CONSTRUCTION LOAN AGREEMENT
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THIS CONSTRUCTION LOAN AGREEMENT is made and entered into as of the 15th
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day of December, 1999, by and between GREATER HOUSTON GULF PARTNERS, LTD., a
Texas limited partnership ("Borrower"), whose address is ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and SOUTHWEST BANK OF TEXAS, N.A., a national banking
association ("Lender"), whose address is Five Post Oak Park, ▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
ARTICLE I.
DEFINITION OF TERMS
As used in this Agreement, the following terms shall have the respective
meanings indicated below:
ADVANCE: A disbursement by Lender, whether by deposit to Borrower's
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account, check to third party or otherwise, of any of the proceeds of the Loan,
any insurance proceeds or Borrower's Deposit.
AFFIDAVIT FOR PAYMENT: An affidavit, executed by the Borrower, in the form
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attached hereto as Exhibit "E" relating to each Request for Advance.
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AGREEMENT: This Construction Loan Agreement, as the same may be amended or
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supplemented from time to time.
ALLOCATIONS: The line items set forth in the Project Budget for which
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Advances of Loan proceeds will be made.
APPRAISAL: An appraisal or appraisals obtained or to be obtained by
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Lender from a qualified appraiser satisfactory to Lender prepared in accordance
with the requirements for appraisal standards for national banks published by
the Office of the Comptroller of the Currency on August 24, 1990, as amended, or
as otherwise required by applicable law or Lender's then current appraisal
requirements, the cost for which shall be paid for by Lender but reimbursed to
Lender by Borrower within ten (10) days after written request therefor, which
request shall include a copy of the invoice or statement with respect to such
Appraisal.
APPROVED COSTS: Those costs and expenses incurred and paid by Borrower for
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the acquisition of the Land, the construction of the Improvements, and other
costs related thereto, evidence of the payment of which shall be furnished to
Lender for Lender's approval, which approval shall not be unreasonably withheld
or delayed.
ASSIGNMENTS: Collectively, the Assignment of Rents and Leases, the
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Assignment of Rights Under Construction Contract and Subordination Agreement,
and the Assignment of Design Work Product and Permits.
ASSIGNMENT OF DESIGN WORK PRODUCT AND PERMITS: A written agreement, executed by
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Borrower in favor of Lender, in form and substance satisfactory to Lender,
whereby all design work, engineering work, test reports, surveys, building
permits, appraisals, development rights, utility commitments, potable and waste
water capacities and other matters related to the development of the Land and
the construction of the Improvements are assigned to Lender to secure the Loan.
ASSIGNMENT OF RENTS AND LEASES: The Assignment of Rents and Leases of even
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date herewith executed by Borrower in favor of Lender.
ASSIGNMENT OF RIGHTS UNDER CONSTRUCTION CONTRACT AND SUBORDINATION
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AGREEMENT: A written agreement executed by Borrower and Contractor in favor of
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Lender, in form and substance satisfactory to Lender, whereby all of Borrower's
rights in and to the Construction Contract are assigned to Lender to secure the
Loan and whereby Contractor agrees that the Construction Contract and all
derivative rights thereunder are subordinate in all respects to the lien of the
Deed of Trust.
BORROWER'S DEPOSIT: Such cash amounts as Lender may deem necessary for
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Borrower to deposit with it in accordance with the applicable provisions of this
Agreement.
COMMITMENT FEE: A fee in the amount of $44,325.00 which will be paid to
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Lender prior to the Initial Advance.
COMMENCEMENT DATE: December 15, 1999.
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COMPLETION DATE: December 15, 2001.
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COMPLETION OF THE IMPROVEMENTS: The occurrence of the satisfaction of each
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of the following conditions: (i) receipt by Lender of a certification from
Contractor, in form and substance acceptable to Lender, certifying that the
Improvements have been completed in compliance with all Governmental
Requirements and restrictive covenants, if any, affecting the Land, free and
clear of liens or claims for liens for material supplied or for labor or
services performed in connection with the construction of the Improvements; and
(ii) Lender shall have received certified copies of certificates of compliance
and certificates of occupancy for the Improvements, if applicable.
CONSTITUENT PARTY: Greater Houston Gulf Partners, G.P., Inc., a Texas
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corporation, and sole general partner of Borrower.
CONSTRUCTION ADVANCE ACCOUNT: An account established by Borrower with
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Lender (in which Borrower shall at all times maintain a minimum balance of
$1,000.00) into which all Advances (excluding direct disbursements made by
Lender pursuant to this Agreement) will be deposited and against which checks
will be drawn only for the payment of all bills for labor and materials incident
to the construction of the Improvements and for other items in the Project
Budget.
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CONSTRUCTION RESERVE ACCOUNT: An account established by Borrower with
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Lender (in which Borrower shall at all times maintain a minimum balance of
$1,000.00) into which excess proceeds from the sale of any Unit will be
deposited in accordance with Article X of this Agreement, and which will be
drawn only for the payment of all bills for labor and materials incident to the
construction of the Improvements and for other items in the Project Budget, and
for monthly interest payments to Rampart pursuant to the Rampart Loan. A maximum
of $300,000.00 shall be deposited into the Construction Reserve Account.
CONSTRUCTION CONTRACT: Collectively, all contracts and agreements entered
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into between Borrower and Contractor pertaining to the development, construction
and completion of the Improvements.
CONTRACTOR: Any person or entity with whom Borrower contracts for the
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development, construction and completion of the Improvements or any portion
thereof, subject to the reasonable approval of the Lender.
DEED OF TRUST: The Deed of Trust, Security Agreement and Assignment of
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Rents of even date herewith pursuant to which Borrower conveys the Project to
secure the Loan.
ENVIRONMENTAL REPORT: Such report or reports which evidence the Project's
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compliance with the requirements of all applicable environmental protection
laws, rules and regulations, including, without limitation, the Phase I
Environmental Site Assessment required to be obtained by Borrower as a condition
precedent to the Initial Advance.
EVENT OF DEFAULT: Any happening or occurrence described in Section 7.01 of
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this Agreement.
FINANCIAL STATEMENTS: Collectively, (i) certified unaudited financial
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statements of Borrower and of Guarantor prepared in accordance with sound
accounting practices consistently applied by and certified to be true and
correct by Borrower and Guarantor, as applicable, which financial statements
shall consist of a balance sheet and related statements of income and expenses
and cash flow statements (both actual and projected), and which financial
statements of Borrower and of Guarantor shall also include statements of sources
and application of funds and available credit facilities and a statement of all
contingent liabilities; and (ii) certified unaudited financial statements of the
Project prepared in accordance with sound accounting practices consistently
applied by and certified to be true and correct by Borrower, which financial
statements shall consist of a balance sheet and related statements of income and
expenses and cash flow statements (both actual and projected).
FINANCING STATEMENT: The financing statement or financing statements (on
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Standard Form UCC1 or otherwise) executed and delivered by Borrower in
connection with the Loan Documents.
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GOVERNMENTAL AUTHORITY: Any and all courts, boards, agencies, commissions,
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offices, or authorities of any nature whatsoever for any governmental ▇▇▇▇
(▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ or otherwise), whether now or
hereafter in existence.
GOVERNMENTAL REQUIREMENTS: All statutes, laws, ordinances, rules,
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regulations, orders, writs, injunctions or decrees of any Governmental Authority
applicable to Borrower, Guarantor, or the Project.
GUARANTOR: Collectively, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
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GUARANTY: That or those instruments of guaranty now or hereafter in effect
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from Guarantor to Lender guaranteeing the repayment of all or any part of the
Loan, and the satisfaction of, or continued compliance with, the covenants
contained in this Agreement or both.
IMPROVEMENTS: The redevelopment and rehabilitation of a maximum of 96 fee
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simple townhomes, including, but not limited to, exterior restoration,
landscaping, and interior construction and decoration.
INITIAL ADVANCE: The Advance to be made at the time Borrower satisfies the
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conditions set forth in Section 3.01 of this Agreement, which Initial Advance
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shall not exceed the amount set forth in Section 3.08 of this Agreement.
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INSPECTING ARCHITECT: A person or entity retained and designated by Lender
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from time to time who will inspect the Improvements from time to time (but, at a
minimum, at least every thirty (30) days) for the benefit of Lender. The fees of
the Inspecting Architect shall be paid for by Lender, but reimbursed to Lender
by Borrower.
INSURANCE POLICIES: The insurance policy or policies required to be
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obtained and maintained by Borrower pursuant to the terms of the Deed of Trust.
LAND: The real property or interest therein described in Exhibit "A"
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attached hereto and incorporated herein by this reference.
LEASES: Borrower's interest in and to any and all leases, subleases,
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licenses, concessions or other agreements (written or oral, now or hereafter in
effect) which grant to third parties a possessory interest in and to, or the
right to use, all or any part of the Land and the improvements thereon, together
with all security and other deposits made in connection therewith.
LIMITED PARTNERSHIP AGREEMENT: That certain Agreement of Limited
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Partnership of GREATER HOUSTON GULF PARTNERS, LTD., a Texas limited partnership,
dated as of December 15, 1999, by and between Greater Houston Gulf Partners,
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G.P., Inc., a Texas corporation, as General Partner, and the Limited Partner
specified therein, the certificate of which was filed in the Office of the
Secretary of State of the State of Texas, Corporations Section, on November 9,
1999.
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LOAN: The construction loan evidenced by the Note.
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LOAN AMOUNT: An amount not to exceed the least of (i) TWO MILLION NINE
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HUNDRED FIFTY-FIVE THOUSAND AND NO/100 DOLLARS ($2,955,000.00), (ii) the product
obtained by multiplying the value of the Project as reflected the Appraisal by
sixty-five percent (65%), or (iii) an amount equal to the product of (A) $28.10
times (B) the total number of livable square feet contained in the Units
actually acquired by Borrower. For purposes of this definition, it is hereby
agreed that the number of livable square feet in each Unit shall be determined
based upon the four (4) basic floor plans containing either 960, 1050, 1100 or
1200 square feet.
LOAN DOCUMENTS: The Note, the Deed of Trust, this Agreement, the
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Assignments, the Financing Statement, the Guaranty, and any and all other
documents now or hereafter executed by the Borrower, Guarantor, or any other
person or party in connection with the Loan, the indebtedness evidenced by the
Note, or the covenants contained in this Agreement.
MATURITY DATE: December 15, 2001.
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MAXIMUM RATE: At any time, the maximum rate of nonusurious interest
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permitted from day to day by applicable law, including Chapter 303 of the Texas
Finance Code (the "Code") (and as the same may be incorporated by reference in
other Texas statutes). To the extent that Chapter 303 of the Code is relevant to
any holder of the Note for the purposes of determining the Maximum Rate, each
such holder elects to determine such applicable legal rate pursuant to the
"weekly ceiling," from time to time in effect, as referred to and defined in
Chapter 303 of the Code; subject, however, to the limitations on such applicable
ceiling referred to and defined in the Code, and further subject to any right
such holder may have subsequently, under applicable law, to change the method of
determining the Maximum Rate.
NOTE: The promissory note dated as of even date herewith in the original
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principal sum of $2,955,000.00 (together with all renewals and extensions
thereof) which has been executed and delivered by Borrower to Lender
representing the Loan.
PROJECT: Collectively, the Land and the Improvements.
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PROJECT BUDGET: The budget which is set forth on Exhibit "D" attached
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hereto and incorporated herein by reference.
RAMPART LOAN: A loan in the amount of $1,100,000.00 made by Rampart
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Properties Corporation to Borrower, evidenced by that certain Promissory Note
dated of even date herewith, executed by Borrower and payable to Rampart, and
secured in part by a second lien Deed of Trust covering the Project.
REQUEST FOR ADVANCE: A certificate of Borrower in substantially the form of
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that which is attached hereto as Exhibit "F" and made a part hereof for all
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purposes. Such certificate shall be accompanied by copies of billing statements,
vouchers or invoices from the parties named therein, in form and substance
satisfactory to Lender.
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TITLE INSURANCE: One or more title insurance commitments, binders or
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policies, as Lender may require, issued by the Title Insurance Company, on a
coinsurance or reinsurance basis (with direct access in Texas) if and as
required by Lender, in the maximum amount of the Loan insuring or committing to
insure that the Deed of Trust constitutes a valid lien covering the Project
subject only to those exceptions which Lender may approve.
TITLE INSURANCE COMPANY: American Title Company, acting as issuing agent
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for First American Title Insurance Company.
UNITS: A maximum of 96 fee simple townhome units to be purchased and
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rehabilitated by Borrower, together with all rights appurtenant thereto.
ARTICLE II.
THE LOAN
2.01 Agreement to Lend. Lender hereby agrees to lend up to, but not in
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excess of, the Loan Amount to Borrower, and Borrower hereby agrees to borrow
such sum from Lender, all upon and subject to the terms and provisions of this
Agreement, such sum to be evidenced by the Note. Notwithstanding anything to the
contrary contained herein or in any of the Loan Documents, in no event shall
Lender be obligated to fund or advance to Borrower hereunder any amount which
would exceed Borrower's legal lending limit. No principal amount repaid by
Borrower may be reborrowed by Borrower. Borrower's liability for repayment of
the interest on account of the Loan shall be limited to and calculated with
respect to Loan proceeds actually disbursed to Borrower pursuant to the terms of
this Agreement and the Note and only from the date or dates of such
disbursements. Interest under the Note shall commence to accrue in accordance
with the terms of the Note as of the date of disbursal or wire transfer of
proceeds by Lender, notwithstanding whether Borrower shall receive the benefit
of such monies as of such date and even if such monies are held in escrow
pursuant to the terms of any escrow arrangement or agreement. When monies are
disbursed by wire transfer, then such money shall be considered advanced at the
time of the transmission of the wire, rather than the time of receipt thereof by
the receiving bank. With regard to the repayment of the Loan, interest shall
continue to accrue on any amount repaid until such time as the repayment has
been received and cleared by Lender at its principal office located in Houston,
Texas. Upon the occurrence of an Event of Default, Lender may, in Lender's
discretion, disburse Loan proceeds directly to third parties to pay costs or
expenses required to be paid by Borrower pursuant to this Agreement. Loan
proceeds disbursed directly by Lender to pay costs or expenses required to be
paid by Borrower pursuant to this Agreement shall constitute Advances to
Borrower.
2.02 Allocations. The purposes for which Loan proceeds are allocated and
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the respective amounts of such Allocations are set forth in the Project Budget.
2.03 Advances. The Allocations shall be disbursed for the purposes set
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forth in the Project Budget. Lender shall not be obligated to make an Advance
for an Allocation set forth in the Project Budget to the extent that the amount
of the Advance for such Allocation would, when added to all prior Advances for
such Allocation, exceed the total of such Allocation as set forth in the Project
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Budget, subject however, to the provisions of Section 2.05 and Section 2.06
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hereof. Lender shall not be obligated to advance to Borrower any sums under this
Agreement after maturity (however maturity occurs) of the Loan.
2.04 Limitation on Advances. To the extent that Loan proceeds disbursed by
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Lender pursuant to a particular Allocation are insufficient to pay all costs
associated with such Allocation, Borrower shall pay such excess costs with funds
derived from sources other than the Loan. To the extent that Loan proceeds
disbursed by Lender pursuant to the Allocations are insufficient to pay all
costs required for the development, construction and completion of the Project,
Borrower shall pay such excess costs with funds derived from sources other than
the Loan. Subject to Section 2.05 and Section 2.06 herein, in no event shall
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Lender be required to make any Advance for any item in excess of the amount
budgeted for such item as an Allocation in the Project Budget, nor shall Lender
be obligated to make any Advance if the undisbursed Loan proceeds budgeted in
the Project Budget for any particular item, including interest, shall at any
time appear, in the reasonable judgment of Lender, to be less than the amount
which will be required for such item prior to completion of the Improvements
pursuant to the Plans and Specifications, unless and until Borrower shall have
complied with Section 3.05 of this Agreement. Under no circumstances shall the
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sum of all Advances made exceed the Loan Amount.
2.05 Reallocations. In the event that Borrower can demonstrate to the
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Lender, by documentation reasonably acceptable to Lender, that there exists a
cost savings in any particular Allocation, then Lender agrees to reallocate such
cost savings and to disburse Loan proceeds allocated to any such Allocation
(other than the Interim Interest Allocation, as to which Lender shall not be
obligated to reallocate any such cost savings) where a cost savings exists for
such other purposes or in such different proportions as Lender may, in its
reasonable discretion, deem necessary or advisable. Except as set forth in this
Section 2.05 and Section 2.06 of this Agreement, Borrower shall not be entitled
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to require that Lender, and Lender shall not be obligated to, reallocate funds
among the Allocations.
2.06 Contingency Allocations. Any amount allocated in the Project
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Budget for "contingencies" or other non-specific purposes may be re-allocated to
hard cost line items, but not to soft cost line items. Upon completion of the
Improvements, any amount allocated in the Project Budget for "contingencies" or
other non-specific purposes may, upon the reasonable approval of the Lender, be
reallocated to the Construction Contract Allocation and "soft costs." The Lender
shall be deemed to have approved of such reallocation if approval has not been
denied five (5) business days after the receipt of such request for approval.
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ARTICLE III.
ADVANCES
3.01 Conditions to Initial Advance. The obligation of Lender to make the
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Initial Advance hereunder is subject to the prior or simultaneous occurrence of
each of the following conditions:
(a) Borrower shall have furnished the Title Insurance to Lender, at the
sole expense of Borrower.
(b) Borrower shall have furnished to Lender a current survey of the
Project, certified by a registered surveyor or engineer, to Lender,
Borrower, and the Title Insurance Company, showing all easements,
building or setback lines, rights-of-way and dedications affecting the
Project, showing no state of facts objectionable to Lender, and
otherwise in form acceptable to Lender.
(c) Borrower shall have furnished to Lender, in form and substance
satisfactory to Lender, letters from appropriate utility companies and
each applicable Governmental Authority (or other satisfactory
documents) evidencing the availability, when needed, of all necessary
utilities at the boundary lines of the Project, including sanitary
sewer facilities, storm sewer facilities, public water, telephone,
electricity, and municipal services.
(d) Borrower shall have furnished to Lender, in form and substance
satisfactory to Lender, letters from each applicable Governmental
Authority evidencing that the present and proposed use of the Land and
construction thereon complies with all Governmental Requirements.
Further, Borrower shall have furnished to Lender evidence that the
present and proposed use of the Land and construction of the
Improvements contemplated thereon complies with all applicable deed
restrictions and other restrictive covenants affecting the Land.
(e) Borrower shall have furnished to Lender all soils and geological tests
and reports with respect to the Land on which the Improvements are
located, which reports shall contain no fact or condition which is
unacceptable to Lender.
(f) Borrower shall have furnished to Lender a Phase I Environmental Site
Assessment of the Project, the form and substance of such report and
the professional firm conducting such audit and preparing such report
to be satisfactory to Lender.
(g) Borrower shall have furnished to Lender certified copies of authority
documents for Borrower and the Constituent Party authorizing the
execution, delivery and performance of all of the Loan Documents and
authorizing the borrowing hereunder, along with such certificates of
existence, certificates of good standing and other certificates and
documents as Lender may reasonably require to evidence Borrower's or
such Constituent Party's authority.
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(h) Borrower shall have furnished to Lender true copies of all
organization documents of Borrower, including the Limited Partnership
Agreement and all amendments or supplements thereto, along with such
certificates and other documents as Lender may reasonably require to
evidence Borrower's authority.
(i) Borrower shall have furnished to Lender true copies of all
organizational documents of the Constituent Party and all amendments
and supplements thereto.
(j) Borrower shall have furnished to Lender an opinion of counsel for
Borrower, which opinion shall be in form and substance reasonably
satisfactory to Lender.
(k) Borrower shall have furnished to Lender the Project Budget showing the
total costs, including, but not limited to, such related
nonconstruction items as interest during construction, commitment,
legal, architect and real estate agents' fees, plus the amount of
direct construction items required to be paid to satisfactorily
complete the Project, free and clear of liens or claims for liens for
material supplied and for labor and services performed.
(l) Lender shall have received from Borrower and from Guarantor current
Financial Statements.
(m) Lender shall have received and shall have approved the Appraisal,
which Appraisal shall reflect an "as-improved" value of not less than
$4,546,154.00.
(n) Lender shall have received, and approved, the insurance policy or
policies required to be obtained and maintained by Borrower pursuant
to the terms of the Deed of Trust.
(o) Lender shall have received from Borrower all of the Loan Documents
duly executed by Borrower and, where required, by Guarantor; and the
Loan Documents shall remain outstanding and enforceable in accordance
with their terms, all as required hereunder.
(p) Lender shall have received evidence that Borrower has expended, other
than from the proceeds of the Loan, $1,100,000.00 or more of Approved
Costs toward the acquisition and/or construction of the Units.
(q) Lender shall have received an executed copy of the Construction
Contract between Borrower and Contractor for the construction of the
Improvements, which Construction Contract shall have been approved by
Lender, which approval shall not be unreasonably withheld or delayed.
(r) Lender shall have received a copy of the building permit and all other
permits required by all Governmental Authority which are required to
permit construction of the Improvements, if applicable.
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(s) Lender shall have received from Borrower evidence that Borrower is
ready, willing and able to consummate the acquisition of at least
eighty-five (85) Units.
(t) Lender shall have received from Borrower such other instruments,
evidence or certificates as it may reasonably require.
3.02 Conditions to Advances for Subsequent Acquisition of Additional Lots.
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The obligation of Lender to make future Advances for the acquisition of
additional Lots by Borrower is subject to the prior or simultaneous occurrence
of each of the following conditions with respect to each such Lot (provided,
however, in the event any of the requirements below have previously been
satisfied with respect to a larger property of which such lot is a part, such
requirement shall, at the discretion of Lender, be deemed satisfied):
(a) Borrower shall have furnished the Title Insurance to Lender, at the
sole expense of Borrower (provided that the amount of such Title
Insurance shall be equal to the amount advanced by Lender in
connection with such acquisition).
(b) Borrower shall have furnished to Lender a current survey of such Lot,
certified by a registered surveyor or engineer, to Lender, Borrower,
and the Title Insurance Company, showing all easements, building or
setback lines, rights-of-way and dedications affecting such Lot,
showing no state of facts objectionable to Lender, and otherwise in
form acceptable to Lender.
(c) Borrower shall have furnished to Lender, in form and substance
satisfactory to Lender, letters from appropriate utility companies and
each applicable Governmental Authority evidencing the availability,
when needed, of all necessary utilities at such Lot, including
sanitary sewer facilities, storm sewer facilities, public water,
telephone, electricity, and municipal services.
(d) Borrower shall have furnished to Lender, in form and substance
satisfactory to Lender, letters from each applicable Governmental
Authority evidencing that the present and proposed use of such Lot and
construction thereon complies with all Governmental Requirements.
Further, Borrower shall have furnished to Lender evidence that the
present and proposed use of such and construction of the improvements
contemplated thereon complies with all applicable deed restrictions
and other restrictive covenants affecting such Lot.
(e) Borrower shall have furnished to Lender all soils and geological tests
and reports with respect to such Lot, which reports shall contain no
fact or condition which is unacceptable to Lender.
(f) Borrower shall have furnished to Lender a Phase I Environmental Site
Assessment of such Lot, the form and substance of such report and the
professional firm conducting such audit and preparing such report to
be satisfactory to Lender.
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(g) Lender shall have received, and approved, evidence that the insurance
policy or policies required to be obtained and maintained by Borrower
pursuant to the terms of the Deed of Trust apply to such Lot.
(h) Lender shall have received from Borrower an additional deed of trust,
in form acceptable to Lender, with respect to each such Lot, conveying
such Lot to further secure the Loan, such deed of trust being
cross-collateralized to the Deed of Trust and any other deeds of trust
covering other Lots acquired subsequent to the date hereof.
(i) Lender shall have received evidence that the Construction Contract
between Borrower and Contractor covers such Lot.
(j) Lender shall have received a copy of the building permit and all other
permits required by all Governmental Authority which are required to
permit construction and rehabilitation of such Lot, if applicable.
(k) Lender shall have received from Borrower such other Loan Documents,
instruments, evidence or certificates as it may reasonably require.
3.03 Conditions to Advances for Improvements. Once Lender has made the
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Initial Advance, except as provided in Section 3.02 no further Advances shall be
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made by Lender until each of the conditions set forth in this Section 3.03 have
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been satisfied or waived by Lender in writing. The obligation of Lender to make
each Advance hereunder for Improvements shall be subject to the prior or
simultaneous occurrence or satisfaction of each of the following conditions:
(a) Lender shall have received from Borrower a Request for Advance, fully
completed and accompanied by all required invoices, billing
statements, and lien releases, duly executed by Borrower, which
Request for Advance (except with respect to the Initial Advance) shall
be provided by Borrower to the Lender and to the Inspecting Architect
not less than ten (10) days prior to the date Borrower requests that
such Advance be funded.
(b) At Lender's request, Lender shall have received a title report dated
within five (5) days of the requested Advance from the Title Insurance
Company showing no state of facts objectionable to Lender, including,
but not limited to, a showing that title to the Land is vested in
Borrower and that no claim for mechanics' or materialmen's liens has
been filed against the Project.
(c) The representations and warranties made by Borrower, as contained in
this Agreement and in all other Loan Documents, shall be true and
correct in all material respects as of the date of each Advance; and
if requested by Lender, Borrower shall give a certificate to Lender to
that effect.
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(d) The covenants made by Borrower to Lender, as contained in this
Agreement and in all other Loan Documents, shall have been fully
complied with, except to the extent such compliance may be limited by
the passage of time or the completion of construction of the
Improvements.
(e) Except in connection with the Initial Advance, Lender shall have
received a list of all subcontractors and materialmen involved in the
construction of the Improvements, which will provide work or materials
in excess of $5,000 each.
(f) Except in connection with the Initial Advance, Lender shall have
received the Performance and Payment Bonds referred to in Section 5.17
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hereinafter.
(g) Except in connection with the Initial Advance, Lender shall have
received from Borrower a certificate on A.I.A. Form G 702 and Form G
703, as appropriate (or such other forms required by Lender),
completed, executed and sworn to by Borrower and Contractor and with
the Inspecting Architect's approval noted thereon, stating that the
requested amount does not exceed ninety percent (90%) of the then
unpaid cost of construction of the Improvements since the last
certificate furnished hereunder; and that said construction was
performed substantially in accordance with the Plans and
Specifications.
(h) Borrower shall have received, and have furnished to Lender, from each
contractor, subcontractor and materialman providing labor or materials
in excess of $5,000, an invoice, lien waiver and such other
instruments and documents as Lender may from time to time specify, in
form and content, and containing such certifications, approvals and
other data and information, as Lender may require. The invoice, lien
waiver and other documents shall cover and be based upon work actually
completed or materials actually furnished as certified by the
certificate required in Section 3.03(g). The lien waiver of each
----------------
contractor, subcontractor and materialman providing labor or materials
in excess of $5,000 shall be received by Lender or Borrower's
Architect simultaneously with the making of any Advance hereunder for
the benefit of such contractor or materialman.
(i) Lender shall have received an Affidavit for Payment, duly executed by
Borrower.
(j) There shall exist no Event of Default under the Loan Documents.
(k) The Improvements shall not have been materially injured, damaged or
destroyed by fire or other casualty, nor shall any part of the Project
be subject to condemnation proceedings or negotiations for sale in
lieu thereof.
-12-
(l) All work typically done at the stage of construction when the Advance
is requested shall have been done, and all materials, supplies,
chattels and fixtures typically furnished or installed at such stage
of construction shall have been furnished or installed.
(m) Except as otherwise permitted by Section 5.16 of this Agreement, all
------------
personal property not yet incorporated into the Project but which is
to be paid for out of such Advance, must then be located upon the Land
and Lender shall have received evidence thereof.
(n) Borrower shall have complied with all requirements of the Inspecting
Architect.
3.04 Advance Not A Waiver. No Advance of the proceeds of the Loan shall
--------------------
constitute a waiver of any of the conditions of Lender's obligation to make
further Advances, nor, in the event Borrower is unable to satisfy any such
condition, shall any such Advance have the effect of precluding Lender from
thereafter declaring such inability to be an Event of Default as hereinafter
provided.
3.05 Borrower's Deposit. Subject to the provisions of Section 2.05 and
------------------- ------------
Section 2.06 of this Agreement, if (i) at any time Lender shall, in its sole
-------------
discretion, deem that the undisbursed proceeds of any Allocation are
insufficient to meet the costs of completing the work contemplated to be
completed by such Allocation or to pay the expenses contemplated to be paid by
such Allocation, or (ii) at any time Lender shall, in its sole discretion, deem
that the undisbursed proceeds of the Loan are insufficient to meet the costs of
completing construction of the Project, plus the costs of insurance, ad valorem
taxes and other normal costs of the Project, then in either of such events,
Lender may refuse to make any additional Advances to Borrower hereunder until
Borrower shall have deposited with Lender sufficient additional funds to cover
the deficiency which Lender deems to exist. Such additional funds (herein
referred to as the "Borrower's Deposit") will be disbursed by Lender to Borrower
pursuant to the terms and conditions hereof as if they constituted a portion of
the Loan being made hereunder. Borrower agrees upon ten (10) days' written
demand by Lender to deposit with Lender such additional funds.
3.06 Advance Not An Approval. The making of any Advance or part thereof
-----------------------
shall not be deemed an approval or acceptance by Lender of the work theretofore
done. Lender shall have no obligation to make any Advance or part thereof after
the happening of any Event of Default, but shall have the right and option so to
do; provided that if Lender elects to make any such Advance, no such Advance
shall be deemed to be either a waiver of the right to demand payment of the
Loan, or any part thereof, or an obligation to make any other Advance.
3.07 Time and Place of Advances. All Advances are to be made at the
-----------------------------
office of Lender, or at such other place as Lender may designate; and Lender
shall require ten (10) days' prior notice in writing before the making of any
such Advance. All Advances (excluding direct disbursements) are to be made by
direct deposit into the Construction Advance Account. In the event Borrower
shall part with or be in any manner whatever deprived of Borrower's interests in
and to the Land, except pursuant to Article XI hereof, Lender may, at Lender's
----------
option but without any obligation to do so,
-13-
continue to make Advances under this Agreement, and subject to all its terms and
conditions, to such person or persons as may succeed to Borrower's title and
interest, and all sums so disbursed shall be deemed Advances under this
Agreement and secured by the Deed of Trust and all other liens or security
interests securing the Loan.
3.08 Amount of Initial Advance. Subject to the satisfaction of each of the
-------------------------
conditions set forth herein, at the closing of the Loan, Lender shall make an
Initial Advance in an amount not in excess of $1,550,000.00, to fund a portion
------------
of the acquisition of the initial Units.
3.09 Other Advances. Subsequent to the Initial Advance, and subject to
---------------
compliance by Borrower with the terms and conditions set forth herein, Lender
will make Advances in accordance with the procedures set forth herein from time
to time during the progress of construction of the Project. Advances under the
Loan will be made only monthly and shall not be made until Borrower has fully
complied with all the terms and conditions set forth in this Agreement. The
Inspecting Architect shall periodically (but not less frequently than every
thirty (30) days) inspect the progress of the work and shall submit to Lender
reports of the progress of the work.
3.10 Retainage. An amount equal to ten percent (10%) of the cost of
---------
construction and rehabilitation of the Improvements shall be retained by Lender
and shall be paid over by Lender to Borrower when all of the following have
occurred:
(a) Lender has received a completion certificate prepared by the
inspecting Architect and executed by Borrower stating that the
Improvements have been substantially completed;
(b) if necessary, the applicable Governmental Authority shall have issued
all certificates of compliance and certificates of occupancy for the
Improvements; and
(c) thirty (30) days shall have elapsed from the later of (i) the date
of completion of the Improvements, as specified in Texas Property Code
Sec. 53.106, if the Affidavit of Completion provided for in this
Agreement is filed within ten (10) days after such date of completion,
or (ii) the date of filing of such Affidavit of Completion, if such
Affidavit of Completion is filed ten (10) days or more after the date
of the completion of the Improvements, as specified in Texas Property
Code Section 53.106.
ARTICLE IV.
WARRANTIES AND REPRESENTATIONS
Borrower hereby unconditionally warrants and represents to Lender, as of
the date hereof and at all times during the term of this Agreement, that:
4.01 Governmental Requirements. No violation of any Governmental
--------------------------
Requirements exists or will exist with respect to the Project and neither the
Borrower nor any Guarantor are, nor will they be, in default with respect to any
Governmental Requirements.
-14-
4.02 Utility Services. All utility services of sufficient size and capacity
-----------------
necessary for the construction of the Improvements and the operation thereof for
their intended purposes are available at the property line of the Land for
connection to the Improvements, including potable water supply, storm and waste
water facilities, and gas, electric and telephone facilities, and written
permission has been obtained from the applicable utility companies or
municipalities to connect the Improvements into each of said services.
4.03 Access. All off-site roads necessary for the full utilization of the
------
Improvements for their intended purposes have been completed or the necessary
rights-of-way therefor have either been acquired by the appropriate Governmental
Authority or have been dedicated to the public use and accepted by such
Governmental Authority, and all necessary steps have been taken by Borrower and
such Governmental Authority to assure that the construction and installation
thereof will be completed prior to the Completion Date.
4.04 No Commencement. As of the date of this Agreement, no steps to
----------------
commence construction or rehabilitation of the Improvements, including steps to
clear or otherwise prepare the Land for construction thereon or the delivery of
material for use in construction or rehabilitation of the Improvements, have
been taken, nor has any contract or other agreement for construction thereon
been entered into, for furnishing materials for such construction or for any
other purpose, the performance of which by the other party thereto would give
rise to a lien on the Land.
4.05 Year 2000. To the best of Borrower's knowledge and belief, all
----------
software, hardware and critical systems used by Borrower and its subsidiaries,
if any, in the conduct of Borrower's and such subsidiaries' business
("Borrower's Computer Items") will record, store, process and present calendar
dates falling on or after January 1, 2000, and all information pertaining to
such dates accurately. Borrower's Computer Items will have all appropriate
capability and compatibility for handling century-aware or year-2000 compliant
data, and the data related user interface functions, data fields and data
related program instructions and functions of Borrower's Computer Items will
include the indication of the century.
ARTICLE V.
COVENANTS OF BORROWER
Borrower hereby unconditionally covenants and agrees with Lender that until
the Loan shall have been paid in full and the lien of the Deed of Trust shall
have been released:
5.01 Commencement and Completion. Borrower will cause the construction of
----------------------------
the Improvements to commence by the Commencement Date and to be prosecuted with
diligence and continuity and will complete the same in accordance with the Plans
and Specifications such that the Completion of the Improvements occurs on or
before the Completion Date, free and clear of liens or claims for liens for
material supplied and for labor and services performed in connection with the
construction of the Improvements.
-15-
5.02 No Change. Borrower will not, without the prior written consent
----------
of Lender, amend, alter or change, pursuant to change order, amendments or
otherwise, the Plans and Specifications or the Construction Contract if the
cost of making such change increases or decreases the Project Budget by greater
than $10,000.00 with respect to any single change or if the cumulative increase
or decrease to the Project Budget, taking into account all prior changes whether
approved by Lender or not, exceeds $50,000.00. Any amendment, alteration or
change to the Construction Contract consented to by Lender shall be executed by
Borrower, Borrower's Architect, Contractor and Lender.
5.03 Use of Advances. Borrower will receive the Advances and will hold
----------------
same as a trust fund for the purpose of paying the cost of construction of the
Project and related nonconstruction costs and other Approved Costs related to
the Project as provided for herein. Borrower will apply the same promptly to
the payment of the costs and expenses for which each Advance is made and will
not use any part thereof for any other purpose.
5.04 Lender's Expenses. Borrower will reimburse Lender for all
------------------
reasonable expenses of Lender, including reasonable attorneys' fees, incurred in
connection with the preparation, execution, delivery and performance of the Loan
Documents and in connection with the closing of the Loan, including any
post-closing covenants and obligations relating to the Loan. Borrower will also
reimburse Lender for all expenses of Lender incurred in connection with
obtaining any Appraisal or in connection with services performed by the
Inspecting Architect.
5.05 Defects and Variances. Borrower will, upon demand of Lender and at
---------------------
Borrower's sole expense, correct any structural defect in the Improvements or
any variance (other than a minor variance which does not adversely affect the
structural integrity or the value of the Project) from the Plans and
Specifications not approved in writing by Lender in a commercially reasonable
manner and time frame.
5.06 Estoppel Certificates. Borrower will deliver to Lender,
----------------------
promptly after request therefor, estoppel certificates or written statements,
duly acknowledged, stating the amount that has then been advanced to Borrower
under this Agreement, the amount due on the Note, and whether any offsets or
defenses exist against the Note or any of the other Loan Documents.
5.07 Inspecting Architect. Lender shall retain the services of the
--------------------
Inspecting Architect and shall pay the fees and expenses of the Inspecting
Architect in connection with the performance of the Inspecting Architect's
duties. Borrower will reimburse to Lender within ten (10) days after written
request therefor the fees and expenses of the Inspecting Architect incurred by
Lender. Borrower will cooperate with the Inspecting Architect and will cause
Borrower's Architect, each Contractor, each subcontractor and the employees of
each of them to cooperate with the Inspecting Architect and, upon request, will
furnish the Inspecting Architect whatever the Inspecting Architect may consider
necessary or useful in connection with the performance of the Inspecting
Architect's duties. Without limiting the generality of the foregoing, Borrower
shall furnish or cause to be furnished such items as working details, Plans and
Specifications and details thereof, samples of materials, licenses, permits,
certificates of public authorities, building codes and copies of the contracts
between Borrower and Contractor. Borrower will permit Lender, the Inspecting
Architect and their representatives to enter the Project for the purposes of
inspecting same. If the Inspecting
-16-
Architect shall be, or for any reason becomes, disqualified or unable to act or
continue to act as Inspecting Architect, or if Lender in its sole discretion
desires, Lender may appoint a successor Inspecting Architect; and any such
successor shall have the same duties to Lender and shall be entitled to the same
cooperation as if he had originally been named herein. Borrower acknowledges
that the duties of the Inspecting Architect run solely to Lender and that the
Inspecting Architect shall have no obligations or responsibilities whatsoever to
Borrower, Contractor or to any of Borrower's or Contractor's agents, employees,
or subcontractors.
5.08 Brokers. Borrower will indemnify Lender from claims of brokers
-------
claiming by, through or under Borrower arising by reason of the execution hereof
or the consummation of the transactions contemplated hereby.
5.09 Personality and Fixtures. Borrower will deliver to Lender, on
--------------------------
demand, copies of any contracts, bills of sale, statements, receipted vouchers
or agreements under which Borrower claims title to any materials, fixtures or
articles incorporated in the Project or subject to the lien of the Deed of Trust
or to the security interest of the Security Agreement.
5.10 Compliance with Governmental Requirements. Borrower will comply
--------------------------------------------
promptly with all Governmental Requirements.
5.11 Compliance with Restrictive Covenants. Borrower will comply with all
-------------------------------------
restrictive covenants, if any, affecting the Land. Construction of the
Improvements will be performed in a good and workmanlike manner, within the
perimeter boundaries of the Land and within all applicable building and setback
lines in accordance with all Governmental Requirements and the Plans and
Specifications. There are, and will be, no structural defects in the
Improvements.
5.12 Affidavit of Commencement. Borrower shall, within ten (10) days
---------------------------
after the Commencement Date, but not before construction or rehabilitation of
the Improvements has actually begun, file in the appropriate records of the
county in which the Land is situated, an Affidavit of Commencement in the form
of Exhibit "B" attached hereto and incorporated herein by this reference, duly
-----------
executed by Borrower and Contractor. The date of commencement of work set forth
in such Affidavit of Commencement shall not be the date of or prior to the date
on which the Deed of Trust was recorded.
5.13 Affidavit of Completion. Borrower shall file in the appropriate
-------------------------
records in the county in which the Land is situated, within ten (10) days after
construction of the Improvements has been completed, an Affidavit of Completion
in the form of Exhibit "C" attached hereto and incorporated herein by this
------------
reference.
5.14 Payment of Expenses. Borrower shall pay all costs and expenses
---------------------
relating to the Project and for which an Advance is made by checks drawn on the
Construction Advance Account.
5.15 Notices Received. Borrower will promptly deliver to Lender a true
----------------
and correct copy of all notices of default, and any correspondence or notices
from any Governmental Authority,
-17-
received by Borrower from any person or entity with respect to Borrower, any
Guarantor, the Project, or any or all of them.
5.16 Storage of Materials. Borrower shall cause all materials supplied
----------------------
for, or intended to be utilized in, the construction of any part of the Project,
but not affixed to or incorporated into the Improvements or the Land, to be
stored on the Land or at such other location as may be approved by Lender in
writing, with adequate safeguards, as required by Lender, to prevent loss,
theft, damage or commingling with other materials or projects.
5.17 Delivery of Operating Reports and Financial Statements. Borrower
---------------------------------------------------------
agrees to deliver to Lender the Financial Statements for the Project at the
time and in the manner required by the Deed of Trust.
ARTICLE VI.
ASSIGNMENTS
6.01 Assignment of Construction Contract. 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 each
Construction Contract upon the following terms and conditions:
(a) Borrower represents and warrants that the copy of each Construction
Contract it will furnish to Lender is a true and complete copy
thereof, including all amendments thereto, if any, 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 any Construction
Contract, and Borrower shall continue to be liable for all obligations
of Borrower thereunder, Borrower hereby agreeing to perform all of its
obligations under each Construction Contract. Borrower agrees to
indemnify and hold Lender harmless against and from any loss, cost,
liability or expense (including but not limited to attorneys' fees)
resulting from any failure of Borrower to so perform.
(c) 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 any Construction Contract or to protect the rights of
Borrower or Lender thereunder. 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 indemnify and hold Lender 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.
-18-
(d) Borrower hereby irrevocably constitutes and appoints Lender as
Borrower's attorney-in-fact, in Borrower's or Lender's name, to
enforce all rights of Borrower under each Construction Contract.
(e) Prior to the occurrence of an event of default, Borrower shall have the
right to exercise its rights as owner under each Construction
Contract, provided that, except as otherwise provided herein, Borrower
shall not cancel or amend any Construction Contract or do or suffer to
be done 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 and its
successors and assigns, any purchaser upon foreclosure of the Deed of
Trust, any receiver in possession of the Project and any corporation
formed by or on behalf of Lender which assumes Lender's rights and
obligations under this Agreement.
ARTICLE VII.
EVENTS OF DEFAULT
7.01 Events of Default. The following shall constitute "Events of Default"
-----------------
hereunder:
(a) If Borrower shall fail to comply with any of the covenants, duties or
obligations of Borrower in this Agreement (excluding, however, any
failure by Borrower to make any payments which are due and payable
pursuant to the terms and provisions of the Note, as to which failure
Borrower shall not be entitled to any notice or opportunity to cure)
and such failure shall either be incurable or, if curable, shall
remain uncured for a period of twenty (20) days after the date Lender
gives written notice thereof to Borrower; provided, however, if such
default is one which cannot be cured within such twenty (20) day
period through no fault of Borrower, Borrower shall not be in default
so long as it has commenced the cure of such default within such
twenty (20) day period and thereafter diligently prosecutes same to
completion, but in any event within sixty (60) days after the date
Lender gives written notice thereof to Borrower.
(b) If an event of default shall occur under any of the Loan Documents
(including, without limitation, the Guaranty), which event of default
shall continue beyond the period of notice, if any, and opportunity to
cure, if any, provided for in any such Loan Document;
(c) If the construction of the Improvements are, at any time, (i)
discontinued due to acts or matters within Borrower's control for a
period of ten (10) or more consecutive days, (ii) not carried out with
reasonable dispatch, or (iii) not completed by the Completion Date;
-19-
(d) If Borrower is unable to satisfy any condition of Borrower's right to
receive an Advance hereunder for a period in excess of thirty (30)
days after Lender's refusal to make any further Advances;
(e) If Borrower executes any conditional ▇▇▇▇ of sale, chattel mortgage or
other security instrument covering any materials, fixtures or articles
intended to be incorporated in the Project or the appurtenances
thereto, or covering articles of personal property placed in the
Project, or files a financing statement publishing notice of such
security instrument, or if any of such materials, fixtures or articles
are not purchased in such a manner that the ownership thereof vests
unconditionally in Borrower, free from encumbrances, on delivery at
the Land, or if Borrower does not produce to Lender upon reasonable
demand the contracts, bills of sale, statements, receipted vouchers or
agreements, or any of them, under which Borrower claims title to such
materials, fixtures and articles;
(f) If any levy, attachment or garnishment is issued, or if any lien for
the performance of work or the supply of materials is filed, against
any part of the Project and remains unsatisfied or unbonded following
the earlier of(i) twenty (20) days after the date of filing thereof,
or (ii) the requesting by Borrower of an Advance;
(g) If any statement, representation or warranty in this Agreement or in
any of the other Loan Documents is false, misleading or erroneous in
any material respect; or,
(h) if the Construction Contract is amended or modified (except as is
expressly permitted herein) or terminated without Lender's prior
written consent.
7.02 Remedies. Lender shall have the right, upon the happening of an Event
--------
of Default, in addition to any rights or remedies available to it under all
other Loan Documents, to enter into possession of the Project and perform any
and all work and labor necessary to complete the Improvements. All amounts so
expended by Lender shall be deemed to have been disbursed to Borrower as Loan
proceeds and secured by the Deed of Trust. For this purpose, Borrower hereby
constitutes and appoints Lender as Borrower's true and lawful attorney-in-fact,
with full power of substitution to complete the Improvements in the name of
Borrower, and hereby empowers Lender, acting as Borrower's attorney-in-fact,
effective upon the occurrence of an Event of Default, as follows: to use any
funds of Borrower, including any balance which may be held in escrow, any
Borrower's Deposit and any funds which may remain unadvanced hereunder, for the
purpose of completing the Improvements; to continue all or any existing
construction contracts or subcontracts; to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for said
purposes; to pay, settle or compromise all existing bills and claims which are
or may be liens against the Project, or may be necessary or desirable for the
completion of the work or the clearing of title; to execute all the applications
and certificates in the name of Borrower which may be required by any
construction contract; and to do any and every act with respect to the
construction of the Improvements which Borrower could do in Borrower's own
behalf. It is understood and agreed that this power of attorney shall be deemed
to be a power coupled with an interest which cannot be revoked. Lender, acting
as Borrower's attorney-in-fact after the occurrence of an Event
-20-
of Default, shall also have power to prosecute and defend all actions or
proceedings in connection with the Project and to take such action and require
such performance as is deemed necessary.
ARTICLE VIII.
LENDER'S DISCLAIMERS - BORROWER'S INDEMNITIES
8.01 No Obligation by Lender to Construct. Lender has no liability or
-------------------------------------
obligation whatsoever or howsoever in connection with the Project or the
development, construction or completion thereof or work performed thereon, and
has no obligation except to disburse the Loan proceeds as herein agreed. Lender
is not obligated to inspect the Project nor is Lender liable, and under no
circumstances whatsoever shall Lender be or become liable, for the performance
or default of any contractor or subcontractor, or for any failure to construct,
complete, protect or insure the Project, or any part thereof, or for the payment
of any cost or expense incurred in connection therewith, or for the performance
or nonperformance of any obligation of Borrower or any Guarantor to Lender nor
to any other person, firm or entity. Nothing, including without limitation any
disbursement of Loan proceeds or of the Borrower's Deposit nor acceptance of any
document or instrument, shall be construed as such a representation or warranty,
express or implied, on Lender's part.
8.02 No Obligation by Lender to Operate. Any term or condition of any
-----------------------------------
of the Loan Documents to the contrary notwithstanding, Lender shall not have,
and by its execution and acceptance of this Agreement hereby expressly
disclaims, any obligation or responsibility for the management, conduct or
operation of the business and affairs of Borrower or any Guarantor. Any term or
condition of the Loan Documents which permits Lender to disburse funds, whether
from the proceeds of the Loan, the Borrower's Deposit or otherwise, or to take
or refrain from taking any action with respect to Borrower, any Guarantor, the
Project or any other collateral for repayment of the Loan, shall be deemed to be
solely to permit Lender to audit and review the management, operation and
conduct of the business and affairs of Borrower and any Guarantor, and to
maintain and preserve the security given by Borrower to Lender for the Loan, and
may not be relied upon by any other person. Further, Lender shall not have, has
not assumed and by its execution and acceptance of this Agreement hereby
expressly disclaims any liability or responsibility for the payment or
performance of any indebtedness or obligation of Borrower or any Guarantor and
no term or condition of the Loan Documents, shall be construed otherwise.
Borrower hereby expressly acknowledges that no term or condition of the Loan
Documents shall be construed so as to deem the relationship between Borrower,
Guarantor and Lender to be other than that of borrower, guarantor and lender,
and Borrower shall at all times represent that the relationship between
Borrower, Guarantor and Lender is solely that of borrower, guarantor and lender.
BORROWER HEREBY INDEMNIFIES AND AGREES TO HOLD LENDER HARMLESS FROM AND AGAINST
ANY COST, EXPENSE OR LIABILITY INCURRED OR SUFFERED BY LENDER AS A RESULT OF ANY
ASSERTION OR CLAIM OF ANY OBLIGATION OR RESPONSIBILITY OF LENDER FOR THE
MANAGEMENT, OPERATION AND CONDUCT OF THE BUSINESS AND AFFAIRS OF BORROWER OR
GUARANTOR, OR AS A RESULT OF ANY ASSERTION OR CLAIM OF ANY LIABILITY OR
RESPONSIBILITY OF LENDER FOR THE PAYMENT OR PERFORMANCE OF ANY INDEBTEDNESS OR
OBLIGATION OF BORROWER OR GUARANTOR; PROVIDED HOWEVER, THE FOREGOING
-21-
INDEMNITY SHALL NOT INCLUDE ANY LIABILITY, LOSS OR DAMAGE CAUSED BY THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER OR ITS AGENTS.
8.03 No Third Party Beneficiaries. The benefits of this Agreement
-------------------------------
shall not inure to any third party, nor shall this Agreement be construed to
make or render Lender liable to any materialmen, subcontractors, contractors,
laborers or others for goods and materials supplied or work and labor furnished
in connection with the construction of the Project or for debts or claims
accruing to any such persons or entities against Borrower. Lender shall not be
liable for the manner in which any Advances under this Agreement may be applied
by Borrower and Borrower's contractors. Notwithstanding anything contained in
the Loan Documents, or any conduct or course of conduct by the parties hereto,
before or after signing the Loan Documents, this Agreement shall not be
construed as creating any rights, claims or causes of action against Lender, or
any of its officers, directors, agents or employees, in favor of any contractor,
subcontractor, supplier of labor or materials, or any of their respective
creditors, or any other person or entity other than Borrower. Without limiting
the generality of the foregoing, Advances made to any contractor, subcontractor
or supplier of labor or materials, pursuant to any Requests for Advances,
whether or not such request is required to be approved by Borrower, shall not be
deemed a recognition by Lender of a third party beneficiary status of any such
person or entity.
8.04 No Agency. Nothing herein shall be construed as making or
----------
constituting Lender as the agent of Borrower in making payments pursuant to any
construction contracts or subcontracts entered into by Borrower for construction
of the Project or otherwise. The purpose of all requirements of Lender
hereunder is solely to allow Lender to check and require documentation
(including, but not limited to, lien waivers) sufficient to protect Lender and
the Loan contemplated hereby. Borrower shall have no right to rely on any
procedures required by Lender, Borrower hereby acknowledging that Borrower has
sole responsibility for constructing the Project and paying for work done in
accordance therewith and that Borrower has solely, on Borrower's own behalf,
selected or approved each contractor, each subcontractor and each materialman,
Lender having no responsibility for any such persons or entities or for the
quality of their materials or workmanship.
8.05 Indemnity by Borrower. BORROWER HEREBY INDEMNIFIES LENDER AND
-----------------------
EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AND
AGENTS FROM, AND HOLDS EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, COSTS, AND EXPENSES TO WHICH ANY OF THEM MAY
BECOME SUBJECT, INSOFAR AS SUCH LOSSES, LIABILITIES, CLAIMS, DAMAGES, COSTS, AND
EXPENSES ARISE FROM OR RELATE TO ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREBY OR FROM ANY INVESTIGATION, LITIGATION, OR
OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING RELATING TO ANY OF THE FOREGOING; PROVIDED
HOWEVER, THE FOREGOING INDEMNITY SHALL NOT INCLUDE ANY LIABILITY, LOSS OR DAMAGE
CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER OR ITS AGENTS.
Without intending to limit the remedies available to Lender with respect to the
enforcement of its
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indemnification rights as stated herein or as stated in any Loan Document, in
the event any claim or demand is made or any other fact comes to the attention
of Lender in connection with, relating or pertaining to, or arising out of the
transactions contemplated by this Agreement, which Lender reasonably believes
might involve or lead to some liability of Lender, Borrower shall, immediately
upon receipt of written notification of any such claim or demand, assume in full
the personal responsibility for and the defense of any such claim or demand and
pay in connection therewith any loss, damage, deficiency, liability or
obligation, including, without limitation, legal fees and court costs incurred
in connection therewith. In the event of court action in connection with any
such claim or demand, Borrower shall assume in full the responsibility for the
defense of any such action and shall immediately satisfy and discharge any final
decree or judgment rendered therein. Lender may, in its sole discretion, make
any payments sustained or incurred by reason of any of the foregoing; and
Borrower shall immediately repay to Lender, in cash and not with proceeds of the
Loan, the amount of such payment, with interest thereon at the maximum rate of
interest permitted by applicable law from the date of such payment. Lender
shall have the right to join Borrower as a party defendant in any legal action
brought against Lender, and Borrower hereby consents to the entry of an order
making Borrower a party defendant to any such action.
ARTICLE IX.
In consideration of Lender's originating the Loan to Borrower contemplated
hereby and of the commitment of Lender to make the proceeds of the Loan
available to Borrower from time to time during the term of, and as so stated in,
this Agreement, Borrower agrees to pay to Lender prior to or simultaneously
with the Initial Advance the Commitment Fee.
ARTICLE X.
PARTIAL RELEASE OF LIEN PROVISIONS
Lender or any subsequent owner or holder of the Note and the indebtedness
evidenced thereby shall execute and deliver to Borrower, within three (3)
business days after a request by Borrower therefor, a partial release of
individual Units comprising the Improvements, together with all rights
appurtenant to any such Unit, upon satisfaction of each of the following
conditions: (a) payment by Borrower to Lender (for application against the
unpaid principal amount of the Note) of an amount equal to the lesser of (i) the
greater of (A) $36.41 times the number of square feet contained in such Unit
(the "Square Foot Release Amount"), or (B) the net sales proceeds from the sale
of such Unit, or (ii) the unpaid principal balance of the Note (the "Partial
Release Price"); (b) no Event of Default has occurred and is then continuing
under the Loan Documents; and (c) payment by Borrower to Lender,
contemporaneously with its request for a partial release, of all reasonable
costs and expenses, including, without limitation, reasonable attorney's fees,
incurred by Lender in connection with Lender's review of such partial release
request. For purposes of this Article X, the term "net sales proceeds" shall
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mean the gross proceeds of the sale of any Unit, less all of the closing costs
paid by Borrower which are directly attributable to the sale, including but not
limited to surveys, title policies, commissions, and property taxes.
Notwithstanding the foregoing, until such time as an aggregate of $300,000.00
has been deposited by Borrower into the Construction Reserve Account, in
connection with the release of such Unit, Lender will allow Borrower to deposit
into the
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Construction Reserve Account an amount equal to the amount by which the net
sales proceeds derived from the sale of such Unit exceed the Square Foot Release
Amount for such Unit. The funds in the Construction Reserve Account shall be
released to Borrower in accordance with the provisions of Section 3.03 of this
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Agreement, and shall only be disbursed to Borrower for (i) use in connection
with the construction of the Improvements, (ii) Payment of the monthly interest
payments due under the Rampart Loan, or (iii) payment of the Partial Release
Price in connection with the sale and release of additional Units.
ARTICLE XI.
MISCELLANEOUS
11.01 Successors and Assigns. This Agreement shall be binding upon, and
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shall inure to the benefit of, Borrower and Lender, and their respective heirs,
legal representatives, successors and assigns, provided that Borrower may not
assign any rights or obligations under this Agreement without the prior written
consent of Lender.
11.02 Headings. The Article, Section, and Subsection entitlements hereof
--------
are inserted for convenience of reference only and shall in no way alter,
modify, define or be used in construing the text of such Articles, Sections or
Subsections.
11.03 Survival. The provisions hereof shall survive the execution of
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all instruments herein mentioned, shall continue in full force and effect until
the Loan has been paid in full and shall not be affected by any investigation
made by any party. This instrument may be amended only by an instrument in
writing executed by the parties hereto.
11.04 CONTROLLING AGREEMENT; APPLICABLE LAW. THIS AGREEMENT SHALL BE
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GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. COURTS WITHIN THE STATE OF
TEXAS SHALL HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN BORROWER AND
GUARANTOR AND LENDER, WHETHER IN LAW OR EQUITY, INCLUDING, BUT NOT LIMITED TO,
ANY AND ALL DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT; AND VENUE IN ANY SUCH DISPUTE, WHETHER IN FEDERAL OR STATE COURT,
SHALL BE LAID IN ▇▇▇▇▇▇ COUNTY, TEXAS.
11.05 Notices. Any notice required or permitted to be given hereunder
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shall be in writing and shall be considered properly given if in accordance with
the procedures for giving notice which are set forth in Section 12.5 of the
Deed of Trust.
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11.06 Reliance by Lender. Lender is relying and is entitled to rely upon
--------------------
each and all of the provisions of this Agreement; and accordingly, if any
provision or provisions of this Agreement should be held to be invalid or
ineffective, then all other provisions hereof shall continue in full force and
effect notwithstanding.
11.07 Participations. Lender shall have the right at any time and from
--------------
time to time to grant participations in the Note and any other Loan Documents.
Each participant shall be entitled to receive all information received by Lender
regarding the creditworthiness of Borrower, including, without limitation,
information required to be disclosed to a participant pursuant to Banking
Circular 181 (Rev., August 2, 1984), issued by the Comptroller of the Currency
(whether the participant is subject to the circular or not). In the event that
Lender grants participations in the Note and any other Loan Documents, Lender
shall remain the lead lender, and Lender shall, subject to the terms and
provisions set forth herein, remain fully obligated to make Advances in
accordance with the terms and provisions of the Loan Documents. Borrower shall
not be obligated to deal with any participant in connection with the funding and
administration of the Loan.
11.08 ENTIRE AGREEMENT. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
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AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
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CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
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THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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11.09 Superseding Effect. In the event of a conflict between the terms and
------------------
conditions of this Agreement and the terms and conditions of any other Loan
Document, the terms and conditions of this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
BORROWER:
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GREATER HOUSTON GULF PARTNERS,
LTD., a Texas limited partnership
By: Greater Houston Gulf Partners, G.P., Inc.,
a Texas corporation
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇, President
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LENDER:
------
SOUTHWEST BANK OF TEXAS, N.A., a national
banking association
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice President
List of Exhibits
----------------
Exhibit "A" - Property Description
Exhibit "B" - Affidavit of Commencement
Exhibit "C" - Affidavit of Completion
Exhibit "D" - Project Budget
Exhibit "E" - Affidavit for Payment
Exhibit "F" - Request for Advance
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