNIT WITH ANY PERMANENT FINANCING.
10.20. LIMITATION OF LIABILITY. NO CLAIM MAY BE MADE BY BORROWER
AGAINST LENDER OR ITS RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES,
ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN
RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS BASED
ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING OUT OF OR
IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND RELATIONSHIPS
ESTABLISHED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN PAPERS, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH. TO THE MAXIMUM EXTENT
PERMITTED BY APPLICABLE LAW, BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO
▇▇▇ UPON SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR
NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
10.21. Inapplicability of Chapter 15 of Texas Credit Code. Chapter
15 of the Texas Credit Code (Tex. Rev. Civ. Stat. ▇▇▇. art. 5069-15.01, et
seq.) pertaining to revolving loans and revolving tri-party accounts does not
apply to this Agreement or the loan transactions evidenced hereby.
10.22. Lot Loan Agreement. If there is an Addendum attached to this
Loan Agreement which has been initialed by both Borrower and Lender, then the
terms of such Addendum shall form a part of the Loan Agreement.
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THIS WRITTEN LOAN AGREEMENT AND THE LOAN PAPERS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first above written.
BORROWER:
NEWMARK HOMES, L. P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Title: SVP
------------------------
LENDER:
BANKTEXAS N.A.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------
Title: Vice President
------------------------
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