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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NEWMARK HOMES CORP.
(Exact Name of Registrant as Specified in Its Charter)
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NEVADA 1521 76-0460831
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
TERRY C. WHITE
CHIEF FINANCIAL OFFICER AND TREASURER
1200 SOLDIERS FIELD DRIVE 1200 SOLDIERS FIELD DRIVE
SUGAR LAND, TEXAS 76459 SUGAR LAND, TEXAS 76459
TELEPHONE (281) 243-0100 TELEPHONE (281) 243-0100
FAX (281) 243-0771 FAX (281) 243-0771
(Address, Including Zip Code, (Name, Address, Including Zip Code,
and Telephone Number, Including Area Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices) of Agent for Service)
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Copies to:
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NORMAN R. MILLER, ESQ. THOMAS P. MASON, ESQ.
WOLIN, RIDLEY & MILLER LLP ANDREWS & KURTH L.L.P.
3100 BANK ONE CENTER 4200 TEXAS COMMERCE TOWER
1717 MAIN STREET HOUSTON, TEXAS 77002
DALLAS, TEXAS 75201 TELEPHONE (713) 220-4368
TELEPHONE (214) 939-4906 FAX (713) 220-4285
FAX (214) 939-4949
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, $.01 par value................ $25,300,000 $7,667
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(1) Estimated pursuant to Rule 457(o) of the Securities Act of 1933 solely for
the purpose of calculating the registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED DECEMBER 15, 1997.
2,000,000 SHARES
NEWMARK HOMES CORP.
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by the
Company. Prior to this offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price per
share will be between $9.00 and $11.00. For information relating to the factors
to be considered in determining the initial public offering price, see
"Underwriting." The Company intends to apply for quotation of the Common Stock
on the Nasdaq National Market under the symbol "NHCH."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT COMPANY(1)
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Per Share......................... $ $ $
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Total(2).......................... $ $ $
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(1) Before deducting estimated expenses of $600,000 payable by the Company.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 300,000 shares of Common Stock, solely to cover
over-allotments, if any. See "Underwriting." If the Underwriters exercise
this option in full, the total price to public, underwriting discount and
proceeds to Company will be $ , $ and $ ,
respectively.
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The shares of Common Stock are offered severally by the Underwriters named
herein subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that certificates
representing the shares will be ready for delivery at the offices of Rauscher
Pierce Refsnes, Inc., Dallas, Texas, on or about , 1998.
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RAUSCHER PIERCE REFSNES, INC. LAIDLAW GLOBAL SECURITIES, INC.
THE DATE OF THIS PROSPECTUS IS , 1998.
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[PHOTOS OF FINISHED HOME (EXTERIOR),
FINISHED HOME (INTERIOR) AND
HOME UNDER CONSTRUCTION]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
COMMON STOCK, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Unless otherwise
specified, the information in this Prospectus has been adjusted to reflect a
92-for-1 split of Common Stock to be paid as a dividend prior to the closing of
this offering and assumes the Underwriters' over-allotment option is not
exercised. Except as otherwise indicated, the information set forth herein does
not give effect to the acquisition of Westbrooke (as defined) which is expected
to close in January 1998. All references in this Prospectus to the "Company"
include Newmark Homes Corp. and its subsidiaries (other than Westbrooke), unless
the context otherwise requires.
THE COMPANY
The Company designs, builds and sells single-family homes in five major
markets within the Southwest and Southeast, including Houston, Austin,
Dallas/Fort Worth, Miami/Ft. Lauderdale and, most recently, Nashville, each of
which has experienced population and job growth above the national average over
the past several years. The Company operated in 47 subdivisions in these
metropolitan areas, and had 452 homes under construction at September 30, 1997.
In addition, as of September 30, 1997, the Company owns or has under option
contract 2,199 lots available for future growth. The Company is also actively
engaged in residential land acquisition and development, which enables it to
provide lots for its homebuilding operations.
The Company offers high-quality homes, designed principally for the
"move-up" and relocation market segments under the Newmark name. Typically,
Newmark homes range in size from 1,700 square feet to over 4,500 square feet and
range in price from $120,000 to $350,000, with an average sales price of
$205,000 for homes closed during the nine months ended September 30, 1997. The
Company also offers custom homes under the Fedrick, Harris Estate Homes name
that range in size from 3,500 square feet to over 7,000 square feet and range in
price from $250,000 to $700,000, with an average sales price of $350,000 for
homes closed during the nine months ended September 30, 1997. Revenues generated
from sales of Fedrick, Harris Estate Homes were 14% and 18% of total
homebuilding revenues for the nine months ended September 30, 1996 and 1997,
respectively.
The Company's production homebuilding operation is positioned to compete
with high-volume builders by offering a broader selection of homes with more
amenities and greater design flexibility than typically offered by volume
builders. Newmark homes give the homebuyer the ability to select various design
features in accordance with their personal preferences. Through a volume
building approach, the Company's custom homes generally offer more value than
those offered by local, lower-volume custom builders, primarily due to the
Company's effective purchasing, construction and marketing programs. While most
design modifications are significant to the homebuyer, they typically involve
relatively minor adjustments that allow the Company to maintain construction
efficiencies and result in greater profitability due to increased sales prices
and margins. The Company believes that its ability to meet the design tastes of
prospective homebuyers at competitive prices distinguishes itself from many of
its competitors.
The Company's subsidiary, Newmark Home Corporation ("Newmark"), was founded
in 1983 in Houston, Texas. The Company achieved annual profitability from
inception despite the adverse economic conditions that prevailed in Texas in the
late 1980's and early 1990's. Seven of the Company's ten executive officers and
key employees have worked together at the Company for more than ten years, and
all of the Company's executive officers and key employees have worked together
for more than four years. The Company has developed and implemented a balanced,
disciplined approach to land purchases and home construction. This balanced
approach has focused on purchasing, construction, marketing, market analysis,
economic and financial forecasting, management information systems and
accounting. The Company believes the experience of its executive officers and
key employees and its disciplined approach to its business have been key factors
in the Company's success.
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STRATEGY
The Company's objective is to provide its customers with homes that offer
both quality and value, while seeking to maximize its return on invested
capital. To achieve this objective, the Company has developed a strategy which
focuses on the following elements:
GROWTH MARKETS. The Company's primary markets have each experienced
population and job growth in excess of the national average over the past
several years. The Company believes that there are significant growth
opportunities in its existing markets. The Company also continues to evaluate
new markets that have significant "move-up" and relocation segments that would
satisfy the Company's profitability, investment return and other criteria. While
the Company anticipates entering new markets primarily through start-up
operations, it will also consider the acquisition of homebuilding companies that
have complementary management styles. Entry into new markets is preceded by
extensive due diligence and research conducted by management, in conjunction
with Pacific Research Group, Inc., an affiliated company specializing in real
estate research ("Pacific Research Group"), and third-party resources.
SOPHISTICATED MARKETING. The Company employs sophisticated and
comprehensive marketing programs to attract potential homebuyers. Elements of
this marketing program include extensive telemarketing, an Internet web site and
a virtual reality CD-ROM home tour. The Company retains a national marketing
consultant to develop its overall advertising strategy. The Company executes its
overall strategy through marketing and advertising campaigns tailored to local
markets. Local marketing campaigns include coordination of realtor promotions,
subdivision grand openings, showcase presentations for custom homes, the
Company's newsletters, realtors' newsletters, product bulletins, billboards,
local newspaper advertisements and other direct sales activities. The Company's
telemarketing program is designed to ensure that prospective homebuyers who tour
its model homes receive information regarding the Company's floor plans,
optional features, subdivisions, schools, available financing and other matters.
The Company's telemarketing group also answers requests from prospective
homebuyers received via the Company's web site, e-mail, and toll-free number.
The Company's web site, featuring a virtual reality home tour, has received over
1 million "hits" since its inception in July 1996 and allows a prospective
homebuyer to download the home tour software to a personal computer and "tour"
completely furnished homes, view the Company's different floor plans, locate the
various subdivisions available in each market, and learn about neighborhood
schools, subdivision amenities and shopping as well as the Company's
construction techniques.
FOCUS ON RELOCATION MARKET. In markets with a significant number of
relocation buyers, the Company aggressively competes with individual resales of
existing homes, primarily by making available to potential buyers completed or
nearly completed homes. Since 1993, approximately 65% of the Company's homes
were begun before a sales contract was executed and an earnest money deposit was
received. As of September 30, 1997, the Company had 115 completed homes in
inventory and 261 homes under construction without a sales contract. The Company
believes that maintaining an inventory of completed or nearly completed homes
provides distinct competitive advantages by (i) allowing homebuyers to
physically inspect their future home, in many instances easing their decision to
buy, (ii) providing homes which can be moved into in or close to the same time
frame as purchases of used homes, and (iii) avoiding the significant time and
monetary costs typically associated with updating used homes. Since 1993, 70% of
the Company's homes were sold prior to completion of the home.
MANAGEMENT TRAINING. The Company aggressively recruits and hires new
management trainees, typically with some construction experience, following
graduation from college and trains these new hires for increasing levels of
responsibility within the Company. Through continuous "on the job" experience
and classroom training, these associates become knowledgeable, experienced
candidates for middle management positions. The Company believes that one of its
strengths is its depth of middle management. This depth facilitates the
Company's growth strategy as more experienced management relocates to new
markets to conduct start-up operations while top performing middle managers are
promoted to increasing levels of responsibility for continuing expansion of
existing markets. The Company also actively seeks and employs qualified
candidates for sales and marketing positions and provides extensive training
designed to improve marketing skills and
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educate sales associates with respect to the uniqueness of the Company's homes
which allows them to emphasize product differentiation in the sales process.
DECENTRALIZED OPERATIONS WITH EXPERIENCED MANAGEMENT. The Company believes
that the in-depth knowledge of its experienced management in local markets
enables the Company to better serve its customers. The Company is organized into
operating divisions, each relating to a local market area. Local management of
each operating division is responsible for preliminary site selection and
negotiation of option contracts in accordance with Company policies.
Additionally, each operating division plans its homebuilding schedule, selects
the building plans and architectural scheme for its subdivisions, obtains all
building approvals, and develops a marketing plan for its homes. The Company's
corporate office retains responsibility for purchasing, accounting and certain
other management and administrative matters, including approval of all lot
contracts, final product selection, securing all financing and marketing plan
approval.
CENTRALIZED PURCHASING. The Company utilizes centralized purchasing to
leverage its purchasing power into volume discounts, a practice which reduces
costs, ensures timely deliveries and reduces the risk of supply shortages due to
allocations of materials. The Company has negotiated favorable price
arrangements with high quality national and regional suppliers such as General
Electric, Rheem Manufacturing, Dupont Corian, Owens Corning, Dow Chemical, Royal
Baths, Weslock National and Sherwin-Williams for appliances, heating and air
conditioning, counter tops, bathroom fixtures, roofing and insulation products,
floor coverings, and other housing components. Major materials, such as lumber,
sheetrock, concrete and brick are also centrally purchased to obtain volume
discounts. There are no minimum purchase requirements for these arrangements.
COST MANAGEMENT. The Company controls its divisional overhead costs by
centralizing administrative and accounting functions, eliminating the need for
redundant functions at the city level. The Company controls construction costs
through the efficient design of its homes and by obtaining favorable pricing,
where possible, from subcontractors based on the high volume of work performed
for the Company. The Company also controls its warranty costs through quality
control that ensures that the home has been totally finished prior to the buyer
moving in, thus enhancing customer satisfaction. The Company controls its
advertising expenses through sophisticated budgeting of expenses with extensive
review of all expenditures. Some of the Company's major suppliers and
contractors also contribute advertising dollars for special promotions of houses
and products. These campaigns feature the key suppliers' products and enhance
the image of the Company's homes through brand recognition. In addition, the
Company seeks to control its corporate overhead costs through efficiencies
achieved through its highly automated and integrated systems.
LIMITED REAL ESTATE EXPOSURE. The Company seeks to maximize its return on
capital and limit its exposure to changes in land valuation by obtaining options
to purchase lots whenever feasible. The Company will also directly acquire,
where appropriate, quality residential properties that are in high demand for
use in its homebuilding operations and for sale to third-party builders. The
Company's executive management establishes targeted levels of lot options and
land for development based on its strategic plan for the overall growth of the
Company. The Company targets properties for acquisition that are both suitable
for its homebuilding product and in locations which are anticipated to maintain
the homebuyers' property values. The Company believes this strategy improves
inventory turnover and enables the Company to develop and dispose of the
developed lots typically within two to three years. The Company does not acquire
land that is not suitable for lot development and residential construction and
does not speculate on land values by acquiring and holding land for resale or
for future development.
The Company seeks to limit its exposure to real estate inventory risks by
(i) closely monitoring its unsold inventory of new homes and the stage of
completion of homes under construction on an ongoing basis, (ii) centralizing
control for the start of new homes and (iii) closely monitoring local job market
and demographic trends, housing preferences and related economic developments,
such as new job opportunities, local growth initiatives and trends in work force
median income levels.
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PROPOSED ACQUISITION OF WESTBROOKE
In December 1997, the Company and Pacific USA (as defined below) entered
into a letter of intent to acquire Westbrooke Communities, Inc. and its
affiliated entities ("Westbrooke"). Westbrooke, founded in 1976, is a leading
builder of single-family homes in the South Florida market. Westbrooke's homes
are designed primarily to appeal to first time and move-up home buyers, with
homes ranging in size from 1,300 square feet to over 3,500 square feet and
ranging in price from $108,000 to $240,000, with an average sales price of
$175,000 for the nine months ended September 30, 1997. Westbrooke operated in
four subdivisions and had 304 homes under construction as of September 30, 1997.
Westbrooke has historically had a greater number of closings in the fourth
quarter than in the first three quarters of its fiscal year, and expects this
trend to be consistent for 1997. The Company expects the acquisition of
Westbrooke to significantly enhance its competitive position in the South
Florida area.
Pursuant to the letter of intent between the Company, Pacific USA and
Westbrooke, the consideration for the purchase of Westbrooke will consist of (i)
$12.3 million in promissory notes (the "Acquisition Notes") bearing interest at
6.45% per annum and payable annually over five years and (ii) deferred
consideration of up to $7.5 million contingent upon Westbrooke achieving
specified earnings targets over a five year period. Additionally, a promissory
note bearing interest at 9% per annum and payable within six months of the
closing of the acquisition will be issued to the sellers (as additional purchase
price) to the extent that stockholders' equity of Westbrooke exceeds $5.0
million at closing.
Prior to the acquisition of Westbrooke by the Company, Westbrooke intends
to borrow $10.0 million under a bank loan (the "New Bank Loan") to repay the
$7.5 million outstanding balance of its subordinated notes (the "Subordinated
Notes") and to acquire $2.5 million of minority interests in Westbrooke (the
pre-acquisition transactions). Upon acquisition of Westbrooke and the subsequent
funding of this offering, the Company intends to use $10 million of the net
proceeds of the offering to repay the New Bank Loan.
Additional consideration will be paid to the three key managers of
Westbrooke equal to 6% (2% to each individual) of operating earnings contingent
upon Westbrooke achieving specified earnings targets over a five year period and
will be recorded as compensation expense in the period it is earned.
The Westbrooke acquisition is subject to the execution of a definitive
agreement and satisfaction of certain closing conditions. There can be no
assurance that the Westbrooke acquisition will be completed.
BACKGROUND
The Company is a wholly-owned, indirect subsidiary of Pacific USA Holdings
Corp. ("Pacific USA"), which also conducts operations through companies engaged
in financial services, other real estate activities, technology and investment
banking. The Company is a direct subsidiary of Pacific Realty Group, Inc.
("Pacific Realty Group"), which has investments in companies engaged in other,
non-homebuilding, real estate activities. Pacific USA is an indirect subsidiary
of Pacific Electric Wire & Cable Co., Ltd., a company organized under the laws
of Taiwan with shares listed on the Taiwan Securities Exchange.
In 1993, Pacific Realty Group acquired Newmark and formed Pacific United
Development Corp., a residential land acquisition and development company
("PUDC"). In 1994, the Company was incorporated as a Nevada corporation, and
Pacific Realty Group contributed Newmark and PUDC to the Company. In March 1995,
the Company acquired the business of The Adler Family Partnership ("Adler"), a
builder of single-family homes in the Miami/Ft. Lauderdale metropolitan area.
The Company's principal executive offices are located at 1200 Soldiers
Field Drive, Sugar Land, Texas 77479, and its telephone number is (281)
243-0100.
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THE OFFERING
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Common Stock offered by the
Company............................. 2,000,000 shares
Common Stock to be outstanding after
this offering....................... 11,200,000 shares
Use of Proceeds..................... To repay a portion of the indebtedness
to be assumed in connection with the
acquisition of Westbrooke and to
provide capital to fund the Company's
future growth, including new market
expansion and residential land
acquisitions.
Proposed Nasdaq National Market
Symbol.............................. NHCH
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SUMMARY FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
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PRO FORMA PRO FORMA
1994 1995(1) 1996 1996(2) 1996 1997 1997(2)
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STATEMENT OF OPERATIONS DATA:
Revenues........................ $108,630 $125,427 $191,998 $316,299 $139,727 $163,548 $228,391
Gross profit.................... 22,370 22,836 34,591 52,335 25,668 29,970 39,647
Equity in earnings from
unconsolidated subsidiaries... -- 1,978 792 792 660 262 262
Selling, general and
administrative expenses....... 12,928 16,572 22,976 30,975 17,282 19,121 24,807
Depreciation and amortization... 831 1,271 1,524 2,410 1,110 1,224 1,967
Operating income................ 8,611 6,971 10,883 19,742 7,936 9,887 13,135
Income before income taxes...... 8,189 6,246 10,496 18,701 7,658 8,783 11,267
Net income...................... 4,984 3,769 6,332 11,419 4,706 5,417 6,957
Net income per share............ $ 0.54 $ 0.41 $ 0.69 $ 1.02 $ 0.51 $ 0.59 $ 0.62
Weighted average shares
outstanding................... 9,200 9,200 9,200 11,200 9,200 9,200 11,200
OPERATING DATA:
Units:
New sales contracts, net...... 500 720 998 1,598 830 757 1,255
Closings...................... 534 641 902 1,644 686 731 1,102
Backlog at end of period...... 92 171 267 539 315 293 692
Average sales price per
closing....................... $ 201 $ 188 $ 200 $ 185 $ 200 $ 22 $ 204
Sales value of backlog at end of
period........................ $ 18,579 $ 32,280 $ 50,657 $ 96,222 $ 58,023 $ 63,239 $132,976
Gross profit as a percentage of
revenues...................... 20.6% 18.2% 18.0% 16.6% 18.4% 18.3% 17.4%
Selling, general and
administrative expenses as a
percentage of revenues........ 11.9% 13.2% 12.0% 9.8% 12.4% 11.7% 10.9%
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SEPTEMBER 30, 1997
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PRO FORMA
ACTUAL AS ADJUSTED(2)
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BALANCE SHEET DATA:
Inventories............................................... $ 94,711 $147,153
Total assets.............................................. 132,755 201,252
Total debt................................................ 66,532 97,794
Stockholders' equity...................................... 46,580 74,397
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(1) Reflects the operating data of Adler subsequent to the Company's acquisition
of the homebuilding assets of The Adler Family Partnership on March 1, 1995.
(2) Gives effect to (i) the contribution of indebtedness ($9.8 million as of
September 30, 1997) owed by the Company to Pacific USA to capital of the
Company (the "Capital Contribution"), which will occur upon the consummation
of this offering, (ii) the acquisition of Westbrooke and (iii) the sale of
the Common Stock offered hereby and the application of the estimated net
proceeds therefrom. See "Use of Proceeds" and Pro Forma Condensed Financial
Statements included elsewhere in this Prospectus.
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RISK FACTORS
Prospective investors should carefully consider the specific factors set
forth below as well as the other information included elsewhere in this
Prospectus before deciding to purchase the shares of Common Stock offered
hereby. Except for historical information contained herein, the discussion in
this Prospectus contains forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed in this Prospectus. Factors that could
cause or contribute to such difference include those discussed below, as well as
those discussed elsewhere herein.
GENERAL REAL ESTATE, ECONOMIC AND OTHER CONDITIONS. The homebuilding
industry is cyclical and is significantly affected by changes in general and
local economic conditions, such as employment levels, interest rates,
availability of financing for homebuyers, consumer confidence and housing
demand. In addition, homebuilders are subject to various risks, including
competitive overbuilding, availability and cost of lots, materials and labor,
weather conditions, delays in construction schedules, cost overruns, changes in
governmental regulation and increases in real estate taxes and other local
government fees. In addition, to the extent that hurricanes, tornados, droughts,
floods, brushfires or other natural disasters or similar events occur in any of
the Company's markets, the homebuilding industry in general, and the Company's
business in particular, may be adversely affected.
INTEREST RATES; MORTGAGE FINANCING. Virtually all purchasers of the
Company's homes finance their acquisitions through third-party lenders providing
mortgage financing. In general, housing demand is adversely affected by
increases in interest rates, decreasing availability of mortgage financing,
increasing housing costs and unemployment. If mortgage interest rates increase
and, as a result, the ability of prospective buyers to finance home purchases is
adversely affected, the Company's operating results may be significantly
negatively impacted. The Company's homebuilding activities are also dependent
upon the availability and cost to home buyers of mortgage financing.
ACCESS TO FINANCING. The homebuilding industry is capital intensive and
requires expenditures for home construction and for land purchases and
development. Accordingly, the Company has incurred substantial indebtedness to
finance its homebuilding, land acquisition and development activities. The
Company believes it will have adequate financial resources after this offering,
including availability under its credit facilities, to meet its working capital,
residential land acquisition and development needs under current market
conditions. However, there can be no assurance that the amounts available from
such sources will be sufficient. If the Company identifies significant new
acquisition opportunities, or if the Company's operations do not generate
sufficient cash from operations at levels currently anticipated, the Company may
be required to seek additional capital in the form of equity or debt financing
from a variety of potential sources, including additional bank financings or the
issuance of debt or equity securities. The amount and types of indebtedness
which the Company may incur are limited by the terms of its existing financing
agreements. If the Company is not successful in obtaining sufficient capital to
fund its planned expansion and other expenditures, new projects may be
constrained. Any such delay or abandonment could result in a reduction in sales
and may adversely affect the Company's future results of operations. Prior to
this offering, the Company has been operated as an indirect wholly-owned
subsidiary of Pacific USA and has obtained financing and loan guarantees from
Pacific USA. Pacific USA will be under no obligation to provide such financing,
in part, or guarantees to the Company in the future. In connection with this
offering, all outstanding indebtedness owed by the Company to Pacific USA will
be contributed to the Company's capital, and all currently outstanding loan
guarantees provided by Pacific USA will continue in accordance with their terms.
LAND POLICIES AND POSITION. Historically, the Company has made significant
investments in land inventory and lot positions, primarily in the Miami/Ft.
Lauderdale market, principally because land was not available on an option
basis. Due to market conditions, the Company may not be able to obtain suitable
land inventory or sufficient lot positions through the use of options. This may
require the Company to make significant investments in land and lot positions
that the Company may be required to hold as inventory for an extended period
until economic conditions justify the development of such land and lot
positions. Moreover,
9
<PAGE> 11
there can be no assurance that the Company will be successful in acquiring
suitable land for development in additional markets. If the Company is unable to
locate and acquire suitable land which it can profitably develop, its business,
financial condition and results of operations could be materially and adversely
affected.
SPECULATIVE CONSTRUCTION. Since 1993, approximately 65% of the Company's
homes were begun before a sales contract was executed and an earnest money
deposit was received. Because interest and other expenses are capitalized during
construction but expensed after completion, the Company begins to recognize
significant interest and maintenance expense on unsold inventory. At September
30, 1997, the Company had 115 completed homes in inventory and 261 homes under
construction without a sales contract. In the event there is a downturn in
housing sales in the Company's markets, the Company's inventory of completed
homes could increase, leading to additional financing costs and lower margins,
which could have a material adverse effect on the Company's financial results.
RISKS ASSOCIATED WITH ACQUISITIONS AND EXPANSION OF OPERATIONS. In
connection with its acquisitions (including the pending acquisition of
Westbrooke) and new market expansion, the Company may face risks commonly
encountered with growth through acquisitions and expansions. These risks include
the incurrence of higher than anticipated capital expenditures and operating
expenses, the adverse impact on the Company's ongoing business resulting from
greater attention of management to the acquired businesses or new market
operations, and difficulties encountered in integrating the operations and
personnel of the acquired business. There can be no assurance that the Company
will be successful in overcoming these risks or any other problems encountered
with acquisitions or expansions. To the extent the Company does not successfully
avoid or overcome the risks or problems related to its acquisitions or
expansions, the Company's results of operations and financial condition could be
adversely affected.
To the extent that the Company expands through start-up operations into new
markets or through acquisition, it will need to employ or consult with personnel
that are knowledgeable of such markets. In addition, the success of any
particular acquisition (including the pending Westbrooke acquisition) may be
significantly dependent on retaining key members of the acquired company's
existing management. There can be no assurance that the Company will be able to
employ or retain the necessary personnel, that the Company will be able to
successfully implement its disciplined management process and culture with local
management or that the Company's expansion operations will be successful.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS. The Company and its
competitors are subject to various local and state statutes, ordinances, rules,
and regulations concerning zoning, resource protection (protection of wetlands,
woodlands and hillside areas), building design, construction and similar
matters. The Company may also be subject to periodic delays in its homebuilding
projects due to building moratoriums. Such moratoriums generally relate to
insufficient water supplies, sewage facilities, delays in utility hook-ups, or
inadequate road capacity within specific market areas or subdivisions. In
addition, certain new development projects are subject to various assessments
for schools, parks, streets and highways and other public improvements, the
costs of which can be substantial. By raising the cost of the Company's homes to
its customers, an increase in such assessments could have a negative impact on
the Company's sales.
Federal and state environmental laws and regulations also affect the
Company and its competitors. The particular environmental laws which apply to
any given homebuilding site vary according to the site's location, its
environmental conditions and the present and former uses of the site, as well as
adjoining properties. Environmental laws and conditions may result in delays,
may cause the Company to incur substantial compliance and other costs, and may
prohibit or severely restrict homebuilding activity in environmentally sensitive
markets.
Furthermore, in projects in which the Company is developing land, it must
obtain the approval of numerous governmental authorities regulating such matters
as permitted land uses and levels of density and the installation of utility
services such as electricity, water and waste disposal. The length of time
necessary to obtain permits and approvals increases the carrying cost of
unimproved property acquired for the purpose of development and construction.
There can be no assurance that the time necessary to obtain permits and
approvals will not increase in the future, or that, whether or not such time
periods increase, governmental restrictions and approval processes will not
materially increase the carrying cost of property held by the
10
<PAGE> 12
Company, which could have a material adverse effect on the Company's business,
financial condition or results of operations.
VARIABILITY OF RESULTS. The Company historically has experienced, and in
the future expects to continue to experience, variability in sales and net
income on an annual and a quarterly basis. Factors expected to contribute to
this variability include, among others: (i) the timing of home closings; (ii)
the Company's ability to continue to acquire land and options thereon under
acceptable terms; (iii) the timing of receipt of regulatory approvals for the
construction of homes; (iv) the condition of the real estate market and general
economic conditions in the Company's local markets; (v) the cyclical nature of
the homebuilding industry; (vi) the prevailing interest rates and the
availability of mortgage financing; (vii) pricing policies of the Company's
competitors; (viii) the timing of the opening of new residential projects; (ix)
weather; and (x) the cost and availability of materials and labor. The Company's
historical financial performance is not necessarily a meaningful indicator of
future results and, in particular, the Company expects its financial results to
vary from project to project and from period to period. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results."
DEPENDENCE ON TEXAS AND FLORIDA ECONOMIES AND HOUSING MARKETS. The Company
presently conducts most of its business in Texas and Florida. Economic growth in
Texas has increased considerably in the 1990's, compared to the late 1980's, a
period characterized by a weak economy, excessive home inventories and low sale
prices, while economic growth in Florida has generally been in excess of the
national average over the last several years. A prolonged economic downturn in
Texas or Florida would have a material adverse effect on the Company.
MIAMI/FT. LAUDERDALE OPERATIONS. Certain insurance companies doing business
in the Miami/Ft. Lauderdale have restricted, curtailed or suspended the
issuance of homeowners' insurance policies on single family and multi-family
homes. This has had the effect of both reducing the availability of hurricane
and other types of natural disaster insurance and, in general, increasing the
cost of such insurance to prospective purchasers of homes in the Miami/Ft.
Lauderdale metroplex. Mortgage financing for a new home is conditioned, among
other things, on the availability of adequate homeowners' insurance. There can
be no assurance that homeowners' insurance will be available or affordable to
prospective purchasers of the Company's homes offered for sale in the Miami/Ft.
Lauderdale market. Long-term restrictions on, or unavailability of, homeowners'
insurance in the Miami/Ft. Lauderdale market could have an adverse effect on the
homebuilding industry in that market in general, and on the Company's business
within that market in particular. Additionally, the availability of permits for
new homes in new and existing developments has been adversely affected by the
significantly limited capacity of the schools, roads, and other infrastructure
in that market.
POTENTIAL CONFLICTS OF INTEREST. Conflicts of interest may arise in the
future between the Company and Pacific USA in a number of areas relating to
their ongoing relationships, including dividends, incurrence of indebtedness,
tax matters, financial commitments and issuances and sales of capital stock of
the Company. The Company and Pacific USA have agreed pursuant to a tax
allocation agreement that the Company will pay Pacific USA an amount equal to
the liability that the Company would be required to pay if the Company paid
federal income taxes on a stand-alone basis. A conflict of interest may arise if
Pacific USA chooses to contest, compromise or settle any adjustment or
deficiency proposed by the relevant taxing authority in a manner that may be
beneficial to Pacific USA and detrimental to the Company. In addition, under
federal income tax law, each member of a consolidated group (as determined for
federal income tax purposes) is also jointly and severally liable for the
federal income tax liability of the consolidated group. See "Certain
Transactions -- Tax Allocation Agreement."
CONCENTRATION OF OWNERSHIP. Following completion of this offering, Pacific
USA will indirectly beneficially own approximately 82.1% of the outstanding
Common Stock of the Company (80.0% if the Underwriters' overallotment option is
exercised in full). Accordingly, Pacific USA will be in a position to elect the
Company's directors and officers, to control the policies and operations of the
Company and to determine the outcome of corporate transactions or other matters
submitted for shareholder approval, including mergers, consolidations, the sale
of the Company's assets or a change in control of the Company. See "Security
Ownership" and "Description of Capital Stock."
11
<PAGE> 13
COMPETITION. The homebuilding industry is highly competitive and
fragmented. Homebuilders compete for desirable properties, financing, materials
and skilled labor. The Company competes for residential sales with large
homebuilding companies, some of which have greater financial resources than the
Company, and smaller homebuilders, which may have lower administrative costs.
The Company also competes for home sales with individual resales of existing
homes and condominiums. There can be no assurance that the Company will be able
to continue to compete successfully in any of its markets. The inability of the
Company to continue to compete successfully in any of its markets could have a
material adverse effect on the Company's business, financial condition or
results of operations.
WARRANTY LIABILITY. Various components of homes built by the Company are
warranted against defects in materials or work quality for up to 10 years. The
Company has not experienced any material losses from warranty claims to date and
maintains reserves for normal, recurring warranty expenses. There can be no
assurance that material warranty claims will not be asserted in the future.
These claims could have a material adverse effect on the Company's business,
financial condition or results of operations.
DEPENDENCE ON KEY PERSONNEL. The Company's future success will depend on
the continued services of its executive and senior officers. Certain members of
executive and senior management have employment agreements with the Company. See
"Management -- Employment Agreements." The loss of the services of one or more
key personnel could have a material adverse effect upon the Company's
operations. The Company's success also depends on its ability to attract and
retain qualified personnel. There can be no assurances that the Company will be
successful in attracting and retaining such personnel. See "Management."
SHARES ELIGIBLE FOR FUTURE SALE. Following completion of this offering, the
Company will have outstanding 11,200,000 shares of Common Stock. The 2,000,000
shares sold in this offering may be publicly offered and sold without
restriction, unless they are purchased by affiliates of the Company. Shares of
Common Stock outstanding prior to completion of this offering will be
"restricted securities" under the Securities Act of 1933, as amended (the
"Securities Act"). These "restricted securities" may be sold only if they are
registered under the Securities Act by the Company or pursuant to an applicable
exemption from the registration requirements of the Securities Act, including
Rule 144 thereunder. The Company and Pacific USA have agreed that they will not,
directly or indirectly, sell or otherwise dispose of any of such shares for a
period of 180 days after the date of this Prospectus, without the prior written
consent of Rauscher Pierce Refsnes, Inc. on behalf of the Representatives of the
Underwriters. See "Underwriting." The sale of substantial amounts of Common
Stock, or the perception that such sales could occur, could adversely affect the
prevailing market price for the Common Stock. See "Shares Eligible for Future
Sale."
IMMEDIATE AND SUBSTANTIAL DILUTION. Investors participating in this
offering will experience immediate and substantial dilution in net tangible book
value per share. See "Dilution."
ABSENCE OF PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK
PRICE. Prior to this offering, there has been no public market for the Common
Stock. Although the Company intends to apply for inclusion of the Common Stock
on the Nasdaq National Market, there can be no assurance that an active market
will develop or be sustained following this offering. The initial public
offering price for the shares of Common Stock sold in this offering will be
determined through negotiations between the Company and the Representatives and
may not necessarily reflect the market price for the Common Stock following this
offering. Market prices for the Common Stock following this offering will be
influenced by a number of factors, including the Company's operating results and
other factors affecting the Company specifically and the homebuilding industry
and financial markets generally, as well as the depth and liquidity of the
market for the Common Stock. In recent years, the stock market has experienced
price and volume fluctuations. This volatility has had a significant effect on
the market prices of securities issued by many companies for reasons unrelated
to their operating performance. See "Underwriting."
ANTI-TAKEOVER PROVISIONS. Nevada law includes a number of provisions that
may have the effect of encouraging persons considering unsolicited tender offers
or other unilateral takeover proposals to negotiate with the Board of Directors
rather than pursue non-negotiated takeover attempts. The Company's Articles of
Incorporation provide for "blank check" preferred stock which may also have the
effect of deterring a non-negotiated take-over attempt. See "Description of
Capital Stock --Anti-Takeover Provisions of State Law."
12
<PAGE> 14
USE OF PROCEEDS
The net proceeds from the sale of the shares of Common Stock offered by the
Company are estimated to be approximately $18.0 million (approximately $20.8
million if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $10 per share and after deducting
the underwriting discount and other estimated offering expenses.
Of the net proceeds, the Company intends to use $10 million to repay a bank
loan incurred by Westbrooke prior to its acquisition by the Company. Pending new
market expansion or land acquisition opportunities, the remaining balance of the
net proceeds is expected to be used to repay a portion of the outstanding
balances under the Company's construction credit facilities. Borrowings under
such credit facilities bear interest at rates ranging from prime plus 0.5% to
prime plus 1.5% per annum, and mature upon the closing of the sale of the homes
securing the borrowings. Upon application of the net proceeds as set forth
above, the Company will have approximately $12.0 million available under its
credit facilities for future borrowings, which the Company believes will provide
it with financial flexibility as new market expansion or land acquisition
opportunities arise. Pending such uses, the net proceeds of this offering will
be invested in short term, interest bearing securities.
Contemporaneously with this offering, all of the indebtedness owed to
Pacific USA ($9.8 million at September 30, 1997) will be contributed to the
capital of the Company.
DIVIDEND POLICY
The Company intends to retain all earnings to provide funds for its
operations and expansion, and, therefore, does not anticipate paying cash
dividends on its Common Stock in the foreseeable future. The Company's future
dividend policy will be determined by its Board of Directors based on various
factors, including the Company's results of operations, financial condition,
business opportunities, capital requirements, credit restrictions and such other
factors as the Board of Directors may deem relevant. In addition, certain of the
Company's credit agreements restrict the amount of dividends payable by the
Company.
13
<PAGE> 15
DILUTION
At September 30, 1997, after giving effect to the Capital Contribution, the
Company had pro forma net tangible book value of $2.16 per share of Common
Stock. Net tangible book value per share of Common Stock equals the tangible
assets of the Company, less all liabilities, divided by the total number of
shares of Common Stock outstanding. After giving effect to the sale of shares of
Common Stock offered hereby at an assumed initial public offering price of
$10.00 per share and the application of the net proceeds therefrom, the net
tangible book value of the Company at September 30, 1997 would have been $3.38
per share. This represents an immediate increase of $1.22 per share to the
existing shareholder and an immediate dilution of $6.62 per share to new
investors purchasing shares at the initial public offering price. The following
table illustrates this per share dilution to new investors:
<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $10.00
Pro forma net tangible book value per share as of
September 30, 1997..................................... $2.16
-----
Increase per share attributable to new investors.......... 1.22
-----
Net tangible book value per share after offering............ 3.38
------
Dilution per share to new investors......................... $ 6.62
======
</TABLE>
The following table sets forth the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company and the
average price paid per share by the sole existing shareholder and new investors
purchasing shares in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ ------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing
shareholder......... 9,200,000 82.1% $42,469,000 68.0% $ 4.62
---------- ------ ----------- ------ ------
New investors......... 2,000,000 17.9% 20,000,000 32.0% 10.00
---------- ------ ----------- ------ ------
Total............ 11,200,000 100.0% $62,469,000 100.0%
========== ====== =========== ======
</TABLE>
14
<PAGE> 16
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1997 (i) on an actual basis, (ii) pro forma to give effect to the
pending acquisition of Westbrooke and (iii) pro forma as adjusted to reflect the
sale of the shares of Common Stock offered hereby and the application of the
estimated net proceeds therefrom and the Capital Contribution. See "Use of
Proceeds." This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Construction loans payable........................ $ 56,715 $ 87,549 $ 79,549
Notes payable to Pacific USA...................... 9,817 9,817 --
Bank loan......................................... -- 10,000 --
Acquisition Notes(1).............................. -- 18,245 18,245
Stockholders' equity:
Preferred stock, $0.01 par value, 3,000,000
shares authorized; no shares issued, actual
or as adjusted............................... -- -- --
Common stock, $0.01 par value, 30,000,000 shares
authorized; 9,200,000 shares issued, actual;
11,200,000 shares issued, as adjusted........ 92 92 112
Additional paid-in capital...................... 42,377 42,377 70,174
Retained earnings............................... 4,111 4,111 4,111
-------- -------- --------
Total stockholders' equity.............. 46,580 46,580 74,397
-------- -------- --------
Total capitalization.................... $113,112 $172,191 $172,191
======== ======== ========
</TABLE>
- ---------------
(1) The principal amount of the Acquisition Notes totals $12.3 million, which
amount is subject to either an increase or decrease by the amount by which
the stockholders' equity of Westbrooke at closing exceeds, or is less than,
$5 million. As of September 30, 1997, the principal amount of the
Acquisition Notes would have been $18.2 million, after giving effect to the
adjustment described in the preceding sentence.
15
<PAGE> 17
SELECTED FINANCIAL AND OPERATING DATA
The statement of operations data and balance sheet data presented below
have been derived from the historical financial statements of the Company. The
Company's consolidated financial statements for the years ended December 31,
1994, 1995 and 1996 have been audited by KPMG Peat Marwick LLP, independent
certified public accountants, and are included elsewhere herein. The selected
statement of operations data and balance sheet data presented for the nine
months ended September 30, 1996 and 1997 are derived from unaudited financial
statements of the Company which, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial position and results of operations of the
Company as of and for these periods. Results of operations for the nine months
ended September 30, 1997 are not necessarily indicative of the results of
operations that may be achieved for the full fiscal year. The selected financial
data set forth below should be read in conjunction with and are qualified by
reference to the Company's consolidated financial statements and notes thereto
included elsewhere in this Prospectus and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------- DECEMBER 31, ------------------------------ -------------------
1992(1) 1993(1) 1993(1)(2) 1994 1995(3) 1996 1996 1997
-------- -------- ------------ -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................... $ 79,778 $ 86,445 $24,273 $108,630 $125,427 $191,998 $139,727 $163,548
Cost of sales.................. 64,137 68,980 19,641 86,260 102,591 157,407 114,059 133,578
-------- -------- ------- -------- -------- -------- -------- --------
Gross profit................... 15,641 17,465 4,632 22,370 22,836 34,591 25,668 29,970
Equity in earnings from
unconsolidated
subsidiaries................. -- -- -- -- 1,978 792 660 262
Selling, general and
administrative expenses...... (12,946) (14,101) (2,638) (12,928) (16,572) (22,976) (17,282) (19,121)
Depreciation and
amortization................. (221) (188) (222) (831) (1,271) (1,524) (1,110) (1,224)
-------- -------- ------- -------- -------- -------- -------- --------
Operating income............... 2,474 3,176 1,772 8,611 6,971 10,883 7,936 9,887
Interest expense............... (256) (360) (123) (613) (1,332) (1,238) (943) (1,525)
Other income, net.............. (6) (170) (68) 191 607 851 665 421
-------- -------- ------- -------- -------- -------- -------- --------
Income before income taxes..... 2,212 2,646 1,581 8,189 6,246 10,496 7,658 8,783
Income taxes................... 140 202 772 3,205 2,477 4,164 2,952 3,366
-------- -------- ------- -------- -------- -------- -------- --------
Net income..................... $ 2,072 $ 2,444 $ 809 $ 4,984 $ 3,769 $ 6,332 $ 4,706 $ 5,417
======== ======== ======= ======== ======== ======== ======== ========
Net income per common
share........................ -- -- $ 0.09 $ 0.54 $ 0.41 $ 0.69 $ 0.51 $ 0.59
======= ======== ======== ======== ======== ========
Weighted average shares
outstanding.................. -- -- 9,200 9,200 9,200 9,200 9,200 9,200
OPERATING DATA:
Units:
New sales contracts, net..... 500 720 998 830 757
Closings..................... 534 641 902 686 731
Backlog at end of period..... 92 171 267 315 293
Average sales price per
closing...................... $ 201 $ 188 $ 200 $ 200 $ 220
Sales value of backlog at end
of period.................... $ 18,579 $ 32,280 $ 50,657 $ 58,023 $ 63,239
Gross profit as a percentage of
revenues..................... 20.6% 18.2% 18.0% 18.4% 18.3%
Selling, general and
administrative expenses as a
percentage of revenues....... 11.9% 13.2% 12.0% 12.4% 11.7%
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------- ------------------------------ SEPTEMBER 30,
1992(1) 1993(1) 1994 1995 1996 1997
-------- -------- -------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Inventories.................... $ 23,555 $ 28,124 $ 36,670 $ 59,689 $ 83,659 $ 94,711
Total assets................... 27,765 30,818 68,980 104,545 121,177 132,755
Total debt..................... 18,652 23,818 33,086 47,428 60,768 66,532
Stockholders' equity........... 9,113 7,000 35,894 45,813 43,929 46,580
</TABLE>
- ---------------
(1) Data for 1992 and 1993 reflect the results of Newmark prior to its
acquisition by Pacific USA in 1993. The financial data of Newmark for the
years ended September 30, 1992 and 1993 were derived from audited financial
statements. PUDC was formed in 1993 and had no operations until 1994.
(2) The Company changed its fiscal year end from September 30 to December 31 in
1993.
(3) Reflects the operating data of Adler subsequent to the Company's acquisition
of the homebuilding assets of The Adler Family Partnership on March 1, 1995.
16
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
On October 1, 1993, Pacific Realty Group acquired Newmark, a homebuilding
company with a long-term track record of successful performance, established
name in its existing markets, disciplined management culture, process and
systems, and locations in strong growth markets. Since inception, the Company
has sought to achieve profitability and revenue growth by providing quality
homes in markets which have experienced population and job growth in excess of
the national average during the past several years. Newmark has served as the
foundation to support the Company's growth strategy, including expansion within
existing markets, entry into two new markets through start-up operations and the
acquisition of a regional homebuilder. In order to solidify lot position for its
homebuilding operation, Pacific Realty Group formed a residential land
acquisition and development company in 1993.
The Company has experienced significant growth and has positioned itself to
continue to expand its residential land and lot acquisitions significantly in
markets that it has recently entered, such as Nashville and Dallas/Fort Worth,
as well as in Houston. The Company believes that, based on its recently acquired
lot options in a number of master-planned communities in and around Houston,
there are significant opportunities for achieving greater market share in this
market. The Company has continued to expand its operations in Miami/Ft.
Lauderdale through new developments and the proposed acquisition of Westbrooke.
The Company has also entered into new complementary lines of business including
providing title and mortgage origination services through business relationships
with Stewart Title Co. and CTX Mortgage Ventures Corporation. The Company
expects these ancillary sources of revenues to grow at a rate consistent with
the growth of its core homebuilding business.
The Company recognizes revenue at the time of closing when title to, and
possession of, the property transfers to the buyer. The Company capitalizes in
inventory all homebuilding costs during the construction period including
interest and maintenance and charges those capitalized costs to cost of sales as
the related inventories are sold. Interest incurred on inventory following
completion of construction is expensed. Accordingly, as the Company's inventory
level rises and falls, interest expense can vary significantly. Included in the
Company's depreciation and amortization expenses is amortization of goodwill in
excess of $1.0 million in each of 1995 and 1996 related to the Company's
acquisitions of Newmark and Adler.
Equity in earnings from unconsolidated subsidiaries primarily represents
earnings from a Florida homebuilding partnership, owned 50% by the Company,
which wound-up its home-building operations in October 1997. Currently, all of
the Company's continuing Florida operations are conducted through a wholly-owned
subsidiary and included in the Company's revenues rather than in equity in
earnings of unconsolidated subsidiaries. Equity in earnings from unconsolidated
subsidiaries also includes earnings from Pacific Title, L.L.C. ("Pacific
Title"), a title service business in which the Company owns a 49% interest, and
NHC Mortgage Group, L.P. ("NHC Mortgage"), a mortgage finance joint venture in
which the Company owns a 50% interest, each of which was formed in 1997.
17
<PAGE> 19
RESULTS OF OPERATIONS
The following table sets forth the homebuilding revenue and number of home
closings by market for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Houston:
Revenues................... $ 63,864 $ 51,932 $ 79,920 $ 64,236 $ 68,615
Units...................... 324 253 363 293 283
Austin:
Revenues................... $ 43,226 $ 53,507 $ 63,891 $ 48,983 $ 49,398
Units...................... 210 291 334 257 234
Dallas/Fort Worth:
Revenues................... -- $ 4,922 $ 20,180 $ 14,725 $ 20,139
Units...................... -- 27 103 77 97
Miami/Ft. Lauderdale:
Revenues................... -- $ 10,229 $ 16,819 $ 9,332 $ 22,562
Units...................... -- 70 102 59 117
Nashville(1):................ -- -- -- -- --
-------- -------- -------- -------- --------
Total homebuilding
revenues(2)........... $107,090 $120,590 $180,810 $137,277 $160,714
======== ======== ======== ======== ========
Total home closings..... 534 641 902 686 731
======== ======== ======== ======== ========
Average sales price per
home....................... $ 201 $ 188 $ 200 $ 200 $ 220
</TABLE>
- ---------------
(1) Nashville start-up operations began in August 1997 with home closings
expected to begin in the second quarter of 1998.
(2) Does not include revenues from land sales of $1.5 million, $4.8 million and
$11.2 million in 1994, 1995 and 1996, respectively, and $2.5 million and
$2.8 million for the nine months ended September 30, 1996 and 1997,
respectively.
The following table sets forth, as a percentage of revenue, certain
information in the Company's statement of operations for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -------------
1994 1995 1996 1996 1997
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Cost of sales.................................. 79.4% 81.8% 82.0% 81.6% 81.7%
Gross profit................................... 20.6 18.2 18.0 18.4 18.3
Selling, general and administrative expenses... 11.9 13.2 12.0 12.4 11.7
Income before income taxes..................... 7.5 5.0 5.5 5.5 5.4
Income taxes(1)................................ 39.1 39.7 39.7 38.5 38.3
Net income..................................... 4.6 3.0 3.3 3.4 3.3
</TABLE>
- ---------------
(1) As a percent of income before income taxes.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
Revenues increased by 17.0% to $163.5 million for the first nine months of
1997 from $139.7 million for the comparable period in 1996. This increase in
revenues is largely attributable to the number of homes closed by the Company
which increased by 6.6% to 731 units in the 1997 period from 686 units in the
1996 period. Home closings grew in the Company's Dallas/Fort Worth and Miami/Ft.
Lauderdale markets, and decreased in Houston and Austin. Although Houston's home
closings decreased in the 1997 period compared to the 1996
18
<PAGE> 20
period due to inclement weather in the first quarter of 1997, Houston's
homebuilding revenues increased due to a higher percentage of higher priced
custom homes being closed in the 1997 period as compared to the prior period.
The increase in revenues is attributable to a 10.0% increase in the average home
price to $220,000 from $200,000. Revenues from land sales increased to $2.8
million for the first nine months of 1997 from $2.5 million for the comparable
period in 1996.
As a percentage of revenues, cost of sales remained relatively constant at
81.7% in the first nine months of 1997 compared to 81.6% in the same period in
1996. As a percentage of revenues from land sales, the cost of land sales was
81.8% in the first nine months of 1997 compared to 64.8% in the same period of
1996.
Equity in earnings from unconsolidated subsidiaries decreased $398,000 to
$262,000 for the first nine months of 1997 compared to $660,000 for the first
nine months of 1996. Earnings from Pacific Title and NHC Mortgage amounted to
approximately $173,000 and $37,000, respectively, for the first nine months of
1997.
Selling, general and administrative expenses increased by 10.4% to $19.1
million for the first nine months of 1997 from $17.3 million for the first nine
months of 1996. Of such increase, $202,000 was due to costs incurred in entering
the Nashville market in the first nine months of 1997. The balance of the
increase in these expenses was due largely to the increases in sales and
construction activity required to sustain the higher level of revenues. As a
percentage of revenues, selling, general and administrative expenses decreased
to 11.7% in the first nine months of 1997 from 12.4% for the same period in
1996.
Interest expense, which primarily reflects the carrying cost of completed
homes, increased 61.7% to $1.5 million for the first nine months of 1997 from
$943,000 for the first nine months of 1996. This increase was primarily due to
the impact of adverse weather on home sales in the Houston market and an
increased inventory level in Florida associated with increased levels of
activity in that market.
The Company's provision for income taxes remained stable as a percentage of
earnings before taxes at 38.3% for the first nine months of 1997, compared to
38.5% for the same period in 1996. Under a tax allocation agreement with Pacific
USA (the "Tax Allocation Agreement"), the Company is required to calculate its
federal corporate income tax liability as if it filed a separate federal income
tax return for each period and to pay Pacific USA the sum which would result
from such calculation if the Company were subject to federal corporate income
tax and filed a separate tax return. The Company recognized federal income tax
expense under the Tax Allocation Agreement amounting to $3.4 million in the
first nine months of 1997 compared to $3.0 million for the first nine months of
1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues grew by 53.1% to $192.0 million in 1996 from $125.4 million in
1995. The increase in revenues was largely attributable to the number of homes
closed, which increased by 40.7% to 902 units in 1996 from 641 units in 1995.
This increase in the number of homes closed was due in part to the inclusion of
sales by Adler for the entire 1996 fiscal year compared to only ten months of
sales by Adler in 1995. Home closings also increased in each of the Company's
markets, with the Houston market leading the way with a 43.5% increase in
closings as its units grew to 363 in 1996 from 253 in 1995. The increase in home
closings in Houston reflected the increase in job growth in Houston and the
decrease in interest rates experienced in 1996 as compared to 1995. Dallas/Fort
Worth unit sales nearly quadrupled to 103 from 27 in its first full year of
operations in that market. The Company's overall increase in revenues was also
attributable to an increase in the average home price of 6.4% to $200,000 in
1996 from $188,000 in 1995. Revenues from land sales increased to $11.2 million
for 1996 from $4.8 million for 1995.
As a percentage of revenues, cost of sales increased slightly to 82.0% in
1996 compared to 81.8% in 1995. Average cost of units sold increased by 9.4% to
$175,000 in 1996 from $160,000 in 1995. As a percentage of revenues from land
sales, cost of land sales was 89.0% in 1996 compared to 87.0% in 1995.
Selling, general and administrative expenses increased by 38.6% to $23.0
million in 1996 from $16.6 million in 1995. The increase in these expenses was
primarily due to the increase in sales commissions associated with an increase
in units sold of $2.7 million, additional advertising to establish the Company
name in new markets of $910,000, and costs associated with a full year of
operations in the Company's start-up
19
<PAGE> 21
markets of $760,000, as well as other administrative expenses associated with
the increase in volume. As a percentage of revenues, selling, general and
administrative dropped 1.2% to 12.0% in 1996 from 13.2% in 1995.
Interest expense decreased by $94,000 to $1.2 million in 1996 from $1.3
million in 1995. Lower interest expense resulted from improved inventory
turnover during the year primarily in the Houston market.
Other income, which primarily represents management fees from a Florida
homebuilding unconsolidated partnership, grew by $244,000 to $851,000 in 1996
from $607,000 in 1995. The Company expects income from this partnership to
decline as its inventory of land is depleted and homebuilding operations cease.
The Company's provision for income taxes remained at 39.7% of pre-tax
income from 1995 to 1996. The Company recognized expense of $4.1 million under
the Tax Allocation Agreement in 1996 compared to $2.5 million in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The Company experienced revenue growth of 15.5% to $125.4 million in 1995
from $108.6 million in 1994. This increase in revenues was largely attributable
to an increase of 107, or 20%, in units closed to 641 units in 1995 from 534
units in 1994. Of the units closed in 1995, 70 units representing $10.2 million
in revenue were attributable to the Adler acquisition. The Austin market
achieved a 38.6% unit gain, driven by job growth in the technology sector, while
Houston experienced a 29.1% decline in units closed. Houston's results were
affected by a slower job growth rate and higher interest rates in 1995 as
compared to 1994. The average home price was $188,000 in 1995 compared to
$201,000 in 1994. Revenues from land sales increased to $4.8 million for 1995
from $1.5 million for 1994.
As a percentage of revenues, cost of sales increased by 2.4% to 81.8% in
1995 from 79.4% in 1994. The increase in cost of sales was the result of the
slowdown in the Houston market and increased competition in Austin. Average cost
of units sold decreased by $2,000 to $160,000 in 1995 from $162,000 in 1994 as a
result of decreases in lumber prices and changes in product mix.
Selling, general and administrative expenses increased by 28.7% to $16.6
million in 1995 from $12.9 million in 1994. Approximately $385,000 of the
increase was attributable to start-up costs in Dallas/Ft. Worth and
approximately $2.0 million of the increase was due to the acquisition of Adler.
The remainder of the increase was attributable to higher selling expenses.
Interest expense increased 112% to $1.3 million in 1995 from $613,000 in
1994 primarily as a result of higher interest rates and a slowdown in the
Houston market.
Other income, which primarily represents management fees from a Florida
homebuilding partnership, increased by $416,000 for the period.
The Company's provisions for income taxes increased as a percentage of
income before income taxes by 0.6% in 1995 to 39.7% compared to 39.1% in 1994 as
the result of increases in state income taxes. The Company recognized federal
income tax expense of $2.3 million under the Tax Allocation Agreement in 1995
compared to $2.9 million in 1994.
SEASONALITY AND QUARTERLY RESULTS
The homebuilding industry is seasonal, as generally there are more sales in
the spring and summer months, resulting in more home closings in the fall. The
Company operates in the Southwestern and Southeastern markets of the United
States, where weather conditions are more suitable to a year round construction
process than other areas. The Company also believes its geographic dispersion to
be somewhat counter-cyclical, with adverse economic conditions associated with
certain of its markets often being offset by more favorable economic conditions
in other areas. The seasonality of school terms has an impact on the Company's
operations, but it is somewhat mitigated by the fact that many of the Company's
buyers at the higher end of the Company's price range, including Fedrick, Harris
custom homes, no longer have children in school. As a result of these factors,
among others, the Company generally experiences more sales in the spring and
summer months, and more closings in the summer and fall months.
20
<PAGE> 22
The following table presents selected quarterly operating data of the
Company for each of the eight quarters through the period ended September 30,
1997. In the opinion of management, all necessary adjustments (consisting of
normal recurring adjustments) have been included to present fairly the unaudited
selected quarterly operating data. This data is not necessarily indicative of
the results of the operations of the Company for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
DEC. 31, MARCH 30, JUNE 30, SEPT. 30, DEC. 31, MARCH 30, JUNE 30, SEPT. 30,
1995 1996 1996 1996 1996 1997 1997 1997
-------- --------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................... $32,136 $38,181 $50,713 $50,833 $52,271 $46,580 $54,979 61,989
Gross profit............... 5,628 6,631 9,441 9,596 8,923 8,686 10,033 11,251
Selling, general and
administrative........... 4,840 5,403 6,070 5,809 5,694 5,663 6,348 7,110
Operating income........... 824 1,246 3,134 3,556 2,947 3,023 3,685 3,179
MARGIN ANALYSIS:
Gross margin............... 17.5% 17.4% 18.6% 18.9% 17.1% 18.7% 18.2% 18.1%
Selling, general and
administrative........... 15.1% 14.2% 12.0% 11.4% 10.9% 12.2% 11.5% 11.5%
Operating income........... 2.7% 3.2% 6.2% 7.0% 5.6% 6.5% 6.7% 5.1%
OPERATING DATA:
Homes closed (units)....... 174 191 247 248 216 215 249 267
Average sales price of
homes
closed................... $ 185 $ 200 $ 205 $ 205 $ 242 $ 217 $ 221 $ 232
</TABLE>
The Company historically has experienced, and in the future expects to
continue to experience, variability in revenues on a quarterly basis. Factors
expected to contribute to the variability include, among others: (i) the timing
of home closings; (ii) the Company's ability to continue to acquire land and
options on acceptable terms; (iii) the timing of receipt of regulatory approvals
for the construction of homes; (iv) the condition of the real estate market and
general economic conditions; (v) the cyclical nature of the homebuilding
industry; (vi) prevailing interest rates and the availability of mortgage
financing; (vii) pricing policies of the Company's competitors; (viii) the
timing of the opening of new residential projects; (ix) weather; and (x) the
cost and availability of materials and labor. The Company's historical financial
performance is not necessarily a meaningful indicator of future results and the
Company expects its financial results to vary from project to project from
quarter to quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing needs depend primarily upon its sales volume,
inventory levels, inventory turnover and land acquisitions. Historically, it has
financed its operations primarily through its earnings, borrowings from
financial institutions, and capital contributions and borrowings from Pacific
USA, primarily for residential land development acquisitions.
The Company believes that upon the completion of this offering it will have
adequate financial resources, including availability under its credit
facilities, to meet its working capital and residential land acquisition and
development plans under current market conditions for the next eighteen months.
However, there can be no assurance that the amounts available from such sources
will be sufficient. If the Company identifies significant new acquisition
opportunities outside of the Company's existing markets, or if the Company's
operations do not generate sufficient cash from operations at levels currently
anticipated, the Company may be required to seek additional capital in the form
of equity or debt financing from a variety of potential sources, including
additional bank financings or the issuance of debt or equity securities.
21
<PAGE> 23
The Company finances its operations with cash from operations and
borrowings under construction credit facilities. Generally these credit
agreements are with regional and national lenders. Each of the credit agreements
relates to specific markets and provides for financing residential land and lot
acquisition and construction. The agreements have restrictive covenants which,
among other things, limit speculative home building, debt to tangible net worth
ratios, dividends and set a minimum requirement for tangible net worth. The
agreements have various maturity dates and bear interest at rates based on Libor
and prime. At September 30, 1997, the Company had $17.2 million of available
credit under its credit facilities. The Company plans to renew these facilities
as they mature.
Historically, Pacific USA has guaranteed certain indebtedness and
contingent liabilities of the Company. The total amount of guaranteed
indebtedness and contingent liabilities at September 30, 1997 was $1.8 million
and $1.1 million, respectively. The Company does not expect such guarantees to
be required by its commercial lenders following this offering.
The Company generally finances its operations by borrowing for the
acquisition of lot inventory and during the various stages of construction.
Inventories (including finished homes and construction in progress, residential
lots developed and under development) had increased by 13.9% to $95.2 million at
September 30, 1997 from $83.6 million at December 31, 1996. The increase was due
to expansion in the Nashville, Dallas/Fort Worth, Houston and Miami/Ft.
Lauderdale markets. In the Miami/Ft. Lauderdale market, the Company is limited
in its ability to acquire finished lots under option contracts, a factor which
requires the Company to make significant capital expenditures in order to
maintain adequate lot inventory in this market.
The Company utilizes lot options as a method of controlling its investments
in land. At September 30, 1997, the Company had 1,396 lots under option. At
September 30, 1997, the Company had capital commitments with respect to lot
purchase contracts of approximately $4.3 million.
From time to time, the Company has breached certain of its loan covenants
and has been required to obtain waivers from its commercial lenders in
connection therewith. The Company is currently in compliance with all of its
loan covenants.
INFLATION
The Company, as well as the homebuilding industry in general, may be
adversely affected during periods of high inflation, primarily because of higher
land and construction costs. In addition, higher mortgage interest rates may
significantly affect the affordability of permanent mortgage financing to
prospective purchasers. The Company attempts to pass through to its customers
any of its costs through increased sales prices. However, there is no assurance
that inflation will not have a material adverse impact on the Company's future
results of operations.
22
<PAGE> 24
BUSINESS
GENERAL
The Company designs, builds and sells single-family homes in five major
markets within the Southwest and Southeast, including Houston, Austin,
Dallas/Fort Worth, Miami/Ft. Lauderdale and, most recently, Nashville, each of
which has experienced population and job growth above the national average over
the last several years. The Company operated in 47 subdivisions in these
metropolitan areas, and had 452 homes under construction at September 30, 1997.
In addition, as of September 30, 1997, the Company owns or has under option
contract 2,199 lots available for future growth. The Company is also actively
engaged in residential land acquisition and development, which enables it to
provide lots for its homebuilding operations.
The Company offers high-quality homes, designed principally for the
"move-up" and relocation market segments under the Newmark name. Typically,
Newmark homes range in size from 1,700 square feet to over 4,500 square feet and
range in price from $120,000 to $350,000, with an average sales price of
$205,000 for homes closed during the nine months ended September 30, 1997. The
Company also offers custom homes under the Fedrick, Harris Estate Homes name
that range in size from 3,500 square feet to over 7,000 square feet and range in
price from $250,000 to $700,000, with an average sales price of $350,000 for
homes closed during the nine months ended September 30, 1997. Revenues generated
from sales of Fedrick, Harris Estate Homes were 14% and 18% of total
homebuilding revenues for the nine months ended September 30, 1996 and 1997,
respectively.
The Company's production homebuilding operation is positioned to compete
with high-volume builders by offering a broader selection of homes with more
amenities and greater design flexibility than typically offered by volume
builders. Newmark homes give the home buyer the ability to select various design
features in accordance with their personal preferences. Through a volume
building approach the Company's custom homes generally offer more value than
those offered by local, lower-volume custom builders, primarily due to the
Company's effective purchasing, construction and marketing programs. While most
design modifications are significant to the homebuyer, they typically involve
relatively minor adjustments that allow the Company to maintain construction
efficiencies and result in greater profitability due to increased sales prices
and margins. The Company believes that its ability to meet the design tastes of
prospective homebuyers at competitive prices distinguishes itself from many of
its competitors.
STRATEGY
The Company's objective is to provide its customers with homes that offer
both quality and value, while seeking to maximize its return on invested
capital. Management believes that a balanced and disciplined approach to home
construction, land purchases and marketing is essential to the Company's
anticipated growth. To achieve this objective, the Company has developed a
strategy which focuses on the following elements:
GROWTH MARKETS. The Company's primary markets have each experienced
population and job growth in excess of the national average over the past
several years. The Company believes that there are significant growth
opportunities in its existing markets. The Company also continues to evaluate
new markets that have significant "move-up" and relocation segments that would
satisfy the Company's profitability, investment return and other criteria. While
the Company anticipates entering new markets primarily through start-up
operations, it will also consider the acquisition of homebuilding companies that
have complementary management styles. Entry into new markets is preceded by
extensive due diligence and research conducted by management, in conjunction
with Pacific Research Group and third-party resources.
SOPHISTICATED MARKETING. The Company employs sophisticated and
comprehensive marketing programs to attract potential homebuyers. Elements of
this marketing program include extensive telemarketing, an Internet web site and
a virtual reality CD-ROM home tour. The Company retains a national marketing
consultant to develop its overall advertising strategy. The Company executes its
overall strategy through marketing and advertising campaigns tailored to local
markets. Local marketing campaigns include coordination of realtor promotions,
subdivision grand openings, showcase presentations for custom homes, the
23
<PAGE> 25
Company's newsletters, realtors' newsletters, product bulletins, billboards,
local newspaper advertisements and other direct sales activities. The Company's
telemarketing program is designed to ensure that prospective homebuyers who tour
its model homes receive information regarding the Company's floor plans,
optional features, subdivisions, schools, available financing and other matters.
The Company's telemarketing group also answers requests from prospective
homebuyers received via the Company's web site, e-mail, and toll-free number.
The Company's web site, featuring a virtual reality home tour, has received over
1 million "hits" since its inception in July 1996 and allows a prospective
homebuyer to download the home tour software to a personal computer and "tour"
completely furnished homes, view the Company's different floor plans, locate the
various subdivisions available in each market, and learn about neighborhood
schools, subdivision amenities and shopping as well as the Company's
construction techniques.
FOCUS ON RELOCATION MARKET. In markets with a significant number of
relocation buyers, the Company aggressively competes with individual resales of
existing homes, primarily by making available to potential buyers completed or
nearly completed homes. Since 1993, approximately 65% of the Company's homes
were begun before a sales contract was executed and an earnest money deposit was
received. As of September 30, 1997, the Company had 115 completed homes in
inventory and 261 homes under construction under construction without a sales
contract. The Company believes that maintaining an inventory of completed or
nearly completed homes provides distinct competitive advantages by (i) allowing
home buyers to physically inspect their future home, in many instances easing
their decision to buy, (ii) providing homes which can be moved into in or close
to the same time frame as purchases of used homes and (iii) avoiding the
significant time and monetary costs typically associated with updating used
homes. Since 1993, 70% of the Company's homes were sold prior to completion of
the home.
MANAGEMENT TRAINING. The Company aggressively recruits and hires new
management trainees, typically with some construction experience, following
graduation from college and trains these new hires for increasing levels of
responsibility within the Company. Through continuous "on the job" experience
and classroom training, these associates become knowledgeable, experienced
candidates for middle management positions. The Company believes that one of its
strengths is its depth of middle management. This depth facilitates the
Company's growth strategy as more experienced management relocates to new
markets to conduct start-up operations while top performing middle managers are
promoted to increasing levels of responsibility for continuing expansion of
existing markets. The Company also actively seeks and employs qualified
candidates for sales and marketing positions and provides extensive training
designed to improve marketing skills and educate sales associates with respect
to the uniqueness of the Company's homes which allows them to emphasize product
differentiation in the sales process.
DECENTRALIZED OPERATIONS WITH EXPERIENCED MANAGEMENT. The Company believes
that the in-depth knowledge of its experienced management in local markets
enables the Company to better serve its customers. The Company is organized into
operating divisions, each relating to a local market area. Local management of
each operating division is responsible for preliminary site selection and
negotiation of option contracts in accordance with Company policies.
Additionally, each operating division plans its homebuilding schedule, selects
the building plans and architectural scheme for its subdivisions, obtains all
building approvals, and develops a marketing plan for its homes. The Company's
corporate office retains responsibility for purchasing, accounting and certain
other management and administrative matters including approval of all lot
contracts, final product selection, securing all financing and marketing plan
approval.
CENTRALIZED PURCHASING. The Company utilizes centralized purchasing to
leverage its purchasing power into volume discounts, a practice which reduces
costs, ensures timely deliveries and reduces the risk of supply shortages due to
allocations of materials. The Company has negotiated favorable price
arrangements with high quality national and regional suppliers such as General
Electric, Rheem Manufacturing, Dupont Corian, Owens Corning, Dow Chemical, Royal
Baths, Weslock National and Sherwin-Williams for appliances, heating and air
conditioning, counter tops, bathroom fixtures, roofing and insulation products,
floor coverings, and other housing components. Major materials, such as lumber,
sheetrock, concrete and brick are also centrally purchased to obtain volume
discounts. There are no minimum purchase requirements for these arrangements.
24
<PAGE> 26
COST MANAGEMENT. The Company controls its divisional overhead costs by
centralizing administrative and accounting functions, eliminating the need for
redundant functions at the city level. The Company controls construction costs
through the efficient design of its homes and by obtaining favorable pricing,
where possible, from subcontractors based on the high volume of work performed
for the Company. The Company also controls its warranty costs through quality
control that ensures that the home has been totally finished prior to the buyer
moving in, thus enhancing customer satisfaction. The Company controls its
advertising expenses through sophisticated budgeting of expenses with extensive
review of all expenditures. Some of the Company's major suppliers and
contractors also contribute advertising dollars for special promotions of houses
and products. These campaigns feature the key suppliers' products and enhance
the image of the Company's homes through brand recognition. In addition, the
Company seeks to control its corporate overhead costs through efficiencies
achieved through its highly automated and integrated systems.
LIMITED REAL ESTATE EXPOSURE. The Company seeks to maximize its return on
capital and limit its exposure to changes in land valuation by obtaining options
to purchase lots whenever feasible. The Company will also directly acquire,
where appropriate, quality residential properties that are in high demand for
use in its homebuilding operations and for sale to third-party builders. The
Company's executive management establishes targeted levels of lot options and
land for development based on its strategic plan for the overall growth of the
Company. The Company targets properties for acquisition that are both suitable
for its homebuilding product and in locations which are anticipated to maintain
the homebuyers property values. The Company believes this strategy improves
inventory turnover and enables the Company to develop and dispose of the
developed lots typically within two to three years. The Company does not acquire
land that is not suitable for lot development and residential construction and
does not speculate on land values by acquiring and holding land for resale or
for future development.
The Company seeks to limit its exposure to real estate inventory risks by
(i) closely monitoring its unsold inventory of new homes and the stage of
completion of homes under construction on an ongoing basis, (ii) centralizing
control for the start of new homes and (iii) closely monitoring local job market
and demographic trends, housing preferences and related economic developments,
such as new job opportunities, local growth initiatives and trends in work force
median income levels.
MARKETS
The Company conducts homebuilding activities in three states within five
markets, including Houston, Austin, Dallas/Fort Worth, Miami/Ft. Lauderdale and
Nashville. The Company's operations in each of its markets differ based on a
number of market specific factors. From the results of the research and analysis
performed by the Company and Pacific Research Group, the Company plans to focus
its development activity based on the following factors, among others: regional
economic conditions, job growth, land availability, the local land development
process, consumer tastes, competition from other builders of new homes and
secondary home sales activity. The statistical information presented below is
derived from a number of public sources.
25
<PAGE> 27
The following table presents selected lot inventory and homebuilding data
for the Company's current markets:
<TABLE>
<CAPTION>
HOMEBUILDING REVENUES
-----------------------------------
LOT INVENTORY
------------------------------ YEAR ENDED NINE MONTHS
DECEMBER 31, DECEMBER 31, ENDED
OPERATIONS -------------- SEPTEMBER 30, ------------------- SEPTEMBER 30,
MARKET COMMENCED 1995 1996 1997 1995 1996 1997
------ ---------- ----- ---- ------------- -------- -------- -------------
(DOLLARS IN THOUSANDS/UNITS)
<S> <C> <C> <C> <C> <C> <C> <C>
Houston............... 1983 258 330 691 $ 51,952 $ 79,920 $ 68,615
253 363 283
Austin................ 1983 279 230 368 53,507 63,891 49,398
291 334 234
Dallas/Fort Worth..... 1995 337 260 489 4,922 20,180 20,139
27 103 97
Miami/Ft.
Lauderdale.......... 1995 248 152 375 10,229 16,819 22,562
70 102 117
Nashville............. 1997 -- -- 276 -- -- --
-- -- --
----- --- ----- -------- -------- --------
Total Lots/
Revenue..... 1,122(1) 972(1) 2,199(1) $120,590 $180,810 $160,714
===== === ===== ======== ======== ========
Total Units
Closed...... 641 902 731
======== ======== ========
</TABLE>
- ---------------
(1) Includes 627, 669 and 1,498 lots under option contracts in 1995, 1996 and
1997, respectively.
HOUSTON, TEXAS. Growth in the energy sector combined with a healthy
national economy are the key elements behind Houston's recent economic
expansion. Houston has enjoyed a 2.7% rate of annual employment growth, or an
average of 51,000 jobs per year since 1993. Houston has diversified its
employment base between energy-dependent and energy-independent industries,
which the Company believes should promote more stable job growth and a strong
relocation market. Houston's population has grown by an average of more than
80,000 persons per year since 1990. Houston's affordable homes, low cost of
living and strong population growth continue to favorably impact the demand for
single-family homes. The median household income for Houston rose to $36,597 in
1996 from $31,503 in 1995, reflective of the strong job market in the metro
area.
Historically, the Company has maintained a moderate level of market share
in Houston, but believes that additional expansion in this market is appropriate
based on current and anticipated market conditions. The Company has strong brand
name recognition in Houston and has positioned itself to take advantage of this
anticipated market expansion.
AUSTIN, TEXAS. From 1993 to 1997, Austin had created an average of 29,300
jobs per year, an annual growth rate of 5.9%. According to the American Metro
Study Corporation Residential Survey for the second quarter of 1997, Austin's
economy has slowed somewhat in 1996 and 1997, with 14,000 to 20,000 new jobs per
year projected over the next three years, reflecting a slower forecasted growth
rate of approximately 2.2% per annum. Despite this slowdown, the rate of
Austin's job growth remains stronger than that of the national economy. The
Austin economy is dominated by four major sectors: high-technology
manufacturing, software development, back-office operations and state
government, including the University of Texas. The Austin Metropolitan
Statistical Area ("MSA") has added an average of more than 100 families per week
since 1994 and Austin's population exceeded one million persons in 1996 for the
first time, aided by favorable cost of living factors and steady corporate
expansions and relocations. The MSA continues to have a young (average age
29.5), well educated (64% of adults have at least some college education)
workforce with a median income of $34,420, all factors which are favorable to
growth in the single-family housing market.
26
<PAGE> 28
The Company plans to maintain current levels of activity in this market.
The Company believes that this is an appropriate level of activity given the
size of the Austin market.
DALLAS/FORT WORTH, TEXAS. The combined Dallas/Fort Worth metropolitan area
exceeded 4.5 million in total population in 1996. With an employment base of
more than 2.3 million jobs, the metro area has added an average of 85,000 jobs
annually for the last four years (a 3.5% annual growth rate). This growth is
partially attributable to the emergence of the "Telecom Corridor," a new center
for high-technology communication companies in north Dallas and the Alliance
Airport region, a hub for the manufacturing and service industries in Fort
Worth. The metroplex has positioned itself as an attractive market for corporate
relocations and expansions due to the relatively low cost of living and ease of
accessibility to the metroplex. The median household income in 1996 was $44,300
and has risen an average of 5.4% annually since 1980. The single-family market
in Dallas/Fort Worth is characterized by rising home values in a market which
has grown at an average rate of 21,000 units per year over the last four years.
The Company has positioned itself to increase its market share in the
Dallas/Fort Worth market, as this area continues its economic expansion. The
Company entered this market with start-up operations in 1995 and is achieving
the image, brand awareness and improved lot position which the Company believes
will support its expansion in this market.
MIAMI/FT. LAUDERDALE, FLORIDA. The Company's operations in Florida are
concentrated in Broward and Dade Counties, which include the cities of Ft.
Lauderdale and Miami, respectively. Broward County experienced an average annual
population growth of 29,900 residents from 1990 to 1996, representing a
compounded annual growth rate of 2.2%. The 1997 Urban Land Institute Profiles
projects that Broward County's population will increase at a rate of 1.9%
annually between 1996 and 2001. Most newcomers to the market are expected to be
working-age families, a majority relocating from the South Dade/Miami area. The
service sector dominates the overall employment in Broward. The service sector
job growth rate of 3.5% between 1995 and 1996 is reflected in the 20,900 new
jobs created during that period.
Fueled by growth in the service and trade industries, Dade County has
averaged approximately 20,000 new jobs per year over the last two years, an
annual growth rate of approximately 2.2%. According to the American Metro Study
Corporation Business Forecast for 1997, the Dade County population is projected
to increase annually by 25,000 people to a total population of 2.1 million by
2000. According to the American Demographics 1997 MSA Profile for Miami/Ft.
Lauderdale, the forecasted employment average annual growth rate through the
year 2000 of 2.2% for this area compares favorably to a national projected
average annual growth rate of 1.2%.
The Company entered this market with the 1995 acquisition of a regional
homebuilder. In addition, in December 1997 the Company and Pacific USA entered
into a letter of intent to acquire Westbrooke, an acquisition which expands the
Company's operations in Dade and Broward counties and provides an entry into
homebuilding operations in Palm Beach County. The Company believes that each of
these acquisitions has positioned it to expand into new developments in this
market.
NASHVILLE, TENNESSEE. Over the past six years, middle Tennessee's
population grew by 11.1%, double the U.S. rate of 5.4%. With more than 100,000
new jobs created from 1990 through 1995, the area's employment growth rate of
17.9% was almost triple the national rate of 6.6% over that period, largely due
to heavy immigration of relocating workers and new job seekers. Growing demand
for labor pushed unemployment rates to their lowest sustained levels in 30
years, averaging 3.2% for the Nashville MSA. The Nashville MSA had a median
household income of $40,405 and average household income of $49,880. The Company
believes that the low cost of living, strong job growth and steady increase in
per capita personal income will continue to have a favorable impact on demand
for single-family homes in Nashville.
The Company entered the Nashville market through a start-up operation,
which commenced construction of new homes in August 1997. Initial home closings
are expected to begin in the first half 1998.
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<PAGE> 29
BACKLOG
The following table sets forth the Company's sales backlog by market for
the periods indicated below:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------------- ---------------------------------
1995 1996 1996 1997
--------------- --------------- --------------- ---------------
SALES SALES SALES SALES
HOMES VALUE HOMES VALUE HOMES VALUE HOMES VALUE
----- ------- ----- ------- ----- ------- ----- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Houston.............. 65 $13,342 70 $15,411 75 $16,443 88 $21,336
Austin............... 77 14,158 72 13,773 81 15,438 91 19,210
Dallas............... 15 2,734 28 5,486 30 5,737 48 9,966
Miami................ 14 2,046 97 15,987 129 20,405 66 12,727
Nashville............ -- -- -- -- -- -- -- --
--- ------- --- ------- --- ------- --- -------
Total........... 171 $32,280 267 $50,657 315 $58,023 293 $63,239
=== ======= === ======= === ======= === =======
</TABLE>
Backlog represents home purchase contracts which have been executed and for
which earnest money deposits have been received. Home sales are not recorded as
revenues until the closings occur. Sales value represents the product of the
number of homes for which earnest money contracts have been received multiplied
by the average home sales price for the specific city for the period indicated.
Consistent with historical experience, 95% of the homes in backlog at
December 31, 1996 were closed by September 30, 1997. Based upon dollar volume,
contract cancellations in 1996 were approximately 14% of the home sales
contracts signed during that year. This compares to the 14% cancellation rate
experienced by the Company in 1995. Although cancellations can disrupt
anticipated home closings, the Company believes that cancellations have not had
a material negative impact on operations or liquidity of the Company during the
last several years. The Company attempts to reduce cancellations by reviewing
each homebuyer's ability to obtain mortgage financing early in the sales process
and by closely monitoring the mortgage approval process.
IDENTIFICATION OF NEW MARKETS
To achieve the Company's expansion strategy, the Company, together with its
affiliate, Pacific Research Group, has developed a new market expansion process
designed to identify and track growing homebuilding markets in the United
States. The Company's program is designed as an ongoing process and consists of
three stages which track economic and demographic activity in primary and
secondary metropolitan markets (Stage I), narrowing the focus on specific
markets and criteria (Stage II and Stage III) as they meet expansion objectives
and timing. As part of its screening process, the Company evaluates
geographically diverse markets because it believes that potential adverse
economic conditions associated with certain markets are often offset by more
favorable economic conditions in other operating areas. Consideration is also
given to those markets located near current operating markets, which could
function as satellite operations. An in-depth description of each of the stages
is set forth below:
Stage I includes the accumulation, maintenance and monitoring of quarterly
economic and demographic data in potential expansion markets through the use of
published databases and U.S. Census Statistics. Local and statewide data in each
market are also analyzed for comparison purposes. The following factors are
tracked on a quarterly basis for each expansion market: population growth and
trends; breakdown of population by age; overall employment growth; employment by
industry; median/average household income; unemployment rate; single-family
housing starts/permits; median/average sales price of new and existing homes;
and resale inventory and months of supply.
The Stage II analysis establishes and analyzes economic and demographic
benchmarks for the selection of three main markets and five back-up markets
based on desired market share and geographic diversity. Following the selection
of the three main markets, an in-depth Stage II market analysis is performed to
determine market viability in these selected markets. If the evaluation of any
of the three selected markets reveal factors unfavorable for expansion, then a
Stage II analysis is performed on one of the selected back-up markets. A Stage
II analysis consists of the following: identifying and engaging a market
research firm that
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<PAGE> 30
tracks and can produce single-family statistical data; profiling market
(identify submarkets, price bands, and total single-family starts, closings,
inventory levels and competition); assessing the availability of single-family
land and lots (both current and future); assessing the availability and quality
of the local trade base; identifying job growth corridors and access to
submarkets; identifying corporate relocations/expansions and major employers;
identifying tax structure of cities; profiling school districts; profiling
business and political climate for municipalities; assessing the
government/regulatory issues with respect to homebuilding and land development;
assessing market specific environmental issues; determining availability of
utilities in submarkets and future growth corridors; determining presence of
national and regional builders; and assessing office, retail, industrial and
multi-family market activity.
Upon completion of the Stage II analysis, one or more of the three markets
will be selected as an expansion market. Once a market is identified as an
expansion market, a market penetration and positioning strategy is developed by
the Company to evaluate the Stage III analysis data which includes the
following: profile of existing communities in each submarket based on activity
levels (starts, closings, inventory levels), price point and product; profile of
existing communities based on location and lot product size; and profile of
builders by submarket.
LAND POLICIES AND POSITION
The Company provides lot positions for its homebuilding operations by
acquiring lot options and by purchasing land for the development of lots. When
appropriate, developed lots are sold to third-party builders to increase
inventory turnover and to enhance earnings for the Company. The Company has
typically optioned lot positions in the Houston and Austin markets due to the
brand awareness of the Newmark and Fedrick, Harris Estate Homes names among both
consumers and developers, in addition to the vast amount of available lots being
optioned in those markets by developers. The Company also acquires lot options
in the Dallas/Fort Worth and Nashville markets. The Company has developed land
in both the Miami/Ft. Lauderdale and Dallas/Fort Worth markets and intends to
continue to do so in the future. The Company also intends to purchase additional
land for lot development in the Nashville market. Additionally, residential land
developments may be purchased when the Company enters new markets. Prior to any
land acquisitions, the Company conducts extensive due diligence utilizing
regional expertise, including on-site inspection and soil testing.
DESIGN
The Company's home designs and floor plans are prepared by outside
architects in each of the Company's markets to appeal to the local tastes and
preferences of the community. The Company offers six hours of interior decorator
consultation without cost to homebuyers who purchase the Company's Fedrick,
Harris Estate Homes. For its Newmark homes, the Company offers optional interior
and exterior features to enhance the basic home design. The Company's design
department has the capability to change its standard floor plans to accommodate
the individual homebuyer. While most design modifications are significant to the
homebuyer, they typically involve relatively minor adjustments that allow the
Company to maintain construction efficiencies and result in greater
profitability due to increased margins. The design department also verifies that
each floor plan will fit on a particular lot before construction begins. To
contain costs, the design department periodically alters the Company's most
popular floor plans, so that they remain current with design trends, product
updates and consumer tastes.
CONSTRUCTION
Substantially all of the Company's construction work is performed by
subcontractors. The Company's construction superintendents monitor the
construction of each home, coordinate the activities of subcontractors and
suppliers, subject the work of subcontractors to quality and cost controls and
monitor compliance with zoning and building codes. Subcontractors typically are
retained pursuant to a contract that obligates the subcontractor to complete
construction in a workmanlike manner and that provides standard indemnifications
and warranties. The subcontractor is paid on a per unit basis which fluctuates
depending on the size of the home. The contracted price is a part of each
purchase order. Typically, the Company works with the same
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<PAGE> 31
subcontractors in each city. The Company's subcontractors are not subject to any
collective bargaining agreements. While the Company competes with other
homebuilders for qualified subcontractors, it has established long-standing
relationships with many of its subcontractors. To date, by providing both timely
payments and steady work assignments, the Company has not experienced any
inability to obtain qualified subcontractors.
The Company's purchasing and cost accounting practices are designed to
facilitate construction flexibility. This process permits homebuyers to modify
their designs, while allowing the Company to monitor and maintain its
profitability. Construction time for the Company's homes depends on weather,
availability of labor, materials and supplies and other factors. The Company
typically completes the construction of a home within four to five months.
The Company does not maintain significant inventories of construction
materials, except for work in process materials for homes under construction.
Typically, the construction materials used in the Company's operations are
readily available from numerous sources. The Company has favorable price
arrangements or contracts with suppliers of certain of its building materials,
but it is not under any specific purchasing requirements. In recent years, the
Company has not experienced any significant delays in construction due to
shortages of materials or labor.
MARKETING AND SALES
The Company markets and sells its homes through commissioned employees and
cooperates with independent real estate brokers. The Company targets the
"move-up" and relocation market segments and employs sophisticated marketing
techniques to attract potential homebuyers through its Internet web site,
extensive telemarketing and other marketing programs. The Company pioneered the
development of the virtual reality CD-ROM home tour that allows a prospective
homebuyer to download the home tour software to a personal computer and "tour"
completely furnished homes, view the Company's different floor plans, locate the
various subdivisions available in each market, and learn about neighborhood
schools, subdivision amenities and shopping as well as the Company's
construction techniques. Home sales are typically conducted from sales offices
located in furnished model homes used in each subdivision. At September 30,
1997, the Company owned 36 model homes. In some cases, these model homes are
sold and then leased back until the completion of the respective subdivision.
The Company's sales personnel assist prospective buyers by providing them with
floor plans, price information, tours of model homes and the selection of
options and other custom features. Such personnel are trained by both the
Company and external independent experts in sales expertise. These sales and
marketing personnel are kept informed as to the availability of financing,
construction schedules and marketing and advertising plans. The Company has also
formed sales teams comprised of a sales person and other employees from
throughout the Company to provide sales support and motivation.
In addition to using model homes, the speculative homes built in each
subdivision enhance the Company's marketing and sales activities. Construction
of these speculative homes is also necessary to satisfy the requirements of
relocated personnel, "move-up" buyers, and independent brokers, who often
represent homebuyers requiring a completed home within sixty days. For the nine
months ended September 30, 1997, approximately 70% of these speculative homes
were sold while under construction. The number of speculative homes the Company
builds in any given subdivision is influenced by local market factors, such as
new employment opportunities, significant job relocations, growing housing
demand and the length of time the Company has built in the market. At September
30, 1997, the Company was operating in 47 subdivisions.
The Company advertises in newspapers and in real estate and mortgage broker
company publications, brochures, newsletters and billboards. Because real estate
brokers are important to sales, the Company sponsors realtor breakfasts,
contests and other events to increase awareness of the Company's subdivisions
and products. Certain of the Company's suppliers participate with the Company in
its advertising and promotional materials, either through co-branding and
cost-sharing or through rebates.
Sales of the Company's homes generally are made pursuant to a standard
sales contract which requires a down payment of $2,000 to $5,000, or 5% to 10%
of the sales price, on custom homes. The contract includes a
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<PAGE> 32
financing contingency which permits the customer to cancel in the event mortgage
financing at prevailing interest rates is unobtainable within a specified
period, typically four to six weeks, and may include other contingencies, such
as the sale of an existing home. The Company includes a home sale in its backlog
upon execution of the sales contract and receipt of the initial down payment.
The Company does not recognize revenue until the home is closed and title passes
to the homebuyer. The Company estimates that the average period between the
execution of a sales contract for a home and closing is approximately four to
five months for presold homes.
TITLE SERVICES
In 1997, the Company acquired a 49% interest in Pacific Title, which serves
as a title insurance agent and provides title insurance policies and closing
services to purchasers of homes built and sold by the Company in Texas. The
Company assumes no title insurance risk associated with these title policies,
which are issued by Stewart Title Co., one of the oldest title companies in
Texas. Stewart Title Co. owns the balance of the shares of Pacific Title.
CUSTOMER FINANCING
In 1997, the Company acquired a 50% interest in NHC Mortgage, a joint
venture with CTX Mortgage Ventures Corporation, one of the nation's largest
mortgage companies. The joint venture underwrites, originates and sells
mortgages for the homes the Company builds and for other homebuilders. The
Company's capital is not at risk in connection with these mortgages.
MANAGEMENT INFORMATION SYSTEMS
The primary application software for the Company is The Homebuilder
Software Package from Systems Analysis, Inc. This package was written
specifically for production homebuilders in RPGIII language and operates in
OS/400 on an IBM AS/400. The Company recently migrated the application software
and the data files to native OS/400 from System 36 mode to increase the speed of
on-line processing and utilize current tools offered by IBM and IBM Business
Partners. The Homebuilder Software Package is a fully-integrated accounting
package which has general ledger, accounts payable, job costs, purchasing,
payroll, warranty and production status modules. Communication to the AS/400
from remote offices is managed utilizing TCP/IP protocol over a frame relay
network provided by Network MCI. Locally attached devices such as personal
computers, printers, and terminals communicate with the AS/400 via TCP/IP
protocol over an Ethernet network. Hardware for the wide area network includes
IBM hubs, Motorola, Inc. DSU/CSUs, Cisco Systems, Inc. routers, and Perle
protocol converters. Network software for the Company is Microsoft Windows NT.
Data is protected on the AS/400 using RAID-5 data protection, daily tape
backups and redundant data archive on a second AS/400 at the corporate office. A
third AS/400 is maintained off-site as a contingency backup in case of fire or
other disaster.
Telecommunications for the Company is provided by a Siemens Rolm digital
switch utilizing a T-1 line from MCI Telecommunications for local direct inward
dialing (DID Smart Trunks), caller ID and long distance calling. Long distance
rates are substantially reduced by utilizing several channels of a fractional
T-1 from MCI.
The Company has conducted a review of its computer systems to identify how
its computer systems could be affected by the "Year 2000" issue. Based upon this
review, the Company believes that it has adequately addressed the Year 2000
issue, and that any further modifications to the Company's systems with respect
to the Year 2000 issue will not result in significant future capital
expenditures.
CUSTOMER SERVICE AND QUALITY CONTROL
The Company's operating divisions are responsible for pre-closing, quality
control inspections and responding to customer's post-closing needs. The Company
believes that the prompt, courteous response to
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<PAGE> 33
homebuyers' needs during and after construction reduces post-closing repair
costs, enhances the Company's reputation for quality and service, and ultimately
leads to significant repeat and referral business. The Company conducts
pre-closing inspections with homebuyers immediately prior to closing. In
conjunction with the inspections, a list of items for home completion is
created. It is the Company's policy that the sale is not closed until all items
are completed to the homebuyer's satisfaction.
All warranty requests are processed through the customer service
departments located in each of the markets. In most instances, a customer
service manager inspects the warranty request within 48 hours of receipt. If
appropriate, the repair work is scheduled to be approved by the homeowner upon
satisfactory completion. An integral part of the Company's customer service
program revolves around post-closing interviews. Generally, a customer service
representative is sent into each home within 45 days of closing to evaluate the
homeowner's satisfaction with both their home and their home-buying experience.
The post-closing interview involves an analysis of the homebuyer's experiences
with the sales counselor, the title company, the mortgage company and the
construction department as well as their satisfaction with the product.
Typically, after a year, another interview is conducted with the homeowner to
determine their continued satisfaction. The subsequent interview provides
management a direct link to the customer's perception of the entire buying
experience as well as valuable feedback on the quality of the product.
WARRANTY PROGRAM
The Company provides a two-year limited warranty of workmanship and
materials with each of its homes. The first year of such warranty, the Company
provides coverage on workmanship and materials, plumbing, electrical, heating,
cooling, ventilation systems and major structural defects. The second year the
Company is responsible for major structural defects and specific types of
defects in plumbing, electrical, heating, cooling and ventilation systems
exclusive of effects in appliances, fixtures and equipment. The Company
subcontracts its homebuilding work to subcontractors who provide the Company
with an indemnity and a certificate of insurance prior to receiving payments for
their work and, therefore, claims relating to workmanship and materials are
generally the primary responsibility of the Company's subcontractors. The next
eight years the Company provides a limited homeowners' warranty covering major
structural defects through a single national agreement with the Residential
Warranty Corporation. A reserve of approximately 0.75% of the sale price of a
home is established to cover warranty expenses, although this reserve is subject
to adjustment in special circumstances. The Company's historical experience is
that such warranty expenses generally fall within the amount established for
such reserve. The Company does not currently have any material litigation or
claims regarding warranties or latent defects with respect to construction of
homes. Current claims and litigations are expected to be substantially covered
by the Company's reserve or insurance. Generally, warranty claims are handled by
the construction superintendent who built the particular home to ensure that
prompt and appropriate corrective action is taken by the appropriate
subcontractor.
COMPETITION
The development and sale of residential properties is highly competitive
and fragmented. The Company competes for residential sales on the basis of a
number of interrelated factors, including location, reputation, amenities,
design, quality and price, with numerous large and small homebuilders, including
some homebuilders with nationwide operations and greater financial resources
and/or lower costs than the Company. The Company also competes for residential
sales with individual resales of existing homes, available rental housing and,
to a lesser extent, resales of condominiums. The Company believes that it
compares favorably to other builders in the markets in which it operates, due
primarily to: (i) its experience within its geographic markets, which allows it
to vary its product offerings to reflect changing market conditions; (ii) its
responsiveness to market conditions, enabling it to capitalize on the
opportunities for advantageous land acquisitions in desirable locations; and
(iii) its reputation for service and quality. There can be no assurance that the
Company will be able to continue to compete successfully in any of its markets.
The inability of the Company to continue to compete successfully in any of its
markets could have a material adverse effect on the Company's business,
financial condition or results of operations.
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<PAGE> 34
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
All of the Company's land is purchased with the right to obtain building
permits upon compliance with specified conditions, which generally are within
the Company's control. Upon compliance with such conditions, the Company seeks
building permits. The length of time necessary to obtain such permits and
approvals affects the carrying costs of unimproved property acquired for the
purpose of development and construction. In addition, the continued
effectiveness of permits already granted is subject to several factors, such as
changes in policies, rules and regulations and their interpretation and
application. To date, the governmental approval processes discussed above have
not had a material adverse effect on the Company's development activities. There
can be no assurance, however, that these and other restrictions will not
adversely affect the Company in the future.
Local and state governments also have broad discretion regarding the
imposition of development fees for projects in their jurisdiction. These are
normally established, however, when the Company receives recorded final maps and
building permits. The Company is also subject to a variety of local, state and
federal statutes, ordinances, rules and regulations concerning the protection of
health, zoning and the environment. These laws may result in delays, cause the
Company to incur compliance and other costs, and prohibit or restrict
development in certain environmentally sensitive markets.
EMPLOYEES
At September 30, 1997, the Company employed 260 persons, of whom 69 were
sales and marketing personnel, 103 were executive, administrative and clerical
personnel, and 88 were involved with construction. None of the Company's
employees are covered by collective bargaining agreements. The Company believes
its relations with its employees are good.
PROPERTIES
The Company owns a 16,000 square foot facility in Sugar Land, Texas, which
serves as the Company's headquarters and primary residential homebuilding
office. The Company leases an aggregate of approximately 7,500 square feet in
Dallas, Austin, Nashville and Miami for its division operations.
LITIGATION
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of the Company's management, the
ultimate disposition of these matters is not expected to have a material adverse
effect on the financial condition or results of operations of the Company.
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<PAGE> 35
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS. The Company's directors and executive
officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- ---- --------
<S> <C> <C>
Lonnie M. Fedrick..................... 53 President and Chief Executive Officer
and Director
James M. Carr......................... 47 Executive Vice President and Director
J. Eric Rome.......................... 38 Executive Vice
President -- Homebuilding
B. Coleman Bradley.................... 37 Executive Vice President -- Land
Acquisition and Development
Terry C. White........................ 48 Chief Financial Officer and Treasurer
Michael K. McCraw..................... 46 Chairman of the Board
Larry D. Horner....................... 63 Director
Bill C. Bradley....................... 64 Director
</TABLE>
- ---------------
In addition to the directors named above, the Company intends to appoint
two independent directors upon or shortly after completion of this offering,
each of whom will serve on the audit and compensation committees.
Lonnie M. Fedrick has served as President and Chief Executive Officer of
the Company since 1997. Mr. Fedrick has also been President and Chief Executive
Officer of Newmark since 1994 and was Executive Vice President of Newmark from
1984 to 1994. Mr. Fedrick co-founded Newmark in 1983 and has more than 31 years
experience in the homebuilding industry. Mr. Fedrick began his career with
Norwood Homes in 1967, most recently serving as the Vice President of
Construction. From 1974 to 1983, he served as Vice President of Operations of
Monarch Homes. He is a member of the board of directors of the Greater Houston
Builders Association.
James M. Carr will become Executive Vice President and a Director of the
Company upon the closing of the acquisition of Westbrooke by the Company. Mr.
Carr founded Westbrooke in 1976, and has served as Chairman, Chief Executive
Officer and President of Westbrooke since its inception. Mr. Carr is a graduate
of the University of Miami. He is also the Chairman of the Baptist Hospital
Foundation and a director of Baptist Health Systems.
J. Eric Rome has served as Executive Vice President -- Homebuilding of the
Company since 1997. Mr. Rome has served as President of the Texas Division of
Newmark since 1996. He was Executive Vice President of the Newmark's Central
Texas Division from 1995 to 1996, a Vice President from 1984 to 1994, and
Construction Manager of Newmark's Houston division from 1983 to 1984. From 1981
to 1983, Mr. Rome was employed by Monarch Homes as a construction
superintendent. He has also served as an officer in various capacities with the
Texas Capitol Area Builders Association.
B. Coleman Bradley has served as Executive Vice President -- Land
Acquisition and Development of the Company since 1997. Additionally, he has
served as President and Chief Executive Officer of PUDC since its formation in
1993. From 1990 to 1993, he directed the land development activities of Pacific
USA. From 1986 to 1990, Mr. Bradley served as Executive Vice President of Real
Estate Decision Systems, and from 1982 to 1986, Mr. Bradley served as President
of a Dallas/Fort Worth custom homebuilding company.
Terry C. White has served as Chief Financial Officer and Treasurer of the
Company since 1997. Mr. White is also Senior Vice President, Chief Financial
Officer and Treasurer of Newmark, which he joined in 1984 as Controller. Prior
thereto, Mr. White was employed by Wood Bros. Homes as a division controller and
prior to that he served in various accounting and finance positions with Safeway
Stores, Inc. He has played a key role in establishing the Company's accounting
controls and management information systems. Mr. White is a certified public
accountant and a graduate of the University of North Texas.
Michael K. McCraw, Chairman of the Board, has served as Chief Financial
Officer of Pacific USA since 1992. He is also the President and Chief Operating
Officer of Pacific Realty Group, Inc., the immediate parent of the Company. From
1989 to 1992, Mr. McCraw served as Chief Financial Officer of Pacific Southwest
Bank. He was formerly associated with KPMG Peat Marwick LLP for 15 years. He is
a certified public accountant and a graduate of Texas A & I University.
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<PAGE> 36
Larry D. Horner, a director of the Company, has served as Chairman of
Pacific USA since 1994. He is also Chairman of the Board and Chief Executive
Officer of Asia Pacific Wire & Cable Corporation Limited, a Bermuda corporation
with operations in Southeast Asia, which is publicly traded on the New York
Stock Exchange, and a director of American General Corp., Phillips Petroleum
Company, Atlantis Plastics, Inc., Biological & Popular Cultures, Inc. and
Laidlaw Holdings Inc., an affiliated company. Mr. Horner was formerly associated
with KPMG Peat Marwick LLP for 35 years, retiring as Chairman and Chief
Executive Officer of both the U.S. and International firms. He is a certified
public accountant and a graduate of the University of Kansas and the Stanford
Executive Program.
Bill C. Bradley, a director of the Company, has served as Chief Executive
Officer and a director of Pacific USA since 1991. Mr. Bradley was formerly
associated with KPMG Peat Marwick LLP for 23 years and also served as a member
of its board of directors. He is a graduate of the University of Texas.
Bill C. Bradley and B. Coleman Bradley are father and son. There are no
other familial relationships among the executive officers and directors of the
Company.
TERMS OF OFFICE. Directors of the Company are elected annually by the
stockholders to serve for a term of one year or until their successors are duly
elected and qualified. Vacancies in unexpired terms and any additional positions
created are filled by action of the Board of Directors. The executive officers
of the Company are appointed annually by the Board of Directors and serve for a
term of one year, or until their successors are appointed or their earlier
resignation or removal.
The Company's Articles of Incorporation provide that the Board of Directors
will consist of not less than one nor more than ten members, with the exact
number to be determined from time to time by resolution of the Board of
Directors. However, no decrease in the number of directors constituting the
Board of Directors may shorten the term of any incumbent director, unless the
director is removed in accordance with the removal provisions of the Articles.
Upon completion of this offering, the number of Board members will be set at
six.
AUDIT COMMITTEE. The Board of Directors has established an Audit Committee
to be comprised of independent directors. The functions of the Audit Committee
are to make recommendations to the Board of Directors regarding the engagement
of the Company's independent accountants and to review with management and the
independent accountants the Company's financial statements, basic accounting and
financial policies and practices, audit scope and competency of accounting
personnel. Members of the Audit Committee will be appointed annually by the
Board of Directors and serve at the discretion of the Board of Directors until
their successors are appointed or their earlier resignation or removal.
COMPENSATION COMMITTEE. The Board of Directors has established a
Compensation Committee to be comprised of independent directors. The
Compensation Committee is responsible for reviewing and making recommendations
to the Board of Directors with respect to compensation of executive officers,
other compensation matters and awards under the Company's stock option plan.
Members of the Compensation Committee will be appointed annually by the Board of
Directors and serve at the discretion of the Board of Directors until their
successors are appointed or their earlier resignation or removal.
COMPENSATION OF DIRECTORS. Independent directors of the Company will
receive an annual fee of $15,000 and $2,000 per board meeting attended and will
be reimbursed for out-of-pocket expenses incurred for attendance at meetings.
Additionally, these independent directors will be eligible to receive phantom
stock grants under the Company's Executive Phantom Stock Plan.
KEY EMPLOYEES. In addition to its executive officers, the following persons
are key employees of the Company:
J. Mike Beckett is Senior Vice President -- Purchasing of Newmark. Mr.
Beckett has been employed by Newmark since its inception in 1983. He was
promoted to his current position in 1992. Mr. Beckett oversees all purchases for
Newmark's operations in five metropolitan markets and has successfully
negotiated with major suppliers for substantial price reductions. Additionally,
he has established arrangements with suppliers that have resulted in substantial
savings on advertising expenses through co-branding, cost sharing and
35
<PAGE> 37
advertising rebates. Mr. Beckett received a science and construction technology
degree from Bowling Green State University.
Ray G. Hurlbut is Executive Vice President -- Houston Division of Newmark.
Mr. Hurlbut joined Newmark in 1984 as a sales associate after ten years of
experience with two national homebuilders. He was awarded Sales Manager of the
Year and Marketing Director of the Year by the Greater Houston Builders
Association in 1987 and 1992, respectively. In 1995, he received the Texas
Capital Area Builders' Award for Marketing Director of the Year. He served as
Vice President -- Sales and Marketing of Newmark until his promotion to
Executive Vice President -- Houston Division in 1994.
Steve J. Von Hofe is Senior Vice President -- Houston Division of Newmark.
He joined Newmark in 1984 as a construction superintendent. In 1985, he was
named Manager of Construction Operations, in 1992, he became Vice
President -- Construction, and in 1997, Mr. Von Hofe was promoted to his current
position as a Senior Vice President. He is a member of the Greater Houston
Builders Association Builder Council and a graduate of Western Michigan
University.
Brian K. Shields is Senior Vice President -- Central Texas Division of
Newmark. In 1985, Mr. Shields joined Newmark as a construction superintendent
and later served as Vice President -- Construction. In 1996, Mr. Shields was
promoted to his current position as a Senior Vice President. He serves on the
Government Relations Committee of Texas Capitol Area Builder's Association.
Steve A. Treece is Executive Vice President -- North Texas Division of
Newmark. Mr. Treece joined Newmark in 1991 as Director of Sales and Marketing.
From 1993 to 1995, he served as Vice President of Fedrick, Harris Estate Homes,
overseeing all aspects of custom home construction and sales. In 1995, he was
promoted to his current position as Executive Vice President of Newmark.
Mike M. Moody is the Senior Vice President -- Nashville Division of
Newmark. He began his career with Newmark in 1990 as a construction
superintendent and was promoted to Sales Manager -- Central Texas in 1992. He
served in this capacity until his promotion in 1995 to Senior Vice President. He
was recently selected to begin start-up operations for Newmark in Nashville. Mr.
Moody is a graduate of the University of Texas.
EXECUTIVE COMPENSATION. The following tables sets forth a summary of annual
and long-term compensation for the fiscal year ended December 31, 1996, for the
chief executive officer and for the three other executive officers of the
Company whose compensation exceeded $100,000 for such year.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
NAME AND ----------------------- ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION
------------------ -------- -------- ------------
<S> <C> <C> <C> <C>
Lonnie M. Fedrick, 1996 $325,000 $454,862 10,630(2)
President and Chief
Executive Officer
J. Eric Rome, 1996 200,000 290,614 7,744(2)
Executive Vice President --
Homebuilding
B. Coleman Bradley, 1996 200,000 80,000 9,830(2)
Executive Vice President --
Land Acquisition and
Development
Terry C. White, 1996 125,000 152,088 7,492(2)
Chief Financial Officer
and Treasurer
</TABLE>
- ---------------
(1) Information with respect to certain prerequisites and other personal
benefits has been omitted because the aggregate value of such items does not
meet the minimum amount required for disclosure under the regulations of the
Securities and Exchange Commission.
(2) Includes contributions pursuant to a 401(k) plan.
36
<PAGE> 38
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Prior to this
offering, the Board of Directors had no Compensation Committee, and, prior to
October 1997, the sole director was Bill C. Bradley.
EMPLOYMENT AGREEMENTS. Eric Rome, Coleman Bradley and Terry White have
employment agreements through December 31, 1999. Mr. Rome's base compensation
for 1997, 1998 and 1999 is $225,000, $250,000 and $275,000, respectively. Mr.
Bradley's base compensation for 1997, 1998 and 1999 is $225,000, $250,000 and
$275,000, respectively. Mr. White's base compensation for 1997, 1998 and 1999 is
$137,500, $150,000 and $162,500, respectively. Each of them is permitted to
participate in such pension, profit-sharing, bonus, life insurance,
hospitalization, major medical, and other employee benefit plans of the Company
that may be in effect from time to time. Upon the closing of the Westbrooke
acquisition, the Company expects to enter into an employment agreement with
James Carr. Certain of the Company's key employees also have employment
agreements.
PHANTOM STOCK PLAN. The Company intends to adopt an Executive Phantom Stock
Plan (the "Plan") in order to offer long-term incentives to key employees.
Participating key employees (the "Participants") will receive benefits expressed
in shares of Common Stock, but which do not represent actual shares of Common
Stock ("Phantom Shares"). Generally, a Participant may exercise the right to
receive payment for an award of Phantom Shares equal to the amount by which the
Phantom Share price on the date of exercise exceeds the Phantom Share price at
the date of grant, multiplied by the number of Phantom Shares exercised (less
required tax withholding). The Compensation Committee administers the Plan,
which may be amended, modified or terminated by the Board of Directors.
CERTAIN TRANSACTIONS
LOANS FROM PACIFIC USA. The Company owed $4.3 million to Pacific USA at
December 31, 1996, and $9.7 million at September 30, 1997. Interest paid to
Pacific USA during the years ended December 31, 1994, 1995 and 1996 was
approximately $326,000, $432,000 and $439,000, respectively. All amounts
outstanding under these loans will be contributed to capital of the Company
effective upon consummation of this offering.
TAX ALLOCATION AGREEMENT. Pursuant to the Tax Allocation Agreement, the
Company is included in the consolidated federal income tax returns filed by
Pacific USA. The amount of the Company's liability to (or entitlement to payment
from) Pacific USA under the Tax Allocation Agreement will equal the amount of
taxes that the Company would owe (or refund that it would receive) had it
prepared tax returns on a stand-alone basis. A conflict of interest may arise if
Pacific USA chooses to contest, compromise or settle any adjustment or
deficiency proposed by the relevant taxing authority in a manner that may be
beneficial to Pacific USA and detrimental to the Company. In addition, under
federal income tax law, each member of a consolidated group (as determined for
federal income tax purposes) is also jointly and severally liable for the
federal income tax liability of the consolidated group. Pursuant to the Tax
Allocation Agreement, Pacific USA has agreed to indemnify the Company for any
federal income tax liability for which Pacific USA has already received payment
from the Company or with respect to any tax liabilities of Pacific USA or its
affiliated entities other than the Company. Payments of $2.8 million, $1.8
million and $3.0 million, respectively, were made by the Company to Pacific USA
during 1994, 1995 and 1996 under this agreement.
RISK MANAGEMENT SERVICES. The Company purchases all of its insurance
policies through an affiliated insurance broker, Pacific Agency, Inc. Pacific
Agency, Inc. earned commissions of $69,000, $89,000 and $86,000 in 1995, 1996
and the first nine months of 1997, respectively, with respect to such policies.
The Company believes that these commissions are comparable to amounts it would
pay to an independent third party for similar services.
PACIFIC USA GUARANTEES. Certain of the Company's construction and lot loans
are guaranteed by Pacific USA. The outstanding balance of Company loans
guaranteed by Pacific USA was $112,000 at December 31, 1996, with no balance at
September 30, 1997. Additionally, the Company and Pacific USA had guaranteed
certain construction loans payable by a partnership that is 50% owned by the
Company. The partnership's loans guaranteed by the Company and Pacific USA
totaled approximately $950,000 at December 31, 1996 and $200,000 at September
30, 1997 and were secured by lots and single family residences. The partnership
37
<PAGE> 39
loans have been repaid in full. In addition, Pacific USA has guaranteed or
secured certain of the obligations of the Company with respect to the
acquisition of Westbrooke.
Following the completion of this offering, the Company expects that
guarantees from Pacific USA will not be required. Pacific USA will be under no
obligation to provide such guarantees to the Company in the future.
ADMINISTRATIVE SERVICES. Pacific USA provides certain administrative
services for the Company because it can obtain lower costs and achieve greater
efficiencies and reduce expenses for the Company. Functions which are performed
by Pacific USA include payroll and benefits administration, the evaluation,
negotiation and purchase of office supplies, long distance and overnight
delivery services. While Pacific USA has not charged the Company for these
services in the past, it may do so in the future at rates which the Company
believes are comparable to those attainable from independent vendors. The
Company does not expect such charges, if any, to be material.
DEMOGRAPHIC RESEARCH SERVICES. An affiliated company, Pacific Research
Group, provides demographic and economic research to the Company pursuant to a
services agreement. The Company pays $10,000 per year to Pacific Research Group
for such services.
The Board of Directors has adopted a policy that any future transactions
with affiliates of the Company will be on terms no less favorable to the Company
than are reasonably available from unrelated third parties and shall have been
approved by a majority of the Company's directors who do not have a material
interest in the transactions.
SECURITY OWNERSHIP
The following table sets forth as of September 30, 1997, certain
information with respect to the beneficial ownership of Common Stock by each
person who is the beneficial owner of more than 5% of the outstanding Common
Stock. None of the Company's directors and executive officers own beneficially
or of record any equity securities of the Company.
<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON STOCK
STOCK BENEFICIALLY BENEFICIALLY OWNED
OWNED BEFORE OFFERING AFTER OFFERING(1)
---------------------- -----------------------
NAME AND ADDRESS OF PERCENT PERCENT
BENEFICIAL OWNER NUMBER OF CLASS NUMBER OF CLASS
------------------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C>
Pacific USA Holdings Corp.(2).............. 9,200,000 100% 9,200,000 82.1%
5999 Summerside Drive
Suite 112
Dallas, Texas 75252
</TABLE>
- ---------------
(1) Assumes the Underwriters' over-allotment option will not be exercised. If
such option is exercised in full, Pacific USA's percentage ownership
interest would be 80.0%.
(2) Pacific USA is an indirect subsidiary of Pacific Electric Wire & Cable Co.,
Ltd. which directs the voting and investment of its indirect holdings of
Pacific USA's Common Stock. All of the Company's outstanding shares of
Common Stock are held of record by Pacific Realty Group, a direct subsidiary
of Pacific USA. Pacific USA directs the voting and investment of its
indirect holdings of the Company's Common Stock. The Company is not aware of
any arrangement which may at a subsequent date result in a change in control
of the Company or Pacific USA.
38
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 30,000,000 shares of Common Stock, $.01 par value, of
which 9,200,000 shares were issued and outstanding as of October 31, 1997, and
3,000,000 shares of Preferred Stock, $.01 par value, of which no shares will be
issued and outstanding as of October 31, 1997.
COMMON STOCK. Holders of Common Stock are entitled to one vote for each
share held in the election of directors and on all other matters submitted to a
vote of shareholders. Cumulative voting of shares of Common Stock is prohibited.
Accordingly, holders of a majority of the shares of Common Stock entitled to
vote in any election of directors may elect all of the directors standing for
election.
Subject to the prior rights of the holders of any outstanding Preferred
Stock, holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." Upon the liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to receive ratably the assets
of the Company remaining after payment of all liabilities and payment to holders
of Preferred Stock if such Preferred Stock has an involuntary liquidation
preference over the Common Stock. Holders of Common Stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of Common
Stock are, and the shares offered by the Company in this offering will be, when
issued and paid for, validly issued, fully paid and nonassessable.
PREFERRED STOCK. The Board of Directors is authorized, without any further
notice or action of the shareholders, to issue 3,000,000 shares of Preferred
Stock in one or more series and to determine the relative rights, preferences
and privileges of the shares of any such series. The Company has no present
plans to issue any shares of Preferred Stock.
LIMITATION ON LIABILITY. The Company's Restated Articles of Incorporation
and Bylaws provide for indemnification of officers and directors of the Company
to the fullest extent permitted by Nevada law. Under the Articles, Directors and
officers of the Company are not liable to the Company or its shareholders for
damages for breach of fiduciary duty as directors or officers, except for acts
or intentional misconduct, fraud or a knowing violation of the law, or the
payment of unlawful dividends. The Company has directors and officers' liability
insurance.
ANTI-TAKEOVER PROVISIONS OF STATE LAW. Nevada's "Combination with
Interested Stockholders Statute," Nevada Revised Statutes Sections 78.411
through 78.444, which applies to any Nevada corporation subject to the reporting
requirements of section 12 of the Securities Exchange Act of 1934, as amended,
and which has at least 200 shareholders prohibits an "interested stockholder"
from entering into a "combination" with the corporation, unless certain
conditions are met. Pursuant to the Company's Restated Articles of
Incorporation, the Company will expressly elect to be governed by the provisions
of Sections 78.411 through 78.444 of the Nevada Revised Statutes. A
"combination" includes (a) any merger with an "interested stockholder," or any
other corporation which is or after the merger would be, an affiliate or
associate of the interested stockholder, (b) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets, in one transaction or
a series of transactions, to or with an "interested stockholder," having (i) an
aggregate market value equal to 5% or more of the aggregate market value of the
corporation's assets, (ii) an aggregate market value equal to 5% or more of the
aggregate market value of all outstanding shares of the corporation, or (iii)
representing 10% or more of the earning power or net income of the corporation,
(c) any issuance or transfer of shares of the corporation or its subsidiaries,
to the "interested stockholder," having an aggregate market value equal to 5% or
more of the aggregate market value of all the outstanding shares of the
corporation, (d) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by the "interested stockholder," (e)
certain transactions which would result in increasing, directly or indirectly,
the proportionate share of shares of the corporation owned by the "interested
stockholder," or (f) the receipt of benefits by an "interested stockholder,"
except proportionately as a stockholder, of any loans, advances or other
financial benefits provided by the corporation. An "interested stockholder" is a
person who (i) directly or indirectly owns 10% or more of the voting power of
the outstanding voting shares of the corporation or (ii) an affiliate or
associate of the corporation which at any time within three years before the
date in question was the beneficial
39
<PAGE> 41
owner, directly or indirectly, of 10% or more of the voting power of the then
outstanding shares of the corporation.
A corporation to which the statute applies may not engage in a
"combination" within three years after the interested stockholder acquired its
shares, unless the combination or the interested stockholder's acquisition of
shares was approved by the board of directors before the interested stockholder
acquired the shares. If this approval is not obtained, the combination may be
consummated after the three year period expires if either (a) (i) the board of
directors of the corporation approved, prior to such person becoming an
interested stockholder, the combination or the purchase of shares by the
interested stockholder or (ii) the combination is approved by the affirmative
vote of holders of a majority of voting power not beneficially owned by the
interested stockholder at a meeting called no earlier than three years after the
date the interested stockholder became such or (b) the aggregate amount of cash
and the market value of consideration other than cash to be received by holders
of common shares and holders of any other class or series of shares meets the
minimum requirements set forth in Section 78.441 through 78.443, inclusive, and
prior to the consummation of the combination, except in limited circumstances,
the "interested stockholder" would not have become the beneficial owner of
additional voting shares of the corporation.
Nevada's "Control Share Acquisition Statute," Nevada Revised Statues
sec. 78.378-78.3793, prohibits an "acquiring person", under certain
circumstances, from voting shares of a target corporation's stock after crossing
certain threshold ownership percentages, unless the acquiror obtains the
approval of the target corporation's stockholders. The Control Share Acquisition
Statute only applies to Nevada corporations with at least 200 stockholders,
including at least 100 record stockholders who are Nevada residents, and which
do business directly or indirectly in Nevada. The Company does not intend to "do
business" in Nevada within the meaning of the Control Share Acquisition Statute.
Therefore, it is unlikely that the Control Share Acquisition Statute will apply
to the Company. The statute specifies three thresholds: at least one-fifth but
less than one-third, at least one-third but less than a majority, and a majority
or more, of the outstanding voting power. Once an acquiror crosses one of the
above thresholds, shares which it acquired in the transaction taking it over the
threshold or within ninety days thereof become "Control Shares" which are
deprived of the right to vote until a majority of the disinterested stockholders
restore that right. A special stockholders' meeting may be called at the request
of the acquiror to consider the voting rights of the acquiror's shares no more
than 50 days (unless the acquiror agrees to a later date) after the delivery by
the acquiror to the corporation of an information statement which sets forth the
range of voting power that the acquiror has acquired or proposes to acquire and
certain other information concerning the acquiror and the proposed control share
acquisition. If no such request for a stockholders' meeting is made,
consideration of the voting rights of the acquiror's shares must be taken at the
next special or annual stockholders' meeting. If the stockholders fail to
restore voting rights to the acquiror, or if the acquiror fails to timely
deliver an information statement to the corporation, the corporation may, if so
provided in its Articles or Bylaws, call certain of the acquiror's shares for
redemption at the average price paid for the control shares by the acquiror. The
Company's Articles and Bylaws do not currently permit it to call an acquiror's
shares for redemption under these circumstances. The Control Share Acquisition
Statute also provides that in the event the stockholders restore full voting
rights to a holder of Control Shares that owns a majority of the voting stock,
then all other stockholders who do not vote in favor of restoring voting rights
to the Control Shares may demand payment for the "fair value" of their shares
(which is generally equal to the highest price paid by the acquiror in the
transaction subjecting the acquiror to the statute).
The provisions described above, together with the ability of the Board of
Directors to issue Preferred Stock as described under "-- Preferred Stock," may
have the effect of delaying or deterring a change in the control or management
of the Company.
TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for the
Common Stock is First Chicago Trust Company of New York.
40
<PAGE> 42
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
11,200,000 shares of Common Stock. Of these shares of Common Stock, the
2,000,000 shares sold in this offering may be publicly offered and sold without
restriction, unless they are purchased by affiliates of the Company. Shares of
Common Stock outstanding prior to completion of this offering will be
"restricted securities" under the Securities Act (the "Restricted Shares"). The
Restricted Shares may be sold only if they are registered under the Securities
Act by the Company or pursuant to an applicable exemption from the registration
requirements of the Securities Act, including Rule 144 thereunder. The Company,
Pacific Realty Group and Pacific USA have agreed that, for a period of 180 days
after the date of this Prospectus, they will not offer, sell or otherwise
dispose of shares of Common Stock, without the prior written consent of Rauscher
Pierce Refsnes, Inc. on behalf of the Representatives. See "Underwriting."
In general, under Rule 144 as currently in effect, Pacific USA or any
subsequent transferee (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year but less than two
years is entitled to sell within any three-month period a number of shares that
does not exceed the greater of 1% of the then outstanding shares of the Common
Stock (approximately 112,000 shares immediately after the offering) or the
average weekly trading volume in the Common Stock during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain manner of
sale provisions, notice requirements and the availability of current public
information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an "affiliate" of the Company at any
time during the 90 days preceding a sale, and who has beneficially owned
Restricted Shares for at least two years, would be entitled to sell such shares
under Rule 144 without regard to the volume or manner of sale limitations
referred to above.
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sales, will have on the market
price of the Common Stock. The sale of substantial amounts of Common Stock, or
the perception that such sales could occur, could adversely affect the
prevailing market price for the Common Stock.
41
<PAGE> 43
UNDERWRITING
The Underwriters named below, represented by Rauscher Pierce Refsnes, Inc.
and Laidlaw Global Securities, Inc. (the "Representatives"), have severally
agreed, subject to the terms and conditions of the Underwriting Agreement, to
purchase from the Company the number of shares of Common Stock set forth
opposite their names below. The nature of the obligations of the Underwriters is
such that, if any of such shares are purchased, all must be purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Rauscher Pierce Refsnes, Inc. ..............................
Laidlaw Global Securities, Inc. ............................
---------
Total ............................................ 2,000,000
=========
</TABLE>
The Underwriters propose initially to offer the shares of Common Stock
offered hereby to the public at the price to public set forth on the cover page
of this Prospectus. The Underwriters may allow a concession to selected dealers
who are members of the National Association of Securities Dealers, Inc. ("NASD")
not in excess of $ per share, and the Underwriters may allow, and such
dealers may reallow, to members of the NASD a concession not in excess of
$ per share. After this offering, the price to public, the concession
and the reallowance may be changed by the Representatives.
The Company has granted an option to the Underwriters, exercisable within
30 days after the date of this Prospectus, to purchase up to an additional
300,000 shares of Common Stock at the initial price to public, less underwriting
discount, set forth on the cover page of this Prospectus. The Underwriters may
exercise such option only for the purpose of covering any over-allotments. To
the extent that the Underwriters exercise such option, each Underwriter will be
committed, subject to certain conditions, to purchase that number of the
additional shares of Common Stock which is proportionate to such Underwriter's
initial commitment.
Prior to the offering, there has been no market for the Common Stock, and
there can be no assurance that a regular trading market will develop upon the
consummation of the offering. The initial public offering price was determined
by negotiations between the Company and the Representatives. The primary factors
considered by the Representatives in determining such public offering price
included the history of and the prospects for the industry in which the Company
competes, an assessment of the Company's management, its past and present
operations, its past and present earnings and the trend of such earnings, the
general condition of the securities markets at the time of the offering and the
price-earnings multiples and market prices of publicly trade securities of
comparable companies.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company, its executive officers and directors and Pacific USA have
agreed that for a period of 180 days after the date of this Prospectus, they
will not offer, sell or otherwise dispose of any shares of Common Stock
beneficially owned or controlled by them (including subsequently acquired
shares) without the prior written consent of Rauscher Pierce Refsnes, Inc. on
behalf of the Underwriters.
The Representatives have advised the Company that they do not expect any
sales by the Underwriters to accounts over which they exercise discretionary
authority.
In connection with this offering, the Underwriters may purchase and sell
Common Stock in the open market. The transactions may include over-allotment and
stabilization transactions and purchases to cover syndicate short positions
created in connection with this offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock, and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock than
they are required to purchase from the Company in this offering. The
Underwriters also
42
<PAGE> 44
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the shares of Common Stock sold in
this offering for their account may be reclaimed by the syndicate if such shares
of Common Stock are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Common Stock, which may be higher than the price that might
otherwise prevail in the open market, and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
Laidlaw Global Securities, Inc., a member of the National Association of
Securities Dealers, Inc. ("NASD") and the comanager of this offering, is a
partially owned, indirect subsidiary of Pacific USA. The Company is a
wholly-owned, indirect subsidiary of Pacific USA. Larry D. Horner and Bill C.
Bradley, each a director of the Company, are also Chairman of the Board and a
director, respectively, of Laidlaw Holdings, Inc., the sole shareholder of
Laidlaw Global Securities, Inc. As a result of the foregoing, this offering is
subject to the provisions of Section 2720 of the Conduct Rules of the NASD
(formerly Schedule E to the Bylaws of the NASD) ("Section 2720"). Accordingly,
the underwriting arrangements for this offering will conform with the
requirements set forth in Section 2720. In particular, the price at which such
offering is to be distributed to the public must be at a price no higher than
that recommended by a "qualified independent underwriter" who has also
participated in the preparation of the Registration Statement and the prospectus
and who meets certain standards. In accordance with this requirement, Rauscher
Pierce Refsnes, Inc. will serve in such role and will recommend the public
offering price in compliance with the requirements of Section 2720. Rauscher
Pierce Refsnes, Inc., in its role as qualified independent underwriter, has
performed the due diligence investigations and reviewed and participated in the
preparation of the Prospectus and the Registration Statement of which the
Prospectus forms a part.
LEGAL MATTERS
The validity of the Common Stock offered hereby is being passed upon for
the Company by Wolin, Ridley & Miller LLP, Dallas, Texas. Certain legal matters
in connection with this offering will be passed upon for the Underwriters by
Andrews & Kurth L.L.P., Houston, Texas. Andrews & Kurth L.L.P. has represented
other subsidiaries of Pacific USA from time to time in connection with asset
securitization matters.
EXPERTS
The financial statements and schedules of Newmark Homes Corp. as of
December 31, 1995 and 1996, and for each of the years in the three-year period
ended December 31, 1996, have been included herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
The financial statements of the Westbrooke Communities, Inc. and Affiliates
at December 31, 1995 and 1996 and for the years then ended appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent certified public accountants, as set forth in their report appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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<PAGE> 45
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (as amended and together with
all exhibits thereto, the "Registration Statement") under the Securities Act,
with respect to the shares of Common Stock offered pursuant to this Prospectus.
This Prospectus has been filed as part of the Registration Statement and does
not contain all of the information set forth in the Registration Statement, as
permitted by the rules and regulations of the Commission. Statements contained
in this Prospectus as to the contents of any contract, agreement or other
document referred to herein are not necessarily complete and, where such
agreement or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions of such exhibit,
to which reference is hereby made for a full statement of the provisions
thereof. For further information with respect to the Company and the Common
Stock, reference is hereby made to the Registration Statement and to the
schedules and exhibits thereto.
The Registration Statement and the exhibits may be inspected, without
charge, and copies may be obtained, at prescribed rates, at the public reference
facilities of the Commission maintained at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, DC 20549, or on the Internet at http://www.sec.gov. Copies of
the Registration Statement and the exhibits may also be inspected, without
charge, at the Commission's regional offices at 7 World Trade Center, Suite
1300, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. In addition, copies of the Registration Statement and
the exhibits may be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, DC 20549 and its public reference
facilities in New York, New York and Chicago, Illinois, at prescribed rates.
As a result of this offering, the Company will become subject to the
information and periodic reporting requirements of the Exchange Act, and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the public
reference facilities and regional offices referred to above. The Company intends
to furnish its shareholders with annual reports containing consolidated
financial statements certified by its independent auditors and with quarterly
reports for each of the first three quarters of each fiscal year containing
unaudited consolidated financial information.
44
<PAGE> 46
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Newmark Homes Corp.:
Pro Forma Condensed Consolidated Financial Statements
(unaudited)............................................ F-2
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997.................................... F-3
Pro Forma Condensed Consolidated Statement of
Operations for the Nine Months Ended September 30,
1997.................................................. F-4
Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1996....... F-5
Notes to Pro Forma Condensed Consolidated Financial
Statements............................................ F-6
Historical Financial Statements:
Independent Auditors' Report........................... F-8
Consolidated Balance Sheets as of December 31, 1995 and
1996 and September 30, 1997 (unaudited)............... F-9
Consolidated Statements of Operations for the Years
Ended December 31, 1994, 1995 and 1996 and the Nine
Months Ended September 30, 1996 and 1997
(unaudited)........................................... F-10
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1994, 1995 and 1996 and the
Nine Months Ended September 30, 1997 (unaudited)...... F-11
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1994, 1995 and 1996 and the Nine
Months Ended September 30, 1996 and 1997
(unaudited)........................................... F-12
Notes to Consolidated Financial Statements............. F-13
Westbrooke Communities, Inc. and Affiliates:
Report of Independent Certified Public Accountants........ F-22
Combined Balance Sheets as of December 31, 1995 and 1996
and September 30, 1997 (unaudited)..................... F-23
Combined Statements of Income for the Years Ended December
31, 1995 and 1996 and the Nine Months Ended September
30, 1996 and 1997 (unaudited).......................... F-24
Combined Statements of Changes in Capital for the Years
Ended December 31, 1995 and 1996 and the Nine Months
Ended September 30, 1996 and 1997 (unaudited).......... F-25
Combined Statements of Cash Flows for the Years Ended
December 31, 1995 and 1996 and the Nine Months Ended
September 30, 1996 and 1997 (unaudited)................ F-26
Notes to Combined Financial Statements.................... F-27
</TABLE>
F-1
<PAGE> 47
NEWMARK HOMES CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma financial statements are derived from the
historical financial statements of the Company and Westbrooke Communities, Inc.
and certain of its affiliates ("Westbrooke") included elsewhere in this
Prospectus. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997 is presented as if the Westbrooke acquisition (the
"Westbrooke Acquisition"), the contribution of notes payable to Pacific USA to
capital (the "Capital Contribution") and the sale of Common Stock offered hereby
(the "Offering") had occurred on September 30, 1997. The Pro Forma Condensed
Consolidated Statements of Operations for the nine months ended September 30,
1997 and the year ended December 31, 1996 are presented as if the Westbrooke
Acquisition, the Capital Contribution and the Offering had occurred on January
1, 1996.
The Pro Forma Condensed Consolidated Financial Statements should be read in
conjunction with the historical consolidated financial statements of Newark
Homes Corp. and subsidiaries, including the notes thereto, included elsewhere in
the Prospectus. The Pro Forma Condensed Consolidated Financial Statements do not
purport to represent the Company's financial position as of September 30, 1997
or the results of operations for the nine months ended September 30, 1997 and
for the year ended December 31, 1996 that would actually have occurred had the
Westbrooke Acquisition, the Capital Contribution and the Offering been completed
on September 30, 1997 or the beginning of the period presented, or to project
the Company's financial position or results of operations as of any future date
or any future period.
F-2
<PAGE> 48
NEWMARK HOMES CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
COMBINED
COMPANY WESTBROOKE ACQUISITION NEWMARK AND OFFERING
HISTORICAL HISTORICAL ADJUSTMENTS WESTBROOKE ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash....................... $ 727 $ 3,465 $ (212)(a) $ 3,980 $ -- $ 3,980
Receivables................ 3,335 1,023 -- 4,358 -- 4,358
Inventory.................. 94,711 54,108 (1,666)(b) 147,153 -- 147,153
Investment in
unconsolidated
subsidiary............... 368 -- -- 368 -- 368
Other assets............... 6,122 3,461 (689)(b) 8,894 -- 8,894
Goodwill, net.............. 27,492 -- 9,007(b) 36,499 -- 36,499
-------- ------- -------- -------- -------- --------
Total assets..... $132,755 $62,057 $ 6,440 $201,252 $ -- $201,252
======== ======= ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Construction loans
payable.................. $ 56,715 $30,834 $ -- $ 87,549 $ (8,000)(d) $ 79,549
Bank loan.................. -- -- 10,000(a) 10,000 (10,000)(d) --
Acquisition note payable... -- -- 18,245(b) 18,245 -- 18,245
Notes payable to
affiliates............... 9,817 -- -- 9,817 (9,817)(c) --
Payable to affiliates...... 2,295 -- -- 2,295 -- 2,295
Accounts payable and
accrued liabilities...... 12,327 9,785 (367)(b) 21,745 -- 21,745
Other liabilities.......... 5,021 -- -- 5,021 -- 5,021
Subordinated notes
payable.................. -- 7,500 (7,500)(a) -- -- --
-------- ------- -------- -------- -------- --------
Total liabilities........ 86,175 48,119 20,378 154,672 (27,817) 126,855
-------- ------- -------- -------- -------- --------
Minority interest in
Westbrooke............... -- 2,712 (2,712)(a) -- -- --
Stockholders' equity:
Common stock............. 92 45 (45)(b) 92 20(d) 112
9,817(c)
Additional paid-in
capital............... 42,377 9,955 (9,955)(b) 42,377 17,980(d) 70,174
Retained earnings........ 4,111 1,226 (1,226)(b) 4,111 -- 4,111
-------- ------- -------- -------- -------- --------
Total stockholders'
equity................ 46,580 11,226 (11,226) 46,580 27,817 74,397
-------- ------- -------- -------- -------- --------
Total liabilities and
stockholders'
equity................ $132,755 $62,057 $ 6,440 $201,252 $ -- $201,252
======== ======= ======== ======== ======== ========
</TABLE>
F-3
<PAGE> 49
NEWMARK HOMES CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED
COMPANY WESTBROOKE ACQUISITION NEWMARK AND OFFERING
HISTORICAL HISTORICAL ADJUSTMENTS WESTBROOKE ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues................... $163,548 $64,843 $ -- $228,391 $ -- $228,391
(1,125)(j)
Cost of sales.............. 133,578 57,114 (497)(e) 190,195 (326)(k) 188,744
-------- ------- ------- -------- ------- --------
29,970 7,729 497 38,196 1,451 39,647
Equity in earnings of
unconsolidated
subsidiaries............. 262 -- -- 262 -- 262
Selling, general and
administrative
expenses................. (19,121) (5,686) -- (24,807) -- (24,807)
Depreciation and
amortization............. (1,224) (518) (225)(h) (1,967) -- (1,967)
-------- ------- ------- -------- ------- --------
Operating income......... 9,887 1,525 272 11,684 1,451 13,135
Other income:
Interest expense......... (1,525) -- (1,195)(g) (2,720) -- (2,720)
Other income, net........ 421 431 -- 852 -- 852
-------- ------- ------- -------- ------- --------
Income before income
taxes and minority
interests............. 8,783 1,956 (923) 9,816 1,451 11,267
Income taxes............... 3,366 -- 393(i) 3,759 551(l) 4,310
-------- ------- ------- -------- ------- --------
Income before minority
interest.............. 5,417 1,956 (1,316) 6,057 900 6,957
Minority interests in
Westbrooke............ -- 197 (197)(f) -- -- --
-------- ------- ------- -------- ------- --------
Net income............... $ 5,417 $ 1,759 $(1,119) $ 6,057 $ 900 $ 6,957
======== ======= ======= ======== ======= ========
</TABLE>
F-4
<PAGE> 50
NEWMARK HOMES CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED
COMPANY WESTBROOKE ACQUISITION NEWMARK AND OFFERING
HISTORICAL HISTORICAL ADJUSTMENTS WESTBROOKE ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues................... $191,998 $124,301 $ -- $316,299 $ -- $316,299
(1,500)(j)
Cost of sales.............. 157,407 108,950 (662)(e) 265,695 (231)(k) 263,964
-------- -------- ------- -------- ------- --------
34,591 15,351 662 50,604 1,731 52,335
Equity in earnings of
unconsolidated
subsidiaries............. 792 -- -- 792 -- 792
Selling, general and
administrative
expenses................. (22,976) (7,999) -- (30,975) -- (30,975)
Depreciation and
amortization............. (1,524) (586) (300)(h) (2,410) -- (2,410)
-------- -------- ------- -------- ------- --------
Operating
income................ 10,883 6,766 362 18,011 1,731 19,742
Other income:
Interest expense......... (1,238) -- (1,327)(g) (2,565) -- (2,565)
Other income, net........ 851 673 -- 1,524 -- 1,524
-------- -------- ------- -------- ------- --------
Income before income
taxes and minority
interests............. 10,496 7,439 (965) 16,970 1,731 18,701
Income taxes............... 4,164 -- 2,460(i) 6,624 658(l) 7,282
-------- -------- ------- -------- ------- --------
Income before minority
interests................ 6,332 7,439 (3,425) 10,346 1,073 11,419
Minority interests in
Westbrooke............... -- 1,384 (1,384)(f) -- -- --
-------- -------- ------- -------- ------- --------
Net income............... $ 6,332 $ 6,055 $(2,041) $ 10,346 $ 1,073 $ 11,419
======== ======== ======= ======== ======= ========
</TABLE>
F-5
<PAGE> 51
NEWMARK HOMES CORP. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
In December 1997, the Company entered into a letter of intent to acquire
Westbrooke, a leading builder of single-family homes in the South Florida
market. Pursuant to the letter of intent between the Company, Pacific USA and
Westbrooke, the consideration for the purchase of all of the outstanding capital
stock of Westbrooke will consist of (i) $12,341,000 in promissory notes (the
"Acquisition Notes") bearing interest at 6.45% per annum and payable annually
over five years and (ii) deferred consideration of up to $7.5 million contingent
upon Westbrooke achieving specified earnings targets over a period of five
years. Additionally, a promissory note bearing interest at 9% and payable within
six months of the closing of the acquisition will be issued to the sellers (as
additional purchase price) to the extent that stockholders' equity of Westbrooke
exceeds $5.0 million at closing. Based on the balance of Westbrooke's
stockholder's equity at September 30, 1997 of $11,226,000, the total principal
balance of all Acquisition Notes would have been $18,245,000.
Prior to the acquisition of Westbrooke by the Company, Westbrooke intends
to borrow $10.0 million under a bank loan (the "New Bank Loan") to repay the
$7.5 million outstanding balance of its subordinated notes (the "Subordinated
Notes") and to acquire $2.5 million of minority interests in Westbrooke
(collectively, the pre-acquisition transactions). Upon the acquisition of
Westbrooke and the subsequent funding of this offering, the Company intends to
use $10 million of the net proceeds of the offering to repay the New Bank Loan.
Contemporaneously with the consummation of the Offering, all of the
indebtedness owed to Pacific USA ($9.8 million at September 30, 1997) will be
contributed to capital of the Company (the "Capital Contribution").
The pro forma adjustments to the Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1997 are as follows:
<TABLE>
<S> <C>
(a) To record the pre-acquisition transactions by
Westbrooke:
Proceeds from the New Bank Loan...................... $ 10,000
Reduction in cash.................................... (212)
Repayment of the Subordinated Notes.................. (7,500)
Acquisition of minority interest in Westbrooke....... (2,712)
Minority interest in Westbrooke in excess of $2.5
million are to be distributed to the minority owner
from available cash.
(b) To record the Westbrooke Acquisition and related
purchase accounting adjustments:
Issuance of the Acquisition Notes.................... $ 18,245
Reduction of inventory............................... (1,666)
Reduction in other assets............................ (689)
Goodwill............................................. 9,007
Reduction in accounts payable and accrued
liabilities......................................... (367)
Elimination of stockholders' equity of Westbrooke:
Common Stock...................................... $ (45)
Additional paid-in capital........................ (9,955)
Retained earnings................................. (1,226)
--------
$ 11,226
========
Excluded from the acquisition of Westbrooke are a
condominium with a carrying value of $689,000 and a
mortgage note payable on the condominium of $367,000
which will be distributed to the seller prior to
consummation of the acquisition.
(c) To record the Capital Contribution...................... $ 9,817
</TABLE>
F-6
<PAGE> 52
<TABLE>
<S> <C>
(d) To record the estimated net proceeds from the Offering
and the anticipated use of proceeds therefrom:
Common Stock......................................... $ 20
Additional paid in capital........................... 17,980
--------
Net proceeds from the Offering.................... $ 18,000
Repayment of the New Bank Loan....................... (10,000)
Repayment of construction notes payable.............. (8,000)
</TABLE>
The pro forma adjustments to the Pro Forma Condensed Consolidated Statement
of Operations for the year ended December 31, 1996 and the nine months ended
September 30, 1997 are as follows.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
(e) To record the net decrease in cost of sales due
to the reduction of interest incurred
resulting from the repayment of the
Subordinated Notes (which bear interest at
19.5%) and the borrowings under the New Bank
Loan (at an estimated interest rate of
8.0%):
Interest on the Subordinated Notes.......... $(1,462) $(1,097)
Interest on the New Bank Loan............... 800 600
------- -------
$ (662) $ (497)
======= =======
(f) To record the elimination of minority interests
in Westbrooke............................... $(1,384) $ (197)
(g) To record interest on the Acquisition Notes.... $(1,327) $(1,195)
(h) Amortization of goodwill acquired in the
Westbrooke Acquisition...................... $ (300) $ (225)
(i) Tax effect of Westbrooke income and pro forma
adjustments resulting from the Westbrooke
Acquisition................................. $ 2,460 $ 393
Westbrooke qualified as a Subchapter S
corporation for tax purposes; accordingly,
no taxes have been recorded on the
historical financial statements of
Westbrooke. The pro forma adjustments for
income taxes have been recorded at the
estimated effective tax rate of the Company
of 38%.
(j) To record the decrease in cost of sales due to
the reduction of interest incurred resulting
from the repayment of the New Bank Loan
(with an estimated interest rate of 8.0%)
and $8.0 million of construction notes
payable (which bear interest at 8.75%) from
the net proceeds from the Offering:
Interest on the New Bank Loan............... $ (800) $ (600)
Interest on construction notes payable...... (700) (525)
------- -------
$(1,500) $(1,125)
======= =======
(k) To record the decrease in cost of sales due to
the reduction of interest incurred resulting
from the Capital Contribution............... $ (231) $ (326)
(l) To record tax effect of pro forma adjustments
related to the Capital Contribution and the
use of net proceeds from the Offering....... $ 658 $ 551
</TABLE>
F-7
<PAGE> 53
INDEPENDENT AUDITORS' REPORT
WHEN THE TRANSACTION REFERRED TO IN NOTE 2(J) OF THE NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS HAS BEEN CONSUMMATED, WE WILL BE IN A POSITION TO RENDER
THE FOLLOWING REPORT.
KPMG Peat Marwick LLP
The Board of Directors
Newmark Homes Corp.:
We have audited the accompanying consolidated balance sheets of Newmark
Homes Corp. and subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of operations, stockholder's equity, and cash flows for
each of the years for the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Newmark
Homes Corp. and subsidiaries as of December 31, 1995 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
Dallas, Texas
February 14, 1997, except as to
Note 2(j), which is as of
F-8
<PAGE> 54
NEWMARK HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Cash....................................................... $ 250 $ 642 $ 727
Certificate of deposit (note 7)............................ 1,000 1,000 --
Receivables:
Title companies.......................................... 1,095 1,364 2,930
Affiliates............................................... 191 50 --
Other.................................................... 263 842 405
Inventory (notes 4, 7 and 8):
Single family residences................................. 48,034 67,141 73,994
Lots..................................................... 11,655 16,518 20,717
-------- -------- --------
59,689 83,659 94,711
Land held for commercial development (notes 4 and 8)....... 5,631 325 450
Note receivable (note 5)................................... 3,034 -- --
Investment in unconsolidated subsidiaries (note 6)......... 1,773 1,448 368
Property, premises and equipment, net of accumulated
depreciation of $409, $676 and $945 in 1995, 1996, and
1997, respectively....................................... 1,034 1,691 2,832
Deferred tax asset, net (note 9)........................... 436 966 969
Other assets (note 4)...................................... 918 955 1,871
Goodwill, net of accumulated amortization of $1,710, $2,740
and $3,256 in 1995, 1996, and 1997, respectively (note
3)....................................................... 29,231 28,235 27,492
-------- -------- --------
Total assets..................................... $104,545 $121,177 $132,755
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Construction loans payable (note 7)........................ $ 39,859 $ 56,462 $ 56,715
Notes payable to affiliates (note 8)....................... 7,569 4,306 9,817
Other payables to affiliates (notes 8 and 9)............... 971 2,062 2,295
Accounts payable and accrued liabilities................... 7,689 10,162 12,327
Other liabilities (note 10)................................ 2,644 4,256 5,021
-------- -------- --------
Total liabilities................................ 58,732 77,248 86,175
-------- -------- --------
Stockholder's equity (note 7):
Common stock -- $.01 par value; 30,000,000 shares
authorized, 9,200,000 shares issued and outstanding... 92 92 92
Additional paid-in capital............................... 43,439 42,415 42,377
Retained earnings........................................ 2,282 1,422 4,111
-------- -------- --------
Total stockholder's equity....................... 45,813 43,929 46,580
Commitments and contingencies (notes 3, 7 and 10)..........
-------- -------- --------
Total liabilities and stockholder's equity....... $104,545 $121,177 $132,755
======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-9
<PAGE> 55
NEWMARK HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.................................... $108,630 $125,427 $191,998 $139,727 $163,548
Cost of sales (note 4)...................... 86,260 102,591 157,407 114,059 133,578
-------- -------- -------- -------- --------
Gross profit................................ 22,370 22,836 34,591 25,668 29,970
Equity in earnings from unconsolidated
subsidiaries(note 6)...................... -- 1,978 792 660 262
Selling, general and administrative
expenses.................................. (12,928) (16,572) (22,976) (17,282) (19,121)
Depreciation and amortization............... (831) (1,271) (1,524) (1,110) (1,224)
-------- -------- -------- -------- --------
Operating income.......................... 8,611 6,971 10,883 7,936 9,887
Other income (expense):
Interest expense (notes 4 and 8).......... (613) (1,332) (1,238) (943) (1,525)
Other income, net (note 8)................ 191 607 851 665 421
-------- -------- -------- -------- --------
Income before income taxes............. 8,189 6,246 10,496 7,658 8,783
Income taxes (note 9)....................... 3,205 2,477 4,164 2,952 3,366
-------- -------- -------- -------- --------
Net income............................. $ 4,984 $ 3,769 $ 6,332 $ 4,706 $ 5,417
======== ======== ======== ======== ========
Net income per common share................. $ 0.54 $ 0.41 $ 0.69 $ 0.51 $ 0.59
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-10
<PAGE> 56
NEWMARK HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1993............................. $ 2 $25,221 $ 809 $26,032
Additional capital contribution........................ -- 4,660 -- 4,660
Initial capital contribution of the Company (note 2)... 92 (91) -- 1
Net income............................................. -- -- 4,984 4,984
--- ------- ------ -------
Balance, December 31, 1994............................. 94 29,790 5,793 35,677
Contribution of Newmark Homes Corporation and Pacific
United Development Corporation (note 2).............. (2) 2 -- --
Acquisition of The Adler Companies, Inc. (note 3)...... -- 13,211 -- 13,211
Additional capital contribution........................ -- 436 -- 436
Dividends Paid......................................... -- -- (7,280) (7,280)
Net income............................................. -- -- 3,769 3,769
--- ------- ------ -------
Balance, December 31, 1995............................. 92 43,439 2,282 45,813
Capital contribution................................... -- 1,247 -- 1,247
Dividends paid......................................... -- (2,271) (7,192) (9,463)
Net income............................................. -- -- 6,332 6,332
--- ------- ------ -------
Balance, December 31, 1996............................. 92 42,415 1,422 43,929
Capital contribution (unaudited)....................... -- 125 -- 125
Dividends paid (unaudited)............................. -- (163) (2,728) (2,891)
Net income (unaudited)................................. -- -- 5,417 5,417
--- ------- ------ -------
Balance, September 30, 1997 (unaudited)................ $92 $42,337 $4,111 $46,580
=== ======= ====== =======
</TABLE>
See accompanying notes to the consolidated financial statements.
F-11
<PAGE> 57
NEWMARK HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------ --------------------
1994 1995 1996 1996 1997
-------- -------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 4,984 $ 3,769 $ 6,332 $ 4,706 $ 5,417
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization........................... 831 1,271 1,524 1,110 1,224
Net (gain) loss on sale of property, premises and
equipment............................................. (31) (14) (82) 8 20
Equity in earnings from unconsolidated subsidiaries..... -- (1,978) (792) (660) (262)
Deferred tax (benefit) expense.......................... (135) 254 (518) (50) (3)
Changes in operating assets and liabilities:
Inventory and land held for commercial development,
net................................................. (14,793) (16,104) (18,664) (12,672) (11,177)
Receivables -- title companies....................... 175 146 (269) (1,552) (1,566)
Receivables -- affiliates and other.................. (91) (329) (438) (230) 487
Other assets.......................................... (715) 504 (49) (242) (916)
Payable to affiliates................................. 764 207 1,091 (742) 233
Accounts payable and accrued liabilities.............. (946) 2,887 2,473 2,926 2,165
Other liabilities..................................... (209) 561 1,612 1,721 765
-------- -------- -------- --------- --------
Net cash provided by (used in) operating activities... (10,166) (8,826) (7,780) (5,677) (3,613)
-------- -------- -------- --------- --------
Cash flows from investing activities:
Proceeds from maturity of certificate of deposit.......... 1,000 1,000 1,000 1,000 1,000
Purchase of certificate of deposit........................ (1,000) (1,000) (1,000) (1,000) --
Advance on note receivable................................ -- (3,034) -- -- --
Repayment of note receivable.............................. -- -- 3,034 3,034 --
Purchases of property, premises and equipment............. (389) (709) (1,285) (576) (1,635)
Proceeds from sales of property, premises and equipment... 60 82 216 92 24
Acquisition of Adler (note 3)............................. -- 27 -- -- --
Other..................................................... (79) -- (34) (24) (31)
Investment in unconsolidated subsidiaries................. -- (17) -- -- (105)
Distributions from unconsolidated subsidiaries............ -- 144 1,117 518 1,447
-------- -------- -------- --------- --------
Net cash provided by (used in) investing activities... (408) (3,507) 3,048 3,044 700
-------- -------- -------- --------- --------
Cash flows from financing activities:
Capital contributions received............................ 4,661 436 1,247 603 125
Dividends paid............................................ -- (7,280) (9,463) (3,425) (2,891)
Proceeds from advances on construction loans payable...... 59,147 91,398 133,349 94,158 105,355
Principal payments on construction loans payable.......... (58,792) (74,024) (116,746) (87,815) (105,102)
Proceeds from advances on notes payable
to affiliate............................................ 6,300 1,269 4,455 3,172 6,885
Principal payments on notes payable to affiliate.......... -- -- (7,718) (4,015) (1,374)
-------- -------- -------- --------- --------
Net cash provided by financing activities............. 11,316 11,799 5,124 2,678 2,998
-------- -------- -------- --------- --------
Increase (decrease) in cash................................. 742 (534) 392 45 85
Cash, beginning of period................................... 42 784 250 250 642
-------- -------- -------- --------- --------
Cash, end of period......................................... $ 784 $ 250 $ 642 $ 295 $ 727
======== ======== ======== ========= ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest................................................ $ 2,196 $ 3,739 $ 4,928 $ 3,602 $ 4,840
======== ======== ======== ========= ========
Income taxes............................................ $ 2,975 $ 2,307 $ 3,164 $ 3,164 $ 3,054
======== ======== ======== ========= ========
</TABLE>
See accompanying note 3 for supplemental disclosure of noncash investing and
financing activities.
See accompanying notes to the consolidated financial statements.
F-12
<PAGE> 58
NEWMARK HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995, 1996
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
(1) ORGANIZATION
Newmark Homes Corp. (NHC) and subsidiaries (the Company) is a wholly owned
subsidiary of Pacific Realty Group (PRG) and ultimately a subsidiary of Pacific
USA Holdings Corp. (PUSA). NHC was formed in December 1994 to serve as a real
estate holding company.
NHC's primary subsidiaries are as follows:
<TABLE>
<CAPTION>
SUBSIDIARY NATURE OF BUSINESS
---------- ------------------
<S> <C>
Newmark Home Corporation (Newmark)................. Single-family residential homebuilding in Texas and
Tennessee
The Adler Companies, Inc. (Adler).................. Single-family residential homebuilding in Florida
Pacific United Development Corporation (PUDC)...... Residential lot developer in Texas and Tennessee
</TABLE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and general practices within the homebuilding
industry. The following summarizes the more significant of these policies.
(a) Basis of Presentation
The consolidated financial statements include the accounts of NHC and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements. On February 24, 1995 and
May 1, 1995 the common stock of Newmark and PUDC, respectively, which were both
wholly-owned subsidiaries of PUSA, were contributed to the Company. The
contributions were accounted for at historical cost in a manner similar to
pooling of interests. As a result, these consolidated financial statements have
been restated on a combined basis for all periods prior to the combination.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Effective January 1, 1996, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of (Statement
121). Statement 121 addresses the accounting for the impairment of long-lived
assets, certain identifiable intangibles and goodwill when events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Impairment is evaluated by estimating future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows is less than the carrying amount of the assets, an
impairment loss is recognized. The Company's adoption of Statement 121 had no
effect on the Company's financial position or results of operations.
Statement of Financial Accounting Standards No. 128, issued in February
1997, established standards for computing and presenting earnings per share
(EPS). This Statement replaces the presentation of primary EPS with a
presentation of basic EPS and requires dual presentation of basic and diluted
EPS. This Statement will be effective for the Company's year ending December 31,
1997.
F-13
<PAGE> 59
NEWMARK HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
The Company conducts business primarily in Texas, Florida and Tennessee.
Accordingly, the market value of the Company's inventory is susceptible to
changes in market conditions that may occur in Texas, Florida and Tennessee.
(b) Receivables from Title Companies
Receivables from title companies consist of sales proceeds due for homes
sold and closed, less amounts withheld by the title companies for disbursement
to third parties.
(c) Inventory and Land Held for Commercial Development
Single family residences are recorded at the lower of cost or estimated net
realizable value. Net realizable value is defined as the estimated proceeds upon
disposition, less applicable future costs to complete and sell. Construction
costs are accumulated during the period of construction. The Company utilizes
the specific identification method of charging construction costs to cost of
sales as units are sold. Common construction overhead costs are allocated to
each individual unit (home) in the various subdivisions based upon the total
number of units to be constructed in each subdivision community.
Interest cost and overhead related to construction activities, primarily
salaries and benefits of supervisors and support staff, are capitalized as
construction costs during the construction period and charged to cost of sales
as the related inventories are sold. General and administrative costs and
selling costs are expensed at the time they are incurred.
(d) Property, Premises and Equipment
Property, premises and equipment, consisting primarily of office premises,
transportation equipment, office furniture and fixtures, and model home
furniture, are carried at cost net of accumulated depreciation. Office premises
and transportation equipment are depreciated using the straight-line method over
thirty years and five years, respectively. Furniture and fixtures and model home
furniture are depreciated over estimated useful lives of three to seven years
using the declining balance method switching to the straight-line method in the
year that depreciation, computed on the straight-line method, equals or exceeds
that determined under the declining-balance method.
(e) Purchase Options
The Company enters into lot option contracts and contracts to purchase
undeveloped land. When the Company does not exercise an option, its liability is
limited to the forfeiture of the related deposit (note 4). Consequently, the
Company's policy is to record the lots or land and the related liabilities at
the time such are purchased and legal title has passed.
(f) Goodwill
The excess of the purchase price paid by the Company over the fair value of
net assets acquired is recorded as goodwill and is being amortized on a
straight-line basis over 30 years.
The Company evaluates goodwill for impairment periodically by determining
whether the amortization of the balance over its remaining life can be recovered
through future operations of the Company.
(g) Revenue Recognition
Revenue is generally recognized at the time of the closing of the sale,
when title to and possession of the property transfers to the buyer.
F-14
<PAGE> 60
NEWMARK HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
(h) Advertising Costs
As incurred, the Company expenses advertising costs, consisting primarily
of newspaper and trade publications, signage and the cost of maintaining an
internet web site. Advertising expense included in selling, general and
administrative expenses for the years ended December 31, 1994, 1995 and 1996 was
approximately $1.8 million, $1.9 million and $3.1 million, respectively.
(i) Income Taxes
The Company is included in the consolidated federal income tax return of
PUSA. Under a tax sharing agreement with PUSA, the Company is required to
calculate its federal income tax on a separate company basis and pay to PUSA the
amount of the liability. The realization of any potential tax benefits
calculated on a separate federal income tax return basis is limited under the
tax sharing agreement. In accordance with the agreement, the consolidated group
must be in a taxable position before the Company is entitled to receive payments
from PUSA for such benefits. Such payment is only available to the extent the
benefits calculated can be utilized to offset prior separate company income
through carryback or, if carried forward, at the time such benefits are fully
utilized to offset separate company income.
Income taxes are accounted for using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(j) Earnings Per Share
The Company intends to file in December 1997 a registration statement on
Form S-1 with the Securities and Exchange Commission for the issuance of common
stock (the "Offering"). In connection with the Offering, the Company is expected
to declare a 92-for-1 split of its common stock outstanding. The accompanying
consolidated financial statements have been restated to reflect this split.
Earnings per share are computed using the weighted average number of shares
outstanding of 9,200,000 for the years ending December 31, 1994, 1995 and 1996
and for the nine months ended September 30, 1996 and 1997.
(k) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires companies to disclose the
estimated fair value of their financial instrument assets and liabilities. Fair
value estimates are made at a specific point in time, based upon relevant market
information about the financial instrument. These estimates do not reflect any
premium or discount that could result from offering for sale at one time the
Company's entire holdings of a particular instrument. The carrying values of
cash, other receivables, accounts payable and accrued liabilities approximate
their fair values due to their short-term nature. The carrying value of
construction loans payable approximates its fair value as substantially all of
the debt has a fluctuating interest rate based upon a current market index.
(l) Interim Financial Statements
In the opinion of management, the unaudited interim consolidated financial
statements at September 30, 1997 and for the nine-month periods ended September
30, 1996 and 1997 include all adjustments, consisting of normal recurring
accruals, necessary to present fairly the Company's consolidated financial
position at September 30, 1997 and the consolidated results of operations and
cash flows for the nine-month periods
F-15
<PAGE> 61
NEWMARK HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
ended September 30, 1996 and 1997. Results for the period ended September 30,
1997 are not necessarily indicative of the results to be expected for the entire
fiscal year.
(3) ACQUISITION
On March 1, 1995, NHC Florida Acquisition Company (subsequently renamed The
Adler Companies, Inc.), a wholly owned subsidiary of PUSA, acquired the Miami,
Florida homebuilding operations of The Adler Family Partnership for $12.9
million in cash and a note payable due from PUSA. PUSA subsequently contributed
Adler to the Company. This acquisition has been accounted for using the purchase
method and, accordingly, the operating results of Adler have been included in
the Company's consolidated operating results since the effective date of the
acquisition.
The note payable from PUSA to The Adler Family Partnership was not assumed
by the Company. The Company is a guarantor on a letter of credit issued by a
financial institution as security for the note. The amount of this note payable
at December 31, 1995 and 1996 was $3.3 million and $2.7 million, respectively.
As of March 1, 1995, the fair values of assets acquired and liabilities
assumed, exclusive of cash acquired of $174,000, were as follows (in thousands):
<TABLE>
<S> <C>
Inventory................................................... $ 2,744
Receivables -- title company................................ 139
Property and equipment...................................... 86
Investment in partnership................................... (78)
Other assets................................................ 601
Goodwill.................................................... 12,416
Construction loans payable.................................. (2,378)
Other liabilities........................................... (755)
-------
$12,775
=======
</TABLE>
Additional acquisition costs of $263,000 and $147,000 were incurred by the
PUSA and the Company, respectively, and recorded to goodwill.
(4) INVENTORY
The inventory of single family residences as of December 31, 1995 and 1996
and September 30, 1997 consists of the following:
<TABLE>
<CAPTION>
NUMBER OF HOMES CARRYING VALUE
----------------------------- -----------------------------------
DECEMBER 31, DECEMBER 31,
------------ SEPTEMBER 30, ------------------ SEPTEMBER 30,
1995 1996 1997 1995 1996 1997
---- ---- ------------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Completed.............. 102 110 115 $17,359 $18,359 $20,646
Under construction..... 232 398 452 24,221 43,218 45,399
Models................. 35 28 36 6,454 5,564 7,949
--- --- --- ------- ------- -------
369 536 603 $48,034 $67,141 $73,994
=== === === ======= ======= =======
</TABLE>
F-16
<PAGE> 62
NEWMARK HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
A summary of interest capitalized in inventory is as follows (in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------- --------------------
1994 1995 1996 1996 1997
------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C>
Interest capitalized, beginning of
period................................ $1,179 $ 820 $1,061 $1,061 1,494
Interest incurred....................... 1,675 3,302 4,596 3,710 4,844
Less interest included in:
Cost of sales......................... 1,421 1,729 2,925 2,025 2,689
Other income (expense)................ 613 1,332 1,238 943 1,525
------ ------ ------ ------ ------
Interest capitalized, end of period..... $ 820 $1,061 $1,494 $1,803 $2,124
====== ====== ====== ====== ======
</TABLE>
In the ordinary course of business, the Company enters into contracts to
purchase lots and land for development. At December 31, 1995 and 1996, the
Company had nonrefundable deposits aggregating $531,000 and $452,000 included in
other assets in the accompanying consolidated balance sheets, for lots and land
with a related purchase price of approximately $39.0 million and $30.3 million,
respectively. The Company's liability for nonperformance under such contracts is
limited to forfeiture of the related deposits.
(5) NOTE RECEIVABLE
Note receivable represents an amount receivable from the sale of
undeveloped land. The terms of the note required quarterly payments of principal
and interest at a rate of 10%. The note was paid in full during 1996.
(6) INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES
Investment in unconsolidated subsidiaries at December 31, 1995 and 1996
represents the Company's 50% general partnership interest in the Twin Acres
Partnership (Twin Acres). Twin Acres owns certain land in Broward County,
Florida, for the purpose of developing, constructing and selling single family
residences. The Company obtained its investment in Twin Acres in 1995 in the
acquisition of Adler (see note 3). The Company does not have control of Twin
Acres and therefore has accounted for its partnership interest using the equity
method.
F-17
<PAGE> 63
NEWMARK HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
Summarized financial information for Twin Acres is as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- ------
<S> <C> <C>
Assets:
Cash and receivables...................................... $ 1,186 $ 441
Lot inventory............................................. 5,267 1,988
Single family residence inventory......................... 4,917 1,833
Other assets.............................................. 78 93
------- ------
$11,448 $4,355
======= ======
Liabilities:
Accounts payable.......................................... $ 748 $ 126
Customer deposits......................................... 882 396
Construction loans payable................................ 5,515 950
------- ------
7,145 1,472
Partners' capital........................................... 4,303 2,883
------- ------
$11,448 $4,355
======= ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1995 1996
------- -------
<S> <C> <C>
Revenues.................................................... $38,872 $19,869
Cost of sales............................................... 29,352 15,488
------- -------
9,520 4,381
Subdivision overhead........................................ 5,495 2,819
Other, net.................................................. (62) (29)
------- -------
Net income................................................ $ 4,087 $ 1,591
======= =======
</TABLE>
The construction loans payable require monthly payments of interest only at
prime plus 1% through April 1997, at which time all unpaid interest and
principal is due. The due date of the construction loans was extended to October
21, 1997, by which time Twin Acres is scheduled to close on the sale of the
remainder of its homes and will utilize the proceeds from these closings to
repay the loan.
During 1997, the Company acquired a 49% interest in Pacific Title L.L.C., a
title agency, for $24,000 and a 50% interest in NHC Mortgage, a mortgage finance
company, for $81,000. The Company does not have control of these entities and
therefore has accounted for its interests using the equity method.
F-18
<PAGE> 64
NEWMARK HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
(7) CONSTRUCTION LOANS PAYABLE
Construction loans payable consist of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Construction and lot loans with financial institutions,
collateralized by lots and single family residences
completed or under construction, bearing interest at the
prime rate plus 0.50% to 1.50% (8.75% to 9.75% at December
31, 1996), maturing upon completion and sale of the homes
as defined in the loan agreement. $36,114 $52,635
$4,500,000 revolving construction loan with a financial
institution collateralized by single-family residences
completed and under construction, interest payable monthly
at prime plus 1.50% (9.75% at December 31, 1996), with
final maturity in August 1998. 2,416 1,421
Promissory note drawn on line of credit with a bank,
collateralized by a deed of trust on property, bearing
interest at a reference rate plus 0.75% (9.00% at December
31, 1996) payable monthly, maturing July 31, 1998. -- 1,391
Revolving line of credit with a financial institution,
collateralized by a certificate of deposit, due on demand
on or before January 31, 1997; interest due monthly at
1.00% in excess of the rate earned on the collateral
(5.90% at December 31, 1996). 1,000 1,000
Promissory note payable to an individual, collateralized by
single family residences completed or under construction,
interest due quarterly at 7%. 308 --
Other 21 15
------- -------
$39,859 $56,462
======= =======
</TABLE>
Construction and lot loans are generally repaid as sales of individual
homes are closed. All construction and lot loans outstanding at December 31,
1996 mature prior to August 1998. At December 31, 1996, the Company had unused
lines of credit for construction loans totaling approximately $114 million.
Certain of the Company's lenders require, among other things, that the
Company maintain minimum tangible net worth levels and debt to tangible net
worth ratios. At December 31, 1996, the Company was in compliance with such
requirements after receipt of certain debt waivers from the lenders. Certain
debt agreements of NHC's subsidiaries restrict the subsidiaries' ability to pay
dividends or advance funds to NHC to the extent that the payment would put the
subsidiary in violation of debt covenants.
Certain of the Company's construction and lot loans are guaranteed by PUSA.
The outstanding balance of Company loans guaranteed by PUSA was $112,000 at
December 31, 1996. Additionally, the Company and PUSA guarantees construction
loans payable by Twin Acres. Twin Acres' loans guaranteed by the Company and
PUSA totaled approximately $950,000 at December 31, 1996 and are secured by lots
and single family residences. Twin Acres' loans matured in April 1997.
(8) PAYABLE TO AFFILIATES
Payable to affiliates consists of amounts owed by Newmark, Adler and PUDC
to PUSA. Of the total amount owed at December 31, 1995 and 1996, $7.6 million
and $4.3 million, respectively, was in the form of notes payable that accrue
interest at various rates, notes payable owed by PUDC to PUSA are collateralized
by land held for commercial development and single family residential lots.
Total interest paid to PUSA
F-19
<PAGE> 65
NEWMARK HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
during the years ended December 31, 1994, 1995 and 1996 was approximately
$326,000, $432,000 and $439,000, respectively.
The Company purchases insurance policies from an affiliated insurance
broker. The affiliated entity earned commissions of $69,000 and $89,000 in 1995
and 1996, respectively, with respect to such policies. PUSA provides certain
administrative services to the Company including legal services, payroll and
benefit processing, and the evaluation, negotiation and purchase of office
supplies, long distance and overnight-delivery services, for which the Company
has not been charged. The Company also purchases demographic and economic
research information through an affiliate for $10,000 per year.
The Company provides various managerial services to Twin Acres for which it
receives a fee. For the years ended December 31, 1995 and 1996, management fees
included in other income were $607,000 and $851,000, respectively.
(9) INCOME TAXES
Components of income tax expense (benefit) consist of (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current:
Federal............................................ $3,006 $2,057 $4,231
State.............................................. 334 166 451
------ ------ ------
3,340 2,223 4,682
Deferred:
Federal............................................ (119) 224 (459)
State.............................................. (16) 30 (59)
------ ------ ------
(135) 254 (518)
------ ------ ------
$3,205 $2,477 $4,164
====== ====== ======
</TABLE>
The difference between total reported income taxes and expected income tax
expense computed using the federal statutory income tax rate of 34% for 1994 and
1995 and 35% for 1996, is reconciled as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Computed "expected" tax expense............................. $2,784 $2,124 $3,674
Goodwill amortization....................................... 204 205 211
State taxes, net of federal benefit......................... 210 129 255
Other....................................................... 7 19 24
------ ------ ------
$3,205 $2,477 $4,164
====== ====== ======
</TABLE>
F-20
<PAGE> 66
NEWMARK HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
Significant temporary differences that give rise to the deferred tax assets
and liabilities as of December 31, 1995 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ -----
<S> <C> <C>
Deferred tax assets:
Warranty reserve.......................................... $ 214 $ 240
Advertising accrual....................................... 60 145
Property, premises and equipment, principally due to
differences in depreciation............................ 50 35
Capitalized interest...................................... 201 184
Accrued bonuses........................................... 401 592
Other..................................................... 142 150
------ -----
Total gross deferred tax assets................... 1,068 1,346
------ -----
Deferred tax liabilities:
Amortizable intangibles................................... (95) (262)
Partnership investment.................................... (517) (100)
Other..................................................... (20) (18)
------ -----
Total gross deferred tax liabilities.............. (632) (380)
------ -----
Net deferred tax asset............................ $ 436 $ 966
====== =====
</TABLE>
Management of the Company believes that it is more likely than not that the
gross deferred tax assets will be realized or settled due to the Company's
ability to generate taxable income exclusive of reversing timing differences.
Accordingly, no valuation allowance was established at December 31, 1995 and
1996.
Included in payable to affiliates at December 31, 1995 and 1996 is $1.0
million and $2.0 million payable to PUSA under terms of the tax sharing
agreement. Payments of $2.8 million, $1.8 million and $3.0 million,
respectively, were made to PUSA for federal income taxes during 1994, 1995 and
1996, under the aforementioned agreement.
(10) COMMITMENTS AND CONTINGENCIES
The Company leases office premises and equipment under noncancelable
operating leases. Future minimum payments under these noncancelable operating
leases for the fiscal years ending on December 31 are as follows:
1997 -- $244,000; 1998 -- $183,000; 1999 -- $101,000; 2000 -- $77,000; and
2001 -- $1,000.
Rental expense for the year ended December 31, 1994, 1995 and 1996
aggregated $104,000, $268,000 and $340,000, respectively.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position.
The Company provides homebuyers with a two year limited warranty of
workmanship and materials from the date of sale. The Company generally has
recourse against its subcontractors for claims relating to workmanship and
materials. The Company also provides a ten-year homeowner's warranty through a
single national contract through a third party. This warranty generally covers
major structural defects. Estimated warranty costs are recorded at the time of
sale. As of December 31, 1995 and 1996, the liability for warranty costs was
$560,000 and $569,000, respectively, and was included in other liabilities.
F-21
<PAGE> 67
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholder
Westbrooke Communities, Inc. and Affiliates
We have audited the accompanying combined balance sheets of Westbrooke
Communities, Inc. and Affiliates (the Companies) as of December 31, 1995 and
1996, and the related combined statements of income, changes in capital and cash
flows for the years then ended. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Westbrooke
Communities, Inc. and Affiliates at December 31, 1995 and 1996, and the combined
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Miami, Florida
December 2, 1997
F-22
<PAGE> 68
WESTBROOKE COMMUNITIES, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------- SEPTEMBER 30
1995 1996 1997
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Cash........................................................ $ 1,203 $ 2,105 $ 1,486
Restricted cash............................................. 2,130 2,823 1,979
Receivables................................................. 1,516 1,877 1,023
Real estate inventory....................................... 48,199 43,553 54,108
Property, furniture and equipment, net of accumulated
depreciation of $274, $399 and $479 at December 31, 1995
and 1996 and September 30, 1997, respectively............. 259 204 931
Other assets................................................ 2,774 2,005 2,530
------- ------- -------
$56,081 $52,567 $62,057
======= ======= =======
LIABILITIES AND CAPITAL
Liabilities:
Accounts payable.......................................... $ 3,287 $ 2,291 $ 2,999
Customer deposits......................................... 4,110 2,862 4,561
Accrued expenses and other liabilities.................... 634 2,458 1,858
Mortgage note payable..................................... -- -- 367
Notes payable............................................. 26,755 21,063 30,834
Subordinated notes payable................................ 7,500 7,500 7,500
------- ------- -------
42,286 36,174 48,119
Minority interest........................................... 3,008 3,627 2,712
Commitments and contingencies
Capital:
Common stock.............................................. 45 45 45
Additional paid-in-capital................................ 9,955 9,955 9,955
Partners' capital/retained earnings....................... 787 2,766 1,226
------- ------- -------
$56,081 $52,567 $62,057
======= ======= =======
</TABLE>
See accompanying notes.
F-23
<PAGE> 69
WESTBROOKE COMMUNITIES, INC. AND AFFILIATES
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
----------------------- ------------------
1995 1996 1996 1997
--------- ---------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues........................................... $55,241 $124,301 $72,374 $64,843
Cost of sales...................................... 47,793 108,950 62,718 57,114
------- -------- ------- -------
Gross profit..................................... 7,448 15,351 9,656 7,729
Selling, general and administrative expenses....... 4,019 7,999 5,529 5,686
Depreciation and amortization...................... 436 586 435 518
------- -------- ------- -------
Operating income................................. 2,993 6,766 3,692 1,525
Other income:
Interest income.................................. 174 144 94 114
Other............................................ 261 529 188 317
------- -------- ------- -------
Total other income................................. 435 673 282 431
------- -------- ------- -------
Net income before minority interest................ 3,428 7,439 3,974 1,956
Minority interest.................................. 694 1,384 688 197
------- -------- ------- -------
Net income......................................... $ 2,734 $ 6,055 $ 3,286 $ 1,759
======= ======== ======= =======
</TABLE>
See accompanying notes.
F-24
<PAGE> 70
WESTBROOKE COMMUNITIES, INC. AND AFFILIATES
COMBINED STATEMENTS OF CHANGES IN CAPITAL
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN- RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -------
<S> <C> <C> <C> <C>
Balance at January 1, 1995............................. $45 $9,955 $ -- $10,000
Distributions........................................ -- -- (1,947) (1,947)
Net income........................................... -- -- 2,734 2,734
--- ------ ------- -------
Balance at December 31, 1995........................... 45 9,955 787 10,787
Distributions........................................ -- -- (4,076) (4,076)
Net income........................................... -- -- 6,055 6,055
--- ------ ------- -------
Balance at December 31, 1996........................... 45 9,955 2,766 12,766
Distributions (unaudited)............................ -- -- (3,299) (3,299)
Net income (unaudited)............................... -- -- 1,759 1,759
--- ------ ------- -------
Balance at September 30, 1997 (unaudited).............. $45 $9,955 $ 1,226 $11,226
=== ====== ======= =======
</TABLE>
See accompanying notes
F-25
<PAGE> 71
WESTBROOKE COMMUNITIES, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
----------------------- -------------------
1995 1996 1996 1997
---------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income........................................ $ 2,734 $ 6,055 $ 3,286 $ 1,759
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization................... 436 586 435 518
Minority interest............................... 694 1,384 688 197
Changes in operating assets and liabilities:
Restricted cash.............................. (294) (693) (2,201) 844
Receivables.................................. (868) (361) 155 854
Real estate inventory........................ (25,373) 4,646 (15,447) (10,555)
Other assets................................. (1,941) 308 (302) (942)
Accounts payable............................. 854 (996) 780 708
Customer deposits............................ 1,746 (1,248) 1,473 1,699
Accrued expenses and other liabilities....... 28 1,824 129 (600)
-------- -------- -------- --------
Net cash (used in) provided by operating
activities...................................... (21,984) 11,505 (11,004) (5,518)
FINANCING ACTIVITIES
Proceeds from mortgage note payable............... -- -- -- 375
Proceeds from notes payable....................... 55,991 86,613 69,620 54,517
Payments on mortgage note payable................. -- -- -- (8)
Payments on notes payable......................... (38,485) (92,305) (57,838) (44,746)
Payments on notes payable to Westbrooke
shareholders.................................... (3,624) -- -- --
Proceeds from issuance of subordinated notes
payable......................................... 7,500 -- -- --
-------- -------- -------- --------
Net cash provided by (used in) financing
activities...................................... 21,382 (5,692) 11,782 10,138
INVESTING ACTIVITIES
Additions to furniture and equipment, net......... (185) (70) (24) (828)
Minority interest contributions -- cash........... 2,500 -- -- --
Distribution to minority interest................. (186) (765) (565) (1,112)
Distribution to partners.......................... (1,947) (4,076) (796) (3,299)
-------- -------- -------- --------
Net cash provided by (used in) investing
activities...................................... 182 (4,911) (1,385) (5,239)
-------- -------- -------- --------
(Decrease) increase in cash....................... (420) 902 (607) (619)
Cash at beginning of period....................... 1,623 1,203 1,203 2,105
-------- -------- -------- --------
Cash at end of period............................. $ 1,203 $ 2,105 $ 596 $ 1,486
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest.......... $ 3,590 $ 4,624 $ 3,431 $ 3,250
======== ======== ======== ========
</TABLE>
See accompanying notes
F-26
<PAGE> 72
WESTBROOKE COMMUNITIES, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
1. ORGANIZATION AND BUSINESS
PRINCIPLES OF COMBINATION
The accompanying combined financial statements include the accounts of
Westbrooke Communities, Inc., and its affiliated entities, Westbrooke at West
Lake, Inc., Westbrooke at Spring Valley, Inc., Westbrooke at Rock Creek, Inc.,
Westbrooke at Pembroke Pines, Inc., Westbrooke at Winston Trails, Inc.,
Westbrooke at Winston Park, Inc., and Westbrooke at Oakridge, Inc. (referred to
collectively as Westbrooke). These entities are under common control and have a
75% controlling interest in The Westbrooke Partnership (the Partnership), which
has been consolidated in the combined financial statements. During 1995,
Westbrooke at Rock Creek, Inc., Westbrooke at Spring Valley, Inc. and Westbrooke
at Winston Park, Inc. ceased operations. All significant intercompany
transactions have been eliminated in the combination.
THE WESTBROOKE PARTNERSHIP
The Partnership, a Florida general partnership, was formed on January 1,
1995 pursuant to an Agreement of Partnership (the Agreement) among the
Westbrooke entities and Athena Westbrooke Investors, L.P. (Athena). Athena's
partnership interest is shown on the accompanying combined financial statements
as minority interest.
The Partnership continued the business of Westbrooke which was engaged
principally in the development, construction, marketing and sale of residential
single family homes in southeast Florida. In addition, the Partnership has, from
time to time, managed the development and sale of large tracts of undeveloped
land for the benefit of third parties.
CAPITAL CONTRIBUTIONS AND PROFIT ALLOCATIONS
The initial capital contributions to the Partnership consisted of a
contribution by Westbrooke of $10 million and a contribution by Athena of $2.5
million in cash. The Westbrooke contribution included the contribution of all of
its assets, including unrestricted cash of $1,623,000 and net assets of
$8,377,000 consisting of restricted cash of $1,836,000, receivables of $648,000,
inventory of $22,826,000, furniture and equipment of $179,000, and prepaid
expenses and other assets of $1,164,000, net of the assumption by the
Partnership of all of Westbrooke's liabilities, including accounts payable of
$2,433,000, accrued expenses and other liabilities of $540,000, customer
deposits of $2,364,000, notes payable to banks and others of $9,315,000 and
notes payable to Westbrooke shareholders of $3,624,000. The non-cash
contribution made by Westbrooke was recorded at historical cost. Concurrent with
the initial contributions to the Partnership, the Partnership completed a
private placement of $7.5 million of subordinated notes payable which is
described in Note 8.
The Agreement provides for a priority return on the partners' initial
capital contributions of 12% and interest on each partners' capital account at a
rate of prime plus 1%, both of which are payable quarterly. The Agreement
further provides that Athena will receive a distribution of $2.4 million in
January 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND RESTRICTED CASH
Restricted cash consists of deposits received from buyers of single-family
homes which are held in escrow. The concentration of credit risk associated with
cash and restricted cash is considered low due to the credit quality of the
financial institutions in which deposits are maintained.
F-27
<PAGE> 73
WESTBROOKE COMMUNITIES, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
REAL ESTATE INVENTORY
Real estate inventory is stated at the lower of cost or net realizable
value and consists of residential homes under construction and completed and
land held for development. Interest and real estate taxes are capitalized during
the construction period. Interest incurred and capitalized during the years
ended December 31, 1995 and 1996 was $3,870,000 and $4,799,000, respectively.
For the nine months ended September 30, 1996 and 1997, $3,492,000 and
$3,201,000, respectively, of interest was incurred and $3,492,000 and
$3,193,000, respectively, was capitalized.
The costs of development and construction not specifically identified to a
particular house are allocated to individual houses based on their relative fair
value within each development.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. Westbrooke
adopted Statement 121 in the first quarter of 1996 and the effect of the
adoption was not material to its financial statements.
PROPERTY, FURNITURE AND EQUIPMENT
Property, furniture and equipment is carried at cost. Depreciation on
furniture and equipment is provided on the straight-line method over the
estimated useful lives of the assets, which is generally three years. Property
consists of a condominium which is being depreciated on the straight-line basis
over the estimated useful life of thirty years.
OTHER ASSETS
Included in other assets are $957,000, $801,000 and $497,000 of unamortized
deferred financing fees at December 31, 1995 and 1996 and September 30, 1997,
respectively. Amortization of deferred financing fees is provided on the
straight-line method over the life of the respective loan. At December 31, 1995
and 1996 and September 30, 1997, accumulated amortization of deferred financing
fees totaled $331,000, $792,000 and $1,209,000, respectively.
INCOME TAXES
Each Westbrooke entity, other than The Westbrooke Partnership, has
individually elected to be treated as an S Corporation for federal and state
income tax purposes. As such, Westbrooke's taxable income or loss is included in
the individual income tax return of the shareholder. Accordingly, Westbrooke is
not subject to federal or state income taxes.
Since the income of the Partnership will also be included in the taxable
income reportable on the income tax returns of its partners, Westbrooke and
Athena, no provision for income taxes has been provided on such income.
PROFIT RECOGNITION
Revenues from sales of homes are recognized when closings have occurred and
ownership of the home has transferred to the customer. Customers' deposits
received prior to closing are recorded as liabilities, and if required, are held
in escrow until closing.
F-28
<PAGE> 74
WESTBROOKE COMMUNITIES, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING COSTS
Westbrooke expenses advertising costs as incurred. Advertising expense was
$1,487,000, $1,944,000, $1,593,000 and $1,219,000 for the years ended December
31, 1995 and 1996 and the nine months ended September 30, 1996 and 1997,
respectively.
INTERIM FINANCIAL DATA
The unaudited interim financial statements at September 30, 1997 and for
the nine months ended September 30, 1996 and 1997 do not include all disclosures
provided in the annual financial statements. These interim statements should be
read in conjunction with the accompanying annual audited financial statements
and the footnotes thereto. Results for the 1997 interim period are not
necessarily indicative of the results to be expected for the year ending
December 31, 1997. However, the accompanying interim financial statements
reflect all adjustments which are in the opinion of management of a normal and
recurring nature necessary for a fair presentation of the financial position and
results of operation of Westbrooke. Unless otherwise stated, all information
subsequent to December 31, 1996 is unaudited.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. RECEIVABLES
The West Lake Community Development District (the West Lake District) has
authorized the issuance of bonds to finance the acquisition, construction and
installation of the West Lake District's water, sewer, drainage and offsite
roadway improvements. Under the Purchase and Sale and Option Agreement for lots
purchased in this district, Westbrooke is entitled to 44% of the net proceeds of
these bonds which was estimated to be $1,336,000. In 1996, the decision was made
to sell the bonds in a public issuance. The bonds were subsequently issued on
January 30, 1997 and approximately $930,000 of the proceeds due to Westbrooke
were received on January 31, 1997. The balance of the proceeds is expected to be
received over a two year period. Accordingly, at December 31, 1995 and 1996 and
September 30, 1997, receivables in the amount of $657,000, $922,000, and
$116,000, respectively, have been recorded to reflect the estimated bond
proceeds on units sold through the respective period.
The Oakridge Community Development District (the Oakridge District) has
authorized the issuance of bonds to finance the acquisition, construction and
installation of the Oakridge District's drainage and certain roadway
improvements. Under the Purchase and Sale and Option Agreement for lots
purchased in this district, Westbrooke is entitled to 50% of the net proceeds of
these bonds which is estimated to be $795,000. Accordingly, at December 31, 1996
and September 30, 1997, a receivable in the amount of $182,000 and $415,000,
respectively, has been recorded to reflect the estimated bond proceeds on units
sold through the respective period.
On December 31, 1995, Westbrooke terminated its interest in the Winston
Park Joint Venture (the Venture) which was formed to construct, market and sell
single-family residences in Coconut Creek, Florida. Included in receivables at
December 31, 1995 and 1996 and September 30, 1997, is a promissory note with a
balance of $647,000, $246,000 and $150,000, respectively, including interest of
$0 and $33,000 and $42,000, respectively, from the former joint venture partner
representing Westbrooke's investment in the Venture at the time of termination.
The note from the joint venture partner requires minimum payments of
$76,000 in 1997 and $170,000 in 1998 and provides for interest at the prime rate
which is payable monthly. The note is collateralized by a
F-29
<PAGE> 75
WESTBROOKE COMMUNITIES, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
security interest in certain lots and provides for periodic payments as these
lots are sold to end buyers. Pursuant to a termination agreement, Westbrooke's
guarantee of $734,000 of construction loans of the Venture will continue until
such loans are repaid. The balance of these construction loans at December 31,
1996 and September 30, 1997 was $332,000.
4. REAL ESTATE INVENTORY
Real estate inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------ SEPTEMBER 30
1995 1996 1997
------- ------- ------------
<S> <C> <C> <C>
(UNAUDITED)
Construction in-progress......................... $27,212 $23,487 $37,146
Completed homes.................................. 1,853 1,828 1,545
Models and model furnishings..................... 5,367 7,462 7,640
Land held for development........................ 13,767 10,776 7,777
------- ------- -------
$48,199 $43,553 $54,108
======= ======= =======
</TABLE>
5. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
trade accounts payable and accrued expenses approximate fair value because of
their short duration to maturity. The carrying amounts of the notes payable and
subordinated notes payable approximate fair value because the interest rate is
tied to a quoted variable index.
6. MORTGAGE NOTE PAYABLE
The mortgage note payable is payable in monthly installments of principal
and interest of $3,530 with the unpaid balance of approximately $297,000 due in
February 2002. The mortgage note has an interest rate of 7.75% and is
collateralized by a condominium with a carrying value of $568,000 at September
30, 1997.
7. NOTES PAYABLE
Notes payable consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------ SEPTEMBER 30
1995 1996 1997
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Construction loans with banks, payable $17,212 in
1998, $2,415 in 1999 and $6,410 in 2000, with
interest at prime (8.5%, 8.25% and 8.5% at
December 31, 1995 and 1996 and September 30,
1997, respectively) to prime plus 1.5%......... $16,084 $16,600 $26,037
Development loan with bank, payable in 1998, with
interest at prime plus 1.5%.................... 5,517 2,495 4,797
Land acquisition loan, payable in 1998, with
interest at prime plus 1.5%.................... 5,154 1,968 --
------- ------- -------
$26,755 $21,063 $30,834
======= ======= =======
</TABLE>
Notes payable are collateralized by substantially all real estate inventory. The
construction and development loans require the payment of release prices as
collateralized units are closed. The land acquisition loan requires payment of
release prices when construction on collateralized units is started. At December
31, 1995 and 1996
F-30
<PAGE> 76
WESTBROOKE COMMUNITIES, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
and September 30, 1997, release prices ranged from $16,000 to $164,000, $16,000
to $160,000 and from $15,000 to $188,000, respectively. Notes payable are
guaranteed by the sole shareholder of Westbrooke. At December 31, 1995 and 1996
and September 30, 1997, Westbrooke had construction loan facilities totaling
$32,873,000, $42,000,000 and $45,194,000, respectively. Eligible borrowings
under these facilities totaled $22,165,000, $21,249,000 and $31,832,000, at
December 31, 1995 and 1996 and September 30, 1997, respectively, of which
$6,081,000, $4,649,000 and $5,795,000 were available in addition to the amount
outstanding.
8. SUBORDINATED NOTES PAYABLE
On January 11, 1995, Westbrooke issued $7,500,000 of unsecured notes
payable (the Notes) which are subordinated in right of payment to all
liabilities and indebtedness of Westbrooke. The Notes mature on January 1, 2000,
and require minimum principal payments of $1,875,000 in 1998, $1,875,000 in 1999
and $3,750,000 in 2000.
The Notes bear interest at a base rate of 12% (Basic Interest), payable
monthly, and provide for additional interest of 7.5% (Additional Interest), the
payment of which may be deferred until such time as principal payments of the
Notes are due. Westbrooke, however, is required to pay all accrued Additional
Interest prior to distributing profits to the partners in excess of priority
returns. For the years ended December 31, 1995 and 1996 and for the nine months
ended September 30, 1996 and 1997, the Partnership accrued $875,000 , $900,000,
$675,000 and $675,000 of Basic Interest, and $547,000, $563,000, $422,000 and
$422,000 of Additional Interest, respectively. For the years ended December 31,
1995 and 1996, and for the nine months ended September 30, 1996 and 1997,
$800,000, $900,000, $675,000 and $675,000 of Basic Interest, respectively, and
$347,000, $497,000, $422,000 and $575,000 of Additional Interest, respectively,
were paid.
9. COMMITMENTS AND CONTINGENCIES
Westbrooke purchases certain developed lots under option agreements and
contracts which provide for the payment of additional amounts, in excess of the
base lot price, in the event the net income of the respective project exceeds
certain agreed upon levels. For the years ended December 31, 1995 and 1996 and
for the nine months ended September 30, 1996 and 1997, additional amounts in
excess of the base lot prices due under these agreements were $-0-, $1,737,000,
$143,000 and $1,947,000, respectively. Prepaid expenses, at December 31, 1995
and 1996 and at September 30, 1997, include $653,000, $309,000, and $222,000,
respectively, which had been prepaid under one of these agreements. Accrued
expenses and other liabilities at December 31, 1995 and 1996 and at September
30, 1997 include $-0-, $1,215,000, and $902,000, respectively, for amounts due
under one of these agreements.
Westbrooke has a $1,500,000 unsecured letter of credit facility which is
used to issue letters of credit which guarantee Westbrooke's performance of
certain development and construction obligations. At December 31, 1996 and
September 30, 1997, letters of credit aggregating $1,484,000 and $1,402,000,
respectively, were outstanding under this facility.
Westbrooke is involved from time to time in litigation arising in the
ordinary course of business, none of which, in the opinion of management, is
expected to have a material adverse effect on Westbrooke's financial position or
results of operations.
10. EMPLOYEE BENEFIT PLAN
Westbrooke sponsors a 401(k) Profit Sharing Plan (the Plan). Under the
terms of the Plan, Westbrooke matches 25% of employee's voluntary contributions
up to a maximum of 6% of each participant's earnings. Additional employee
contributions in the form of profit sharing are made at the discretion of
Westbrooke.
F-31
<PAGE> 77
WESTBROOKE COMMUNITIES, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Westbrooke's matching contributions to the Plan were $12,000, $37,000, $28,000
and $24,000 for the years ended December 31, 1995 and 1996 and for the nine
months ended September 30, 1996 and 1997, respectively.
11. COMBINED COMMON STOCK
Combined common stock consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
----------------- ------------
1995 1996 1997
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Westbrooke Communities, Inc., $1 par value, 1,000
shares authorized, 100 shares issued and
outstanding......................................... $ 100 $ 100 $ 100
Westbrooke at West Lake, Inc., $1 par value, 7,500
shares authorized, issued and outstanding........... 7,500 7,500 7,500
Westbrooke at Spring Valley, Inc., $1 par value, 7,500
shares authorized, issued and outstanding........... 7,500 7,500 7,500
Westbrooke at Pembroke Pines, Inc., $1 par value,
7,500 shares authorized, issued and outstanding..... 7,500 7,500 7,500
Westbrooke at Winston Trails, Inc., $1 par value,
7,500 shares authorized, issued and outstanding..... 7,500 7,500 7,500
Westbrooke at Winston Park, Inc., $1 par value, 7,500
shares authorized, issued and outstanding........... 7,500 7,500 7,500
Westbrooke at Oakridge, Inc., $.01 par value, 10,000
shares authorized, issued and outstanding........... 100 100 100
Westbrooke at Rock Creek, Inc., $1 par value, 7,500
shares authorized, issued and outstanding........... 7,500 7,500 7,500
------- ------- -------
$45,200 $45,200 $45,200
======= ======= =======
</TABLE>
12. SUBSEQUENT EVENTS
On May 25, 1997, Westbrooke entered into two agreements to purchase
approximately 605 fully developed lots from an unrelated party. For the years
ended December 31, 1998, 1999, 2000 and 2001, lot purchases are anticipated to
be $6,731,000, $4,414,000, $7,960,000 and $1,957,000, respectively.
In December 1997, the sole shareholder of the Westbrooke entities entered
into a letter of intent to sell the Westbrooke entities and the Partnership to
Newmark Homes Corp. As a condition precedent to the closing of this transaction,
Westbrooke intends to purchase Athena's interest in the Partnership.
F-32
<PAGE> 78
[PHOTOS OF FINISHED HOME (EXTERIOR),
FINISHED HOME (INTERIOR) AND
HOME UNDER CONSTRUCTION]
<PAGE> 79
============================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY. THE SHARES OF COMMON STOCK OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
SOLICITATION OR OFFER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................... 3
Risk Factors................................. 9
Use of Proceeds.............................. 13
Dividend Policy.............................. 13
Dilution..................................... 14
Capitalization............................... 15
Selected Financial and Operating Data........ 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 17
Business..................................... 23
Management................................... 34
Certain Transactions......................... 37
Security Ownership........................... 38
Description of Capital Stock................. 39
Shares Eligible for Future Sale.............. 41
Underwriting................................. 42
Legal Matters................................ 42
Experts...................................... 42
Additional Information....................... 43
Index to Financial Statements................ F-1
</TABLE>
---------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
============================================================
============================================================
2,000,000 SHARES
NEWMARK HOMES CORP.
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
RAUSCHER PIERCE REFSNES, INC.
LAIDLAW GLOBAL SECURITIES, INC.
, 1998
============================================================
<PAGE> 80
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The registrant will pay the following estimated expenses in connection with
the issuance and distribution of Common Stock pursuant to this registration
statement, in addition to underwriting discounts:
<TABLE>
<S> <C>
SEC Filing Fee.............................................. $ 7,667
NASD Filing Fee............................................. 3,030
Nasdaq National Market Application Fee......................
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Printing and Engraving...................................... *
Transfer Agent and Registrar Fees and Expenses.............. *
Blue Sky Fees and Expenses (including fees of counsel)...... *
Underwriter's Nonaccountable Expense Allowance.............. *
Miscellaneous............................................... *
--------
Total..................................................... $600,000
========
</TABLE>
- ---------------
* To be furnished by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Nevada Private Corporations Law ("NPCL") provides that a corporation
may indemnify any person who was or is a party or is threatened to be made a
party, by reason of the fact that such person was an officer of director of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, to (x) any action or suit by or in the right
of the corporation against expenses, including amounts paid in settlement and
attorneys' fees, actually and reasonably incurred, in connection with the
defense or settlement believed to be in, or not opposed to, the best interests
of the corporation, except that indemnification may not be made for any claim,
issue or matter as to which such person has been adjudged by a court of
competent jurisdiction to be liable to the corporation or for amounts paid in
settlement to the corporation and (y) any other action or suit or proceeding
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred, if he or she acted in good
faith and in a manner which he or she reasonably believed to be in, or not
opposed to, reasonable cause to believe his or her conduct was unlawful. To the
extent that a director, officer, employee or agent has been "successful on the
merits or otherwise" the corporation must indemnify such person. The articles of
incorporation or bylaws may provide that the expenses of officers and directors
incurred in defending any such action must be paid as incurred and in advance of
the final disposition of such action. The NPCL also permits the Registrant to
purchase and maintain insurance on behalf of the Registrant's directors and
officers against any liability arising out of their status as such, whether or
not Registrant would have the power to indemnify him against such liability.
These provisions may be sufficiently broad to indemnify such persons for
liabilities arising under the Securities Act.
The Registrant's Restated Articles and Bylaws, as amended to date, provide
that the Registrant shall, to the fullest extent not prohibited by applicable
law, indemnify any director or officer of the Registrant in connection with
certain actions, suits or proceedings, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred. The Registrant is also required to pay any expenses incurred by a
director or officer in defending such an action, in advance of the final
disposition of such action. The Registrant's Articles and Bylaws further provide
that, by resolution of the Board of Directors, such benefits may be extended to
employees, agents or other representatives of the Registrant.
II-1
<PAGE> 81
The Registrant has authority under the NPCL to indemnify its officers,
directors, employees and agents to the extent provided in such statute. Article
VIII of the Registrant's Bylaws, referenced as Exhibit 3.2 hereto, provide for
indemnification of the Registrant's officers, directors, employees and agents.
The NPCL provides that a corporation's articles of incorporation may
contain a provision which eliminates or limits the personal liability of a
director or officer to the corporation or its stockholders for damages for
breach of fiduciary duty as a director or officer, provided that such a
provision must not eliminate or limit the liability of a director or officer
for: (a) acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law; or (b) the payment of illegal distributions. The
Company's Articles include a provision eliminating the personal liability of
directors for breach of fiduciary duty except that such provision will not
eliminate or limit any liability which may not be so eliminated or limited under
applicable law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The information set forth on the "Index to Exhibits" of this Registration
Statement is incorporated herein by reference.
FINANCIAL STATEMENT SCHEDULES:
Schedule I -- Condensed Financial Information of Registrant; Parent Company
Only Balance Sheets; Parent Company Only Statements of
Operations; Parent Company Only Statements of Cash Flows.
Schedule II -- Valuation and Qualifying Accounts.
Schedule III -- Properties and Accumulated Depreciation.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to
each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy, as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the Common
Stock being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
II-2
<PAGE> 82
(3) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of the registration statement as of the time it was
declared effective.
(4) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 83
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on December 12, 1997.
NEWMARK HOMES CORP.
By: /s/ LONNIE M. FEDRICK
----------------------------------
Lonnie M. Fedrick
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael K. McCraw and Terry C. White, and each of
them, his true and lawful attorney-in-fact either one of who may act without the
other, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and to sign
any and all additional registration statements relating to the same offering of
securities as this Registration Statement that is filed pursuant to Rule 462(b)
under the Securities Act of 1933 and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on behalf
of the registrant in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ LONNIE M. FEDRICK President and Chief Executive December 12, 1997
- ----------------------------------------------------- Officer
Lonnie M. Fedrick
/s/ TERRY C. WHITE Chief Financial Officer and December 12, 1997
- ----------------------------------------------------- Treasurer
Terry C. White
/s/ LARRY D. HORNER Director December 12, 1997
- -----------------------------------------------------
Larry D. Horner
/s/ BILL C. BRADLEY Director December 12, 1997
- -----------------------------------------------------
Bill C. Bradley
/s/ MICHAEL K. MCCRAW Director December 12, 1997
- -----------------------------------------------------
Michael K. McCraw
</TABLE>
II-4
<PAGE> 84
SCHEDULE I
NEWMARK HOMES CORP. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY ONLY BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Cash and short-term investments............................. $ 1 $ 1
Investments in and equity in net assets of subsidiaries..... 45,812 43,928
Other assets................................................ 877 1,347
------- -------
Total assets...................................... $46,690 $45,276
======= =======
LIABILITIES
Other liabilities........................................... $ 877 $ 1,347
------- -------
Total liabilities................................. 877 1,347
------- -------
STOCKHOLDERS' EQUITY
Common stock................................................ 92 92
Additional paid in capital.................................. 43,439 42,415
Retained earnings........................................... 2,282 1,422
------- -------
Total Stockholders' Equity........................ 45,813 43,929
------- -------
Total Liabilities and Stockholders' Equity........ $46,690 $45,276
======= =======
</TABLE>
S-1
<PAGE> 85
SCHEDULE 1
NEWMARK HOMES CORP. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY ONLY STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994,1995, AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
---- ------ ------
<S> <C> <C> <C>
Equity in earnings of subsidiaries.......................... $-- $3,769 $6,332
--- ------ ------
Net income.................................................. $-- $3,769 $6,332
=== ====== ======
</TABLE>
S-2
<PAGE> 86
SCHEDULE 1
NEWMARK HOMES CORP. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
---- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................. $-- $ 3,769 $ 6,332
Adjustments to reconcile net income to cash from operating
activities:
Change in other assets...................................... -- (877) (470)
Change in other liabilities................................. -- 877 470
Equity in undistributed earnings of subsidiaries.......... -- (3,769) (6,332)
--- ------- -------
Net cash used by operating activities....................... -- -- --
--- ------- -------
Cash flows from investing activities:
Dividends from subsidiaries............................... -- 7,280 9,463
Capital contributions to subsidiaries..................... -- (461) (1,247)
--- ------- -------
-- 6,819 8,216
Cash flows from financing activities:
Capital contributions from parent......................... -- 461 1,247
Dividends paid to parent.................................. -- (7,280) (9,463)
Initial capital contribution.............................. 1 -- --
--- ------- -------
1 6,819 (8,216)
Net change in cash and short-term investments............... 1 -- --
Cash at the beginning of the year........................... -- 1 1
--- ------- -------
Cash at the end of the year................................. $ 1 $ 1 $ 1
=== ======= =======
</TABLE>
S-3
<PAGE> 87
SCHEDULE II
NEWMARK HOMES CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING OF COSTS AND ACCOUNTS -- DEDUCTIONS -- END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ------------ ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Warranty Reserve:
December 31, 1994.............. $356 $ 850 $ -- $ (830) $376
December 31, 1995.............. 376 922 -- (738) 560
December 31, 1996.............. 560 1,130 -- (1,121) 569
</TABLE>
S-4
<PAGE> 88
SCHEDULE III
NEWMARK HOMES CORP. AND SUBSIDIARIES
PROPERTIES AND ACCUMULATED DEPRECIATION
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COSTS ACQUISITION
----------------------- -----------------------
BUILDINGS
AND CARRYING
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS
----------- ------------ -------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
PROPERTIES:
Landmark Retail Tract
Dallas, TX.......................... -- $ 325 -- -- --
-------- -------- -------- -------- --------
======== ======== ======== ======== ========
<CAPTION>
TOTAL COSTS
-------------------------------------
BUILDINGS ACCUMULATED DATE OF
AND DEPRECIATION ACQUIS.(A)
DESCRIPTION LAND IMPROVEMENTS TOTAL(1)(2) (2) CONSTR.(C)
----------- -------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
PROPERTIES:
Landmark Retail Tract
Dallas, TX.......................... $ 325 -- $ 325 $ -- 1994(A)
-------- -------- -------- -------- --------
$ --
======== ======== ======== ======== ========
</TABLE>
NOTES:
(1) The following table reconciles the historical cost of the Company's
properties from January 1, 1994 to December 31, 1996:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of period............................... $ 9,826 $ 9,498 $ 5,631
Additions during period (acquisition, improvements,
etc.).................................................. 424 425 1,378
Deductions during period (cost of real estate sold,
etc.).................................................. (752) (4,292) (6,684)
----------- ----------- -----------
Balance, close of period................................... $ 9,498 $ 5,631 $ 325
=========== =========== ===========
</TABLE>
S-5
<PAGE> 89
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
1.1* -- Form of Underwriting Agreement
3.1 -- Form of Amended and Restated Articles of Incorporation
to be effective prior to the offering
3.2 -- Bylaws
4.1* -- Specimen of Registrant's Stock Certificate
5.1* -- Legal Opinion by Wolin, Ridley & Miller LLP regarding
the legality of securities being issued.
10.1(a) -- Construction Loan Agreement dated August 6, 1997 for
$3,675,000 between Pacific United, L.P., as Borrower,
NHC Holdings, Corp., as Guarantor, and Bank of America
Texas, N.A., as Lender
10.1(b) -- $3,675,000 Promissory Note Secured by Deed of Trust
dated August 6, 1997 payable to Bank of America, N.A.,
as Lender, by Pacific United, L.P.
10.1(c) -- Deed of Trust, Security Agreement, Financing Statement,
and Assignment of Rental between Pacific United, L.P.,
Grantor to David S. Owens, Trustee, and Bank of America
Texas N.A., Beneficiary dated August 4, 1997
10.1(d) -- Indemnity Agreement dated August 6, 1997 between Pacific
United, L.P., in favor of Bank of America Texas, N.A.
10.1(e) -- Payment Guaranty dated August 6, 1997, by NHC Holdings
Corp., as Guarantor, in favor of Bank of America Texas,
N.A., as Lender
10.2 -- $10,000,000 Promissory Note dated April 23, 1997,
between BankTexas, as Lender, and Newmark Home
Corporation, as Borrower
10.3(a) -- Master Revolving Line of Credit Loan Agreement dated
October 1, 1996 between Newmark Homes, L.P. and Compass
Bank
10.3(b) -- First Amendment and Modification to Loan Agreement
between Newmark Homes, L.P. and Compass Bank dated March
1, 1997
10.3(c) -- Second Amendment and Modification to Loan Agreement
between Newmark Homes, L.P. and Compass Bank dated June
1, 1997.
10.3(d) -- Compass Bank Revolving Line of Credit Promissory Note
dated June 1, 1997
10.4(a) -- $15,000,000 Loan Agreement between Newmark Homes and
Bank of America Texas, N.A.
10.4(b) -- Promissory Note dated November 29, 1996 between Newmark
Homes and Bank of America Texas, N.A. for $15,000,000
10.4(c) -- Deed of Trust, Security Agreement and Assignment of
Rents and Leases dated November 29, 1996, by Newmark
Homes, L.P., as Grantor, to Chris A. Peirson, Trustee,
for the benefit of Bank of America Texas, N.A.
10.5(a) -- April 30, 1996 Amended & Restated Construction Loan
Agreement for $20,000,000 between Newmark Home
Corporation and Bank One, Texas, N.A. (the "Bank One
Loan Agreement")
10.5(b) -- Modification Agreement to Amended & Restated
Construction Loan Agreement between Newmark Home
Corporation and Bank One, Texas dated April 30, 1996
10.5(c) -- Fourth Amendment to Bank One Loan Agreement
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
10.5(d) -- Third Amendment to Bank One Loan Agreement
10.5(e) -- Second Amendment to Bank One Loan Agreement
10.5(f) -- First Amendment to Bank One Loan Agreement
10.6* -- Tax Allocation Agreement between Pacific USA and various
affiliates and subsidiaries, of Pacific USA, including
the Registrant, dated April 28, 1992
10.7 -- March 13, 1996 Lot Acquisition Loan Agreement between
The Adler Companies, Inc. and Bank United of Texas
10.8(a) -- March 13, 1996 Construction Line of Credit Loan
Agreement between The Adler Companies, Inc. and Bank
United of Texas FSB
10.8(b) -- Amendment to Construction Line of Credit Loan Agreement,
dated December 30, 1996
10.8(c) -- Amendment to Construction Line of Credit Loan Agreement,
dated January 15, 1997
10.8(d) -- Mortgage Modification and Spreading Agreement and Notice
of Future Advance, dated January 15, 1997
10.8(e) -- January 15, 1997 Promissory Note between The Adler
Companies, Inc. and Bank United
10.9 -- April 23, 1997 Construction Loan Agreement between
BankTexas N.A. and Newmark Homes, L.P.
10.10 -- Lot Acquisition Loan Agreement between The Adler
Companies, Inc. and Bank United of Texas FSB dated
January 15, 1997
10.11(a) -- Master Loan Agreement between Newmark Homes, L.P. and
Guaranty Federal Bank dated August 1997
10.11(b) -- Revolving Promissory Note for $10,000,000 dated August
1997 between Guaranty Federal Bank and Newmark
10.11(c) -- Master Form of Deed of Trust with Security Agreement and
Assignment of Rents and Leases between Guaranty Federal
Bank, FSB and Newmark Homes, L.P. re: $10,000,000 Loan
Agreement
10.12(a) -- $15,000,000 Revolving Line of Credit Loan Agreement
between First American Bank and Newmark Homes, L.P.
dated December 17, 1996
10.12(b) -- Master Revolving Line of Credit/Promissory Note dated
December 17, 1996 for $15,000,000 between Newmark Homes,
L.P. and First American Bank Texas and Deed of Trust
10.12(c) -- February 4, 1997 Amendment to $15,000,000 Revolving Line
of Credit Loan Agreement dated December 17, 1996 between
First American Bank and Newmark Homes, L.P.
10.12(d) -- April 30, 1997 Amendment to $15,000,000 Revolving Line
of Credit Loan Agreement dated December 17, 1996 between
First American Bank and Newmark Homes, L.P.
10.12(e) -- Master Deed of Trust and Security Agreement for the
benefit of First American Bank Texas dated December 17,
1996
10.13 -- December 1995 Construction Loan Agreement for $5,000,000
revolving line of credit and $2,473,000 loan between The
Adler Companies, Inc. and Barnett Bank of South Florida,
N.A.
10.14* -- Executive Phantom Stock Plan
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
10.15(a) -- January 10, 1997 Amended and Restated Construction Loan
Agreement for $20,000,000 between Newmark Homes, L.P.
and Mellon Bank
10.15(b) -- Modification Agreement dated October 1, 1996 between
Newmark Homes Corp., NHC Homes, Inc., Newmark Homes,
L.P. and Mellon Bank
10.15(c) -- Modification Agreement dated January 10, 1997 between
Newmark Homes, L.P. and Mellon Bank
10.16(a) -- Loan Agreement between Bank United f/k/a United Savings
Association of Texas and Newmark Home Corp. dated June
28, 1990 with twelve amendments increasing loan amount
to $30,000,000
10.16(b) -- $30,000,000 Promissory Note between Newmark Home Corp.
and Bank United of Texas dated July 1, 1997
10.16(c) -- Supplemental Deed of Trust and Security Agreement
between Newmark Homes Corp., as Grantor and Henson as
Trustee, for the benefit of Bank United of Texas
10.17 -- Employment Agreement between Newmark Home Corp. and
Terry White effective November 1, 1996
10.18 -- Employment Agreement between Newmark Home Corp. and Eric
Rome effective November 1, 1996
10.19 -- Employment Agreement between Newmark Home Corp. and
Steve Treece effective November 1, 1996
10.20 -- Employment Agreement between Newmark Home Corp. and Ray
Hurlbut effective November 1, 1996
10.21 -- Employment Agreement between Newmark Home Corp. and Mike
Beckett effective November 1, 1996
10.22 -- Letter of Intent between Newmark Homes Corp., Pacific
USA Holdings, Inc., and Westbrooke Communities, Inc. and
related entities dated December 12, 1997.
11.1* -- Statement of Computation of Earnings Per Share
21.1 -- List of Subsidiaries
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Ernst & Young LLP
23.3* -- Consent of Wolin, Ridley & Miller LLP (included in
Exhibit 5.1)
24.1 -- Power of Attorney (See page II-4)
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE AMENDING AND RESTATING
THE ARTICLES OF INCORPORATION OF
NEWMARK HOMES CORP.
The undersigned, being the President and Secretary of Newmark Homes
Corp., a Nevada corporation (the "Corporation"), do hereby certify:
1. That the board of directors of the Corporation, by unanimous
written consent, adopted a resolution to amend and restate the
Articles of Incorporation of the Corporation, as amended, as
set forth in this Certificate.
2. That the sole stockholder of the Corporation consented to and
approved, by written consent, the following amendments to the
Articles of Incorporation of the Corporation.
3. The Articles of Incorporation of the Corporation are hereby
amended and restated as follows:
"RESTATED ARTICLES OF INCORPORATION
OF
NEWMARK HOMES CORP.
ARTICLE I
NAME
The name of the corporation is NEWMARK HOMES CORP. (hereinafter
referred to as the "Corporation").
ARTICLE II
PURPOSE
The name of the business of the Corporation and the purposes for which
it is organized are to engage in any business and lawful act or activity.
ARTICLE III
CAPITAL
Section 1. Number and Par Value of Shares. The Corporation is
authorized to issue two classes of capital stock, to be designated "Common
Stock" and "Preferred Stock," respectively. The
1
<PAGE> 2
number of shares of Common Stock authorized to be issued is Thirty Million
(30,000,000), par value $0.01 per share, and the number of shares of Preferred
Stock authorized to be issued is Three Million (3,000,000), par value of $0.01
per share.
The Board of Directors of the Corporation (the "Board of
Directors") is expressly authorized, at any time and from time to time,
to fix, by resolution or resolutions, the following provisions for
shares of any class or classes of Preferred Stock of the Corporation or
any series of any class of Preferred Stock:
(a) the designation of such class or series, the
number of shares to constitute such class or series and the
stated value thereof if different from the par value thereof;
(b) whether the shares of such class or series shall
have voting rights, in addition to any voting rights provided
by law, and, if so, the terms of such voting rights, which may
(i) be general or limited, (ii) subject to applicable law or
regulation, including, without limitation, the rules of any
securities exchange on which securities of any class of the
Corporation may be listed, permit more than one vote per
share, or (iii) vary among stockholders of the same class
based upon such factors as the Board of Directors may
determine including, without limitation, the size of a
stockholder's position and/or the length of time with respect
to which such position has been held;
(c) the dividends, if any, payable on such class or
series, whether any such dividends shall be cumulative, and,
if so, from what dates, the conditions and dates upon which
such dividends shall be payable, the preference or relation
which such dividends shall bear to the dividends payable on
any shares of stock of any other class or any other series of
the same class;
(d) whether the shares of such class or series shall
be subject to redemption by the Corporation and, if so, the
times, prices and other conditions of such redemption;
(e) the amount or amounts payable upon shares of such
series upon, and the rights of the holders of such class or
series in, the voluntary or involuntary liquidation,
dissolution or winding up, or upon any distribution of the
assets, of the Corporation;
(f) whether the shares of such class or series shall
be subject to the operation of a retirement or sinking fund
and, if so, the extent to and manner in which any such
retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such
2
<PAGE> 3
class or series for retirement or other corporate purposes
and the terms and provisions relative to the operation
thereof;
(g) whether the shares of such class or series shall
be convertible into, or exchangeable for, shares of stock of
any other class or any other series of the same class or any
other securities (including Common Stock) and, if so, the
price or prices or the rate or rates of conversion or exchange
and the method, if any, of adjusting the same, and any other
terms and conditions of conversion or exchange;
(h) the limitations and restrictions, if any, to be
effective while any shares of such class or series are
outstanding upon the payment of dividends or the making of
other distributions on, and upon the purchase, redemption or
other acquisition by the Corporation of, the Common Stock or
shares of stock of any other class or any other series of the
same class;
(i) the conditions or restrictions, if any, upon the
creation of indebtedness of the Corporation or upon the issue
of any additional stock, including additional shares of such
class or series or of any other series of the same class or of
any other class;
(j) the ranking (be it pari passu, junior or senior)
of each class or series vis-a-vis any other class or series of
any class of Preferred Stock as to the payment of dividends,
the distribution of assets and all other matters; and
(k) any other powers, preferences and relative,
participating, optional and other special rights, and any
qualifications, limitations and restrictions thereof, insofar
as they are not inconsistent with the provisions of these
Restated Articles of Incorporation, to the full extent
permitted in accordance with the laws of the State of Nevada.
Section 2. Assessment of Shares. The capital stock of the Corporation,
after the amount of the par value has been paid, is not subject to assessment to
pay the debts of the Corporation and no stock issued as fully paid up may ever
be assessed, and the Restated Articles of Incorporation cannot be amended in
this respect.
Section 3. Cumulative Voting. Cumulative voting by any shareholder
is denied.
Section 4. Denial of Preemptive Rights. No shareholder shall, by reason
of holding shares of any class of stock, have any preemptive or preferential
right to purchase or subscribe for any
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shares of any class of stock now or hereafter authorized or any notes,
debentures or bonds convertible into or carrying options or warrants to purchase
shares of any class of stock now or hereafter authorized, whether or not the
issuance of any shares, notes, debentures or bonds would adversely affect the
dividend or voting rights of the shareholder.
ARTICLE IV
GOVERNING BOARD
The members of the governing board shall be known as directors and the
number thereof shall be not less than one (1) nor more than ten (10). The number
of directors may be increased or decreased within the limit above specified from
time to time by resolution of the Board; provided, however, that no decrease in
the number of directors constituting the Board shall shorten the term of any
incumbent director, unless such director is removed in accordance with the
provisions of Section 3 of Article V.
ARTICLE V
MANAGEMENT
For the management of the business and for the conduct of the affairs
of the Corporation, and in further creation, definition, limitation and
regulation of the powers of the Corporation and of its directors and of its
stockholders, it is further provided:
Section 1. Newly Created Directorships and Vacancies. Newly created
directorships resulting from any increase in the number of directors and any
vacancies on the Board resulting from death, resignation, disqualification,
removal or other cause shall be filled solely by the affirmative vote of a
majority of the remaining directors then in office, even though less than a
quorum of the Board.
Section 2. Bylaw Amendments. The Board shall have power to make, alter,
amend and repeal the bylaws. Any bylaws made by the Board under the powers
conferred hereby may be altered, amended or repealed by the directors or by the
stockholders.
Section 3. Removal of Directors. Any director, or the entire Board, may
be removed from office at any time with or without cause only by the affirmative
vote of the holders of not less than two-thirds of all of the then outstanding
shares of the Common Stock; provided that any director elected by the holders of
any class or series of shares entitled to elect one or more directors, may be
removed by the vote of stockholders representing not less than two-thirds of the
voting power of such class or series of shares.
ARTICLE VI
DIRECTORS' AND OFFICERS' LIABILITY
No director or officer of the Corporation will be liable to the
Corporation or its stockholders for damages for breach of fiduciary duty as a
director or officer, excepting only (a) acts or omissions
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which involve intentional misconduct, fraud or a knowing violation of law, or
(b) the payment of dividends in violation of Nevada Revised Statutes Section
78.300. No amendment or repeal of this Article VI applies to or has any effect
on the liability or alleged liability of any Director or officer of this
Corporation for or with respect to any acts or omissions of the Director or
officer occurring prior to the amendment or repeal, except as otherwise required
by law.
ARTICLE VII
CERTAIN CONTRACTS AND TRANSACTIONS
The Corporation shall have authority, to the fullest extent now or
hereafter permitted by the law of the State of Nevada or by any other applicable
law, to enter into any contract or transaction with one or more of its directors
or officers, or with any corporation, partnership, joint venture, trust,
ARTICLE VIII
INDEMNITY
The Corporation shall indemnify, to the fullest extent permitted by the
laws of the State of Nevada as from time to time may be in effect, any person
against all liability and expense (including attorneys' fees, judgment, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
incurred by reason of the fact that he is or was a director or officer of the
Corporation, or, he is or was serving at the request of the Corporation as a
director, officer, partner or trustee of, or in any similar managerial or
fiduciary position of, or as an employee or agent of another corporation,
partnership, joint venture, trust, association or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity. Expenses
(including attorneys' fees) incurred in defending any action, suit, or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit, or proceeding to the full extent and under the
circumstances permitted by the laws of the State of Nevada. The right to
indemnification conferred upon such persons by this Article VII shall be a
contract right. The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, fiduciary, or agent of
the Corporation against any liability asserted against and incurred by such
person in any such capacity or arising out of such person's position, whether or
not the Corporation would have the power to indemnify against such liability
under the provisions of this Article VII. The indemnification provided by this
Article VII shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under these Restated Articles of Incorporation, any
bylaw, agreement, vote or stockholders or disinterested directors, statute, or
otherwise, and shall inure to the benefit of their heirs, executors, and
administrators. The provisions of this Article VII shall not be deemed to
preclude the Corporation from indemnifying other persons from similar or other
expenses and liabilities as the Board of Directors or the stockholders may
determine in a specific instance or by resolution of general application.
Neither the amendment nor repeal of this Article VII, nor the adoption
of any provision of these Articles of Incorporation or bylaws or of any statute
inconsistent with this Article VII, shall eliminate or reduce the effect of this
Article VII, in respect of any acts or omissions occurring prior to such
amendment, repeal or adoption of an inconsistent provision.
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association, or other entity in which one or more of its directors or officers
are directors or officers, or have a financial interest, notwithstanding such
relationships and notwithstanding the fact that the director or officer is
present at or participates in the meeting of the Board or committee thereof
which authorizes the contract or transaction.
These Restated Articles of Incorporation correctly set forth the
Articles of Incorporation as heretofore amended, and supersede the original
Articles of Incorporation and all amendments to the original Articles of
Incorporation.
Dated: ________ ___, 1998
By:____________________________________
Lonnie M. Fedrick, President
By:____________________________________
Cathryn L. Porter, Secretary
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STATE OF TEXAS )
) ss.
COUNTY OF HARRIS )
On this ____ day of __________, 1998, personally appeared before me, a
notary public, Lonnie M. Fedrick as President of Newmark Homes Corp., personally
known (or proved) to me to be the person whose name is subscribed to the above
instrument who acknowledge that he executed the instrument.
------------------------------------
Notary Public
STATE OF TEXAS )
) ss.
COUNTY OF HARRIS )
On this ____ day of __________, 1998, personally appeared before me, a
notary public, Cathryn L. Porter as Secretary of Newmark Homes Corp., personally
known (or proved) to me to be the person whose name is subscribed to the above
instrument who acknowledge that he executed the instrument.
------------------------------------
Notary Public
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<PAGE> 1
EXHIBIT 3.2
BYLAWS OF
NEWMARK HOMES CORP.
ARTICLE I
OFFICES
1.01 Registered Office. The registered office shall be located at
502 East John Street, Carson City, Nevada 89706.
1.02 Other Offices. The Corporation may also have offices at such
other places located within or without the State of Nevada as the Board of
Directors may from time to time determine, or as the business of the
Corporation may require.
ARTICLE II
STOCKHOLDER
2.01 Location of Meetings. Meetings of stockholders shall be held at
the principal business office of the Corporation, or at any other location
which may be specified in the notice of the meeting or in a duly executed
waiver thereof. Meetings of stockholders may be held by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
2.02 Annual Meetings. Unless a unanimous consent of the stockholders
is submitted to the Corporation pursuant to Section 2.10, an annual meeting of
stockholders shall be held annually at such date and time as shall be
designated from time to time by the Board of Directors and stated in the notice
of meeting. At this meeting, the stockholders shall elect a Board of
Directors, and may transact other business properly brought before the meeting.
The failure to hold the annual meeting or to file the written consent in lieu
thereof will not cause a forfeiture or dissolution of the Corporation.
2.03 List of Stockholders. At least ten (10) days before each meeting
of stockholders, a complete list of stockholders entitled to vote at said
meeting, arranged in alphabetical order, with the address of each and the
number of voting shares held by each, shall be prepared by the office or agent
having charge of the stock transfer book. This list shall be kept on file at
the registered office of the Corporation and shall be subject to inspection by
any stockholder at any time during usual business hours for a period of ten
(10) days prior to such meeting. This list shall be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
stockholder during the entire time of the meeting.
2.04 Special Meetings. Special meetings of the stockholders may be
called by the
<PAGE> 2
President, the Board of Directors, or the Chairman of the Board of Directors,
if one is appointed.
2.05 Notice of Meetings. A written or printed notice stating the
place, day and hour of any meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days before the date of the
meeting, either personally or by mail, by or at the direction of the President,
the Secretary or the officer or person calling the meeting, to each stockholder
of record entitled to vote at the meeting. If mailed, notice shall be deemed
to be delivered when deposited, postage prepaid, in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the Corporation. If a stockholder gives no address, notice shall be
deemed to have been given to the stockholder if sent by mail or other written
communication addressed to the place where the Corporation's registered office
is located, or if published at least once in some newspaper of general
circulation in the county in which the Corporation's registered office is
located. Where notice is required to be given and notice of two (2) previous
consecutive annual meetings or notices of meetings or notice of taking of
action without a meeting by written consent have been mailed and addressed to a
stockholder at the address as shown on the records of the Corporation and have
been returned undeliverable, the giving of further notice to the stockholder is
not required.
2.06 Quorum. The holders of a majority of shares entitled to vote or,
in the event of any vote by class or classes, a majority of each class of the
shares entitled to vote as a class, represented in person or by proxy, shall
constitute a quorum at meetings of stockholders, except as otherwise provided
by statute, the Articles of Incorporation or these Bylaws. If, however a
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders present in person or represented by proxy shall have the power
to adjourn the meeting, from time to time, without notice other than
announcement at the meeting. At any adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
2.07 Majority May Conduct Business. When a quorum is present at the
meeting, the vote of the holders of a majority of all the shares entitled to
vote, represented in person or by proxy, shall be the act of the stockholders'
meeting, unless the vote of a greater number is required by statute, the
Articles of Incorporation or these Bylaws.
2.08 Voting of Shares. Each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote at a meeting
of the stockholders, except to the extent that the voting rights of the shares
of any class shall be limited or denied by the Articles of Incorporation and
except as otherwise provided by statute.
2.09 Proxies. A stockholder may vote either in person or by proxy
executed in writing by the stockholder or by his duly authorized attorney-in-
fact. No proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy. Each proxy shall be
revocable unless expressly provided therein to be irrevocable and unless
otherwise made irrevocable by law. Each proxy shall be filed with the
Secretary of the Corporation not less than 48 hours prior to that meeting.
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2.10 Action Without Meeting. Any action required by statute to be
taken at a meeting of the stockholders, or any action which may be taken at a
meeting of the stockholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
stockholders entitled to vote with respect to the subject matter thereof.
2.11 Voting of Shares of Certain Holders.
(a) Shares standing in the name of another Corporation may be
voted by such officer, agent or proxy as the bylaws of such corporation
may authorize, or in the absence of such authorization, as the Board of
Directors of such corporation may determine.
(b) Shares held by an administrator, executor, guardian, or
conservator may be voted by him so long as such shares are in the
possession and forming a part of the estate being served by him, either
in person or by proxy, without a transfer of the shares into his name.
Shares standing in the name of a trustee may be voted by him, either in
person or by proxy, but no trustee shall be entitled to vote shares held
by him without a transfer of the shares into his name as trustee.
(c) Shares standing in the name of a receiver may be voted by
the receiver, and shares held by or under the control of a receiver may
be voted by him without the transfer thereof into his name, if authority
to do so is contained in the appropriate order of the court by which he
was appointed.
(d) A stockholder whose shares are pledged shall be entitled
to vote such shares until they have been transferred into the name of
the pledgee, and thereafter the pledgee shall be entitled to vote the
transferred shares.
(e) Treasury shares, shares of its own stock owned by another
corporation, the majority of the voting stock of which is owned or
controlled by it, and shares or its own stock held by the Corporation in
a fiduciary capacity, shall not be voted, directly or indirectly, at any
meeting, and shall not be counted in determining the total number of
outstanding shares at any given time.
2.12 Record Dates. For the purpose of determining stockholders
entitled to notice of, or to vote at, any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of stockholders for any other proper purpose, the
Board of Directors may provide that the stock transfer books shall be closed
for a stated period not to exceed sixty (60) days. If the stock transfer books
are closed for the purpose of determining stockholders entitled to notice of,
or to vote at, a meeting of stockholders, the books shall be closed for at
least ten (10) days immediately preceding the meeting.
In lieu of closing the stock transfer books, the Board of Directors may
fix in advance as the record date for determination of stockholders, a date in
any case to be not more than sixty (60) in
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case of a meeting or stockholders, not less than ten (10) days prior to the
date on which the particular action requiring the determination of
stockholders is to be taken.
If the stock transfer books are not closed and no record date is fixed
for the determination of stockholders entitled to notice of, or to vote at, a
meeting of stockholders, or entitled to receive payment of a dividend, the date
on which notice of the meeting is mailed and the date on which the resolution
of the Board of Directors declaring such dividend is adopted, as the case may
be, shall be the record date for determination of stockholders.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made, as provided in this section, such determination
shall apply to any adjournment thereof, except where the determination has been
made through the closing of stock transfer books and the stated period of
closing has expired, in which case a new determination shall be made in
accordance with the provisions of this section.
ARTICLE III
DIRECTORS
3.01 Powers. The business and affairs of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all lawful acts and things as are not by statute or by the
Articles of Incorporation, or by these Bylaws, directed or required to be
exercised or done by the stockholders.
3.02 Number and Election. Except as otherwise fixed pursuant to the
provisions of the Articles of Incorporation, as amended, the number of
directors constituting the initial Board of Directors of the Corporation shall
be as set forth in the Articles of Incorporation, as amended, and the number of
directors may be changed by the Board of Directors, from time to time, by
appropriate resolution by the Board of Directors, provided the number of
directors shall not be less than one (1) nor more than ten (10). The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 3.04, and each director elected shall hold office until the next
succeeding annual meeting and until his successor shall have been elected and
qualified, except as otherwise provided in the Articles of Incorporation or in
these Bylaws. Directors need not be residents of the State of Nevada or
stockholders of the Corporation.
3.03 Elections to Fill Vacancies. Any vacancy occurring on the Board
of Directors may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of Directors, or by
a sole remaining director. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any directorship
to be filled by reason of an increase in the number of directors may be filled
by election at an annual or special meeting of stockholders called for that
purpose, or may be filled by the Board of Directors, for a term of office
continuing only until the election of one or more directors by election at an
annual or special meeting of stockholders called for that purpose, or may be
filled by the Board of Directors for a term of office continuing only until the
election of one or more directors by election at an annual or special meeting
of stockholders call for that purpose, or may be filled by the Board of
Directors for a term of office continuing only until the election of one or
more directors by the stockholders;
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provided, however, that the Board of Directors may not fill more than two (2)
such directorships during the period between any two (2) successive annual
meetings of the stockholders.
3.04 Location of Meetings. Meetings of the Board of Directors,
regular or special, may be held either within or outside the State of Nevada.
Members of the Board of Directors or of committees thereof may participate in
and hold a meeting of the Board of Directors or committee thereof by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other and participation in
such a meeting shall constitute presence in person at such meeting, except
where a person participates in the meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting is not
lawfully called or convened.
3.05 First Meeting of Newly Elected Board. The first meeting of each
newly elected Board of Directors shall be held at such time and place directly
following the annual meeting of the stockholders or as shall be fixed by the
vote of the stockholders a their annual meeting, and not notice of such meeting
shall be necessary to the newly elected directors in order legally to
constitute the meeting, provided that a quorum shall be present. In the event
such meeting is not held after the annual meeting of the stockholders, or in
the event of a failure of the stockholders to fix the time and place of the
first meeting of the newly elected Board of Directors, or in the event the
meeting is not held at the time and place so fixed by the stockholders such
meeting may be held at the time and place specified in a notice given as
provided for special meetings of the Board of Directors, or as specified in a
written waiver signed by all of the directors.
3.06 Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at such times and places as shall, from time to time, be
determined by the Board.
3.07 Special Meetings. Special meeting of the Board of Directors may
be called by the Chairman of the Board of Directors or the President. Notice
of special meetings of the Board of Directors may be given personally, either
verbally or in writing, or sent in writing by United States mail, or by
facsimile. In case the notice is mailed, the notice shall be deposited in the
mail at the placed in which the principal business office of the Corporation is
located at least five (5) days prior to the time of the holding of the meeting.
In case the notice is delivery personally, either verbally or in writing, or is
sent by facsimile, the notice shall be so delivered at least two (2) hours
prior to the time of the holding of the meeting. The delivery, mailing, or
sending by facsimile, as above provided, shall constitute due, legal and
personal notice to the director. Notice shall be given by the person calling
the meeting or by the Secretary. Neither the business to be transacted at nor
the purpose of any regular or special meeting of the Board of Directors need be
specified in the any notice or waiver of notice, except as may otherwise be
expressly provided by statute, the Articles of Incorporation or these Bylaws.
3.08 Quorum. A majority of the directors shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors unless a greater number is required by statute the Articles
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of Incorporation or these Bylaws. If a quorum shall not be present at any
meeting, from time to time, without notice other than announcement thereof at
the meeting, until a quorum shall be present.
3.09 Action Without Meeting. Any action that may be taken by the
executive committee, if any, or the Board of Directors at a meeting, may be
taken without a meeting if a consent in writing setting forth the actions so
taken shall be signed by all of the members of the executive committee or all
of the directors.
3.10 Compensation. Directors, as such, shall not receive any salary
for their services, but, by resolution of the Board may receive a fixed sum and
necessary expenses of attendance of each regular or special meeting of the
Board of Directors. Members of the executive committee, by resolution of the
Board of Directors, may be allowed like compensation for attending committee
meetings. Nothing herein contained shall be construed to preclude any director
from serving the Corporation in another capacity and receiving compensation
therefor.
ARTICLE IV
NOTICES
4.01 Content and Method. Notices to directors and stockholders shall
be in writing, unless otherwise provided in these Bylaws, shall specify the
time ad place of the meeting, and shall be delivered personally or mailed to
the directors or stockholders at their addresses appearing on the books of the
Corporation. Notice by mail shall be deemed given at the time when the notice
is placed in the United States mail, postage prepaid. Notice to directors may
also be given by facsimile.
4.02 Waiver of Notice. Whenever any notice is required to be given to
any stockholder or director under the provisions of applicable statutes, the
Articles of Incorporation or these Bylaws, a waiver thereof in writing, signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be equivalent to the giving of notice.
4.03 Attendance Construed as Waiver of Notice. Attendance of a
stockholder, in person or by proxy, or a director at a meeting shall constitute
a waiver of notice of such meeting, except where a director or stockholder
attends a meeting for the express purpose of objecting to the transaction of
any business on the ground that the meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
5.01 Titles. The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer and, in the discretion of the Board of
Directors, such other officers as are contemplated by Section 5.03 hereof, each
of whom shall be elected by the Board of Directors. Any two or more offices
may be held by the same person.
5.02 Election. The Board of Directors, at its first meeting after
each annual meeting of
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stockholders, shall elect a President, a Secretary, and a Treasurer and may
elect one or more Vice Presidents, none of whom needs to be a member of the
Board, and may appoint a member of the Board of Directors as Chairman of the
Board.
5.03 Other Officers. Such other officers an assistant officers and
agents as may be deemed necessary may be elected or appointed by the Board of
Directors.
5.04 Compensation. The compensation of the President, any Vice
Presidents, the Secretary and the Treasurer shall be fixed by the Board of
Directors, but the compensation of all minor officers and all other agents and
employees of the Corporation may be fixed by the President, unless by
resolution the Board of Directors shall determine otherwise.
5.05 Term of Office. Each officer of the Corporation shall hold
office until his successor is chosen and qualifies, or until his death or
removal or resignation from office. Any officer, agent or member of the
executive committee elected or appointed by the Board of Directors may be
removed by a majority vote of the Board of Directors whenever, in its judgment,
the best interest of the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Any vacancy occurring in an office of the Corporation, for any
reason, may be filled by the Board of Directors.
5.06 Chairman of the Board. In the event that a Chairman of the Board
is designated by the Board of Directors, the Chairman shall preside over all
meetings of the stockholders and of the Board of Directors. He shall see that
all orders and resolutions of the Board of Directors are carried into effect.
The Chairman shall have such other powers and duties as usually pertain to such
office or as may be assigned to him, from time to time, by the Board of
Directors.
5.07 President. In the absence of the Chairman of the Board, the
President shall preside at all meetings of the stockholders and, if the
President is also a member of the Board of Directors, at all meetings of the
directors. Unless the Board of Directors shall otherwise direct, the President
shall have general and active management responsibility for the business of the
Corporation.
5.08 Vice Presidents. In the event that the Board of Directors shall
provide for one or more Vice Presidents, then each of the Vice Presidents, in
the order of his seniority, unless otherwise determined by the Board of
Directors, shall in the absence or disability of the President, serve in the
capacity of the President and perform the duties and exercise the powers of the
President. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors shall from time to time prescribe.
5.09 Secretary. The Secretary shall:
(a) attend all meetings of the Board of Directors and of the
stockholders, and shall record all votes and keep the minutes of all
such proceedings in one or more books kept for that purpose;
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(b) perform like services for the executive committee; if any;
(c) give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors;
(d) keep in safe custody the seal of the Corporation, and,
when authorized by the Board of Directors, affix the same to any
instrument requiring it and when so affixed, it shall be attested by the
Secretary's signature, or by the signature of the Treasurer, if any, or
any Assistant Secretary or Assistant Treasurer; and
(e) perform all duties incidental to the office of Secretary
and such other duties as, from time to time, may be assigned to the
Secretary by the President or Board of Directors under whose supervision
the Secretary shall function.
5.10 Assistant Secretaries. Each Assistant Secretary, if any, in the
order of his seniority, unless otherwise determined by the Board of Directors,
in the absence or disability of the Secretary, shall perform the duties and
exercise the powers of the Secretary, and shall perform such other duties and
have such other powers as the Board of Directors may, from time to time,
prescribe.
5.11 Treasurer. The Treasurer shall:
(a) have custody of the corporate funds and securities;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) deposit all money and other valuable effects in the name
and to the credit of the Corporation;
(d) disburse such funds of the Corporation; taking proper
vouchers for all disbursements;
(e) render to the Board of Directors at the regular meetings
of the Board of Directors, or whenever the Board of Directors may
require, an account of all transactions entered into under this Section
5.11 and of the financial condition of the Corporation; and
(f) perform all such other duties as, from time to time, may
be assigned to him by the Board of Directors.
5.12 Treasurer's Bond. If required by the Board of Directors, the
Treasurer or such other officer as designated by the Board of Directors to
perform the duties enumerated in Section 5.11 above, shall give the Corporation
a bond, in such sum and with such surety or sureties as shall be satisfactory
to the Board of Directors, for the faithful performance of the duties of his
office, and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control, belonging to the Corporation.
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5.13 Assistant Treasurers. Each Assistant Treasurer, if any, in the
order of his seniority, unless otherwise determined by the Board of Directors,
shall in the absence of disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer, and shall perform such other duties and
have such other powers as the Board of Directors may, from time to time,
prescribe.
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ARTICLE VI
CERTIFICATES REPRESENTING SHARES
6.01 Description. The Corporation shall deliver certificates
representing all shares to which stockholders are entitled. Certificates shall
be signed by the President and the Secretary of the Corporation, or in the
absence of the President and/or Secretary, a Vice President and/or Assistant
Secretary, if such offices have been appointed or elected by the Board of
Directors and may be sealed with the seal of the Corporation or a facsimile
thereof. No certificate shall be issued for any share until the consideration
therefor has been fully paid. Each certificate shall be consecutively numbered
and shall be entered in the books of the Corporation as issued. Each
certificate representing shares shall state upon the face thereof that the
Corporation is organized under the laws of the State of Nevada, and name of the
person to whom issued, the number and class of shares, and the designation of
the series, if any, which such certificate represents.
6.02 Facsimile Signatures. The signature of the President and the
Secretary upon a certificate may be facsimile. In the event that an officer
who has signed or whose facsimile signature has been placed upon a certificate
shall cease to be such officer before the certificate is issued, the
certificate may be issued by the Corporation with the same effect as if he were
such officer at the date of issuance.
6.03 Lost Certificate. The Board of Directors may direct new
certificate(s) to be issued in place of any certificate(s) previously issued by
the Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate(s) to be lost or
destroyed. When authorizing such issuance of new certificate(s), the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of the lost or destroyed certificate(s), or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum and form and with such
sureties as it may direct as an indemnity against any claim that may be made
against the Corporation with respect to the certificate(s) alleged to have been
lost or destroyed.
6.04 Transfer of Shares. Shares of stock shall be transferable only
on the books of the Corporation by the holder thereof in person or b his duly
authorized attorney-in-fact. Upon surrender to the Corporation or the transfer
agent of the Corporation, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
6.05 Transfer Agents and Registrars. The Corporation may have one or
more transfer agents and one or more registrars of its stock, whose respective
duties the Board of Directors may, from time to time, define. No certificate
of stock shall be valid until countersigned by a transfer agent, if the
Corporation shall have a transfer agent, or until registered by the registrar,
if the Corporation shall have a registrar. The duties of transfer agent and
registrar may be combined.
10
<PAGE> 11
6.06 Registered Owners. The Corporation shall be entitled to
recognize the exclusive rights of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to, or interest in, such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Nevada.
ARTICLE VII
GENERAL PROVISIONS
7.01 Dividends. The Board of Directors may declare and the
Corporation may pay dividends on its outstanding shares in cash, property or
its own shares, pursuant to law and subject to the provisions of its Articles
of Incorporation.
7.02 Execution of Instruments. Unless otherwise authorized by the
Board of Directors, deeds, transferees, assignments, contracts, obligations,
certificates and other instruments may be signed on behalf of the Corporation
by a person who holds the office of Chairman of the Board or President or
Executive Vice President. In addition, the Board of Directors may, from time
to time, direct the manner in which and the person or persons by whom any
instrument or instruments may or shall be signed. Any signing officer may
affix the corporate seal to any instrument requiring the same but no instrument
is invalid merely because the corporate seal is not affixed thereto.
7.03 Reserves. The Board of Directors may, by resolution, create a
reserve or reserves out of earned surplus for any purpose or purposes, and may
abolish any such reserve in the same manner.
7.04 Signatures. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or other person or
persons as the Board of Directors may, from time to time, designate.
7.05 Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
7.06 Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation and shall be in the form determined by the Board of
Directors. The seal may be used by causing it, or a facsimile thereof, to be
impressed, affixed or in any other manner reproduced. The use of the seal is
not necessary on any corporate document and its use or nonuse shall not, in any
way, affect the legality of the document.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent permitted by the
laws of the State of Nevada as from time to time may be in effect, any person
against all liability and expense (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
incurred by reason of the fact that he is or was a director or officer of the
Corporation,
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<PAGE> 12
or, he is or was serving at the request of the Corporation as a director,
officer, partner or trustee of, or in any similar managerial or fiduciary
position of, or as an employee or agent of another corporation, partnership,
joint venture, trust, association or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, provided
however, no indemnity shall be provided hereunder in circumstances involving
the negligence or gross negligence of the person requesting indemnity.
Expenses (including attorneys' fees) incurred in defending any Acton, suit, or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit, or proceeding to the full extent and under the
circumstances permitted by the laws of the State of Nevada. The right to
indemnification conferred upon such persons by these Bylaws shall be a contract
right. The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, fiduciary, or agent of the
Corporation against any liability asserted against and incurred by such person
in any such capacity or arising out of such person's position, whether or not
the Corporation would have the power to indemnify against such liability under
the provisions of Article VIII of the Articles of Incorporation, as amended.
The indemnification provided in Article VIII of the Articles of Incorporation,
as amended, or these Bylaws, shall not be deemed exclusive of any other rights
to which those indemnified may be entitled under the Articles of Incorporation,
these Bylaws, or any other bylaw, agreement, vote of stockholders or
disinterested directors statute, or otherwise, and shall inure to the benefit
of their heirs, executors and administrators. The provisions of this Article
VIII of these Bylaws shall not be deemed to preclude the Corporation from
indemnifying other persons from similar or other expenses and liabilities as
the Board of Directors or the stockholders may determine in a specific instance
or by resolution of general application.
Neither the amendment nor repeal of this Article VIII of these Bylaws
nor the adoption of any provisions of these Bylaws, any other bylaw or any
statute inconsistent with this Article VIII of these Bylaws shall eliminate or
reduce the effect of this Article VIII of these Bylaws in respect of any acts
or omissions occurring prior to such amendment, repeal or adoption of any
inconsistent provision.
ARTICLE IX
AMENDMENTS
Unless otherwise provided in the Articles of Incorporation, these Bylaws
may be altered, amended or repealed, and new bylaws may be adopted by the
affirmative vote of a majority of either the Board of Directors or the holders
of a majority of the shares entitled to vote, present at any meeting at which a
quorum of each respective body is present, provided that notice of the proposed
alteration, amendment, repeal or adoption shall be contained in the notice of
the meeting. This power to alter, amend or repeal these Bylaws, and to adopt
new bylaws, may be modified or divested by action of the holders of a majority
of the shares entitled to vote taken at any regular or special meeting of the
stockholders.
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<PAGE> 1
EXHIBIT 10.1(a)
CONSTRUCTION LOAN AGREEMENT
(Texas Property)
This CONSTRUCTION LOAN AGREEMENT ("Agreement") is dated for reference
purposes as of August 6, 1997, between PACIFIC UNITED, L.P., a Texas limited
partnership (the "Borrower"), NHC HOLDINGS CORP., a Nevada corporation (the
"Guarantor"), and BANK OF AMERICA TEXAS, N.A. (the "Bank").
FACTUAL BACKGROUND
A. Bank has agreed to make a loan to Borrower in the principal
amount of Three Million Six Hundred Seventy-Five Thousand and No/100 Dollars
($3,675,000.00) (the "Loan"). Borrower will use the Loan to provide financing
for constructing infrastructure and other improvements (the "Improvements") for
development of 87 single-family lots (the "Lots") being situated upon real
property (the "Land") located in Dallas County, Texas, as described in Exhibit
A. Borrower will also use the Loan to pay other costs and expenses related to
the development of the Land. The Improvements are to be built in two phases.
Phase I Improvements (herein so called) shall consist of improvements to serve
44 Lots. Phase II Improvements (herein so called) shall consist of
improvements to serve 43 Lots. Subject to force majeure, Borrower intends to
complete construction of the Phase I Improvements on or before May 30, 1998
(the "Phase I Completion Date") and (subject to obtaining an appropriate
extension of the Maturity Date, in accordance with the provisions of the
promissory note hereinafter described) intends to complete construction of the
Phase II Improvements on or before January 1, 2000 (the "Phase II Completion
Date").
B. The Improvements are described in plans and specifications (the
"Plans and Specifications") which were prepared by a licensed engineer (the
"Engineer") under an agreement with Borrower (the "Engineering Contract"). The
Improvements will be constructed by a licensed general contractor (the
"Contractor"), which may be Borrower or a third party. In this Agreement, the
term "Contractor" refers either to Borrower acting in the capacity of general
contractor, or to a third party general contractor. Exhibit B more fully
describes the Improvements and Plans and Specifications, and also sets forth
further information and requirements of Bank relating to the Engineer and
Contractor.
C. Borrower is executing a promissory note (the "Note") payable to
Bank evidencing the Loan. The Note is to be secured by a Deed of Trust,
Security Agreement, Financing Statement and Assignment of Rental ("Deed of
Trust") covering the Land and Improvements and certain other property. In this
Agreement, the "Property" refers to all or any part of the property affected by
the Deed of Trust, or any interest in all or any part of it, as the context may
require.
D. Guarantor has agreed to guaranty Borrower's obligations to Bank
in accordance with a Payment Guaranty.
E. As of the date of this Agreement, Borrower and Bank do not
contemplate that Borrower will purchase any form of interest rate protection
for the Loan. For this reason, the defined terms "Additional Interest" and
"Interest Rate Protection Agreement" have no application to the Loan and should
be disregarded in construing the Loan Documents.
F. The maturity date of the Loan is August 6, 1999, unless extended
to August 6, 2001, as permitted under the Note.
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Construction Loan Agreement/Pacific United, L.P. Page 1
<PAGE> 2
G. This Agreement, the Note and the Deed of Trust, together with all
of their exhibits, and all other documents which evidence, guaranty, secure or
otherwise pertain to the Loan, collectively constitute the "Loan Documents."
The Loan Documents include the documents listed on the attached Exhibit C.
Therefore, Bank and Borrower agree as follows:
AGREEMENT
I. Disbursement
1.1 Cost Breakdown
(a) Bank shall make disbursements of the Loan based on a
detailed breakdown ("cost breakdown") of construction, financing and other
development costs for the Improvements, as more fully described in the attached
Exhibit D. The initial cost breakdown, prepared by Borrower and approved by
Bank, is attached as Exhibit D-1.
(b) The cost breakdown restricts disbursements to line items
in cost categories. Borrower agrees to use disbursements solely in conformity
with the cost breakdown. If the Improvements cannot be completed in strict
conformity with the most recently approved cost breakdown, Borrower shall
immediately submit to Bank for its approval a revised cost breakdown in the
form attached as Exhibit D-2. The revised cost breakdown shall identify
Borrower's requested changes in any line items and shall be accompanied by
Borrower's written statement of reasons for the changes. Borrower shall
execute such documentation and provide such endorsements to Bank's title
insurance policy as Bank may reasonably require in connection with the revised
cost breakdown. If further changes are required, Borrower shall seek Bank's
approval, following the procedures described above. Bank need make no further
disbursements as to the changing line items unless and until it approves the
revised cost breakdown. Bank reserves the right to approve or disapprove any
cost breakdown in its reasonable judgment. The most recently approved cost
breakdown supersedes all previously approved cost breakdowns.
1.2 Loan in Balance; Borrower's Funds Account
(a) The Loan is "in balance" whenever the amount of the
undisbursed Loan funds, plus any sums provided or to be provided by Borrower as
shown in the cost breakdown most recently approved by Bank, are sufficient in
the reasonable judgment of Bank to pay, through completion of the Improvements
and maturity of the Loan, all of the following sums: (i) all costs of
construction, marketing, ownership, maintenance and sale of the Lots; and (ii)
all interest, including any and all Additional Interest, and all other sums
which may accrue or be payable under the Loan Documents. Unless otherwise
shown in the cost breakdown, all sums provided by Borrower will be deposited in
an interest-bearing account being maintained at Bank in the name of Borrower
(the "Borrower's Funds Account") on and subject to such terms and conditions,
and at such interest rates, as are generally made available to Bank's
commercial customers. The Loan is "out of balance" if and when Bank in its
reasonable judgment determines that there are insufficient funds (including all
undisbursed Loan funds and any sums provided and to be provided by Borrower) to
pay for all such costs and sums payable under the Loan Documents.
(b) Borrower acknowledges that the Loan may become "out of
balance" in numerous ways, not all of which may now be foreseen. Borrower
further acknowledges that the Loan may become "out of balance" from a shortage
of funds in any single line item or category of the cost breakdown, even if
there are undisbursed Loan funds in other line items or categories.
Undisbursed Loan funds in one category or line item may not be applied to
another category or line item unless
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Construction Loan Agreement/Pacific United, L.P. Page 2
<PAGE> 3
either the cost breakdown allows such use (and only to the extent specifically
allowed) or Bank consents in writing to such use in each instance, such consent
not to be unreasonably withheld as long as the total undisbursed Loan funds
from line items other than line items for interest on the Loan are equal to or
greater than the unpaid cost to complete the Improvements.
(c) Whenever the Loan becomes "out of balance," Bank may make
written demand on Borrower to deposit Borrower's own funds into the Borrower's
Funds Account in an amount sufficient in Bank's reasonable judgment to cause
the Loan to be "in balance." Upon Borrower's request, Bank shall advise
Borrower of Bank's basis for determining the Loan is "out of balance." Subject
to the provisions of subparagraph 1.2(b), Borrower shall deposit all funds
required by Bank's demand within three (3) business days thereafter. If
required by Bank, Borrower shall also submit, for Bank's approval, a revised
cost breakdown within fifteen (15) days after any such demand.
(d) At any time, Bank may evaluate the sufficiency of
undisbursed Loan funds allocated for payment of future interest, including any
Additional Interest ("Interest Reserve"), exercising its reasonable judgment in
light of: (i) Bank's projections of interest rates for period(s) up to and
including the full remaining term of the Loan (and permitted extensions, if
any); (ii) cost overruns or change orders; (iii) failure of the Lots to sell at
the rate projected by Borrower in Exhibit E (the "Pro Forma Schedule")
described in Section 3.1 below. Based on Bank's evaluation of these data and
projections, the Loan may be "out of balance." If this happens, Bank may
exercise its rights under clause (c) above, or if it so chooses, Bank may make
written demand on Borrower to pay all future interest as it accrues, including
any and all Additional Interest, out of Borrower's own funds until the Interest
Reserve is sufficient in Bank's reasonable judgment to cover any and all such
amounts which might become due during the remaining term of the Loan.
1.3 Disbursement Conditions, Amounts and Procedures. The
Disbursement Schedule attached as Exhibit F sets forth disbursement conditions,
amounts and procedures applicable to the Loan. Bank shall disburse the Loan as
described in Exhibit F and elsewhere in this Agreement.
1.4 Termination of Disbursements. Bank shall have no obligation to
make, and Borrower shall have no right to require, any disbursement of Loan
funds after the earlier to occur of the full disbursement of the Loan or the
Maturity Date, as the same may be extended.
II. Covenants of the Borrower
Borrower promises to keep each of the covenants set forth below, unless
Bank has waived compliance in writing.
2.1 Commencement and Completion of Improvements
(a) Borrower has commenced and shall diligently continue
construction to completion.
(b) By the Phase I Completion Date:
(i) Borrower shall have completed construction of all
Phase I Improvements such that upon application therefor by a builder,
building permits could be obtained for construction of a single family
home upon each of forty-four (44) Lots;
(ii) The Phase I Improvements have been inspected and
finally approved by the appropriate governmental authorities and except
for building permits for construction of specific homes and related
permits customarily obtained by a builder, the appropriate
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Construction Loan Agreement/Pacific United, L.P. Page 3
<PAGE> 4
governmental authorities shall have issued all permits and approvals
necessary to begin construction of single family homes on each of the
Lots;
(iii) All costs and liens relating to the completed Phase
I Improvements have been paid or discharged.
(c) By the Phase II Completion Date:
(i) Borrower shall have completed construction of all
Phase II Improvements such that upon application therefor by a builder,
building permits could be obtained for construction of a single family
home upon each of the remaining forty-three (43) Lots;
(ii) The Phase II Improvements have been inspected and
finally approved by the appropriate governmental authorities and except
for building permits for construction of specific homes and related
permits customarily obtained by a builder, the appropriate governmental
authorities shall have issued all permits and approvals necessary to
begin construction of single family homes on each of the Lots;
(iii) All costs and liens relating to the completed Phase
II Improvements have been paid or discharged.
2.2 Requirements. Borrower shall construct the Improvements in a
good and workmanlike manner in substantial accordance with sound building
practices as well as the Plans and Specifications and the recommendations of
any soils report which is satisfactory to Bank. Borrower shall comply with all
existing and future laws, regulations, orders, building codes, restrictions and
requirements of, and all agreements with and commitments to, all governmental,
judicial or legal authorities having jurisdiction over the Property, including
those pertaining to the construction, sale, or financing of the Improvements,
and with all recorded covenants and restrictions affecting the Property (all
collectively, the "Requirements").
2.3 Changes
(a) Borrower agrees to provide Bank with copies of all change
orders, together with all additional documents that Bank may reasonably
require. These documents may include the following: (i) plans and
specifications indicating the proposed change; (ii) a written description of
the proposed change and related working drawings; and (iii) a written estimate
of the cost of the proposed change and the time necessary to complete it.
(b) Borrower shall obtain Bank's prior written approval of any
change in the Plans and Specifications which:
(i) at the time of such requested change, it is reasonably
foreseeable that the change might materially adversely affect the value
of Bank's security; or
(ii) regardless of cost, is a material change in
structure, design, function or appearance of the Improvements; or
(iii) requires the approval of any other person or entity;
or
(iv) would cause any line item or category of the cost
breakdown to be increased or decreased by five percent (5%) or more; or
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Construction Loan Agreement/Pacific United, L.P. Page 4
<PAGE> 5
(v) might delay completion of the Phase I Improvements
beyond the Phase I Completion Date or of the Phase II Improvements
beyond the Phase II Completion Date, provided, that Bank shall not
unreasonably refuse to extend either completion date to the extent
completion is delayed by force majeure.
(c) Borrower shall also obtain Bank's prior written approval
of any change in any work or materials for the Improvements (whether positive
or negative) which exceeds Ten Thousand Dollars ($10,000.00) in amount and
which causes any line item of the cost breakdown to be increased or decreased
by five percent (5%) or more. Also, the prior written approval of Bank shall
be obtained for any change in any work or materials which, when added to all
prior changes, exceeds Twenty-five Thousand and No/100 Dollars ($25,000.00) in
aggregate amount (whether positive or negative).
(d) In addition, Borrower shall obtain Bank's prior written
approval of all material changes in the scope or general conditions of the
Construction Contract, the Engineering Contract, or any other contracts for the
construction of the Improvements. Finally, Borrower shall obtain from the
appropriate persons or entities all approvals of any changes in plans,
specifications, work, materials or contracts that are required by any of the
Requirements, or under the terms of any lease, loan commitment or other
agreement relating to the Property.
(e) Bank may take a reasonable time to evaluate any requests
for proposed changes, and may require that all other approvals required from
other parties be obtained before it reviews any requested change. Bank may
approve or disapprove changes in the exercise of its reasonable judgment.
Borrower acknowledges that delays may result, and agrees that so long as the
delays are not unreasonable in duration, they shall not affect Borrower's
obligation to complete the Phase I Improvements on or before the Phase I
Completion Date or to complete the Phase II Improvements on or before the Phase
II Completion Date.
2.4 Construction Information and Verification
(a) Within fifteen (15) days after receiving notification from
Bank, Borrower shall deliver to Bank any and all of the following information
and documents that Bank may request, all in forms reasonably acceptable to
Bank:
(i) Current plans and specifications for the
Improvements certified by the Engineer as being complete and accurate;
(ii) A current, complete and correct list showing the
name, address and telephone number of each contractor, subcontractor and
material supplier engaged in connection with the construction of the
Improvements, and the total dollar amount of each contract and
subcontract (including any changes) together with the amounts paid
through the date of the list;
(iii) True and correct copies of the most current
versions of all executed contracts and subcontracts identified in the
list described in clause (ii) above, including any changes;
(iv) A current construction progress schedule showing
the progress of construction and the projected sequencing and completion
times for uncompleted work, all as of the date of the schedule;
(v) Any update to any item described above, which
Borrower may have previously delivered to Bank;
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Construction Loan Agreement/Pacific United, L.P. Page 5
<PAGE> 6
(vi) Following completion of the Improvements, as-built
plans and specifications for the Improvements as actually completed,
certified by the Engineer as being complete and accurate;
(vii) Following completion of the Improvements, as-built
survey for the Improvements as actually completed, certified by a
registered public surveyor acceptable to Bank.
(b) Borrower expressly authorizes Bank to contact the
Engineer, Contractor, Borrower's surveyor, or any contractor, subcontractor,
material supplier, surety or any governmental authority or agency to verify any
information disclosed in accordance with this Section 2.4, and Borrower hereby
consents to and directs all such persons and entities to provide full and
complete information with respect to Borrower, Guarantor, and the Improvements.
Subject to the terms of the applicable contract, any defaulting architect,
engineer, contractor, subcontractor, material supplier or surety shall be
promptly replaced, and Borrower shall promptly deliver all required information
and documents to Bank regarding each replacement architect, engineer,
contractor, subcontractor, material supplier and surety. Bank may disapprove
any architect, engineer, contractor, subcontractor, material supplier, surety
or other party whom Bank in its reasonable judgment may deem financially or
otherwise unqualified; however, the absence of any such disapproval shall not
constitute a representation of qualification.
(c) If, based on any construction progress schedule or other
materials submitted by Borrower, Bank in its reasonable judgment determines
that, subject to Force Majeure, the Phase I Improvements will not be completed
by the Phase I Completion Date or that the Phase II Improvements will not be
completed by the Phase II Completion Date, Bank may request Borrower in writing
to reschedule the work of construction to permit timely completion. Within
fifteen (15) days after receiving such a request from Bank, Borrower shall
deliver to Bank a revised construction progress schedule showing completion of
the Phase I Improvements by the Phase I Completion Date and of the Phase II
Improvements by the Phase II Completion Date or, if such completion cannot be
achieved by such dates, the earliest date thereafter that completion can be
obtained.
2.5 Permits, Licenses and Approvals. Borrower shall properly obtain,
comply with and keep in effect all permits, licenses and approvals which are
required to be obtained from governmental bodies in order to construct the
Improvements and to market and sell the Lots. Borrower shall promptly deliver
copies of all such permits, licenses and approvals to Bank.
2.6 Purchase of Materials; Conditional Sales Contracts. Borrower
shall not purchase or contract for any materials, equipment, furnishings,
fixtures or articles of personal property to be placed or installed on the Land
or in any Improvements under any security agreement or other agreement where
the seller reserves or purports to reserve title or the right of removal or
repossession, or the right to consider them personal property after their
incorporation in the work of construction, unless Bank in each instance has
authorized Borrower to do so in writing.
2.7 Site Visits; Right to Stop Work
(a) Bank and its agents and representatives shall have the
right at any reasonable time to enter and visit the Property for the purposes
of performing an appraisal, observing the work of construction and examining
all materials, plans, specifications, working drawings and other matters
relating to the construction. For purposes of these site visits, Borrower
shall at all times maintain a full set of working drawings at the construction
site. Bank shall also have the right to examine, copy and audit the books,
records, accounting data and other documents of Borrower and its contractors
which relate to the Property or construction of the Improvements. In each
instance, Bank shall give Borrower reasonable notice before entering the
Property. Bank shall make reasonable efforts to avoid
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Construction Loan Agreement/Pacific United, L.P. Page 6
<PAGE> 7
interfering with Borrower's use of the Property when exercising any of the
rights granted in this Section 2.7.
(b) If Bank in its reasonable judgment determines that any
work or materials fail to conform to the approved Plans and Specifications or
sound building practices in any material manner, or that they otherwise depart
from any of the material requirements of this Agreement, Bank may require the
work to be stopped and withhold disbursements until the matter is corrected.
If this occurs, Borrower shall promptly correct the work to Bank's reasonable
satisfaction, and pending completion of such corrective work shall not allow
any other work to proceed. No such action by Bank shall affect Borrower's
obligation to complete the Phase I Improvements on or before the Phase I
Completion Date and the Phase II Improvements on or before the Phase II
Completion Date.
(c) Bank is under no duty to visit the construction site, or
to supervise or observe construction or to examine any books or records. Any
site visit, observation or examination by Bank shall be solely for the purpose
of protecting Bank's rights and interests. No site visit, observation or
examination by Bank shall impose any liability on Bank or result in a waiver of
any default of Borrower. In no event shall any site visit, observation or
examination by Bank be a representation that there has been or shall be
compliance with the Plans and Specifications, that the construction is free
from defective materials or workmanship, or that the construction complies with
the Requirements or any other applicable governmental law. Neither Borrower
nor any other party is entitled to rely on any site visit, observation or
examination by Bank. Bank owes no duty of care to protect Borrower or any
other party against, or to inform Borrower or any other party of, any negligent
or defective design or construction of the Improvements, or any other adverse
condition affecting the Property.
2.8 Protection Against Lien Claims. Borrower shall promptly pay or
otherwise discharge all claims and liens for labor done and materials and
services furnished in connection with the construction of the Improvements.
Borrower shall have the right to contest in good faith any claim or lien,
provided that it does so diligently and without prejudice to Bank or delay in
completing the Improvements. Upon Bank's request, Borrower shall promptly
provide a bond, cash deposit or other security which Bank in the exercise of
its reasonable judgment determines to be satisfactory.
2.9 Signs and Publicity. At Bank's request, Borrower shall post
signs on the Property for the purpose of identifying Bank as the construction
lender, and shall use its best efforts to identify Bank in publicity concerning
the project, but Borrower shall not be required to incur any material expense
in connection therewith. In addition, Bank shall have the right to post signs
on the Property identifying itself as the construction lender for the Property,
and may refer to the Property in its own promotional and advertising materials.
Borrower shall not post signs, or otherwise identify Bank as the construction
lender, except with Bank's prior written consent in each instance.
2.10 Insurance
(a) Borrower shall provide, maintain and keep in force at all
times during any period of construction the builder's "all risk" insurance
required under subsection 1.1(g) of Exhibit F. At all times prior to repayment
of the Loan, Borrower shall provide, maintain and keep in force all other
insurance required by Exhibit F. Also at all such times, Borrower shall
provide, maintain and keep in force any and all additional insurance that Bank
in its reasonable judgment may from time to time require, against insurable
hazards which at the time are commonly insured against in the case of property
similarly situated. Such additional insurance may include flood insurance as
required by federal law and earthquake insurance as required by Bank. At
Bank's request, Borrower shall supply Bank with an original or certified copy
of any policy.
(b) All policies of insurance required under the Loan
Documents shall be issued by companies approved by Bank having a minimum A.M.
Best's rating acceptable to Bank. The limits,
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Construction Loan Agreement/Pacific United, L.P. Page 7
<PAGE> 8
coverage, forms, deductibles, inception and expiration dates and cancellation
provisions of all such policies shall be acceptable to Bank. In addition, each
required property insurance policy shall contain a mortgagee clause (Texas Form
130 or its equivalent) in favor of Bank, and shall provide that all proceeds be
payable to Bank to the extent of its interest. An approval by Bank is not, and
shall not be deemed to be, a representation of the solvency of any insurer or
the sufficiency of any amount of insurance.
(c) Each policy of insurance required under the Loan Documents
shall provide that it may not be modified or canceled without at least thirty
(30) days' prior written notice to Bank. When any required insurance policy
expires, Borrower shall furnish Bank with proof acceptable to Bank that the
policy has been reinstated or a new policy issued, continuing in force the
insurance covered by the policy which expired. Borrower shall also furnish
Bank with evidence satisfactory to Bank that all premiums for such policy have
been paid within thirty (30) days of renewal or issuance. If Bank fails to
receive such proof and evidence, Bank shall have the right, but not the
obligation, to obtain current coverage and advance funds to pay the premiums
for it. Borrower shall repay Bank immediately on demand for any advance for
such premiums, which shall be considered to be an additional loan to Borrower
bearing interest at the Reference-based Rate, as defined in the Note, and
secured by the Deed of Trust and any other collateral held by Bank in
connection with the Loan.
2.11 Cooperation. Borrower shall cooperate at all times with Bank in
bringing about the timely completion of the Improvements, and Borrower shall
resolve all disputes arising during the work of construction in a manner which
shall allow work to proceed expeditiously.
2.12 Maximum Loan-to-Value Ratio. Borrower agrees that the ratio of
the total committed amount of the Loan (minus any payment of principal received
and applied to the Loan) to the aggregate wholesale value of the Property then
subject to the Deed of Trust ("Aggregate Wholesale Value") shall at no time
exceed seventy percent (70%) (the "Maximum Loan-to-Value Ratio"). For purposes
of this Section 2.12, Bank shall determine the Aggregate Wholesale Value of the
Property using a methodology which (i) conforms to then-current regulatory
requirements, (ii) is considered by Bank to be reasonable and appropriate under
the circumstances, and (iii) takes into account then-current market conditions,
discount rates, and absorption rates, all as determined by Bank. If Bank at
any time should determine that such ratio has been exceeded, Bank may make
written demand on Borrower to repay principal of the Loan in an amount
sufficient in Bank's reasonable judgment to cause the Maximum Loan-to-Value
Ratio to be met. Borrower shall make any such payment of principal within
fifteen (15) days after Bank's demand.
2.13 [Intentionally omitted]
2.14 Income from Property. Borrower shall first apply all revenues
from sales of Lots, and all other income derived from the Property, to pay
costs and expenses associated with the ownership, maintenance, development,
operation and marketing of the Land and Improvements, including all amounts
then required to be paid under the Loan Documents, before using or applying
such income for any other purpose. Unless and until all such costs and
expenses are paid in full, and the Loan is "in balance," Borrower shall not
distribute any such income to any of its partners or shareholders, or allow any
partner or shareholder to withdraw capital, or make any payments on
indebtedness owed to any partner or shareholder. Despite the foregoing,
Borrower is not prohibited from paying or distributing to any of its partners
or shareholders (a) such reasonable management fees or reasonable salary as
Bank may find acceptable from time to time, and (b) an amount equal to any
income taxes imposed on that partner or shareholder which are attributable to
Borrower's income from the Property.
2.15 Payment of Expenses. Borrower shall pay Bank's reasonable costs
and expenses incurred in connection with the making, disbursement and
administration of the Loan, as well as any revisions, extensions, renewals or
"workouts" of the Loan, and in the exercise of any of Bank's rights
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Construction Loan Agreement/Pacific United, L.P. Page 8
<PAGE> 9
or remedies under this Agreement. Such reasonable costs and expenses include
charges for title insurance (including endorsements), filing, recording and
escrow charges, fees for appraisal, architectural and engineering review,
construction services and environmental services, mortgage taxes, reasonable
legal fees and expenses of Bank's counsel and any other reasonable fees and
costs for services, regardless of whether such services are furnished by Bank's
employees or agents or independent contractors.
2.16 Financial Information. Borrower shall keep true and correct
financial books and records on a cash basis for the construction of the
Improvements. Within one hundred twenty (120) days after the end of each
fiscal year until the Loan is paid in full, Borrower shall deliver balance
sheets, income statements and financial statements to Bank for itself and
audited financial statements for Guarantor, together with a statement showing
all changes in the financial condition of Borrower and Guarantor which occurred
during the preceding fiscal year. Within forty-five (45) days of the end of
the first three fiscal quarters of each fiscal year, Borrower shall provide to
Bank quarterly operating statements covering Borrower. Borrower shall promptly
provide Bank with any additional audited financial information that Borrower or
Guarantor may obtain, and shall deliver, signed copies of Borrower's and
Guarantor's federal income tax returns within thirty (30) days after filing
with the Internal Revenue Service. Borrower and Guarantor shall deliver such
other information as Bank may reasonably request concerning the affairs and
properties of Borrower and Guarantor.
2.17 Notices. Borrower shall promptly notify Bank in writing of:
(a) Any litigation affecting Borrower or, if known to
Borrower, any litigation affecting Guarantor where the amount claimed is Fifty
Thousand Dollars ($50,000.00) or more, unless the claim does not arise in
connection with the project and is fully covered by Borrower's liability
insurance or Guarantor's liability insurance;
(b) Any communication, whether written or oral, that Borrower
may receive from any governmental, judicial or legal authority, giving notice
of any claim or assertion that the Land or Improvements fail in any respect to
comply with any of the Requirements or any other applicable governmental law;
(c) Any material adverse change in the physical condition of
the Property (including any damage suffered as a result of earthquakes,
hurricanes, tornadoes or floods) or Borrower's or, if known to Borrower,
Guarantor's financial condition or operations; and
(d) Any default by the Contractor or any subcontractor having
a subcontract for more than $100,000, or any material adverse change in the
financial condition or operations of any of them.
2.18 Keeping Guarantor Informed. Borrower shall keep Guarantor
informed of Borrower's financial condition and business operations, the
condition and all uses of the Property, including all changes in condition or
use, and any and all other circumstances which may affect Borrower's ability to
pay or perform its obligations under the Loan Documents. In addition, Borrower
shall deliver to Guarantor all of the financial information described in
Section 2.16 within the times given in that Section.
2.19 Performance of Acts. Upon request by Bank, Borrower shall
perform all acts which may be reasonably necessary or advisable to perfect any
lien or security interest provided for in the Loan Documents or to carry out
the intent of the Loan Documents.
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Construction Loan Agreement/Pacific United, L.P. Page 9
<PAGE> 10
III. The Lots
3.1 Pro Forma Schedule
(a) Borrower has prepared and Bank has approved the Cash Flow
Projections attached as Exhibit E which sets forth, among other things, the
following projections and economic assumptions made by Borrower:
(i) Absorption during time periods before and after
completion of the Improvements;
(ii) Estimated cash flow through the term of the Loan;
and
(iii) Any and all other material economic terms and
conditions bearing upon Borrower's projections regarding the sale of the
Lots or the Property.
(b) Borrower understands and acknowledges that Bank, in making
the Loan, has relied on Borrower's projections as set forth in the Pro Forma
Schedule. Borrower further understands and acknowledges that such projections
represent the minimum level of economic achievement acceptable to Bank. At all
times, Borrower shall use its best efforts to meet the projections of the
currently approved Pro Forma Schedule.
(c) Whenever Borrower knows or believes there has been or will
be a material failure to meet the projections of the Pro Forma Schedule,
Borrower shall submit to Bank for its approval a revised Pro Forma Schedule in
the form of Exhibit E. Also, whenever Bank in its reasonable judgment
determines that there has been or will be a material failure to meet such
projections, Bank may make written demand on Borrower to submit a revised Pro
Forma Schedule to Bank for its approval. Borrower shall submit a revised Pro
Forma Schedule to Bank within fifteen (15) days after any such demand.
(d) The revised Pro Forma Schedule shall identify any changes
in any projections or other economic terms and shall be accompanied by
Borrower's statement of reasons for the changes. Borrower shall execute such
documentation and provide such endorsements to Bank's title insurance policy as
Bank may reasonably require in connection with the revised Pro Forma Schedule.
If, in Bank's judgment, the Loan is or would be out of balance, Bank need make
no further disbursements unless and until it approves the revised Pro Forma
Schedule. Bank reserves the right to approve or disapprove any Pro Forma
Schedule in its reasonable judgment. The most recently approved Pro Forma
Schedule supersedes all previously approved Pro Forma Schedules.
3.2 Lot Sales
(a) Bank acknowledges that Borrower has entered into contracts
for the sale of the Lots and Bank has approved such contracts, all as described
in Section 3.7. The following provisions shall apply with respect to any sale
of the Lots except pursuant to such approved contracts. Subject to the
provisions of Section 3.7 of this Agreement, except with Bank's prior written
consent, which consent shall not be unreasonably withheld, Borrower shall not
sell, lease, restrict, or encumber any of the Property except in accordance
with this Section 3.2. A contract between Borrower, as seller, and a third
party, as purchaser, for the sale of one or more Lots is hereinafter referred
to as a "Lot Sale Contract." Bank has approved Borrower's standard Lot Sale
Contract in the form attached as Exhibit G. Borrower shall not materially
modify that approved contract form without Bank's prior written consent in each
instance (Bank's approval not to be unreasonably withheld). Each Lot Sale
Contract shall be subject to Bank's written approval (Bank's approval not to be
unreasonably withheld) as to form and substance prior to execution and
delivery. Despite the foregoing, however, Borrower may
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Construction Loan Agreement/Pacific United, L.P. Page 10
<PAGE> 11
enter into Lot Sale Contract (and amendments to such contracts) in the ordinary
course of business with bona fide third party purchasers without Bank's prior
written consent if:
(i) The contract is executed in the form of Exhibit G
without material modification and provides for the full purchase price
to be payable in cash at the closing of the sale;
(ii) Bank receives a copy of the executed contract within
fifteen (15) days after it is executed (accompanied by all financial
information obtained by Borrower pertaining to the purchaser);
(iii) Borrower, following the exercise of due diligence,
has determined that the purchaser is financially capable of performing
all of its obligations under the contract and has at least two (2)
years' experience in constructing and selling single family homes in the
Dallas-Fort Worth market;
(iv) The contract conforms to the projections of the Pro
Forma Schedule and reflects an arm's-length transaction at the
then-current market rate for comparable lots;
(v) The Lots subject to the contact are not then subject
to purchase agreement or option to purchase in favor of any other party;
(vi) The contract must expressly provide that it is
subject to the rights of Bank under the Loan Documents and that upon a
foreclosure of the Deed of Trust, Bank may, at its option, succeed to
Borrower's rights under such contract or Bank may, without liability to
Borrower or the purchaser, terminate such contract by written notice to
the purchaser;
(vii) The contract does not affect in excess of 44 Lots;
and
(viii) The contract, together with all contracts
previously executed, does not cause the Loan to become "out of balance."
Borrower acknowledges that the Loan may become "out of balance" if the
seller's aggregate economic obligations under the contract exceed those
projected in the Pro Forma Schedule, or if the net sales proceeds from
such contracts would yield revenues at a lower level or at a later time
than set forth in the Pro Forma Schedule.
(b) Bank in the exercise of its sole discretion may consider
any executed Lot Sale Contract it may receive to be unsatisfactory if the
contract fails to meet the requirements of this Agreement in all material
respects. If this happens, or if Borrower at any time fails to submit any
executed Lot Sale Contract (and accompanying information) at the time required
by this Section 3.2, or if any Event of Default (as defined in Section 5.1) has
occurred and is continuing, Bank may make written demand on Borrower to submit
all future Lot Sales Contracts for Bank's approval prior to execution.
Borrower shall comply with any such demand by Bank.
(c) Sales. Borrower will use diligent, good faith efforts to
sell the Lots to third-parties for an all-cash price sufficient to yield net
sales proceeds of at least $50,690 per Lot (the "Minimum Net Proceeds").
Provided no Event of Default (or event which with notice or the passage of time
would be an Event of Default) has occurred under the Loan Documents, Bank will
release Lots from the lien of the Deed of Trust upon application of the Minimum
Net Proceeds or one hundred percent (100%) of the net sales proceeds from such
sale, whichever is greater, to the unpaid principal balance of the Loan. The
Deed of Trust contains additional requirements for obtaining the release of
such tracts from the lien of the Deed of Trust. The Minimum Net Proceeds
required by Bank is intended to be equal to the product of (a) the quotient
resulting from dividing (i) the sum of the total amount of the Loan, including
the unpaid principal balance plus any committed but undisbursed Loan
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Construction Loan Agreement/Pacific United, L.P. Page 11
<PAGE> 12
amount by (ii) the total number of Lots covered by the Deed of Trust;
multiplied by (b) 120%. Following completion of the Improvements, if the
outstanding balance of the Loan is less than the total committed amount of the
Loan, then upon Borrower's written request Bank shall make an appropriate
adjustment of the Minimum Net Proceeds in accordance with the formula stated
above. Following any such adjustment, Borrower shall be deemed to have waived
the right to obtain any further disbursement of proceeds of the Loan.
3.3 Notices Regarding Contracts. If any purchaser at any time
breaches or disavows its Lot Sale Contract or claims any breach of Borrower's
obligations, Borrower shall promptly notify Bank.
3.4 Lot Information and Documents. Borrower has disclosed to Bank
any and all Lot Sale Contracts or other agreements in effect at the date of
this Agreement which affect the Property or any portion of or interest in it.
Borrower shall promptly deliver to Bank such sales and marketing schedules and
reports, operating statements and other information relating to the Property as
Bank from time to time may request. In addition, Borrower shall promptly
obtain and deliver to Bank such assignments of Borrower's rights under Lot Sale
Contracts, estoppel certificates and subordination agreements executed by such
purchasers under any Lot Sale Contract in such forms as Bank from time to time
may require.
3.5 Purpose and Effect of Contract Approval. No approval of any Lot
Sale Contract by Bank shall be for any purpose other than to protect Bank's
security and to preserve Bank's rights under the Loan Documents. No approval
by Bank shall result in a waiver of any default of Borrower. In no event shall
any approval by Bank of a Lot Sale Contract be a representation of any kind
with regard to the contract or its enforceability, or the financial capacity of
any purchaser or guarantor.
3.6 Seller's Obligations. Borrower shall perform all obligations
required to be performed by it under any Lot Sale Contract or any other
agreement affecting any part of the Property.
3.7 Existing Lot Sale Contracts. Prior to the date of this
Agreement, Borrower entered into a Lot Sale Contract (the "Existing Lot Sale
Contract") with Newmark Homes for the sale of 100% of the Lots, a copy of which
is attached hereto as Exhibit G. Bank has approved such contract. As
additional security for the Loan, Borrower shall collaterally assign to Bank
all of its rights in the Existing Lot Sale Contract and shall deliver to Bank
the agreements of the purchasers thereunder that, at Bank's option, following a
foreclosure of the Deed of Trust, Bank shall have the right, exercisable by
written notice, either to succeed to the rights of Borrower thereunder or to
terminate such contract and that in the event of Bank's termination of such
contract, Bank shall have no liability to Borrower or the Purchaser thereunder.
IV. Representations and Warranties
Borrower promises that each representation and warranty set forth below
is true, accurate and correct as of the date of this Agreement. Except as to
matters for which Borrower has given written notice that such representation or
warranty has become untrue or incorrect, each Draw Request, as defined in
Section 3.1 of Exhibit F, shall be deemed to be a reaffirmation of each and
every representation and warranty made by Borrower in this Agreement. Borrower
shall notify Bank in writing promptly upon obtaining knowledge that any of the
representations and warranties given below are not true and correct in all
material respects. Bank, in its reasonable discretion, may waive or elect not
to waive any Event of Default (hereafter defined) resulting from the failure of
a representation and warranty to be true and correct as of the date of any Draw
Request.
4.1 Authority. Borrower has complied with any and all laws and
regulations concerning its organization, existence and the transaction of its
business. Borrower has the right and power to own the Property and to develop
the Land and Improvements as contemplated in the Loan Documents.
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Construction Loan Agreement/Pacific United, L.P. Page 12
<PAGE> 13
4.2 Compliance. Borrower is familiar and has complied with all of
the Requirements, as well as all other applicable laws, regulations and
ordinances. Borrower has properly obtained or will properly obtain all
permits, licenses and approvals necessary to construct, occupy, operate, market
and sell the Lots in accordance with all Requirements, including those
pertaining to zoning, and Borrower has delivered true and correct copies of
them to Bank.
4.3 Enforceability. Borrower is authorized to execute, deliver and
perform under the Loan Documents. Those documents are valid and binding
obligations of Borrower.
4.4 No Violation. Borrower is not in violation of any law,
regulation or ordinance, or any order of any court or governmental entity. No
provision or obligation of Borrower contained in any of the Loan Documents
violates any of the Requirements, any other applicable law, regulation or
ordinance, or any order or ruling of any court or governmental entity. No such
provision or obligation conflicts with, or constitutes a breach or default
under, any agreement binding or regulating the Property.
4.5 No Claims. There are no claims, actions, proceedings or
investigations pending against Borrower or affecting the Property except for
those previously disclosed by Borrower to Bank in writing. To the best of
Borrower's knowledge, there has been no threat of any such claim, action,
proceeding or investigation, except for those previously disclosed by Borrower
to Bank in writing.
4.6 Financial Information. All financial information which has been
and will be delivered to Bank, including all information relating to the
financial condition of Borrower, or the Property, fairly and accurately
represents the financial condition being reported on. All such information was
prepared in accordance with generally accepted accounting principles
consistently applied, unless otherwise noted. There has been no material
adverse change in any financial condition reported at any time to Bank.
4.7 Accuracy. All reports, documents, instruments, information and
forms of evidence which have been delivered to Bank concerning the Loan or
required by the Loan Documents are accurate in all material respects and are
correct and sufficiently complete to give Bank true and accurate knowledge of
their subject matter. None of them contains any material misrepresentation or
omission.
4.8 Loan in Balance; Adequacy of Loan. The Loan is "in balance" and
the undisbursed Loan funds, together with any sums provided or to be provided
by Borrower as shown in the cost breakdown, are sufficient to construct the
Improvements through completion and to accomplish the purposes contemplated by
the Loan Documents.
4.9 Taxes. Borrower has filed all required state, federal and local
income tax returns and has paid all taxes which are due and payable. Borrower
knows of no basis for any additional assessment of taxes.
4.10 Utilities. All utility services, including gas, water, sewage,
electrical and telephone, which are necessary to develop and occupy the Land
and Improvements are available at or within the boundaries of the Land. In the
alternative, Borrower has taken all steps necessary to assure that all utility
services will be available upon completion of the Improvements.
4.11 Borrower Not a "Foreign Person". Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code
of 1986, as amended from time to time.
4.12 Disclosure to Guarantor. Before Guarantor became obligated in
connection with the Loan, Borrower made full disclosure to Guarantor regarding
Borrower's financial condition and
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Construction Loan Agreement/Pacific United, L.P. Page 13
<PAGE> 14
business operations, the present and former condition, uses and ownership of
the Property, and all other circumstances bearing upon Borrower's ability to
pay and perform its obligations under the Loan Documents.
V. Default and Remedies
5.1 Events of Default. Borrower will be in default under this
Agreement upon the occurrence of any one or more of the following events
("Events of Default"):
(a) The failure of Borrower to pay the Loan or any part
thereof, as it becomes due in accordance with the terms of the Note or any
other Loan Documents and the continuance thereof for a period of at least three
(3) days after notice of such failure from Bank or when accelerated pursuant to
any power to accelerate contained in the Loan Documents; or
(b) Borrower fails to make any required payment of principal
or deposit of funds demanded by Bank under this Agreement within fifteen (15)
days after Bank's written demand; or
(c) Borrower or Guarantor fails to comply with any other
covenant contained in this Agreement and does not remedy or cure such failure
(i) within twenty (20) days after notice of such failure from Bank (the
"Initial Cure Period") or (ii) within sixty (60) days after notice of such
failure from Bank so long as Borrower attempts to cure such failure within the
Initial Cure Period and diligently continues to attempt to cure such failure;
or
(d) Borrower or Guarantor becomes insolvent or the subject of
any bankruptcy or other voluntary or involuntary proceeding, in or out of
court, for the adjustment of debtor-creditor relationships ("Insolvency
Proceeding") and such proceeding is not dismissed within sixty (60) days after
the filing thereof; or
(e) Borrower or Guarantor dissolves or liquidates; or
(f) [Intentionally omitted]; or
(g) Any of the representations or warranties contained in
Article IV above are not true and correct as of the date of any Draw Request
and Borrower does not cure the same within the times provided in Section
5.1(b); or
(h) Any representation or warranty made or given in any of the
Loan Documents proves to be false or misleading in any material respect; or
(i) Construction of the Improvements is abandoned, or, subject
to Force Majeure, development of the Phase I Improvements is not completed on
or before the Phase I Completion Date or development of all of the Phase II
Improvements is not completed on or before the Phase II Completion Date; or
(j) Construction of the Improvements is halted prior to
completion for any period of twenty (20) consecutive days for any cause which
is not beyond the reasonable control of Borrower or any of its contractors or
subcontractors; or
(k) Any governmental, judicial or legal authority having
jurisdiction over the Property orders or requires that construction of the
Improvements be stopped in whole or in part, or any required approval, license
or permit is withdrawn or suspended, and the order, requirement, withdrawal or
suspension remains in effect either (i) for a period of thirty (30) consecutive
days, or (ii) for a total period of ninety (90) days, so long as Borrower
begins within the initial 30 day period and
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Construction Loan Agreement/Pacific United, L.P. Page 14
<PAGE> 15
diligently continues to take steps to remove the effect of the order,
requirement, withdrawal or suspension, and Bank, exercising reasonable
judgment, determines that Borrower is reasonably likely to prevail; or
(l) Borrower is in default in any material respect under the
Engineering Contract, the Construction Contract, any other contract for the
construction of the Improvements, or any Lot Sale Contract or any other
agreement to sell Lots, either (i) for an Initial Cure Period of thirty (30)
consecutive days, or (ii) for a total period of ninety (90) days, so long as
Borrower begins within the Initial Cure Period and diligently continues to cure
the default, and Bank, exercising reasonable judgment, determines that the cure
cannot reasonably be completed at or before expiration of the Initial Cure
Period; or
(m) Borrower fails to comply with any provision contained in
this Agreement other than those provisions elsewhere referred to in this
Section 5.1, and does not cure that failure either (i) within an Initial Cure
Period of thirty (30) consecutive days after written notice from Bank, or (ii)
within ninety (90) days after such written notice, so long as Borrower begins
within the Initial Cure Period and diligently continues to cure the failure,
and Bank, exercising reasonable judgment, determines that the cure cannot
reasonably be completed at or before expiration of the Initial Cure Period; or
(n) Under any of the Loan Documents, an Event of Default (as
defined in that document) occurs; or
(o) There is a material adverse change in Borrower's or
Guarantor's financial condition and Borrower or Guarantor fail to provide other
additional security or assurance of ability to pay and perform their
obligations under the Loan Documents reasonably acceptable to Bank within
twenty (20) days after Bank's written demand.
5.2 Remedies
(a) If an Event of Default occurs under this Agreement, Bank
may exercise any right or remedy which it has under any of the Loan Documents,
or which is otherwise available at law or in equity or by statute, and all of
Bank's rights and remedies shall be cumulative. If any Event of Default
occurs, Bank's obligation to lend under the Loan Documents shall automatically
terminate, and Bank, in its sole discretion, may withhold any one or more
disbursements. Bank may also withhold any one or more disbursements after an
event occurs that with notice or the passage of time could become an Event of
Default. No disbursement of Loan funds by Bank shall cure any default of
Borrower, unless Bank agrees otherwise in writing in each instance.
(b) If Borrower becomes the subject of any Insolvency
Proceeding, all of Borrower's obligations under the Loan Documents shall
automatically become immediately due and payable upon the filing of the
petition commencing such proceeding, all without notice of default, presentment
or demand for payment, protest or notice of nonpayment or dishonor, notice of
intention to accelerate, notice of acceleration, or other notices or demands of
any kind or character, all of which are hereby expressly waived by Borrower.
Upon the occurrence of any other Event of Default, all of Borrower's
obligations under the Loan Documents may become immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, notice of intention to accelerate, notice of
acceleration, or other notices or demands of any kind or character, all of
which are hereby expressly waived by Borrower, all at Bank's option,
exercisable in its sole discretion. If such acceleration occurs, Bank may
apply the undisbursed Loan funds, and any sums in the Account (as defined in
Article III of Exhibit F) or the Borrower's Funds Account to the obligations of
Borrower under the Loan Documents, in any order and proportions that Bank in
its sole discretion may choose.
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Construction Loan Agreement/Pacific United, L.P. Page 15
<PAGE> 16
(c) Also upon any Event of Default, Bank shall have the right
in its sole discretion to enter and take possession of the Property, whether in
person, by agent or by court-appointed receiver, and to take any and all
actions which Bank in its sole discretion may consider necessary to complete
construction of the Improvements, including making changes in plans,
specifications, work or materials and entering into, modifying or terminating
any contractual arrangements, all subject to Bank's right at any time to
discontinue any work without liability. If Bank chooses to complete the
Improvements, it shall not assume any liability to Borrower or any other person
for completing the Improvements, or for the manner or quality of construction
of the Improvements, and Borrower expressly waives any such liability. If Bank
exercises any of the rights or remedies provided in this clause (c), that
exercise shall not make Bank, or cause Bank to be deemed to be, a partner or
joint venturer of Borrower. Bank in its sole discretion may choose to complete
construction in its own name. All sums which are expended by Bank in
completing construction shall be considered to have been disbursed to Borrower
and shall be secured by the Deed of Trust and any other collateral held by Bank
in connection with the Loan; any sums of principal shall be considered to be an
additional loan to Borrower bearing interest at the Default Rate, as defined in
the Note, and shall be secured by the Deed of Trust and any other collateral
held by Bank in connection with the Loan. For these purposes Bank, in its sole
discretion, may reallocate any line item or cost category of the cost
breakdown.
VI. Arbitration
6.1 Mandatory Arbitration. Any controversy or claim between or among
the parties, including those arising out of or relating to this Agreement or
the Loan Documents and any claim based on or arising from an alleged tort,
shall at the request of any party be determined by arbitration conducted in
Dallas, Texas. THE ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH THE UNITED
STATES ARBITRATION ACT (TITLE 9, U.S. CODE), NOTWITHSTANDING ANY CHOICE OF LAW
PROVISION IN THIS AGREEMENT, AND UNDER THE COMMERCIAL RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. The arbitrator(s) shall be an attorney(s) having no
less than seven (7) years experience in contracts and litigation relating to
commercial construction. The arbitrator(s) shall give effect to statutes of
limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrator(s). Judgment upon
the arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief. No
provision of this Section 6.1 shall limit the right of any party to this
Agreement (i) to exercise self-help remedies such as setoff, foreclosure
against or sale of any real or personal property collateral or security, or to
obtain provisional or ancillary remedies from a court of competent jurisdiction
before, after or during the pendency of any arbitration or other proceeding or
(ii) seek or obtain injunctive or similar relief during the pendency of any
arbitration or other proceeding except relating directly to the subject matter
of the arbitration proceeding. Notwithstanding the foregoing, during the
pendency of arbitration proceedings that are initiated at the request of Bank
and which are limited to matters for which Bank has requested arbitration
(including any related matters for which Borrower has requested concurrent
arbitration), Bank hereby agrees that it will not exercise its self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security. Notwithstanding the foregoing, Bank, shall
have the unilateral right to dismiss any arbitration proceeding commenced at
Bank's request and following three (3) days' notice to Borrower of Bank's
election to dismiss such arbitration proceeding, the provisions of the
preceding sentence shall not apply. In any subsequent judicial proceeding,
Bank's election to dismiss such arbitration proceeding shall be without
prejudice to Bank's or Borrower's claims or defenses in respect of the subject
matter of that arbitration proceeding. The exercise of a remedy does not waive
the right of either party to resort to arbitration. At Bank's option,
foreclosure under the deed of trust may be accomplished either by exercise of
power of sale under the deed of trust or by judicial foreclosure.
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Construction Loan Agreement/Pacific United, L.P. Page 16
<PAGE> 17
VII. Miscellaneous Provisions
7.1 No Waiver; Consents. Each waiver by Bank must be in writing, and
no waiver shall be construed as a continuing waiver. No waiver shall be
implied from Bank's delay in exercising or failure to exercise any right or
remedy against Borrower or any security. Consent by Bank to any act or
omission by Borrower shall not be construed as a consent to any other or
subsequent act or omission or as a waiver of the requirement for Bank's consent
to be obtained in any future or other instance. All rights and remedies of
Bank are cumulative.
7.2 Purpose and Effect of Bank Approval. Bank's approval of any
matter in connection with the Loan shall be for the sole purpose of protecting
Bank's security and rights. No such approval shall result in a waiver of any
default of Borrower. In no event shall Bank's approval be a representation of
any kind with regard to the matter being approved.
7.3 No Commitment to Increase Loan. From time to time, Bank may
approve changes to the Plans and Specifications at Borrower's request, and may
also require Borrower to make corrections to the work of construction, all on
and subject to the terms and conditions of this Agreement. Borrower
acknowledges that no such action or other action by Bank shall in any manner
commit or obligate Bank to increase the amount of the Loan.
7.4 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and benefit of Bank and Borrower and their
permitted successors and assigns. No trust fund is created by this Agreement
and no other persons or entities shall have any right of action under this
Agreement or any right to the Loan funds.
7.5 Joint and Several Liability. If Borrower consists of more than
one person or entity, each shall be jointly and severally liable to Bank for
the faithful performance of this Agreement.
7.6 Notices. All notices given under this Agreement shall be in
writing and shall be given by personal delivery, overnight receipted courier
(such as Federal Express), or by registered or certified United States mail,
postage prepaid, sent to the party at its address appearing below its
signature. Notices shall be effective upon receipt or when proper delivery is
refused. Addresses for notice may be changed by either party by notice to the
other party in accordance with this Section 7.6. Service of any notice on any
one Borrower shall be effective service on Borrower for all purposes.
7.7 Authority to File Notices. Borrower irrevocably appoints Bank as
its attorney-in-fact, with full power of substitution, to file for record, at
Borrower's cost and expense and in Borrower's name, any notices of completion,
notices of cessation of labor, or any other notices that Bank in its reasonable
discretion may consider necessary or desirable to protect its security, if
Borrower fails to do so within three (3) days after Bank's written request.
7.8 Actions. Bank shall have the right, but not the obligation, to
commence, appear in, and defend any action or proceeding which might affect its
security or its rights, duties or liabilities relating to the Loan, the
Property, or any of the Loan Documents. Borrower shall pay promptly on demand
all of Bank's reasonable out-of-pocket costs, expenses, and legal fees and
expenses of Bank's counsel incurred in those actions or proceedings.
7.9 Attorneys' Fees. If any lawsuit or arbitration is commenced
which arises out of or relates to this Agreement, the Loan Documents or the
Loan, the prevailing party shall be entitled to recover from each other party
such sums as the court or arbitrator may adjudge to be reasonable attorneys'
fees in the action or arbitration, in addition to costs and expenses otherwise
allowed by law. In all other situations, including any matter arising out of
or relating to any Insolvency Proceeding, Borrower agrees to pay all of Bank's
costs and expenses, including reasonable attorneys' fees, which
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Construction Loan Agreement/Pacific United, L.P. Page 17
<PAGE> 18
may be incurred in enforcing or protecting Bank's rights or interests. From
the time(s) incurred until paid in full to Bank, all such sums shall bear
interest at the Default Rate.
7.10 In-House Counsel Fees. Whenever Borrower is obligated to pay or
reimburse Bank for any attorneys' fees which may be incurred in enforcing or
protecting Bank's rights or interests, those fees shall include the allocated
costs for services of in-house counsel.
7.11 APPLICABLE LAW. THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE
STATE OF TEXAS, WITHOUT REGARD TO THE CHOICE OF LAW RULES OF THAT STATE.
7.12 Heirs, Successors and Assigns; Participations. The terms of this
Agreement shall bind and benefit the heirs, legal representatives, successors
and assigns of the parties; provided, however, that Borrower may not assign
this Agreement or any Loan funds, or assign or delegate any of its rights or
obligations, without the prior written consent of Bank in each instance. Bank
in its sole discretion may sell or assign participations or other interests in
all or part of the Loan on the terms and subject to the conditions of the Loan
Documents, all without notice to or the consent of Borrower. Also without
notice to or the consent of Borrower, Bank may disclose to any actual or
prospective purchaser of any securities issued or to be issued by Bank, and to
any actual or prospective purchaser or assignee of any participation or other
interest in the Loan or any other loans made by Bank to Borrower (whether under
this Agreement or otherwise), any financial or other information, data or
material in Bank's possession relating to Borrower, the Loan, the Improvements
or the Property.
7.13 Relationships With Other Bank Customers. From time to time, Bank
may have business relationships with Borrower's customers, suppliers,
contractors, tenants, partners, shareholders, officers or directors, or with
businesses offering products or services similar to those of Borrower, or with
persons seeking to invest in, borrow from or lend to Borrower. Borrower agrees
that Bank may extend credit to such parties and may take any action it may deem
necessary to collect the credit, regardless of the effect that such extension
or collection of credit may have on Borrower's financial condition or
operations. Borrower further agrees that in no event shall Bank be obligated
to disclose to Borrower any information concerning any other Bank customer.
7.14 Disclosure to Title Company. Without notice to or the consent of
Borrower, Bank may disclose to any title insurance company which insures any
interest of Bank under the Deed of Trust (whether as primary insurer, coinsurer
or reinsurer) any information, data or material in Bank's possession relating
to Borrower, Guarantor, the Loan, the Improvements or the Property, other than
confidential financial information submitted to Bank in connection with the
Loan.
7.15 Improvement District. Borrower shall not vote in favor of, or
directly or indirectly advocate or assist in the incorporation of any part of
the Property into any improvement or community facilities district, special
assessment district or other district without Bank's prior written consent in
each instance, which consent will not be unreasonably withheld.
7.16 Restriction on Personal Property. Borrower shall not sell,
convey, or otherwise transfer or dispose of its interest in any personal
property in which Bank has a security interest, or contract to do any of the
foregoing, without the prior written consent of Bank in each instance.
7.17 Force Majeure. If the work of construction is directly affected
and delayed by fire, storm or other acts of God, strike, lockout, acts of
public enemy, riot, insurrection, or governmental regulation of the sale or
transportation of materials, supplies or labor, Borrower must notify Bank in
writing within five (5) calendar days after the event occurs which causes the
delay. So long as no Event of Default has occurred and is continuing, Bank
shall extend the Phase I Completion Date or the Phase II Completion Date (and
shall consent to any applicable extension of takedown schedule under any
affected Lot Sale Contract), as applicable, by a period of time equal to the
period of the
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Construction Loan Agreement/Pacific United, L.P. Page 18
<PAGE> 19
delay, but not more than a total of ninety (90) days. Such an extension,
however, shall not affect the time for performance of, or otherwise modify, any
of Borrower's other obligations under the Loan Documents or the maturity of the
Note.
7.18 Severability. The invalidity or unenforceability of any one or
more provisions of this Agreement shall in no way affect any other provision.
7.19 Interpretation. Whenever the context requires, all words used in
the singular will be construed to have been used in the plural, and vice versa,
and each gender will include any other gender. The captions of the sections of
this Agreement are for convenience only and do not define or limit any terms or
provisions. The word "include(s)" means "include(s), without limitation," and
the word "including" means "including, but not limited to." No listing of
specific instances, items or matters in any way limits the scope or generality
of any language of this Agreement. Time is of the essence in the performance
of this Agreement by Borrower. The exhibits to this Agreement are hereby
incorporated in this Agreement.
7.20 Maximum Interest. Regardless of any provision contained in this
Agreement or in any of the other Loan Documents, Bank shall never be deemed to
have contracted for or be entitled to receive, collect or apply as interest on
the Loan, any amount in excess of the maximum rate of interest permitted to be
charged by applicable law, and, in the event that Bank ever receive, collect or
apply as interest any such excess, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance of
the Loan, and, if the principal balance of the Loan is paid in full, any
remaining excess shall forthwith be paid to Borrower. In determining whether
or not the interest paid or payable under any specific contingency exceeds the
highest lawful rate, Borrower and Bank shall, to the maximum extent permitted
under applicable law (i) characterize any non-principal payment (other than
payments which are expressly designated as interest payments hereunder) as an
expense, fee, or premium, rather than as interest payments hereunder) as an
expense, fee, or premium, rather than as interest, (ii) exclude voluntary
prepayments and the effect thereof, and (iii) spread the total amount of
interest throughout the entire contemplated term of the Loan so that the
interest rate is uniform throughout such term.
7.21 Amendments. This Agreement may not be modified or amended except
by a written agreement signed by the parties.
7.22 Counterparts. This Agreement and any attached consents or
exhibits requiring signatures may be executed in counterparts, and all
counterparts shall constitute but one and the same document.
7.23 Language of Agreement. The language of this Agreement shall be
construed as a whole according to its fair meaning, and not strictly for or
against any party.
7.24 [Intentionally omitted]
7.25 Integration and Relation to Loan Commitment. The Loan Documents
(a) integrate all the terms and conditions mentioned in or incidental to this
Agreement, (b) supersede all oral negotiations and prior writings with respect
to their subject matter, including Bank's loan commitment to Borrower, and (c)
are intended by the parties as the final expression of the agreement with
respect to the terms and conditions set forth in those documents and as the
complete and exclusive statement of the terms agreed to by the parties. No
representation, understanding, promise or condition shall be enforceable
against any party unless it is contained in the Loan Documents. If there is
any conflict between the terms, conditions and provisions of this Agreement and
those of any other agreement or instrument, including any other Loan Document,
the terms, conditions and provisions of this Agreement shall prevail.
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Construction Loan Agreement/Pacific United, L.P. Page 19
<PAGE> 20
7.26 No Oral Agreements.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
As used herein, the term "Loan Agreement" means one or more promises,
promissory notes, agreements, undertakings, security agreements, deeds of trust
or other documents, or commitments, or any combination of those actions or
documents relating to the Loan. This Notice is given with respect to the Loan,
pursuant to Section 26.02 of the Texas Business and Commerce Code.
Date: August 6, 1997
BORROWER:
--------
PACIFIC UNITED, L.P.,
a Texas limited partnership
By: Pacific United Development Corp.,
a Nevada corporation,
its sole general partner
By: /s/ COLEMAN BRADLEY, Pres.
------------------------------
Coleman Bradley,
President
Addresses Where Notices to
Borrower(s) are to be Sent:
2445 Midway, Suite 106
Carrollton, Texas 75006
Telephone No.: (972) 447-0401
Telecopy No.: (972) 447-0783
BANK:
----
BANK OF AMERICA TEXAS, N.A.,
a national banking association
By: /s/ DAVID S. OWENS
-------------------------------------
Name: DAVID S. OWENS
-------------------------------
Title: VICE PRESIDENT
------------------------------
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Construction Loan Agreement/Pacific United, L.P. Page 20
<PAGE> 21
Addresses Where Notices to
Bank are to be Sent:
1925 West John Carpenter Freeway
Irving, Texas 75063
GUARANTOR:
---------
NHC HOLDINGS CORP.,
a Nevada corporation
By: /s/ BILL C. BRADLEY
-------------------------------------
Name: BILL C. BRADLEY
-------------------------------
Title: CEO
------------------------------
Addresses Where Notices to
Guarantor are to be Sent:
3200 Southwest Freeway, Suite 1220
Houston, Texas 77027
Attention: Legal Department, Chief General
Counsel
EXHIBITS:
Exhibit A Property Description
Exhibit B Description of Improvements, Contracts and Plans and
Specifications
Exhibit C Loan Documents
Exhibit D Cost Breakdowns
Exhibit D-1 Initial Cost Breakdowns
Exhibit D-2 Form of Revised Cost Breakdowns
Exhibit E Borrower's Pro Forma Schedule
Exhibit F Disbursement Schedule and Conditions
Exhibit G Lot Sale Contract
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Construction Loan Agreement/Pacific United, L.P. Page 21
<PAGE> 1
EXHIBIT 10.1(b)
PROMISSORY NOTE
SECURED BY DEED OF TRUST
$3,675,000.00 August 6, 1997 Irving, Texas
Interest Rate Available: Reference Rate plus three-fourths percent (0.75%) per
year;
Maturity Date: August 6, 1999 (see Section 8 below for extension option).
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1. FOR VALUE RECEIVED, PACIFIC UNITED, L.P., a Texas limited
partnership ("Borrower"), promises to pay to the order of BANK OF AMERICA
TEXAS, N.A. ("Bank") at Bank's Real Estate Division Office in Irving, Dallas
County, Texas, or at such other place as Bank from time to time may designate,
the principal sum of Three Million Six Hundred Seventy- Five Thousand and
No/100 Dollars ($3,675,000.00) (the "Maximum Loan Amount"), or so much thereof
as may be advanced, plus interest as specified in this Note. This Note
evidences a construction loan ("Loan") from Bank to Borrower.
2. This Note is secured by a Deed of Trust, Security Agreement,
Financing Statement and Assignment of Rental of even date herewith ("Deed of
Trust") covering certain real and personal property in Dallas County, Texas, as
therein described (the "Property"). It may also be secured by other
collateral. This Note and the Deed of Trust are two of several Loan Documents,
as defined and designated in a construction loan agreement ("Loan Agreement")
between Bank and Borrower. It may also be secured by other collateral. Some
or all of the Loan Documents, including the Loan Agreement, contain provisions
for the acceleration of the maturity of this Note.
3. The principal sum outstanding from time to time under this
Note shall bear interest at Bank's Reference Rate plus three-fourths percent
(0.75%) per year (the "Reference-based Rate"). As used here, "Reference Rate"
means the per annum rate of interest publicly announced from time to time by
Bank at Irving, Texas, as its Reference Rate. The Reference Rate is set by
Bank based on various factors, including. Bank's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing loans. Bank may price loans at, above or below the Reference Rate.
Any change in the Reference Rate shall take effect on the day specified in the
public announcement of such change. Interest shall be calculated on the basis
of a 365-day year and actual days elapsed.
4. Accrued interest shall be payable on the tenth (10th) day of
each calendar month. The first installment of interest shall be payable on
September 10, 1997.
5. Prior to the Maturity Date, principal shall be payable in
quarterly installments of Three Hundred Thousand and No/100 Dollars
($300,000.00) each, commencing on the date (the "Initial Principal Payment
Date") that is the tenth (10th) day of the calendar month immediately following
the earlier to occur of (i) the Phase I Completion Date (as such term is
defined in the Loan
Promissory Note ($3,675,000)/Pacific United, L.P.
Page 1
<PAGE> 2
Agreement) or (ii) May 10, 1998, with additional installments being due and
payable quarter-annually thereafter, on the tenth (10th) day of each third
month thereafter from the Initial Principal Payment Date until the Maturity
Date, when the entire unpaid balance of principal and accrued interest shall be
due and payable. Prepayments of principal made during a calendar quarter in
connection with Borrower's sale of Lots (as such term is defined in the Loan
Agreement) shall be credited against the next maturing installment of principal
due hereunder.
6. [Intentionally omitted]
7. (Intentionally omitted].
8. (a) All unpaid principal and all accrued, unpaid interest
shall be due and payable on the Maturity Date.
(b) "Maturity Date" shall mean August 6, 1999, unless
extended to August 6, 2001, pursuant to subsection (c) following.
(c) So long as no Event of Default has occurred and is
continuing and no event has occurred that with notice or the passage of time
could become an Event of Default, Bank shall extend the Maturity Date to August
6, 2001, upon the occurrence of the following:
(i) Receipt by Bank from Borrower, on a date
which is not more than ninety (90) days before and not less
than sixty (60) days before the Maturity Date, of a written
extension request (provided, Borrower may request such
extension more than 90 days prior to the Maturity Date in
connection with commencing construction of the "Phase II
Improvements", as such term is defined in the Loan Agreement);
(ii) Receipt by Bank of an appraisal of the
Property (at Borrower's expense), in form and substance
satisfactory to Bank, indicating that the value of the
Property is equal to or greater than the quotient of (1) the
outstanding principal balance of the Loan as of the date of
calculation (after credit for any principal prepayment made by
Borrower), divided by (2) seventy percent (70%);
(iii) Borrower shall have sold by August 4, 1999
not less than thirty-six (36) Lots upon the terms set forth in
the Existing Lot Sales Contract (as defined in the Loan
Agreement);
(iv) Borrower shall execute and deliver to Bank
such documents and instruments as Lender shall reasonably
require to evidence such extension of the Maturity Date and of
the hens, rights, security interests, and guaranties securing
the Loan; and
Promissory Note ($3,675,000)/Pacific United, L.P.
Page 2
<PAGE> 3
(v) Borrower shall procure an endorsement to the
mortgagee policy of title insurance insuring the hen of the
Deed of Trust under Procedural Rule P9b3 of the State Board of
Insurance.
9. Borrower may prepay some or all of the principal under this
Note without premium or penalty.
10. If Borrower fails to make any payment of principal or interest
within fifteen (15) days after it becomes due and payable, Borrower agrees to
pay interest on the late payment at an annual rate (the "Default Rate") equal
to the lesser of (i) three (3) percent in excess of the Reference-based Rate or
(ii) the highest non-usurious rate permitted by applicable law, from the date
the payment becomes due until Borrower pays in full the amount past due.
11. From and after maturity of this Note, whether by acceleration
or otherwise, all sums then due and payable under this Note, including all
principal and all accrued and unpaid interest, shall bear interest until paid
in full at the Default Rate.
12. Borrower will be in default under this Note and the Deed of
Trust upon the occurrence of any one or more of the following events (an "Event
of Default"), but notwithstanding anything herein to the contrary, it is
expressly understood and agreed that the Bank shall not undertake to exercise
any of its rights and remedies hereunder (except for required notices) until
after the expiration of the applicable cure period, if any, for each Event of
Default:
(a) The failure of Borrower to pay the Note or any part
thereof, as it becomes due in accordance with the terms of the Note or any
other Loan Documents and the continuance thereof for a period of at least three
(3) days after notice of such failure from Bank; or when accelerated pursuant
to any power to accelerate contained in this Note, the Deed of Trust, or any of
the other Loan Documents; or
(b) Borrower fails to punctually and properly to perform
any other covenant, agreement, obligation, or condition contained herein, or in
the other Loan Documents, or any other instrument securing or evidencing the
Note, or any part thereof, or executed in connection therewith and does not
remedy or cure such failure W within twenty (20) days after notice of such
failure from Bank (the "Initial Cure Period") or (ii) within sixty (60) days
after notice of such failure from Bank so long as Borrower attempts to cure
such failure within the Initial Cure Period and diligently continues to attempt
to cure such failure; or
(c) The discovery by Bank that any statement,
representation, or warranty in this Note, the Deed of Trust, the Loan Documents
or in any writing ever delivered to Bank pursuant to the provisions hereof or
thereof, is false, misleading, or erroneous in any material respect; or
(d) The ownership of the Property, or any part thereof,
or any legal or equitable interest therein, becomes vested in a person or
entity other than Borrower, except in connection with a sale of portions of the
Property in the manner permitted by the Loan Agreement; or
Promissory Note ($3,675,000)/Pacific United, L.P.
Page 3
<PAGE> 4
(e) Any change in the ownership of more than forty nine
percent (49%) of the partnership interests of Borrower in the aggregate at any
time or from time to time after the date of this Note, except for a transfer to
the general partner or Guarantor; or
(f) Borrower shall W execute a general assignment for the
benefit of Borrower's creditors, or (ii) become the subject, voluntarily or
involuntarily, of any bankruptcy, insolvency or reorganization proceeding, or
(iii) admit in writing Borrower's inability to pay Borrower's debts generally
as they become due, or (iv) apply for or consent to the appointment of a
custodian, receiver, trustee, or liquidator of Borrower or of all or a
substantial part of Borrower's assets, or (v) file a voluntary petition seeking
protection under any debtor's relief, or other insolvency law now or hereafter
existing, or (vi) file an answer admitting the material allegations of, or
consenting to, or default in filing an answer to, a petition filed against
Borrower in any bankruptcy, reorganization, or other insolvency proceedings, or
(vii) institute or voluntarily be or become a party to any other judicial
proceedings intended to effect a discharge of the debts of Borrower, in whole
or in part, or a postponement of the maturity or the collection thereof, or a
suspension of any of the rights or powers of Bank granted in the Loan Documents
and such proceeding is not dismissed within sixty (60) days of the filing
thereof; or
(g) An order, judgment, or decree shall be entered by any
court of competent jurisdiction appointing a custodian, receiver, trustee, or
liquidator of Borrower of all or any substantial part of Borrower's assets; or
(h) The failure of Borrower to pay any material money
judgment against it at least ten (10) days prior to the date on which the
assets of Borrower may be sold to satisfy such judgment; or
(i) The failure to have discharged within a period of
thirty (30) days after the commencement thereof any attachment, sequestration,
or similar proceedings against any of Borrower's assets; or
(j) The liens, mortgages or security interests created
(or purported to be created) by the Deed of Trust or by the other Loan
Documents should become unenforceable, or cease to be first priority liens,
mortgages or security interests and such unenforceability or priority is not
remedied to the satisfaction of Bank within twenty (20) days after notification
thereof to Borrower, or;
(k) The liquidation, dissolution or termination of
Borrower; or
(l) Any sale, trade, transfer, assignment, exchange or
other disposition of the Property, except to Bank and except for sales of Lots
for which Borrower is entitled to a release under the Deed of Trust; or
(m) An Event of Default occurs under any of the Loan
Documents.
Promissory Note ($3,675,000)/Pacific United, L.P.
Page 4
<PAGE> 5
If any "Event of Default" occurs, at the holder's option, exercisable
in its sole discretion, an sums of principal and interest under this Note shall
become immediately due and payable without notice of presentment or demand for
payment, protest or notice of nonpayment or dishonor, or other notices or
demands of any kind or character.
13. It shall be an "Event of Default" under this Note if Borrower
becomes the subject of any bankruptcy, receivership or other voluntary or
involuntary insolvency proceeding described in Section 12(f) ("Insolvency
Proceeding") which is not dismissed within sixty (60) days of the filing
thereof. If that happens, and all sums of principal and interest under this
Note shall automatically become immediately due and payable without notice of
default, presentment or demand for payment, protest or notice of nonpayment or
dishonor, notice of intention to accelerate or other notices or demands of any
kind or character.
14. All amounts payable under this Note are payable in lawful
money of the United States during normal business hours on a Banking Day, as
defined below.
15. If any lawsuit or arbitration is commenced which arises out of
or relates to this Note, the Loan Documents or the Loan, the prevailing party
shall be entitled to recover from each other party such sums as the court or
arbitrator may adjudge to be reasonable attorneys' fees in the action or
arbitration, in addition to costs and expenses otherwise allowed by law. In
all other situations, including any matter arising out of or relating to any
Insolvency Proceeding, Borrower agrees to pay all of Bank's costs and expenses,
including reasonable attorneys' fees, which may be incurred in enforcing or
protecting Banks rights or interests. From the time(s) incurred until paid in
full to Bank, all such sums shall bear interest at the Default Rate.
16. Whenever Borrower is obligated to pay or reimburse Bank for
any attorneys' fees those fees shall include the allocated reasonable costs for
services of in-house counsel after the occurrence of an Event of Default.
17. This Note is governed by the laws of the State of Texas,
without regard to the choice of law rules of that State.
18. Borrower agrees that the holder of this Note may accept
additional or substitute security for this Note, or release any security or any
party liable for this Note, or extend or renew this Note, all without notice to
Borrower and without affecting the liability of Borrower.
19. If Bank delays in exercising or fails to exercise any of its
rights under this Note, that delay or failure shall not constitute a waiver of
any of Bank's rights, or of any breach, default or failure of condition of or
under this Note. No waiver by Bank of any of its rights, or of any such
breach, default or failure of condition shall be effective, unless the waiver
is expressly stated in a writing signed by Bank. All of Bank's remedies in
connection with this Note or under applicable law shall be cumulative, and
Bank's exercise of any one or more of those remedies shall not constitute an
election of remedies.
Promissory Note ($3,675,000)/Pacific United, L.P.
Page 5
<PAGE> 6
20. Regardless of any provision contained in this Note or in any
of the other Loan Documents, Bank shall never be deemed to have contracted for
or be entitled to receive, collect or apply as interest on the Loan, pursuant
to this Note or any other Loan Document, or otherwise, any amount in excess of
the maximum rate of interest permitted to be charged by applicable law, and, in
the event that Bank ever receives, collects or applies as interest any such
excess, such amount which would be excessive interest shall be applied to the
reduction of the unpaid principal balance of the Loan, and, if the principal
balance of the Loan is paid in full, any remaining excess shall forthwith be
paid to Borrower. In determining whether or not the interest paid or payable
under any specific contingency exceeds the highest lawful rate, Borrower and
Bank shall, to the maximum extent permitted under applicable law, (a)
characterize any non- principal payment as an expense, fee, or premium, rather
than as interest, (b) exclude voluntary prepayments and the effect thereof, and
W spread the total amount of interest throughout the entire contemplated term
of the Loan so that the interest rate is uniform throughout such term;
provided, that if the Loan is paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
term thereof exceeds the maximum lawful rate, Bank shall refund to Borrower the
amount of such excess, or credit the amount of such excess against the
aggregate unpaid principal balance of the Loan at the time in question.
21. Any controversy or claim between or among the parties,
including those arising out of or relating to this Agreement or the Loan
Documents and any claim based on or arising from an alleged tort, shall at the
request of any party be determined by arbitration conducted in Dallas, Texas.
THE ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH THE UNITED STATES
ARBITRATION ACT (TITLE 9, U.S. CODE), NOTWITHSTANDING ANY CHOICE OF LAW
PROVISION IN THIS AGREEMENT, AND UNDER THE COMMERCIAL RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. The arbitrator(s) shall be an attorney(s) having
experience in contracts and litigation relating to commercial construction.
The arbitrator(s) shall give effect to statutes of limitation in determining
any claim. Any controversy concerning whether an issue is arbitrable shall be
determined by the arbitrators). Judgment upon the arbitration award may be
entered in any court having jurisdiction. The institution and maintenance of
an action for judicial relief or pursuit of a provisional or ancillary remedy
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief. No provision of this Section 21
shall limit the right of any party to this Agreement (i) to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies
from a court of competent jurisdiction before, after or during the pendency of
any arbitration or other proceeding or (ii) seek or obtain injunctive or
similar relief during the pendency of any arbitration or other proceeding
except relating directly to the subject matter of the arbitration proceeding.
Notwithstanding the foregoing, during the pendency of arbitration proceedings
that are initiated at the request of Bank and which are limited to matters for
which Bank has requested arbitration (including any related matters for which
Borrower has requested concurrent arbitration), Bank hereby agrees that it will
not exercise its self-help remedies such as setoff, foreclosure against or sale
of any real or personal property collateral or security. Notwithstanding the
foregoing, Bank, shall have the unilateral right to dismiss any arbitration
proceeding commenced at Banks request and following three (3) days' notice to
Borrower of Bank's election to dismiss such arbitration
Promissory Note ($3,675,000)/Pacific United, L.P.
Page 6
<PAGE> 7
proceeding, the provisions of the preceding sentence shall not apply. In any
subsequent judicial proceeding, Bank's election to dismiss such arbitration
proceeding shall be without prejudice to Bank's or Borrower's claims or
defenses in respect of the subject matter of that arbitration proceeding. The
exercise of a remedy does not waive the right of either party to resort to
arbitration. At bank's option, foreclosure under the deed of trust may be
accomplished either by exercise of power of sale under the deed of trust or by
judicial foreclosure.
22. This Note inures to and binds the heirs, legal
representatives, successors and assigns of Borrower and Bank; provided,
however, that Borrower may not assign this Note or any Loan funds, or assign or
delegate any of its rights or obligations, without the prior written consent of
Bank in each instance. Bank in its sole discretion may transfer this Note, and
may sell or assign participations or other interests in all or part of the
Loan, on the terms and subject to the conditions of the Loan Documents, with
notice to Borrower. Without notice to or the consent of Borrower, Bank may
disclose to any actual or prospective purchaser of any securities issued or to
be issued by Bank, and to any actual or prospective purchaser or assignee of
any participation or other interest in this Note, the Loan or any other loans
made by Bank to Borrower (whether evidenced by this Note or otherwise), any
financial or other information, data or material in Banks possession relating
to Borrower, the Loan or the Property, including any improvements on it if such
purchaser or assignee of any participation or other interest in this Note
agrees to maintain any financial information and other information, data and
material relating to Borrower confidential.
23. As used in this Note, the terms "Bank", "holder" and "holder
of this Note" are interchangeable. As used in this Note, the word "include(s)"
means "include(s), without limitation," and the word "including" means
"including, but not limited to." The term "Banking Day" means a day other than
a Saturday or Sunday, on which Bank is open for business in Dallas, Texas.
24. All notices shall be in writing and shall be given by personal
delivery, overnight receipted courier (such as Federal Express), or by
registered or certified United States mail, postage prepaid, sent to the party
at its address appearing below its signature. Notices shall be effective upon
receipt or when proper delivery is refused. Addresses for notice may be
changed by either party by notice to the other party in accordance with this
Section 24. Service of any notice on any one Borrower shall be effective
service on Borrower for all purposes. Contemporaneously with sending a notice
of default to Borrower, Bank shall send a copy of such notice to NHC Holdings
Corp.
25. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Promissory Note ($3,675,000)/Pacific United, L.P.
Page 7
<PAGE> 8
BORROWER:
PACIFIC UNITED, L.P.,
a Texas limited partnership
By: Pacific United Development Corp.,
a Nevada corporation
its sole general partner
By: /s/ COLEMAN BRADLEY
------------------------------
Coleman Bradley,
President
Address for notices to Borrower(s):
2445 Midway, Suite 106
Carrollton, Texas 75006
Telephone No.: (972) 447-0401
Telecopy No.: (972) 447-0783
with a copy to:
NHC Holdings Corp.
Suite 1220
3200 Southwest Freeway
Houston, Texas 77027
Promissory Note ($3,675,000)/Pacific United, L.P.
Page 8
<PAGE> 1
EXHIBIT 10.1(c)
DEED OF TRUST, SECURITY AGREEMENT,
FINANCING STATEMENT, AND ASSIGNMENT OF RENTAL
THE STATE OF TEXAS )
) KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF DALLAS )
THIS DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT, AND
ASSIGNMENT OF RENTAL is executed as of the date last shown below, by PACIFIC
UNITED, L. P., a Texas limited partnership ("Grantor"), to DAVID S. OWENS whose
address is 1925 W. John Carpenter Freeway, Irving, Dallas County, Texas, as
Trustee ("Trustee") for the benefit of BANK OF AMERICA TEXAS, N.A. whose
address is 1925 W. John Carpenter Freeway, Irving, Texas 75063 (such party,
together with any holder or holders of all or any part of the "Secured
Indebtedness" (as hereinafter defined) shall be referred to herein as
"Beneficiary").
ARTICLE I
DEFINITIONS
Section 1.1. As used herein, the following terms shall have the definitions
assigned to them as follows:
"Beneficiary" has the meaning assigned to it in the preamble hereof.
"Code" means the Uniform Commercial Code as adopted in the State of
Texas.
"Collateral" means all of Grantor's right, title, and interest, to the
extent assignable or transferable, now owned or hereafter acquired, in and to
the following described properties and interests and all replacements or
substitutes therefor and all products and proceeds thereof, and accessions
thereto:
(1) All portions of the Personal Property which are
either fixtures or personal property, tangible or intangible; and
(2) All accounts, inventory, instruments, chattel paper,
documents, consumer goods, insurance proceeds, leases, contract
rights, and general intangibles now, or hereafter related to, any of
the Real Estate, including, without limitation, the following:
(A) All contracts now or hereafter entered into
by and between Grantor, as owner, and any "Original
Contractor" (as such term is defined in Section 53.001(7) of
the Texas Property Code), or any party, as well as all right,
title, and interest of Grantor in, to, and under any
subcontracts, providing for the construction (original,
restorative or otherwise) of any of the Improvements, and of
any other buildings, structures or improvements to, or on, the
Real Estate (or any part thereof), or the furnishing of any
materials, supplies, equipment, or labor in connection with
any such construction;
(B) All of the plans, specifications, and
drawings (including, without limitation, plot plans,
foundation plans, utility facilities plans, floor plans,
elevations plans, framing plans, cross-sections of walls
plans, mechanical plans, electrical plans, architectural and
engineering plans and specifications, and architectural and
engineering studies and analyses) heretofore or hereafter
prepared by any architect or engineer with respect to any of
the Real Estate;
Deed of Trust/Pacific United, L.P. Page 1
<PAGE> 2
(C) All agreements now or hereafter entered into
with any party with respect to architectural, engineering,
management, brokerage, promotional, marketing, or consulting
services rendered or to be rendered, with respect to the
planning, design, inspection, or supervision of the
construction, development, management, marketing, promotion,
leasing, operation, or sale of any of the Real Estate;
(D) All commitments (and the proceeds therefrom)
issued by any lenders to finance any of the Mortgaged
Property;
(E) Any completion bonds, performance bonds,
labor and material payment bonds, and any other bonds (and the
proceeds therefrom) relating to any of the Real Estate or to
any contract providing for construction of any of the
Improvements or any other buildings, structures, or
improvements to, or on, any of the Real Estate;
(F) All rights or awards due to Grantor arising
out of any eminent domain proceedings for the taking or for
loss of value of any of the Real Estate;
(G) All rents, issues, profits, and deposits due
to Grantor, as lessor, under any lease covering any of the
Real Estate;
(H) All trademarks, trade names, or symbols under
which any of the Real Estate is operated or the business of
Grantor at the Real Estate is conducted;
(I) All accounts receivable arising out of the
leasing and operation of, or the business conducted at or in
relation to, any of the Real Estate;
(J) All monetary deposits which Grantor has been,
or may be, required to give to any public or private utility
with respect to utility services furnished, or to be
furnished, to the Real Estate;
(K) All contracts of sale and options relating to
the disposition of any of the Real Estate;
(L) All products and proceeds arising by virtue
of any transaction related to the disposition of any of the
Mortgaged Property;
(M) All deposits of cash, securities, or other
property which may be held at any time, and from time to time,
by Grantor to secure the performance by each "Lessee" (as
hereinafter defined) of such Lessee's covenants, agreements,
and obligations under any "Lease" (as hereinafter defined);
(N) All permits, licenses, franchises,
certificates, and other rights and privileges obtained by
Grantor in connection with the Mortgaged Property;
(0) The balance of every deposit account (now or
hereafter existing) of Grantor with Beneficiary (or any agent,
affiliate, or subsidiary of Beneficiary) and any other claim
of Grantor against Beneficiary (now or hereafter existing) and
all money, instruments, securities, documents, chattel paper,
credits, demands, and any other property, rights, or interests
of Grantor which at any time shall come into the possession,
custody, or control of Beneficiary (or any agent, affiliate,
or subsidiary of Beneficiary);
Deed of Trust/Pacific United, L.P. Page 2
<PAGE> 3
(P) All proceeds payable or to be payable under
each policy of insurance relating to the Real Estate and/or
the Personal Property; and
(Q) All books, records and computer software
concerning the Real Estate, the Personal Property, and the
property described in clauses (A) through (P) above.
"Deed of Trust" means this Deed of Trust, Security Agreement,
Financing Statement and Assignment of Rental, including all exhibits attached
hereto, as the same may, at any time and from time to time, be renewed,
extended, modified and/or increased.
"Event of Default" has the meaning set forth in Section 4.1 hereof.
"Grantor" has the meaning assigned to it in the preamble hereof.
"Grantor's Successors" means each and all of the heirs, executors,
administrators, legal representatives, successors, and assigns of Grantor, both
immediate and remote.
"Improvements" means all buildings and improvements now or hereafter
situated upon the Land.
"Land" means all of that certain tract of real property located in
Dallas County, Texas, more particularly described upon Exhibit A attached
hereto, together with all strips or gores appurtenant to such property,
underlying roadways or public rights-of-way or otherwise, in which Grantor now
or hereafter possesses an interest.
"Loan" means the indebtedness and obligations of Grantor evidenced by
the Security Instruments.
"Loan Agreement" means that certain Construction Loan Agreement dated
of even date herewith between Grantor and Beneficiary.
"Lots" means the 87 single-family residential lots situated or to be
situated within the Land.
"Mortgaged Property" means the Real Estate and the Collateral,
collectively.
"Note" means that certain promissory note dated August 6, 1997,
executed by Grantor payable to the order of Beneficiary, in the original
principal amount of Three Million Six Hundred Seventy-Five Thousand and No/100
Dollars ($3,675,000.00), bearing interest as therein specified, containing a
clause requiring the payment of attorneys' fees, and providing that the
principal balance of such Note shall be due and payable on August 6, 1999,
unless extended to August 6, 2001, in accordance with the provisions of the
Note, and all loans, principal, interest, fees, expenses, obligations and
liabilities of Grantor to Beneficiary arising pursuant to or represented by
such note, as it may, at any time and from time to time, be renewed, extended,
modified and/or increased.
"Permitted Exceptions" means those items shown as exceptions in the
mortgagee policy of title insurance issued by Chicago Title Insurance Company
in connection with this Deed of Trust.
"Personal Property" means all fixtures, building materials, machinery,
equipment, furniture, furnishings, and personal property in which Grantor now
has, or at any time hereafter acquires, an interest, and which now, or at any
time hereafter, are situated in, on or about the Land.
Deed of Trust/Pacific United, L.P. Page 3
<PAGE> 4
"Real Estate" means the Land, the Improvements, the Personal Property
and all other estates, easements, licenses, interests, rights, titles, powers
and privileges of every kind and character which Grantor now has or at any time
hereafter acquires, in and to the Land, the Improvements, the Personal
Property, and all property owned by Grantor which is used or useful in
connection with the Land, the Improvements, and the Personal Property, and the
proceeds of any and all insurance covering the Land, the Improvements, and the
Personal Property.
"Secured Indebtedness" means
(a) All indebtedness, liabilities and obligations arising under
the Note or this Deed of Trust or the other Security Instruments;
(b) All loans and advances which Beneficiary may hereafter make to
Grantor in connection with the Loan or the Mortgaged Property;
(c) All other and additional indebtedness, liabilities and
obligations of every kind and character, of Grantor now or hereafter existing
in favor of Beneficiary in connection with the Loan or the Mortgaged Property,
regardless of whether they are direct, indirect, primary, secondary, joint,
several, joint and several, liquidated, unliquidated, fixed or contingent, and
regardless of whether the same may, prior to their acquisition by Beneficiary,
be or have been payable to some other person or entity, it being the intention
and contemplation of Grantor and Beneficiary that future advances may be made
to Grantor for a variety of purposes, that Grantor may guarantee (or otherwise
become directly or contingently obligated with respect to), the obligations of
others to Beneficiary in connection with the Loan or the Mortgaged Property,
and that Beneficiary may, from time to time, acquire from others obligations of
Grantor to such others, or that Grantor may otherwise hereafter be or become
further indebted to Beneficiary in connection with the Loan or the Mortgaged
Property, and that payment and repayment of all of the foregoing are intended
to and shall be part of the Secured Indebtedness secured hereby;
(d) The payment and performance by Grantor of all of its
obligations under (i) any loan agreement now or hereafter executed by and
between Grantor and Beneficiary in connection with the Loan or the Mortgaged
Property, together with all amendments, modifications, renewals, restatements,
rearrangements, or extensions thereof, and (ii) any and all other security
agreements, mortgages, deeds of trust, collateral pledge agreements, assignments
or contracts of any kind now or hereafter existing as evidence of, security for,
or otherwise executed in connection with any indebtedness, obligation or
liability of Grantor to Beneficiary in connection with the Loan or the Mortgaged
Property; and
(e) Any and all renewals, increases, extensions, modifications,
rearrangements, or restatements of and supplements to all or any part of the
loans, advances, indebtedness, liabilities, and obligations described or
referred to in subparagraphs, (a) through (d) above, together with all costs,
expenses and attorneys' fees incurred in connection with the enforcement or
collection thereof.
"Security Instruments" means the Note, this Deed of Trust and the Loan
Agreement, together with all loan agreements, security agreements, deeds of
trust, collateral pledge agreements, assignments, guaranties or contracts
evidencing, referring to or securing the Secured Indebtedness, as they may, at
any time and from time to time, be amended, renewed, extended, increased,
supplemented and/or restated.
"Trustee" has the meaning assigned to it in the preamble and shall
include all substitute trustees appointed in conformity with Section 4.2(g).
Deed of Trust/Pacific United, L.P. Page 4
<PAGE> 5
Section 1.2. All capitalized terms not otherwise defined herein shall have
the meaning assigned to them in the Note.
ARTICLE II
GRANT
Section 2.1.
(a) For good and valuable consideration, including the
indebtedness evidenced by the Note, the Secured Indebtedness and the trust
herein after described, the receipt and legal sufficiency of which are hereby
expressly acknowledged by all parties, Grantor does hereby GRANT, BARGAIN,
SELL, TRANSFER, ASSIGN, AND CONVEY unto Trustee the Mortgaged property, subject
only to the Permitted Exceptions.
TO HAVE AND TO HOLD the Mortgaged Property, together with all and singular the
rights, hereditaments, and appurtenances in anywise appertaining or belonging
thereto, unto Trustee and Trustee's successors or substitutes in this trust,
and Trustee's and its or his successors and assigns, in trust and for the uses
and purposes hereinafter set forth, forever.
(b) This Deed of Trust shall also constitute a security agreement
with respect to, and Grantor hereby grants to Beneficiary a security interest
in, the Collateral. This Deed of Trust shall constitute a "fixture filing" for
purposes of Chapter 9 of the Code. Portions of the Collateral are or may become
fixtures. Information concerning the security interests herein granted may be
obtained at the addresses stated in Section 7.20 hereof.
(c) To the extent that any of the Collateral is not subject to the
Uniform Commercial Code of the state of states where it is situated, Grantor
hereby assigns to Beneficiary all of Grantor's right, title, and interest in
and to the Collateral to secure the Secured Indebtedness, together with the
right of set-off with regard to such Collateral (or any part hereof)
exercisable after the occurrence of an Even of Default. Release of the lien of
this Deed of Trust shall automatically terminate this assignment.
Section 2.2. Grantor, for Grantor and Grantor's Successors, hereby agrees
to warrant and forever defend, all and singular, title to the Mortgaged
Property unto Trustee, and Trustee's successors or substitutes in this trust,
forever, against every person whomsoever lawfully claiming, or to claim, the
same or any part thereof, subject, however, to the Permitted Exceptions.
Section 2.3. This Deed of Trust, and all rights, remedies, powers,
privileges, and benefits, and all titles, interests, liens, and security
interests created hereby, or arising by virtue hereof, are given to secure
payment and performance of the Secured Indebtedness.
Section 2.4. A carbon, photographic, or other reproduction of this Deed of
Trust, or any financing statement relating to this Deed of Trust, shall be
sufficient as a financing statement.
ARTICLE III
CERTAIN REPRESENTATIONS,
WARRANTIES AND COVENANTS OF GRANTOR
Section 3.1. Representations and Warranties. Grantor expressly represents
and warrants to Beneficiary and Trustee as follows:
Deed of Trust/Pacific United, L.P. Page 5
<PAGE> 6
(a) Grantor is duly organized and validly existing under
applicable state laws;
(b) Grantor has full and lawful authority and power to execute,
acknowledge, deliver, and perform this Deed of Trust, the Note, and the other
Security Instruments and the same constitute the legal, valid, and binding
obligations of Grantor and any other party thereto, enforceable against Grantor
and such other parties in accordance with their respective terms;
(c) The Personal Property is, and will be, used as equipment in
Grantor's business and not as inventory, or as goods leased or held for lease
by Grantor but not held for sale;
(d) Grantor's principal office and mailing address is set forth in
Section 7.20 hereof;
(e) Grantor is the lawful owner of good and indefeasible title to
the Mortgaged Property, subject only to the Permitted Exceptions;
(f) To the best of Grantor's knowledge, all of the representations
and warranties contained in this Deed of Trust, the Note, and the other
Security Instruments are in all material respects true and correct. Neither the
execution and delivery of the Note, this Deed of Trust or the other Security
Instruments, nor consummation of any of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or with the
terms and provisions thereof, will contravene or conflict with any provision of
law, statute or regulation to which Grantor is subject or any judgment,
license, order or permit applicable to Grantor or any indenture, mortgage, deed
of trust, agreement or other instrument to which Grantor is a party or by which
Grantor may be bound, or to which Grantor may be subject, or violate or
contravene any provision of the Articles of Incorporation forming Grantor;
(g) No event has occurred and is continuing which constitutes an
"Event of Default" (hereinafter defined);
(h) All taxes, assessments and other charges levied against the
Mortgaged Property have been paid in full to the extent due and payable;
(i) Except as disclosed to Beneficiary, neither the Land nor any
portion thereof is located within an area that has been designated or
identified as an area having special flood hazards by the Secretary of Housing
and Urban Development or by such other official as shall from time to time be
authorized by federal or state law to make such designation pursuant to the
National Flood Insurance Act of 1968, as such act may from time to time be
amended, or pursuant to any other national, state, county or city program of
flood control;
(j) Upon the occurrence of an Event of Default, Beneficiary shall
quietly enjoy and possess the Mortgaged Property;
(k) No part of the Mortgaged Property constitutes a part of a
business or residential homestead;
(l) The Secured Indebtedness constitutes a "contract under which
credit is extended for business, commercial, investment, or other similar
purpose," and is not for "personal, family, household, or agricultural use,"
within the meaning of TEX. REV. CIV. STAT. ANN. art. 5069-1.04(b)(2);
(m) The representations and warranties of Grantor shall at all
times be construed to be for the benefit of the Beneficiary, and they shall
remain in full force and effect, notwithstanding the assignment hereof, or the
partial release of the lien hereof, or any foreclosure thereof; and
Deed of Trust/Pacific United, L.P. Page 6
<PAGE> 7
(n) There is no financing statement or other document creating or
evidencing a lien now on file in any public office covering any of the
Collateral or the Real Estate, or any lien or encumbrance on any of the
Collateral or the Real Estate, whether such Collateral and the Real Estate
shall be real or personal, tangible or intangible, or whether Grantor is named
or signed as Grantor, and until the termination of this Deed of Trust, Grantor
will not execute and there will not be on file in any public office any such
financing statement or statements, except as may have been or may hereafter be
granted to Beneficiary, and Grantor further agrees that it will not permit or
suffer any security interest, lien, or encumbrance upon any of the Collateral
or the Real Estate, except as may be granted to Beneficiary, and except liens,
claims, or encumbrances contested under Section 3.2(a) during the pendency of
such contest.
Section 3.2. Covenants. Grantor, for Grantor and Grantor's Successors,
covenants and agrees as follows:
(a) To pay, or cause to be paid, before delinquent, all lawful
taxes and assessments of every character in respect of any of the Mortgaged
Property, and from time to time, upon request of Beneficiary, to furnish to
Beneficiary evidence satisfactory to Beneficiary of the timely payment of such
taxes and assessments and to promptly pay all bills for labor and materials
incurred in connection with the Mortgaged Property and never to permit to be
fixed against the Mortgaged Property, or any party thereof, any lien or
security interest, even through inferior to the liens and security interests
hereof, for any such bill which may be legally due and payable. Notwithstanding
anything to the contrary contained in this Deed of Trust, Grantor (i) may
contest the validity or amount of any claim of any contractor, consultant,
architect, or other person providing labor, materials, or services with respect
to the Mortgaged Property, in the amount of such claim, (ii) may contest any
tax or special assessments levied by any governmental authority, and (iii) may
contest the enforcement of or compliance with any governmental requirements,
and such contest on the part of Grantor shall not constitute an Event of
Default if, during the pendency of any such contest, Grantor shall furnish to
Beneficiary a Bond Indemnifying Against Liens (pursuant to Tex. Property Code
Ann. Section 53.171) with corporate surety reasonably satisfactory to
Beneficiary or other security acceptable to Beneficiary in an amount equal to
the amount being contested plus a reasonable additional sum to cover possible
costs, interest, and penalties, and provided that Grantor shall pay any amount
adjudged by a court of competent jurisdiction to be due, with all costs,
interest, and penalties thereon, before such judgment becomes a lien on the
Mortgaged Property;
(b) To carry insurance with respect to the Mortgaged Property with
such insurers, in such amounts and covering such risks as is required under
Section 2.10 of the Loan Agreement;
(c) [Intentionally Deleted];
(d) [Intentionally Deleted];
(e) To comply with all valid governmental laws, ordinances, rules,
and regulations applicable to the Mortgaged Property and its ownership, use,
and operation, and to comply with all, and not violate any, easements,
restrictions, agreements, covenants, and conditions with respect to or
affecting the Mortgaged Property, or any part thereof;
(f) At all times to maintain, preserve, and keep the Mortgaged
property in good repair and condition, and from time to time, to make all
necessary and proper repairs, replacements, and renewals, and not to commit or
permit any waste on or of the Mortgaged Property;
(g) Without the prior written consent of Beneficiary, not to
permit to be created or exist in respect of the Mortgaged Property, or any part
thereof, any other or additional lien or security interest on a parity with or
superior or inferior to the liens and security interests hereof; provided,
Deed of Trust/Pacific United, L.P. Page 7
<PAGE> 8
however, if Beneficiary so consents to the creation of any such lien or security
interest, Grantor covenants to timely perform all covenants, agreements and
obligations required to be performed under or pursuant to the terms of any
instrument or agreement creating or giving rise to such lien or security
interest;
(h) At any time, and from time to time, upon request by
Beneficiary, forthwith to execute and deliver to Beneficiary any and all
additional instruments and further assurances, and do all other acts and
things, as may be necessary or proper, in Beneficiary's reasonable opinion, to
effect the intent of these presents, more fully evidence and to perfect, the
rights, titles, liens, and security interests herein created or intended to be
created and protect the rights, remedies, powers, and privileges of Beneficiary
hereunder;
(i) From time to time, upon request of Beneficiary, promptly to
furnish to Beneficiary such financial statements and reports relating to
Grantor and Grantor's business affairs, as Beneficiary may reasonably request;
(j) Continuously to maintain Grantor's existence and Grantor's
right to do business in Texas under all applicable laws;
(k) Except as expressly permitted by Section 7.23. not, without
the prior written consent of Beneficiary (which consent may be withheld with or
without cause), to W sell, trade, transfer, assign, exchange, or otherwise
dispose of the Collateral, or any part thereof or any interest therein (whether
legal or equitable in nature), except items of Personal Property which have
become obsolete or worn beyond practical use and which have been replaced by
adequate substitutes having a value equal to or greater than the replaced items
when new, or (ii) permit the sale, transfer, assignment, exchange or other
disposition more than forty nine percent (49.0%) of the partnership interests
of Borrower in the aggregate at any time or from time to time after the date of
this Deed of Trust, except to general partner or to Guarantor;
(1) To pay and perform all of the Secured Indebtedness in
accordance with the terms thereof or hereof, or when the maturity thereof may
be accelerated in accordance with the terms thereof or hereof;
(m) Promptly to deliver to Beneficiary the terms of any sale of
the Mortgaged Property, or any part thereof; provided, however, that neither
this Subsection 3.2(m) nor any other provision herein shall be construed to
impliedly or expressly authorize any action by Grantor contrary to Subsection
3.2(k) preceding or Subsection 4.1(d);
(n) To deliver to Beneficiary financial information as required
under Section 2.16 of the Loan Agreement;
(o) [Intentionally Delete];
(p) At any time any law shall be enacted imposing or authorizing
the imposition of any tax upon this Deed of Trust, or upon any rights, titles,
liens, or security interests created hereby, or upon the Secured Indebtedness,
or any part thereof, immediately to pay all such taxes to the extent permitted
by law; provided that, if it is unlawful for Grantor to pay such taxes, then
Grantor shall, if Beneficiary so requires, prepay the Secured Indebtedness in
full within sixty (60) days after demand therefor by Beneficiary;
(q) At any time and from time to time, to furnish promptly upon
request, a written statement or affidavit, in such form as shall be reasonably
satisfactory to Beneficiary, stating the unpaid balance of the Secured
Indebtedness and that there are no offsets or defenses against full
Deed of Trust/Pacific United, L.P. Page 8
<PAGE> 9
payment of the Secured Indebtedness and the terms hereof, or, if there are any
such offsets and defenses, specifically describing such offsets to the
satisfaction of Beneficiary;
(r) Punctually and properly to perform all of Grantor's covenants,
duties, and liabilities under this Deed of Trust, the Note, and all of the
other Security Instruments within the time period specified therein or within
any applicable cure period specified therein;
(s) To allow Beneficiary and its agents, representatives and
employees to inspect the Mortgaged Property and all records relating thereto
after prior notice to Borrower during business hours or to the Secured
Indebtedness, and to make and take away copies of such records;
(t) Not to cause or permit any of the Personal Property to be
removed from the county and state where the Land is located, except items of
Personal Property which have become obsolete or worn beyond practical use and
which have been replaced by adequate substitutes having a value equal to, or
greater than, the replaced items when new;
(u) That by agreement with the maker or makers of any instrument
evidencing any indebtedness at any time secured hereby, Beneficiary, without
notice to or consent of any other party to this Deed of Trust, may from time to
time extend the time of payment of the whole or any part of such indebtedness,
or may accept from said maker or makers one or more new instruments in the same
or different form, in renewal of or by way of substitution for any instrument
of indebtedness without in any manner impairing or affecting the lien of this
Deed of Trust or any of Beneficiary's rights hereunder;
(v) To do all things necessary or proper to defend title to the
Mortgaged Property, but Beneficiary shall have the right, at any time, to
intervene in any suit affecting such title and to employ independent counsel in
connection with any such suit to which it may be a party by intervention or
otherwise; and upon demand Grantor agrees to pay Beneficiary all reasonable
expenses paid or incurred by Beneficiary in respect of any such suit affecting
title to any such property or affecting Beneficiary's lien or rights hereunder,
including reasonable fees to Beneficiary's attorneys, and Grantor will
indemnify and hold harmless Beneficiary from and against any and all costs and
expenses, including, but not limited to, any and all cost, loss, damage or
liability which Beneficiary may suffer or incur by reason of the failure of the
title to all or any part of the property hereby mortgaged or assigned or by
reason of the failure or inability of Grantor, for any reason, to convey the
rights, titles and interests which this Deed of Trust purports to mortgage or
assign, and all amounts at any time so payable by Grantor hereunder shall be
secured by the lien hereof and by the said assignment;
(w) To protect, warrant and forever defend title to the Mortgaged
Property unto Beneficiary, its successors and assigns, at Grantor's expense,
against all persons whomsoever lawfully having or claiming an interest therein
or lien thereon;
(x) Promptly to deliver to Beneficiary a copy of any notice or
other instrument received by Grantor which might materially adversely affect
the Mortgaged Property or the liens or security interests securing the Secured
Indebtedness, including, without limitation, any notice from a public authority
concerning any tax or special assessment, or any notice of any alleged
violation of any zoning ordinance, fire ordinance, material building code
provision, or other law or regulation affecting the Mortgaged Property;
(y) Upon the request of Beneficiary after the occurrence of an
Event of Default, Grantor shall promptly, at its expense:
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(i) deliver to Beneficiary with appropriate endorsement
or assignment, all instruments, chattel paper, monies, checks, notes,
drafts and other evidence of indebtedness, or other property in the
nature of items of payment representing proceeds of any of the
Collateral, or arising from an account, which are then in, or may
thereafter come into, Grantor's possession; and
(ii) direct all parties obligated on any of the Collateral
to make all payments due or to become due thereon directly to
Beneficiary or to such other person or officer as may be specified by
Beneficiary; and
(z) Grantor will not at any time insist upon, or plead, or in any
manner whatever claim or take any benefit or advantage of any stay or extension
or moratorium law, any exemption from execution or sale of the Mortgaged
Property, or any part thereof, whenever enacted, now or at any time hereafter
enforced, which may affect the covenants and terms of performance of this Deed
of Trust, nor claim, take or insist upon any benefit or advantage of any law
now or hereafter enforced providing for the valuation or appraisal of the
Mortgaged Property, or any part thereof, prior to any sale or sales thereof
which may be made pursuant to any provision herein, or pursuant to the decree,
judgment or order of any court of competent jurisdiction; nor, after such sale
or sales, claim or exercise any right under any statute heretofore or hereafter
enacted to redeem the property so sold or any part thereof and the Grantor
hereby expressly waives all benefit or advantage of any such law or laws and
covenants not to hinder, delay or impede the execution of any power herein
granted or delegated to Trustee or Beneficiary, but to suffer and permit the
execution of every power as though no such law or laws had been made or
enacted.
ARTICLE IV
RESPECTING DEFAULTS AND REMEDIES OF BENEFICIARY
Section 4.1. The term "Event of Default" shall mean the occurrence of any one
or more of the following events:
(a) The failure of Grantor to pay the Secured Indebtedness or any
part thereof, as it becomes due in accordance with the terms of the Note or any
other Security Instruments and the continuance thereof for a period of at least
three (3) days after notice of such failure from Beneficiary or when
accelerated pursuant to any power to accelerate contained in this Deed of
Trust, the Note, or any of the other Security Instruments; or
(b) Grantor fails to punctually and properly to perform any other
covenant, agreement, obligation, or condition contained herein, or in the Note,
the Security Instruments, or any other instrument securing or evidencing the
Secured Indebtedness, or any part thereof, or executed in connection therewith
and does not cure such failure within twenty (20) days after notice of such
failure from Beneficiary (the "Initial Cure Period") or (ii) within sixty (60)
days after notice of such failure from Beneficiary so long as Grantor attempts
to cure such failure within the Initial Cure Period and diligently continues to
attempt to cure such failure;
(c) The discovery by Beneficiary that any statement,
representation, or warranty in the Note, this Deed of Trust, the Security
Instruments or in any writing ever delivered to Beneficiary pursuant to the
provisions hereof or thereof, is false, misleading, or erroneous in any
material respect; or
(d) Except as permitted by Section 7.23, the ownership of the
Mortgaged Property, or any part thereof, or any legal or equitable interest
therein, becomes vested in a person or entity other than Grantor; or
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(e) Any change in the ownership of more than forty-nine percent
(49%) of the partnership interests of Grantor in the aggregate at any time or
from time to time after the date of this Deed Of Trust, except to general
partner or to Guarantor; or
(f) Grantor shall (i) execute a general assignment for the benefit
of Grantor's creditors, or (ii) become the subject, voluntarily or
involuntarily, of any bankruptcy, insolvency or reorganization proceeding, or
(iii) admit in writing Grantor's inability to pay Grantor's debts generally as
they become due, or (iv) apply for or consent to the appointment of a
custodian, receiver, trustee, or liquidator of Grantor or of all or a
substantial part of Grantor's assets, or (v) file a voluntary petition seeking
protection under any debtor's relief, or other insolvency law now or hereafter
existing, or (vi) file an answer admitting the material allegations of, or
consenting to, or default in filing an answer to, a petition filed against
Grantor in any bankruptcy, reorganization, or other insolvency proceedings, or
(vii) institute or voluntarily be or become a party to any other judicial
proceedings intended to effect a discharge of the debts of Grantor, in whole or
in part, or a postponement of the maturity or the collection thereof, or a
suspension of any of the rights or powers of Beneficiary granted in the
Security Instruments and such proceeding is not dismissed within sixty (60)
days of the filing thereof; or
(g) An order, judgment, or decree shall be entered by any court of
competent jurisdiction appointing a custodian, receiver, trustee, or liquidator
of Grantor or of all or any substantial part of Grantor's assets; or
(h) The failure of Grantor to pay any material money judgment
against it at least ten (10) days prior to the date on which the assets of
Grantor may be sold to satisfy such judgment; or
(i) The failure to have discharged within a period of thirty (30)
days after the commencement thereof any attachment, sequestration, or similar
proceedings against any of Grantor's assets; or
(j) The liens, mortgages or security interests created (or
purported to be created) by this Deed of Trustor by the other Security
Instruments should become unenforceable, or cease to be first priority liens,
mortgages or security interests and such unenforceability or priority is not
remedied to the satisfaction of Beneficiary within twenty (20) days after
notification thereof to Beneficiary; or
(k) The liquidation, dissolution or termination of Grantor; or
(1) Any sale, trade, transfer, assignment, exchange or other
disposition of the Mortgaged Property, except to Beneficiary, or except as
otherwise expressly permitted by Section 7.23.
Section 4.2. Upon the occurrence of an Event of Default, Beneficiary may, at
Beneficiary's option, do any one or more of the following:
(a) If Grantor has failed to keep or perform any covenant
whatsoever contained in this Deed of Trust or other security instruments,
Beneficiary may, but shall not be obligated to any person to, perform or
attempt to perform said covenant, and any payment made or expense incurred in
the performance or attempted performance of any such covenant shall be a part
of the Secured Indebtedness, and Grantor promises, upon demand, to pay to
Beneficiary, at the place where the Note is payable, or at such other place as
Beneficiary may direct by written notice, all sums so advanced or paid by
Beneficiary, with interest at the highest lawful rate from the date when paid
or incurred by Beneficiary. No such payment by Beneficiary shall constitute a
waiver of any Event of Default. In addition to the liens and security interests
hereof, Beneficiary shall be subrogated to all rights, titles, liens, and
security interests securing the payment of any debt, claim, tax, or assessment
for the payment of which Beneficiary may make an advance, or which Beneficiary
may pay.
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(b) Beneficiary may, at its option, declare the Note and all or
any other portion of the remaining Secured Indebtedness to be immediately due
and payable without presentment, demand, protest, notice of protest, notice of
acceleration and intention to accelerate or other notice of any kind, all of
which are expressly waived by Grantor; provided, however, that if any Event of
Default specified in Section 4.1(f) hereof shall occur, the Note and the
remaining Secured Indebtedness shall thereupon become due and payable
concurrently therewith, without any further action by Beneficiary and without
presentment, demand, protest, notice of protest and non-payment, or other
notice of default, notice of acceleration and intention to accelerate or other
notice of any kind, all of which are expressly waived by Grantor.
(c) Beneficiary may request Trustee to proceed with foreclosure,
and in such event Trustee is hereby authorized and empowered, and it shall be
Trustee's special duty, upon such request of Beneficiary, to sell the Mortgaged
Property, or any part thereof, to the highest bidder or bidders for cash or
credit, as directed by Beneficiary, at the location at the county courthouse
specified by the commissioner's court of the county in the State of Texas
wherein the Land then subject to the lien hereof is situated or, if no such
location is specified by the commissioner's court, then at the location
specified in Beneficiary's notice of such sale to Grantor; provided, that if
the Land is situated in more than one county, then such sale of the Mortgaged
Property, or part thereof, may be made in any county in the State of Texas
wherein any part of the Land then subject to the lien hereof is situated. Any
such sale shall be made at public outcry, between the hours of ten o'clock
(10:00) A.M. and four o'clock (4:00) P.M. on the first (1st) Tuesday in any
month. Written or printed notice of such sale shall be posted at the courthouse
door in the county, or if more than one, then in each of the counties, wherein
the Land then subject to the lien hereof is situated. Such notice shall
designate the county where the Mortgaged Property, or part thereof, will be
sold and the earliest time at which the sale will occur, and such notice shall
be posted at least twenty-one (21) days prior to the date of sale. Such notice
shall also be filed with the county clerk in the county, or if more than one,
then in each of the counties wherein the Land is located. Beneficiary shall, at
least twenty-one (21) days preceding the date of sale, serve written notice of
the proposed sale by certified mail on each debtor obligated to pay the Secured
Indebtedness according to the records of Beneficiary. After such sale, Trustee
shall make to the purchaser or purchasers thereunder good and sufficient
assignments, deeds, bills of sale, and other instruments, in the name of
Grantor, conveying the Mortgaged Property, or part thereof, so sold to the
purchaser or purchasers with general warranty of title by Grantor. The sale of
a part of the Mortgaged Property shall not exhaust the power of sale, but sales
may be made from time to time until the Secured Indebtedness is paid and
performed in full. It shall not be necessary to have present or to exhibit at
any such sale any of the Personal Property.
(d) In addition to the rights and powers of sale granted under the
preceding Subsection 4.2(c), if any Event of Default occurs concerning the
payment of any installment of the Secured Indebtedness, Beneficiary, at its
option, at once or at any time thereafter while any matured installment remains
unpaid, without declaring the entire Secured Indebtedness to be due and
payable, may orally or in writing direct the Trustee to enforce this trust and
to sell the Mortgaged Property subject to such unmatured indebtedness and the
assignments, liens, and security interests securing its payment, in the same
manner, on the same terms, at the same place and time and after having given
notice in the same manner, all as provided in the preceding provisions of
Subsection 4.2(c). After such sale, the Trustee shall make due conveyance to
the purchaser or purchasers. Sales made without maturing the Secured
Indebtedness may be made hereunder whenever there occurs an Event of Default in
the payment of any installment of the Secured Indebtedness without exhausting
the power of sale granted hereby, and without affecting in any way the power of
sale granted under this Subsection 4.2(d), the unmatured balance of the Secured
Indebtedness (except as to any proceeds of any sale which Beneficiary may apply
as a prepayment of the Secured Indebtedness) or the assignments, liens and
security interests securing payment of the Secured Indebtedness.
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(e) It is intended by each of the foregoing provisions of Subsection
4.2(c) and Subsection 4.2(d) that Trustee may, after any request or direction
by Beneficiary, sell not only the Real Estate but also the Collateral and other
interests constituting a party of the Mortgaged Property, or any part thereof,
along with the Real Estate, or any party thereof, all as a unit and as a part
of a single sale, or may sell any party of the Mortgaged Property separately
from the remainder of the Mortgaged Property. The sale or sales by Trustee of
less than the whole of the Mortgaged Property shall not exhaust the power of
sale herein granted, and Trustee is specifically empowered to make successive
sale or sales under such power until the whole of the Mortgaged Property shall
be sold; and if the proceeds of such sale or sales of less than the whole of
such Mortgaged property shall be less than the aggregate of the Secured
Indebtedness and the expense of executing this trust, this Deed of Trust and
the assignments, liens, and security interests hereof shall remain in full
force and effect as to the unsold portion of the Mortgaged Property just as
though no sale or sales of less than the whole of the Mortgaged Property had
occurred, but Beneficiary shall have the right, at its sole election, to
request Trustee to sell less than the whole of the Mortgaged Property.
(f) Grantor and Beneficiary agree that, in any assignments, deeds,
bills of sale, no of sale, or postings, given by Trustee or Beneficiary, any
and all statements of fact or other recitals therein made as to the identity of
Beneficiary, or as to the occurrence or existence of any Event of Default, or
as to the acceleration of the maturity of the Secured Indebtedness, or as to
the request to sell, posting of notice of sale, notice of sale, time, place,
terms and manner of sale and receipt, distribution and application of the money
realized therefrom, or as to the due and proper appointment of a substitute
trustee and without being limited by the foregoing, as to any other act or
thing having been duly done by Beneficiary or by Trustee, shall be taken by all
courts of law and equity as prima facie evidence that the said statements or
recitals state facts and are without further question to be so accepted, and
Grantor does hereby ratify and confirm any and all acts that Trustee may
lawfully do in the premises by virtue hereof.
(g) In the event of the resignation or death of Trustee, or
Trustee's removal from Trustee's county of residence stated on the first page
hereof, or Trustee's failure, refusal or inability, for any reason, to make any
such sale or to perform any of the trusts herein declared, or, at the option of
Beneficiary, without cause, Beneficiary may appoint, orally or in writing, a
substitute trustee, who shall thereupon succeed to all the estates, titles,
rights, powers, and trusts herein granted to and vested in Trustee. If
Beneficiary is a corporation, such appointment may be made on behalf of such
Beneficiary by any person who is then the president, or a vice-president,
assistant vice-president, treasurer, cashier, secretary, or any other authorized
officer or agent of Beneficiary. In the event of the resignation or death of
any substitute trustee, or such substitute trustee's failure, refusal or
inability to make any such sale or perform such trusts, or, at the option of
Beneficiary, without cause, successive substitute trustees may thereafter, from
time to time, be appointed in the same manner. Wherever herein the word
"Trustee" is used, the same shall mean the person who is the duly appointed
trustee in the first paragraph of this Deed of Trust or substitute trustee
hereunder at the time in question.
(h) Beneficiary may, or Trustee may upon written request of
Beneficiary, proceed by suit or suits, at law or in equity, to enforce the
payment and performance of the Secured Indebtedness in accordance with the
terms hereof or of the Note or the other Security Instruments, to foreclose or
otherwise enforce the assignments, liens, and security interests created or
evidenced by the other Security Instruments, or this Deed of Trust as against
all, or any part of, the Mortgaged Property, and to have all or any part of the
Mortgaged Property sold under the judgment or decree of a court of competent
jurisdiction.
(i) To the extent permitted by law, Beneficiary, as a matter of
right without notice to Grantor and without regard to the sufficiency of the
security, and without any showing of insolvency, fraud, or mismanagement on the
part of Grantor, and without the necessity of filing any judicial or
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other proceeding other than the proceeding for appointment of a receiver, shall
be entitled to the appointment of a receiver or receivers of the Mortgaged
Property, or any part thereof, and of the income, rents, issues, and profits
thereof.
(j) To the extent permitted by law, Beneficiary may enter upon the
Land, take possession of the Mortgaged Property and remove the Collateral or
any part thereof, with or without judicial process, and, in connection
therewith, without any responsibility or liability on the part of Beneficiary,
take possession of any property located on or in the Real Estate which is not a
part of the Mortgaged Property and hold or store such property at Grantor's
expense.
(k) Beneficiary may require Grantor to assemble the Collateral, or
any part thereof, and make it available to Beneficiary at a place to be
designated by Beneficiary which is reasonably convenient to Grantor and
Beneficiary.
(l) After notification, if any, hereafter provided in this
Subsection, Beneficiary may, or the Trustee may, upon request of Beneficiary,
sell, lease, or otherwise dispose of, at the office of Beneficiary, or on the
Land, or elsewhere as chosen by Beneficiary, all or any part of the Collateral,
in its then condition, or following any commercially reasonable preparation or
processing, and each "Sale" (as used herein, the term "Sale" means any such
sale, lease, or other disposition made pursuant to this Subsection 4.2 (l) may
be as a unit or in parcels, by public or private proceedings, and by way of one
or more contracts, and, at any Sale, it shall not be necessary to exhibit the
Collateral, or part thereof, being sold. The Sale of any part of the Collateral
shall not exhaust Beneficiary's power of Sale, but Sales may be made, from time
to time, until the Secured Indebtedness is paid and performed in full.
Reasonable notification of the time and place of any public Sale pursuant to
this Subsection, or reasonable notification of the time after which any private
Sale is to be made pursuant to this Subsection, shall be sent to Grantor and to
any other person entitled to notice under Chapter 9 of the Code; provided, that
if the Collateral being sold, or any part thereof, is perishable, or threatens
to decline speedily in value, or is of a type customarily sold on a recognized
market, Beneficiary may sell, lease, or otherwise dispose of such Collateral
without notification, advertisement or other notice of any kind. It is agreed
that notice sent or given not less than ten (10) calendar days prior to the
taking of the action to which the notice relates, is reasonable notification
and notice for the purposes of this Subsection.
(m) Beneficiary may retain the Collateral in satisfaction of the
Secured Indebtedness whenever the circumstances are such that Beneficiary is
entitled to do so under the Code.
(n) Beneficiary may buy the Mortgaged Property, or any part
thereof, at any public Sale or judicial Sale (including any Sale of the
Collateral as contemplated in Subsection 4.2(l) hereof).
(o) Beneficiary may buy the Collateral, or any part thereof, at
any private Sale if the Collateral, or part thereof, being sold is a type
customarily sold in a recognized market or a type which is the subject of
widely distributed standard price quotations.
(p) Beneficiary shall have and may exercise any and all other
rights and remedies which Beneficiary may have at law or in equity, or by
virtue of any other security instrument, or under the Code, or otherwise.
(q) Notwithstanding anything contained herein to the contrary,
pursuant to TEX. BUS. & COM. CODE ANN. Section 9.501(d) (TEX. UCC) (Vernon
Supp. 1982), Beneficiary may proceed under Chapter 9 of the Code as to all
personal property covered hereby or, at Beneficiary's election, Beneficiary may
proceed as to both the real and personal property covered hereby in accordance
with Beneficiary's rights and remedies in respect of real property, in which
case the provisions of Chapter 9 of the Code (and Subsection 4.2 (l) hereof)
shall not apply.
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Section 4.3. If Beneficiary is the purchaser of the Mortgaged Property, or
any part thereof, at any sale thereof (including any Sale of the Collateral as
contemplated in Subsection 4.2(l) hereof), whether such sale be under the power
of sale hereinabove vested in Trustee, or upon any other foreclosure or
enforcement of the assignments, liens, and security interests hereof, or
otherwise, Beneficiary shall, upon any such purchase, acquire good title to the
Mortgaged Property so purchased, free of the assignments, liens, and security
interests of these presents.
Section 4.4. Should any part of the Mortgaged Property come into the possession
of Beneficiary, whether before or after the occurrence of an Event of Default,
Beneficiary may use or operate the Mortgaged Property for the purpose of
preserving it or its value, pursuant to the order of a court of appropriate
jurisdiction, or in accordance with any other rights held by Beneficiary with
respect to the Mortgaged Property. Grantor covenants to promptly reimburse and
pay to Beneficiary, at the place where the Note is payable, or at such other
place as may be designated by Beneficiary in writing, the amount of all
reasonable expenses (including the cost of any insurance, taxes, or other
charges) incurred by Beneficiary in connection with its custody, preservation,
use or operation of the Mortgaged Property, together with interest thereon from
the date incurred by Beneficiary at the highest lawful rate, and all such
expenses, cost, taxes, interest, and other charges shall be a part of the
Secured Indebtedness. It is agreed, however, that the risk of accidental loss
or damage to the Mortgaged Property is undertaken by Grantor, and Beneficiary
shall have no liability whatever for decline in value of the Mortgaged
Property, nor for failure to obtain or maintain insurance, nor for failure to
determine whether any insurance ever in force is adequate as to amount or as to
the risks insured.
Section 4.5. If the assignments, liens, or security interests hereof shall be
foreclosed or otherwise enforced by a Trustee's sale, or by any other judicial
or non-judicial action, then the purchaser at any such sale shall receive, as
an incident to his ownership, immediate possession of that portion of the
Mortgaged Property purchased, and if Grantor or Grantor's Successors shall hold
possession of any of said portion of the Mortgaged Property subsequent to such
foreclosure, Grantor and Grantor's Successors shall be considered as tenants at
sufferance of the purchaser at such foreclosure sale, and anyone occupying the
Mortgaged Property (or any part thereof) after demand made for possession
thereof shall be guilty of forcible detainer and shall be subject to eviction
and removal, forcible or otherwise, with or without process of law, and all
damages by reason thereof are hereby expressly waived.
Section 4.6. The proceeds from any sale, lease or other disposition made
pursuant to this Article IV, or the proceeds from surrendering any insurance
policies pursuant to Subsection 4.2(m) hereof, or any Rental (as hereafter
defined) collected by Beneficiary pursuant to Article V hereof, or sums
received pursuant to Section 7.7 hereof, or proceeds from insurance which
Beneficiary elects to apply to the Secured Indebtedness pursuant to Section 7.8
hereof, shall be applied by Trustee, or by Beneficiary, as the case may be, as
follows: FIRST, to the payment of all reasonable expenses of collection or of
advertising, selling, and conveying the Mortgaged Property, or any part
thereof, and reasonable attorneys' fees; SECOND, to interest on the matured
portion of the Secured Indebtedness; THIRD, to principal on the matured portion
of the Secured Indebtedness; FOURTH, to prepayment of the unmatured portion, if
any, of the Secured Indebtedness applied to installments of principal in
inverse order of maturity; and FIFTH, the balance, if any, remaining after the
full and final payment and performance of the Secured Indebtedness, to Grantor,
or as otherwise required by applicable law.
Section 4.7. This instrument shall be effective as a mortgage as well as a deed
of trust, and upon the occurrence of an Event of Default may be foreclosed as
to the Mortgaged Property in any manner permitted by the laws of Texas and any
other state in which any part of the Mortgaged Property is situated. Any
foreclosure suit may be brought by Trustee or any Beneficiary. If a foreclosure
hereunder is commenced by Trustee, Beneficiary may, at any time before the
sale, direct the Trustee to abandon the sale, and may then institute suit for
the collection of the Note, and for the foreclosure or enforcement of the
assignments, liens, and security interests hereof. If Beneficiary should
institute
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a suit for the collection of the Note, and for a foreclosure or enforcement of
the assignments, liens, and security interests hereof, it may, at any time
before the entry of a final judgment in said suit, dismiss the same, and
require Trustee to sell the Mortgaged Property, or any part thereof, in
accordance with the provisions of this Deed of Trust.
ARTICLE V
LEASES AND ASSIGNMENT OF RENTAL
Section 5.1. As used in this Deed of Trust: (i) "Lease" means any ground lease,
space lease, sublease or other agreement (oral or written) under the terms of
which any person other than Grantor has or acquires any right to occupy, use,
or manage the Mortgaged Property, or any part thereof, or interest therein;
(ii) "Lessee" means the lessee, sublessee, tenant or other person having the
right to occupy, use, or manage the Mortgaged Property, or any part thereof,
under a Lease; and (iii) "Rental" means the rents, issues, profits, royalties,
bonuses, revenue, income and other benefits derived from the Mortgaged Property
or arising from the use or enjoyment of any portion thereof or from any Lease
and liquidated damages following defaults under any Lease, and all proceeds
payable under any policy of insurance covering loss of rents, together with any
and all rights which Grantor may have against any tenant under any Lease.
Section 5.2. Grantor hereby assigns to Beneficiary all Rental payable under
each Lease now or at any time hereafter existing, such assignment being upon
the following terms:
(a) until Beneficiary notifies Grantor of the occurrence of an
Event of Default, Grantor shall collect Rental directly from each Lessee, and
each Lessee may pay Rental directly to Grantor, but Grantor covenants to hold
the Rentals in trust, to be applied, and Grantor covenants to apply the
Rentals, to the payment of (i) the Note and the remaining Secured Indebtedness,
and (ii) reasonable and necessary expenses and charges with respect to the
ownership, maintenance and operation of the Mortgaged Property, all before the
Rentals are applied by Grantor for any other purpose;
(b) upon receipt by Grantor from Beneficiary of notice of the
occurrence of an Event of Default and that Rental shall be paid directly to
Beneficiary, Grantor is hereby directed to pay directly to Beneficiary all
Rental thereafter accruing;
(c) upon receipt by Grantor, the manager of the Mortgaged Property
and/or any Lessee from Beneficiary of notice of the occurrence of an Event of
Default and that Rental shall be paid directly to Beneficiary, Grantor, such
manager and each Lessee that receives notice of the occurrence of an Event of
Default are hereby authorized and directed to pay directly to Beneficiary all
Rental thereafter accruing, and the receipt of Rental by Beneficiary shall be a
release of each such Lessee to the extent of all amounts so paid to
Beneficiary;
(d) Rental so received by Beneficiary shall be applied by
Beneficiary, at its option, in any order determined by Beneficiary in its
reasonable discretion, notwithstanding any instructions, directions or requests
from Grantor or any Lessee to the contrary, to (i) the payment and performance
of the Secured Indebtedness and/or (ii) expenses of and charges with respect to
the ownership, maintenance and operation of the Mortgaged Property (and
including, at Beneficiary's option, the maintenance, without interest thereon,
of a reserve for replacement), all before the Rentals are applied for any other
purpose not inconsistent with the Security Instruments; and
(e) Beneficiary shall not be liable for Beneficiary's failure to
collect, or its failure to exercise diligence in the collection of, Rental, but
shall be accountable only for Rental that it shall actually receive.
Deed of Trust/Pacific United, L.P. Page 16
<PAGE> 17
This assignment is in addition and in supplement to, and Beneficiary's
rights and remedies under this Article V are cumulative of, Beneficiary's
rights and remedies under any other document or assignment concerning or
applicable to each Lease now or at any time hereafter existing or Rentals
thereunder, or any part thereof.
As between Beneficiary and Grantor, and any person claiming through or
under Grantor, the assignment contained in this Section 5.2 is intended to be
absolute, unconditional and presently effective, and the provisions of
Subsections 5.2(a) and (b) are intended solely for the benefit of the manager
of the Mortgaged Property and each Lessee and shall never inure to the benefit
of Grantor or any person claiming through or under Grantor, other than a
manager or a Lessee who has not received such notice. It shall never be
necessary for Beneficiary to institute legal proceedings of any kind whatsoever
to enforce the provisions of this Section 5.2.
Section 5.3. Nothing in this Article V shall ever be construed as
subordinating this Deed of Trust to any Lease; provided, however, that any
proceedings by Beneficiary to foreclose this Deed of Trust, or any action by
way of its entry into possession after an Event of Default, shall not operate
to terminate any Lease which has been approved in writing by Beneficiary to the
Lessee thereunder, and Beneficiary will not cause any Lessee under any such
approved Lease to be disturbed in his possession and enjoyment of the leased
premises so long as such Lessee shall continue to fully and promptly pay the
Rental and perform all of the terms, covenants and provisions of such Lessee's
Lease.
Section 5.4. Grantor covenants: (i) upon demand by Beneficiary, to assign
to Beneficiary, by separate instrument in form and substance satisfactory to
Beneficiary, any or all Leases, or the Rental payable thereunder, including but
not limited to, any Lease which is now in existence or which may be executed
after the date hereof; (ii) not to accept from any Lessee, nor permit any
Lessee to pay, Rental for more than one month in advance; (iii) to comply with
the terms and provisions of each Lease; (iv) except to Beneficiary, not to
assign, transfer or mortgage any Lease; and (v) except to Beneficiary, not to
assign, transfer, pledge or mortgage any Rental.
Section 5.5. In the event that Beneficiary ever collects Rental,
Beneficiary shall be entitled to pay its agent as compensation for collecting
such Rental, from sums so collected, a reasonable fee.
Section 5.6. [Intentionally Omitted]
Section 5.7. In addition to the foregoing, Grantor covenants and agrees
that (unless otherwise consented to by Beneficiary in writing):
(a) Grantor shall not enter into any agreement with any person or
entity for the payment of leasing commissions with regard to any Lease which
agreement is not expressly made subordinate and inferior to the assignments,
liens, and security interests created by this Deed of Trust; and
(b) Grantor shall not challenge or interfere with Beneficiary's
application of Rentals as provided in Subsection 5.2.(d).
Section 5.8.
(a) notwithstanding any provision in this Deed of Trust to the
contrary, upon full payment and satisfaction of the Secured Indebtedness, this
assignment of Rental shall terminate, but the affidavit, certificate, letter or
statement of any officer or agent of Beneficiary stating that any part of the
Secured Indebtedness remains unpaid or undischarged shall constitute conclusive
evidence of the validity, effectiveness or continuing force of this assignment,
and any person, firm or corporation may, and is hereby authorized to, rely
thereon. Written demand made by Beneficiary delivered to any Lessee for payment
of Rentals by reason of the occurrence of any Event of Default claimed by
Deed of Trust/Pacific United, L.P. Page 17
<PAGE> 18
Beneficiary shall be sufficient evidence of each such Lessee's obligation and
authority to make all future payments of Rentals to Beneficiary without the
necessity for further consent by the Grantor. Grantor hereby indemnifies and
agrees to hold each Lessee free and harmless from and against all liability,
loss, cost, damage or expense suffered or incurred by such Lessee by reason of
its compliance with any demand for payment of Rentals made by the Beneficiary
contemplated by the preceding sentence.
(b) If Beneficiary receives any Rentals as provided in this
Article V, then provisions of Section 7.22 shall apply to the Rentals received
by Beneficiary.
ARTICLE VI
ENVIRONMENTAL PROVISIONS
Section 6. 1. Grantor warrants and represents to Beneficiary that to
Grantor's knowledge (except as disclosed in the Phase I Environmental Site
Assessment delivered to Beneficiary by Grantor) (a) the location, construction,
occupancy, operation, and use of the Mortgaged Property do not violate any
applicable law, statute, ordinance, rule, regulation, order, or determination
of any governmental authority or any board of fire underwriters (or other body
exercising similar functions), or any restrictive covenant or deed restriction
(of record or otherwise) affecting the Mortgaged Property, including, without
limitation, all applicable zoning ordinances and building codes, flood disaster
laws and health and environmental laws and regulations (hereinafter sometimes
collectively called the "Applicable Regulations"); (b) without limitation of
(a) above, the Mortgaged Property is not in violation of or subject to any
existing, pending, or, to Grantor's knowledge, threatened investigation or
inquiry by any governmental authority and are not subject to any remedial
obligations under any Applicable Regulations pertaining to health or the
environment (hereinafter sometimes collectively called "Applicable
Environmental Laws"), including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), and the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), and this representation and warranty would continue to be true and
correct following disclosure to the applicable governmental authorities of all
relevant facts, conditions, and circumstances, if any, pertaining to the
Mortgaged Property; (c) neither Grantor nor any Lessee has obtained or is
required to obtain any permits, licenses, or similar authorizations to
construct, occupy, operate, or use any buildings, improvements, fixtures, and
equipment forming a part of the Mortgaged Property as presently used and
operated by reason of any Applicable Environmental Laws; (d) Grantor has taken
all steps necessary to determine, and has determined, that no Reportable
Quantity of any hazardous substances or solid wastes has been disposed of or
otherwise released on or to the Mortgaged Property; (e) the use which Grantor
makes, intends to make, or intends to allow, of the Mortgaged Property will not
result in the disposal of or release of a Reportable Quantity of any hazardous
substance or solid waste onto the Mortgaged Property and (f) no underground
storage tanks, whether or not containing any substance, are located on or under
the Land. The terms (as used in this Article VI) "hazardous substance" and
"release" shall have the meanings specified in CERCLA, and the terms "solid
waste" and "disposal" (or "disposed") shall have the meanings specified in
RCRA, provided, in the event either CERCLA or RCRA is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment, and provided further, to
the extent that the laws of the State of Texas establish a meaning for
"hazardous substance," "release," "solid waste," or "disposal" which is broader
than that specified in either CERCLA or RCRA, such broader meaning shall apply.
For purposes of this Deed of Trust, the term "Reportable Quantity" shall have
the same meaning specified in the regulations promulgated under CERCLA.
Section 6.2. Grantor covenants and agrees that (a) Grantor shall not
construct or install, or permit to be constructed or installed, on or under the
Land, any underground storage tank, without the prior written consent of
Beneficiary, (b) Grantor shall give notice to Beneficiary immediately upon
Grantor's
Deed of Trust/Pacific United, L.P. Page 18
<PAGE> 19
acquiring knowledge of the presence or release of a Reportable Quantity of any
hazardous substance on, to or from the Mortgaged Property, with a full
description thereof, (c) Grantor shall promptly comply with any requirement or
order of any governmental authority requiring the removal, treatment, or
disposal of any hazardous substance and provide Beneficiary with satisfactory
evidence of such compliance, and (d) Grantor shall provide Beneficiary, within
thirty (30) days after demand by Beneficiary, with a bond, letter of credit, or
similar financial assurance evidencing to Beneficiary's satisfaction that the
necessary funds are available to pay the costs and expenses of removing,
treating and disposing of any hazardous substances located on the Mortgaged
Property in accordance with Applicable Environmental Laws and of discharging
any assessments or liens which may be established against the Mortgaged Property
as a result thereof.
Section 6.3. At any time and from time to time, that Beneficiary shall
reasonably believe that any hazardous substance shall have been disposed of on
or released to the Mortgaged Property, Grantor agrees to deliver to
Beneficiary, within thirty (30) days of a written request by Beneficiary made
not more than once during each twelve (12) month period commencing on the date
hereof, an environmental audit prepared by an environmental consulting firm
acceptable to Beneficiary in Beneficiary's reasonable judgment, at Grantor's
cost and expense, detailing the results of an environmental investigation of
the Mortgaged Property prepared in accordance with prudent engineering
standards, including, without limitation, the interpretation of and results of
a chemical analysis of soil and ground water samples. Grantor covenants and
agrees to take such action as is recommended by the environmental audit in
connection with any Reportable Quantity of any hazardous substances which may
be located on the Mortgaged Property, including, without limitation, asbestos.
Section 6.4. Grantor agrees to indemnify and to hold Beneficiary harmless
from and against, and to reimburse Beneficiary with respect to, any and all
claims, demands, causes of action, loss, damage, liabilities, costs, and
expenses (including attorneys' fees and court costs) of any and every kind or
character, known or unknown, fixed or contingent, asserted against or incurred
by Beneficiary at any time and from time to time by reason of or arising out of
any violation of any Applicable Environmental Law and any and all matters
arising out of any acts, omission, event, or circumstance (including, without
limitation, the presence on the Mortgaged Property or release from or to the
Mortgaged Property of hazardous substances or solid waste disposed of or
otherwise released), regardless of whether the act, omission, event, or
circumstance constituted a violation of any Applicable Environmental Law at the
time of the existence or occurrence.
Section 6.5. Notwithstanding anything set forth in this Deed of Trust or
any of the other Security Instruments to the contrary, the representations,
warranties, covenants and agreements contained in this Article VI shall survive
the satisfaction of the Secured Indebtedness and the foreclosure, release
and/or extinguishment of this Deed of Trust.
ARTICLE VII
MISCELLANEOUS
Section 7.1. If the Secured Indebtedness is paid and performed in full in
accordance with the terms of this Deed of Trust and the Note and other
instruments evidencing the Secured Indebtedness, and if Grantor shall well and
truly perform all of Grantor's covenants contained herein, then this conveyance
shall become null and void and be released at Grantor's request and expense;
otherwise, it shall remain in full force and effect, provided that no release
hereof shall impair Grantor's warranties and indemnities contained herein.
Section 7.2. As used in this Article VII, "Rights" means rights, remedies,
powers and privileges, and "Liens" means all assignments, titles, interests,
liens, security interests, and other encumbrances.
Deed of Trust/Pacific United, L.P. Page 19
<PAGE> 20
All Rights and Liens herein expressly conferred are cumulative of all other
Rights and Liens herein or by law or in equity provided, or provided in any
other security instrument, and shall not be deemed to deprive Beneficiary or
Trustee of any such other legal or equitable Rights and Liens by judicial
proceedings, or otherwise, appropriate to enforce the conditions, covenants and
terms of this Deed of Trust, the Note and the other Security Instruments, and
the employment of any Rights hereunder, or otherwise, shall not prevent the
concurrent or subsequent employment of any other appropriate Rights.
Section 7.3. Any and all covenants in this Deed of Trust may from time to
time, by instrument in writing signed by Beneficiary and delivered to Grantor,
be waived to such extent and in such manner as Beneficiary may desire, but no
such waiver shall ever affect or impair Beneficiary's Rights or Liens
hereunder, except to the extent so specifically stated in such written
instrument. Impossibility shall not excuse the performance of any covenant or
condition in this Deed of Trust.
Section 7.4. If Grantor, or any of Grantor's Successors, conveys its
interest in any of the Mortgaged Property to any other party, then Beneficiary
may, without notice to Grantor, or its successors and assigns, deal with any
owner of any part of the Mortgaged Property with reference to this Deed of
Trust and the Secured Indebtedness, either by way of forbearance on the part of
Beneficiary, or extension of time of payment of the Secured Indebtedness, or
release of all or any part of the Mortgaged Property, or any other property
securing payment of the Secured Indebtedness, without in any way modifying or
affecting Beneficiary's Rights and Liens hereunder or the liability of Grantor,
or any other party liable for payment of the Secured Indebtedness, in whole or
in part.
Section 7.5. Grantor hereby waives all Rights of marshaling in the event of
any foreclosure of the Liens hereby created.
Section 7.6. At the request of Beneficiary after the occurrence of an Event
of Default, Grantor shall create a fund or reserve for the payment of all
insurance premiums, taxes, and assessments against the Mortgaged Property by
paying to Beneficiary, contemporaneously with each installment of principal and
interest on the Note, a sum equal to the premiums that will next become due and
payable on the hazard insurance policies covering the Mortgaged Property, or
any part thereof, plus taxes and assessments next due on the Mortgaged
Property, or any part thereof, as estimated by Beneficiary, less all sums paid
previously to Beneficiary therefor, divided by the number of installments of
principal and/or interest to elapse before one month prior to the date when
such ground rentals, premiums, taxes, and assessments will become delinquent,
such sums to be held by Beneficiary, with interest, for the benefit of Grantor
for the purposes of paying such ground rentals, premiums, taxes, and
assessments. Any excess reserve shall, at the discretion of Beneficiary, be
credited by Beneficiary on subsequent payments to be made on the Secured
Indebtedness by Grantor, and any deficiency shall be paid by Grantor to
Beneficiary on or before the date when such ground rentals, premiums, taxes,
and assessments, shall have become delinquent. Transfer of legal title to the
Mortgaged Property shall automatically transfer title in all sums deposited
under the provisions of this Section 7.6.
Section 7.7. Beneficiary shall be entitled to receive any and all sums
which may be awarded or become payable to Grantor for the condemnation of any
of the Mortgaged Property for public or quasi-public use, or by virtue of
private sale in lieu thereof, and any sums which may be awarded or become
payable to Grantor for damages caused by public works or construction on or
near the Mortgaged Property. All such sums are hereby assigned to Beneficiary,
and Grantor shall, upon request of Beneficiary, make, execute, acknowledge, and
deliver any and all additional assignments and documents as may be necessary
from time to time to enable Beneficiary to collect and receipt for any such
sums. Beneficiary shall not be, under any circumstances, liable or responsible
for failure to collect, or exercise diligence in the collection of, any of such
sums. After the occurrence of an Event of Default, any sums so collected shall
be applied by Beneficiary, first, to the expenses, if any, of collection, and
then in accordance with Section 4.6 hereof. Subject to the provisions of
Section 7.8(d), Grantor may use any sums so collected to rebuild or restore the
Mortgaged Property.
Deed of Trust/Pacific United, L.P. Page 20
<PAGE> 21
Section 7.8. Damages and Insurance Proceeds
(a) Grantor hereby absolutely and irrevocably assigns to
Beneficiary, and authorizes the payor to pay to Beneficiary, the following
claims, causes of action, awards, payments and rights to payment:
(i) All awards, claims and causes of action,
arising out of any warranty affecting all or any part of the Property,
or for damage or injury to or decrease in value of all or part of the
Property or any interest in it; and
(ii) All proceeds of any insurance policies
payable because of loss sustained to all or part of the Property; and
(iii) All interest which may accrue on any of the
foregoing.
(b) Grantor shall immediately notify Beneficiary in
writing if:
(i) Any damage occurs or any injury or loss is
sustained in the amount of $25,000.00 or more to all or part of the
Property, or any action or proceeding relating to any such damage,
injury or loss is commenced; or
(ii) Any offer is made, or any action or
proceeding is commenced, which relates to any actual or proposed
condemnation or taking of all or part of the Property.
(c) If Beneficiary chooses to do so, Beneficiary may in
its own name appear in or prosecute any action or proceeding to enforce any
cause of action based on warranty, or for damage, injury or loss to all or part
of the Property, and Beneficiary may make any compromise or settlement of the
action or proceeding. Beneficiary, if it so chooses, may participate in any
action or proceeding relating to condemnation or taking of all or part of the
Property, and may join Grantor in adjusting any loss covered by insurance.
(d) All proceeds of these assigned claims, all
condemnation proceeds and all other property and rights which Grantor may
receive or be entitled to shall be paid to Beneficiary. In each instance,
Beneficiary shall apply such proceeds first toward reimbursement of all of
Beneficiary's costs and expenses of recovering the proceeds, including
attorneys' fees. If, in any instance, each and all of the following conditions
are satisfied in Beneficiary's reasonable judgment, Beneficiary shall permit
Grantor to use the balance of such proceeds ("Net Claims Proceeds") to pay
costs of repairing or reconstructing the Property in the manner described
below:
(i) The plans and specifications, cost breakdown,
construction contract, construction schedule, contractor and payment
and performance bond (bonds not to be required for losses less than
$100,000.00) for the work of repair or reconstruction must all be
acceptable to Beneficiary.
(ii) Beneficiary must receive evidence
satisfactory to it that after repair or reconstruction, the Property
would be at least as valuable as it was immediately before the damage
or condemnation occurred.
(iii) The Net Claims Proceeds must be sufficient in
Beneficiary's determination to pay for the total cost of repair or
reconstruction, including all associated
Deed of Trust/Pacific United, L.P. Page 21
<PAGE> 22
development costs and interest projected to be payable on the Secured
Obligations until the repair or reconstruction is complete; or Grantor
must provide its own funds in an amount equal to the difference
between the Net Claims Proceeds and a reasonable estimate, made by
Grantor and found acceptable by Beneficiary, of the total cost of
repair or reconstruction.
(iv) Beneficiary must receive evidence
satisfactory to it that all leases which Beneficiary may find
acceptable will continue after the repair or reconstruction is
complete.
(v) No Event of Default shall have occurred and
be continuing.
If Beneficiary finds that such conditions have been met, Beneficiary shall hold
the Net Claims Proceeds and any funds which Grantor is required to provide in a
noninterest-bearing account and shall disburse them to Grantor to pay costs of
repair or reconstruction upon presentation of evidence reasonably satisfactory
to Beneficiary that repair or reconstruction has been completed satisfactorily
and lien-free. However, if Beneficiary finds that one or more of such
conditions have not been satisfied, Beneficiary may apply the Net Claims
Proceeds to pay or prepay some or all of the Secured Obligations in such order
and proportions as Beneficiary in its sole discretion may choose. Any Net
Claims Proceeds remaining after completion of repair or reconstruction shall be
applied against the unpaid balance of the Note as a partial or total
prepayment, subject to the terms and conditions of the Note with respect to
prepayments.
Section 7.9. It is understood and agreed that the proceeds of the Note, to
the extent that the same are utilized to pay or renew or extend any
indebtedness of Grantor, or any other indebtedness, or take up or release any
outstanding Liens against the Mortgaged Property, or any portion thereof, have
been advanced by Beneficiary at Grantor's request and at the request of the
obligors thereof and upon the representation that such amounts are due and
payable. Beneficiary shall be subrogated to any and all Rights and Liens owned
or claimed by any owner or Beneficiary of said outstanding Rights and Liens,
however remote, regardless of whether said Rights and Liens are acquired by
assignment or are released by the Beneficiary thereof upon payment.
Section 7.10. Each and every party who signs this Deed of Trust, and each
and every subsequent owner of any of the Mortgaged Property, covenants and
agrees that such party will perform or cause to be performed, each and every
condition, term, provision, and covenant of this Deed of Trust, except that
such party shall have no duty to pay the indebtedness evidenced by the Note
except in accordance with the terms of the Note, and all renewals, extensions,
modifications and increases thereof, and the terms of this Deed of Trust or in
accordance with the terms of the transfer to him.
Section 7.11. If any provision of this Deed of Trust is held to be illegal,
invalid, or unenforceable under present or future laws effective during the
term of this Deed of Trust, the legality, validity, and enforceability of the
remaining provisions of this Deed of Trust shall not be affected thereby, and
in lieu of each such illegal, invalid or unenforceable provision there shall be
added automatically as a part of this Deed of Trust a provision as similar in
terms to such illegal, invalid, or unenforceable provision as may be possible
and be legal, valid, and enforceable. If the Rights and Liens created by this
Deed of Trust shall be invalid or unenforceable as to any part of the Secured
Indebtedness, then the unsecured portion of the Secured Indebtedness shall be
completely paid prior to the payment of the remaining and secured portion of
the Secured Indebtedness, and all payments made on the Secured Indebtedness
shall be considered to have been paid on and applied first to the complete
payment of the unsecured portion of the Secured Indebtedness.
Section 7.12. This Deed of Trust is binding upon Grantor and Grantor's
Successors, and shall inure to the benefit of Beneficiary, and its successors
and assigns, and the provisions hereof shall likewise be covenants running with
the land. The duties, covenants, conditions, obligations, and warranties of
Grantor in this Deed of Trust shall be joint and several obligations of Grantor
and Grantor's
Deed of Trust/Pacific United, L.P. Page 22
<PAGE> 23
Successors. Beneficiary may at any time and from time to time assign or sell to
other lenders all or a portion of the indebtedness secured hereby, or sell
participations therein, and may, in contemplation of such sale or assignment
divulge, and deliver copies of, information (financial or otherwise) concerning
Grantor and any Guarantor to such prospective lenders.
Section 7.13. This Deed of Trust has been simultaneously executed in a
number of identical counterparts, each of which, for all purposes, shall be
deemed an original.
Section 7.14. Beneficiary shall have the right at any time to file this Deed
of Trust as a financing statement, but the failure to do so shall not impair
the validity and enforceability of this Deed of Trust in any respect
whatsoever.
Section 7.15. Grantor hereby assumes all liability for the Mortgaged
Property, for the Liens created therein by this Deed of Trust, and for any
development, use, possession, maintenance, and management of, and construction
upon, the Mortgaged Property, or any part thereof, and agrees to assume
liability for, and to indemnify and hold Beneficiary harmless from and against,
any and all claims, causes of action, or liabilities, for injuries to or deaths
of persons and damage to property, howsoever arising, from or incident to such
development, use, possession, maintenance, management, and construction,
whether such persons be agents or employees of Grantor or of third parties, or
such damage be to property of Grantor or of others. Grantor agrees to
indemnify, save and hold harmless Beneficiary from and against, and covenants
to defend Beneficiary against, any and all losses, damages, claims, costs,
penalties, liabilities, and expenses, including, but not limited to, court
costs and reasonable attorneys' fees, howsoever arising or incurred because of,
incident to, or with respect to the Mortgaged Property or any development, use,
possession, maintenance, or management thereof or construction thereon.
Section 7.16. If all or any portion of the proceeds of the loan evidenced by
the Note has been advanced for the purpose of paying the purchase price for all
or a part of the Mortgaged Property, then: (a) Beneficiary shall have, and is
hereby granted, a vendor's lien on the Mortgaged Property to further secure the
Secured Indebtedness; and (b) Beneficiary shall be subrogated to all rights,
titles, interests, liens, and security interests owned or claimed by the holder
of any indebtedness which has been directly or indirectly discharged or paid
from the proceeds of the loan evidenced by the Note.
Section 7.17. All references to "Article," "Articles," "Section," "Sections,"
"Subsection," or "Subsections" contained herein are, unless specifically
indicated otherwise, references to articles, sections, and subsections of this
Deed of Trust.
Section 7.18. Whenever 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.
Section 7.19. The captions, headings, and arrangements used in this Deed of
Trust are for convenience only and do not in any way affect, limit, amplify, or
modify the terms and provisions hereof.
Section 7.20. Whenever this Deed of Trust requires or permits any consent,
approval, notice, request, or demand from one party to another, the consent,
approval, notice, request, or demand must be in writing to be effective and
shall be deemed to have been given when (a) if by hand delivery, telecopy or
other facsimile transmission, on the day and at the time on which delivered to
such party at the address or telecopier numbers specified below; (b) if by
mail, on the day two (2) days following the date upon which it is deposited,
postage prepaid, in the United States, registered or certified mail, return
receipt requested, addressed to such party at the address specified below
(except that any notice of a nonjudicial foreclosure shall be effective upon
the date so deposited in the U. S. mail); or
Deed of Trust/Pacific United, L.P. Page 23
<PAGE> 24
(c) if by Federal Express or other reputable express mail service, on the
next Business Day following the delivery to such express mail service,
addressed to such party at the address set forth below:
If to Beneficiary: Bank of America Texas, N.A.
1925 W. John Carpenter Freeway
Irving, Texas 75063
Telephone: (972) 444-7596
Telecopier: (972) 444-5210
Attention: Robert J. Carroll
If to Grantor: Pacific United, L.P.
2445 Midway, Suite 106
Carrollton, Texas 75006
Telephone: (972) 447-0401
Telecopier: (972) 447-0783
Attention: Coleman Bradley
Failure to deliver copies of notices to parties other than Grantor and
Beneficiary shall not affect the effectiveness or validity of notices otherwise
properly given. Any party may change its address for purposes hereof by giving
ten (10) days written notice of such change to the other parties pursuant to
this Section 7.20.
Notwithstanding any provision contained herein or in any of the other
Security Instruments to the contrary, in the event that Beneficiary shall fail
to give any notice to Grantor required hereunder or thereunder, the sole and
exclusive remedy for such failure shall be to seek appropriate equitable relief
to enforce the Security Instruments to give such notice and to have any action
of Beneficiary postponed or revoked and any proceedings in connection therewith
delayed or terminated pending the giving of such notice by Beneficiary, and no
Person shall have any right to damages (whether actual or consequential) or any
other type of relief not herein specifically set out against Beneficiary, all
of which damages or other relief are expressly waived by Grantor. The foregoing
is not intended and shall not be deemed under any circumstances to require
Beneficiary to give notice of any type or nature to any Person except as
expressly set forth herein or as may be otherwise expressly required by
applicable law regarding statutory notice of non-judicial foreclosure sales of
certain collateral.
Section 7.21. This Deed of Trust is being executed and delivered, and is
intended to be performed, in the State of Texas, and the substantive laws of
such State shall govern the validity, construction, enforcement, and
interpretation of this Deed of Trust, the Note, and the other Security
Instruments, unless otherwise specified herein or therein or unless federal law
or the laws of another state require the application of such laws.
Section 7.22. Regardless of any provisions contained in this Deed of Trust,
the Note or any of the other Security Instruments, Beneficiary shall never be
entitled to receive, collect or apply, as interest on the Secured Indebtedness,
any amount in excess of the highest lawful rate and, in the event that
Beneficiary ever receives, collects or applies, as interest, any such excess,
such amount which would be excessive interest shall be applied to the reduction
of the unpaid principal balance of the Secured Indebtedness, and if the
principal balance of the Secured Indebtedness is paid in full, any remaining
excess shall be forthwith paid to Grantor. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the highest
lawful rate, Grantor and Beneficiary shall, to the maximum extent permitted
under applicable law, (a) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (b) exclude voluntary prepayments and
the effects thereof, and (c) "spread" the total amount of interest throughout
the entire term of the Note so that the interest rate does not exceed the
highest lawful rate of interest.
Deed of Trust/Pacific United, L.P. Page 24
<PAGE> 25
Section 7.23. Subject to the requirements of Section 3.2(c) of the Loan
Agreement, after completion of the Improvements, Grantor shall be entitled to
obtain, from time to time, the release of one or more of the Lots from the Lien
of this Deed of Trust in connection with the all-cash sale of one or more of
such Lots to third parties for purposes of constructing single-family homes
thereon, provided the following conditions have been satisfied: (i) at least
fifteen (15) days before the closing of the intended sale, Borrower shall have
given Beneficiary written notice of the intended sale accompanied by (a) a
survey plat containing the legal description of the Lots proposed to be
released from the lien of this Deed of Trust (the "Release Lots") and depicting
the location of the Release Lots within the Property in relation to the Lots
remaining subject to the lien of this Deed of Trust (the "Remaining Lots"); (b)
a copy of the contract of sale (which is subject to Beneficiary's prior
approval pursuant to Section 3.2 of the Loan Agreement) and all other documents
proposed to be executed in connection with the sale; (c) a certification by the
Grantor that Grantor and all other parties liable in connection with the Loan
are in compliance with all material provisions of the Loan Documents; (d)
Grantor's computation of the net sales proceeds that will result from the sale
(which proceeds must be at least equal to the minimum proceeds required by
Section 3.2(c) of the Loan Agreement); (e) such evidence as Beneficiary may
reasonably require that following the release, the Remaining Lots will continue
to be in compliance with all applicable zoning, platting and land use laws and
restrictions and (ii) Bank reasonably determines that following the requested
release, the ratio of the unpaid balance of the Note to the value of the
Remaining Lots will not exceed the Maximum Loan to Value Ratio set forth in the
Loan Agreement. If the foregoing information is satisfactory to Beneficiary and
the requirements of Section 3.2(c) of the Loan Agreement are met, then Grantor
shall be entitled to a release of the Release Lots from the lien of this Deed of
Trust at the closing of the sale of the Release Lots, conditioned upon delivery
to Beneficiary of (i) an acceptable form of modification endorsement to the
mortgagee title policy insuring the lien of this deed of trust and (ii) payment
to Beneficiary of the greater of (i) one hundred percent (100%) of the net sales
proceeds from the sale, or (ii) the Minimum Net Proceeds (as such term is
defined in the Loan Agreement). Regardless of whether or not the proposed
partial release is approved, Grantor shall pay Beneficiary's reasonable costs,
including legal fees, incurred in connection with any requested release of Lots
from the lien of this Deed of Trust. Within five (5) days after the closing of
a sale of a portion of the Land for which a Partial Release is given, Grantor
shall provide Beneficiary with a signed copy of the closing statement for such
sale.
Section 7.24. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
As used herein, the term "Loan Agreement" means one or more promises,
promissory notes, agreements, undertakings, security agreements, deeds of trust
or other documents, or commitments, or any combination of those actions or
documents relating to the Loan. This Notice is given with respect to the Loan,
pursuant to Section 26.02 of the Texas Business and Commerce Code.
Section 7.25. Time is of the essence of this Deed of Trust and the other
Security Instruments.
Section 7.26. Nothing contained in this Deed of Trust, the Note, the
Security Instruments, or any of the other security instruments nor the acts of
the parties hereto shall be construed to create a relationship of principal and
agent, partnership, or joint venture between Grantor and Beneficiary.
Deed of Trust/Pacific United, L.P. Page 25
<PAGE> 26
EXECUTED effective as of August 6, 1997.
GRANTOR:
PACIFIC UNITED, L.P.,
a Texas limited partnership
By: Pacific United Development Corp.,
a Nevada corporation,
its sole general partner
By: /s/ COLEMAN BRADLEY
--------------------------------
Coleman Bradley,
President
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on August 6, 1997, by
Coleman Bradley, President of PACIFIC UNITED DEVELOPMENT CORP., a Nevada
corporation, on behalf of said corporation as general partner on behalf of
PACIFIC UNITED, L.P., a Texas limited partnership.
/s/ CHARLINE KEE
---------------------------------
Notary Public Signature
(PERSONALIZED SEAL)
[NOTARY PUBLIC SEAL]
Deed of Trust/Pacific United, L.P. Page 26
<PAGE> 1
EXHIBIT 10.1(d)
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is made as of August 6, 1997,
by PACIFIC UNITED, L.P., a Texas limited partnership ("Indemnitor"), in favor
of BANK OF AMERICA TEXAS, N.A. ("Bank").
FACTUAL BACKGROUND
A. Indemnitor is executing this Agreement to induce Bank to make
a term loan (the "Loan") to Indemnitor in the principal amount of Three Million
Six Hundred Seventy-Five Thousand and No/100 Dollars ($3,675,000.00).
B. The Loan is evidenced by a promissory note of even date
herewith (the "Note") made payable to Bank in the principal amount of the Loan.
The Loan is secured by, among other things, a deed of trust covering the real
property located in Dallas County, Texas, described in Exhibit A attached
hereto ("Deed of Trust").
C. Because Bank is making the Loan and obtaining the Deed of
Trust, Bank may potentially become subject to certain costs, risks and
liabilities. Among other things, Bank may become subject to liabilities or
alleged liabilities relating to environmental conditions as an "owner" or
"operator" under applicable environmental law. These costs and liabilities may
arise before or after repayment of the Loan, and before or after foreclosure
under the Deed of Trust. Because these costs and liabilities, if they occur,
will be the result of Bank's agreement to make the Loan, and in consideration
of that agreement, Bank and Indemnitor have agreed as set forth below.
I. DEFINITIONS
In addition to any terms defined elsewhere in this Agreement, as used
in this Agreement:
1.1 "Hazardous Substance" means any substance, material or waste
(including petroleum and petroleum products) which is or becomes designated,
classified or regulated as being "toxic" or "hazardous" or a "pollutants" or
which is or becomes similarly designated, classified or regulated, under any
federal, state or local law, regulation or ordinance.
1.2 "Indemnified Costs" means all actual or threatened
liabilities, claims, actions, causes of action, judgments, orders, damages
(including foreseeable and unforeseeable consequential damages), costs,
expenses, fines, penalties and losses (including sums paid in settlement of
claims and all consultant, expert and legal fees and expenses of Bank's
counsel), including those incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work (whether of
the Property, as defined below, or any other property), or any resulting
damages, harm or injuries to the person or property of any third parties or to
any natural resources.
1.3 "Indemnified Parties" means and includes Bank, its parent,
subsidiary and affiliated companies, assignees of any of Bank's interest in the
Loan or the Loan Documents,
<PAGE> 2
owners of participation or other interests in the Loan or the Loan Documents,
or any of its affiliates, and the officers, directors, employees and agents of
each of them.
1.4 "Loan Documents" means the Note, the Deed of Trust, this
Agreement, and the other documents executed in connection therewith.
1.5 "Property" means all property that is or was at any time
encumbered by the Deed of Trust, which may later include any and all property
previously released from it.
1.6 "Reference-based Rate" means the rate of interest defined as
such in the Note.
II. INDEMNITY AGREEMENT.
2.1 INDEMNITY REGARDING HAZARDOUS SUBSTANCES. Indemnitor
indemnifies, defends and holds the Indemnified Parties harmless from and
against any and all Indemnified Costs directly or indirectly arising out of or
resulting from any Hazardous Substance being present or released in, on or
around any part of the Property, or in the soil, groundwater or soil vapor on
or under the Property, including:
(a) any claim for such Indemnified Costs asserted by any
federal, state or local governmental agency, including the United States
Environmental Protection Agency and the Texas Natural Resource Conservation
Commission, and including any claim that any Indemnified Party is liable for
any such Indemnified Costs as an "owner" or "operator" of the Property under
any law relating to Hazardous Substances; and
(b) any such Indemnified Costs claimed against any
Indemnified Party by any person other than a governmental agency, including any
person who may purchase or lease all or any portion of the Property from
Indemnitor, from any Indemnified Party, or from any other purchaser or lessee;
any person who may at any time have any interest in an or any portion of the
Property; any person who may at any time be responsible for any clean-up costs
or other Indemnified Costs relating to the Property; and any person claiming to
have been injured in any way as a result of exposure to any Hazardous
Substance; and
(c) any such Indemnified Costs which any Indemnified
Party reasonably believes at any time must be incurred to comply with any law,
judgment, order, regulation or regulatory directive relating to Hazardous
Substances, or which any Indemnified Party reasonably believes at any time must
be incurred to protect the public health or safety; and
(d) any such Indemnified Costs resulting from currently
existing conditions in, on or around the Property, whether known or unknown by
Indemnitor or the Indemnified Parties at the time this Agreement is executed,
and any such Indemnified Costs resulting from the activities of Indemnitor,
Indemnitor's tenants, or any other person in, on or around the Property.
2.2 INDEMNITY REGARDING CONSTRUCTION AND OTHER RISKS. Indemnitor
indemnifies, defends and holds the Indemnified Parties harmless from and
against any and all Indemnified Costs directly or indirectly arising out of or
resulting from construction of any improvements on
<PAGE> 3
the Property, including any defective workmanship or materials; or any failure
to satisfy any requirements of any laws, regulations, ordinances, governmental
policies or standards, reports, subdivision maps or development agreements that
apply or pertain to the Property; or breach of any material representation or
warranty made or given by Indemnitor to any of the Indemnified Parties or to
any prospective or actual buyer of all or any portion of the Property; or any
claim or cause of action of any kind by any party that any Indemnified Party is
liable for any act or omission of Indemnitor or any other person or entity in
connection with the ownership, sale, operation or development of the Property.
2.3 DEFENSE OF INDEMNIFIED PARTIES. Upon demand by any
Indemnified Party, Indemnitor shall defend any investigation, action or
proceeding involving any Indemnified Costs which is brought or commenced
against any Indemnified Party, whether alone or together with Indemnitor or any
other in the person, all at Indemnitor's own cost and by counsel to be approved
by the Indemnified Party exercise of its reasonable judgment. In the
alternative, any Indemnified Party may elect to conduct its own defense at the
reasonable expense of Indemnitor.
2.4 REPRESENTATION AND WARRANTY REGARDING HAZARDOUS SUBSTANCES.
Before signing this Agreement, Indemnitor researched and inquired into the
previous uses and owners of the Property. Based on that due diligence,
Indemnitor represents and warrants that to the best of its knowledge, no
Hazardous Substance has been disposed of or released, or otherwise now exists,
in, on, under or around the Property, except as Indemnitor has disclosed to
Bank in writing, as set forth in that certain Phase I Environmental Site
Assessment delivered to Bank by Indemnitor.
2.5 COMPLIANCE REGARDING HAZARDOUS SUBSTANCES. Indemnitor has
complied, and shall comply and use its best efforts to cause all tenants and
any other persons who may come upon the Property to comply, with all laws,
regulations and ordinances governing or applicable to Hazardous Substances,
including those requiring disclosures to prospective and actual buyers of all
or any portion of the Property. Indemnitor also has complied and shall comply
with the recommendations of any qualified environmental engineer or other
expert which apply or pertain to the Property.
2.6 NOTICES REGARDING HAZARDOUS SUBSTANCES. Indemnitor shall
promptly notify Bank if it knows, suspects or believes there may be any
Hazardous Substance in or around the Property, or in the soil, groundwater or
soil vapor on or under the Property, or that Indemnitor or the Property may be
subject to any threatened or pending investigation by any governmental agency
under any law, regulation or ordinance pertaining to any Hazardous Substance.
2.7 SITE VISITS, OBSERVATIONS AND TESTING. The Indemnified
Parties and their agents and representatives shall have the right at any
reasonable time to enter and visit the Property for the purposes of observing
the Property, taking and removing soil or groundwater samples, and conducting
tests on any part of the Property. The Indemnified Parties have no duty,
however, to visit or observe the Property or to conduct tests, and no site
visit, observation or testing by any Indemnified Party shall impose any
liability on any Indemnified Party. In no event shall any site visit,
observation or testing by any Indemnified Party be a representation that
Hazardous Substances are or are not present in, on or under the Property, or
that there has been or shall be compliance with any law, regulation or
ordinance pertaining to Hazardous Substances or any
<PAGE> 4
other applicable governmental law. Neither Indemnitor nor any other party is
entitled to rely on any site visit, observation or testing by any Indemnified
Party. The Indemnified Parties owe no duty of care to protect Indemnitor or
any other party against, or to inform Indemnitor or any other party of, any
Hazardous Substances or any other adverse condition affecting the Property.
Any Indemnified Party shall give Indemnitor reasonable notice before entering
the Property. The Indemnified Party shall make reasonable efforts to avoid
interfering with Indemnitor's use of the Property in exercising any rights
provided in this Section.
2.8 COSTS AND EXPENSES. Indemnitor agrees to pay all of the
Indemnified Parties' reasonable costs and expenses, including attorneys' fees,
which may be incurred in any effort to enforce any term of this Agreement,
including all such costs and expenses which may be incurred by any Indemnified
Party in any legal action or arbitration proceeding. From the time(s) incurred
until paid In full to the Indemnified Party, those sums shall bear interest at
the Reference-based Rate.
3. INDEMNITOR'S AGREEMENTS AND WAIVERS.
3.1 RIGHTS OF BANK. Indemnitor authorizes Bank to perform any or
all of the following acts at any time in its sole discretion, all without
notice to Indemnitor and without affecting Indemnitor's obligations under this
Agreement:
(a) [Intentionally omitted].
(b) Bank may take and hold security for the Loan or this
Agreement, accept additional or substituted security for either, and
subordinate, exchange, enforce, waive, release, compromise, and sell or
otherwise dispose of any such security.
(c) Bank may direct the order and manner of any sale of all or any
part of any security now or later to be held for the Loan or this Agreement,
and Bank may also bid at any such sale.
(d) Bank may apply any payments or recoveries from Borrower,
Indemnitor or any other source, and any proceeds of any security, to Borrower's
obligations under the Loan Documents in such manner, order and priority as Bank
may elect.
(e) Bank may release Borrower of its liability for the Loan or any
part of it.
(f) Bank may substitute, add or release any one or more guarantors
or endorsers.
(g) In addition to the Loan, Bank may extend other credit to
Borrower, and may take and hold security for the credit so extended, all
without affecting Indemnitor's liability under this Agreement.
Nothing in this Section 3.1 shall be construed to constitute a consent
by Borrower to any action by Bank not permitted under the terms of the other
Loan Documents or by applicable law.
<PAGE> 5
3.2 ABSOLUTE INDEMNITY. Indemnitor expressly agrees that until
the Loan is paid in full and all obligations of the Borrower under the Loan
Documents have been fully performed, Indemnitor shall not be released by or
because of:
(a) Any act or event which might otherwise discharge, reduce,
limit or modify Indemnitor's obligations under this Agreement;
(b) Any waiver, extension, modification, forbearance, delay or
other act or omission of Bank, or its failure to proceed promptly or otherwise
as against Borrower, Indemnitor or any security;
(c) Any action, omission or circumstance which might increase the
likelihood that Indemnitor may be called upon to perform under this Agreement
or which might affect the rights or remedies of Indemnitor as against Borrower;
or
(d) Any dealings occurring at any time between Borrower and Bank,
whether relating to the Loan or otherwise.
Indemnitor hereby expressly waives and surrenders an defense to their
liability under this Agreement based upon any of the foregoing acts, omissions,
agreements, waivers or matters. It is the purpose and intent of this Agreement
that the obligations of Indemnitor under it shall be absolute and unconditional
under any and all circumstances.
3.3 INDEMNITOR'S WAIVERS. INDEMNITOR HEREBY WAIVES:
(a) Any right it may have to require Bank to proceed against
Borrower, proceed against or exhaust any security held from Borrower, or pursue
any other remedy in Bank's power to pursue;
(b) Any defense based on any claim that Indemnitor's obligations
exceed or are more burdensome than those of Borrower;
(c) Any defense based on: (i) any legal disability of Borrower,
(ii) any release, discharge, modification, impairment or limitation of the
liability of Borrower to Bank from any cause, whether consented to by Bank or
arising by operation of law or from any bankruptcy or other voluntary or
involuntary proceeding, in or out of court, for the adjustment of
debtor-creditor relationships ("Insolvency Proceeding") and (iii) any rejection
or disaffirmance of the Loan, or any part of it, or any security held for it,
in any such Insolvency Proceeding;
(d) Any defense based on any action taken or omitted by Bank in
any Insolvency Proceeding involving Borrower, including any election to have
Bank's claim allowed as being secured, partially secured or unsecured, any
extension of credit by Bank to Borrower in any Insolvency Proceeding, and the
taking and holding by Bank of any security for any such extension of credit;
(e) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices of
intention to accelerate, notices of acceleration,
<PAGE> 6
notices of acceptance of this Agreement and of the existence, creation, or
incurring of new or additional indebtedness, and demands and notices of every
kind; and
(f) Any defense based on or arising out of any defense that
Borrower may have to the payment or performance of the Loan or any part of it.
3.4 WAIVERS OF SUBROGATION AND OTHER RIGHTS.
(a) Upon a default by Borrower, Bank in its sole discretion,
without prior notice to or consent of Indemnitor, may elect to do any one or
more of the following: W foreclose either judicially or nonjudicially against
any real or personal property security it may hold for the Loan, (ii) accept a
transfer of any such security in lieu of foreclosure, (iii) compromise or
adjust the Loan or any part of it or make any other accommodation with Borrower
or one or more Indemnitor, and/or (iv) exercise any other remedy against
Borrower or any security. No such action by Bank shall release or limit the
liability of Indemnitor, who shall remain liable under this Agreement after the
action, even if the effect of the action is to deprive one or more Indemnitor
of any subrogation rights, rights of indemnity, or other rights to collect
reimbursement from Borrower for any sums paid to Bank, whether contractual or
arising by operation of law or otherwise. Indemnitor expressly agrees that
under no circumstances shall it be deemed to have any right, title, interest or
claim in or to any real or personal property to be held by Bank or any third
party after any foreclosure or transfer in lieu of foreclosure of any security
for the Loan.
(b) Regardless of whether Indemnitor may have made any payments to
Bank under this Agreement, until the Loan and all obligations under this
Agreement have been paid and performed in full, Indemnitor waives: G) all
rights of subrogation, all rights of indemnity, and any other rights to collect
reimbursement from Borrower for any sums paid to Bank under this Agreement,
whether contractual or arising by operation of law (including the United States
Bankruptcy Code or any successor or similar statute) or otherwise, Gi) all
rights to enforce any remedy that Bank may have against Borrower, and (iii) all
rights to participate in any security now or later to be held by Bank for the
Loan. Further, Indemnitor expressly waives each and every right, if any, to
which it may be entitled by virtue of the suretyship law of the State of Texas,
including without limitation, any rights pursuant to Rule 31, Texas Rules of
Civil Procedure, Articles 1986 and 1987, Revised Civil Statutes of Texas and
Chapter 34 of the Texas Business and Commerce Code.
3.5 REVIVAL AND REINSTATEMENT. If Bank is required to pay, return
or restore to Borrower or any other person any amounts previously paid on the
Loan because of any Insolvency Proceeding of Borrower, any stop notice or any
other reason, the obligations of each Indemnitor shall be reinstated and
revived and the rights of Bank shall continue with regard to such amounts, all
as though they had never been paid.
3.6 REPRESENTATION AND WARRANTY REGARDING HAZARDOUS SUBSTANCES.
Before signing this Agreement, Indemnitor researched and inquired into the
previous uses and owners of the Property. Based on that due diligence,
Indemnitor represents and warrants that to the best of its knowledge, no
Hazardous Substance has been disposed of or released, or otherwise now exists,
in, on, under or around the Property, except as Indemnitor has disclosed to
Bank in
<PAGE> 7
writing as set forth in that certain Phase I Environmental Site Assessment
delivered to Bank by Indemnitor.
3.7 COMPLIANCE REGARDING HAZARDOUS SUBSTANCES. Indemnitor has
complied, and shall comply and shall use its best efforts to cause all tenants
and any other persons who May come upon the Property to comply, with all laws,
regulations and ordinances governing or applicable to Hazardous Substances,
including those requiring disclosures to prospective and actual buyers of all
or any portion of the Property. Indemnitor also has complied and shall comply
with the recommendations of any qualified environmental engineer or other
expert which apply or pertain to the Property.
3.8 NOTICES REGARDING HAZARDOUS SUBSTANCES. Indemnitor shall
promptly notify Bank if it knows, suspects or believes there may be any
Hazardous Substance in or around the Property, or in the soil, groundwater or
soil vapor on or under the Property, or that Indemnitor or the Property may be
subject to any threatened or pending investigation by any governmental agency
under any law, regulation or ordinance pertaining to any Hazardous Substance.
3.9 SITE VISITS, OBSERVATIONS AND TESTING. The Indemnified
Parties and their agents and representatives shall have the right at any
reasonable time to enter and visit the Property for the purposes of observing
the Property, taking and removing soil or groundwater samples, and conducting
tests on any part of the Property. The Indemnified Parties have no duty,
however, to visit or observe the Property or to conduct tests, and no site
visit, observation or testing by any Indemnified Party shall impose any
liability on any Indemnified Party. In no event shall any site visit,
observation or testing by any Indemnified Party be a representation that
Hazardous Substances are or are not present in, on or under the Property, or
that there has been or shall be compliance with any law, regulation or
ordinance pertaining to Hazardous Substances or any other applicable
governmental law. Neither Indemnitor nor any other party is entitled to rely
on any site visit, observation or testing by any Indemnified Party. The
Indemnified Parties owe no duty of care to protect Indemnitor or any other
party against, or to inform Indemnitor or any other party of, any Hazardous
Substances or any other adverse condition affecting the Property. Any
Indemnified Party shall give Indemnitor reasonable notice before entering the
Property. The Indemnified Party shall make reasonable efforts to avoid
interfering with Indemnitor's use of the Property in exercising any rights
provided in this Section.
3.10 COSTS AND EXPENSES. Indemnitor agrees to pay all of the
Indemnified Parties' reasonable costs and expenses, including attorneys' fees,
which may be incurred in any effort to enforce any term of this Agreement,
including all such costs and expenses which may be incurred by any Indemnified
Party in any legal action or arbitration proceeding. From the time(s) incurred
until paid in full to the Indemnified Party, those sums shall bear interest at
the Reference-based Rate.
3.11 REPRESENTATIONS AND WARRANTIES. Indemnitor represents and
warrants that:
(a) All financial statements and other financial
information furnished or to be furnished to Bank are or will be true and
correct and do or will fairly represent the financial condition of such
Indemnitor (including all contingent liabilities);
<PAGE> 8
(b) All financial statements of Indemnitor were or will
be prepared in accordance with sound accounting principles, consistently
applied; and
(c) There has been no material adverse change in
Indemnitor's financial condition since the dates of the statements most
recently furnished to Bank.
3.12 ADDITIONAL AND INDEPENDENT OBLIGATIONS. Indemnitor's
obligations under this Agreement are in addition to Indemnitor's obligations
under any other existing or future agreements or guaranties, each of which
shall remain in full force and effect until it is expressly modified or
released in a writing signed by Bank. Indemnitor's obligations under this
Agreement are independent of any other indemnity obligations of Indemnitor
under the Loan Documents, and any indemnity agreements signed by Indemnitor as
Borrower. Bank may bring a separate action, or commence a separate arbitration
proceeding against Indemnitor without first proceeding against any other party
liable under the Loan Documents or any other person or any security that Bank
may hold, and without pursuing any other remedy. Bank's rights under this
Agreement shall not be exhausted by any action by Bank until the Loan has been
paid and performed in full.
3.13 NO RELEASE, SURVIVAL. Indemnitor shall not be released from
his or its obligations under this Agreement except by a writing signed by Bank.
Indemnitor's liability under this Agreement shall not terminate upon the
payment in full of the Loin or upon the release, foreclosure or other
termination of the Deed of Trust, but will survive the payment in full of the
indebtedness secured by the Deed of Trust, foreclosure of the Deed of Trust or
conveyance in lieu of foreclosure, the release or termination of the Deed of
Trust and any and all of the other Loan Documents, any bankruptcy or other
debtor relief proceeding, and any other event whatsoever.
3.14 CONSIDERATION. Indemnitor acknowledges that it expects to
benefit from Bank's extension of the Loan, and that Indemnitor is executing
this Agreement in consideration of that anticipated benefit.
IV. GENERAL PROVISIONS
4.1 EVENTS OF DEFAULT. Bank may declare Indemnitor to be in
default under this Agreement upon the occurrence of any of the following events
and ten (10) days period to cure ("Events of Default"):
(a) Indemnitor fails to perform any of its obligations
under this Agreement; or
(b) Indemnitor revokes this Agreement or this Agreement
becomes ineffective for any reason.
4.2 RESERVATION OF OTHER RIGHTS AND REMEDIES. Nothing in this
Agreement shall be construed to limit any claim or right which any Indemnified
Party may otherwise have at any time against Indemnitor or any other person
arising from any source other than this Agreement, including any claim for
fraud, misrepresentation, waste or breach of contract other than this
<PAGE> 9
Agreement, and any rights of contribution or indemnity under federal or state
environmental law or any other applicable law, regulation or ordinance.
4.3 DELAY; CUMULATIVE REMEDIES. If any Indemnified Party delays
in exercising or fails to exercise any right or remedy against Indemnitor, that
alone shall not be construed as a waiver of such right or remedy. All remedies
of any Indemnified Party against Indemnitor are cumulative.
4.4 RULES OF CONSTRUCTION. In this Agreement, the word "person"
includes any individual, company, trust or other legal entity of any kind. If
this Agreement is executed by more than one person, the word "Indemnitor"
includes all such persons. The word "include(s)" means "include(s), without
limitation," and the word "including" means "including, but not limited to."
When the context and construction so require, all words used in the singular
shall be deemed to have been used in the plural and vice versa. All headings
appearing in this Agreement are for convenience only and shall be disregarded
in construing this Agreement.
4.5 ARBITRATION
(a) MANDATORY ARBITRATION. Any controversy or claim
between or among the parties, including those arising out of or relating to
this Agreement or the Loan Documents and any claim based on or arising from an
alleged tort, shall at the request of any party be determined by arbitration.
THE ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH THE UNITED STATES
ARBITRATION ACT (TITLE 9, U.S. CODE), NOTWITHSTANDING ANY CHOICE OF LAW
PROVISION IN THIS AGREEMENT, AND UNDER THE COMMERCIAL RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. The Arbitrator(s) shall give effect to statutes of
limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrators). Judgment upon the
arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
(b) PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision of this Section 4.5 shall limit the right of any party to this
Agreement to exercise self-help remedies such as setoff, foreclosure against or
sale of any real or personal property collateral or security, or to obtain
provisional or ancillary remedies from a court of competent jurisdiction
before, after, or during the pendency of any arbitration or other proceeding.
The exercise of a remedy does not waive the right of either party to resort to
arbitration. At Bank's option, foreclosure under a deed of trust or mortgage
may be accomplished either by exercise of power of sale under the deed of trust
or mortgage or by judicial foreclosure.
4.6 SEVERABILITY. Every provision of this Agreement is intended
to be severable. In the event any term, provision, section or subsection of
this Agreement is declared to be illegal or invalid, for any reason whatsoever,
by a court of competent jurisdiction, such illegality or invalidity shall not
affect the other terms, provisions, sections or subsections of this Agreement,
which shall remain binding and enforceable.
<PAGE> 10
4.7 IN-HOUSE COUNSEL FEES. Whenever Indemnitor is obligated to
pay or reimburse any Indemnified Party for any attorneys' fees which may be
incurred in enforcing and protecting Bank's rights or interests, those fees
shall include the reasonable allocated costs for services of in-house counsel.
4.8 MISCELLANEOUS. The provisions of this Agreement shall bind
and benefit the heirs, executors, administrators, legal representatives,
successors and assigns of Indemnitor and the Indemnified Parties; provided,
however, that Indemnitor may not assign this Agreement, or assign or delegate
any of its rights or obligations under this Agreement, without the prior
written consent of Bank in each instance. The liability of all persons who are
in any manner obligated under this Agreement shall be joint and several. Any
Indemnitor who is married agrees that any Indemnified Party may look to all of
his or her community property and separate property to satisfy his or her
obligations under this Agreement. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
4.9 INTEGRATION: MODIFICATIONS. The Loan Documents, including
this Agreement, (a) integrate all the terms and conditions mentioned in or
incidental to this Agreement, (b) supersede all oral negotiations and prior
writings with respect to their subject matter, and (c) are intended by the
parties as the final expression of the agreement with respect to the terms and
conditions set forth in the Loan Documents and as the complete and exclusive
statement of the terms agreed to by the parties. No representation,
understanding, promise or condition shall be enforceable against any party
unless it is contained in the Loan Documents. This Agreement may not be
modified except in a writing signed by both Bank and Indemnitor.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
INDEMNITOR:
PACIFIC UNITED, L.P.,
a Texas limited partnership
By: Pacific United Development Corp.,
a Nevada corporation,
its sole general partner
By: /s/ COLEMAN BRADLEY
------------------------------
Coleman Bradley,
President
<PAGE> 1
EXHIBIT 10.1(e)
PAYMENT GUARANTY
This PAYMENT GUARANTY ("Guaranty") is made as of August 6, 1997, by
NHC HOLDINGS CORP., a Nevada corporation ("Guarantor"), in favor of BANK OF
AMERICA TEXAS, N.A. ("Bank").
FACTUAL BACKGROUND
A. Guarantor is executing this Guaranty to induce Bank to make a
loan (defined in Section 2 as the "Loan") to PACIFIC UNITED, L.P., a Texas
limited partnership ("Borrower") in the principal amount of Three Million Six
Hundred Seventy-Five Thousand and No/100 Dollars ($3,675,000.00). The Loan is
being made under a Construction Loan Agreement (the "Loan Agreement") entered
into as of the date hereof, between Bank and Borrower.
B. The Loan is evidenced by a promissory note (the "Note") made
payable to Bank in the principal amount of the Loan. The Note is secured by a
Deed of Trust, Security Agreement, Financing Statement and Assignment of Rental
("Deed of Trust") from the Borrower to David S. Owens, Trustee, covering
certain real and personal property, as therein described (all collectively, the
"Property"). The Note may also be secured by other collateral, as more fully
explained in the Loan Agreement.
C. This Guaranty is one of several Loan Documents, as defined and
designated in the Loan Agreement. The Loan Documents also include the Loan
Agreement, the Note, the Deed of Trust and certain other specified instruments
and agreements.
GUARANTY
1. Guaranty of Loan. Each Guarantor irrevocably,
unconditionally, and jointly and severally guarantees to Bank the full payment
of the Loan, and unconditionally agrees to pay Bank the full amount of the
Loan. This is a guaranty of payment, not of collection. Each Guarantor hereby
irrevocably and unconditionally covenants and agrees that it is liable for the
full amount of the Loan as primary obligor. If Borrower fails to pay the Loan,
or any part of it when due in accordance with its terms, after the giving of
all notices required by the Loan Documents or if Borrower fails to pay the Loan
or any part of it following the occurrence of an Event of Default (as such term
is defined in the Note), then Guarantor, or any of them, shall in lawful money
of the United States pay to Bank or order, on demand, all sums due and owing on
the Loan, including all interest, charges, fees and other sums, costs and
expenses. Bank agrees to give to Guarantor a copy of each notice of default
that Bank is required to give to Borrower contemporaneously with the giving of
such notice to Borrower.
2. Loan. In this Guaranty, the term "Loan" is broadly defined to
mean and include all primary, secondary, direct, indirect, fixed and contingent
obligations of Borrower to pay principal, interest, prepayment charges, late
charges, loan fees and any other fees, charges, sums, costs and expenses which
may be owing at any time under the Note or the other Loan Documents, as any or
all of them may from time to time be modified, amended, extended or renewed.
For purposes of this Guaranty, the Loan includes any and all such obligations
which may arise in connection with (a) any set aside letters and (b) any
advances made before recording of the Deed of Trust, and any interest rate
swaps or other transactions between Borrower and Bank which may afford interest
rate protection to all or part of the Loan. If the amount outstanding under
the Loan is determined by a court of competent jurisdiction, that determination
shall be conclusive and binding on Guarantor, regardless of whether Guarantor
was a party to the proceeding in which the determination was made or not.
Notwithstanding the foregoing, this Guaranty shall not extend to modifications
of the Loan Documents entered into without Guarantors written consent, to the
extent such modifications evidence additional advances
Payment Guaranty/Pacific United, L.P. Page 1
<PAGE> 2
to Borrower for the purpose of acquiring land not included within the Property
or to construct improvements not situated on the Property.
3. Rights of Bank. Guarantor authorizes Bank to perform any or
all of the following acts at any time in its sole discretion, all without
notice to any Guarantor and without affecting any Guarantor's obligations under
this Guaranty:
(a) Bank may alter any terms of the Loan or any part of
it, including renewing, compromising extending or accelerating, or otherwise
changing the time for payment of, or increasing or decreasing the rate of
interest on, the Loan or any part of it; provided, Bank shall not modify the
Loan Documents so as to increase the principal amount of the Note to more than
$3,675,000.00 without the prior written consent of Guarantor.
(b) Bank may take and hold security for the Loan or this
Guaranty, accept additional or substituted security for either, and
subordinate, exchange, enforce, waive, release, compromise, fail to perfect and
sell or otherwise dispose of any such security.
(c) Bank may direct the order and manner of any sale of
all or any part of any security now or later to be held for the Loan or this
Guaranty, and Bank may also bid at any such sale.
(d) Bank may apply any payments or recoveries from
Borrower, any Guarantor or any other source, and any proceeds of any security,
to Borrower's obligations under the Loan Documents in such manner, order and
priority as Bank may elect, whether or not those obligations are guarantied by
this Guaranty or secured at the time of the application.
(e) Bank may release Borrower of its liability for the
Loan or any part of it.
(f) Bank may substitute, add or release any one or more
guarantors or endorsers.
(g) In addition to the Loan, Bank may extend other credit
to Borrower, and may take and hold security for the credit so extended, all
without affecting Guarantor's liability under this Guaranty.
4. Guaranty to be Absolute and Continuing. Guarantor expressly
agrees that until the Loan is paid and performed in full and each and every
term, covenant and condition of this Guaranty is fully performed, this Guaranty
shall continue in full force and Guarantor shall not be released by or because
of:
(a) Any act or event which might otherwise discharge,
reduce, limit or modify any Guarantor's obligations under this Guaranty other
than a breach by Bank of its obligations hereunder (provided that if Bank
breaches its obligations hereunder, such breach shall not release Guarantor
from its liability hereunder, but Guarantor may assert a right of set-off to
reduce its liability hereunder by an amount equal to actual damages sustained
by Guarantor by reason of such breach by Bank);
(b) Any waiver, extension, modification, forbearance,
delay or other act or omission of Bank, or its failure to proceed promptly or
otherwise as against Borrower, any Guarantor or any security;
(c) Any action, omission or circumstance which might
increase the likelihood that Guarantor may be called upon to perform under this
Guaranty or which might affect the rights or remedies of any Guarantor as
against Borrower; or
Payment Guaranty/Pacific United, L.P. Page 2
<PAGE> 3
(d) Any dealings occurring at any time between Borrower
and Bank, whether relating to the Loan or otherwise.
Each Guarantor expressly waives and surrenders any defense to its
liability under this Guaranty based upon any of the foregoing acts, omissions,
agreements, waivers or matters. It is the purpose and intent of this Guaranty
that the obligations of each Guarantor under it shall be absolute and
unconditional under any and all circumstances.
5. Guarantor's Waivers. Each Guarantor waives:
(a) [Intentionally omitted];
(b) Any right it may have to require Bank to proceed
against Borrower, proceed against or exhaust any security held from Borrower,
or pursue any other remedy in Bank's power to pursue;
(c) Any defense based on any claim that any Guarantor's
obligations exceed or are more burdensome than those of Borrower or any other
Guarantor;
(d) Any defense based on: W any legal disability of
Borrower, (ii) any release, discharge, modification, impairment or limitation
of the liability of Borrower to Bank from any cause, whether consented to by
Bank or arising by operation of law or from any bankruptcy or other voluntary
or involuntary proceeding, in or out of court, for the adjustment of
debtor-creditor relationships ("Insolvency Proceeding") and (iii) any rejection
or disaffirmance of the Loan, or any part of it, or any security held for it,
in any such Insolvency Proceeding;
(e) Any defense based on any action taken or omitted by
Bank in any Insolvency Proceeding involving Borrower, including any election to
have Bank's claim allowed as being secured, partially secured or unsecured, any
extension of credit by Bank to Borrower in any Insolvency Proceeding, and the
taking and holding by Bank of any security for any such extension of credit;
(f) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty, notices Of intention to accelerate and
acceleration and of the existence, creation, or incurring of new or additional
indebtedness, and demands and notices of every kind except for any demand or
notice by Bank to Guarantor expressly provided for in Section 1; and
(g) Any defense based on or arising out of any defense
that Borrower may have to the payment or performance of the Loan or any part of
it.
6. Waivers of Subrogation and Other Rights.
(a) Upon the occurrence of an Event of Default (as such
term is defined in the Note), Bank in its sole discretion, without prior notice
to Guarantor (except as provided in Section 1 hereof) and without consent of
Guarantor, may elect to do any one or more of the following: W foreclose either
judicially or nonjudicially against any real or personal property security it
may hold for the Loan, (ii) accept a transfer of any such security in lieu of
foreclosure, (iii) compromise or adjust the Loan or any part of it or make any
other accommodation with Borrower or any Guarantor, and/or (iv) exercise any
other remedy against Borrower or any security. No such action by Bank shall
release or limit the liability of any Guarantor, each of whom shall remain
liable under this Guaranty after the action, even if the effect of the action
is to deprive a Guarantor of any subrogation rights, rights of indemnity, or
other rights to collect reimbursement from Borrower for any
Payment Guaranty/Pacific United, L.P. Page 3
<PAGE> 4
sums paid to Bank, whether contractual or arising by operation of law or
otherwise. Each Guarantor expressly agrees that under no circumstances shall
he or it be deemed to have any right, title, interest or claim in or to any
real or personal property to be held by Bank or any third party after any
foreclosure or transfer in lieu of foreclosure of any security for the Loan.
(b) Regardless of whether any Guarantor may have made any
payments to Bank, until the Loan has been paid and performed in full, each
Guarantor hereby waives: W all rights of subrogation, all rights of indemnity,
and any other rights to collect reimbursement from Borrower for any sums paid
to Bank, whether contractual or arising by operation of law (including the
United States Bankruptcy Code or any successor or similar statute) or
otherwise, (ii) all rights to enforce any remedy that Bank may have against
Borrower, and (iii) all rights to participate in any security now or later to
be held by Bank for the Loan. Further, each Guarantor expressly waives each
and every right to which it may be entitled by virtue of the suretyship law of
the State of Texas, including without limitation, any rights pursuant to Rule
31, Texas Rules of Civil Procedure, Articles 1986 and 1987, Revised Civil
Statutes of Texas and Chapter 34 of the Texas Business and Commerce Code.
(c) Guarantor understands and acknowledges that if Bank
forecloses judicially or nonjudicially against any real property security for
the Loan, that foreclosure could impair or destroy any ability that a Guarantor
may have to seek reimbursement, contribution or indemnification from Borrower
or others based on any right a Guarantor may have of subrogation,
reimbursement, contribution or indemnification for any amounts paid by any
Guarantor under this- Guaranty. By executing this Guaranty, each Guarantor
freely, irrevocably and unconditionally: W waives and relinquishes any defense
to this Guaranty that he or it may have by law as a result of such action by
Bank and agrees that each Guarantor will be fully liable under this Guaranty
even though Bank may foreclose judicially or nonjudicially against any real
property security for the Loan; (ii) agrees that he or it will not assert any
such defense in any action or proceeding which Bank may commence to enforce
this Guaranty; and (iii) acknowledges and agrees that Bank is relying on this
waiver in making the Loan, and that this waiver is a material part of the
consideration which Bank is receiving for making the Loan.
7. Revival and Reinstatement. If Bank is required to pay, return
or restore to Borrower or any other person any amounts previously paid on the
Loan because of any Insolvency Proceeding of Borrower, any stop notice or any
other reason, the obligations of Guarantor shall be reinstated and revived and
the rights of Bank shall continue with regard to such amounts, all as though
they had never been paid.
8. Information Regarding Borrower and the Property. Before
signing this Guaranty, each Guarantor investigated the financial condition and
business operations of Borrower, the present and former condition, uses and
ownership of the Property, and such other matters as he or it deemed
appropriate to assure himself or itself of Borrower's ability to discharge its
obligations under the Loan Documents. Each Guarantor assumes full
responsibility for that due diligence, as well as for keeping informed of all
matters which may affect Borrower's ability to pay and perform its obligations
to Bank. Bank has no duty to disclose to any Guarantor any information which
Bank may have or receive about Borrower's financial condition or business
operations, the condition or uses of the Property, or any other circumstances
bearing on Borrower's ability to perform.
9. Subordination. Commencing automatically upon the occurrence
of a monetary Event of Default and continuing so long as such monetary Event of
Default remains uncured, any rights of Guarantor, whether now existing or later
arising, to receive payment on account of any indebtedness (including interest)
owed to it by Borrower or any subsequent owner of the Property, or to withdraw
capital invested by it in Borrower, or to receive distributions from Borrower,
shall be subordinate as to lien and time of payment and in all other respects
to the full and prior repayment to Bank of the Loan. No Guarantor shall be
entitled to
Payment Guaranty/Pacific United, L.P. Page 4
<PAGE> 5
enforce or receive payment of any sums hereby subordinated until the Loan has
been paid and performed in full and any such sums received in violation of this
Guaranty shall be received by each Guarantor in trust for Bank. The provisions
of this Section 9 shall not be operative until the occurrence of a monetary
Event of Default. For purposes of this Section 9, a "monetary Event of
Default" means an Event of Default under any of the Loan Documents that is
curable by the payment of money which neither Borrower nor Guarantor have paid.
10. Financial Information. Guarantor shall keep true and correct
financial books and records, using sound accounting principles consistently
applied. Within one hundred twenty (120) days after the end of each fiscal
year, Guarantor shall deliver to Bank an audited financial statement, together
with a statement showing all changes in its financial condition which occurred
during the preceding fiscal year. Guarantor shall promptly provide Bank with
any additional audited financial information that such Guarantor may obtain.
Guarantor shall deliver to Bank, within thirty (30) days after filing with the
Internal Revenue Service, copies of signed tax returns and shall deliver such
other information concerning its affairs and properties as Bank may reasonably
request.
11. Guarantor's Representations and Warranties. Guarantor
represents and warrants that:
(a) All financial statements and other financial
information furnished or to be furnished to Bank are or will be true and
correct in all material respects and do or will fairly represent the financial
condition of each Guarantor (including all contingent liabilities);
(b) There has been no material adverse change in any
Guarantor's financial condition since the dates of the statements most recently
furnished to Bank.
12. Events of Default. After the giving of any notice required by
Section 1 hereof, Bank may declare Guarantor to be in default under this
Guaranty upon the occurrence of any of the following events ("Events of
Default"):
(a) Any Guarantor fails to perform any of its obligations
under this Guaranty; or
(b) Any Guarantor revokes this Guaranty or this Guaranty
becomes ineffective for any reason; or
(c) Any representation or warranty made or given by any
Guarantor to Bank proves to be false or misleading in any material respect; or
(d) Any Guarantor becomes insolvent or the subject of any
Insolvency Proceeding.
13. Arbitration. Any controversy or claim between or among the
parties, including those arising out of or relating to this Guaranty or the
Loan Documents and any claim based on or arising from an alleged tort, shall at
the request of any party be determined by arbitration conducted in Dallas,
Texas. THE ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH THE UNITED STATES
ARBITRATION ACT (TITLE 9, U.S. CODE), NOTWITHSTANDING ANY CHOICE OF LAW
PROVISION IN THIS AGREEMENT, AND UNDER THE COMMERCIAL RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. The arbitrator(s) shall be an attorney(s) having no
less than seven (7) years experience in contracts and litigation relating to
commercial construction. The arbitrator(s) shall give effect to statutes of
limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrator(s). Judgment upon
the arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional
Payment Guaranty/Pacific United, L.P. Page 5
<PAGE> 6
or ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration if
any other party contests such action for judicial relief. No provision of this
Section 13 shall limit the right of any party to this Agreement (i) to exercise
self-help remedies such as setoff, foreclosure against or sale of any real or
personal property collateral or security, or to obtain provisional or ancillary
remedies from a court of competent jurisdiction before, after or during the
pendency of any arbitration or other proceeding or (ii) seek or obtain
injunctive or similar relief during the pendency of any arbitration or other
proceeding except relating directly to the subject matter of the arbitration
proceeding. Notwithstanding the foregoing, during the pendency of arbitration
proceedings that are initiated at the request of Bank and which are limited to
matters for which Bank has requested arbitration (including any related matters
for which Guarantor has requested concurrent arbitration), Bank hereby agrees
that it will not exercise its self-help remedies such as setoff, foreclosure
against or sale of any real or personal property collateral or security.
Notwithstanding the foregoing, Bank, shall have the unilateral right to dismiss
any arbitration proceeding commenced at Bank's request and following three (3)
days' notice to Guarantor of Bank's election to dismiss such arbitration
proceeding, the provisions of the preceding sentence shall not apply. In any
subsequent judicial proceeding, Bank's election to dismiss such arbitration
proceeding shall be without prejudice to Bank's or Guarantor's claims or
defenses in respect of the subject matter of that arbitration proceeding. The
exercise of a remedy does not waive the right of either party to resort to
arbitration. At Bank's option, foreclosure under the deed of trust may be
accomplished either by exercise of power of sale under the deed of trust or by
judicial foreclosure.
14. Authorization, No Violation. Each Guarantor is authorized to
execute, deliver and perform under this Guaranty, which is a valid and binding
obligation of each Guarantor. No provision or obligation of Guarantor
contained in this Guaranty violates any applicable law, regulation or
ordinance, or any order or ruling of any court or governmental agency. No such
provision or obligation conflicts with, or constitutes a breach or default
under, any agreement to which a Guarantor is a party.
15. Additional and Independent Obligations. Each Guarantor's
obligation under this Guaranty are in addition to its obligations under any
other existing or future guaranties to Bank, each of which shall remain in full
force and effect until it is expressly modified or released in a writing signed
by Bank. Each Guarantor's obligations under this Guaranty are independent of
those of Borrower on the Loan. Bank may bring a separate action, or commence a
separate arbitration proceeding against Guarantor or any of them without first
proceeding against Borrower, any other person or any security that Bank may
hold, and without pursuing any other remedy. Bank's rights under this Guaranty
shall not be exhausted by any action by Bank until the Loan has been paid and
performed in full.
16. No Waiver: Consents: Cumulative Remedies. Each waiver by Bank
must be in writing, and no waiver shall be construed as a continuing waiver.
No waiver shall be implied from Bank's delay in exercising or failure to
exercise any right or remedy against Borrower, any Guarantor or any security.
Consent by Bank to any act or omission by Borrower or any Guarantor shall not
be construed as a consent to any other or subsequent act or omission, or as a
waiver of the requirement for Bank's consent to be obtained in any future or
other instance. All remedies of Bank against Borrower and Guarantor are
cumulative.
17. No Release. No Guarantor shall be released from its
obligations under this Guaranty except by a writing signed by Bank.
18. Heirs, Successors and Assigns: Participations. The terms of
this Guaranty shall bind and benefit the heirs, legal representatives,
successors and assigns of Bank and each Guarantor, respectively; provided,
however, that no Guarantor may assign this Guaranty, or assign or delegate any
of his or its rights or obligations under this Guaranty, without the prior
written consent of Bank in each instance. Bank in its sole discretion may sell
or assign participations or other interests in the Loan and this Guaranty, in
whole of in part,
Payment Guaranty/Pacific United, L.P. Page 6
<PAGE> 7
all without notice to or the consent of Guarantor and without affecting
Guarantor's obligations under this Guaranty. Also without notice to or the
consent of any Guarantor, Bank may disclose any and all information in its
possession concerning any Guarantor, this Guaranty and any security for this
Guaranty to any actual or prospective purchaser of any securities issued or to
be issued by Bank, and to any actual or prospective purchaser or assignee of
any participation or other interest in the Loan and this Guaranty.
19. Notices. All notices given under this Guaranty must be in
writing and shall be effectively served upon delivery, or if mailed, upon the
first to occur of receipt or the expiration of forty-eight (48) hours after
deposit in certified United States mail, postage prepaid, sent to the party at
its address given at the end of this Guaranty. Those addresses may be changed
by Bank or any Guarantor by written notice to the other party. Service of any
notice on any one Guarantor signing this Guaranty shall be effective service on
Guarantor for a purposes.
20. Rules of Construction. In this Guaranty, the word "Borrower"
includes both the named Borrower and any other person who at any time assumes
or otherwise becomes primarily liable for all or any part of the obligations of
the named Borrower on the Loan. The word "person" includes any individual,
company, trust or other legal entity of any kind. If this Guaranty is executed
by more than one person, the word "Guarantor" includes all such persons. The
word "include(s)" means "include(s), without limitation," and the word
"including" means "including, but not limited to." When the context and
construction so require, all words used in the singular shall be deemed to have
been used in the plural and vice versa. No listing of specific instances,
items or matters in any way limits the scope or generality of any language of
this Guaranty. All headings appearing in this Guaranty are for convenience
only and shall be disregarded in construing this Guaranty.
21. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
22. Costs and Expenses. If any lawsuit or arbitration is
commenced which arises out of, or which relates to this Guaranty, the Loan
Documents or the Loan, the prevailing party shall be entitled to recover from
each other party such sums as the court or arbitrator may adjudge to be
reasonable attorneys' fees (including reasonable allocated costs for services
of in-house counsel) in the action or proceeding, in addition to costs and
expenses otherwise allowed by law. In all other situations, including any
Insolvency Proceeding, Guarantor agree to pay all of Bank's costs and expenses,
including reasonable attorneys' fees (including reasonable allocated costs for
services of Bank's in-house counsel) which may be incurred in any effort to
collect or enforce the Loan or any part of it or any term of this Guaranty.
From the time(s) incurred until paid in full to Bank, all sums shall bear
interest at the Default Rate, as defined in the Note.
23. Consideration. Each Guarantor acknowledges that he or it
expects to benefit from Bank's extension of the Loan to Borrower because of his
or its relationship to Borrower, and that it is executing this Guaranty in
consideration of that anticipated benefit.
24. Miscellaneous. The death or legal incapacity of any Guarantor
shall not terminate the obligations of such Guarantor or any other Guarantor
under this Guaranty, including its obligations with regard to future advances
under the Loan Documents. The liability of all persons who are in any manner
obligated under this Guaranty shall be joint and several. The illegality or
unenforceability of one or more provisions of this Guaranty shall not affect
any other provision. Any Guarantor who is married agrees that Bank may look to
all of his or her community property and separate property to satisfy his or
her obligations under this Guaranty. Time is of the essence in the performance
of this Guaranty by each Guarantor.
Payment Guaranty/Pacific United, L.P. Page 7
<PAGE> 8
25. Integration, Modifications. This Guaranty (a) integrates all
the terms and conditions mentioned in or incidental to this Guaranty, (b)
supersedes all oral negotiations and prior writings with respect to its subject
matter, and (c) is intended by Guarantor and Bank as the final expression of
the agreement with respect to the terms and conditions set forth in this
Guaranty and as the complete and exclusive statement of the terms agreed to by
Guarantor and Bank. No representation, understanding, promise or condition
shall be enforceable against any party unless it is contained in this Guaranty.
This Guaranty may not be modified except in a writing signed by both Bank and a
Guarantor.
26. Release. Conditioned upon the payment in full of the Loan and
the performance of all obligations of Borrower and Guarantor under the Loan
Documents, within a reasonable time after Guarantor's written request, Bank
will confirm to Guarantor in writing that Guarantor's obligations under this
Guaranty are released.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
GUARANTOR.
---------
NHC HOLDINGS CORP.,
a Nevada corporation
By: /s/ BILL BRADLEY
---------------------------------
Name: Bill Bradley
-------------------------------
Title:
------------------------------
Addresses Where Notices to
Guarantor are to be-Sent.
NHC Holdings Corp.
c/o Pacific USA Holding Corp.
3200 Southwest Freeway, Suite 1220
Houston, Texas 77027
Attn: Cathryn L. Porter
Title: Chief General Counsel
Address Where Notices to
Bank are to be Sent.
Bank of America Texas, NA.
1925 W. John Carpenter Freeway
Irving, Texas 75063-3297
Attention: Robert J. Carroll
Payment Guaranty/Pacific United, L.P. Page 8
<PAGE> 9
THE STATE OF TEXAS )
)
COUNTY OF _____________ )
This instrument was acknowledged before me on this 8th day of August,
1997, by Bill Bradley of NHC HOLDINGS CORP., a Nevada corporation, on behalf of
said corporation.
/s/ CAROL SOLAIDONE
----------------------------------
Notary Public Signature
(PERSONALIZED SEAL)
Payment Guaranty/Pacific United, L.P. Page 9
<PAGE> 1
EXHIBIT 10.2
PROMISSORY NOTE
$10,000,000.00 Houston, Texas April 23, 1997
NEWMARK HOMES, L. P. (hereinafter called the "Borrower"), a limited
partnership with offices at 1200 Soldiers Field Drive, Sugar Land, Texas 77479,
for value received, promises and agrees to pay on or before May 31, 1998, to
the order of BANKTEXAS N.A. (hereinafter called the "Lender") at its offices at
8820 Westheimer, P. O. Box 630369, Houston, Texas 77263, in coin or currency of
the United States of America which at the time of payment is legal tender for
the payment of public and private debts, the principal sum of TEN MILLION AND
NO/00 DOLLARS ($10,000,000.00), or so much thereof as may be advanced pursuant
to the Loan Agreement hereinafter mentioned, as shown on the schedule attached
hereto and any continuation of such schedule.
All capitalized terms which are used but not defined in this Note shall
have the same meanings as in the Construction Loan Agreement of even date
herewith between the Borrower and the Lender (such Construction Loan Agreement,
together with all amendments or supplements thereto, being the "Loan
Agreement").
In addition to the principal sum referred to in the first paragraph of
this Note, the Borrower also agrees to pay interest on all amounts hereof so
advanced and remaining from time to time unpaid hereon from the date hereof
until maturity at a varying rate per annum which is one-eighth of one percent
(.125%) per annum above the Prime Rate (but in no event to exceed the Highest
Lawful Rate).
Past due principal and interest shall bear interest at a varying rate
per annum which is five percent (5%) above the Prime Rate (but in no event to
exceed the Highest Lawful Rate). Adjustments in the varying interest rate
shall be made on the same day as each change announced in the Prime Rate and,
to the extent allowed by law, on the effective date of any change in the
Highest Lawful Rate.
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As used herein, the term "Prime Rate" shall mean the First Banks, Inc.,
St. Louis prime rate. The Prime Rate is not necessarily the lowest rate
charged by Lender on its loans. If the First Banks, Inc., St. Louis prime rate
becomes unavailable during the term of this Note, Lender may designate a
substitute prime rate.
Accrued interest is due and payable monthly, the first such payment
being due and payable on May 5, 1997, and the remaining payments being due and
payable on the fifth (5th) day of each and every succeeding calendar month
thereafter and at the maturity of this Note.
The Borrower and any and each co-maker, guarantor, accommodation party,
endorser or other person liable for the payment or collection of this Note
expressly waive demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, bringing of suit, and diligence
in taking any action to collect amounts called for hereunder and in the
handling of Property at any time existing as security in connection herewith,
and shall be directly and primarily liable for the payment of all sums owing
and to be owing hereon, regardless of and without any notice, diligence, act or
omission as or with respect to the collection of any amount called for
hereunder or in collection with any Lien at any time had or existing as
security for any amount called for hereunder.
This Note is issued pursuant to and is entitled to the benefits of the
Loan Agreement. Reference is made to the Loan Agreement for provisions for the
acceleration of the maturity hereof on the occurrence of certain events
specified therein, for interest rate computations in the event that the
otherwise agreed rate is at any time limited by the Highest Lawful Rate, for
the reimbursement of attorneys' fees or other costs of collection or
enforcement, and for all other pertinent purposes. It is contemplated that by
reason of prepayment hereon there may be times when no Indebtedness is owing
hereunder; but notwithstanding such occurrences, this Note shall remain valid
and shall be in full force and effect as to Advances made pursuant to the Loan
Agreement subsequent to each occurrence.
It is the intention of the parties hereto to conform strictly to usury
laws applicable to the Lender. Accordingly, if the transactions contemplated
hereby would be usurious under applicable
2
<PAGE> 3
law (including the laws of the United States of America and the State of
Texas), then, in the event, notwithstanding anything to the contrary herein or
in the Loan Agreement or in any other Security Instrument or agreement entered
into in connection with or as security for this Note, it is agreed as follows:
(i) the aggregate of all consideration which constitutes interest under law
applicable to the Lender that is contracted for, taken, reserved, charged or
received herein or under the Loan agreement or under any of the other Loan
Papers or otherwise in connection herewith shall under no circumstances exceed
the maximum amount allowed by such applicable law, and any excess shall be
credited by the Lender on the principal amount of the Indebtedness (or, if the
principal amount of the Indebtedness shall have been paid in full, refunded by
the Lender to the Borrower, as required); and (ii) in the event that the
maturity of this Note is accelerated by reason of an election of the Lender
resulting from an Event of Default under the Loan Agreement or otherwise, or in
the event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to the Lender may never include more
than the maximum amount allowed by such applicable law, and excess interest, if
any, provided for in the Loan Agreement or otherwise shall be cancelled
automatically as the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by the Lender on the principal amount of
the Indebtedness (or, if the principal amount of the Indebtedness shall have
been paid in full, refunded by the Lender to the Borrower, as required).
Without limiting the foregoing, all calculation of the rate of interest taken,
reserved, contracted for, charged, received or provided for under this Note or
any other the Loan Papers which are made for the purpose of determining whether
the interest rate exceeds the Highest Lawful Rate shall be made, to the extent
allowed by law, by amortizing, prorating, allocating and spreading in equal
parts during the period of the full stated term of the loan evidenced hereby,
all interest at any time taken, reserved, contracted for, charges, received or
provided for under this Note or any of the Loan Papers. To the extent that
Article 5069-1.04 of the Texas Revised Civil Statutes is relevant to the Lender
for the purpose of determining the Highest Lawful Rate, the Lender hereby
elects to determine the applicable rate ceiling under such Article by the
indicated (weekly) rate ceiling from time to time in effect, subject to the
Lender's right subsequently to change such method in accordance with applicable
law.
NEWMARK HOMES, L.P.
By: /s/ TERRY WHITE
---------------------------
Name: Terry White
-------------------------
Title: Senior Vice President
------------------------
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<PAGE> 1
EXHIBIT 10.3(a)
MASTER REVOLVING LINE OF CREDIT LOAN AGREEMENT
(Amended and Restated)
October 1, 1996
NEWMARK HOMES, L.P., a Texas Limited Partnership (the "Borrower"),
acting by and through NEWMARK HOME CORPORATION, a Nevada corporation, as the
general partner of the Borrower, and COMPASS BANK, a Texas state banking
association of Houston, Harris County, Texas (the "Bank"), for and in
consideration of the mutual covenants and agreements contained herein, and of
the loan or loans hereinafter referred to, agree as follows:
RECITALS:
A. WHEREAS, Bank (then known as "Compass Bank-Houston") and
Newmark Home Corporation, a Texas corporation (of which Borrower's
general partner is a successor by merger), entered into that certain
Master Revolving Line of Credit Loan Agreement dated August 31, 1993,
which was modified by that First Amendment and Modification to Loan
Agreement dated September 29, 1993, and further modified by that
Second Amendment and Modification to Loan Agreement dated August 31,
1994, and by that Third Amendment and Modification to Loan Agreement
dated December 6, 1994, and by that Fourth Amendment and Modification
to Loan Agreement dated December 6, 1994, and by that Fifth Amendment
and Modification to Loan Agreement dated November 7, 1995, and by that
Sixth Amendment and Modification to Loan Agreement dated February 28,
1996, and by that Seventh Amendment and Modification to Loan Agreement
dated June 1, 1996, and by that Eighth Amendment and Modification to
Loan Agreement dated June 1, 1996, all of which are incorporated
herein by reference for all purposes, and which are hereinafter
referred to collectively as the "Prior Loan Agreement."
B. WHEREAS, as evidenced by that certain Modification
Agreement dated effective October 1, 1996, the Prior Loan Agreement
was modified to include, without limitation, the transfer and
assignment of the properties owned by the borrower in the Prior Loan
Agreement to Borrower, and Borrower's assumption of the obligations of
the said borrower in the Prior Loan Agreement.
C. WHEREAS, Borrower and Bank desire to amend and restate the
Prior Loan Agreement, and the instruments incorporated therein or
relating to the Prior Loan Agreement, in order to continue the
agreements therein contained but modified to conform to the various
agreements between Borrower and Bank:
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AGREEMENTS
1. DEFINITIONS.
1.1. Certain Definitions. As used in this Agreement, certain terms are
defined in Attachment 1 to this Agreement, which are incorporated herein by
reference for all purposes.
1.2. Accounting Principles. With respect to the annual audited
Financial Statements, where the character or amount of any asset or liability
or item of income or expense is required to be determined, or other accounting
computation is required to be made for the purposes of this Agreement, this
shall be done in accordance with generally accepted accounting principles
applied on a basis consistent with those reflected by the annual audited
Financial Statements, except where such principles are inconsistent with the
requirements of this Agreement.
2. AMOUNT AND TERMS OF THE NOTE
2.1. Commitment. The Borrower may, from time to time, request that
additional Home(s) be included as Eligible Home(s) under this Agreement, and
subject to the terms and conditions and relying on the representations and
warranties contained in this Agreement, the Bank agrees to make available to
Borrower funds as a revolving line of credit loan to the Borrower. During the
period commencing with the date of this Agreement to and including the Funding
Termination Date, the Bank will make revolving line of credit loans to the
Borrower from time to time on any Business Day in such amounts as the Borrower
may request up to and including Fifteen Million and no/100 ($15,000,000.00)
Dollars (the "Commitment"), but not to exceed however the Maximum Loan Amount
at any time, and the Borrower may borrow, prepay pursuant to Section 2.4 and
2.5, and reborrow as provided in this Section 2.1; provided, however, that the
aggregate principal amount of all of such Advances under the line of credit at
any one tune outstanding shall not exceed the lesser of (i) the Maximum Loan
Amount, as approved by Bank; or (ii) the amount of the Commitment. It is
expressly contemplated that, by reason of prepayments or other circumstances,
there may be times when no Indebtedness is owing thereunder, but
notwithstanding such occurrences the Line of Credit Note shall remain in full
force and effect as to such loans or Advances made subsequent to such
occurrence. To evidence the loans made by the Bank pursuant to this subsection,
the Borrower will issue, execute and deliver its promissory note dated of even
date herewith in the original principal amount of the Commitment, in
substantially the form of Exhibit "A" hereto. The said promissory note is in
renewal, extension and rearrangement of the promissory note, as renewed,
extended and modified, referenced in the Prior Loan Agreement, including that
certain $15,000,000.00 Promissory Note dated June 1, 1996.
2.2. Interest Terms. The Note shall bear interest on the outstanding
principal balance at the Index Rate plus 50/100 (0.50%) percent per annum,
floating, but in no event to exceed the Highest Lawful Rate. Changes in the
interest rate of the Line of Credit Note shall occur without notice to
Borrower as the Index Rate changes.
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2.3. Advances. Advances for the payment of cost of labor, materials,
and services supplied for the construction of the Improvements for Eligible
Homes shall not be made more frequently than weekly, and no Advance, initial,
interim or final shall be due unless in the judgment of the Bank, all work
usually done at the stage of construction when the Advance is made payable
shall have been done in a good and workmanlike manner, and all materials and
fixtures usually installed and furnished at such stage of construction shall
have been furnished and installed, unless all construction, materials, and
fixtures shall be in strict conformity with said Plans and Specifications and
all applicable government requirements. From time to time, upon not less than
five (5) business days prior to the date on which an Advance is desired,
Borrower shall submit to Bank a written list of each Eligible Home for which an
Advance is requested, it being understood and agreed by Borrower that no
Eligible Home shall be included on such list for an Advance more often than
five (5) total times; and as to each such home for which an Advance is
requested, Borrower shall specify to Bank the percentage completion of each
such respective Eligible Home in Borrower's best opinion, utilizing such
percentage guidelines as approved by Bank.
Advances shall be used by Borrower for the payment of costs of labor,
materials, and services supplied for the construction of the Improvements or
for the payment of other costs incident to the Loan, the acquisition of the
property, or the construction of the Improvements and for no other purpose.
Each Advance shall be made as the work progresses, in an amount equal to the
value (in Bank's sole discretion) of such services and materials furnished and
completed during the preceding period with respect to the Borrowing Formula
with respect to each Eligible Home for which an Advance is requested, less
amounts deemed by the Bank necessary to complete or correct the contracted
materials and/or performance.
Borrower's request for an Advance, whether written or oral, shall be deemed a
certification by Borrower that all work usually done at the stage of
construction when the request is made has been done in a good and workmanlike
manner, that all materials and fixtures usually installed and furnished at such
stage of construction have been furnished and installed, that all construction
materials and fixtures that are incorporated in the Improvements are in
conformity with said Plans and Specifications, and that Borrower has received
no unresolved material claims (see Section 5.3 of this Agreement for a
definition of materiality) for unpaid materials or labor in connection with
such Improvements, except for those which will be paid by Borrower prior to
delinquency in the ordinary course of business.
Bank shall have the right to inspect the Improvements, either by its personnel
or inspectors acceptable to Bank, at any time and upon the submission of any
request for an Advance, and the determination of work completed and/or
materials furnished and regarding the extent of completion by such personnel or
inspectors shall be required for any advance.
2.4. Interest Repayment. The Borrower shall pay interest on the Line
of Credit Note monthly as it accrues, the first payment of which shall be due
and payable on or before November 1, 1996, with successive payments being due
and payable on the same day of each month thereafter and on maturity.
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2.5. Mandatory Principal Repayments. The Borrower shall pay the
entire principal balance of the Note on the earlier to occur of the Stated
Maturity Date, or upon the occurrence of an Event of Default. Furthermore,
should the principal balance of the Note outstanding at any time exceed the
Maximum Loan Amount at such time, as confirmed and approved by Bank, Borrower
shall pay such difference to Bank immediately such that the amount of the
principal balance of the Note at such time shall not exceed the said Maximum
Loan Amount.
In addition to the preceding provision, as to each Home (other than a Model
Home) in Inventory, the principal amount Advanced by Bank to Borrower with
respect to such Home shall be repaid to Bank by Borrower no later than twelve
(12) months from the date such Home is included in Eligible Homes; provided
that Bank may consider extending the due date of the principal with respect to
such Home (but Bank shall not be obligated to extend the said due date) upon
Borrower's written request to Bank accompanied by a principal reduction of the
loan equal to ten (10%) percent of the Home Borrowing Formula Amount with
respect to such Home, which amount shall not be readvanced to Borrower with
respect to such Home, such extension to be for the earlier to occur of an
additional six (6) months or the Stated Maturity Date.
As to each Model Home in Inventory, the principal amount Advanced by Bank to
Borrower with respect to such Model Home shall be repaid to Bank by Borrower no
later than two (2) years from the date such Model Home is included in Eligible
Homes, or the Stated Maturity Date, whichever date is earlier.
2.6. Optional Principal Prepayment. On any Business Day, the Borrower
may prepay the principal of the Note, in whole or in part, without the payment
of any penalty or premium.
2.7. Supporting Documentation. The requirements of Sections 3.1 and
3.2 are a condition precedent for each Advance on the Note.
2.8. Payments and Computations. The Borrower shall make each payment
due hereunder and under the Note, not later than 10:00 A.M. (Houston, Texas
time) on the date when due in lawful money of the United States of America in
same day funds, to the Bank at its address referred to in Section 7.2, which
payment shall include interest accrued to the first (1st) day of such
respective month. All computations of interest under the Note shall be made by
the Bank on the basis of a year of 365 days. Interest will accrue for the
actual number of days that amounts are outstanding.
2.9. Payment on Non-Business Days. Whenever any payment to be made
hereunder or under the Note shall be stated to be due on a Saturday, Sunday or
a public or bank holiday or the equivalent for commercial banks generally under
the laws of the State of Texas (any other day being a "Business Day"), such
payment may be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment of interest.
2.10. Term of this Agreement. Notwithstanding anything herein to the
contrary, this Agreement shall not terminate except upon payment in full and
final payment of the Note,
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<PAGE> 5
whether prior or subsequent to the maturity of the Note, and shall continue in
full force and effect throughout the term of any renewals, extensions,
increases or rearrangements of the Note.
2.11. Fees. Borrower shall pay to Bank a loan fee of one-fourth (0.25%)
percent of the Home Borrowing Formula Amount, which fee shall be paid by
Borrower to Bank upon the execution of each respective Addendum to Loan
Agreement.
2.12. Releases. Provided that no Event of Default has occurred and is
continuing, Borrower will be entitled to receive from Bank a release of lien as
to the Deed of Trust lien on any respective Property in Inventory, upon the
payment to Bank of the amount Advanced by Bank to Borrower with respect to such
Property, in which case Bank shall make no further Advances to Borrower with
respect to such Property.
3. ADVANCES
3.1. Conditions Precedent to Funding. The obligation of the Bank to
make any Advance on the Loan is subject to the condition precedent that the Bank
shall have received the following, in form and substance reasonably satisfactory
to the Bank:
3.1.A. Note. The note, duly and validly issued, executed,
and delivered to the Bank.
3.1.B. Subdivisions. Information as to the location of each
Home. Bank will only make a Loan for Homes in an Approved Subdivision.
(The Bank has the right, for any reason, to withdraw approval of a
subdivision, whereupon no additional Homes in such subdivision shall
be added as Eligible Homes.)
3.1.C. Appraisal. An appraisal for each Home in form and
substance and by an appraiser satisfactory to Bank in the exercise of
its sole discretion indicating the appraised value of each Home after
the construction of the Improvements on the Property. In the event
that Bank's regulatory requirements dictate that the same is
necessary, each such appraisal must be dated within one-year for each
Home included in Eligible Homes.
3.1.D. Secretary's Certificate. A certificate of the
Secretary or Assistant Secretary of the Borrower's general partner
setting forth: (i) resolutions of its Board of Directors, in form and
substance satisfactory to the Bank, with respect to the authorization
of the Note, this Agreement, the Security Instruments, and any other
documents evidencing other necessary corporate and/or limited
partnership action with respect to any of the foregoing, together with
the officers of the Borrower's general partner authorized to sign the
same, and (ii) specimen signatures of the officers so authorized. Such
certificate shall not be required more frequently than every twelve
(12) months, if Borrower has previously submitted a certificate which
authorizes multiple transactions evidenced by the Supplemental Deeds
of Trust and otherwise acceptable to Bank.
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<PAGE> 6
3.1.E. Certificate of Limited Partnership and Certificate of
Incorporation and Qualification. A copy, certified as true by the
Secretary or Assistant Secretary of the Borrower's general partner, of
the Limited Partnership Agreement of the Borrower, a certificate from
the Secretary of State of Texas as to the registration of the Borrower
as a Texas limited partnership, articles or certificate of
incorporation and the bylaws of the Borrower's general partner, and a
Certificate of Good Standing from the Secretary of State of Texas as
to the Borrower's general partner.
3.1.F. Plans and Specifications. The set of Plans and
Specifications for each Home; or in the alternative, Borrower may
submit certain standard floor plans to Bank for Lender's pre-approval
(upon Lender's approval thereof, each such standard floor plan will be
an "Approved Floor Plan"). Borrower shall designate to Bank which
Approved Floor Plan is to be constructed on each Lot.
3.1.G. Speculative Home Limitation. Notwithstanding any
provision contained in this Agreement to the contrary, Bank shall have
the right to disallow certain Speculative Homes as being qualified to
be an Eligible Home, to the extent that the Home Borrowing Formula
Amount for Speculative Homes exceeds sixty (60%) percent of the Home
Borrowing Formula Amount for all Homes in Inventory. To the extent the
Home Borrowing Formula Amount for Speculative Homes comprises more
than sixty (60%) percent of the Home Borrowing Formula Amount for
Homes in Inventory, such excess constitutes excessive Speculative
Homes, and Bank shall have the right to require Borrower to remove
Speculative Homes from Eligible Homes (by obtaining releases therefor
pursuant to Section 2.12 of this Agreement) until the result does not
exceed said sixty (60%) percent. Notwithstanding the preceding
sentences of this Section to the contrary, between October 1 of any
year, but prior to March 31 of the next year, the percentage
references of "sixty (60%) percent" shall be modified to "seventy
(70%) percent". In addition to the foregoing limitations, there shall
be a further sublimit that Borrower shall have no more than Seven
Million Five Hundred Thousand ($7,500,000.00) Dollars of total Home
Borrowing Formula Amount for Speculative Homes in Inventory at any
time.
Within twenty (20) days of the end of each calendar month, Borrower
shall certify to Bank the following information, effective as of the
last day of such calendar month:
a. The identity of, the number, and the total Home
Borrowing Formula Amount of Speculative Homes
included in Eligible Homes; and
b. The number and total Home Borrowing Formula Amount of
all Homes included in Eligible Homes;
3.1.H. Conditions to Inclusion as an Eligible Home. In order
for a Home to be included in Eligible Homes, in addition to the other
requirements contained in this Agreement, the following conditions
must be satisfied:
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3.1.H.1. Title Policy. Bank shall receive a Binder
with respect to each Home. Each such Binder shall show Bank to
be the proposed insured, shall be in an amount no less than
the Home Borrowing Formula Amount, shall be in form and
substance satisfactory to Bank, and shall show no other Liens
against the Property other than to Bank (and subordinate liens
securing subdivision assessments, and for ad valorem taxes for
the current and future years). Bank shall also receive copies
of all documents evidencing exceptions to title, together with
correct and legible copies of the recorded plat for the
subdivision in which such Property is located. As to any Model
Home, said Binder must be extended by Borrower pursuant to
applicable title insurance rules and procedures to continue to
be binding on the Title Insurer as long as such Home is in
Inventory.
3.1.H.2. Master Form Deed of Trust. A Master Form
Deed of Trust, Security Agreement and Financing Statement, in
the form of Exhibit "B" attached hereto, shall have been
recorded in each county in which an Approved Subdivision is
located.
3.1.H.3. Supplemental Deed of Trust. Borrower
shall have executed and delivered to Bank a Supplemental Deed
of Trust, Security Agreement and Financing Statement, in the
form of Exhibit "C" attached hereto, covering the individual
Property which Borrower desires to be included in Eligible
Homes, such Supplemental Deed of Trust to have been duly
executed and notarized and recorded in the county in which the
Property is located.
3.1.H.4. Bank's Acceptance. Bank shall have accepted
the Home, as evidenced by Bank's execution of an Addendum to
Loan Agreement, in the form of Exhibit "D" attached hereto. By
Borrower's execution of such Addendum, Borrower is
representing and warranting to Bank that such Home is eligible
in all respects to be included in Eligible Homes, however,
Bank's execution of such Addendum does not waive any
requirement or condition as contained in this Agreement
respecting whether such Home may be included in Eligible
Homes.
3.1.I. Insurance. Borrower shall have purchased builder's risk
insurance which will apply to each Home included in Inventory, and
public liability insurance in the minimum amount of $2,000,000.00,
flood insurance for each Home in Inventory which is located within the
100 year flood plain and for which flood insurance is available,
worker's compensation insurance covering any employees of Borrower who
are required to be covered by workmen's compensation insurance by
Borrower under Texas law, an umbrella policy in the amount of
$2,000,000.00 together with such other insurance as Bank may
reasonably require, covering, each such Property and the construction
thereon, all as approved by Bank, such insurance to be written in form
and with companies approved by Bank with loss made payable to Bank
pursuant to the Texas standard mortgagee clause, without contribution,
and Borrower shall have delivered the corresponding certificates of
insurance to Bank together with evidence of payment of premiums
thereon for the period to and including the Funding Termination Date.
Such
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<PAGE> 8
policies shall provide, by way of riders, endorsements, or otherwise,
provided that the insurance thereby shall not be terminated, reduced or
otherwise limited regardless of any breach of the representations and
agreements set forth therein, and that no such policy shall be
cancelled, endorsed or amended to any extent unless the issuer thereof
shall have first given Bank at least thirty (30) days prior written
notice. Borrower shall also obtain and maintain in force and effect
such completed value fire and extended coverage insurance and such
liability and other insurance policies and protection as Bank may
reasonably from time to time specify.
3.1.J. Other. The Bank shall have received such other
documents as it may reasonably have requested at any time or at the
closing.
3.2. Conditions Precedent to All Advances. The obligation of the Bank
to make each Advance (including the initial Advance) shall be subject to the
further conditions precedent that on the date of such Advance, the following
statements shall be true or the appropriate document shall have been furnished
to Bank:
3.2.A. Representations and Warranties. The representations and
warranties of the Borrower contained in Article 4 ("Representations
and Warranties") and otherwise made in writing by or on behalf of the
Borrower pursuant to this Agreement were true and correct in all
material respects when made and are true and correct in all material
respects on and as of the date of such Advance.
3.2.B. No Default. No monetary default has occurred under
Section 6.1.A. of this Agreement and is continuing, or no other Event
of Default has occurred (and any applicable cure period has expired
without the event being cured by Borrower), hereunder or under the
Note, or any Security Instrument, or any loan or credit agreement,
indenture, deed of trust, security agreement, or other agreement or
instrument evidencing or pertaining to any Debt of the Borrower, or
under any material agreement or instrument to which the Borrower is a
party or by which the Borrower is bound;
3.2.C. Performance and Compliance. The Borrower has performed
and complied with all agreements, terms and conditions contained in
this Agreement.
3.2.D. No Material Adverse Change. There shall have occurred,
in the opinion of the Bank, no change, either in any instance or in the
aggregate, in the condition, financial or otherwise, of the Borrower
or any Collateral, from the facts represented in any Security
Instrument, including this Agreement, which would have a Material
Adverse Effect;
3.2.E. Work Progressing. All work of Borrower on uncompleted
Homes shall be progressing, in the ordinary course of business;
3.2.F. Inspection. Bank shall have the right to inspect the
Improvements, either by its personnel or inspectors acceptable to
Bank, at any time, and upon submission of a request for an Advance,
and the Bank's determination of work completed
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<PAGE> 9
and/or materials furnished and regarding the extent of completion by
such personnel or inspectors shall be utilized in lieu of any such
information contained in Borrower's request for an Advance. It is
agreed and understood that Homes in the Houston area shall be
inspected by Bank's personnel, at Bank's cost and expense;
3.2.G. Nothing Further Certificates. At Bank's option for
reasonable cause, and at Borrower's expense, nothing further
certificates from the Title Company shall be delivered to Bank,
showing that since the date of issuance of the title binder or
mortgagee policy, as the case may be, no lien or other encumbrances
have been claimed, granted or otherwise created with respect to or
covering any of the Property included in Inventory;
3.2.H. Further Assurances. The Bank shall have received such
other approvals, opinions or documents as the Bank may reasonably
request.
3.3. No Waiver. No Advance shall constitute a waiver of any condition
precedent to the obligation of Bank to make any further Advance or preclude
Bank from thereafter declaring the failure of Borrower to satisfy such
condition precedent to an Event of Default. The making of any Advance or any
part of an Advance, shall not be deemed an approval or acceptance by Bank of
the work theretofore done.
3.4. Requirements Only for the Benefit of Bank. All requirements to
make any Advance or imposed hereby are solely for the benefit of Bank, and no
other party may rely upon Bank's actions or be entitled to assume that Bank
will make any Advance. Any requirements of this Agreement may be waived by
Bank, with or without notice to Borrower or any other party, in whole or in
part, at any time, without prejudice as to subsequent reinstatement of such
waived or partially waived requirements.
4. REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement, the Borrower
represents and warrants to the Bank (which representations and warranties will
survive the delivery of the Note and the making of the loans hereunder) as
follows:
4.1. Limited Partnership and Corporate Existence. The Borrower is a
limited partnership, validly existing and in good standing under the laws of
the state of Texas; the general partner of the Borrower is a corporation, duly
incorporated, validly existing and in good standing under the laws of the state
of Nevada, with the right to do business in the state of Texas.
4.2. Partnership and Corporate Power and Authorizations. The execution,
delivery and performance by the Borrower of this Agreement, the Note and the
Security Instruments (as herein defined) to which they are a party, are within
the Borrower's limited partnership powers, and the actions of Borrower's
general partner have been duly authorized by all necessary corporate action,
and do not contravene (i) the Borrower's limited partnership agreement or the
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Borrower's general partner's charter, articles or certificate of incorporation,
or bylaws or (ii) any law, Governmental Requirement, or any contractual
restriction binding on or affecting the Borrower or Borrower's general partner.
4.3. Governmental Approvals. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Borrower of this Agreement, the Note, or the Security Instruments.
4.4. Binding Obligations. This Agreement is, and the Note and
Security Instruments to which it is a party when delivered hereunder will be,
legal, valid, binding and enforceable obligations of the Borrower, in
accordance with their respective terms except for bankruptcy laws and similar
laws.
4.5. Exchange Act Compliance. No proceeds of any Advance will be used
to acquire any security in any transaction which is subject to Sections 13 and
14 of the Securities Exchange Act of 1934, as amended.
4.6. Use of Proceeds; No Credit For Margin Stock. The proceeds of the
Note will be used by the Borrower to provide funds for working capital. The
Borrower is not engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U issued
by the Board of Governors of the Federal Reserve System), and no proceeds of
any Advance will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock.
4.7. Pending Proceedings. There is no pending action or proceeding
before any court, governmental agency or arbitrator, affecting the Borrower,
which may, in Bank's reasonable opinion, have a Material Adverse Effect on the
financial condition or operations of the Borrower.
4.8. No Additional Consent or Approval. The Borrower's execution,
delivery, and performance of the Note, this Agreement, or the Security
Instruments does not require any consent or approval that has not already been
obtained, including, without limitation, the consent or approval of any
regulatory authority, governmental body, or political subdivision of the United
States of America or any state thereof.
4.9. Financial Condition. The Financial Statements of the Borrower
(including any related schedules or notes) which have been delivered to the
Bank have been prepared in accordance with the Accounting Principles set forth
in Section 1.2 of this Agreement, and subject to the definition of
"Financial Statements" as defined in Attachment I of this Agreement. No change,
either in any instance or in the aggregate, has occurred in the condition,
financial or otherwise, of the Borrower which in Bank's reasonable judgment
would have a Material Adverse Effect, nor has Borrower incurred any material
liabilities, except as disclosed in writing, to the Bank.
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<PAGE> 11
4.10. Taxes; Governmental Charges. The Borrower has filed all tax
returns and reports required to be filed and have paid all taxes, assessments,
fees and other governmental charges levied upon them or upon its properties or
income which are due and payable, including interest and penalties, or have
provided adequate reserves for the payment thereof.
4.11. Titles, Etc. With respect to any Property pledged, transferred,
or assigned hereunder or under the Security Instruments as security for the
loan, the Borrower has, or simultaneous with the execution of any Supplement
Deed of Trust will have, good title to such Property, whether real, personal or
mixed, tangible or intangible, free and clear of all liens and security
interests, other than those granted to Bank hereunder or under the Security
Instruments.
4.12. Commencement of Construction. With respect to each Property
included in Inventory, prior to the recordation of the Mortgage in favor of
Bank, no work of any kind (including the destruction or removal of any existing
improvements, site work, clearing, grubbing, draining, or fencing of the
Property) shall have commenced or shall have been performed on the Property, no
equipment or material shall have been delivered to or upon the Property 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 by any person or entity in the Mechanic's
Lien or other appropriate records in the county where the Property is located,
and no specially fabricated materials or equipment has been ordered or
received.
4.13. Omissions and Misrepresentations. No instruments, certificates,
or any other documents delivered or to be delivered by the Borrower contains or
will contain any untrue statement of a material fact or contains an omission of
any material fact necessary to make such statements not misleading.
4.14. Satisfactory Plans. The Plans and Specifications are
satisfactory to the Borrower and to the extent required by applicable law or
any effective restrictive covenant have been approved by all Governmental
Authorities and the beneficiary of any such covenant. No violation of any
requirement of Governmental Authorities exists with respect to the Property,
and the anticipated use thereof complies with applicable zoning ordinances,
regulations and restrictive covenants affecting the Property and all
Governmental Requirements for such use have been satisfied.
4.15. Flood Plain. No Property will lie within the 100-year flood
plain or any area that has been designated by the Secretary of Housing and
Urban Development as an area having special flood hazards or if it does, the
community in which said Property is located has been approved for flood
insurance under the National Flood Insurance Program and flood insurance is
available for said Property under said program.
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<PAGE> 12
5. COVENANTS OF THE BORROWER
5.1. Affirmative Covenants. So long as the Note shall remain unpaid or
the Borrower shall be indebted to the Bank hereunder, the Borrower will, unless
the Bank shall otherwise consent in writing:
5.1.A. Construction of the Improvements. Prosecute the
construction of the Improvements with diligence and continuity, in a
good and workmanlike manner, and in accordance with sound building and
engineering practices, all applicable Governmental Requirements, the
Plans and Specifications, except as to material changes approved as
herein provided by the Bank, and all other terms of this Agreement.
Borrower shall not permit cessation of work on any Home in Inventory
for a period in excess of thirty (30) days, and Borrower shall
complete construction of the Improvements free and clear of all liens
except those created by this Agreement.
5.1.B. Compliance with Laws, Etc. Comply in all material
respects with all applicable Governmental Requirements, laws, rules,
regulations and orders, such compliance to include, without
limitation, paying, before the same become delinquent, all taxes,
assessments and governmental charges imposed upon it or upon its
Property except to the extent contested in good faith. Borrower shall
timely comply and the Improvements shall be constructed in accordance
with all Governmental Requirements and that said Improvements shall be
constructed entirely on the Property and will not encroach upon or
overhang any easement or right-of-way nor upon the land of others and
that the Improvements, when erected, shall be wholly within the
building restriction lines however established and will not violate
applicable use or other restrictions contained in any prior
conveyances, zoning ordinances or regulations. Borrower assumes full
responsibility for the compliance of the Plans and Specifications and
the Property with all Governmental Requirements and with sound
building and engineering practices, and notwithstanding any approvals
by Bank, Bank shall have no obligation, responsibility or liability
whatsoever for the Plans and Specifications or any other matter
incident to the Property or the construction of the Improvements.
5.1.C. Reporting Requirements. Furnish to the Bank the
following:
5.1.C.1. As soon as available, and in any event
within thirty (30) days after the end of each calendar month,
a balance sheet of the Borrower as of the end of such month, a
combined income statement for such month and for the period
from the beginning of the fiscal year to the end of such month,
all of which shall be certified by the principal financial
officer of the Borrower to have been prepared in accordance
with sound accepted accounting principles, consistently
followed throughout the period indicated;
5.1.C.2. As soon as available, and in any event
within fifteen (15) days after the end of each calendar month,
a sales report by subdivision indicating
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<PAGE> 13
sales since the last monthly report, and as to all Homes in
Inventory, whether or not they are subject to a contract for
sale;
5.1.C.3. No less often than monthly, a construction
report indicating the percentage of completion of construction
of each Home in Inventory;
5.1.C.4. Quarterly, a Compliance Certificate in
substantially the form of Exhibit "E" attached to this
Agreement or other form acceptable to the Bank, signed by the
principal financial officer of the Borrower, stating that a
review of the activities of the Borrower has been made under
such officer's supervision with a view to determining whether
the Borrower has fulfilled all of its obligations under this
Agreement, the Note, the Security Instruments, and other
documents executed herewith; that the Borrower has fulfilled
all of its obligations under such instruments, and that all
representations made herein and in such instruments continue
to be true and correct in all material respects (or specifying
the manner in which the representations made have changed),
or, if the Borrower shall be in Default, specifying any
Default and the nature and status thereof; and, to the extent
reasonably requested from time to time by the Bank,
specifically affirming compliance by the Borrower with any of
its representations or obligations under such instruments;
5.1.C.5. As soon as available, and in any event
within one hundred twenty (120) days after the end of each
fiscal year for the Borrower, a copy of the audited Financial
Statements for the Borrower, certified in a manner reasonably
acceptable to the Bank by a nationally recognized certified
public accounting firm reasonably acceptable to Bank;
5.1.C.6. As soon as available, and in any event
within one hundred twenty (120) days after the end of each
fiscal year for Pacific USA, a copy of the audited Financial
Statements for Pacific USA, certified in a manner reasonably
acceptable to the Bank by a nationally recognized certified
public accounting firm reasonably acceptable to Bank (provided
however, that this shall not be a default unless the
statements are not provided to Bank within 15 days following
written notice from Bank to Borrower that such statements were
not received within the required 120 day period); and
5.1.C.7. Such other information respecting the
condition or operations, financial or otherwise, of the
Borrower as the Bank may from time to time reasonably request.
5.1.D. Right of Inspection. Permit any officer, employee or
agent of the Bank to visit and inspect any of the properties of the
Borrower, to examine the Borrower's books of record and accounts
(including but not limited to all contracts, subcontracts, statements,
invoices, bills and claims for labor, materials and services supplied
for the construction of the Improvements), to examine and take copies
and extracts therefrom, and Borrower agrees to discuss the affairs,
finances and accounts of the
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<PAGE> 14
Borrower with the Bank's officers, and in the presence of an officer
of Borrower, with Borrower's accountants and auditors, all at such
reasonable times and as often as the Bank may reasonably desire.
5.1.E. Notice of Certain Events. Promptly notify the Bank in
writing if the Borrower learns of the occurrence of (i) any event
which constitutes a Default, together with a detailed statement by a
responsible officer of the Borrower of the steps being taken to cure
the effect of such Default; or (ii) the receipt of any notice from, or
the taking of any other action by, the holder of any promissory note,
debenture or other evidence of indebtedness of the Borrower or of any
security (as defined in the Securities Act of 1933, as amended) of the
Borrower with respect to a claimed default, together with a detailed
statement by a responsible officer of the Borrower specifying the
notice given or other action taken by such holder and the nature of
the claimed default and what action the Borrower is taking or proposes
to take with respect thereto; or (iii) any legal, judicial or
regulatory proceedings affecting the Borrower or any of its properties
in which the amount involved is material and is not covered by
insurance or which, if adversely determined, would have a Material
Adverse Effect; or (iv) any event or condition having a Material
Adverse Effect.
5.1.F. Reimbursement of Expenses. Pay all reasonable legal
fees incurred by the Bank in connection with the preparation of this
Amended and Restated Agreement and the documents contemplated hereby
(as the loan revision was at the specific request of the Borrower),
and pay all fees, charges or taxes for the recording or filing of
Security Instruments. The Bank will pay for legal fees for any renewal
or extension of the Loan, as well as the documentation of each
Eligible Home added to this Agreement. The Borrower will, upon
request, promptly reimburse the Bank for amount expended by Bank to
satisfy any obligation of the Borrower under this Agreement or any
other Security Instrument, or to collect the Note, or to enforce the
rights of the Bank under this Agreement or any other Security
Instrument, which amounts will include all court costs, reasonable
attorneys' fees (including, without limitation, fees for trial, appeal
or other proceedings), fees of auditors and accountants, and
investigation expenses reasonably incurred by the Bank in connection
with any such matters, together with interest not to exceed the
highest lawful rate of interest on each such amount from the date of
written demand or request by the Bank for reimbursement until the date
of reimbursement to the Bank.
5.1.G. Further Assurance. Promptly cure any defects in the
creation and issuance of the Note and the execution and delivery of
the Security Instruments, including this Agreement. The Borrower, at
its expense, will promptly execute and deliver to the Bank upon
request all such other and further documents, agreements and
instruments to comply with or accomplish the covenants and agreements
of the Borrower in the Security Instruments, including this Agreement,
or to further evidence and more fully describe the Collateral intended
as security for the Note, or to correct any omissions in the Security
Instruments, or to more fully state the security obligations set out
herein or in any of the Security Instruments, or to perfect, protect
or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, file any notices,
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<PAGE> 15
or obtain any consents, all as may be reasonably necessary or
appropriate in connection therewith.
5.1.H. Net Worth. Continuously maintain a minimum Tangible
Net Worth of at least $9,000,000.00, as stated on its Financial
Statements.
5.1.I. Correction of Defects. Correct or cause to be
corrected:
(a) any defect in the Improvements,
(b) any material departure in the construction of the
Improvements from the Plans and Specifications,
Governmental Requirements, or
(c) any encroachment by any part of the Improvements or
any other structure located on the Property on any
building line, easement, property line, or restricted
area.
5.1.J. Inspection of the Property. Permit Bank, any
Governmental Authority and their agents and representatives, at any
time to enter with free access the Property, Improvements and any
location where materials intended to be utilized in the construction
of the Improvements are stored for the purpose of inspection of all
work done, labor performed and materials furnished on, in, and about
the Property and Improvements.
5.1.K. Insurance Proceeds. Allow Bank, at Bank's option, in
the case of an insured loss, to either credit all or part of the
insurance proceeds to the outstanding debt of Borrower, or allow
Borrower the use of all or part thereof for rebuilding or repairing
the loss or damage.
5.1.L. Notices by Governmental Authority, Fire and Casualty
Losses, Etc. Timely comply with and promptly furnish to Bank true and
complete copies of any official notice or claim by any Governmental
Authority pertaining to the Property and Improvements. Borrower shall
promptly notify Bank of any fire or casualty or any notice of taking
or eminent domain action or proceeding affecting the Property or
Improvements.
5.1.M. Required Deposit by Borrower. In the event of an
occurrence of an Event of Default, and if Bank determines that the
unadvanced portion of the Loan will be insufficient for payment in
full of: (1) remaining unpaid cost of labor, materials, and services
required for the completion of construction of the Improvements; and
(2) any other costs and expenses required to be paid in connection
with the construction of the Improvements in accordance with the Plans
and Specifications and any Governmental Requirements, the Borrower
shall, on request of Bank, deposit any sum or sums over and above the
unadvanced proceeds of the Loan allocated to such Property (the
"Borrower's Deposit") with Bank. Bank shall not be required to pay
interest on such Borrower's Deposit. Bank may advance all or a portion
of the Borrower's Deposit prior to any
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<PAGE> 16
portion of the Loan proceeds. Borrower shall promptly notify Bank in
writing if and when the costs of the construction of the Improvements
exceed, or appear likely to exceed, the unadvanced portion of the
Loan. The Borrower shall receive all Advances hereunder as a trust
fund to be applied for the purpose of paying for the Cost of the
acquisition of the Property and for construction of the Improvements.
Such account will be subject to a security interest retained for the
benefit of Bank.
5.1.N. Direct Disbursement and Application by Bank. Allow
Bank the right, but not the obligation, to disburse and directly apply
the proceeds of the Loan to the satisfaction of any of Borrower's
obligations under the Note, including the payment of interest as
accrued on the Note. Any Advance by Bank for such purpose, except
Borrower's Deposit, shall be part of the Loan and shall be secured by
the security instruments. After the occurrence of an Event of Default,
Borrower hereby authorizes Bank to hold, use, disburse, and apply the
Loan and the Borrower's Deposit for payment of costs of construction
of the Improvements, expenses incident to the Loan and the Property,
including accrued interest, and the payment or performance of any
obligation of Borrower hereunder. Borrower hereby assigns and pledges
the proceeds of the Loan and the Borrower's Deposit to Bank for such
purposes. Bank may advance and incur such expenses as Bank deems
necessary for the completion of construction of the Improvements, and
such expenses, even though in excess of the amount of the Loan, shall
be secured by the security instruments, and payable to Bank upon
demand. Bank may disburse any portion of any Advance at any time after
an Event of Default, to Persons other than Borrower for the purposes
specified in this section.
5.1.O. Costs and Expenses. Pay at the time of execution of
this Agreement, or when due, or at the option of Bank, at any time or
times thereafter specified by Bank all reasonable costs and expenses
required by the terms of this Agreement, the Note, or Mortgages, and
including, without limitation:
(a) All taxes and assessments applicable to the Property
and Improvements,
(b) All fees for filing or recording the security
instruments,
(c) All reasonable fees and expenses as provided in
Section 5.1.F. hereof.
(d) All title insurance and title examination charges,
including the premium for the Title Binder,
(e) All survey costs and expenses, including the cost of
a Survey,
(f) All premiums for the Insurance Policies,
(g) All architects', engineers', and building loan
services fees, and
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<PAGE> 17
(h) All other reasonable costs and expenses payable to third
parties incurred by Bank in connection with the consummation
of the transactions contemplated by this Agreement, subject to
Borrower's approval (not to be unreasonably withheld or
delayed).
5.1.P. Payment of Claims. Promptly pay or cause to be paid
when due all costs and expenses incurred in connection with the
Property and the construction of the Improvements and, Borrower shall
keep the Property free and clear of any mechanic's liens, other liens,
charges, or claims other than the lien of the Mortgage and other liens
approved in writing by Bank whether inferior or superior to the
Mortgage. A discharge of the Mortgage and taking of a new Mortgage in
substitution thereof shall not release or diminish this obligation.
Notwithstanding anything to the contrary contained in this Agreement,
Borrower may contest (i) the validity or amount of any claim of any
contractor, consultant, architect, or other Person providing labor,
materials, or services with respect to Property and Improvements or
(ii) any tax or special assessment levied by any Governmental
Authority, or (iii) the enforcement of or compliance with any
Governmental Requirements; any such contest on the part of Borrower
shall not be a default hereunder provided, that during the pendency of
any such contest, Borrower shall furnish to Bank and Title Insurer,
within fifteen (15) days of Bank's request, an indemnity bond with
corporate surety satisfactory to Bank and Title Insurer or other
security acceptable to them in an amount equal to the amount in
contest plus a reasonable additional sum to cover possible cost,
interest, and penalties, and provided further that Borrower shall pay
any amount adjudged by a court of competent jurisdiction to be due,
with all costs, interest, and penalties thereon before such judgment
creates a lien on the Property or Improvements.
5.2. Negative Covenants. So long as the Note shall remain unpaid or
the Borrower shall be indebted to the Bank hereunder, the Borrower will not,
without the prior written consent of the Bank:
5.2.A. Liens. Incur, create, assume, or suffer to exist any
Lien on a Property in Inventory, except Liens securing the payment of
any Indebtedness herein.
5.2.B. Mergers of Consolidations. Merge or consolidate with
any Person.
5.2.C. Ownership. Sell, transfer or convey any ownership
interests in Borrower or any related entity to Borrower.
5.2.D. Business Activity. Change its major business pursuit
from home building to anything else.
5.2.E. Debt to Worth Ratio. Permit the ratio of total Debt
to Tangible Net Worth to exceed five to one (5.0:1.0).
5.2.F. Occupying Property. Permit any purchaser or
prospective purchaser to occupy any Property before a final release
has been executed by Bank
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<PAGE> 18
except for a Lease to a Person who is the "Purchaser" in a bona fide
Earnest Money Contract to purchase the property so leased and such
occupancy shall continue to exist ten (10) days after written notice
from Bank to Borrower.
5.2.G. Prohibition on Assignment or Sale. Assign, encumber,
or otherwise transfer any rights or interests of Borrower hereunder
without the prior written consent of Bank, and this Agreement shall be
binding upon Borrower and its successors and assigns. Borrower shall
not assign (other than to the Bank) the rents or income (if any) from
the Property without the consent of the Bank. Borrower shall, not
sell or encumber the Property (except for sales to bona fide third
party purchasers in the ordinary course of business), nor shall there
be any change in Borrower's ownership, without the prior written
consent of Bank.
5.2.H. No Conditional Sale Contracts. Etc. Allow any
materials, equipment, or fixtures to be supplied, purchased, or
installed for the construction or operation of the Improvements
pursuant to security agreements, conditional sale contracts, lease
agreements, or other arrangements or understandings whereby a security
interest or title is retained by any party where the right is reserved
or accrues to any party to remove or repossess any materials,
equipment or fixtures intended to be utilized in the construction or
operation of the Improvements. The Borrower shall execute and deliver
unto the Bank, at any time it is requested to do so, a security
agreement or other ar instrument(s) covering all property of any kind
whatsoever located or to be located on the land, with respect to which
there may be doubt as to such properties, being subject to the lien of
the mortgage.
5.2.I. Restrictions and Annexation. Impose any restrictive
covenants or encumbrances upon the Property or Improvements, execute
or file any subdivision plat affecting the Property, or consent to the
annexation of the Property to any city or other political unit without
the prior written consent of Bank.
5.3. Furnishing Information. In the event a situation exists which in
the judgment of the Bank impairs the prospect of payment or performance by
Borrower of any Indebtedness or obligations, or if Bank is notified, verbally
or in writing, of Borrowers failure to pay when due for work performed which
exceeds $25,000.00 in the aggregate, or $5,000.00 on any Property in Inventory,
or is notified of any claim in excess of $25,000.00 being asserted by a
contractor, subcontractor, materialmen or laborer or upon an Event of Default,
Borrower will within forty-eight (48) hours of Bank's written request:
5.3.A. Payments Due. Provide a listing of the amounts and
names of parties to whom money is owed for services actually performed
or materials actually furnished in connection with the construction of
the Improvements with copies of billing statements, invoices, or
vouchers from such parties;
5.3.B. Additional Documents. Furnish Bank copies of all
executed construction contracts and subcontracts, change orders,
invoices, bonds, estimates with respect to the construction, and also
upon Bank's request to give sworn statements setting
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<PAGE> 19
forth names of contractors, subcontractors, and all others furnishing
labor, materials, and services or the construction, including the
amounts due, amounts paid, and total contract prices. Borrower shall
also execute and deliver to Bank, from time to time as requested by
Bank, such other documents as shall be necessary to provide the rights
and remedies to Bank granted or provided for by the Security
Instruments.
5.4. Mechanic's Liens. In the event any mechanic, materialman, laborer
or vendor shall file any mechanics or materialmans lien, or give notice of
nonpayment of any invoice which might result in the filing of such Lien,
Borrower shall give its immediate attention to identifying and using its best
efforts in attempting to resolve such problem. If, however, such problem is
unresolved forty-five (45) days from the date Borrower is notified about such
problem, Borrower shall, within ten (10) days of the expiration of such 45th
day, provide one of the following to Bank:
5.4.A. Releases and Waivers. Procure and deliver to Bank, as
the Bank may require, releases or waivers of Mechanic's Liens and such
written verified statements of Borrower and receipted bills showing
payment of all parties who have furnished materials or service or
performed labor of any kind in connection with the construction of
any of the Improvements;
5.4.B. Final Releases and Waivers. Provide any final lien
releases or waivers by architects, contractors, subcontractors,
materialmen, laborers, and other parties who have supplied labor,
material, or services for the construction of the Improvements, or who
otherwise might be entitled to claim a contractual, statutory, or
constitutional lien against the Improvements and/or Property; and
5.4.C. Bonds. Furnish all indemnity bonds as Bank may deem
necessary or may request for its protection, including surety,
performance, payment, completion, lien, or other bonds and assurances
of performance and payment by Borrower and any contractors.
5.5. No Liability of Bank. Bank shall have no liability, obligation,
or responsibility whatsoever with respect to the construction of the
Improvements except to advance the Loan in Bank's sole function as Lender, and
the only consideration passing from Bank to Borrower is the loan proceeds in
accordance with and subject to the terms of this Agreement. Bank shall not be
obligated to inspect the Property or the construction of the Improvements.
Borrower has selected all architects, engineers, contractors, sub-contractors,
materialmen, as well as all others furnishing services or materials to the
construction project and Bank has, and shall have, no responsibility whatsoever
for them or any other party or their performance or default or for the quality
of their materials or workmanship 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 disbursement or acceptance hereunder of any
document or instrument, shall be construed as a representation or warranty,
express or implied, to any party by Bank.
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<PAGE> 20
5.6. Defense of Actions. Bank may (but shall not be obligated to)
commence, appear in, or defend any action or proceeding related to the Loan,
the Property, or the respective rights and obligations of Bank and Borrower
pursuant to this Agreement. Bank may (but shall not be obligated to) pay all
necessary expenses, including reasonable attorney's fees and expenses incurred
in connection with such proceedings or actions, which Borrower agrees to repay
to Bank upon demand.
5.7. Assignment of Plans and Specifications. As additional security for
the payment of the Loan, Borrower hereby transfers and assigns to lender all of
Borrower's right, title and interest in and to the Plans and Specifications and
hereby represents and warrants to and agrees with Bank as follows:
5.7.A. The Schedule of the Plans and Specifications once
approved and delivered to Bank is a complete and accurate description
of the Plans and Specifications, and when so filed shall govern on all
matters that may arise with respect thereto.
5.7.B. The Plans are complete and adequate for the
construction of the Improvements and there have been no material
modifications thereof except as described in such schedule. The Plans
and Specifications shall not be materially modified without the prior
written request of Borrower signed by Borrower and Bank and shall be
conditioned upon the written acceptance by the Bank, which acceptance
may be subject to such conditions and qualifications as the Bank in
its discretion prescribes, it being understood that the Bank has at
all times the right to require compliance with the original Plans and
Specifications.
5.7.C. Bank may use the Plans and Specifications for any
purpose relating to the Improvements, including but not limited to
inspections of construction of the Improvements.
5.7.D. Bank's acceptance of this Assignment shall not
constitute approval of the Plans and Specifications by Bank. Bank has
no liability or obligation whatsoever in connection with the Plans and
Specifications and no responsibility for the adequacy thereof or for
the construction of the Improvements contemplated by the Plans and
Specifications. Bank has no duty to inspect the Improvements, and if
Bank should inspect the Improvements, Bank shall have no liability or
obligation to Borrower arising out of such inspection. No such
inspection nor any failure by Bank to make objections after any such
inspections shall constitute a representation by Bank that the
Improvements are in accordance with the Plans and Specifications or
constitute a waiver of Bank's right thereafter to insist that the
Improvements be constructed in accordance with the Plans.
5.7.E. This assignment shall inure to the benefit of Bank,
its successors and assigns, including any purchaser upon foreclosure
of the Mortgage, any receipt in possession of the Property, and any
corporation formed by or on behalf of the Bank which assumes Bank's
rights and obligations under this Agreement.
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<PAGE> 21
5.7.F. This is a non-exclusive assignment and Borrower
retains the right to continue to use such Plans and Specifications.
6. EVENTS OF DEFAULT
6.1. Events of Default. Any of the following events (following the
expiration of any applicable notice and cure time as provided in this
Agreement) shall be considered an Event of Default as that term is used herein:
6.1.A. Payment or Other Default. The Borrower shall fail to
pay when due any installment of principal of, or interest on, the
Note, or shall otherwise commit an Event of Default within the terms
of the Note, or any of the Security Instruments or this Agreement,
provided that: (i) any failure to pay or other monetary default shall
not be cured by Borrower within five (5) days of written notice from
Bank to Borrower pursuant to Section 7.2; or (ii) any non-monetary
default shall not be cured by Borrower within fifteen (15) days of
written notice from Bank to Borrower pursuant to Section 7.2 (In the
event such non-monetary default cannot be cured within such fifteen
(15) day period, Borrower must initiate such action as may be deemed
necessary and appropriate by Bank to cure such non-monetary default
within such fifteen (15) days, and thereafter diligently pursue to
completion such actions to fully cure such non-monetary default within
ninety (90) days from the date of such notice); or
6.1.B. Representations and Warranties. Any representation or
warranty made by the Borrower herein or by the Borrower (or any of its
general partner's officers) in connection with this Agreement shall
prove to have been incorrect in any material respect (as determined by
Bank in its reasonable discretion) when made; or
6.1.C. Covenants. The Borrower shall fail to perform or
observe any covenant or agreement contained in this Agreement or the
Loan Documents and such failure (other than a failure to make payments
when required), continues unremedied for a period in excess of the
period specified in Section 6.1.A. (ii) above; or
6.1.D. Other Debt. The Borrower shall fail to pay any Debt
(other than Debt evidenced by the Note) of Borrower, or any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue to exist fifteen (15) days after written notice thereof from
Bank to Borrower, or any other Default under any agreement or
instrument relating to any such Debt, or any other event, shall occur,
if the effect of such Default or event is to accelerate, or to permit
the acceleration of, the maturity of such Debt; or any such Debt shall
be declared to be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment), prior to the
stated maturity thereof; or
6.1.E. Bankruptcy or Other Proceedings. The Borrower
shall generally not pay its Debts as such Debts become due, or shall
admit in writing its inability to pay
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<PAGE> 22
its Debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or
against the Borrower seeking to adjudicate such entity a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of its
Debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of any order
for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its Property; or the
Borrower shall take any action to authorize any of the matters set
forth above in this subsection; or
6.1.F. Undischarged Judgments. A final judgment or order for
the payment of money in excess of $10,000.00, shall be rendered
against the Borrower, unless such judgment shall be on appeal and
during such appeal a supersedeas bond shall have been provided by
Borrower covering the full amount of such judgment. If such appeal is
not successful, upon final rendition of such judgement, Borrower shall
pay the same in full within fifteen (15) days thereof; or
6.1.G. Adverse Effect. A situation exists which has a
Material Adverse Effect on the operations or financial condition of
the Borrower or the Collateral pledged as security for the Loan or
Loans hereunder and such situation shall continue to exist fifteen
(15) days after written notice from Bank to Borrower; or
6.1.H. Security Instruments. The Security Instruments after
delivery thereof shall for any reason, except to the extent permitted
by the terms hereof or thereof, cease to create a valid and perfected
first priority security interest in any of the Collateral purported to
be covered thereby, which is not cured within fifteen (15) days after
written notice thereof from Bank; or
6.1.I. Title. At the time any Advance is due Borrower the
title is not satisfactory to Bank's attorney, regardless of whether
the lien, encumbrance or question existed at the time of a prior
Advance which is not cured within ten (10) days after written notice
thereof from Bank, subject to Section 5.4 hereof; or
6.1.J. Other. The occurrence of any event or condition which
results in, or with notice or lapse of time could result in, a default
in the payment of any Indebtedness or performance of any obligation of
Borrower to Bank as contemplated by this Agreement, subject to the
notice and cure provisions of Section 6.1.A. above.
6.2. Remedies Upon Default. In the event any Event of Default shall
occur and be continuing, the Bank may, with or without further notice to the
Borrower:
6.2.A. Acceleration. (i) Declare its obligation to make any
Advance to be terminated, and (ii) declare the Note, all interest
thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Note, all such interest and
all such amounts shall become and be forthwith due and payable,
without grace, presentment, demand, demand for payment, notice of
acceleration, notice of intent to accelerate, protest or notice of
protest, or of non-payment, or further notice
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<PAGE> 23
of any kind (other than the respective notice required under Section
6.1 above), all of which are hereby expressly waived by the Borrower;
6.2.B. Cessation of Credit. Cease advancing money under the
Line of Credit Note or extending credit to or for the benefit of the
Borrower under this Agreement;
6.2.C. Rights under the Texas Business and Commerce Code.
Exercise any or all of the rights accruing to a secured party under
the Texas Business and Commerce Code, as amended, and exercise any or
all of the rights accruing to a secured party under any other law
applicable upon default by a debtor;
6.2.D. Rights under the Security Instruments. Exercise any
or all rights under the Security Instruments;
6.2.E. Secure the Collateral. Enter, with or without process
of law, any premises where the Collateral pledged to secure this loan
is or may be located and, without breach of the peace and without
charge or liability to the Bank therefor, until the Bank's completion
of enforcement of its security interests in the Collateral and/or
until the Bank's removal of the Collateral therefrom to such other
place or places as the Bank deems convenient: (i) take possession of
said premises and of any of the Collateral located therein; (ii) place
a custodian in exclusive control of said premises and of any of the
Collateral located therein; (iii) remove the Collateral (and any of
the Borrower's materials, supplies, books and records in any way
relating to the Collateral or useful to the Bank in enforcing its
rights under this Article 6) from said premises; (iv) remain upon said
premises and use the same (together with said materials, supplies,
books and records) for the purpose of collecting the Collateral and/or
preparing the Collateral for disposition and/or disposing of the
Collateral, and the Borrower hereby grants the Bank a security
interest in said materials, supplies, books and records for the
purpose above stated;
6.2.F. Sale or Disposition of Collateral. Sell or otherwise
dispose of the Collateral (in its then condition or after further
manufacturing, processing or preparation thereof, utilizing in
connection therewith, without charge to or liability of the Bank
therefor, any of the Borrower's assets) at a public or a private sale,
as the Bank deems advisable, for cash or credit; provided, however,
that the Borrower shall be credited with the net proceeds of such sale
only when such proceeds are actually received by the Bank and the Bank
may become the purchaser at any sale if permissible under applicable
law. In the event of an Event of Default by the Borrower under this
Agreement, the Borrower shall, if the Bank requests, assemble the
Collateral and make it available to the Bank at a place or places to
be designated by the Bank which is reasonably convenient to the Bank;
6.2.G. Rights of Bank. Upon the occurrence of an event of
Default, Bank shall have the right to terminate this Agreement, in
addition to any other right or remedy of Bank, or the Bank, at its
option, at any time thereafter has the right, but not the
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<PAGE> 24
obligation, in its own name or in the name of Borrower, to enter into
possession of the Property and Improvements; to perform all work and
labor necessary to complete the construction Improvements
substantially in accordance with the Plans and Specifications, and to
employ watchmen and other safeguards to protect the Property and
Improvements. Borrower hereby constitutes and appoints Bank as the
true and lawful attorney-in-fact of Borrower, with full power of
substitution, and in name of Borrower, if Bank elects to do so and
hereby empowers said attorney or attorneys to:
6.2.G.1. Use such sums as are necessary, including
any proceeds of the Loan and the Borrower's Deposit, make such
additions and changes or corrections in the Plans and
Specifications, and employ such architects, engineers, and
contractors, vendors, sub-contractors and agents, and
inspectors, as may be required for the purpose of completing
the construction of the Improvements substantially in
accordance with the Plans and Specifications, and Governmental
Requirements,
6.2.G.2. Execute all applications and certificates
in the name of Borrower which may be required for completion
of construction of the Improvements,
6.2.G.3. Pay, settle, or compromise all existing
bills and claims which may be liens against the Improvements
or as may be necessary or desirable for the completion of the
job, or clearance of title,
6.2.G.4. Endorse the name of Borrower on any checks
or drafts representing proceeds of the Insurance Policies, or
other checks or instruments payable to Borrower with respect
to the Property and Improvements,
6.2.G.5. Execute all applications and certificates
in the name of Borrower which may be required by any of the
contract documents,
6.2.G.6. Employ at the expense of Borrower a
watchman or such other security agency as Bank may choose to
protect the Improvements, building materials and equipment,
and its contacts from depreciation or injury.
6.2.G.7. Do any and every act with respect to the
construction of the Improvements which Borrower may do, and
6.2.G.8. Prosecute or defend any action or
proceeding incident to the construction of the Improvements or
Property as Bank deems necessary.
All sums so expended by Bank hereunder shall be deemed to be
paid to Borrower and secured by said Mortgage even if in excess of the
amount of the Loan, and the total thereof shall be due and payable
from Borrower to Bank pursuant to the terms of the Note. The
power-of-attorney granted hereby is a power coupled with an interest
and is
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<PAGE> 25
irrevocable. Bank shall have no obligation to undertake any of the
foregoing actions, and if Bank should do so, and shall have no
liability to Borrower for the sufficiency or adequacy of any such
action taken by Bank. The Borrower hereby assigns and quit-claims to
the Bank all sums unadvanced under said Mortgage and all sums due in
escrow, conditioned upon the use of said sums and trusts for the
completion of the Improvements, such assignment to become effective
only in the case of the Borrower's default.
6.2.H. No Waiver or Exhaustion. No waiver by Bank of any of
its rights or remedies hereunder, in the other security instruments,
or otherwise, shall be considered a waiver of any other or subsequent
right or remedy of Bank; no delay or omission in the exercise or
enforcement by Bank of any rights or remedies shall ever be construed
as a wavier of any right or remedy of Bank; and, no exercise or
enforcement of such rights or remedies shall ever be held to exhaust
any right or remedy of Bank.
6.2.I. Additional Information. Upon the occurrence of an Event
of Default, Bank shall have the right to request certain additional
information from Borrower, which Borrower shall provide to Bank within
ten (10) days of such request, with respect to each Home in Inventory,
to wit:
6.2.I.1. The amounts and names of parties to whom
money is owed for services actually performed or materials
actually furnished in connection with the construction of the
Improvements with copies of billing statements, invoices, or
vouchers from such parties; and
6.2.I.2. The percentage of completion of the
entire Improvements which has been completed at the time of
such certification.
6.2.I.3. Evidence that no mechanic's or
materialman's liens or other encumbrances have been filed and
remain in effect against the Improvements and/or property,
6.2.I.4. Final lien releases or waivers from all
Sub-Contractors, Materialmen, Laborers, and other parties who
have supplied labor, material, or services for the
construction of the Improvements, or who otherwise might be
entitled to claim a contractual, statutory, or constitutional
lien against the Improvements and/or property, and
6.2.I.5. Such other documents, instruments and
certificates as Bank may require.
6.3. Release. In the event of a Default by the Borrower under this
Agreement, the Borrower waives and releases all rights of redemption from any
such sale. The Bank may postpone or adjourn any such sale from time to time by
announcement at the time and place of sale stated in the notice of sale or by
announcement at any adjourned sale, without being required to give a new notice
of sale, unless required by law.
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<PAGE> 26
7. MISCELLANEOUS
7.1. Amendments, Etc. No amendment or waiver of any provisions of this
Agreement, the Note, or the Security Instruments nor consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Bank and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
7.2. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing (including telegraphic communication) mailed or
telegraphed or delivered, as follows:
7.2.A. If to the Borrower, at:
10435 Greenbough
Stafford, Texas 77477
Attention: Terry White
with a copy to:
Barry Snowden
Morris, Lendais, Hollrah & Snowden
1980 Post Oak Boulevard, Suite 700
Houston, TX 77056
7.2.B. If to the Bank, at:
2001 Kirby Drive, 4th Floor
Houston, Texas 77019
Attn: Lucy Leatherwood
with a copy to:
Rick Oshman
Greenberg, Peden, Siegmyer & Oshman, P.C.
12 Greenway Plaza, Suite 1000
Houston, Texas 77046
7.2.C. Or, with respect to each party, at such other address
as shall be designated by such party in a written notice to the other
party. All such notices and communications shall, when delivered
personally, or upon deposit in a regularly maintained receptacle of
the United States Postal Service, registered or certified mail,
postage prepaid, addressed as aforesaid, except that notices to the
Bank shall not be effective until received by the Bank.
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<PAGE> 27
7.3. No Waiver, Remedies. No course of dealings by the Bank, its
officers, employees, consultants, or agents, nor any failure on the part of the
Bank to exercise, and no delay in exercising, any right hereunder, under the
Note, or under the Security Instruments shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder, under the Note, or
under the Security Instruments preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
7.4. Invalidity. In the event that any one or more of the provisions
contained in the Note, this Agreement or in any other Security Instrument
shall, for any reason, be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect
any other provision of the Note, this Agreement or any other Security
Instrument.
7.5. Survival of Agreements. All representations and warranties of the
Borrower herein or in the other Security Instruments, and all covenants and
agreements herein and in the other Security Instruments, shall survive until
repayment in full of the Indebtedness.
7.6. Singular and Plural. Words used herein in the singular, where the
context so permits, shall be deemed to include the plural and vice versa. The
definitions of words herein in the singular where the context so permits, shall
apply to such words when used in the plural, and vice versa.
7.7. Interest. It is the intention of the parties hereto to conform
strictly to the usury laws applicable to the Bank and the Borrower.
Accordingly, if the transactions contemplated hereby would be usurious under
applicable law (including the laws of the United States of America and the
State of Texas), then, in that event, notwithstanding anything to the contrary
in the Note, this Agreement or in any other Security Instrument or agreement
entered into in connection with or as security for the Note, it is agreed as
follows: (i) the aggregate of all consideration which constitutes interest
under law applicable to the Bank that is contracted for, taken, reserved,
charged or received under the Note, this Agreement or under any of the other
aforesaid Security Instruments or agreements or otherwise in connection with
the Note shall under no circumstances exceed the maximum amount allowed by
such applicable law, and any excess shall be credited by the Bank on the
principal amount of the Indebtedness (or, if the principal amount of the
Indebtedness shall have been paid in full, refunded by the Bank to the
Borrower); and (ii) in the event that the maturity of the Note is accelerated
by reason of an election of the Bank resulting from any Event of Default under
this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to the Bank may never include more than the maximum amount allowed
by such applicable law, and excess interest, if any, provided for in this
Agreement or otherwise shall be cancelled automatically as of the date of such
acceleration or prepayment, and, if previously paid, shall be credited by the
Bank on the principal amount of the Indebtedness (or, if the principal amount
of the Indebtedness shall have been paid in full, refunded by the Bank to the
Borrower).
To the extent that Article 5069-1.04 of the Texas Revised Civil
Statutes is relevant to the Bank for the purpose of determining the Highest
Lawful Rate, the Bank hereby elects to determine the applicable rate ceiling
under such Article by the indicated (weekly) rate ceiling
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<PAGE> 28
from time to time in effect, subject to the Bank's right subsequently to change
such rate ceiling in accordance with applicable law.
7.8. References. The words "herein," "hereof," "hereunder" and other
words of similar import when used in this Agreement refer to this Agreement as
a whole, and not to any particular article, section or subsection.
7.9. Entire Agreement. The Note, this Agreement and the Security
Instruments referred to herein embody the entire agreement and understanding
between the Bank and the Borrower.
7.10. Exhibits. The exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein, except that in the event of any conflict between any of
the provisions of such exhibits and the provisions of this Agreement, the
provisions of this Agreement shall prevail.
7.11. Titles of Articles, Sections and Subsections. All titles or
headings to articles, sections, subsections or other divisions of this
Agreement or the exhibits hereto are only for the convenience of the parties
and shall not be construed to have any effect or meaning with respect to the
other content of such articles, sections, subsections or other divisions, such
other content being controlling as to the agreement between the parties hereto.
7.12. Counterparts. This Agreement may be executed in two or more
counterparts, and it shall not be necessary that the signatures of all parties
hereto be contained on any one counterpart hereof; each counterpart shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
7.13. Costs, Expenses and Taxes. The Borrower agrees to pay on demand
all reasonable costs and expenses in connection with the preparation, execution
and delivery of this Agreement, the Note, the Security Instruments, and the
other documents to be delivered hereunder, in accordance with Section 5.1.F.,
of this Agreement. In addition, the Borrower agrees to pay on demand all costs
and expenses, if any, in connection with the enforcement of this Agreement, the
Note, the Security Instruments, and other documents to be delivered hereunder.
In addition, the Borrower shall pay any and all stamp and other taxes payable
or determined to be payable in connection with the execution and delivery of
this Agreement, the Note, the Security Instruments, and other documents to be
delivered hereunder, and agrees to save the Bank harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
7.14. Indemnification. Borrower hereby agrees to indemnify, defend and
hold harmless Bank and its respective officers, agents and employees,
properties and assets from and against any and all claims, losses, fines,
penalties, costs, damages, causes of action, suits and liability of every kind,
including all expenses of litigation, court costs and attorneys fees, for
injury, sickness, disease or death sustained by any Person or Persons, or for
any damage, loss of use or destruction of any property, resulting from the use,
storage or other dealings with hazardous
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<PAGE> 29
or toxic waste and materials on any Property by Borrower or for which Borrower
is responsible under applicable law.
7.15. Binding Effect; Governing Law. This Agreement shall be binding
upon and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. This Agreement, the Note and the Security Instruments
shall be governed by, and construed in accordance with, the laws of the State
of Texas.
7.16. No Third Party Beneficiary. This Agreement is made for the sole
protection and benefit of Borrower and Bank and is not intended for the
protection or benefit of any other Person, and no other Person shall be deemed
to have any privity of contract hereunder nor any right of action of any kind
hereon, or be entitled to rely hereon to any extent whatsoever. This Agreement
furthermore shall be binding upon Borrower and Bank and their respective heirs,
legal representatives, successors and assigns, but no assignment hereof may be
made by Borrower in whole or in part, without the prior written consent of Bank.
7.17. Time of the Essence. Time is of the essence with respect to the
dates, terms and provisions of this Agreement, and as to each and every
instrument and document executed in connection herewith.
7.18. List of Exhibits and Attachments. The exhibits and attachments
to this Agreement consist of the following:
<TABLE>
<CAPTION>
Title Title of Document
----- -----------------
<S> <C>
Attachment "1" Definitions
Exhibit "A" Line of Credit Promissory Note
Exhibit "B" Master Form Deed of Trust
Exhibit "C" Supplemental Deed of Trust
Exhibit "D" Addendum to Loan Agreement
Exhibit "E" Compliance Certificate
</TABLE>
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<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate originals by the respective officers thereunto duly
authorized, as of the date first written above.
BORROWER:
NEWMARK HOMES, L.P.
By: Newmark Home Corporation, a
Nevada corporation
By: /s/ TERRY WHITE
------------------------------
Name: Terry White
----------------------------
Title: SVP
---------------------------
BANK:
COMPASS BANK
By: /s/ JESSICA N. CHU
-------------------------------
Name: Jessica N. Chu
-----------------------------
Title: Vice President
----------------------------
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<PAGE> 1
EXHIBIT 10.3(b)
FIRST AMENDMENT AND MODIFICATION
TO LOAN AGREEMENT
This First Amendment and Modification to Loan Agreement (the "First
Amendment") is executed by and between NEWMARK HOMES, L.P., a Texas Limited
Partnership (the "Borrower"), acting by and through NEWMARK HOME CORPORATION,
a Nevada corporation, as the general partner of the Borrower. and COMPASS BANK,
a Texas state banking association of Harris County, Texas (the "Bank")
effective as of the 1st day of March, 1997, for the following purposes and
considerations:
WHEREAS, Borrower and Bank executed and entered into that certain
Master Revolving Line of Credit Loan Agreement dated October 1, 1996,
which is incorporated herein by reference for all purposes, and which
is hereinafter referred to as the "Loan Agreement". All capitalized
terms used herein shall have the same meaning as defined in the Loan
Agreement; and
WHEREAS, Borrower and Bank desire to amend and modify the Loan
Agreement to adjust the interest rate as provided in the Note as of
the effective date of this First Amendment:
NOW, THEREFORE, for and in consideration of the mutual benefits to
Bank and Borrower, the receipt and sufficiency of which are hereby acknowledged
and confessed by each party, the undersigned do hereby enter into this First
Amendment, as of the effective date stated above, as follows:
1. Section 2.2 of the Loan Agreement shall be as written in the Loan
Agreement dated October 1, 1996, through and until February 28, 1997.
Effective from and after March 1, 1997, the said Section 2.2 of the
Loan Agreement is amended to read as follows:
2.2 Interest Terms. The Note shall bear interest on
the outstanding principal balance at the Index Rate plus
125/1000 (0.125%) percent per annum, floating, but in no event
to exceed the Highest Lawful Rate. Changes in the interest
rate of the Line of Credit Note shall occur without notice to
Borrower as the Index Rate changes.
2. Borrower hereby ratifies and confirms each and every provision of the
Loan Agreement, the Note and the Security Instruments, as modified
hereby, including but not limited to the warranties and
representations contained therein. Borrower further certifies to Bank
that Borrower is in full compliance with all of the covenants and
agreements contained in the Loan Agreement, the Note and the Security
Instruments, as modified hereby. Borrower further certifies that no
Event of Default has occurred or currently exists, and
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<PAGE> 2
no situation now exists which, with the passage of time, would
constitute an Event of Default.
This Amendment and Modification is executed between the parties
effective on the date stated above.
BORROWER: BANK:
NEWMARK HOMES, L.P. COMPASS BANK
By: Newmark Home Corporation, a
Nevada corporation
By: /s/ TERRY WHITE By: /s/ JESSICA N. CHU
---------------------------- ----------------------------
Name: Terry White Name: Jessica N. Chu
-------------------------- --------------------------
Title: SVP Title: Vice President
------------------------- -------------------------
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<PAGE> 1
EXHIBIT 10.3(c)
SECOND AMENDMENT AND MODIFICATION
TO LOAN AGREEMENT
This Second Amendment and Modification to Loan Agreement (the "Second
Amendment") is executed by and between NEWMARK HOMES, L.P., a Texas Limited
Partnership (the "Borrower"), acting by and through NEWMARK HOME CORPORATION,
a Nevada corporation, as the general partner of the Borrower. and COMPASS
BANK, a Texas state banking association of Harris County, Texas (the "Bank")
effective as of June 1, 1997, for the following purposes and considerations:
WHEREAS, Borrower and Bank executed and entered into that certain
Master Revolving Line of Credit Loan Agreement dated October 1, 1996,
and thereafter Borrower and Bank entered into that certain First
Amendment and Modification to Loan Agreement dated March 1, 1997,
which are incorporated herein by reference for all purposes, and which
are hereinafter referred to collectively as the "Loan Agreement". All
capitalized terms used herein shall have the same meaning as defined
in the Loan Agreement; and
WHEREAS, Borrower and Bank desire to increase the amount of the loan
from Fifteen Million and no/100 ($15,000,000.00) DOLLARS to Twenty
Million and no/100 ($20,000,000.00) DOLLARS, and to extend the loan,
and to make certain other modifications to the Loan Agreement, such
modification and amendment to be subject to all of the other terms,
conditions, provisions and limitations as contained in the Loan
Agreement and in the Security Instruments;
WHEREAS, Bank is willing to so amend, modify, extend and increase the
loan, subject to all of the other terms, conditions, provisions and
limitations as contained in the Note, which is to be re-executed by
Borrower in the amount of $20,000,000.00, being the amount of the
increased loan, as a renewal, extension and modification of the
$15,000,000.00 Note, and subject to all of the other terms,
conditions, provisions and limitations as contained in the Loan
Agreement and in the Security Instruments:
NOW, THEREFORE, for and in consideration of the mutual benefits to
Bank and Borrower, the receipt and sufficiency of which are hereby acknowledged
and confessed by each party, the undersigned do hereby enter into this Second
Amendment, as of the date stated above, as follows:
1. The term "Qualification Date" shall mean May 31, 1998.
2. The term "Stated Maturity Date" is amended to mean June 1, 1999.
3. The term "Line of Credit Note" is modified, as follows:
-1-
<PAGE> 2
"Line of Credit Note" shall mean the promissory note of the Borrower
described in Section 2.1 of the Loan Agreement, as amended, and being
in the amount of $20,000,000.00 in substantially the form of the note
attached as Exhibit "A" to the Second Amendment, together with any and
all renewals, extensions for any period, increases or rearrangements
thereof, which is in renewal, extension and modification to that
certain $15,000,000.00 Line of Credit Note dated October 1, 1996.
4. The term "Maximum Loan Amount" is modified, as follows:
"Maximum Loan Amount" shall mean the lesser of: (i) Twenty Million and
no/100 ($20,000,000.00) DOLLARS; or (ii) the Borrowing Formula as
applied to Eligible Homes, utilizing the percentage of completion of
each Home included as an Eligible Home.
5. Section 2.1 of the Loan Agreement is amended to read as follows:
2.1 Commitment. The Borrower may, from time to time, request that
additional Home(s) be included as Eligible Home(s) under this
Agreement, and subject to the terms and conditions and relying on the
representations and warranties contained in this Agreement, the Bank
agrees to make available to Borrower funds as a revolving line of
credit loan to the Borrower. During the period commencing with the
date of this Agreement to and including the Funding Termination Date,
the Bank will make revolving line of credit loans to the Borrower from
time to time on any Business Day in such amounts as the Borrower may
request up to and including Twenty Million and no/100 ($20,000,000.00)
Dollars (the "Commitment"), but not to exceed however the Maximum
Loan Amount at any time, and the Borrower may borrow, prepay pursuant
to Section 2.4 and 2.5, and reborrow as provided in this Section 2.1;
provided, however, that the aggregate principal amount of all of such
Advances under the line of credit at any one time outstanding shall
not exceed the lesser of (i) the Maximum Loan Amount, as approved by
Bank; or (ii) the amount of the Commitment. It is expressly
contemplated that, by reason of prepayments or other circumstances,
there may be times when no Indebtedness is owing thereunder, but
notwithstanding such occurrences the Line of Credit Note shall remain
in full force and effect as to such loans or Advances made subsequent
to such occurrence. To evidence the loans made by the Bank pursuant to
this subsection, the Borrower will issue, execute and deliver its
promissory note dated of even date herewith in the original principal
amount of the Commitment, in substantially the form of Exhibit "A"
hereto. The said promissory note is in renewal, extension and
rearrangement of the promissory note, as renewed, extended and
modified, referenced in the Loan Agreement dated October 1, 1996,
including that certain $15,000,000.00 Promissory Note dated October 1,
1996.
6. Section 2.2 of the Loan Agreement is modified to read as follows:
2.2 Interest Terms. The Note shall bear interest on the
outstanding principal balance at the Index Rate per annum, floating,
but in no event to exceed the Highest Lawful Rate.
-2-
<PAGE> 3
Changes in the interest rate of the Line of Credit Note shall occur
without notice to Borrower as the Index Rate changes.
7. Section 3.1.G. of the Loan Agreement entitled "Speculative Home
Limitation" is hereby deleted from the Loan Agreement.
8. Section 3.1.C. of the Loan Agreement is modified to read as follows:
9. 3.1.C. Appraisal. A master appraisal dated not more than one year old
for each type of Home in each subdivision in form and substance and by
an appraiser satisfactory to Bank in the exercise of its sole
discretion indicating the appraised value of each Home after the
construction of the Improvements on the Property. In the event that
Bank's regulatory requirements dictate that the same is necessary, or
in the event that the Bank should request an updated appraisal, each
such appraisal must be updated for each type of Home in each
subdivision for Homes included in Eligible Homes.
10. Borrower hereby ratifies and confirms each and every provision of the
Loan Agreement, the Note and the Security Instruments, as modified
hereby, including but not limited to the warranties and
representations contained therein. Borrower further certifies to Bank
that Borrower is in full compliance with all of the covenants and
agreements contained in the Loan Agreement, the Note and the Security
Instruments, as modified hereby. Borrower further certifies that no
Event of Default has occurred or currently exists, and no situation
now exists which, with the passage of time, would constitute an Event
of Default.
This Second Amendment is executed between the parties effective on
the date stated above.
BORROWER: BANK:
NEWMARK HOMES, L.P. COMPASS BANK
By: Newmark Home Corporation, a
Nevada corporation
By: /s/ TERRY WHITE By: /s/ JESSICA N. CHU
---------------------------- ----------------------------
Name: Terry White Name: Jessica N. Chu
-------------------------- --------------------------
Title: SVP Title: Vice President
------------------------- -------------------------
-33-
<PAGE> 1
EXHIBIT 10.3(d)
COMPASS BANK
REVOLVING LINE OF CREDIT
PROMISSORY NOTE
$20,000,000.00 Houston, Texas June 1, 1997
FOR VALUE RECEIVED, after date, without grace, in the manner, on
the dates, and in the amounts so stipulated, the undersigned NEWMARK HOMES,
L.P., a Texas Limited Partnership (hereinafter referred to as "Maker"),
PROMISES TO PAY TO THE ORDER OF COMPASS BANK (which along with subsequent
holders of this Promissory Note, and their successors or assigns is hereinafter
referred to as "Payee"), at its banking house in Houston, Harris County, Texas,
or at such other place as the Payee of this Promissory Note (the "Note") may
from time to time designate in writing, the sum of TWENTY MILLION AND NO/100
(20,000,000.00) DOLLARS, or so much thereof as has been advanced and is unpaid
under that certain MASTER REVOLVING LINE OF CREDIT LOAN AGREEMENT (AMENDED AND
RESTATED) dated October 1, 1996, as amended and modified by that certain First
Amendment and Modification to Loan Agreement dated March 1, 1997, and by that
certain Second Amendment and Modification to Loan Agreement dated June 1, 1997,
and as the same may be amended and modified from time to time (collectively,
the "Loan Agreement"), executed by and between Maker and Payee, from time to
time, in lawful money of the United States of America, which shall be legal
tender for the payment of all debts or dues, public and private, at the time of
payment, and to pay interest on the principal from time to time outstanding
from date until maturity hereof at the lesser of the following rates:
(i) A variable rate of interest equal to the Index Rate
("IR" as hereinafter defined) from time to time in effect.
Such rate is also referred to in this Note as the "Total
Rate".
(ii) The maximum legal contract rate of interest that Payee
may charge Maker and in regard to which Maker would be
prevented successfully from raising the claim or defense of
usury (hereinafter referred to as the "Maximum Rate"). If
applicable, the method of calculating the maximum legal
contract rate of interest under Texas law shall be the
indicated (weekly) ceiling rate from time to time in effect
as provided in Tex. Rev. Civ. Stat. Ann. art. 5069-1.04 as
amended.
Notwithstanding the foregoing, if at any time the Total Rate shall
exceed the Maximum Rate, and thereafter the Total Rate should become less than
the Maximum Rate, the rate of interest payable in such latter time shall be the
Maximum Rate until Payee shall have received the amount of interest which Payee
would have otherwise received if the Total Rate had not been limited by the
Maximum Rate during the period of time that the Total Rate exceeded the Maximum
Rate.
Changes in the Total Rate shall occur as the Index Rate as defined
below changes without notice to Maker. Interest charges will be calculated on
amounts advanced hereunder on
<PAGE> 2
the actual number of days said amounts are outstanding. The Index Rate ("IR")
is defined, on any day, as the "Prime Rate" as published in The Wall Street
Journal on that day under the section "Money Rates", and being defined therein
as "[t]he base rate on corporate loans posted by at least 75% of the nation's
30 largest banks." If this section of The Wall Street Journal reflects more
than one rate as being the "Prime Rate", then the highest rate shall be the IR.
On days when The Wall Street Journal is not published, the IR shall be the
"Prime Rate" stated in the most recently published edition of The Wall Street
Journal. In the event that The Wall Street Journal ceases to be published
altogether, or ceases to publish the "Prime Rate", then Compass Bank Houston,
its assigns or successors, shall establish and use a new IR disclosed to the
Maker which closely approximates the "Prime Rate" as defined above; provided,
however, that such new IR is readily available to and verifiable by the Maker
and beyond the control of Compass Bank Houston. The IR shall automatically
fluctuate, upward or downward, without notice to the Maker or any person, as
and in the amount the said published "Prime Rate" shall fluctuate. The IR is a
reference rate and does not necessarily represent Compass Bank Houston's best
or lowest rate or a favored rate, and Compass Bank Houston disclaims any
statement, representation or warranty to the contrary.
All computations of interest under the Note shall be made by the
Payee on the basis of a year of 365 days for the actual number of days
(including the first day but excluding the last day) elapsed.
All terms as defined in the Loan Agreement shall have the same
meaning herein.
Accrued interest on the unpaid principal of this Note shall be due
and payable monthly as it accrues, the first payment of which shall be due and
payable on or before the 1st day of July, 1997, and thereafter, on the same day
of each succeeding month.
Principal amounts under this Promissory Note may be advanced by
Payee to Maker as provided in the Loan Agreement. Payee shall have the right to
maintain records regarding the amount of principal advanced to Maker as to each
respective Home, and such records maintained by Payee shall be deemed to be
accurate as to the amount of principal so advanced on each respective Home. The
principal amount advanced by Payee to Maker with respect to each such Home
shall be due and payable by Maker to Payee on the earlier to occur of: (i) the
date such Home is sold and a release of lien is requested from Payee as
provided in the Loan Agreement; or (ii) one (1) year from the date the Addendum
to Loan Agreement has been executed by Maker and Payee with respect to such
Home (such one (1) year being capable of being extended from to eighteen (18)
months with respect to any particular Home or Homes chosen by Payee in its sole
discretion); or (iii) the occurrence of the Stated Maturity Date (as referenced
below).
Notwithstanding anything to the contrary in this Promissory Note, should the
principal balance of this Note outstanding at any time exceed the Maximum Loan
Amount, as defined in the Loan Agreement, as confirmed and approved by Payee,
Maker shall pay such difference to Payee immediately such that the amount of
the principal balance of this Note at such time shall not exceed the said
Maximum Loan Amount.
<PAGE> 3
The unpaid principal of this Note, together with unpaid accrued
interest thereon, if not sooner paid, shall be fully due and payable on or
before the 1st day of June, 1999, which is the Stated Maturity Date as defined
in the Loan Agreement. In the event Maker and Payee should amend the Loan
Agreement to include a later Stated Maturity Date, then the said amended Stated
Maturity Date shall be the maturity date of this Promissory Note. Payee is
under no obligation to amend the said Loan Agreement, but may do so in the
exercise of Payee's sole discretion.
In any event of Default by Maker, all principal, interest and
other amounts payable to Payee by Maker shall bear interest from the due date
thereof at the Maximum Rate, or if there is no Maximum Rate, at the Indicated
(weekly) Rate from time to time in effect as provided in Tex. Rev. Civ. Stat.
Ann. art. 5069-1.04 as amended.
It is especially agreed that time is of the essence of this
agreement, and that if default shall be made in the payment of principal or
interest on this Note or any other note or notes executed by Maker hereof and
held by Payee as the same become due and payable, or if there is a default in
any of the terms, covenants, agreements, conditions or provisions set forth in
any instrument or documents given to secure this Note or relating to this Note,
or in the Loan Agreement, as it may be modified or extended from time to time,
or should Maker make an assignment for the benefit of creditors or authorize
the filing of a voluntary petition in bankruptcy or should a receiver of any of
its property be appointed, or should involuntary bankruptcy proceedings be
filed or threatened against Maker or any endorser or surety hereof (any of the
foregoing being hereinafter referred to as a "Default"), then in any such event
the Payee, at its option, may declare the entirety of this Note, and any other
note or notes executed by Maker and held by Payee, together with all accrued
but unpaid interest hereon, immediately due and payable without notice, demand
or presentment, or notice of intent to accelerate to the Maker or any other
person or party, except as provided in Section 6.01 of the Loan Agreement, all
of which are hereby waived (except as provided in Section 6.01 of the Loan
Agreement), and failure to exercise said option shall not constitute a waiver
on the part of Payee of the right to exercise said option at any other time.
Upon the occurrence of a Default, Payee shall also have the right to exercise
any and all other rights, remedies and recourses now or hereinafter existing in
equity, at law, by virtue of statute or otherwise, including, but not limited
to, the right to foreclose any and all liens and security interests securing
this Note.
If this Note is not paid at maturity, howsoever said maturity may
be brought about, and the same is placed in the hands of any attorney for
collection or if collection by suit or through the probate court, bankruptcy
court, or by any other legal proceedings is sought, the undersigned agrees to
pay all expenses incurred, including reasonable attorneys' fees (including,
without limitation, fees for trial, appeal or other proceedings, limited
however to no more than ten (10%) percent of the outstanding amount of the
Indebtedness as defined in the Loan Agreement, except as to Bank's successful
defense of any claim which may be asserted by, through or under Borrower, in
which case the ten (10%) percent limitation shall not apply), all of which
shall become a part of the principal hereof.
<PAGE> 4
Maker hereof may at any time pay the full amount or any part of
this Note, without the payment of any premium or fee, and all payments
hereunder, whether designated as payments of principal or interest shall be
applied first to the payment of accrued interest and the balance to principal.
Interest shall immediately cease on any principal amount so prepaid.
Any check, draft, money order or other instrument given in payment
of all or any portion of this Note may be accepted by the Payee and handled in
collection in the customary manner, but the same shall not constitute payment
hereunder or diminish any rights of the Payee, except to the extent that actual
cash proceeds of such instrument are unconditionally received by the Payee and
applied to this indebtedness as herein provided.
Each Maker and all sureties, endorsers, guarantors and other
parties hereafter assuming or otherwise becoming liable for the payment of any
sum of money payable under this Note (i) except as provided in Section 6.01 of
the Loan Agreement, severally waive grace, presentment and demand for payment,
notice of acceleration, protest and notice of protest, and non-payment, notice
of intent to accelerate, and all other notice, filing of suit and diligence in
collecting this Note or enforcing any of the security herefor, (ii) severally
agree to any substitution, exchange or release of any such security or the
release of any party primarily or secondarily liable hereon, (iii) severally
agree that the Payee shall not be required first to institute suit or exhaust
its remedies hereon against the Maker or others liable or to become liable
hereon or to enforce its rights against any security hereof in order to enforce
payment of this Note by them, (iv) consent to any extension or postponement of
time of payment of this Note and to any other indulgence with respect hereto
without notice thereof to any of them and (v) agree that if this Note is
executed by more than one Maker, each Maker shall be jointly and severally
liable to Payee.
The invalidity, or unenforceability in particular circumstances,
of any provision of this Note shall not extend beyond such provision or such
circumstances and no other provision of this instrument shall be affected
thereby.
It is the intention of Maker and Payee to conform strictly to the
usury laws applicable to this loan transaction and permitting the highest
lawful rate of interest; accordingly, it is agreed that notwithstanding any
provisions to the contrary in this Note, or in any of the documents securing
payment hereof or otherwise relating hereto, the aggregate of all interest and
any other charges constituting interest under applicable law contracted for,
chargeable or receivable under this Note or otherwise in connection with this
loan transaction shall under no circumstances exceed the maximum amount of
interest permitted by law. If any excess of interest in such respect is
provided for, or shall be adjudicated to be so provided for, in this Note or in
any of the documents securing payment hereof or otherwise relating hereto, then
in such event (a) the provisions of this paragraph shall govern and control,
(b) neither the Maker hereof nor Maker's heirs, legal representatives,
successors or assigns or any other party liable for the payment hereof shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the maximum permitted by law, (c) any excess shall be deemed a mistake and
cancelled automatically and, if theretofore paid, shall, at the option of the
Payee, be refunded to Maker or credited on the principal amount of this Note,
and (d) the effective rate of interest shall be automatically subject to
reduction to the maximum lawful contract rate allowed under such laws
<PAGE> 5
as now or hereafter construed by courts of appropriate jurisdiction. It is
further agreed that without limitation of the foregoing, all calculations of
the rate of interest contracted for, charged or received under this note or
under such other documents which are made for the purpose of determining
whether such rate exceeds the maximum lawful contract rate, shall be made, to
the extent permitted by the laws of the State of Texas, by amortizing,
prorating, allocating and spreading in equal parts during the period of the
full stated term of the loan evidenced hereby, all interest at any time
contracted for, charged or received from the undersigned or otherwise by the
Payee in connection with such loan.
This Note, to the extent of the full face amount hereof, evidences
the indebtedness of Maker to Payee by virtue of monies loaned to Maker at
Maker's special instance and request.
This Note shall be construed and enforced under and in accordance
with and shall be governed by the laws of the State of Texas, and applicable
federal laws.
This Note is secured by all security interests, rights, titles,
liens, assignments, claims and equities, whether express or implied, from Maker
(or any other party) to Payee, including those given simultaneously herewith,
those given heretofore and those hereinafter given, and including specifically
and without limitation, the following (hereinafter referred to as the "Security
Documents"):
a. Various Deeds of Trust of various dates, before, on or
after the date hereof from Maker to ROBERT B. BARNES,
TRUSTEE, and covering various properties; and
b. Various Deeds of Trust prior to the date hereof from
Newmark Home Corporation, a Nevada corporation, to ROBERT B.
BARNES, TRUSTEE, securing that $10,000,000.00 Revolving Line
of Credit Promissory Note dated August 31, 1993, as modified,
which was renewed, modified and extended to secure a
$15,000,000.00 Promissory Note dated June 1, 1996, the
outstanding balance of which has been renewed, rearranged and
modified as a portion of the unpaid balance of this
Promissory Note and covering various properties.
To the extent of the current outstanding principal balance of the
following note, this Note is given in renewal, extension and modification, but
not in extinguishment of the principal balance remaining due on that certain
$15,000,000.00 Revolving Line of Credit Promissory Note from Maker to Payee
dated October 1, 1996 (the "Prior Note"), as modified and extended. Maker
hereby acknowledges and agrees that it is Maker's intention that Payee be
subrogated to all the rights and liens now securing said Prior Note. Further,
Maker hereby agrees that the Prior Note and the Deeds of Trust securing the
same are hereby renewed, extended and modified to conform with the terms and
provisions of this Note. The renewal, extension and modification herein
contained shall in no manner impair the Prior Note or the liens securing the
same and said liens shall not in any manner be waived, the purpose of this
instrument being simply to renew,
<PAGE> 6
EXHIBIT 10.3(d)
extend and modify said Prior Note and to otherwise modify the business
arrangement between Maker and Payee as reflected in the Loan Agreement.
This Note is made and delivered pursuant to the terms of the Loan
Agreement by and between the undersigned, as Borrower, and Payee, as Lender,
reference to which is here made for all purposes. A default under the terms and
conditions of said Loan Agreement shall constitute default under the terms of
this Note, the Deeds of Trust and all other instruments securing this Note.
This is a Revolving Line of Credit Promissory Note. It is
expressly contemplated that by reason of prepayments there may be times when no
indebtedness is owing hereunder, but notwithstanding such occurrences this Note
shall remain in full force and effect as to loans or advances made subsequent
to such occurrence.
NEWMARK HOMES, L.P.
By: Newmark Home Corporation, a Nevada
corporation, its general partner
By: /s/ TERRY WHITE
-------------------------------
Name: Terry White
-----------------------------
Title: Senior Vice President
----------------------------
<PAGE> 1
EXHIBIT 10.4(a)
LOAN AGREEMENT BY AND BETWEEN
NEWMARK HOMES, L.P.
and
BANK OF AMERICA TEXAS, N.A.
Dated the 29th day of November, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 1. General Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Certain Definitions; Use of Defined Terms; Accounting Terms;
Singular or Plural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Revolving Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.4 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.5 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5 Liabilities and Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.6 Titles and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.8 Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.11 Margin Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.12 Utilities, Access and Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.13 Borrower Not a "Foreign Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.14 Commencement of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Taxes and Other Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.3 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.6 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.8 Certificate of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.10 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.11 Residential Subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.12 Surveys and Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.13 Plans; Construction in Compliance with Plans . . . . . . . . . . . . . . . . . . . . . . . 19
3.14 Construction Contracts; Commencement of Construction . . . . . . . . . . . . . . . . . . . 19
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.15 Governmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.16 Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.17 Use Violations; Notifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.18 Construction of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.19 Continuing Compliance with Requirements for Advances . . . . . . . . . . . . . . . . . . . 20
3.20 Correction Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.21 Continuous Construction of the Improvements . . . . . . . . . . . . . . . . . . . . . . . . 21
3.22 Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.23 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1 Dividends and Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.4 Utility Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.5 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.6 Restrictions on Speculative Homes, Model Homes, Single Family Houses in Austin and
Inventoried Lots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.7 Limitation on Aggregate Deed of Trust Amount . . . . . . . . . . . . . . . . . . . . . . . 26
4.8 Flood Plain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.9 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.10 Loans and Advances to Employees, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.11 Investments, Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.12 Merger and Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.13 Restrictions on Undeveloped Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5. Commitment to Lend; Conditions to the Bank's Obligations to Make Advances . . . . . . . . . . . . . . . 27
5.1 Bank's Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.3 Guidance Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.4 Bank's Discretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.5 Involuntary Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6. Events of Default and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Change of Ownership or Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Change in Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 Counsel to Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2 Required Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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Arbitration
<TABLE>
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Section 9. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.1 Controversies Covered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.2 United States Arbitration Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3 Rules of Arbitration; Place of Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4 Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.5 Dispute as to Subject Matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.6 Confirmation and Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.7 No Limitation on Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.8 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10. Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1 Definition of Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.2 Representation and Warranty Regarding Hazardous Substances . . . . . . . . . . . . . . . . 35
10.3 Compliance Regarding Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.4 Notices Regarding Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.5 Site Visits, Observations and Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.6 Remedial Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.7 Secured Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.8 INDEMNITY REGARDING HAZARDOUS SUBSTANCES . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.9 Defense of Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.10 Remedies Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.1 Survival of Various Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.4 Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.5 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.7 Non-Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.8 Consent to Deviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.9 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.10 Payment on Non-Business Days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.12 Controlling Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.13 Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.14 Participations and Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.15 Set Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.16 Form and Substance of Surveys, Appraisals and other Documents . . . . . . . . . . . . . . . 42
11.17 Concerning the Revolving Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.18 Concerning Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.19 Purpose and Effect of Bank Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
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<TABLE>
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11.20 No Third Parties Benefited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.21 Authority to File Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.22 Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.23 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.24 [Intentionally Deleted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.25 Relationships With Other Bank Customers . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.26 Disclosure to Title Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.27 Improvement District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.28 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.29 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.30 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.31 Language of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.32 No Oral Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
EXHIBITS
"A" - Form of Note
"B" - Form of Deed of Trust
"C" - Form of Supplement
"D" - Form of Loan Application
"E" - Form of Certificate of Compliance
"F" - Insurance Requirements
Schedule "1" - Exceptions to Representations and Warranties
</TABLE>
<PAGE> 6
LOAN AGREEMENT
THIS LOAN AGREEMENT made and entered into on the 29th day of November,
1996, by and between NEWMARK HOMES, L.P., a Texas limited partnership, with
offices and place of business at 10435 Greenbough, Suite 101, Stafford, Texas
77477 (the "Borrower"), and BANK OF AMERICA TEXAS, N.A., a national banking
association, with offices at 1925 W. John Carpenter Freeway, Irving, Texas
75063 (hereinafter called the "Bank").
W I T N E S S E T H:
WHEREAS, the Bank has agreed to make a revolving loan to Borrower in
the principal amount of Fifteen Million and No/100 Dollars ($15,000,000.00)
(the "Loan"), the proceeds of which will be used by Borrower to acquire certain
lots for single family homes and/or to construct new single family detached
homes (the "Improvements") on certain real property (the "Land") owned by
Borrower and located in the State of Texas. The Land and the Improvements are
sometimes hereinafter collectively referred to as the "Property". Borrower
will also use the proceeds of the Loan to pay other costs and expenses related
to the development of the Land; and
WHEREAS, the Bank has agreed to make advances of the Loan to the
Borrower pursuant to and in accordance with the terms of this Agreement.
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and confessed, the
Borrower and the Bank hereby agree as follows:
Section Section 1. General Terms
1.1 Indebtedness. Upon the terms and conditions
hereinafter set forth, the Bank agrees to lend the Borrower an aggregate of up
to $15,000,000.00, as evidenced by a Revolving Line of Credit to be extended to
the Borrower by the Bank, as more specifically described in Section 1.3 hereof.
1.2 Certain Definitions; Use of Defined Terms; Accounting
Terms; Singular or Plural.
(a) As used herein:
"Aggregate Deed of Trust Amount" shall mean, at any given time,
the sum of (i) all Deed of Trust Amounts for all Single Family Houses
and (ii) all Deed of Trust Amounts for all Inventoried Lots.
"Agreement" shall mean this Loan Agreement as it may be amended
or supplemented from time to time.
1
<PAGE> 7
"Appraisal" shall mean (i) with respect to each particular plan
type of Single Family House in each (residential) subdivision in which
the Borrower is active, a current appraisal which is not more than nine
(9) months old prepared by an appraiser selected, commissioned and paid
by the Bank (but which shall be subject to reimbursement by the
Borrower pursuant to Section 3.6 of this Agreement), in form and
substance satisfactory to the Bank stating the appraised value of each
Lot upon completion of the Improvements thereon and (ii) with respect
to an Inventoried Lot, a current appraisal which is not more than nine
(9) months old prepared by an appraiser selected, commissioned and paid
by the Bank (but which shall be subject to reimbursement by the
Borrower pursuant to Section 3.6 of this Agreement), in form and
substance satisfactory to the Bank, stating the appraised value of such
Inventoried Lot, without taking into consideration any improvements to
be constructed thereon; provided, however, the Bank will, subject to
its internal review and approval, accept appraisals performed by other
financial institutions which are providing construction financing to
the Borrower with respect to Single Family Houses and/or Inventoried
Lots in subdivisions in which the Bank is providing financing to the
Borrower pursuant to the terms hereof and, upon such review and
approval, each such appraisal performed by or on behalf of such other
financial institution shall constitute an Appraisal hereunder. All
Appraisals shall be periodically updated so that no Appraisal is at any
time more than nine (9) months old. The Bank will, upon the Borrower's
request, provide copies of the Appraisals to other financial
institutions which are providing construction financing to the
Borrower.
"Appraised Value" shall mean the value, or projected value, of
a Single Family House upon completion of the construction thereof
(whether or not such construction has been completed), or the value of
an Inventoried Lot, as the case may be, determined in each case by the
Appraisal thereof.
"Architect" shall mean any fully licensed architect or engineer
engaged by the Borrower to design Single Family Houses.
"Borrowing Base" shall mean the collection or group or assets
satisfying the requirements set forth in Section 3.23(a) hereof.
"Borrowing Base Report" shall have the meaning set forth in
Section 3.23(b) hereof.
"Borrowing Base Value shall mean, as of any given date, the
Aggregate Deed of Trust Amount reflected on the most current Borrowing
Base Report delivered to the Bank by the Borrower and not disapproved
by the Bank pursuant to the provisions of Sections 3.22, 4.6 or 4.7
hereof.
"Borrowing Date" shall mean the date on which all conditions
contained in Section 5 of this Agreement are met.
2
<PAGE> 8
"Business Day" shall mean any day except a Saturday, Sunday or
other day on which the Bank is authorized or required by law to close.
"Certificate of Compliance" shall mean each certificate
described in Section 3.8 of this Agreement.
"Change of Ownership or Control" shall mean the event described
in Section 7.1.
"Collateral" shall mean the property described in Section 3.10
of this Agreement, securing payment of the Indebtedness and performance
of the obligations of the Borrower under this Agreement and the other
Security Instruments.
"Construction Contracts" shall mean any and all contracts or
agreements, written or oral, between either Borrower and any other
person in any way relating to the construction of any Improvements by
such other person.
"Cost of Construction" shall mean and include the cost of
purchasing the Lots (including costs needed to release any liens on a
Lot prior to the lien created by the applicable Deed of Trust) and the
following costs of construction of the Improvements: demolition costs
of any existing buildings; cost of labor, material and site
improvements; and amounts paid to contractors to construct the
Improvements and landscaping. In order for materials to constitute a
Cost of Construction, they must be delivered to the Borrower and be
installed or stored on a Lot; provided that material stored by the
Borrower elsewhere may constitute a Cost of Construction if (i)
identified as off-site material and (ii) assurances are furnished
satisfactory to the Bank that the security interest created by the
applicable Deed of Trust has attached and has been perfected as to such
material and there is no other security interest relating to such
material.
"Debt" shall mean all items of indebtedness, obligation or
liability, whether matured or unmatured, liquidated or unliquidated,
direct or contingent, joint or several, including, but without
limitation:
(a) All indebtedness guaranteed, directly or
indirectly, in any manner, or endorsed (other than for
collection or deposit in the ordinary course of business) or
discounted with recourse;
(b) All indebtedness in effect guaranteed,
directly or indirectly, through agreements, contingent or
otherwise: (1) to purchase such indebtedness; or (2) to
purchase, sell or lease (as lessee or lessor) property,
products, materials or supplies or to purchase or sell
services, primarily for the purpose of enabling the debtor to
make payment of such indebtedness or to assure the owner of the
indebtedness against loss; or (3) to supply funds to or in any
other manner invest in the debtor;
3
<PAGE> 9
(c) All indebtedness secured by (or for which the
holder of such indebtedness has an existing right, contingent
or otherwise, to be secured by) any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance
upon property owned or acquired subject to such mortgage, deed
of trust, pledge, lien, security interest, charge or
encumbrance, whether or not the liabilities secured thereby
have been assumed; and
(d) All indebtedness incurred as the lessee of
goods or services under leases that, in accordance with
generally accepted accounting principles, should not be
reflected on the lessee's balance sheet.
"Deeds of Trust" shall mean, collectively, the Initial Deeds of
Trust and the Supplements.
"Deed of Trust Amount" shall mean (i) with respect to a Single
Family House, the lesser of (a) seventy percent (70%) of the Appraised
Value of such Single Family House, (b) seventy percent (70%) of the
Sales Price of such Single Family House, (c) ninety percent (90%) of
the Cost of Construction of such Single Family House and soft costs
approved by the Bank with respect thereto, (d) with respect to a Model
Home, $225,000.00 and (e) with respect to any other Single Family
House, $300,000.00, and (ii) with respect to an Inventoried Lot, the
lesser of (x) seventy percent (70%) of the sales price of such
Inventoried Lot set by the Borrower, (y) seventy percent (70%) of
Appraised Value of such Inventoried Lot and (z) ninety percent (90%)
of the cost to the Borrower of purchasing such Inventoried Lot.
"Default" shall mean an event which with the giving of notice,
the lapse of time, or both, would constitute an Event of Default.
"Event of Default" shall mean any event specified in Section 6
of this Agreement provided that any requirement for the giving of
notice, the lapse of time, or the happening of any condition, event or
act has been satisfied.
"FHA" shall mean the Federal Housing Administration.
"Financial Statements" shall mean the audit report, annual
financial statements, and interim statements described or referred to
in Section 3.1 of this Agreement.
"General Partner" shall mean Newmark Home Corporation,a Nevada
corporation.
"Governmental Authority" shall mean any and all courts, boards,
agencies, commissions, offices or authorities of any nature whatsoever
for any governmental unit (federal, state, county, district, municipal,
city or otherwise) whether now or hereafter in existence, and any and
all providers of water, gas or electricity.
4
<PAGE> 10
"Governmental Permits" shall mean all authorizations,
certificates, licenses, permits, correspondence and any other evidence
from any Governmental Authority regarding compliance with or
performance or satisfaction of any Legal Requirement.
"Improvements" shall mean the improvements described in the
applicable Plans, consisting of a single family residence for sale, to
be constructed on the applicable Lot as required by the Plans.
"Indebtedness" shall mean all sums owed or to be owed by the
Borrower to the Bank, whether principal or interest, including
principal and interest on the Note and reimbursement of monies advanced
by the Bank pursuant to Sections 3.6, 3.14 or 5.5 hereof.
"Initial Deeds of Trust" shall mean those Deeds of Trust,
Security Agreement and Assignment of Rents and Leases, executed by the
Borrower for the benefit of Bank and recorded in the real property
records of Brazoria, Dallas, Collin, Fort Bend, Galveston, Harris,
Travis, Williamson and Tarrant Counties, Texas, and any other Deed of
Trust, Security Agreement and Assignment of Rents and Leases executed
by the Borrower for the benefit of the Bank in the form attached hereto
as Exhibit "B" and to be recorded in the above described counties
and/or other counties approved by the Bank, each of which shall cover
(i) the Lots in each such county which are added to the Borrowing Base,
and the Improvements to be constructed thereon, and (ii) the Collateral
described in Section 3.10 relating to such Lots and Improvements.
"Inventoried Lot" shall mean a single family residential lot
meeting the requirements of clauses (i) through (iv), but not clause
(v), of the definition of "Lot" set forth herein.
"Legal Requirements" shall mean (a) any and all present and
future judicial decisions, statutes, rulings, rules, regulations,
permits, certificates or ordinances of any Governmental Authority in
any way applicable to the Borrower or any Lot or Improvements,
including the ownership, use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction thereof, (b) the
Borrower's presently or subsequently effective certificate of limited
partnership and limited partnership agreement, (c) any and all
covenants, conditions or restrictions applicable to the Lots or the
Improvements or the ownership, use or occupancy thereof, (d) any and
all leases or contracts (written or oral) of any nature that relate in
any way to the Lots or the Improvements or to which the Borrower may be
bound, and (e) any requirement necessary to satisfy any conditions
imposed upon the Borrower necessary to comply with the requirements of
any permanent financing obtained through either the FHA or VA,
"LIBOR Rate" shall mean the variable rate of interest set
forth on Exhibit "I" attached to the Note.
5
<PAGE> 11
"Loan Application" shall mean a certificate of the chief
financial officer of the General Partner in the form attached hereto as
Exhibit "D," requesting approval of an advance under the Revolving Line
of Credit from the Bank to the Borrower.
"Lot" shall mean any single family residential lot (i)
included in the Borrowing Base, (ii) which is located in a residential
subdivision in the State of Texas which has not been disapproved by the
Bank pursuant to Section 3.11 hereof, (iii) with respect to which all
development and construction work has been completed (including (A)
completion of all public roadways necessary to provide sufficient
access to such Lot and (B) completion of all water, sanitary and storm
sewer facilities in capacities sufficient for single family residential
use) so that such Lot is ready for a Single Family House to be
constructed thereon, (iv) which shall be of sufficient size for the
construction of a Single Family House thereon and (v) upon which the
Borrower intends to commence construction of a Single Family House
promptly after the first advance under the Revolving Line of Credit
with respect thereto.
"Maximum Outstanding Amount" shall mean, at any given time,the
lesser of (i) the Borrowing Base Value at such time and (ii)
$15,000,000.00.
"Maximum Rate" shall have the meaning given thereto in the
Note.
"Model Home" shall mean a Single Family House constructed by
the Borrower to be used in promoting the sale of homes being built with
the proceeds of the Revolving Line of Credit.
"Note" shall mean the Promissory Note Secured by Deed of Trust
of the Borrower issued pursuant to Section 1.3 of this Agreement in the
form attached as Exhibit "A" to this Agreement.
"Pacific USA" shall mean Pacific USA Holdings Corp.
"Permitted Encumbrances" shall mean those outstanding liens,
easements, building lines, restrictions, mineral interests and other
matters affecting a Lot which are described in the Title Commitment
issued with respect to such Lot and are acceptable to the Bank, except
those described in printed exceptions 2, 3 and 4 of the Texas standard
mortgagee's policy and any other similar matters, however designated.
"Person" or "person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, court, government or political subdivision
or agency thereof.
"Plans" shall mean the final plans and specifications, in form
and content satisfactory to the Bank, for the construction of the
Improvements on the Lot with which they are submitted in the Loan
Application, and all amendments and modifications thereof.
6
<PAGE> 12
"Plot Plan" shall mean, with respect to each Single Family
House, the final drawing or plan and related specifications, in form
and content satisfactory to the Bank, showing the location of such
Single Family House on the Lot on which it is to be constructed, and
all easements, setback lines, flood plain designation and other
applicable matters.
"Prior Financial Statements" shall mean the consolidated
financial statements for the Borrower and the General Partner for the
period ended July 31, 1996, and as at such date.
"Reference Rate" shall mean the variable rate of interest set
forth on Exhibit "I" attached to the Note.
"Released Portion" shall have the meaning set forth in
Section 4.3(b) hereof.
"Required Report" shall mean a report, certified by the chief
financial officer of the General Partner, setting forth (1) a summary
of all single family houses (whether or not such single family houses
constitute Single Family Houses) under construction by the Borrower,
constructed and still owned by the Borrower or sold since the date of
the last Required Report, indicating the status, location and value
(both current and projected as completed) of each such single family
house; (2) a "sales and closings" report indicating the sales of single
family houses (whether or not such single family houses constitute
Single Family Houses) closed by the Borrower since the date of the last
Required Report, listing the gross sales price and net sales price of
such closings, any cancellations, and a summary of the then existing
closings and contracts backlog by subdivision; and (3) a "speculative
and models inventory by subdivision" report reflecting, on a
subdivision by subdivision basis, the number of Speculative Homes and
Model Homes in the Borrower's inventory and the date of completion (or
anticipated date of completion) of each Speculative Home and Model
Home.
"Revolving Line of Credit" shall mean the line of credit
pursuant to Section 1.3.
"Sales Contract" shall mean an executed bona fide sale and
purchase contract pursuant to the terms of which a Person other than an
affiliate of the Borrower has contracted to purchase a lot or single
family house.
"Sales Price" shall mean the sales price of a Single Family
House set by the Borrower, such price to be updated monthly. For
purposes of determining the Deed of Trust Amount with respect to a
Single Family House, if the Bank determines that there exists patterns
of sales with actual sales prices below the sale prices set therefore
by the Borrower under this paragraph, then the Bank shall have the
right to adjust such sales prices to amounts which the Bank believes
accurately reflect the true sales price for each Single Family House.
7
<PAGE> 13
"Security Instruments" shall mean this Agreement, the Note,
the Deeds of Trust, the Certificates of Compliance, and any and all
other instruments now or hereafter executed in connection with or as
security for the Note.
"Single Family House" shall mean any single family residence
(i) included in the Borrowing Base, (ii) which is located on a Lot,
(iii) which is the only single family residence located on such Lot and
(iv) which has been completely constructed, or is then under
construction, by the Borrower in compliance with the Plans therefor and
all Legal Requirements.
"Specified Property" shall have the meaning set forth in
Section 3.23(a) hereof.
"Speculative Home" shall mean any Single Family House which is
not the subject of a Sales Contract.
"Supplement" shall mean a Supplemental Deed of Trust, Security
Agreement and Financing Statement to be executed by the Borrower in the
form attached hereto as Exhibit "C" whereby a Lot and the Improvements
thereon or to be constructed thereon, and the Collateral described in
Section 3.10 relating to such Lot and Improvements, are made subject to
the liens created by the Initial Deed of Trust previously filed in the
county in which such Lot is located.
"Survey" shall mean an accurate on-the-ground survey consisting
of field notes (if the applicable property has not been platted)
prepared by a licensed surveyor approved by the Bank and (a) showing
the location of any easements, rights-of-way, setback lines,
encroachments, fences, ditches or overlaps thereon or thereover, at the
outside boundary lines of the applicable tract of land and all
applicable Improvements, (b) identifying all easements, setback lines
and other matters referred to on the related Title Commitment or Title
Insurance, (c) containing a flood plain certification, (d) including
such surveyor's registered number and seal and the date of such survey
and (e) reflecting whether such tract of land has access to and from a
publicly dedicated street or road.
"Title Commitment" shall mean the commitment to issue an
owner's and/or mortgagee's title insurance policy in the form
promulgated by the State Board of Insurance of the State of Texas
issued by the Title Insurer and pertaining to the Lot for which a Loan
Application is submitted to the Bank.
"Title Insurance" shall mean a paid mortgagee's title insurance
policy binder on interim construction loan or paid mortgagee's title
insurance policy, as the Bank, in its sole discretion, may require
prior to the advance hereunder for the acquisition of or commencement
of construction on a Lot for which a Loan Application is being made, in
form and substance satisfactory to the Bank, issued by the Title
Insurer in the amount of the Deed of Trust Amount of such Lot and the
Improvements to be constructed thereon in accordance with the Plans
therefor (which policy may include a rider or endorsement
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limiting the binder or policy to the aggregate amounts actually
advanced) covering the lien on the interest of the Borrower described
therein.
"Title Insurer" shall mean such title insurer as the Bank, in
its sole discretion, may approve.
"VA" shall mean the Veterans Administration.
(b) All terms defined in this Agreement shall have
the defined meanings when used in any Note, certificate, report or
other document made or delivered pursuant to this Agreement, unless
specifically required otherwise.
(b) Terms in the singular shall include the plural
and those in the plural shall include the singular unless the context
shall otherwise require.
1.3 Revolving Line of Credit. The Bank, during the period
from the date of this Agreement until the date that is twenty-four (24) months
after the date of this Agreement (for the initial advance with respect to any
Lot or the Improvements thereon or to be constructed thereon), and until the
earlier to occur of (i) the date that is twelve (12) months after the date of
the initial advance with respect to any Lot or Improvements and (ii) the
maturity date of the Note (whether occurring by the terms of the Note, by
acceleration or otherwise (as such maturity date may be extended in accordance
with the terms of the Note), for subsequent advances for such Lot and
Improvements, subject in all instances to (a) the terms and conditions of this
Agreement, (b) the condition that at the time of each borrowing hereunder, the
condition of the Borrower, financial and otherwise, and the condition of the
Collateral, are satisfactory to the Bank, and (c) the condition that no Default
or Event of Default has occurred and is then continuing to occur, agrees to make
advances to the Borrower pursuant to a Revolving Line of Credit up to but not in
excess of the Maximum Outstanding Amount upon compliance by the Borrower with
the provisions of Section 5.2 hereof. The Borrower's obligation to repay the
Revolving Line of Credit shall be evidenced by the Note. The Note shall bear
interest at the rate or rates set forth in Section 1.5 hereof. Accrued and
unpaid interest on the Note shall be due and payable on the first day of each
month, commencing January 1, 1997. All unpaid principal and accrued and unpaid
interest on the Note shall be due and payable on November 29, 1998; provided,
however, in the event that Bank elects in its sole discretion not to renew the
Revolving Line of Credit hereunder at the maturity date of the Note, the term of
the Note shall be extended for an additional twelve (12) month period in order
to allow for the completion of construction and the sale or refinancing of all
Single Family Houses and Lots which are subject to the Revolving Line of Credit
at the time of the original maturity date of the Note, all as more particularly
provided in the Note.
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1.4 Prepayments.
(a) If at any time the outstanding balance under
the Revolving Line of Credit is in excess of the Maximum Outstanding
Amount, or if required by any other provision of this Agreement, the
Borrower shall, immediately and without demand, make a mandatory
prepayment on the Note in an amount sufficient to reduce the
outstanding balance under the Revolving Line of Credit to the Maximum
Outstanding Amount.
(b) If any Single Family House and/or Lot and/or
Inventoried Lot has not been sold in a bona fide sales transaction to a
Person other than an affiliate of the Borrower on or before the date
that is one (1) year after the date of execution of the Deed of Trust
for such Single Family House, Lot or Inventoried Lot (as the case may
be), the Borrowing Base shall be reduced in an amount equal to ten
percent (10%) of the Deed of Trust Amount of such Single Family House,
Lot or Inventoried Lot (as the case may be). A further ten percent
(10%) reduction (in the manner described herein) shall also be made on
each subsequent anniversary date (of the execution of such Deed of
Trust) with respect to each Single Family House and/or Lot and/or
Inventoried Lot that has not been sold in a bona fide sales transaction
to a Person other than an affiliate of Borrower on or before such
anniversary date.
(c) If any Single Family House (exclusive of Model
Homes) and/or Lot and/or Inventoried Lot has not been sold in a bona
fide sales transaction to a Person other than an affiliate of the
Borrower on or before the date that is two (2) years after the date of
execution of the Deed of Trust for such Single Family House (exclusive
of Model Homes), Lot or Inventoried Lot (as the case may be), the
Borrower shall make a mandatory prepayment on the Note in an amount
equal to the Deed of Trust Amount for such Single Family House
(exclusive of Model Homes), Lot or Inventoried Lot (as the case may
be), as reduced under subparagraph (b) above.
(d) Notwithstanding any provision of Section
1.4(b) or (c) above to the contrary, upon the maturity of the Note
(whether occurring by the terms of the Note, by acceleration or
otherwise) all unpaid amounts under the Note shall become immediately
due and payable upon such maturity date.
(e) Except for the prepayment premium payable
with respect to any Rate Portion bearing interest at a LIBOR
Alternative as more fully described in the Note, the Borrower shall
have the right to prepay without premium at any time, upon two (2)
Business Days written notice to the Bank, any amount owing on the Note
which bears interest at the Reference Rate. Such voluntary prepayments
shall be limited to one (1) per calendar week. Any prepayment made
pursuant to this Section 1.4 shall be applied first to principal.
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<PAGE> 16
1.5 Interest. The Note shall bear interest as follows:
(a) Subject to the provisions of the Note
and paragraphs (b) and (c) of this Section 1.5, the Borrower shall pay
interest on the outstanding principal amount of the Note (or portions
thereof) at either (i) one-half percent ( 1/2%) per annum over the
Reference Rate and/or (ii) two and one-half percent (2 1/2%) per annum
over the LIBOR Rate.
(b) In the event that, and for so long
as any Event of Default shall have occurred and be continuing, then and
in any such event, the outstanding principal amount of the Note shall
bear interest at the Maximum Rate.
(c) Notwithstanding anything contained
herein to the contrary, in no event shall the interest rate payable
with respect to the Note exceed the Maximum Rate.
1.6 Use of Proceeds. Advances under the Revolving Line of
Credit shall be used for Costs of Construction and for the acquisition
of Inventoried Lots, and no other purpose.
Section 2. Representations and Warranties
The Borrower represents and warrants to the Bank that, except as set
forth on Schedule 1 hereof:
2.1 Existence. The Borrower is a limited partnership
duly organized, legally existing and in good standing under the laws of the
State of Texas and duly qualified and in good standing as a foreign limited
partnership in all other jurisdictions wherein the property owned or the
business transacted by it makes such qualification necessary. The Borrower has
the right and power to own and develop the Property as contemplated in this
Agreement.
2.2 Authority. The Borrower is duly authorized and
empowered to create and issue the Note, and to execute and deliver the Security
Instruments, and all other instruments referred to or mentioned herein, and all
action requisite for the due creation, issuance and delivery of the Note and
the due execution and delivery of the Security Instruments has been duly and
effectively taken. This Agreement, the Note, and the other Security
Instruments, when executed and delivered, will be valid and binding obligations
of the Borrower enforceable in accordance with their terms (subject to any
applicable bankruptcy, insolvency or other laws generally affecting the
enforcement of creditors' rights) . This Agreement, the Note, and the other
Security Instruments do not violate any provisions of the Borrower's limited
partnership agreement or any contract, agreement, law or regulation to which
the Borrower is subject, and the same do not require the consent or approval of
any regulatory authority or governmental body of the United States of America
or any state. To the best of the Borrower's knowledge, the Borrower is not in
violation of any law, regulation or ordinance, or any order of any court or
governmental entity.
2.3 Financial Condition. The Prior Financial Statements
which have been delivered to the Bank are complete and correct, have been
prepared in accordance with generally accepted
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<PAGE> 17
accounting principles consistently applied throughout the periods involved, and
fully, fairly and accurately reflect the financial condition and results of the
operations of the Borrower and the General Partner, respectively, as at the
dates and for the periods stated. No material adverse change has occurred
since the date of the Prior Financial Statements in the condition, financial or
otherwise, of either the Borrower or the General Partner.
2.4 Full Disclosure. Neither this Agreement nor any
certificate or statement or any other data, reports, documents and information
furnished by the Borrower or any of its partners in connection with the
negotiation of this Agreement or the transactions contemplated hereby contains
any untrue statement of a material fact or omits a material fact known to the
Borrower necessary to make the statements contained herein or therein not
misleading. There is no material fact known to the Borrower which the Borrower
has failed to disclose to the Bank in writing which affects the business,
operations, assets, prospects or condition, financial or otherwise, of the
Borrower.
2.5 Liabilities and Litigation. The Borrower has no
liabilities, and no litigation, legal or administrative proceedings,
investigation or other action is pending or, to the best knowledge of the
Borrower, threatened against or affecting the Borrower or any Lot or
Improvements, and/or involving the possibility of any judgment or liability not
fully covered by insurance, or which may affect any Lot or Improvements any
other business or assets of the Borrower or the Borrower's ability to carry on
business as now conducted, except as disclosed in the Prior Financial
Statements and liabilities incurred in the ordinary course of business. To the
best knowledge of the Borrower, no unusual or unduly burdensome restriction,
restraint or hazard exists by contract, law, governmental regulation or
otherwise relative to the business or the assets of the Borrower.
2.6 Titles and Encumbrances. The Borrower has good and
indefeasible fee simple title to the Lots and Improvements for which advances
are made to it under the Revolving Line of Credit, free and clear of all
mortgages, liens and encumbrances, except those referred to in Section 4.2
hereof.
2.7 No Default. No Default or Event of Default exists
under this Agreement and the Borrower is not in default in any material respect
under any contract, agreement or instrument to which the Borrower is a party or
by which the Borrower or any of its property may be bound, or in any respect
under any material contract, agreement or instrument to which the Borrower is a
party or by which the Borrower or any of its property may be bound.
2.8 Patents, etc. The Borrower has all patents, patent
rights or licenses, trademarks, trademark rights, trade names, trade name
rights, copyrights, permits and franchises which are required in order for it
to conduct its business as now conducted without known conflict with the rights
of others. The Borrower is not aware of any fact or condition which might
cause any of such foregoing not to be renewed in due course.
2.9 Taxes. The Borrower has filed all federal and state
income tax returns which are required to be filed as of the date of this
Agreement and has paid all taxes shown on said returns and on all assessments
received by it to the extent such taxes have become due. Neither the
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<PAGE> 18
Borrower nor any of such returns is currently the subject of, or has been
threatened with, an audit relating to such tax matters.
2.10 Compliance. The Borrower has complied with all
material valid and applicable statutes, rules and regulations of each
jurisdiction to which it may be subject, including, without limitation, all
Legal Requirements.
2.11 Margin Securities. The Borrower does not own any
"margin security" or "margin stock" as defined in Regulations G, U or X of the
Board of Governors of the Federal Reserve System (12 C.F.R. Parts 207, 221 and
224, respectively).
2.12 Utilities, Access and Construction. All utility
services, including water supply, storm and sanitary sewer facilities, electric
and telephone facilities and related services necessary for the construction of
the Improvements on Lots currently owned by the Borrower, and the use thereof
for their intended purposes, are available for such Lots and Improvements.
Each Lot currently owned by the Borrower has adequate access to public streets
and roads. The Borrower has not made any oral or written contract or
arrangement of any kind, the performance of, which by the other party thereto
would give rise to a lien on any Lot or Improvements of equal or greater
priority than the liens created under the Security Instruments.
2.13 Borrower Not a "Foreign Person". The Borrower is not
a "foreign person" within the meaning of Section 1445(f)(3) of the Internal
Revenue Code of 1986, as amended from time to time.
2.14 Commencement of Construction. Prior to the
recordation of any Deed of Trust (i) no work of any kind shall be commenced or
performed on the Property by or on behalf of the Borrower, and (ii) no
equipment or material shall be ordered or delivered to or upon the Property by
or on behalf of the Borrower for any purpose whatsoever.
Section 3. Affirmative Covenants
Until the Indebtedness of the Borrower to the Bank has been paid or
while the Bank has a commitment to the Borrower hereunder:
3.1 Reporting Requirements. The Borrower will promptly
furnish to the Bank from time to time the following information regarding the
business affairs and financial condition of the Borrower:
(a) as soon as possible and in any event within
five (5) days after the occurrence of each Default or Event of
Default, the statement of the chief financial officer of the General
Partner of the Borrower setting forth details of such Default or Event
of Default and the action which the Borrower proposes to take with
respect thereto;
(b) as soon as available, and in any event within
forty-five (45) days after the end of each fiscal quarter, the balance
sheet of each of the Borrower and the General
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<PAGE> 19
Partner, as of the end of such quarter, the statement of income of
each of the Borrower and the General Partner for such quarter, and the
statement of cash flow of each of the Borrower and the General Partner
for such quarter all in reasonable detail and certified by the chief
financial officer of the General Partner;
(c) as soon as available and in any event within
one hundred twenty (120) days after the end of each fiscal year of
both the Borrower and the General Partner, the balance sheet of each
of the Borrower and the General Partner as at the end of such year and
the statement of income, statement of cash flow and statement of
equity and changes in financial position of each of the Borrower and
the General Partner for such year, together with comparative figures
for the preceding fiscal year, and audited by independent certified
public accountants acceptable to the Bank, together with the
Borrower's and the General Partner's good faith projection of income,
expenses and cash flow for the next two fiscal years (i.e., the two
fiscal years following the year to which such balance sheet, statement
of income, statement of cash flow and statement of equity relate);
(d) as soon as available, and in any event within
thirty (30) days after the last day of each month, the Required
Report;
(e) concurrently with the financial statements
required by Sections 3.1(b) and 3.1(c), a Certificate of Compliance;
(f) as soon as available and in any event within
one hundred twenty (120) days after the end of each fiscal year of
Pacific USA, the balance sheet of Pacific USA and its subsidiaries as
at the end of such year and the statement of income, statement of cash
flow and statement of shareholders' equity and changes in financial
position of such companies for such year, together with comparative
figures for the preceding fiscal year, and audited by independent
certified public accountants acceptable to the Bank;
(g) as soon as available, and in any event within
two (2) Business Days following the last day of each calendar week, a
Borrowing Base Report certified by the chief financial officer of the
General Partner;
(h) concurrently with the financial statements
required by Section 3.1(c), the report of insurance required
by Section 3.7;
(i) as soon as possible, and in any event, within
five (5) days of knowledge thereof, the notice of litigation required
by Section 3.9 of this Agreement; and
(j) such other information the Bank may
reasonably request from time to time.
The Borrower shall use its best efforts to obtain, within one hundred
twenty (120) days after the end of each fiscal year of Pacific Electric Wire &
Cable Co., Ltd., the balance sheet of such company as at the end of such year
and the statement of income, statement of cash flow and
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<PAGE> 20
statement of shareholders' equity and changes in financial position for such
company for such year, together with comparative figures for the preceding
fiscal year.
The Financial Statements and other reports shall be complete and
correct, and prepared in accordance with generally accepted accounting
principles consistently applied. Each balance sheet delivered to the Bank
shall include all contingent liabilities of the Borrower.
The Borrower grants to the Bank the right, at any time and from time
to time, to send the Bank's own representatives and/or employees to inspect,
copy, and/or audit the books of the Borrower.
3.2 Taxes and Other Liens. The Borrower will promptly
pay and discharge, prior to the date when any interest or penalty shall accrue
thereon, all taxes, assessments, governmental charges, impositions, water and
sewer rents, claims for labor, supplies, rent and other obligations which if
unpaid, might become a lien against the property of the Borrower. The Borrower
will promptly pay and discharge all taxes, assessments and other governmental
charges or levies imposed upon the Borrower on the income, profits or assets of
the Borrower or upon any of its property (real, personal or mixed) or upon any
part thereof, not later than the due date thereof. The Borrower shall not
place, or permit to be placed, a lien upon, or otherwise mortgage, hypothecate
or encumber all or any portion of the Lots or Improvements (other than vendor's
liens and purchase money liens reserved by suppliers of appliances and other
similar items placed in the Improvements and which are purchased by the
Borrower on open account) regardless of whether same is allegedly or expressly
inferior to the Bank's liens and, if any such lien is placed or asserted
against any portion of the Lots or the Improvements, the Borrower shall
promptly, at its own cost and expense, (i) pay the underlying claim in full,
take such other action so as to cause the same to be released, or bond around
such claim to the Bank's satisfaction and (ii) within five (5) days after the
date such lien is asserted, give the Bank notice of the placing or assertion of
such lien. Upon request of the Bank, the Borrower will furnish to the Bank
satisfactory evidence to indicate the Borrower's compliance with this Section
3.2.
3.3 Maintenance. The Borrower will maintain its
existence as a limited partnership and remain in or become a limited
partnership in good standing in each jurisdiction in which it is required to be
qualified. The Borrower will maintain all patents, trademarks, franchises and
licenses necessary in its business, and comply with all Legal Requirements, and
it will maintain or cause to be maintained its properties in good and workable
condition at all times. The Borrower shall continue to conduct, operate and
manage its business substantially as its business is currently being conducted,
managed and operated.
3.4 Further Assurances. The Borrower will promptly cure
any defects in the execution and delivery of this Agreement, the Note, the
other Security Instruments and any other instrument or instruments referred to
or mentioned herein. The Borrower will immediately execute and deliver to Bank
upon request all security agreements, financing statements, certificates of
title, deeds of trust, mortgages and other instruments to accomplish the
covenants and agreements of the Borrower under this Agreement and the other
Security Instruments. Upon the request of the Bank, the Borrower shall deliver
to the Bank:
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<PAGE> 21
(a) an endorsement from the Title Insurer in form
and substance satisfactory to the Bank (or other evidence satisfactory
to the Bank), reflecting that there have been no changes to the status
of title to a Lot or the Improvements thereon since the time the Title
Insurance with respect to such Lot or Improvements was issued;
(b) a certificate from the Architect stating
that, in his or their opinion, as the case may be, the construction of
any Improvements relating to any Lot theretofore performed has been in
substantial accordance with the Plans and all Legal Requirements;
(c) lien waivers or releases from all contractors
contracting directly with the Borrower in connection with the
construction of any Improvements; and
(d) such other certifications or evidence as the
Bank may request.
The Borrower shall, without request, on or before the date that is eleven (11)
months after the date of the issuance of each mortgagee's title insurance
policy binder on interim construction loan with respect to a Lot, and every six
(6) months thereafter until the Lot and Improvements thereon have been sold
pursuant to a Sales Contract, cause the Title Insurer to issue and deliver to
the Bank an extension of such title binder.
3.5 Performance of Obligations. The Borrower will pay
the Note according to the reading, tenor and effect thereof and will do and
perform every act and discharge all of the obligations provided to be performed
and discharged under this Agreement, the Note, the Security Instruments and any
and all of the instruments referred to or mentioned herein at the time or times
and in the manner therein and herein specified. The Borrower will perform all
obligations to be performed by it pursuant to the terms of each indenture,
agreement, contract, and other instrument by which the Borrower or its
properties are bound.
3.6 Payment of Expenses. The Borrower shall pay all
out-of-pocket costs and expenses, including, without limitation, all
attorneys', accountants', engineers', architects', inspectors' and other
professionals' or contractors' fees and recording costs incurred by the Bank in
connection with the preparation, negotiation, execution and perfection of the
Security Instruments and the creation of the liens created thereby and the
monitoring and other administration of the Revolving Line of Credit. The
Borrower shall, upon request, promptly reimburse the Bank for all amounts
expended, advanced or incurred by the Bank (i) for fees of Appraisals (and
Appraisal reviews) commissioned by the Bank, (ii) to satisfy any obligation of
the Borrower under the Security Instruments, (iii) to perfect and/or protect
the lien or security interest of the Bank on or in any of the Collateral, (iv)
to collect payments due under the Note or (v) to enforce the rights of the Bank
under the Security Instruments or any other instrument referred to or mentioned
herein or executed or to be executed in connection herewith, which amounts will
include, without limitation, all court costs, attorneys' fees, fees of auditors
and accountants and investigation expenses reasonably incurred by the Bank in
connection with any such matters, together with interest at the rate of ten
percent (10%) per annum, not to exceed the maximum non-usurious interest rate
permitted by applicable law, on each such amount from the date the same
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<PAGE> 22
was expended, advanced or incurred by the Bank until the date it is repaid to
the Bank. A certificate of the Bank setting forth any such amount shall be
conclusive evidence of the matters set forth therein in the absence of manifest
error. The Borrower shall pay all costs and expenses required to satisfy the
conditions of this Agreement and the other Security Instruments, including,
without limitation, taxes and recording expenses and fees and commissions, if
any, lawfully due to brokers in connection with the sale of any Lots or
Improvements. All amounts advanced in connection herewith shall be secured by
the Collateral.
3.7 Insurance.
(a) The Borrower shall provide, maintain and keep in force at
all times during any period of construction the builder's "all risk"
insurance required under Exhibit "F" attached hereto and made a part
hereof for all purposes. At all times prior to repayment of the Loan,
the Borrower shall provide, maintain and keep in force all other
insurance required by Exhibit "F". Also at all such times, the
Borrower shall provide, maintain and keep in force any and all
additional insurance that the Bank, in its reasonable judgment may
from time to time require, against insurable hazards which at the time
are commonly insured against in the case of property similarly
situated. Such additional insurance may include flood insurance as
required by federal law and earthquake insurance as required by the
Bank. At the Bank's request, the Borrower shall supply the Bank with
an original of any policy.
(b) All policies of insurance required under the Security
Instruments shall be issued by companies approved by the Bank having
an A.M. Best rating satisfactory to the Bank. The limits, coverage,
forms, deductibles, inception and expiration dates and cancellation
provisions of all such policies shall be acceptable to the Bank. In
addition, each required property insurance policy shall contain the
mortgagee clause (Texas Form 130 or its equivalent) in favor of the
Bank, and shall provide that all proceeds be payable to the Bank to
the extent of its interest. An approval by the Bank is not, and shall
not be deemed to be, a representation of the solvency of any insurer
or the sufficiency of any amount of insurance.
(c) Each policy of insurance required under the Security
Instruments shall provide that it may not be modified or canceled
without at least fifteen (15) days prior written notice to the Bank.
When any required insurance policy expires, the Borrower shall furnish
the Bank with proof acceptable to the Bank that the policy has been
reinstated or a new policy issued, continuing in force the insurance
covered by the policy which expired. If the Bank fails to receive
such proof and evidence, the Bank shall have the right; but not the
obligation, to obtain current coverage and advance funds to pay the
premiums for it. The Borrower shall repay the Bank immediately on
demand for any advance for such premiums, which shall be considered to
be an additional loan to the Borrower bearing interest at the
Reference Rate and secured by the Deeds of Trust and any other
collateral held by the Bank in connection with the Loan.
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3.8 Certificate of Compliance. At the times set forth in
Section 3.1(e) of this Agreement, the Borrower shall deliver to the Bank a
certificate in the form attached as Exhibit "E" hereto, which certificate shall
be signed by the chief financial officer of the General Partner and shall state
that he has reviewed the activities of the Borrower during the previous
calendar month with a view to determining whether the Borrower has kept,
observed, performed and fulfilled all of its obligations under this Agreement,
the Note and the other Security Instruments, and that the Borrower has kept,
observed, performed and fulfilled each and every covenant and condition
contained in the Note, this Agreement and the other Security Instruments and is
not at the time in default in the observance, performance or fulfillment of any
such covenants and conditions or if the Borrower shall be in default,
specifying any such default, the nature and status thereof, and what action, if
any, has been taken to remedy the default or defaults.
3.9 Litigation. As soon as possible and in any event,
within five (5) days of knowledge thereof, the Borrower shall give written
notice to the Bank of all litigation (other than litigation being defended by
an insurance carrier without reservation as to coverage claiming amounts within
said coverage) in which the Borrower may have liability in excess of
$300,000.00 (or as to which no specified amount of damages is alleged) and of
all proceedings before any governmental or regulatory agency affecting the
Borrower.
3.10 Security. The Indebtedness and obligations of the
Borrower under this Agreement, the Note and the other Security Instruments
shall be secured by a lien in favor of the Bank prior to any other lien or
encumbrance on all of the Borrower's right, title and interest in and to each
Lot and the Improvements thereon or to be constructed thereon, together with a
security interest in favor of the Bank with respect to the following items
located on, used in connection with, or arising out of each Lot and the
Improvements thereon or to be constructed thereon: (i) all equipment now owned
or hereafter acquired; (ii) all accounts receivable now or hereafter existing;
(iii) all chattel paper, documents and instruments now owned or hereafter
acquired; (iv) all inventory now owned or hereafter acquired; (v) all general
intangibles now owned or hereafter acquired; (vi) all sales Contracts; (vii)
all Construction Contracts; and (viii) the proceeds, products and accessions of
and to any and all of the foregoing.
3.11 Residential Subdivisions. Advances may not be made
with respect to any Lot or the Improvements to be constructed thereon if such
Lot is located either outside the State of Texas or in any residential
subdivision which the Bank disapproves in writing. The Borrower shall not be
entitled to any advances with respect to any Lot or Improvements located in a
residential subdivision if the Borrower has not obtained, received and
approved, in accordance with prudent and reasonable industry standards, a Phase
I Environmental Audit prepared with respect to such Lot. If requested by the
Bank, the Borrower shall deliver to the Bank a Phase I Environmental Audit
prepared with respect to any Lot and which is acceptable to the Bank, a Title
Commitment with respect to any Lot, legible copies of all documents,
instruments and plats described in each such Title Commitment and any other
documents, instruments or information which the Bank may request with respect
to such Lot.
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3.12 Surveys and Appraisals. As and when requested by the
Bank, the Borrower shall deliver to the Bank for its review and approval an
Appraisal and/or a Survey with respect to any Lot and the Improvements thereon.
3.13 Plans; Construction in Compliance with Plans. All
Plans shall be in accordance with sound engineering principles, and shall
otherwise be sufficient for the construction of the Improvements. All
construction performed on the Improvements will be performed in accordance with
the Plans. No construction of any Improvements shall be commenced or performed
unless and until (a) the Plans therefor have been submitted to and approved by
all requisite Governmental Authorities and are in compliance with all
applicable Legal Requirements, (b) all requisite Governmental Permits have been
obtained, (c) all applicable Legal Requirements have been fulfilled and (d) if
requested by the Bank, the Plans therefor have been approved by the Bank. No
changes shall be made in the Plans by the Borrower or any other person without
the prior written approval of all requisite Governmental Authorities and the
prior compliance with all applicable Legal Requirements and, if such changes
will result in an increase of the Sales Price of such Improvements of more than
ten percent (10%), without the prior written approval of the Bank.
3.14 Construction Contracts; Commencement of Construction.
No Construction Contract, or an affidavit or memorandum thereof, shall be
entered into or recorded, and no operations incident to the proposed
Improvements shall begin, until the applicable Deed of Trust has been executed,
acknowledged and recorded in the real property records of the county where such
Improvements are located. At the Bank's option and the Borrower's expense, the
Bank's inspector shall perform a site inspection of each Lot on the date the
Deed of Trust with respect to such Lot is recorded in order to determine the
Borrower's compliance or non-compliance with the provisions of this Section
3.14. If requested by the Bank, prior to the commencement of the construction
of any Improvements, the Borrower will submit for the Bank's approval all
Construction Contracts relating to such Improvements.
3.15 Governmental Permits. All necessary Governmental
Permits shall be obtained in a timely manner in order to permit the expeditious
commencement, prosecution and completion of the construction of all
Improvements. Upon the Bank's request, the Borrower shall deliver to the Bank
a copy of any such Governmental Permit and evidence of the Borrower's
compliance therewith.
3.16 Compliance with Legal Requirements. The Borrower
shall promptly and faithfully comply with, conform to and obey all present and
future Legal Requirements, whether or not the same shall necessitate structural
changes in, improvements to or interfere with the use or enjoyment of the Lots
or Improvements. Upon the request of the Bank, the Borrower shall furnish
satisfactory evidence to the Bank of its compliance with all Legal
Requirements.
3.17 Use Violations; Notifications. The Borrower shall
not use, maintain, operate or occupy, or allow the use, maintenance, operation
or occupancy of, the Lots or the Improvements in any manner which (a) violates
any Legal Requirements, (b) may be dangerous, unless safeguarded as required by
law, (c) constitutes a public or private nuisance, (d) makes void,
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voidable or cancelable any insurance then in force with respect thereto or (e)
makes void, voidable, or cancelable any Governmental Permit. Upon the request
of the Bank, the Borrower shall furnish satisfactory evidence to the Bank of
its compliance with this Section 3.17. The Borrower will comply with and
furnish the Bank with any official notice or claim made by any Governmental
Authority. The Borrower will also promptly notify the Bank of any substantial
fire, casualty, or notice of any taking by eminent domain affecting any Lots or
Improvements. Any such event shall conclusively be deemed substantial if the
cost of the repair or restoration of the property taken shall exceed $10,000.
3.18 Construction of Improvements. The construction of
Improvements shall be commenced promptly after the acquisition by the Borrower
of the Lot upon which such Improvements are to be constructed. The
construction of all Improvements shall be prosecuted by the Borrower, with
diligence, continually to completion and shall be completed by the Borrower in
a good and workmanlike manner in accordance with the Plans therefor, all Legal
Requirements, the other provisions of this Agreement and the other Security
Instruments and all usual and customary construction and development standards
relating to the construction and operation of such Improvements, free and clear
of all liens, or claims for liens, other than the liens specifically permitted
hereunder. The Borrower shall file or record all requisite plats and other
instruments necessary or desirable in connection with the construction and
operation of the Improvements to the extent such plats and other instruments
have not previously been filed or recorded. At all times during construction
of any Improvements, the Borrower shall (a) comply strictly with any and all
Legal Requirements required to be complied with incidental to such
construction, (b) deliver to the Bank, or its representatives, immediately upon
demand, counterparts of any and all Construction Contracts executed in
connection with the construction of such Improvements and (c) permit the Bank
to erect and maintain a sign in a conspicuous location on one or more Lots
stating that construction financing has been furnished by the Bank. Within ten
(10) days after the pouring of the concrete slab within each Lot, the Borrower
shall deliver to the Bank, upon the Bank's request, a form slab survey showing
the location of such slab, and whether or not the location thereof is entirely
within the property lines of such Lot and whether or not the same encroaches
upon, breaches or violates any building line, easement or other restriction or
encroachment (and if the location thereof is not entirely within the property
lines of such Lot or encroaches upon, breaches or violates any building line,
easement or other restriction or encroachment, then the Borrower shall either
(A) cure or remove such encroachment, breach or violation or (B) deliver to the
Bank, along with such Survey, appropriate waivers from the appropriate
persons).
3.19 Continuing Compliance with Requirements for Advances.
All of the conditions and requirements which need to be satisfied or fulfilled
in order for the Borrower to receive any advance under the Revolving Line of
Credit shall continue to be achieved, satisfied and fulfilled at all times
during which such Lot or Improvements are subject to a lien in favor of the
Bank.
3.20 Correction Work. The Borrower shall immediately
correct any structural defect in any of the Improvements or any substantial or
material departure from the Plans therefor not approved by the Bank. Any
advance under the Revolving Line of Credit shall not constitute a
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waiver of the Bank's right to require compliance with this covenant with
respect to any such defects or departures from the Plans.
3.21 Continuous Construction of the Improvements.
(a) Once construction of any Improvements has
commenced, construction shall not cease prior to completion of such
Improvements for any cause other than a cause beyond the control of
the Borrower unless consented to by the Bank. For purposes of this
Section 3.21 only, construction of any Improvements shall be deemed
complete if the only work remaining unfinished consists of
construction or installation of purchaser selected items and other
items customarily installed at the time of purchaser move-in.
(b) Once construction of any Improvements has
commenced with respect to any Lots under a Construction Contract,
construction shall not cease with reference to such Construction
Contract prior to the substantial completion of the work contemplated
by such Construction Contract for any cause other than a cause beyond
the control of the Borrower unless consented to by the Bank.
Additionally, the time period commencing on the date construction of
any such Improvements relating to a particular Construction Contract
ceases and the first day of construction of such Improvements relating
to such Lot commences pursuant to another Construction Contract shall
not exceed ninety (90) days for any cause other than a cause beyond
the control of the Borrower unless consented to by the Bank.
3.22 Inspections.
(a) The Borrower shall permit the Bank, the
Bank's architect and/or any of the Bank's other representatives, to
enter upon or into any of the Lots or Improvements or any office or
place of business of the Borrower for the purpose of examining the
Lots, the Improvements, any part thereof, all materials to be used in
construction thereof, all Plans and shop drawings, and any of the
Borrower's books and records including, but not limited to, the
Borrower's books and records in reference to such Lots, Improvements,
the sale and disposition thereof, the disposition of the proceeds
thereof and for the purpose of making copies of any such books and
records. The Borrower shall reimburse the Bank, on demand, for all
expenses incurred by the Bank in connection with any such inspections;
provided, however, the Borrower shall reimburse the Bank in an amount
equal to $15.00 per Single Family House inspected with respect to the
cost of physical inspections by the Bank of such Single Family Houses.
(b) If through such inspections or otherwise, the
Bank, in comparing (i) the actual amount of work completed on any Lot
or Improvements to (ii) the amount of work stated by the Borrower to
have been completed on the Lot or Improvements, and for which advances
under the Revolving Line of Credit have been made, determines that
there exists a variance between (x) the work which should have been
completed for such Improvements and (y) the costs associated with such
Improvements which were taken into account in determining the
Borrowing Base, and that such variance resulted in a Borrowing Base
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Value which, in the Bank's reasonable judgment, is higher than that
indicated by the work in place, then the Bank shall determine a new
Deed of Trust Amount for such Improvements which shall be in effect
until such variance terminates. The Bank shall also have the right,
at all times, to not make any initial advance under the Revolving Line
of Credit with respect to any Lot or Improvements if, in the
determination of the Bank in its sole discretion, there does not exist
under the Revolving Line of Credit unadvanced funds in an amount at
least equal to the amount necessary to complete all Single Family
Houses for which advances are outstanding under the Revolving Line of
Credit.
3.23 Borrowing Base.
(a) Inclusion in Borrowing Base. Single Family
Houses and Lots (each such property to be included in the Borrowing
Base pursuant to this Section 3.23 herein being called a "Specified
Property") shall be included in the Borrowing Base only upon the full
compliance with and achievement of the following conditions and
requirements to the satisfaction of the Bank:
(i) All documents and instruments
(in form and substance satisfactory to the Bank) necessary or
otherwise requested by the Bank to create in favor of the Bank
a lien against the Specified Property, including without
limitation the applicable Deed of Trust, subject only to the
Permitted Encumbrances, have been fully executed, acknowledged,
recorded or filed in the appropriate offices (where applicable)
and certified copies thereof delivered to the Bank by the Title
Insurer or its agent. The Borrower shall cause the recorded
originals of such instruments to be delivered to the Bank by
the Title Insurer or its agent immediately after recording.
(ii) The Title Insurance covering
the Specified Property has been issued by the Title Insurer and
delivered to the Bank.
(iii) The Plans of the Specified
Property have not been disapproved by the Bank.
(iv) An Appraisal covering the
Specified Property has been delivered to the Bank and not
disapproved by the Bank.
(v) The inclusion of the
Specified Property in the Borrowing Base will not give rise to
a Default or an Event of Default including, without limitation,
any breach of any of the Borrower's representations, warranties
or covenants set forth in this Agreement or any of the other
Security Instruments.
(vi) At its option, the Bank's
inspection and approval of the Specified Property.
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(vii) The Borrower shall have
delivered to the Bank such other matters, instruments,
documents, certifications and assurances that the Bank may
reasonably request.
(b) Determination of Borrowing Base; Borrowing
Base Reports. At the times required by Section 3.1(g) hereof, the
Borrower shall deliver to the Bank a report (a "Borrowing Base
Report"), in form satisfactory to the Bank, which sets forth the
Aggregate Deed of Trust Amount, and all component parts giving rise
thereto, all as the last day of the immediately preceding calendar
week. For purposes of determining the Aggregate Deed of Trust Amount
as of such date, the Borrower shall use the procedures set forth in
this Section 3.23.
Section 4. Negative Covenants
A deviation from the provisions of this Section 4 shall not constitute
an event of default under this Agreement if such deviation is consented to in
writing (in the manner hereinafter provided) by the Bank. In the absence of
such a written consent, so long as any part of the Indebtedness shall remain
unpaid or the Bank has a commitment to the Borrower hereunder:
4.1 Dividends and Redemptions. The Borrower will not
declare, pay or make any distribution on account of, or purchase, acquire,
redeem or retire any partnership interest of the Borrower, whether now or
hereafter outstanding, if such declaration, payment, purchase, acquisition or
redemption results or will result in the occurrence of a Default or an Event of
Default hereunder.
4.2 Encumbrances. The Borrower will not create, incur,
assume or permit to exist any mortgage, pledge, lien or encumbrance on any Lots
or Improvements, nor acquire or agree to acquire any Lots or Improvements under
any conditional sale agreement or title retention contract, except that the
foregoing restrictions shall not apply to:
(a) liens for taxes not yet due or which are
being diligently contested in good faith by appropriate proceedings;
(b) pledges or deposits in connection with, or to
secure workmen's compensation, unemployment insurance, pensions or
other employee benefits;
(c) liens required by this Agreement;
(d) Permitted Encumbrances;
(e) liens incurred in the ordinary course of the
Borrower's business which are not placed upon any Collateral; and
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(f) lot option contracts and other similar
earnest money contracts entered into by the Borrower in the ordinary
course of its business.
As to the liens and encumbrances permitted pursuant to paragraph (a)
above, the Borrower's right to contest diligently in good faith by appropriate
proceedings is conditioned upon the Borrower's setting up appropriate reserves
under generally accepted accounting principles and upon stay of levy and
execution thereon.
4.3 Sale of Assets.
(a) The Borrower will not sell, transfer, lease
or otherwise dispose of any Lots or Improvements on which the Bank has
a lien unless the Borrower complies with the provisions set forth in
this Section 4.3.
(b) The Borrower shall be entitled to releases of
Lots and Improvements from the liens thereon in favor of the Bank
(each such Lot and Improvements released is herein called a "Released
Portion") upon the sale of such Released Portion pursuant to a Sales
Contract, subject to and in accordance with the following provisions:
(i) The Borrower shall have delivered to
the Bank, for payment against the principal amount outstanding
under the Note, the Deed of Trust Amount (as such amount may
be reduced pursuant to the terms hereof) with respect to the
Released Portion;
(ii) At the time of the release, no
Default or Event of Default exists;
(iii) The release of the Released Portion
from the liens thereon in favor of the Bank will not
result or give rise to a Default or an Event of Default;
(iv) The instruments or documents
evidencing such release shall be prepared at the cost of the
Borrower and shall be in form and substance satisfactory to
the Bank; and
(v) Such other documentation and
information reasonably requested by the Bank in connection
with such release shall be delivered to the Bank.
(c) Upon the occurrence of a Default or Event of
Default, or in the event the Bank is no longer allowing the Borrower
to receive advances under the Revolving Line of Credit, the Bank shall
have the right, at its option and in its sole discretion, to increase
the amount required under Section 4.3(b)(i) hereof to any amount up to
the full sales price of the Released Portion set forth in the
applicable Sales Contract. All such amounts in excess of the sales
price of such Released Portion shall be applied as a prepayment
against the Note.
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4.4 Utility Rights. The Borrower shall not, without the
specific written consent of the Bank, transfer, sell, assign, or convey, either
in whole or in part, for use in connection with other property, even though
such property may be owned by the Borrower or otherwise, (a) any of the rights
to utility availability applicable to any Lot or Improvements granted by any
municipal utility district, other Governmental Authority or any other person,
or (b) any other utility capacity which may in the future be available to any
Lot or Improvements.
4.5 Alterations. The Borrower shall not commit or permit
any waste of any Lot or Improvements and shall not, without the prior written
consent of the Bank, make or permit to be made, any alterations or additions to
any Lot or Improvements other than construction of the Improvements as
contemplated herein.
4.6 Restrictions on Speculative Homes, Model Homes,
Single Family Houses in Austin and Inventoried Lots.
(a) The Borrower shall not, at any time during
the term of this Agreement, allow:
(i) the aggregate Deed of Trust Amounts
for all Speculative Homes (regardless of location) to be
greater than $7,500,000.00.
(ii) the number of all Single Family
Houses (other than Model Homes) under construction by, or
which have been completed and are still owned, by the Borrower
(whether or not such houses constitute Single Family Houses)
for which the Borrower does not have an executed Sales
Contract to constitute more than sixty percent (60%) of the
number of all Single Family Houses (other than Model Homes)
under construction by, or which have been completed and are
still owned by, the Borrower;
(iii) more than three (3) Speculative
Homes in any residential subdivision to be included in the
Borrowing Base;
(iv) the number of Model Homes included
in the Borrowing Base to be more than twelve (12), or the
number of Model Homes in any residential subdivision included
in the Borrowing Base to be more than two (2);
(v) the aggregate Deed of Trust Amounts for all
Single Family Houses within the greater metropolitan area of
Austin, Texas to be greater than $4,000,000.00;
(vi) the aggregate Deed of Trust Amounts for all
Inventoried Lots to exceed $1,500,000.00; or
(vii) the value (calculated at the greater of cost
or appraised value) of all lots (other than lots upon which
the Borrower intends to promptly commence
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construction of a Single Family House) owned by the Borrower
or any of its affiliates (whether or not such lots constitute
Inventoried Lots) to exceed $4,000,000.00.
(b) In the event of a breach of any of the
provisions of subsection (a) of this Section 4.6, the Borrower shall
immediately make a mandatory prepayment under Section 1.4 of this
Agreement on the Note in an amount necessary to bring the Borrower
into compliance with the provisions of this Section 4.6. For purposes
of this Section 4.6, a Single Family House shall be deemed to be a
Speculative Home unless the Bank has received a copy of an executed
Sales Contract with respect to such Single Family House.
4.7 Limitation on Aggregate Deed of Trust Amount. The
Borrower shall not, at any time during the term of this Agreement, allow the
Aggregate Deed of Trust Amount to exceed the Maximum Outstanding Amount. In
the event, at any time, the Aggregate Deed of Trust Amount exceeds the Maximum
Outstanding Amount, the Borrower shall immediately make a mandatory prepayment
under Section 1.4 of this Agreement on the Note in an amount necessary to bring
the Borrower into compliance with the provisions of this Section 4.7.
4.8 Flood Plain. No Lots or Single Family Houses shall
be located within the 100-year flood plain.
4.9 Financial Covenants. The Borrower shall not, at any
time during the term of this Agreement, allow:
(a) its Tangible Net Worth to be less than
$9,000,000.00 (as determined on a quarterly basis by the Bank);
(b) its Debt to Worth Ratio to be greater than
5.0 to 1.0 (as determined on a quarterly basis by the Bank); or
(c) its capital expenditures during any fiscal
year to exceed $500,000.00 (exclusive of expenditures to acquire Lots
and construct Single Family Houses in the ordinary course of its
business).
4.10 Loans and Advances to Employees, Etc. The Borrower
shall not at any time allow more than an aggregate amount of $200,000.00 in
loans and advances to be outstanding to its employees, officers, directors and
shareholders.
4.11 Investments, Loans and Advances. The Borrower shall
not make any investment in, make any loan or advance to, or sell, transfer or
otherwise dispose of any assets to, any Person (including, without limitation
Pacific USA or any subsidiary or other affiliate of Pacific USA) except sales
of assets permitted by Section 4.3 of this Agreement and loans and advances
permitted by Section 4.10 of this Agreement. The Borrower will maintain
separate bank accounts for its operations, and will not commingle any of its
funds with the funds of any other Person.
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4.12 Merger and Consolidation. The Borrower shall not
merge or consolidate with any Person, enter into any partnerships or joint
ventures, or acquire any other entity.
4.13 Restrictions on Undeveloped Land. The Borrower shall
not own or acquire any undeveloped land or undeveloped lots other than Lots and
Inventoried Lots.
Section 5. Commitment to Lend; Conditions
to the Bank's Obligations to Make Advances
5.1 Bank's Commitment. Subject to the terms and
provisions hereof, the Bank agrees to lend to the Borrower, and the Borrower
may borrow from the Bank, from time to time during the term hereof, amounts not
to exceed the Maximum Outstanding Amount. The Borrower may borrow, repay and
re-borrow amounts under the Revolving Line of Credit as herein provided.
5.2 Borrowing Procedure.
(a) Each advance under this Agreement shall be in
an aggregate principal amount of at least $10,000.00. Any advance may
be made directly to an account maintained by the Borrower with the
Bank or, if the Borrower so requests and the Bank agrees, to any
person on behalf of the Borrower, including a Title Insurer or its
agent acting as escrow agent in connection with the purchase of a Lot.
If requested by the Bank, the Borrower shall maintain a special
checking account with the Bank into which all advances hereunder shall
be deposited and against which only checks for Costs of Construction
shall be drawn.
(b) In order for the Borrower to obtain an
advance hereunder, the Borrower shall deliver to the Bank at least one
(1) Business Day before the requested date of such advance, a Loan
Application in which the Borrower shall specify or certify the
following:
(i) the amount of such advance requested;
(ii) the date of such requested advance,
which shall be a Business Day;
(iii) the Maximum Outstanding Amount, the
Aggregate Deed of Trust Amount, the outstanding balance of the
Revolving Line of Credit and the available amount per the most
recent Borrowing Base Report, all as of the date on which such
notice is given;
(iv) that no Default or Event of Default
is then existing;
(v) that the advance by the Bank of the
requested advance will not result in or give rise to a Default
or an Event of Default; and
(vi) that the representations and
warranties of the Borrower contained in this Agreement are
true and correct as of the date on which such notice is given.
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(c) Simultaneously with the funding by the Bank
of the initial advance with respect to any Lot or Improvements, the
Borrower shall cause a Title Insurer to (i) record in the Official
Public Records of Real Property of the appropriate county, a Deed of
Trust with respect to such Lot and the Improvements to be constructed
thereon and (ii) issue the Title Insurance.
(d) (i) Simultaneously with the funding by
the Bank of the initial advance with respect to any Inventoried Lot,
the Borrower shall pay to the Bank a fee in the amount of one-fourth
percent ( 1/4%) of the Deed of Trust Amount of such Inventoried Lot.
(ii) Simultaneously with the funding by
the Bank of the initial advance with respect to any Lot or
Improvements (including any lot which was previously an Inventoried
Lot) , the Borrower shall pay to the Bank a fee in the amount of
one-fourth percent ( 1/4%) of the Deed of Trust Amount of such Lot or
Improvements.
(e) Notwithstanding any provision to the contrary
contained in this Agreement or in any other Security Instrument, in no
event shall the Borrower be entitled to an advance hereunder, and the
Bank shall have no obligation to advance any amount hereunder, unless
at the time of such advance (i) the Borrower is in full compliance
with all of the provisions of this Section 5.2, (ii) no Default or
Event of Default is then existing and (iii) such advance will not
result in the outstanding balance of the Revolving Line of Credit
being in excess of the Maximum Outstanding Amount. Once the Bank has
received notice of a requested advance, such notice shall not
thereafter be revocable.
5.3 Guidance Line. Notwithstanding anything contained in
this Agreement, the Note or any other Security Instrument to the contrary, the
Bank, in its sole discretion, shall have the right, prior to the initial
advance under the Revolving Line of Credit with respect to any Lot or
Improvements, to disapprove of the inclusion by the Borrower of such Lot or
Improvements in the Borrowing Base. Upon such disapproval, such Lot or
Improvement shall be ineligible for inclusion in the Borrowing Base and shall
not be used in the calculation of the Borrowing Base Value. In deciding
whether to disapprove of the inclusion of any Lot or Improvements in the
Borrowing Base, the Bank may consider, among other matters, (i) the condition,
financial or otherwise, existing or potential, of the Borrower, (ii) the
existing or potential condition of the single family house construction
business generally, (iii) the type of floor plan or specifications to which the
Improvements are to be built and (iv) the residential subdivision in which the
Lot is to be located. The rights of the Bank under this Section 5.3 are in
addition to any other rights the Bank may have under this Agreement or any
other Security Instrument to not make advances under the Revolving Line of
Credit, including, without limitation, any right that may exist as a result of
the Borrower's failure to comply with the provisions of Section 5.2 hereof.
5.4 Bank's Discretion. All conditions precedent to the
inclusion of any Lot or Improvements in the Borrowing Base are imposed solely
and exclusively for the benefit of the Bank and are to be enforced and
monitored solely and exclusively by the Bank in accordance with the provisions
of the Security Instruments. No Person (including the Borrower) other than the
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Bank shall have any standing to require satisfaction of any such conditions.
Any and all of such conditions may be freely waived (in whole or in part) by
the Bank, at any time or times, at the Bank's sole discretion.
5.5 Involuntary Borrowings.
(a) If the Borrower shall fail, refuse or neglect
to make any payment or perform any act required by the Security
Instruments, then at any time after the Bank gives five (5) days
written notice of the Bank's intention to take such action (except in
case the Bank determines that an emergency exists, or its security is
imminently threatened, in which event the Bank shall not be required
to give any notice to or demand upon the Borrower), without waiving or
releasing any other right, remedy or recourse the Bank may have
because of same, the Bank may (but shall not be obligated to) make
such payment or perform such act for the account of and at the expense
of the Borrower, and shall have the right to enter upon any Lot and
into any Improvements thereon for such purpose and to take all such
action thereon and with respect to such Lots and Improvements as it
may deem necessary or appropriate. If the Borrower shall elect not to
pay any real estate or personal property tax, or any other tax, charge
or assessment with respect to any Lot or any Improvements, the Bank
may do so in reliance on any bill, statement or assessment procured
from the appropriate Governmental Authority or other issuer thereof
without inquiring into the accuracy or validity thereof. Similarly,
in making any payments to protect the security intended to be created
by the Security Instruments, the Bank shall not be bound to inquire
into the validity of any apparent or threatened adverse title, lien,
encumbrance or claim before making an advance for the purpose of
preventing or removing the same.
(b) THE BORROWER HEREBY AGREES TO INDEMNIFY THE
BANK FOR ALL LOSSES, EXPENSES, DAMAGES, CLAIMS AND CAUSES OF ACTION,
INCLUDING ATTORNEYS' FEES, INCURRED OR ACCRUING BY REASON OF ANY ACTS
PERFORMED BY THE BANK PURSUANT TO THE PROVISIONS OF THIS SECTION 5.5
OR BY REASON OF ANY OTHER SIMILAR PROVISION IN ANY OTHER SECURITY
INSTRUMENT. ALL SUMS PAID BY THE BANK PURSUANT TO THIS SECTION 5.5 OR
SUCH OTHER PROVISIONS OF THE SECURITY INSTRUMENTS, AND ALL OTHER SUMS
EXPENDED BY THE BANK TO WHICH IT SHALL BE ENTITLED TO BE INDEMNIFIED,
TOGETHER WITH INTEREST THEREON AT THE MAXIMUM RATE, SHALL CONSTITUTE
ADVANCES UNDER THE REVOLVING LINE OF CREDIT, SHALL BE SECURED BY THE
LIENS CREATED BY THE SECURITY INSTRUMENTS AND SHALL BE PAID BY THE
BORROWER TO THE BANK IMMEDIATELY UPON DEMAND.
Section 6. Events of Default and Remedies
6.1 Events of Default. Any of the following events which
shall occur and be continuing shall be considered an Event of Default as that
term is used herein:
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(a) The Borrower does not pay when due any
payment, whether a regularly scheduled installment or a mandatory
prepayment, required on the Note or any other Indebtedness, and such
failure to pay continues for five (5) days after the Bank gives
written notice thereof to the Borrower;
(b) The Borrower does not pay within thirty (30)
days after the originally scheduled maturity (but after expiration of
any grace period applicable to such maturity) or when due whether by
acceleration or otherwise of all or any part of any Debt of the
Borrower to any other Person, except that the foregoing shall not
apply to indebtedness on open account which is being disputed in good
faith by the Borrower;
(c) The Borrower is unable to satisfy any
condition of the right to receive an advance hereunder for a period in
excess of thirty (30) calendar days;
(d) The Borrower does not comply with or fails in
the performance of any covenant contained in Section 3.1, 4.6, 4.9 or
4.10 of this Agreement;
(e) The Borrower does not comply with or fails in
the performance of any other covenant, duty or obligation contained in
this Agreement or in any of the other Security Instruments to be kept
or performed by the Borrower if such failure continues for fifteen
(15) days after the Bank gives written notice thereof to the Borrower;
(f) Any representation or warranty made by the
Borrower herein or in any of the other Security Instruments proves to
have been untrue in any material respect as of the date hereof, or any
representation, statement (including financial statements),
certificate or data furnished or made by the Borrower (or any officer,
accountant or attorney of the Borrower) hereunder proves to have been
untrue in any material respect, as of the date as of which the facts
therein set forth were stated or certified, and the same is not
remedied, to the Bank's satisfaction, in its sole discretion, within
fifteen (15) days after the Bank gives written notice thereof to the
Borrower;
(g) Either the Borrower or the General Partner
shall (i) discontinue business, dissolve or liquidate, (ii) make a
general assignment for the benefit of creditors, (iii) apply for or
consent to the appointment of a receiver, a trustee or liquidator of
itself or of all or a substantial part of its assets, (iv) be
adjudicated a bankrupt or insolvent, (v) file a voluntary petition in
bankruptcy or file a petition or answer seeking reorganization or an
arrangement with creditors or seeking to take advantage of any other
law (whether federal or state) relating to relief of debtors, or admit
(by answer, by default or otherwise) the material allegations of a
petition filed against it in any bankruptcy, reorganization,
arrangement, insolvency or other proceedings (whether federal or
state) relating to relief of debtors, (vi) suffer or permit to
continue unstayed and in effect for thirty (30) consecutive days any
judgment, decree or order, entered by a court of competent
jurisdiction, which approves a petition seeking reorganization of it
or appoints a receiver, trustee or liquidator of it or of all or a
substantial part of its assets, or (vii) take or omit
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to take any action for the purpose or with the result of effecting or
permitting any of the foregoing;
(h) The Borrower shall discontinue construction
of any of the Improvements or not carry on the construction of all of
the Improvements with reasonable dispatch and without interruption to
such an extent that it is unlikely, in the Bank's sole judgment, that
the Improvements will be completed within a reasonable period of time
following the commencement of construction thereof;
(i) Any governmental, judicial or legal authority having
jurisdiction over the Property orders or requires the construction of
the Improvements be stopped in whole or in part, or any required
approval, license or permit is withdrawn or suspended;
(j) A "default" or "event of default" occurs under of any
of the other Security Instruments and such default or event of default
continues beyond any applicable cure or grace period provided
therefore; or
(k) There is a material adverse change in either the
Borrower's or the General Partner's financial condition.
6.2 Remedies. Upon the happening of any Default, at the
option of the Bank, without notice to the Borrower, any commitment hereunder
shall be canceled. Upon the happening of an Event of Default specified in
Section 6.1(g), immediately and without notice, and upon the happening of any
other Event of Default specified in Section 6.1, at the option of the Bank,
without notice to the Borrower, the entire aggregate principal amount of the
Note then outstanding hereunder and the interest accrued thereon shall
thereupon become and be immediately due and payable without notice and without
presentment, demand, protest, notice of protest or other notice of default or
dishonor of any kind, all of which are hereby expressly waived by the Borrower.
In addition to all other remedies provided herein, the Bank may, at its option,
(1) institute appropriate proceedings to specifically enforce performance
thereof, (2) institute proceedings to appoint a receiver, as a matter of strict
right without regard to the solvency of the Borrower, for the purpose of
preserving the Lots and Improvements, or any part thereof, prevent waste, and
to protect all rights accruing to the Bank by virtue of this Agreement and the
other Security Instruments, (3) make any and all further improvements, whether
on-site or off-site, as may be determined by the Bank for the purpose of
completing the development and construction of the Improvements in accordance
with this Agreement and (4) exercise any and all other rights, remedies and
recourses granted under the Security Instruments or otherwise now or hereafter
existing, in equity, at law, by virtue of statute or otherwise. All expenses
incurred in connection with the appointment of a receiver, or in
protecting, preserving or improving the Lots or Improvements, or any part
thereof, shall be chargeable against the Borrower and shall be enforced as a
lien against the Lots and Improvements.
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Section 7. Additional Agreements
7.1 Change of Ownership or Control. If at any time while
the Note shall be outstanding or the Bank has a commitment hereunder, (i) NHC
Holdings Corporation shall own less than all of the issued and outstanding
capital stock of the General Partner or (ii) NHC Homes, Inc. shall own less
than sixty percent (60%) of the partnership interests of Borrower, a "Change of
Ownership or Control" shall be deemed to have occurred. The Borrower and/or
the General Partner (as the case may be) shall immediately give written notice
to the Bank upon obtaining knowledge of an event which is or would constitute
the occurrence of a Change of Ownership or Control. The Bank shall, upon the
happening of a Change of Ownership or Control, have the privilege of declaring
the Note to be due and payable on a date not earlier than thirty (30) days from
the date of the exercise of said privilege. The Note shall thereupon become
due and payable on the date specified in the notice sent to the Borrower by the
Bank including the principal amount thereof plus accrued interest thereon to
the accelerated maturity date and any amounts owed by the Borrower to the Bank
pursuant to this Agreement or any of the other Security Instruments.
7.2 Change in Management. If at any time while the Note
shall be outstanding or the Bank has a commitment hereunder, Lonnie Fedrick
ceases to hold his current position with the General Partner or to perform the
functions and services for the General Partner which he currently performs,
other than as a result of a dismissal of Mr. Fedrick by the General Partner
for cause, the General Partner shall immediately give written notice of such
occurrence to the Bank and the Bank shall, upon such an occurrence, have the
privilege of declining to make any further advances under the Revolving Line of
Credit other than advances with respect to Lots and Improvements thereon, the
initial advances for which were made by the Bank prior to such occurrence.
Section 8. Closing
The commencement of advances pursuant to the Revolving Line of Credit
contemplated hereby shall be subject to the satisfaction of the following
conditions:
8.1 Counsel to Bank. All legal matters incident to the
transactions herein contemplated shall be satisfactory to Jenkens & Gilchrist,
A Professional Corporation, counsel to the Bank.
8.2 Required Documents. The Bank shall have received
executed copies of:
(a) this Agreement, with all exhibits;
(b) the Note;
(c) the Initial Deeds of Trust;
(d) the Financing Statement attached hereto as
Exhibit "G" and made a part hereof for all purposes;
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(e) a certificate of the Secretary of the General
Partner certifying (1) the Certificate of Incorporation of the General
Partner, (2) the Bylaws of the General Partner and (3) the resolutions
of the Board of Directors of the General Partner, in form and
substance satisfactory to the Bank, with respect to authorization of
this Agreement, the Note and the other Security Instruments and the
other instruments provided for herein, which certificate shall also
contain the names of officers of the General Partner of the Borrower
authorized to sign this Agreement, the Note, the other Security
Instruments and certificates related thereto together with the true
signatures of such officers, all of which shall be in form and
substance satisfactory to the Bank, together with true, correct and
complete copies of all such documents;
(f) a certificate of the General Partner of the Borrower
certifying (1) the Certificate of Limited Partnership of the Borrower,
(2) the Agreement of Limited Partnership of the Borrower and (3) the
resolutions of the partners of the Borrower, in form and substance
satisfactory to the Bank with authorization of this Agreement, the
Note and the other Security Instruments and the other instruments
provided for herein, which certificate shall state that the General
Partner is the sole general partner of the Borrower and that the
General Partner is authorized to sign this Agreement, the Note, the
other Security Instruments and certificates related thereto, all of
which shall be in form and substance satisfactory to the Bank,
together with true, correct and complete copies of all such documents;
(g) a Notice of Final Agreement;
(h) a written legal opinion from attorneys satisfactory
to the Bank, which legal opinion shall cover such matters, and be in a
form, as required by the Bank and its counsel;
(i) such Certificates of Insurance as the Bank may
reasonably require; and
(j) such other documents and instruments as the Bank may
reasonably require.
Section 9. Arbitration
9.1 Controversies Covered. This paragraph concerns the
resolution of any controversies or claims between the Borrower and the Bank,
including but not limited to those that arise from:
(a) This Agreement (including any renewals,
extensions or modifications of this Agreement);
(b) Any document, agreement or procedure related
to or delivered in connection with this Agreement;
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(c) Any violation of this Agreement; or
(d) Any claims for damages resulting from any
business conducted between the Borrower and the Bank, including claims
for injury to persons, property or business interests (torts).
9.2 United States Arbitration Act. At the request of the
Borrower or the Bank, any such controversies or claims will be settled by
arbitration in accordance with the United States Arbitration Act; provided,
however, in the event that it is determined that the United States Arbitration
Act is not applicable, then such arbitration shall be in accordance with the
Texas General Arbitration Act. THE UNITED STATES ARBITRATION ACT WILL APPLY
EVEN THOUGH THIS AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
9.3 Rules of Arbitration; Place of Arbitration.
Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration. The
arbitration will be conducted within Harris County, Texas.
9.4 Statute of Limitations. For purposes of the
application of the statute of limitations, the filing of an arbitration
pursuant to this paragraph is the equivalent of the filing of a lawsuit, and
any claim or controversy which may be arbitrated under this paragraph is
subject to any applicable statute of limitations. The arbitrators will have
the authority to decide whether any such claim or controversy is barred by the
statute of limitations and, if so, to dismiss the arbitration on that basis.
9.5 Dispute as to Subject Matter. If there is a dispute
as to whether an issue is arbitrable, the arbitrators will have the authority
to resolve any such dispute.
9.6 Confirmation and Enforcement. The decision that
results from an arbitration proceeding may be submitted to any authorized court
of law to be confirmed and enforced.
9.7 No Limitation on Rights. The provisions of this
Section 9 shall not limit the right of either the Borrower or the Bank to:
(a) exercise self-remedies such as setoff;
(b) foreclose against or sell any real or personal
property collateral; or
(c) act in a court of law, before, during or after the
arbitration proceeding to obtain:
(i) an interim remedy; and/or
(ii) additional or supplementary remedies;
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provided, however, the right to pursue a remedy referred to in
subparagraphs (a), (b) or (c) above shall not apply to the extent the
right to pursue such remedy itself is the subject of the arbitration
proceeding.
9.8 No Waiver. The pursuit of or a successful action for
interim, additional or supplementary remedies, or the filing of a court action,
does not constitute a waiver of the right of the Borrower or the Bank,
including the suing party, to submit the controversy or claim to arbitration if
the other party contests the lawsuit.
Section 10. Hazardous Substances.
10.1 Definition of Hazardous Substance. For purposes of
this Agreement, the term "Hazardous Substance" means and includes any
substance, material or waste, including asbestos, petroleum and petroleum
products (including crude oil), that is or becomes designated, classified or
regulated as "toxic" or "hazardous" or a "pollutant," or that is or becomes
similarly designated, classified or regulated, under any federal, state or
local law, regulation or ordinance.
10.2 Representation and Warranty Regarding Hazardous
Substances. After diligent inquiry and investigation, the Borrower represents
and warrants that, except as the Borrower has disclosed to the Bank in writing
prior to the execution of this Agreement, (i) no Hazardous Substance has been
disposed of, or released to or from, or otherwise now exists in, on, under or
around, any Lot, and (ii) no aboveground or underground storage tanks are now
or have ever been located on or under any Lot.
10.3 Compliance Regarding Hazardous Substances. The
Borrower has complied, and will comply and cause all persons who may come upon
the Lots to comply, with all federal, state and local laws, regulations and
ordinances governing or applicable to Hazardous Substances (Environmental
Laws), including those requiring disclosures to prospective and actual buyers
of all or any portion of the Lots. The Borrower will not install or allow to
be installed any aboveground or underground storage tanks on the Lots. The
Borrower must comply with the recommendations of any qualified environmental
engineer or other expert engaged by the Borrower or the Bank with respect to
the Lots.
10.4 Notices Regarding Hazardous Substances. The Borrower
must promptly notify the Bank in writing (i) if it knows, suspects or believes
there may be any Hazardous Substance in excess of those amounts permitted under
any Environmental Laws which require remedial action by Environmental Laws in
or around any part of the Lots, any Improvements constructed on the Lots, or
the soil groundwater or soil vapor on or under the Lots or that the Borrower or
any of the Lots may be subject to any investigation which is either pending or
threatened in writing by any governmental agency under any law, regulation or
ordinance pertaining to any Hazardous Substance, and (ii) of any claim made or
threatened by any person, other than a governmental agency, against the
Borrower arising out of or resulting from any Hazardous Substance in excess of
those amounts permitted under any Environmental Laws being present or released
in, on or around any part of the Lots, any Improvements constructed on the Lots
or the soil, groundwater
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or soil vapor on or under the Lots (any of the matters described in clauses (i)
and (ii) above a "Hazardous Substances Claim").
10.5 Site Visits, Observations and Testing.
(a) The Bank, its parent, subsidiary and
any affiliated companies, any assignees of any of the Bank's interest
in the Loan or the Security Instruments, any owners of participation
or other interests in the Loan or the Security Instruments, any
purchasers of the Property at any foreclosure sale or from the Bank or
any of its affiliates, and the officers, directors, employees and
agents of each of them (each individually, an "Indemnified Party," and
all collectively, the "Indemnified Parties"), have the right at any
reasonable time to enter and visit the Property for the purposes of
observing the Property, taking and removing soil or groundwater
samples and conducting tests on any part of the Property. The
Indemnified Parties have no duty, however, to visit or observe the
Property or to conduct tests, and no site visit, observation or
testing by any Indemnified Party imposes any liability on any
Indemnified Party. In no event will any site visit, observation or
testing by any Indemnified Party be a representation that Hazardous
Substances are or are not present in, on or under the Property, or
that there has been or will be compliance with any law, regulation or
ordinance pertaining to Hazardous Substances or any other applicable
governmental law. Neither the Borrower nor any other party is
entitled to rely on any site visit, observation or testing by any
Indemnified Party. The Indemnified Parties owe no duty of care to
protect the Borrower or any other party against or to inform the
Borrower or any other party of any Hazardous Substances or any other
adverse condition affecting the Property. Any Indemnified Party will
give the Borrower reasonable notice before entering the Property. The
Indemnified Party will make reasonable efforts to avoid interfering
with the Borrower's use of the Property in exercising any rights
provided in this Section.
(b) The Borrower must pay all costs and
expenses incurred by an Indemnified Party in connection with any
inspection or testing conducted due to any regulatory requirement, or
a reasonable belief by the Bank of any violation of any Environmental
Laws, or if the Borrower has notified the Bank under Section 10.4
hereof. The results of all investigations conducted and/or reports
prepared by or for any Indemnified Party must at all times remain the
property of the Indemnified Party and under no circumstances will any
Indemnified Party have any obligation whatsoever to disclose or
otherwise make available to the Borrower or any other party the
results of any other information obtained by any of them in connection
with the investigations and reports. Notwithstanding the foregoing,
the Indemnified Parties hereby reserve the right, and the Borrower
hereby expressly authorizes any Indemnified Party to make available to
any party, to the extent required by any legal requirement or court
order, any and all reports, whether prepared by any Indemnified Party
or prepared by the Borrower and provided to any Indemnified Party
(collectively, "Environmental Reports") that any Indemnified Party may
have with respect to the Property. The Borrower agrees that the
Indemnified Parties have no liability whatsoever as a result of
delivering any or all of the Environmental Reports or any information
contained therein to any third party in accordance with the
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terms hereof, and the Borrower hereby releases and forever discharges
the Indemnified Parties from any and all claims, damages, or causes of
action, arising out of, connected with or incidental to the
Environmental Reports or the delivery thereof.
10.6 Remedial Work. The Borrower must promptly undertake
any and all remedial work ("Remedial Work") in response to Hazardous Substances
Claims to the extent required by governmental agency or agencies involved or as
recommended by prudent business practices, if such standard requires a higher
degree of remediation, and in all events to minimize any impairment to the
Bank's security under the Security Instruments. All Remedial Work must be
conducted (a) in a diligent and timely fashion by licensed contractors acting
under the supervision of a consulting environmental engineer; (b) pursuant to a
detailed written plan for the Remedial Work approved by all public or private
agencies or persons with a legal or contractual right to such approval; (c)
with insurance coverage pertaining to liabilities arising out of the Remedial
Work as is then customarily maintained with respect to such activities; and (d)
only following receipt of any required permits, licenses or approvals. The
selection of the Remedial Work contractors and consulting environmental
engineer, the contracts entered into with such parties, any disclosures to or
agreements with any public or private agencies or parties relating to Remedial
Work and the written plan for the Remedial Work (and any changes thereto) at
the Bank's option, is subject to the Bank's prior written approval, which may
not be unreasonably withheld or delayed.
10.7 Secured Obligation. The obligations and rights of
the parties under this Article are secured by the Deeds of Trust until the
first to occur of full and final repayment of the Loan or the transfer of title
to all of the Property at a foreclosure sale under the Deeds of Trust, either
pursuant to judicial decree or the power of sale contained in the Deeds of
Trust or by deed in lieu of such foreclosure (any of the foregoing transfers
being referred to as a "Foreclosure Transfer"). The parties' obligations and
rights under this Article continue in full force and effect after the full and
final payment of the Loan or a Foreclosure Transfer, as the case may be, but
(i) in the case of a full and final payment of the Loan, the Borrower's
obligations under this Article are thereafter limited to the indemnification
obligations of Sections 10.8 and 10.9 as to Indemnified Costs (as defined
below) arising out of or as a result of events prior to the full and final
payment of the Loan, and (ii) in the case of a Foreclosure Transfer, the
obligations do not include the obligation to reimburse any Indemnified Party
for diminution in value of the Property resulting from the presence of
Hazardous Substances on the Property before the date of the Foreclosure
Transfer if, and to the extent, that the Indemnified Party recovers on a
deficiency judgment which included compensation for such diminution value;
provided, however, that nothing in this sentence impairs or limits an
Indemnified Party's right to obtain a judgment in accordance with applicable
law for any deficiency in recovery of all obligations that are secured by the
Deeds of Trust, including the Note. As used herein, the term "Indemnified
Costs" means all liabilities, claims, actions, causes of action, judgments,
orders, damages (including foreseeable and unforeseeable consequential
damages), costs, expenses, fines, penalties and losses (including sums paid in
settlement of claims and all consultant, expert and legal fees and expenses of
the Bank's counsel), including those incurred in connection with any
investigation of site conditions or any clean-up, remedial, removal or
restoration work (whether of the Property or any other property), or any
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resulting damages, harm or injuries to the person or property of any third
parties or to any natural resources.
10.8 INDEMNITY REGARDING HAZARDOUS SUBSTANCES. THE
BORROWER INDEMNIFIES, DEFENDS AND HOLDS THE INDEMNIFIED PARTIES HARMLESS FROM
AND AGAINST ANY AND ALL INDEMNIFIED COSTS DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RESULTING FROM ANY HAZARDOUS SUBSTANCE IN EXCESS OF THOSE AMOUNTS PERMITTED
UNDER ENVIRONMENTAL LAWS WHICH REQUIRES REMEDIAL ACTION BY ENVIRONMENTAL LAWS
BEING PRESENT OR RELEASED IN, ON OR AROUND ANY PART OF THE PROPERTY, OR IN THE
SOIL, GROUNDWATER OR SOIL VAPOR ON OR UNDER THE PROPERTY DURING THE BORROWER'S
OWNERSHIP OF THE PROPERTY, INCLUDING:
(a) ANY CLAIM FOR SUCH INDEMNIFIED COSTS
ASSERTED AGAINST ANY INDEMNIFIED PARTY BY ANY FEDERAL, STATE OR LOCAL
GOVERNMENTAL AGENCY, INCLUDING THE UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY, AND INCLUDING ANY CLAIM THAT ANY INDEMNIFIED PARTY
IS LIABLE FOR ANY SUCH INDEMNIFIED COSTS AS AN "OWNER" OR "OPERATOR"
OF THE PROPERTY UNDER ANY LAW RELATING TO HAZARDOUS SUBSTANCES; AND
(b) ANY CLAIM FOR SUCH INDEMNIFIED COSTS
ASSERTED AGAINST ANY INDEMNIFIED PARTY BY ANY PERSON OTHER THAN A
GOVERNMENTAL AGENCY, INCLUDING (I) ANY PERSON WHO MAY PURCHASE ALL OR
ANY PORTION OF THE PROPERTY FROM THE BORROWER, FROM ANY INDEMNIFIED
PARTY OR FROM ANY OTHER PURCHASER, (II) ANY PERSON WHO MAY AT ANY TIME
HAVE ANY INTEREST IN ALL OR ANY PORTION OF THE PROPERTY, (III) ANY
PERSON WHO MAY AT ANY TIME BE RESPONSIBLE FOR ANY CLEAN-UP COSTS OR
OTHER INDEMNIFIED COSTS RELATING TO THE PROPERTY, AND (IV) ANY PERSON
CLAIMING TO HAVE BEEN INJURED IN ANY WAY AS A RESULT OF EXPOSURE TO
ANY HAZARDOUS SUBSTANCE; AND
(c) ANY INDEMNIFIED COSTS INCURRED BY
ANY INDEMNIFIED PARTY IN THE EXERCISE BY THE INDEMNIFIED PARTY OF ITS
RIGHTS AND REMEDIES UNDER THIS AGREEMENT; AND
(d) ANY INDEMNIFIED COSTS INCURRED BY
ANY INDEMNIFIED PARTY AS A RESULT OF CURRENTLY EXISTING CONDITIONS IN,
ON OR AROUND THE PROPERTY, WHETHER KNOWN OR UNKNOWN BY THE BORROWER OR
THE INDEMNIFIED PARTIES AT THE TIME THIS AGREEMENT IS EXECUTED, OR
ATTRIBUTABLE TO THE ACTS OR OMISSIONS OF THE BORROWER, OR ANY OTHER
PERSON IN, ON OR AROUND THE PROPERTY WITH THE CONSENT OR UNDER THE
DIRECTION OF THE BORROWER.
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10.9 Defense of Indemnified Parties. Upon demand by any
Indemnified Party, the Borrower must defend any investigation, action or
proceeding involving any Indemnified Costs that is brought or commenced against
any Indemnified Party, whether alone or together with the Borrower or any other
person, all at the Borrower's own cost and by counsel approved by the
Indemnified Party. In the alternative, any Indemnified Party may elect to
conduct its own defense at the Borrower's expense.
10.10 Remedies Upon Default.
(a) In addition to any other rights or
remedies the Bank may have under this Agreement, at law or in equity,
upon the occurrence of an Event of Default under this Agreement, the
Bank may (i) pursue any remedies available to it under applicable
Texas law; and/or (ii) do or cause to be done whatever is necessary to
cause the Property to comply with any and all laws, regulations and
ordinances governing or applicable to Hazardous Substances, and any
other applicable law, rule, regulation, order or agreement, and the
cost thereof will become immediately due and payable upon demand by
the Bank, and if not paid when due will accrue interest at the Maximum
Rate until paid. Without limiting any of the remedies provided in the
Security Instruments, the Borrower acknowledges and agrees that: (i)
the provisions of this Article are environmental provisions made by
the Borrower relating to the real property security; and (ii) that the
Borrower's failure to comply with the terms of this Agreement is a
breach of contract giving the Bank the right to enforce monetary and
other remedies.
(b) The Borrower hereby acknowledges and
agrees that any amounts realized by the Bank by reason of the
following may be applied to pay the obligations secured by the Deeds
of Trust prior to being applied to pay the Borrower's obligations to
reimburse the Bank for costs and expenses, including those incurred by
the Bank in enforcing its rights and remedies under the provisions of
this Article: (i) any payments made pursuant to any Security
Instrument (other than payments made to the Bank for reimbursement of
costs and expenses or for enforcement of its rights and remedies under
the provisions of this Article); (ii) any foreclosure of any Deed of
Trust or the other documents evidencing or securing the Loan
(including any amounts realized by reason of any credit bid in
connection with any such foreclosure); (iii) any conveyance in lieu of
foreclosure; (iv) any other realization upon any security for the
Loan; (v) any recoveries against the Borrower personally (except for
recoveries against the Borrower for reimbursement of costs and
expenses or enforcement of the Borrower's rights and remedies under
this Article); and (vi) any recoveries against any person or entity
other than the Borrower (including any guarantor) to the maximum
extent permitted by applicable law.
Section 11. Miscellaneous
11.1 Survival of Various Matters. All representations and
warranties of the Borrower herein, and all covenants and agreements herein not
fully performed before the date of this Agreement, shall survive the execution
of this Agreement, delivery of the Note to the Bank and the making of advances
hereunder.
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11.2 Notices. All notices, requests and communications
hereunder shall be in writing and shall be sufficient in all respects if
delivered or sent by registered or certified mail to the Borrower or the Bank,
as the case may be, at their respective addresses set forth on the first page
of this Agreement. Any party may, by proper written notice hereunder to the
other party, change the address to which notices shall thereafter be sent to
it.
11.3 Successors and Assigns. All covenants and agreements
herein contained by or on behalf of the Borrower shall bind its successors and
assigns and shall inure to the benefit of the Bank and its successors and
assigns.
11.4 Renewals. All provisions of this Agreement relating
to the Note shall apply with equal force and effect to each and all promissory
notes hereafter executed which in whole or in part represent a renewal,
extension or rearrangement of any part of the indebtedness originally
represented by the Note.
11.5 No Waiver. No course of dealing on the part of the
Bank or its officers or employees, or any failure or delay by the Bank with
respect to exercising any right, power or privilege of the Bank under this
Agreement, the Note, or the other Security Instruments, shall operate as a
waiver thereof. The rights and remedies of the Bank under this Agreement, the
Note, and the other Security Instruments shall be cumulative and the exercise
or partial exercise of any such right or remedy shall not preclude the exercise
of any other right or remedy. No advance under the Revolving Line of Credit
shall constitute a waiver of any of the conditions of the Bank's obligation to
make further advances nor, in the event the Borrower is unable to satisfy any
such condition, shall any such waiver have the effect of precluding the Bank
from thereafter declaring such inability to be an Event of Default as herein
provided.
11.6 Governing Law. This Agreement and the Note which may
be issued hereunder shall be deemed to be contracts made under and shall be
construed in accordance with and governed by the laws of the State of Texas.
The parties hereto hereby irrevocably submit to the non-exclusive jurisdiction
of any Texas or Federal Court sitting in Dallas, Texas over any suit, action or
proceeding arising out of or relating to any of the Security Instruments.
11.7 Non-Subordination. The Note shall never be in a
position subordinate to any indebtedness owing to any other creditor of the
Borrower, except to the extent that such other creditor may hold a lien or
liens on specific assets of the Borrower which do not constitute Collateral, or
with the knowledge and written consent of the Bank.
11.8 Consent to Deviation. The procedure to be followed
by the Borrower to obtain the consent of the Bank to any deviation from the
negative covenants in Section 4 shall be as follows:
(a) The Borrower shall send a written notice to
the Bank setting forth (i) the covenants of Section 4 relevant to the
matter, (ii) the requested deviation from the covenants involved, and
(iii) the reason for the Borrower's request to deviate from the
covenants; and
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(b) The Bank, within ten (10) days after
receiving the request, shall send a written notice to the Borrower,
signed by the President, Vice-President or other senior officer of the
Bank, permitting or refusing the request. Failure to send said notice
in such time period shall be deemed refusal of said request.
11.9 Exhibits. The Exhibits and Schedules attached to
this Agreement are incorporated herein for all purposes, and shall be
considered a part of this Agreement. Those exhibits are: Form of Note -
Exhibit "A"; Form of Initial Deed of Trust - Exhibit "B"; Form of Supplement -
Exhibit "C"; Form of Loan Application - Exhibit "D", Form of Certificate of
Compliance - Exhibit "E", and Insurance Requirements - Exhibit "F"; the
schedule is: Exceptions to Representations and Warranties - Schedule "1".
11.10 Payment on Non-Business Days. Except to the extent
otherwise set forth herein, whenever (i) any payment to be made hereunder or
under the Note or (ii) any certificate, report or financial statement is due on
a day that is not a Business Day, such payment shall be made or such document
shall be delivered on the next succeeding Business Day and such extension of
time shall be included in the computation of interest due with any such
payment.
11.11 Severability. In the event any one or more of the
provisions contained in this Agreement, the Note, or the other Security
Instruments, or in any other instrument referred to herein or executed in
connection with or as security for the Note shall, for any reason, be held to
be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, the Note, or the other Security Instruments, or any other instrument
referred to herein or executed in connection with or as security for the Note.
Furthermore, in lieu of such invalid, illegal or unenforceable provision, there
shall automatically be added a provision as similar in terms to such invalid,
illegal or unenforceable provision as may be possible and as may be valid,
legal and enforceable.
11.12 Controlling Document. Should a direct conflict exist
between the specific terms of the Note, this Agreement or any of the other
Security Instruments, the Note shall control over this Agreement and the other
Security Instruments, and this Agreement shall control over the other Security
Instruments and the exhibits attached to this Agreement.
11.13 Savings Clause. Nothing contained in this Agreement
or in the Note or in any other agreement or undertaking relating hereto shall
be construed to obligate the Borrower, under any circumstances whatsoever, to
pay interest in excess of the Maximum Rate. In the event that any sums
received from the Borrower are at any time under applicable law deemed or held
to provide a rate of interest in excess of the Maximum Rate, the effective rate
of interest on the loans hereunder shall be deemed reduced to and shall be the
Maximum Rate and the Borrower and all sureties, endorsers and guarantors shall
accept as their sole remedy under such circumstances either the return of any
sums of interest which may have been collected and which produced a rate in
excess of the Maximum Rate, or the application of those sums as a credit
against the unpaid principal amount of the Indebtedness, whichever remedy may
be elected by the Bank. In addition, in the event that the Note is prepaid or
the maturity of the Note is accelerated by reason of
41
<PAGE> 47
election by the Bank hereunder, then all unearned interest shall either be
canceled or, if theretofore paid, shall either be returned to the Borrower or
credited on the unpaid principal amount due under the Note, whichever action
may be elected by the Bank.
11.14 Participations and Assignments. The Bank shall have
the right, at its sole discretion, at any time and from time to time, to assign
its entire interest in, or to invite any Person to participate in portions of,
the Revolving Line of Credit.
11.15 Set Off. Upon the occurrence and during the
continuance of any Default, the Bank is hereby authorized at any time and from
time to time, without notice to the Borrower (any such notice being expressly
waived by the Borrower) to apply an administrative hold or similar action
against any and all deposits (general or special, time or demand, provisional
or final) at any time held by the Bank for the credit or, the account of the
Borrower, it being agreed that the Borrower shall not be entitled to access to
any of such deposits until such time, if at all, that such Default is cured.
In addition to the foregoing, upon the occurrence and during the continuance of
any Event of Default, the Bank is hereby authorized at any time and from time
to time, without notice to the Borrower (any such notice being expressly waived
by the Borrower) , to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Bank to or for the credit or the account
of the Borrower against any and all of the Indebtedness, irrespective of
whether or not the Bank shall have made any demand under this Agreement and
although such obligations may be unmatured. The Bank agrees promptly to notify
the Borrower after any such set off and application made by the Bank, provided
that the failure to give such notice shall not affect the validity of such set
off and application. The rights of the Bank under this Section 11.15 are in
addition to other rights and remedies (including, without limitation, other
rights of set off) which the Bank may have.
11.16 Form and Substance of Surveys, Appraisals and other
Documents. All proceedings taken in connection with the transactions provided
for herein, such as the preparation of Surveys, Appraisals and other documents
required or contemplated by this Agreement, the other Security Instruments or
otherwise, and the persons responsible for the execution and preparation
thereof, all subcontractors, sureties, insurers and the forms of Construction
Contracts, Sales Contracts and policies of insurance shall be satisfactory in
form, substance and coverage to the Bank and the Borrower shall deliver to the
Bank certified copies of all documents which it may request in connection
herewith.
11.17 Concerning the Revolving Line of Credit. The
Revolving Line of Credit is (i) a "Business Loan" as that term is used in the
Depository Institutions Regulation and Monetary Control Act of 1980, as
amended, and (ii) for business, commercial, investment or similar purposes and
not primarily for personal, family, household or agricultural use, as such
terms are used in Chapter One of the Texas Credit Code.
11.18 Concerning Representations and Warranties. No
investigation at any time made by or on behalf of the Bank shall diminish its
rights to rely upon the representations and warranties contained herein. All
statements contained in any certificate or other instrument delivered by the
Borrower or by any Person on behalf of the Borrower under or pursuant to this
42
<PAGE> 48
Agreement or in connection with the transactions contemplated hereby, shall
constitute additional representations and warranties made by the Borrower. The
representations and warranties contained herein shall be true and correct at
all times during the term hereof including, without limitation, at the time
each Financial Statement is submitted by the Borrower to the Bank and at the
time of each advance hereunder.
11.19 Purpose and Effect of Bank Approval. The Bank's
approval of any matter in connection with the Loan shall be for the sole
purpose of protecting the Bank's security and rights. No such approval shall
result in a waiver of any default of the Borrower. In no event shall the
Bank's approval with respect to a particular matter hereunder be construed as a
representation with regard to the matter itself being approved.
11.20 No Third Parties Benefited. This Agreement is made
and entered into for the sole protection and benefit of the Bank and the
Borrower and their permitted successors and assigns. No trust fund is created
by this Agreement and no other persons or entities shall have any right of
action under this Agreement or any right to the Loan funds.
11.21 Authority to File Notices. The Borrower irrevocably
appoints the Bank as its attorney-in-fact, with full power of substitution, to
file for record, at the Borrower's cost and expense and in the Borrower's name,
any notices of completion, notices of cessation of labor, or any other notices
that the Bank at its sole discretion may consider necessary or desirable to
protect its security, if the Borrower fails to do so after demand by the Bank.
11.22 Actions. The Bank shall have the right, but not the
obligation, to commence, appear in, and defend any action or proceeding which
might affect its security or its rights, duties or liabilities relating to the
Loan, the Property or any of the Security Instruments. The Borrower shall pay
promptly on demand all of the Bank's out-of-pocket costs, expenses and
reasonable legal fees and expenses of the Bank's counsel incurred in those
actions or proceedings.
11.23 Attorneys' Fees. If any lawsuit or arbitration is
commenced which arises out of or relates to this Agreement, the Security
Instruments or the Loan, the prevailing party shall be entitled to recover from
each other party such sums as the court or arbitrator may adjudge to be
reasonable attorneys' fees in the action or arbitration, in addition to costs
and expenses otherwise allowed by law. In all other situations, including any
matter arising out of or relating to any insolvency proceeding, the Borrower
agrees to pay all of the Bank's costs and expenses, including reasonable
attorneys' fees, which may be incurred in enforcing or protecting the Bank's
rights or interests. From the time(s) incurred until paid in full to the
Bank, all such sums shall bear interest at the Maximum Rate.
11.24 [Intentionally Deleted.]
11.25 Relationships With Other Bank Customers. From time
to time, the Bank may have business relationships with the Borrower's
customers, suppliers, contractors, tenants, partners, shareholders, officers or
directors, or with businesses offering products or services similar to those of
the Borrower, or with persons seeking to invest in, borrow from or lend to the
Borrower.
43
<PAGE> 49
The Borrower agrees that the Bank may extend credit to such parties and may
take any action it may deem necessary to collect the credit, regardless of the
effect that such extension or collection of credit may have on the Borrower's
financial condition or operations. The Borrower further agrees that in no
event shall the Bank be obligated to disclose to the Borrower any information
concerning any other Bank customer.
11.26 Disclosure to Title Company. Without notice to or
the consent of the Borrower, the Bank may disclose to any title insurance
company which insures any interest of the Bank under the Deeds of Trust
(whether as primary insurer, coinsurer or reinsurers) any information, data or
material in the Bank's possession relating to the Borrower, the Loan or the
Property which such title insurance company needs in connection with its
issuance or defense of such insurance.
11.27 Improvement District. The Borrower shall not vote in
favor of, or directly or indirectly advocate or assist in the incorporation of
any part of the Property into any improvement or community facilities district,
special assessment district or other district without the Bank's prior written
consent in each instance.
11.28 Interpretation. Whenever the context requires, all
words used in the singular will be construed to have been used in the plural,
and vice versa, and each gender will include any other gender. The captions of
the sections of this Agreement are for convenience only and do not define or
limit any terms or provisions. The word "include(s)" means "include(s),
without limitation," and the word "including" means "including, but not limited
to." No listing of specific instances, items or matters in any way limits the
scope or generality of any language of this Agreement. Time is of the essence
in the performance of this Agreement by the Borrower.
11.29 Amendments. This Agreement may not be modified or
amended except by a written agreement signed by the parties.
11.30 Counterparts. This Agreement and any attached
consents or exhibits requiring signatures may be executed in counterparts, and
all counterparts shall constitute but one and the same document.
11.31 Language of Agreement. The language of this
Agreement shall be construed as a whole according to its fair meaning, and not
strictly for or against any party.
11.32 No Oral Agreements. THIS AGREEMENT AND THE OTHER
SECURITY INSTRUMENTS REPRESENT THE FINAL AGREEMENTS BETWEEN THE BANK AND THE
BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE BANK AND THE BORROWER. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE BANK AND THE BORROWER.
44
<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the day and year first above written.
NEWMARK HOMES, L.P.,
a Texas limited partnership
By: Newmark Home Corporation,
a Nevada corporation,
General Partner
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
BANK OF AMERICA TEXAS, N.A.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
45
<PAGE> 51
SCHEDULE 1
None.
46
<PAGE> 1
EXHIBIT 10.4(b)
PROMISSORY NOTE SECURED BY DEED OF TRUST
$15,000,000.00 November 29, 1996 Irving, Texas
Interest Rates Available (see attached Exhibit I):
(a) Reference Rate plus 0.50%;
(b) LIBOR Rate plus 2.5%.
Maturity Date: Twenty-Four (24) months from the date hereof (see Paragraph 6
below).
- --------------------------------------------------------------------------------
1. FOR VALUE RECEIVED, NEWMARK HOMES, L.P., a Texas limited
partnership ("Borrower"), promises to pay to the order of BANK OF AMERICA
TEXAS, N.A., a national banking association ("Bank") at Bank's offices at 1925
W. John Carpenter Freeway, Irving, Texas 75063, or at such other place as Bank
from time to time may designate, the principal sum of FIFTEEN MILLION AND
N0/100 DOLLARS ($15,000,000.00) (the "Maximum Loan Amount"), or so much of that
sum as may be advanced under this promissory note ("Note"), plus interest as
specified in this Note. This Note evidences a loan ("Loan") from Bank to
Borrower.
2. This Note is secured by a Deed of Trust, Security Agreement
and Assignment of Rents and Leases ("Deed of Trust") covering certain real and
personal property, as therein described (the "Property"). It may also be
secured by other collateral. This Note and the Deed of Trust are two of
several Loan Documents, as defined and designated in a loan agreement (the
"Loan Agreement") between Bank and Borrower. Some or all of the Loan
Documents, including the Loan Agreement, contain provisions for the
acceleration of the maturity of this Note. This Note is issued pursuant to and
is entitled to the benefits of the Loan Agreement, the terms of which are
hereby incorporated by reference.
3. The principal sum outstanding from time to time under this
Note shall bear interest in accordance with the formulas set forth in Exhibit
A. Interest shall be calculated on the basis of a 365-day year and actual days
elapsed.
4. Accrued interest shall be payable on the first day of each
month in arrears, on any portion of the Loan bearing interest at the
Reference-based Rate, and on any Rate Portion having a Rate Period longer than
one month. (As used here, the terms "Reference-based Rate," "Rate Portion" and
"Rate Period" have the meanings given to them in Exhibit A.) In addition, all
interest accrued on any Rate Portion, regardless of its length, shall be due
and payable on the last day of the applicable Rate Period and with any
prepayment.
5. For purposes of this Note, "interest" shall include any and
all interest payable as provided in this Note, including Exhibit A.
<PAGE> 2
6. All principal and all accrued and unpaid interest shall be due
and payable no later than twenty-four (24) months from the date hereof (the
"Initial Term") subject to Bank's extension of the term for an additional
twelve (12) months, as described in paragraph 23 hereof.
7. Bank shall not be required to make any advance if that would
cause the outstanding principal of this Note to exceed the Maximum Outstanding
Amount (as such term is defined in the Loan Agreement).
8. Borrower may prepay some or all of the principal under this
Note, on the terms and subject to the conditions set forth in the Loan
Agreement and Exhibit B.
9. If Borrower fails to make any payment of interest within five
(5) days after it becomes due and payable, Borrower agrees to pay interest on
the late interest payment at an annual rate (the "Maximum Rate") of three (3)
percent in excess of the Reference- based Rate from the date the payment
becomes due until Borrower pays in full all accrued and unpaid interest due
under this Note.
10. From and after maturity of this Note, whether by acceleration
or otherwise, all sums then due and payable under this Note, including all
principal and all accrued and unpaid interest, shall bear interest until paid
in full at the Maximum Rate.
11. If any of the following "Events of Default" occur, any
obligation of the holder to make advances under this Note shall terminate, and
at the holder's option, exercisable in its sole discretion, all sums of
principal and interest under this Note shall become immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or
character:
(a) Borrower fails to perform any obligation under this
Note to pay principal or interest, and does not cure that failure within five
(5) days after the date when due; or
(b) Borrower fails to perform any other obligation under
this Note to pay money, and does not cure that failure within fifteen (15)
days after written notice from Bank; or
(c) Under any of the Loan Documents, a Default or Event
of Default (as defined in that document) occurs, except as provided in
Paragraph 12 below.
12. It shall be an "Event of Default" under this Note if Borrower
becomes the subject of any bankruptcy or other voluntary or involuntary
proceeding, in or out of court, for the adjustment of debtor-creditor
relationships (herein an "Insolvency Proceeding") and does not cause the same
to be dismissed or resolved within thirty (30) days. If that happens, any
obligation of the holder to make advances under this Note shall terminate, and
all sums of principal and interest under this Note shall automatically become
immediately due and payable without notice of default, notice of intent to
accelerate, notice of acceleration, presentment or demand for payment, protest
or notice of nonpayment or dishonor, or other notices or demands of any kind or
character, all of which are hereby expressly waived by Borrower.
Exhibit A - Page 2 of 6
<PAGE> 3
13. All amounts payable under this Note are payable in lawful
money of the United States during normal business hours on a Banking Day, as
defined in Article IV of Exhibit A. Checks constitute payment only when
collected.
14. If any lawsuit, proceeding or arbitration is commenced which
arises out of or relates to this Note, the Loan Documents or the Loan, the
prevailing party shall be entitled to recover from each other party such sums
as the court, referee or arbitrator may adjudge to be reasonable attorneys'
fees in the action, proceeding or arbitration, in addition to costs and
expenses otherwise allowed by law. In all other situations, including any
matter arising out of or relating to any Insolvency Proceeding, Borrower agrees
to pay all of Bank's costs and expenses, including attorneys' fees, which may
be incurred in enforcing or protecting Bank's rights or interests. From the
time(s) incurred until paid in full to Bank, all such sums shall bear interest
at the Maximum Rate.
15. Whenever Borrower is obligated to pay or reimburse Bank for
any attorneys' fees after an Event of Default, those fees shall include the
allocated costs for services of in-house counsel.
16. This Note is governed by the laws of the State of Texas,
without regard to the choice of law rules of that State.
17. Borrower agrees that the holder of this Note may accept
additional or substitute security for this Note, or release any security or any
party liable for this Note, or extend or renew this Note, all without notice to
Borrower and without affecting the liability of Borrower.
18. If Bank delays in exercising or fails to exercise any of its
rights under this Note, that delay or failure shall not constitute a waiver of
any of Bank's rights, or of any breach, default or failure of condition of or
under this Note. No waiver by Bank of any of its rights, or of any such
breach, default or failure of condition shall be effective, unless the waiver
is expressly stated in a writing signed by Bank. All of Bank's remedies in
connection with this Note or under applicable law shall be cumulative, and
Bank's exercise of any one or more of those remedies shall not constitute an
election of remedies.
19. This Note inures to and binds the heirs, legal
representatives, successors and assigns of Borrower and Bank; provided,
however, that Borrower may not assign this Note or any Loan funds, or assign or
delegate any of its rights or obligations, without the prior written consent of
Bank in each instance. Bank in its sole discretion may transfer this Note, and
may sell or assign participations or other interests in all or part of the
Loan, on the terms and subject to the conditions of the Loan Documents, all
without notice to or the consent of Borrower, but no such sale or assignment
shall release Bank from its obligations to fund the Loan. Also without notice
to or the consent of Borrower, Bank may disclose to any actual or prospective
purchaser of any securities issued or to be issued by Bank, and to any actual
or prospective purchaser or assignee of any participation or other interest in
this Note, the Loan or any other loans made by Bank to Borrower (whether
evidenced by this Note or otherwise), any financial or other information, data
or material in Bank's possession relating to Borrower, the Loan or the
Property, including any
Exhibit A - Page 3 of 6
<PAGE> 4
improvements on it. If Bank so requests, Borrower shall sign and deliver a new
note to be issued in exchange for this Note, but at no expense to Borrower.
20. As used in this Note, the terms "Bank," and "holder of this
Note" are interchangeable. As used in this Note, the word "include(s)" means
"include(s), without limitation," and the word "including" means "including,
but not limited to." Exhibits A, B and C are attached to this Note and are
incorporated in this Note by this reference.
21. If more than one person or entity are signing this Note as
Borrower, their obligations under this Note shall be joint and several.
22. Borrower has caused this Note to be executed by its general
partner, who was duly authorized and directed to do so by a resolution of the
partnership which was duly passed and adopted by the requisite number of
partners in accordance with the partnership agreement of Borrower. The general
partner of Borrower has caused this Note to be executed by its officers, who
were duly authorized and directed to do so by resolution of its Board of
Directors which was duly passed and adopted by the requisite number of members
of the Board at a meeting which was duly called, noticed and held.
23. In the event that Bank elects not to renew the revolving line
of credit evidenced by this Note at the Maturity Date, Bank will be obligated
for a period of not more than twelve (12) months from the Maturity Date to
continue funding construction costs associated with those improvements
constructed or being constructed on the Property on or before the Maturity Date
and for which Borrower has made application for advances to Bank in accordance
with the terms of the Loan Agreement. Notwithstanding anything contained
herein to the contrary, it is understood and agreed that no additional advances
will be made by Bank to Borrower during this additional twelve (12) month
period with respect to any improvements, the construction of which is commenced
after the Maturity Date or for which the initial request for advance by
Borrower under the Loan Agreement is submitted subsequent to the Maturity Date.
In addition, as a condition precedent to the extension of the term of this Note
for such additional twelve (12) month period as described above, Bank shall be
satisfied that no Event of Default shall have occurred and be continuing and no
other event shall have occurred and be continuing if the event, with notice or
the passage of time or both, would constitute such an Event of Default.
24. It is the intention of the parties hereto to comply strictly
with applicable usury laws; accordingly, notwithstanding any provision to the
contrary in this Note or in any of the Loan Documents, in no event shall this
Note or any of the Loan Documents require or permit the payment, charging,
taking, reserving or receiving of any sums constituting interest under
applicable laws which exceed the maximum amount permitted by such laws. If any
such excess interest is contracted for, charged, taken, reserved or received in
connection with the Loan evidenced this Note or in any of the Loan Documents,
or in any communication by Bank or any other person to Borrower or any other
party liable for payment of this Note, or in the event all or part of the
principal or interest thereof shall be prepaid or accelerated, so that under
any of such circumstances or under any other circumstance whatsoever the amount
of interest contracted for, charged, taken, reserved or received on the amount
of principal actually outstanding from time to
Exhibit A - Page 4 of 6
<PAGE> 5
time under this Note shall exceed the maximum amount of interest permitted by
applicable usury laws, then in any such event it is agreed as follows: (i) the
provisions of this paragraph shall govern and control, (ii) any such excess
shall be deemed an accidental or bona fide error and shall be canceled
automatically to the extent of such excess, and shall not be collected or
collectible, (iii) any such excess which is or has been received shall be
credited against the then unpaid principal balance of this Note or refunded to
Borrower, at Bank's option, and (iv) the effective rate of interest shall be
automatically reduced to the maximum lawful rate allowed under applicable law
as construed by courts having jurisdiction hereof or thereof. Without limiting
the foregoing, all calculations of the rate of interest contracted for,
charged, taken, reserved or received in connection herewith which are made for
the purpose of determining whether such rate exceeds the maximum lawful rate
shall be made to the extent permitted by applicable laws by amortizing,
prorating, allocating and spreading during the period of the full term of the
Loan, including all prior and subsequent renewals and extensions, all interest
at any time contracted for, charged, taken, reserved or received. The terms of
this paragraph shall be deemed to be incorporated in every Loan Document,
security instrument and communication relating to the Loan. The term
"applicable usury laws" shall mean such laws of the State of Texas or the laws
of the United States, whichever laws allow the higher rate of interest, as such
laws now exist; provided, however, that if such laws shall hereafter allow
higher rates of interest, then the applicable usury laws shall be the laws
allowing the higher rates to be effective as of the effective date of such
laws.
25. The provisions set forth in the preceding paragraph shall be
deemed to be incorporated into each of the documents executed in connection
with the Loan, and in every communication and writing relating to the Loan for
the purposes of determining the extent of the indebtedness set forth or
asserted therein, or otherwise contracted for, charged, taken, reserved or
received, as applicable, shall be recomputed automatically by Borrower or other
obligor, or by any court with proper jurisdiction concerning the same, or both,
as necessary to give effect to the adjustments and credits required and agreed
upon therein and the other agreements set forth therein, without the necessity
of any other communication or writing.
26. Under the Loan Agreement, Borrower may request advances and
make payments hereunder from time to time, provided that it is understood and
agreed that the aggregate principal amount outstanding from time to time
hereunder shall not at any time exceed the Maximum Outstanding Amount (as
defined in the Loan Agreement). The unpaid balance of this Note shall increase
and decrease with each new advance or payment hereunder, as the case may be.
This Note shall not be deemed terminated or cancelled prior to the Maturity
Date (or any extension), although the entire principal balance hereof may from
time to time be paid in full. Borrower may borrow, repay, and reborrow
hereunder. This Note is subject to mandatory prepayments as set forth in the
Loan Agreement. All payments of the indebtedness evidenced by this Note and by
any of the other Loan Documents (other than regularly scheduled interest
payments) shall be applied first to the principal amount outstanding hereunder
and then to any accrued but unpaid interest hereunder. All payments and
prepayments of principal of or interest on this Note shall be made in lawful
money of the United States of America in immediately available funds, at the
address of Bank indicated above, or such other place as the holder of this Note
shall designate in writing to Borrower. If any payment of principal of or
interest on this Note shall become due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day and any
Exhibit A - Page 5 of 6
<PAGE> 6
such extension of time shall be included in computing interest in connection
with such payment. As used herein, the term "Business Day" shall mean any day
other than a day on which commercial banks in the State of Texas are authorized
to be closed. The books and records of Bank shall be prima facie evidence of
all outstanding principal of and accrued and unpaid interest on this Note.
27. Borrower agrees that no advances under this Note shall be used
for personal, family or household purposes, and that all advances hereunder
shall be used only for business, commercial, investment or other similar
purposes.
28. Except as specifically provided herein, Borrower and any and
all endorsers and guarantors of this Note severally waive presentment for
payment, notice of nonpayment, protest, demand, notice of protest, notice of
intent to accelerate, notice of acceleration and dishonor, diligence in
enforcement and indulgences of every kind and without further notice hereby
agree to renewals, extensions, exchanges or releases of collateral, taking
additional collateral, indulgences or partial payments, either before or after
maturity.
THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENTS
BETWEEN BANK AND BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF BANK AND BORROWER. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANK AND BORROWER.
NEWMARK HOMES, L.P.
A TEXAS LIMITED PARTNERSHIP
By: Newmark Home Corporation,
a Nevada corporation,
General Partner
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Exhibit A - Page 6 of 6
<PAGE> 1
EXHIBIT 10.4(c)
When Recorded, Return To:
BANK OF AMERICA TEXAS, N.A.
1925 W. John Carpenter Freeway
Irving, Texas 75063
Attn: Robert J. Carroll
DEED OF TRUST, SECURITY AGREEMENT AND
ASSIGNMENT OF RENTS AND LEASES
STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTIES OF BRAZORIA, )
DALLAS, COLLIN, FORT BEND, )
GALVESTON, HARRIS, TRAVIS )
WILLIAMSON AND TARRANT )
THAT, NEWMARK HOMES, L.P., a Texas limited partnership ("GRANTOR"),
whose address is 10435 Greenbough, Suite 101, Stafford, Texas 77477 for and in
consideration of the sum of TEN DOLLARS ($10.00) to Grantor in hand paid by
Chris A. Peirson, Trustee, of Dallas County, Texas ("TRUSTEE"), in order to
secure the payment of the Indebtedness (as hereinafter defined) and the
performance of the obligations, covenants, agreements and undertakings of
Grantor hereinafter described, does hereby GRANT, BARGAIN, SELL, CONVEY,
TRANSFER, ASSIGN and SET OVER to Trustee the real estate (the "LAND") described
on Exhibit "A" attached to each Supplemental Deed of Trust, Security Agreement
and Assignment of Rents and Leases now or hereafter executed by Grantor and
incorporating by its terms this Deed of Trust (a "Supplemental Deed of Trust"),
TOGETHER WITH the following, whether now owned or hereafter acquired by
Grantor:
(a) all buildings and other improvements now or hereafter
attached to or placed, erected, constructed or developed on the Land
(the "IMPROVEMENTS") during the existence of this lien;
(b) all materials, equipment, fixtures, furnishings,
inventory and articles of personal property (the "PERSONAL PROPERTY")
whatsoever now or hereafter delivered to, attached to, installed in,
or used in or about the Improvements or which are necessary or useful
for the complete and comfortable use and occupancy of the Improvements
for the purposes for which they were or are to be attached, placed,
erected, constructed or developed, or which Personal Property is or
may be used in the development of the
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Improvements, and all renewals of or replacements or substitutions for
any of the foregoing whether or not the same shall be attached to the
Land or Improvements;
(c) all water and water rights, timber, crops, and
minerals and equipment now of hereafter delivered to and intended to
be installed in or on the Land or Improvements;
(d) all building materials and equipment now or hereafter
delivered to and intended to be installed in or on the Land or
Improvements;
(e) all security deposits and advance rentals under any
lease agreements now or at any time hereafter arising from or by
virtue of any transactions related to the Land, Improvements or the
Personal Property and held by or for the benefit of Grantor;
(f) all monetary deposits which Grantor has been required
to give to any public or private utility with respect to utility
services furnished to the Land or Improvements;
(g) all rents, issues, profits, revenues, royalties,
bonuses or other benefits of the Land, the Improvements or the
Personal Property, including, without limitation, cash or securities
deposited pursuant to leases of all or any part of the Land,
Improvements or Personal Property;
(h) all proceeds (including premium refunds) of each
policy of insurance relating to the Land, Improvements or Personal
Property;
(i) all proceeds from the taking of the Land,
Improvements, Personal Property or any part thereof or any interest or
right or estate appurtenant thereto by eminent domain or by purchase
in lieu thereof;
(j) all Grantor's rights (but not its obligations) under
any contracts related to the Land or Improvements;
(k) all Grantor's rights (but not its obligations) under
any documents, contract rights, commitments, accounts, general
intangibles (including trademarks, trade names and symbols used in
connection therewith) arising by virtue of any transactions related to
the Land, Improvements or Personal Property;
(l) all deposits, bank accounts, funds, instruments,
notes or chattel paper arising from or related to the Land,
Improvements or Personal Property;
(m) all permits, licenses, franchises, certificates and
other rights and privileges obtained in connection with the Land,
Improvements or Personal Property;
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(n) all plans, specifications, maps, surveys, reports,
architectural, engineering and construction contracts, books of
account, insurance policies and other documents, of whatever kind or
character, relating to the use, construction upon, occupancy, leasing,
sale or operation of the Land or Improvements;
(o) all oil, gas and other hydrocarbons and other
minerals produced from or allocated to the Land or Improvements and
all products processed or obtained therefrom, the proceeds thereof,
and all accounts and general intangibles under which such proceeds may
arise and all proceeds of the Personal Property;
(p) all easements and rights of way used in connection
with the Land or Improvements or as a means of ingress to or egress
from said Land or Improvements;
(q) all right, title and interest of Grantor in and to
all streets, roads, ways, alleys, public places, easements and
rights-of-way, existing or proposed, public or private, adjacent to or
used in connection with, belonging or pertaining to the Land or any
part thereof; and
(r) all rights, estates, powers, privileges and interests
of whatever kind or character appurtenant or incident to the
foregoing. If the estate of Grantor in any of the above-described
property is a leasehold estate (the "LEASEHOLD ESTATE"), this
conveyance shall include and the lien and security interest created
hereby shall encumber all additional title, estate, interest, and
other rights that may hereafter be acquired by Grantor in the property
demised under the Leasehold Estate. The above-described property is
collectively herein referred to as the "MORTGAGED PROPERTY."
TO HAVE AND TO HOLD the Mortgaged Property, together with the rights,
privileges and appurtenances thereto belonging unto the Trustee and his
successors or substitutes, forever in this trust and to his or their successors
and assigns, IN TRUST, however, upon the terms, provisions and conditions
herein set forth.
ARTICLE I
SECURED INDEBTEDNESS
1.1 SECURED INDEBTEDNESS. This Deed of Trust, Security Agreement
and Assignment of Rents and Leases (the "MORTGAGE") is made to secure and
enforce the payment of the following note, obligations, indebtedness and
liabilities:
(a) one certain promissory note dated November 29, 1996
in the original principal amount of FIFTEEN MILLION AND NO/100 DOLLARS
($15,000,000.00), made by Grantor and payable to the order of BANK OF
AMERICA TEXAS, N.A., whose
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address is 1925 W. John Carpenter Freeway, Irving, Texas, Attention:
Real Estate Group, with interest at the rate or rates therein
provided, both principal and interest being payable as therein
provided, and containing a provision for the payment of a reasonable
additional amount as attorneys' fees, and all modifications,
increases, renewals or extensions thereof, in whole or in part, and
all other notes given in substitution therefor or in modification,
increase, renewal or extension thereof, in whole or in part,
hereinafter referred to as the "NOTE" (said payee and all subsequent
holders of the Note or any part thereof or any of the Indebtedness [as
hereinafter defined] are hereinafter referred to as "NOTEHOLDER");
(b) that certain Loan Agreement dated November 29, 1996
between Grantor and Bank of America Texas, N.A., as the same may be
amended or modified from time to time (the "LOAN AGREEMENT"); and
(c) all future loans and advances made by Noteholder to
Grantor and all other debts, obligations and liabilities of every kind
and character of Grantor now or hereafter existing in favor of
Noteholder incurred or arising pursuant to the provisions of this
Mortgage or the Loan Agreement, whether such debts, obligations or
liabilities be direct or indirect, primary or secondary, joint or
several, fixed or contingent, and whether originally payable to
Noteholder or to a third party and subsequently acquired by Noteholder
and whether such debts, obligations and liabilities are evidenced by
note, open account, overdraft, endorsement, surety agreement, guaranty
or otherwise, it being contemplated that Grantor may hereafter become
indebted to Noteholder in further sum or sums.
The indebtedness referred to in this Article I is hereinafter collectively
referred to as the "INDEBTEDNESS." This Mortgage, the Note, the Loan Agreement
(as hereinafter defined) and any other instruments now or hereafter evidencing,
securing, governing, guaranteeing and/or, pertaining to the Indebtedness or any
part hereof are hereinafter collectively referred to as the "LOAN DOCUMENTS."
ARTICLE II
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
OF GRANTOR
2.1 REPRESENTATIONS AND WARRANTIES. Grantor does hereby represent
and warrant to Noteholder as follows:
(a) FINANCIAL MATTERS. Grantor is solvent, is not
bankrupt and has no outstanding liens, suits, garnishments,
bankruptcies or court actions which could render Grantor insolvent or
bankrupt. There has not been filed by or against Grantor a petition
in bankruptcy or a petition or answer seeking an assignment for the
benefit of creditors, the appointment of a receiver, a trustee,
custodian or liquidator with respect to Grantor or
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any substantial portion of Grantor's property, reorganization,
arrangement, rearrangement, composition, extension, liquidation or
dissolution or similar relief under the United States Bankruptcy Code
or any state law. All reports, statements and other data furnished by
Grantor to Noteholder in connection with the loan evidenced by the
Note are true and correct in all material respects and do not omit to
state any fact or circumstance necessary to make the statements
contained therein not misleading. No material adverse change has
occurred since the dates of such reports, statements and other data in
the financial condition of Grantor or of any tenant under leases
described in such reports, statements and other data. For the
purposes of this Paragraph, Grantor shall also include any
guarantor(s), surety(ies) and any joint venturer or general partner of
Grantor.
(b) TITLE AND AUTHORITY. Grantor is the lawful owner of
good, indefeasible and marketable title to the Land and Improvements
and has good right and authority to grant, bargain, sell, transfer,
assign and mortgage the Land and Improvements and to grant a security
interest in the Personal Property. Grantor does not do business with
respect to the Mortgaged Property under any trade name other than
"Fredrick - Harris Estate Homes".
(c) PERMITTED ENCUMBRANCES. The Mortgaged Property is
free and clear from all liens, security interests and encumbrances
except the lien and security interest evidenced hereby and the
Permitted Encumbrances (as defined in the Loan Agreement). There are
no mechanic's or materialmen's liens, lienable bills or other claims
constituting or that may constitute a lien on the Mortgaged Property,
or any part thereof.
(d) NO FINANCING STATEMENTS. There is no financing
statement covering all or any part of the Mortgaged Property or its
proceeds on file in any public office, which has not been terminated
or assigned to Noteholder.
(e) LOCATION OF PERSONAL PROPERTY. All tangible Personal
Property is located on the Land.
(f) NO HOMESTEAD. No portion of the Mortgaged Property
is being used as Grantor's business or residential homestead.
(g) NO DEFAULT OR VIOLATION. The execution, delivery and
performance of this Mortgage, the Note and all other Loan Documents do
not contravene, result in a breach of or constitute a default under
any mortgage, deed of trust, lease, promissory note, loan agreement or
other contract or agreement to which Grantor is a party or by which
Grantor or any of its properties may be bound or affected and do not
violate or contravene any law, order, decree, rule or regulation to
which Grantor is subject.
(h) COMPLIANCE WITH COVENANTS AND LAWS. The Mortgaged
Property and the intended use thereof by Grantor comply with all
applicable restrictive covenants, zoning
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ordinances and building codes, flood disaster laws, applicable health
and environmental laws and regulations and all other applicable laws,
statutes, ordinances, rules, regulations, orders, determinations and
court decisions, including, without limitation, the Americans With
Disabilities Act of 1990 and TEX. REV. CIV. STAT. ANN. art. 9102, as
amended, (all of the foregoing hereinafter sometimes collectively
referred to as "APPLICABLE LAWS") without reliance upon grandfather
provisions or adjacent or other properties. Grantor has obtained all
requisite zoning, utility, building, health and operating permits from
the governmental authority or municipality having jurisdiction over
the Mortgaged Property. All engineering specifications with respect
to the Mortgaged Property are within applicable environmental
standards.
(i) ENVIRONMENTAL. To the best knowledge of Grantor,
without investigation, no asbestos, material containing asbestos which
is or may become friable or material containing asbestos deemed
hazardous by Applicable Laws has been installed in the Mortgaged
Property. Grantor is not in violation of or subject to any existing,
pending or, to the best knowledge of Grantor, threatened investigation
or inquiry by any governmental authority or to any remedial
obligations under any Applicable Laws pertaining to health or the
environment (such Applicable Laws as they now exist or are hereafter
enacted and/or amended hereinafter sometimes collectively referred to
as "APPLICABLE ENVIRONMENTAL LAWS") , including without limitation,
the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 (collectively, together with any
subsequent amendments hereinafter referred to as "CERCLA"), the
Resource Conservation and Recovery Act of 1976, as amended by the Used
Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of
1980, and the Hazardous and Solid Waste Amendments of 1984
(collectively, together with any subsequent amendments hereinafter
called "RCRA"), the Texas Water Code and the Texas Solid Waste
Disposal Act, and, to the best knowledge of Grantor, without
investigation, this representation would continue to be true and
correct following disclosure to the applicable governmental
authorities of all relevant facts, conditions and circumstances, if
any, pertaining to the Mortgaged Property and Grantor. Grantor has
not obtained and, to the best knowledge of Grantor, without
investigation, is not required to obtain any permits, licenses or
similar authorizations to construct, occupy, operate or use any
buildings, improvements, fixtures or equipment forming a part of the
Mortgaged Property by reason of any Applicable Environmental Laws.
The use which Grantor makes and intends to make of the Mortgaged
Property will not result in the disposal or other release of any
hazardous substance or solid waste on or to the Mortgaged Property.
The terms "HAZARDOUS SUBSTANCE" and "RELEASE" as used in this Mortgage
shall have the meanings specified in CERCLA, and the terms "SOLID
WASTE" and "DISPOSAL" (or "DISPOSED") shall have the meanings
specified in RCRA; provided, in the event either CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such
broader meaning shall apply subsequent to the effective date of such
amendment and provided further, to the extent that the laws of the
State of Texas establish a meaning for the terms "HAZARDOUS
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SUBSTANCE," "RELEASE," "SOLID WASTE," or "DISPOSAL," (or "DISPOSED")
which is broader than that specified in either CERCLA or RCRA, such
broader meaning shall apply.
(j) NO SUITS. There are no judicial or administrative
actions, suits or proceedings pending or, to the best of Grantor's
knowledge, threatened against or affecting Grantor, any other person
liable, directly or indirectly, for the Indebtedness, or the Mortgaged
Property or involving the validity, enforceability or priority of any
of the Loan Documents.
(k) CONDITION OF PROPERTY. The Mortgaged Property is
served by electric, storm and sanitary sewers, sanitary water supply,
telephone and other utilities required for the use thereof as
represented by Grantor at or within the boundary lines of the
Mortgaged Property. All streets, alleys and easements necessary to
serve the Mortgaged Property for the use represented by Grantor have
been completed and are serviceable and such streets have been
dedicated and accepted by applicable governmental entities. The
Mortgaged Property is in good condition and repair with no deferred
maintenance and is free from damage caused by fire or other casualty.
Grantor is aware of no latent or patent structural or other
significant defect or deficiency in the Mortgaged Property. Design
and as-built conditions of the Mortgaged Property are such that no
drainage or surface or other water will drain across or rest upon
either the Mortgaged Property or land of others. None of the
Mortgaged Property is within a flood plain. None of the improvements
on the Mortgaged Property create an encroachment over, across or upon
any of the Mortgaged Property boundary lines, rights of way or
easements and no buildings or other improvements on adjoining land
create such an encroachment.
(l) ORGANIZATION. Grantor is a limited partnership duly
organized and validly existing under the laws of the State of Texas.
Grantor has all requisite power and all governmental certificates of
authority, licenses, permits, qualifications and other documentation
to own, lease and operate its properties and to carry on its business
as now conducted and as contemplated to be conducted.
(m) ENFORCEABILITY. The Note, this Mortgage and all
other Loan Documents constitute the legal, valid and binding
obligations of Grantor enforceable in accordance with their terms.
The execution and delivery of, and performance under, the Note, this
Mortgage and all other Loan Documents are within Grantor's powers and
have been duly authorized by all requisite action and are not in
contravention of the powers of Grantor's charter, bylaws or other
corporate papers if Grantor is a corporation, or of Grantor's
partnership or joint venture agreement if Grantor is a partnership or
joint venture, or of Grantor's limited partnership agreement if
Grantor is a limited partnership.
(n) NOT A FOREIGN PERSON. Grantor is not a "FOREIGN
PERSON" within the meaning of the Internal Revenue Code of 1986, as
amended (hereinafter called the "CODE"), Sections 1445 and 7701 (i.e.,
Grantor is not a non-resident alien, foreign
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corporation, foreign partnership, foreign trust or foreign estate, as
those terms are defined in the Code and regulations promulgated
thereunder).
2.2 COVENANTS AND AGREEMENTS. So long as the Indebtedness or any
part thereof remains unpaid, Grantor covenants and agrees with Noteholder as
follows:
(a) PAYMENT AND PERFORMANCE. Grantor will make prompt
payment, as the same becomes due, of the Indebtedness and shall
punctually and properly perform all of Grantor's covenants,
obligations and liabilities under the Loan Documents.
(b) EXISTENCE. Grantor will continuously maintain its
existence and its right to do business in the State of Texas together
with its franchises and trade names.
(c) TAXES ON NOTE AND OTHER TAXES. Grantor will promptly
pay all income, franchise and other taxes owing by Grantor and any
stamp taxes which may be required to be paid with respect to the Note,
this Mortgage or any other Loan Documents.
(d) OPERATION OF MORTGAGED PROPERTY. Grantor will
construct and maintain the Mortgaged Property in a good and
workmanlike manner and in accordance with all Applicable Laws and will
pay all fees or charges of any kind in connection therewith. Grantor
will keep the Mortgaged Property occupied so as not to impair the
insurance carried thereon. Grantor will not use or occupy, or allow
the use or occupancy of, the Mortgaged Property in any manner which
violates any Applicable Law or which constitutes a public or private
nuisance or which makes void, voidable or cancelable, or increases the
premium of, any insurance then in force with respect thereto. Grantor
will not initiate or permit any zoning reclassification of the
Mortgaged Property or seek any variance under existing zoning
ordinances applicable to the Mortgaged Property or use or permit the
use of the Mortgaged Property in such a manner which would result in
such use becoming a nonconforming use under applicable zoning
ordinances or other Applicable Laws. Grantor will not impose any
restrictive covenants or encumbrances upon the Mortgaged Property,
execute or file any subdivision plat affecting the Mortgaged Property
or consent to the annexation of the Mortgaged Property to any
municipality, without the prior written consent of Noteholder.
Grantor shall not cause or permit any drilling or exploration for, or
extraction, removal or production of, minerals from the surface or
subsurface of the Mortgaged Property. Grantor will not do or suffer
to be done any act whereby the value of any part of the Mortgaged
Property may be lessened. Grantor will allow Noteholder or its
authorized representative to enter the Mortgaged Property at any
reasonable time to inspect the Mortgaged Property and Grantor's books
and records pertaining thereto and Grantor will assist Noteholder or
said representative in whatever way necessary to make such inspection.
If Grantor receives a notice or claim from any federal, state or other
governmental entity pertaining to the Mortgaged Property, including,
without limitation, a notice that the Mortgaged Property is not in
compliance
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with any Applicable Law, Grantor will promptly furnish a copy of such
notice or claim to Noteholder.
(e) DEBTS FOR CONSTRUCTION. Grantor will cause all debts
and liabilities of any character, including without limitation all
debts and liabilities for labor, material and equipment and all debts
and charges for utilities servicing the Mortgaged Property, incurred
in the construction, maintenance, operation and development of the
Mortgaged Property to be promptly paid.
(f) AD VALOREM TAXES. Grantor will cause to be paid
prior to delinquency all taxes and assessments heretofore or hereafter
levied or assessed against the Mortgaged Property, or any part
thereof, or against Trustee or Noteholder for or on account of the
Note or any other Indebtedness or the interest created by this
Mortgage and will furnish Noteholder with receipts showing payment of
such taxes and assessments at least ten (10) days prior to the
applicable default date therefor; provided that Grantor may in good
faith, by appropriate proceedings, contest the validity,
applicability, or amount of any asserted tax or assessment, and
pending such contest Grantor shall not be deemed in default hereunder
if:
(i) Grantor shall diligently prosecute such
contest in a manner not prejudicial to the rights, liens and
security interests of Noteholder;
(ii) prior to delinquency of the asserted tax or
assessment Grantor establishes with Noteholder an escrow
acceptable to Noteholder adequate to cover the payment of such
tax or assessment with interest, costs and penalties and a
reasonable additional sum to cover possible costs, interest
and penalties (which escrow shall be returned to Grantor upon
payment of all such taxes, assessments, interest, costs and
penalties or disbursed in accordance with the resolution of
the contest to the claimant) or furnishes Noteholder with an
indemnity bond secured by a deposit in cash or other security
acceptable to Noteholder, or with a surety acceptable to
Noteholder, in the amount of the tax or assessment being
contested by Grantor plus a reasonable additional sum to pay
all costs, interests and penalties which may be imposed or
incurred in connection therewith;
(iii) Grantor pays to Noteholder promptly after
demand therefor all costs and expenses incurred by Noteholder
in connection with such contest; and
(iv) Grantor promptly causes to be paid any amount
adjudged by a court of competent jurisdiction to be due, with
all costs, penalties and interest thereon, promptly after such
judgment becomes final and unappealable;
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provided, however, that in any event each such contest shall be
concluded and the tax, assessment, penalties, interest and costs shall
be paid prior to the date any writ or order is issued under which the
Mortgaged Property may be sold.
(g) CONDEMNATION. Immediately upon obtaining knowledge
of the institution of any proceedings for the condemnation of the
Mortgaged Property or any portion thereof, or any other proceedings
arising out of injury or damage to the Mortgaged Property, or any
portion thereof, Grantor will notify Noteholder of the pendency of
such proceedings. Noteholder may participate in any such proceedings,
and Grantor shall from time to time deliver to Noteholder all
instruments requested by it to permit such participation. Grantor
shall, at its expense, diligently prosecute any such proceedings, and
shall consult with Noteholder, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such
proceedings. All proceeds of condemnation awards or proceeds of sale
in lieu of condemnation with respect to the Mortgaged Property and all
judgments, decrees and awards for injury or damage to the Mortgaged
Property shall be paid to Noteholder and shall be applied, first, to
reimburse Noteholder or Trustee for all costs and expenses, including,
without limitation, reasonable attorneys' fees, incurred in connection
with collection of such proceeds and, second, the remainder of said
proceeds shall be applied, at the sole discretion of Noteholder, to
the payment of the Indebtedness (without premium or penalty) in the
order determined by Noteholder in its sole discretion or paid out to
repair or restore the Mortgaged Property so affected by such
condemnation, injury or damage. In any event the unpaid portion of
the Indebtedness shall remain in full force and effect and Grantor
shall not be excused in the payment thereof. In the event any of the
foregoing proceeds are applied to the repair, restoration or
replacement of the Mortgaged Property, Grantor shall promptly commence
and complete such repair, restoration or replacement of the Mortgaged
Property as nearly as possible to its value, condition and character
immediately prior to such damage or taking in accordance with plans
and specifications submitted to and approved by Noteholder. Grantor
hereby assigns and transfers all such proceeds, judgments, decrees and
awards to Noteholder and agrees to execute such further assignments of
all such proceeds, judgments, decrees and awards as Noteholder may
request. Noteholder is hereby authorized, in the name of Grantor, to
execute and deliver valid acquittances for, and to appeal from, any
such judgment, decree or award. Noteholder shall not be, in any event
or circumstances, liable or responsible for failure to collect, or
exercise diligence in the collection of, any such proceeds, judgments,
decrees or awards.
(h) PROTECTION AND DEFENSE OF LIEN. If the validity or
priority of this Mortgage or of any rights, titles, liens or security
interests created or evidenced hereby with respect to the Mortgaged
Property or any part thereof shall be endangered or questioned or
shall be attacked directly or indirectly or if any legal proceedings
are instituted against Grantor with respect thereto, Grantor will give
prompt written notice thereof to Noteholder and at Grantor's own cost
and expense will diligently endeavor to cure any defect that may be
developed or claimed, and will take all necessary and proper
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steps for the defense of such legal proceedings, including, without
limitation, the employment of counsel, the prosecution or defense of
litigation and the release or discharge of all adverse claims, and
Trustee and Noteholder, or either of them (whether or not named as
parties to legal proceedings with respect thereto) are hereby
authorized and empowered to take such additional steps as in their
judgment and discretion may be necessary or proper for the defense of
any such legal proceedings or the protection of the validity or
priority of this Mortgage and the rights, titles, liens and security
interests created or evidenced hereby, including, without limitation,
the employment of counsel, the prosecution or defense of litigation,
the compromise or discharge of any adverse claims made with respect to
the Mortgaged Property, the purchase of any tax title and the removal
of prior liens or security interests (including, without limitation,
the payment of debts as they mature or the payment in full of matured
or unmatured debts, which are secured by these prior liens or security
interests), and all expenses so incurred of every kind and character
shall be subject to and covered by the provisions of Paragraph 2.3
hereof.
(i) NO OTHER LIENS. Grantor will not, without the prior
written consent of Noteholder, create, place or permit to be created
or placed, or through any act or failure to act, acquiesce in the
placing of, or allow to remain, any deed of trust, mortgage, voluntary
or involuntary lien, whether statutory, constitutional or contractual
(except for the lien for ad valorem taxes on the Mortgaged Property
which are not delinquent), security interest, encumbrance or charge,
or conditional sale or other title retention document, against or
covering the Mortgaged Property, or any part thereof, other than the
Permitted Encumbrances, regardless of whether the same are expressly
or otherwise subordinate to the lien or security interest created in
this Mortgage, and should any of the foregoing become attached
hereafter in any manner to any part of the Mortgaged Property without
the prior written consent of Noteholder, Grantor will cause the same
to be promptly discharged and released. Grantor will own all parts of
the Mortgaged Property and will not acquire any fixtures, equipment or
other property forming a part of the Mortgaged Property pursuant to a
lease, license or similar agreement, without the prior written consent
of Noteholder.
(j) FURTHER ASSURANCES. Grantor will, on request of
Noteholder, promptly:
(i) correct any defect, error or omission which
may be discovered in the contents of this Mortgage or in any
other instrument now or hereafter executed in connection
herewith or in the execution of acknowledgment thereof;
(ii) execute, acknowledge, deliver and record or
file such further instruments (including, without limitation,
further deeds of trust, security agreements, financing
statements, continuation statements and assignments of rents
or leases) and do such further acts as may be necessary,
desirable or proper to carry out more effectively the purposes
of this Mortgage and such other instruments and to subject to
the liens and security interests hereof and thereof any
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property intended by the terms hereof and thereof to be
covered hereby and thereby including, without limitation, any
renewals, additions, substitutions, replacements or
appurtenances to the Mortgaged Property;
(iii) execute, acknowledge, deliver, procure and
record or file any document or instrument (including, without
limitation, any financing statement) deemed advisable by
Noteholder to protect the lien or the security interest
hereunder against the rights or interests of third persons;
and
(iv) provide such certificates, documents,
reports, information, affidavits and other instruments and do
such further acts as may be necessary, desirable or proper in
the reasonable determination of Noteholder to enable
Noteholder to comply with the requirements or requests of any
agency having jurisdiction over Noteholder or any examiners of
such agencies with respect to the Indebtedness.
Grantor or the Mortgaged Property and Grantor will pay all costs
connected with any of the foregoing.
(k) FEES AND EXPENSES; INDEMNIFICATION. Grantor will pay
all appraisal fees, filing and recording fees, inspection fees, survey
fees, taxes, brokerage fees and commissions, abstract fees, title
policy fees, uniform commercial code search fees, escrow fees,
attorneys' fees, and all other costs and expenses of every character
incurred by Grantor or Noteholder in connection with the Indebtedness,
either at the closing thereof or at any time during the term thereof,
or otherwise attributable or chargeable to Grantor as owner of the
Mortgaged Property, and will reimburse Noteholder for all such costs
and expenses incurred by Noteholder. Grantor shall pay all expenses
and reimburse Noteholder for any expenditures, including, without
limitation, reasonable attorneys' fees and legal expenses, incurred or
expended in connection with:
(i) the breach by Grantor of any covenant herein
or in any other Loan Document;
(ii) Noteholder's exercise of any of its rights
and remedies hereunder or under the Note or any other Loan
Document or Noteholder's protection of the Mortgaged Property
and its lien and security interest therein; or
(iii) any amendments to this Mortgage, the Note or
any other Loan Document or any matter requested by Grantor or
any approval required hereunder.
Grantor will indemnify and hold harmless Trustee and Noteholder (for
purposes of this Subparagraph, the terms "TRUSTEE" and "NOTEHOLDER"
shall include the directors, officers, partners, employees,
representatives and agents of Trustee and Noteholder, respectively,
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and any persons or entities owned or controlled by, owning or
controlling, or under common control or affiliated with Trustee and
Noteholder, respectively) from and against, and reimburse them for,
all claims, demands, liabilities, losses, damages, causes of action,
judgments, penalties, costs and expenses (including, without
limitation, reasonable attorneys' fees) which may be imposed upon,
asserted against or incurred or paid by them by reason of, on account
of, or in connection with any bodily injury or death or property
damage occurring in or upon or in the vicinity of the Mortgaged
Property through any cause whatsoever or asserted against them on
account of any act performed or omitted to be performed hereunder by
Grantor or any of its partners, employees, agents, licensees or
invitees or on account of any transaction arising out of or in any way
connected with the Mortgaged Property or with this Mortgage, the Note
or any other Loan Documents. Without limitation of the foregoing, it
is the intention of Grantor and Grantor agrees that the foregoing
indemnities shall apply to each indemnified party with respect to
claims, demands, liabilities, losses, damages, causes of action,
judgments, penalties, costs and expenses (including, without
limitation, reasonable attorneys' fees) which in whole or in part are
caused by or arise out of the negligence of such (and/or any other)
indemnified party. However, such indemnities shall not apply to any
indemnified party to the extent the subject of the indemnification is
caused by or arises out of the gross negligence or willful misconduct
of such indemnified party. The foregoing indemnities shall not
terminate upon release, foreclosure or other termination of this
Mortgage but will survive foreclosure of this Mortgage or conveyance
in lieu of foreclosure and the repayment of the Indebtedness and the
discharge and release of this Mortgage and the other Loan Documents.
Any amount to be paid hereunder by Grantor to Noteholder and/or
Trustee shall be subject to and governed by the provisions of
Paragraph 2.3 hereof.
(l) WARRANTY. Grantor will warrant and forever defend
the title to the Mortgaged Property against the claims of all persons
whomsoever claiming or to claim the same or any part thereof, subject
to the Permitted Encumbrances.
(m) TAX ON LIEN. In the event of the enactment after
this date of any law of the State of Texas or of any other
governmental entity deducting from the value of property for the
purpose of taxation any lien or security interest thereon, or imposing
upon Noteholder the payment of the whole or any part of the taxes or
assessments or charges or liens herein required to be paid by Grantor,
or changing in any way the laws relating to the taxation of deeds of
trust or mortgages or security agreements or debts secured by deeds of
trust or mortgages or security agreements or the interest of the
mortgagee or secured party in the property covered thereby, or the
manner of collection of such taxes, so as to affect this Mortgage or
the Indebtedness or Noteholder, then, and in any such event,
Noteholder may, if, in the opinion of counsel for Noteholder, it is
lawful to require Grantor to make such payment and the making of such
payment would not result in the contracting for, charging or receiving
of interest beyond the maximum amount permitted by law, demand that
Grantor pay such taxes, assessments, charges or liens, or reimburse
Noteholder therefor, and if demanded by Noteholder, Grantor shall pay
such taxes,
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assessments, charges or liens, or reimburse Noteholder therefor,
immediately upon demand.
(n) CHANGE OF NAME, IDENTITY OR STRUCTURE. Grantor will
not change Grantor's name, identity (including its trade name or
names) or structure without notifying Noteholder of such change in
writing at least thirty (30) days prior to the effective date of such
change. Grantor will execute and deliver to Noteholder, prior to or
contemporaneously with the effective date of any such change, any
financing statement or financing statement change required by
Noteholder to establish or maintain the validity, perfection and
priority of the security interest granted herein. At the request of
Noteholder, Grantor shall execute a certificate in form satisfactory
to Noteholder listing the trade names under which Grantor intends to
operate the Mortgaged Property, and representing and warranting that
Grantor does business under no other trade name with respect to the
Mortgaged Property.
(o) ESTOPPEL CERTIFICATE. Grantor shall at any time and
from time to time furnish promptly upon request by Noteholder a
written statement in such form as may be required by Noteholder
stating that the Note, this Mortgage and the other Loan Documents are
valid and binding obligations of Grantor, enforceable against Grantor
in accordance with their terms; the unpaid principal balance of the
Note; the date to which interest on the Note is paid; that the Note,
this Mortgage and the other Loan Documents have not been released,
subordinated or modified; and that there are no offsets or defenses
against the enforcement of the Note, this Mortgage or any other Loan
Documents, or if any of the foregoing statements are untrue,
specifying the reasons therefor.
(p) PROCEEDS OF PERSONAL PROPERTY. Grantor shall account
fully and faithfully for and, if Noteholder so elects, shall promptly
pay or turn over to Noteholder the proceeds in whatever form received
from disposition in any manner of any of the Personal Property, except
as otherwise specifically authorized herein. Grantor shall at all
times keep the Personal Property and its proceeds separate and
distinct from other property of Grantor and shall keep accurate and
complete records of the Personal Property and its proceeds.
(q) LOAN AGREEMENT. Grantor will punctually perform and
discharge each and every obligation and undertaking of Grantor under
the Loan Agreement.
(r) PERMITTED ENCUMBRANCES. Grantor will comply with and
will perform all of the covenants, agreements and obligations imposed
upon it or the Mortgaged Property in the Permitted Encumbrances in
accordance with their respective terms and provisions. Grantor will
not modify or permit any modification of any Permitted Encumbrance,
without the prior written consent of Noteholder.
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(s) ENVIRONMENTAL. Grantor will not cause or permit the
Mortgaged Property or Grantor to be in violation of, or do anything or
permit anything to be done which will subject the Mortgaged Property
to any remedial obligations under, any Applicable Environmental Laws,
including without limitation CERCLA, RCRA, the Texas Water Code and
the Texas Solid Waste Disposal Act, assuming disclosure to the
applicable governmental authorities of all relevant facts, conditions
and circumstances, if any, pertaining to Grantor and/or the Mortgaged
Property, and Grantor will notify Noteholder in writing promptly (but
in any event within five (5) days of knowledge thereof) of any
existing, pending or, to the best knowledge of Grantor, threatened
investigation or inquiry by any governmental authority in connection
with any Applicable Environmental Laws or the occurrence of any event
which may result in the violation of any Applicable Environmental
Laws, including, without limitation, the spill or other release of any
hazardous substance or solid waste onto the Mortgaged Property.
Grantor shall obtain any permits, licenses or similar authorizations
to construct, occupy, operate or use any buildings, improvements,
fixtures and equipment forming a part of the Mortgaged Property by
reason of any Applicable Environmental Laws. Grantor shall take all
steps necessary to determine that no hazardous substances or solid
waste are being disposed of or otherwise released on or to the
Mortgaged Property. Grantor will not cause or permit the disposal or
other release of any hazardous substance or solid waste on or to the
Mortgaged Property and covenants and agrees to keep or cause the
Mortgaged Property to be kept free of any hazardous substance or solid
waste and to remove the same (or if removal is prohibited by law, to
take whatever action is required by law) promptly upon discovery at
its sole expense. Upon Noteholder's reasonable request, at any time
and from time to time during the existence of this Mortgage, but no
more often than once during any calendar year unless Noteholder has a
reasonable suspicion that a violation of an applicable Environmental
Law has occurred with respect to the Mortgaged Property, Grantor will
provide at Grantor's sole expense an inspection or audit of the
Mortgaged Property from an engineering or consulting firm approved by
Noteholder, indicating the presence or absence of hazardous substances
and solid wastes on the Mortgaged Property. If Grantor fails to
provide same after ten (10) days' notice, Noteholder may order same,
and Grantor grants to Noteholder and its agents, employees,
contractors and consultants access to the Mortgaged Property and a
license (which is coupled with an interest and irrevocable while this
Mortgage is in effect) to perform inspections and tests. The cost of
such inspections and tests shall be a demand obligation owing by
Grantor to Noteholder pursuant to this Mortgage and shall be subject
to and covered by the provisions of Paragraph 2.3 hereof.
(t) ASBESTOS. Grantor covenants and agrees that it will
not install in the Mortgaged Property, nor permit to be installed in
the Mortgaged Property, asbestos, material containing asbestos which
is or may become friable or material containing asbestos deemed
hazardous by Applicable Environmental Law, and that, if any such
asbestos or material containing asbestos exists in or on the Mortgaged
Property, whether installed by Grantor or others, Grantor will remove
the same (or if removal is prohibited by law, will take whatever
action is required by law, including without limitation
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implementing any required operation and maintenance program) promptly
upon discovery at its sole expense. Upon Noteholder's reasonable
request, at any time and from time to time during the existence of
this Mortgage, Grantor shall provide at Grantor's sole expense an
inspection or audit of the Mortgaged Property from an engineering or
consulting firm approved by Noteholder, indicating the presence or
absence of asbestos or material containing asbestos on the Mortgaged
Property. If Grantor fails to provide same after ten (10) days'
notice, Noteholder may order same, and Grantor grants to Noteholder
and its agents, employees, contractors and consultants access to the
Mortgaged Property and a license (which is coupled with an interest
and irrevocable while this Mortgage is in effect) to perform
inspections and tests. The cost of such inspections and tests shall
be subject to and covered by the provisions of Paragraph 2.3 hereof.
2.3 RIGHT OF NOTEHOLDER TO PERFORM. Grantor agrees that, if after
prior request by Noteholder Grantor fails to perform any act or to take any
action which hereunder Grantor is required to perform or take, or to pay any
money which hereunder Grantor is required to pay, or takes any action
prohibited hereby, Noteholder, in Grantor's name or in its own name, may but
shall not be obligated to perform or cause to be performed such act or take
such action, including, without limitation, entering the Mortgaged Property for
such purpose and to take all such action thereon as it may deem necessary or
appropriate, or pay such money or remedy any action so taken, and any expenses
so incurred by Noteholder, and any money paid by Noteholder in connection
therewith, shall be a demand obligation owing by Grantor to Noteholder and
Noteholder, upon making such payment, shall be subrogated to all of the rights
of the party receiving such payment. Any amounts due and owing by Grantor to
Noteholder pursuant to this Mortgage shall bear interest from the date such
amount becomes due until paid at the rate of interest payable on matured but
unpaid principal of or interest on the Note and shall be a part of the
Indebtedness and shall be secured by this Mortgage and by any other Loan
Documents.
2.4 INDEMNIFICATION REGARDING ENVIRONMENTAL MATTERS. Grantor
agrees to indemnify and hold Noteholder and Trustee (for purposes of this
Paragraph, the terms "NOTEHOLDER" and "TRUSTEE" shall include the directors,
officers, partners, employees, representatives and agents of Noteholder and
Trustee, respectively, and any persons or entities owned or controlled by,
owning or controlling, or under common control or affiliated with Noteholder
and Trustee, respectively) harmless from and against, and to reimburse
Noteholder and Trustee with respect to, any and all claims, demands, losses,
damages (including consequential damages), liabilities, causes of action,
judgments, penalties, costs and expenses (including attorneys' fees and court
costs) of any and every kind or character, known or unknown, fixed or
contingent, imposed on, asserted against or incurred by Noteholder and/or the
Trustee at any time and from time to time by reason of, in connection with or
arising out of:
(a) the breach of any representation or warranty of
Grantor as set forth herein regarding asbestos, material containing
asbestos or Applicable Environmental Laws;
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(b) the failure of Grantor to perform any obligation
herein required to be performed by Grantor regarding asbestos,
material containing asbestos or Applicable Environmental Laws;
(c) any violation during the time Grantor holds title to
the Mortgaged Property of any Applicable Environmental Law in effect
on or before the date Grantor disposes of the Mortgaged Property;
(d) the removal of hazardous substances or solid wastes
from the Mortgaged Property (or if removal is prohibited by law, the
taking of whatever action is required by law) at any time during the
time Grantor holds title to the Mortgaged Property;
(e) the removal of asbestos or material containing
asbestos from the Mortgaged Property (or if removal is prohibited by
law, the taking of whatever action is required by law including
without limitation the implementation of any required operation and
maintenance program) at any time during the time Grantor holds title
to the Mortgaged Property;
(f) any act, omission, event or circumstance existing or
occurring during the time Grantor holds title to the Mortgaged
Property (including without limitation the release from the Mortgaged
Property of any hazardous substance or solid waste disposed of or
otherwise released during the time Grantor holds title to the
Mortgaged Property), resulting from or in connection with the
ownership, construction, occupancy, operation, use and/or maintenance
of the Mortgaged Property, regardless of whether the act, omission,
event or circumstance constituted a violation of any Applicable
Environmental Law at the time of its occurrence; and
(g) any and all claims or proceedings (whether brought by
private party or governmental agency) for bodily injury, property
damage, abatement or remediation, environmental damage or impairment
or any other injury or damage resulting from or relating to any
hazardous substance or solid waste located upon or migrating into,
from or through the Mortgaged Property during the time Grantor holds
title to the Mortgaged Property (whether or not any or all of the
foregoing was caused by Grantor or any tenant or subtenant of Grantor,
or any third party and whether or not the alleged liability is
attributable to the handling, storage, generation, transportation or
disposal of such substance or waste or the mere presence of such
substance or waste on the Mortgaged Property).
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However, such indemnities shall not be available to any indemnified party:
(i) to the extent the subject of the
indemnification is caused by or arises out of the negligence,
gross negligence or willful misconduct of such indemnified
party; or
(ii) if the subject of the indemnification is not
caused by or does not arise out of the negligence, gross
negligence or willful misconduct of Grantor, any director,
officer, employee, representative, agent, contractor or
subcontractor of Grantor, and (1) Grantor gives written notice
of the occurrence giving rise to such right of indemnification
within five (5) days of Grantor's knowledge thereof; (2)
Grantor diligently pursues collection efforts against the
person or persons responsible for the occurrence giving rise
to such indemnification claim; and (3) the Deed of Trust
Amount (as defined in the Loan Agreement) with respect to the
affected portion of the Mortgaged Property is removed from the
Borrowing Base (as defined in the Loan Agreement).
The foregoing indemnities shall not terminate upon the disposition of the
Mortgaged Property by Grantor or upon the release, foreclosure or other
termination of this Mortgage but will survive such disposition, foreclosure or
other termination, and the repayment of the Indebtedness and the discharge and
release of this Mortgage and the other Loan Documents. Any amount to be paid
hereunder by Grantor to Noteholder and/or Trustee shall be a demand obligation
owing by Grantor to Noteholder and/or Trustee and shall be subject to and
covered by the provisions of Paragraph 2.3 hereof. Nothing in this Paragraph,
elsewhere in this Mortgage or in any other Loan Document shall limit or impair
any rights or remedies of Noteholder and/or Trustee against Grantor or any
third party under Applicable Environmental Laws, including without limitation
any rights of contribution or indemnification available hereunder or
thereunder.
ARTICLE III
ASSIGNMENT OF RENTS, LEASES, PROFITS, INCOME,
CONTRACTS AND BONDS
3.1 ASSIGNMENT OF RENTS. Grantor does hereby absolutely and
unconditionally assign, transfer and set over to Noteholder all rents, income,
receipts, revenues, issues, profits and proceeds to be derived from the
Mortgaged Property, including without limitation the immediate and continuing
right to collect and receive all of the rents, income, receipts, revenues,
issues, profits and other sums of money that may now or at any time hereafter
become due and payable to Grantor under the terms of any leases now or
hereafter covering the Mortgaged Property, or any part thereof, including, but
not limited to, minimum rents, additional rents, percentage rents, deficiency
rents and liquidated damages following default, all proceeds payable under any
policy of insurance covering the loss of rents resulting from untenantability
caused by destruction or damage to the Mortgaged Property, and all of Grantor's
rights to recover monetary amounts from
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any tenant in bankruptcy including, without limitation, rights of recovery for
use and occupancy and damage claims arising out of lease defaults, including
rejections, under any Applicable Bankruptcy Law (as hereinafter defined),
together with any sums of money that may now or at any time hereafter become
due and payable to Grantor by virtue of any and all royalties, overriding
royalties, bonuses, delay rentals and any other amount of any kind or character
arising under any and all present and future oil, gas and mining leases
covering the Mortgaged Property or any part thereof (collectively, the
"RENTS"); and all proceeds and other amounts paid or owing to Grantor under or
pursuant to any and all contracts and bonds relating to the construction,
erection or renovation of the Mortgaged Property; subject, however, to a
license hereby granted by Noteholder to Grantor to collect and receive all of
the foregoing (such license evidenced by Noteholder's acceptance of the
Mortgage), subject to the terms and conditions hereof. Notwithstanding
anything contained herein or in any of the Loan Documents to the contrary, the
assignment in this Paragraph is an absolute, unconditional and presently
effective assignment and not merely a security interest; provided, however,
upon the occurrence of a Default (as hereinafter defined) hereunder or upon the
occurrence of any event or circumstance which with the lapse of time or the
giving of notice or both would constitute a Default hereunder, such license
shall automatically and immediately terminate and Grantor shall hold all Rents
paid to Grantor thereafter in trust for the use and benefit of Noteholder and
Noteholder shall have the right, power and authority, whether or not it takes
possession of the Mortgaged Property, to seek enforcement of any such lease,
contract or bond and to demand, collect, receive, sue for and recover in its
own name any and all of the above described amounts assigned hereby and to
apply the sum(s) collected, first to the payment of expenses incident to the
collection of the same, and the balance to the payment of the Indebtedness;
provided further, however, that Noteholder shall not be deemed to have taken
possession of the Mortgaged Property except on the exercise of its option to do
so, evidenced by its demand and overt act for such purpose. It shall not be
necessary for Noteholder to institute any type of legal proceedings or take any
other action whatsoever to enforce the assignment provisions in this Paragraph
3.1.
3.2 ASSIGNMENT OF LEASES. Grantor hereby assigns to Noteholder
all existing and future leases, including, without limitation, all subleases
thereof, and any and all extensions, renewals, modifications, and replacements
thereof, upon any part of the Mortgaged Property (collectively, the "LEASES").
Grantor hereby further assigns to Noteholder all guaranties of tenants'
performance under the Leases. Prior to a Default, Grantor shall have the
right, without joinder of Noteholder, to enforce the Leases, unless Noteholder
directs otherwise.
3.3 WARRANTIES CONCERNING LEASES AND RENTS. Grantor represents
and warrants that:
(a) Grantor has good title to the Leases and Rents and
authority to assign them, and no other person or entity has any right,
title or interest therein;
(b) all existing Leases are valid, unmodified and in full
force and effect, except as indicated herein, and no default exists
thereunder;
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(c) unless otherwise provided herein, no Rents have been
or will be assigned, mortgaged or pledged;
(d) no Rents have been or will be anticipated, waived,
released, discounted, set off or compromised; and
(e) except as indicated in the Leases, Grantor has not
received any funds or deposits from any tenant for which credit has
not already been made on account of accrued Rents.
3.4 GRANTOR'S COVENANTS OF PERFORMANCE. Grantor covenants to:
(a) perform all of its obligations under the Leases and
give prompt notice to Noteholder of any failure to do so;
(b) give immediate notice to Noteholder of any notice
Grantor receives from any tenant or subtenant under any Leases,
specifying any claimed default by any party under such Leases,
excluding, however, notices of default under residential leases;
(c) enforce the tenant's obligations under the Leases;
(d) defend, at Grantor's expense, any proceeding
pertaining to the Leases, including, if Noteholder so requests, any
such proceeding to which Noteholder is a party; and
(e) neither create nor permit any encumbrance upon its
interest as lessor of the Leases, except this Mortgage and any other
encumbrances permitted by this Mortgage.
3.5 PRIOR APPROVAL FOR ACTIONS AFFECTING LEASES. Grantor shall
not, without the prior written consent of Noteholder:
(a) receive or collect Rents more than one month in
advance;
(b) encumber or assign future Rents;
(c) waive or release any obligation of any tenant under
the Leases;
(d) cancel, terminate or modify any of the Leases; cause
or permit any cancellation, termination or surrender of any of the
Leases; or commence any proceedings for dispossession of any tenant
under any of the Leases, except upon default by the tenant thereunder;
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(e) renew or extend any of the Leases, except pursuant to
terms in existing Leases;
(f) permit any assignment of the Leases; or
(g) enter into any Leases after the date hereof.
3.6 SETTLEMENT FOR TERMINATION. Grantor agrees that no settlement
for damages for termination of any of the Leases under the Federal Bankruptcy
Code, or under any other federal, state or local statute, shall be made without
the prior written consent of Noteholder, and any check in payment of such
damages will be made payable to both Grantor and Noteholder. Grantor hereby
assigns any such payment to Noteholder to be applied to the Indebtedness as
Noteholder may elect and agrees to endorse any check for such payment to the
order of Noteholder.
3.7 NOTEHOLDER IN POSSESSION. Noteholder's acceptance of this
assignment shall not, prior to entry upon and taking possession of the
Mortgaged Property by Noteholder, be deemed to constitute Noteholder a
"mortgagee in possession," nor obligate Noteholder to appear in or defend any
proceedings relating to any of the Leases or to the Mortgaged Property, take
any action hereunder, expend any money, incur any expenses, or perform any
obligation or liability under the Leases, or assume any obligation for any
deposits delivered to Grantor by any tenant and not delivered to Noteholder.
Noteholder shall not be liable for any injury or damage to person or property
in or about the Mortgaged Property.
3.8 APPOINTMENT OF ATTORNEY. Grantor hereby appoints Noteholder
its attorney-in-fact, coupled with an interest, empowering Noteholder to
subordinate any Leases to this Mortgage.
3.9 INDEMNIFICATION. Grantor hereby indemnifies and holds
Noteholder (which shall include the directors, officers, partners, employees,
representatives and agents of Noteholder and any persons or entities owned or
controlled by, owning or controlling, or under common control or affiliated
with Noteholder) harmless from all liability, damage or expense imposed on or
incurred by Noteholder from any claims under the Leases, including, without
limitation, any claims by Grantor with respect to payments of Rents made
directly to Noteholder after Default and claims by tenant for security deposits
or for rental payments more than one (1) month in advance and not delivered to
Noteholder. All amounts indemnified against hereunder, including, without
limitation, attorneys' fees, if paid by Noteholder shall bear interest at the
maximum lawful rate and shall be payable by Grantor in accordance with
Paragraph 2.3 hereof. The foregoing indemnities shall not terminate upon the
foreclosure, release or other termination of this Mortgage but will survive
foreclosure of this Mortgage or conveyance in lieu of foreclosure and the
repayment of the Indebtedness and the discharge and release of this Mortgage
and the other Loan Documents.
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3.10 RECORDS. Upon request by Noteholder, Grantor shall deliver to
Noteholder executed originals of all Leases and copies of all records relating
thereto.
3.11 MERGER. There shall be no merger of the leasehold estates,
created by the Leases, with the fee estate of the Land without the prior
written consent of Noteholder.
3.12 RIGHT TO RELY. Grantor hereby authorizes and directs the
tenants under the Leases to pay Rents to Noteholder upon written demand by
Noteholder without further consent of Grantor, and the tenants may rely upon
any written statement delivered by Noteholder to the tenants. Any such payment
to Noteholder shall constitute payment to Grantor under the Leases. The
provisions of this Paragraph are intended solely for the benefit of the tenants
and shall never inure to the benefit of Grantor or any person claiming through
or under Grantor, other than a tenant who has not received such notice. The
assignment of Rents set forth in Paragraph 3.1 is not contingent upon any
notice or demand by Noteholder to the tenants.
ARTICLE IV
EVENTS OF DEFAULT
DEFAULTS. The term "DEFAULT" as used in this Mortgage shall mean the
occurrence of any of the following events:
4.1 EXECUTION ON MORTGAGED PROPERTY. The Mortgaged Property or
any part thereof is taken on execution or other process of law in any action
against Grantor; or
4.2 ABANDONMENT. Grantor abandons all or a portion of the
Mortgaged Property; or
4.3 ACTION BY OTHER LIENHOLDER. The holder of any lien or
security interest on the Mortgaged Property (without hereby implying the
consent of Noteholder to the existence or creation of any such lien or security
interest) declares a default thereunder or institutes foreclosure or other
proceedings for the enforcement of its remedies thereunder; or
4.4 TRANSFER OF MORTGAGED PROPERTY. Except for sales permitted in
accordance with the terms of Paragraph 6.29 hereof, or without the prior
written consent of Noteholder, Grantor sells, leases, exchanges, assigns,
transfers, conveys or otherwise disposes of all or any part of the Mortgaged
Property or any interest therein, or legal or equitable title to the Mortgaged
Property, or any interest therein, is vested in any other party, in any manner
whatsoever, by operation of law or otherwise, it being understood that the
consent of Noteholder required hereunder may be refused by Noteholder in its
sole discretion or may be predicated upon any terms, conditions and covenants
deemed advisable or necessary in the sole discretion of Noteholder, including,
without limitation, the right to change the interest rate, date of maturity or
payments of principal and/or interest on the Note, to require payment of any
amount as additional consideration as a transfer fee or otherwise and to
require assumption of the Note and this Mortgage; or
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4.5 DESTRUCTION OF MORTGAGED PROPERTY. The Mortgaged Property is
so demolished, destroyed or damaged that, in the judgment of Noteholder, it
cannot be restored or rebuilt with available funds to a profitable condition
within a reasonable period of time; or
4.6 CONDEMNATION. So much of the Mortgaged Property is taken in
condemnation, or sold in lieu of condemnation, or the Mortgaged Property is so
diminished in value due to any injury or damage to the Mortgaged Property, that
the remainder thereof cannot, in the judgment of Noteholder, continue to be
operated profitably for the purpose for which it was being used immediately
prior to such taking, sale or diminution; or
4.7 LOAN AGREEMENT. The occurrence of an Event of Default, as
defined in the Loan Agreement.
ARTICLE V
REMEDIES AND RELATED RIGHTS
If a Default shall occur, Noteholder may exercise any one or more of the
following remedies and shall, in addition to any other rights, have the
following related rights, without notice (unless notice is required by
Applicable Laws):
5.1 ACCELERATION. Upon the occurrence of a Default, Noteholder
shall have the option of declaring all Indebtedness in its entirety to be
immediately due and payable, and the liens and security interests evidenced
hereby shall be subject to foreclosure in any manner provided for herein or
provided for by law as Noteholder may elect.
5.2 POSSESSION. Upon the occurrence of a Default, or any event or
circumstance which, with the lapse of time or the giving of notice, or both,
would constitute a Default hereunder, Noteholder is authorized prior or
subsequent to the institution of any foreclosure proceedings to enter upon the
Mortgaged Property, or any part thereof, and to take possession of the
Mortgaged Property and of all books, records and accounts relating thereto and
to exercise without interference from Grantor any and all rights which Grantor
has with respect to the management, possession, operation, protection or
preservation of the Mortgaged Property, including the right to rent the same
for the account of Grantor and to deduct from such rents all costs, expenses
and liabilities of every character incurred by Noteholder in collecting such
rents and in managing, operating, maintaining, protecting or preserving the
Mortgaged Property and to apply the remainder of such rents to the Indebtedness
in such manner as Noteholder may elect in its sole discretion. All such costs,
expenses and liabilities incurred by Noteholder in collecting such rents and in
managing, operating, maintaining or preserving the Mortgaged Property, if not
paid out of rents as hereinabove provided, shall constitute a demand obligation
owing by Grantor and shall be subject to and covered by Paragraph 2.3 hereof.
If necessary to obtain the possession provided for above, Noteholder may invoke
any and all legal remedies to dispossess Grantor,
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including, without limitation, one or more actions for forcible entry and
detainer, trespass to try title and restitution. In connection with any action
taken by Noteholder pursuant to this Paragraph 5.2, Noteholder shall not be
liable for any loss sustained by Grantor resulting from any failure to let the
Mortgaged Property, or any part thereof, or from any other act or omission of
Noteholder in managing the Mortgaged Property unless such loss is caused by the
willful misconduct and bad faith of Noteholder, nor shall Noteholder be
obligated to perform or discharge any obligation, duty or liability under any
Lease covering the Mortgaged Property or any part thereof or under or by reason
of this instrument or the exercise of rights or remedies hereunder. Grantor
shall and does hereby agree to indemnify Noteholder for, and to hold Noteholder
(which shall include the directors, officers, partners, employees,
representatives and agents of Noteholder and any persons or entities owned or
controlled by, owning or controlling or under common control or affiliated with
Noteholder) harmless from any and all liability, loss or damage which may or
might be incurred by Noteholder under any such Lease or under or by reason of
this Mortgage or the exercise of rights or remedies hereunder and from any and
all claims and demands whatsoever which may be asserted against Noteholder by
reason of any alleged obligations or undertakings on its part to perform or
discharge any of the terms, covenants or agreements contained in any such
Lease. Should Noteholder incur any such liability, the amount thereof,
including costs, expenses and reasonable attorneys' fees, shall be subject to
and covered by Paragraph 2.3 hereof. Nothing in this Paragraph 5.2 shall
impose any duty, obligation or responsibility upon Noteholder for the control,
care, management or repair of the Mortgaged Property, nor for the carrying out
of any of the terms and conditions of any such Lease; nor shall it operate to
make Noteholder responsible or liable for any waste committed on the Mortgaged
Property by the tenants or by any other parties or for any dangerous or
defective condition of the Mortgaged Property, or for any negligence in the
management, upkeep, repair or control of the Mortgaged Property resulting in
loss or injury or death to any tenant, licensee, employee or stranger;
provided, however, Noteholder shall be liable for its own gross negligence or
wilfull misconduct in the management, upkeep, repair or control of the
Mortgaged Property which directly results in loss or injury or death to any
tenant, licensee, employee or stranger. Grantor hereby assents to, ratifies
and confirms any and all actions of Noteholder with respect to the Mortgaged
Property taken under this Paragraph 5.2 and agrees that the foregoing indemnity
shall not terminate upon release, foreclosure or other termination of this
Mortgage.
5.3 FORECLOSURE. Upon the occurrence of a Default, Trustee, his
successor or substitute, is authorized and empowered and it shall be his
special duty at the request of Noteholder to sell the Mortgaged Property or any
part thereof situated in the State of Texas at the courthouse of any county in
the State of Texas in which any part of the Mortgaged Property is situated, at
public venue to the highest bidder for cash. The sale shall take place at such
area of the courthouse as shall be properly designated from time to time by the
commissioners court (or, if not so designated by the commissioners court, at
the courthouse door) of the specified county, between the hours of 10 o'clock
a.m. and 4 o'clock p.m. (the commencement of such sale to occur within three
hours following the time designated in the hereinafter described notice of sale
as the earliest time at which such sale shall occur, if required by Applicable
Laws) on the first Tuesday in any month after having given notice of such sale
at least twenty-one (21) days before
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the day of sale of the time, place and terms of said sale (including the
earliest time at which such sale shall occur) in accordance with the statutes
of the State of Texas then in force governing sales of real estate under powers
conferred by deeds of trust. Notice of a sale of all or part of the Mortgaged
Property by Trustee shall be given by posting written notice thereof at the
courthouse door (or other area in the courthouse as may be designated for such
public notices) of the county in which the sale is to be made, and by filing a
copy of the notice in the office of the county clerk of the county in which the
sale is to be made at least twenty-one (21) days preceding the date of the
sale, and if the Mortgaged Property to be sold is in more than one county, a
notice shall be posted at the courthouse door and filed with the county clerk
of each county in which the Mortgaged Property is situated. In addition,
Noteholder shall, at least twenty-one (21) days preceding the date of sale,
serve written notice of the proposed sale by certified mail on Grantor and each
debtor obligated to pay the Indebtedness or any portion thereof according to
the records of Noteholder. Service of such notice shall be completed upon
deposit of the notice, enclosed in a postpaid certified mail wrapper, properly
addressed to Grantor and each such debtor at the most recent address as shown
by the records of Noteholder, in a post office or official depository under the
care and custody of the United States Postal Service. The affidavit of any
person having knowledge of the facts to the effect that such service was
completed shall be prima facie evidence of the fact of service. Any sale made
by Trustee hereunder may be as an entirety or in such parcels as Noteholder may
request, and any sale may be adjourned by announcement at the time and place
appointed for such sale without further notice except as may be required by
law. The sale by Trustee of less than the whole of the Mortgaged Property
shall not exhaust the power of sale herein granted, and Trustee is specifically
empowered to make successive sale or sales under such power until the whole of
the Mortgaged Property shall be sold; and, if the proceeds of such sale of less
than the whole of the Mortgaged Property shall be less than the aggregate of
the Indebtedness and the expense of executing this trust as provided herein,
this Mortgage and the lien hereof shall remain in full force and effect as to
the unsold portion of the Mortgaged Property just as though no sale had been
made; provided, however, that Grantor shall never have any right to require the
sale of less than the whole of the Mortgaged Property but Noteholder shall have
the right, at its sole election, to request Trustee to sell less than the whole
of the Mortgaged Property. After each sale, Trustee shall make to the
purchaser or purchasers at such sale good and sufficient conveyances in the
name of Grantor, conveying the property so sold to the purchaser or purchasers
in fee simple with general warranty of title, and shall receive the proceeds of
said sale or sales and apply the same as herein provided. Payment of the
purchase price to Trustee shall satisfy the obligation of purchaser at such
sale therefor, and such purchaser shall not be responsible for the application
thereof. The power of sale granted herein shall not be exhausted by any sale
held hereunder by Trustee or his substitute or successor, and such power of
sale may be exercised from time to time and as many times as Noteholder may
deem necessary until all of the Mortgaged Property has been duly sold and all
Indebtedness has been fully paid. In the event any sale hereunder is not
completed or is defective in the opinion of Noteholder, such sale shall not
exhaust the power of sale hereunder and Noteholder shall have the right to
cause a subsequent sale or sales to be made hereunder. Any and all statements
of fact or other recitals made in any deed or deeds given by Trustee or any
successor or substitute appointed hereunder as to nonpayment of the
Indebtedness, or as to the occurrence of any Default, or as to Noteholder
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having declared all of such Indebtedness to be due and payable, or as to the
request to sell, or as to notice of time, place and terms of sale and of the
properties to be sold having been duly given, or as to the refusal, failure or
inability to act of Trustee or any substitute or successor, or as to the
appointment of any substitute or successor Trustee, or as to any other act or
thing having been duly done by Noteholder or by Trustee or any substitute or
successor, shall be taken as prima facie evidence of the truth of the facts so
stated and recited. Trustee, his successor or substitute, may appoint or
delegate any one or more persons as agent to perform any act or acts necessary
or incident to any sale held by Trustee, including, without limitation, the
posting of notices and the conducting of sales, but in the name and on behalf
of Trustee, his successor or substitute.
5.4 JUDICIAL FORECLOSURE. This Mortgage shall be effective as a
mortgage as well as a deed of trust and upon the occurrence of a Default may be
foreclosed as to any of the Mortgaged Property in any manner permitted by the
laws of the State of Texas or of any other state in which any part of the
Mortgaged Property is situated, and any foreclosure suit may be brought by
Trustee or by Noteholder. In the event a foreclosure hereunder shall be
commenced by Trustee, or his substitute or successor, Noteholder may at any
time before the sale of the Mortgaged Property direct Trustee to abandon the
sale, and may then institute suit for the collection of the Indebtedness, and
for the foreclosure of this Mortgage. It is agreed that if Noteholder should
institute a suit for the collection of the Indebtedness and for the foreclosure
of this Mortgage, Noteholder may at any time before the entry of a final
judgment in said suit dismiss the same, and require Trustee, his substitute or
successor to sell the Mortgaged Property in accordance with the provisions of
this Mortgage.
5.5 RECEIVER. In addition to all other remedies herein provided
for, Grantor agrees that upon the occurrence of a Default, or any event or
circumstance which, with the lapse of time or the giving of notice, or both,
would constitute a Default, Noteholder shall as a matter of right be entitled
to the appointment of a receiver or receivers for all or any part of the
Mortgaged Property, whether such receivership be incident to a proposed sale of
the Mortgaged Property or otherwise, and without regard to the value of the
Mortgaged Property or the solvency of any person or persons liable for the
payment of the Indebtedness, and Grantor does hereby consent to the appointment
of such receiver or receivers, waives any and all defenses to such appointment
and agrees not to oppose any application therefor by Noteholder, but nothing
herein is to be construed to deprive Noteholder of any other right, remedy or
privilege it may now have under the law to have a receiver appointed; provided,
however, that the appointment of such receiver, Trustee or other appointee by
virtue of any court order, statute or regulation shall not impair or in any
manner prejudice the rights of Noteholder to receive payment of the Rents
pursuant to Paragraph 3.1 hereof. Any money advanced by Noteholder in
connection with any such receivership shall be subject to and covered by
Paragraph 2.3 hereof.
5.6 PROCEEDS OF SALE. The proceeds of any sale held by Trustee or
any receiver or public officer in foreclosure of the liens evidenced hereby
shall be applied:
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FIRST, to the payment of all necessary costs and
expenses incident to such foreclosure sale, including but not
limited to all court costs and charges of every character in
the event foreclosed by suit, attorneys' fees and a reasonable
fee to Trustee acting under the provisions of Paragraph 5.3 if
foreclosed by power of sale as provided in said paragraph, not
exceeding five percent (5%) of the proceeds of such sale;
SECOND, to the payment in full of the Indebtedness
(including, without limitation, the principal and interest due
and unpaid on the Note, attorneys' fees and any other amounts
due and unpaid and owed to Noteholder under this Mortgage) in
such order as Noteholder may elect in its sole direction; and
THIRD, the remainder, if any there shall be paid to
Grantor or to such other party or parties as may be entitled
thereto by law.
5.7 NOTEHOLDER AS PURCHASER. Noteholder shall have the right to
become the purchaser at any sale held by any Trustee or substitute or successor
or by any receiver or public officer, and any Noteholder purchasing at any such
sale shall have the right to credit upon the amount of the bid made therefor,
to the extent necessary to satisfy such bid, the Indebtedness owing to such
Noteholder.
5.8 ADDITIONAL REMEDIES UNDER THE BUSINESS CODE. Upon the
occurrence of a Default, Noteholder may exercise its rights of enforcement with
respect to the Personal Property under the Texas Business and Commerce Code, as
amended, (the "BUSINESS CODE") and in conjunction with, in addition to or in
substitution for those rights and remedies:
(a) Noteholder may enter upon the Mortgaged Property to
take possession of, assemble and collect the Personal Property or to
render it unusable; and
(b) Noteholder may require Grantor to assemble the
Personal Property and make it available at a place Noteholder
designates which is mutually convenient to allow Noteholder to take
possession or dispose of the Personal Property; and
(c) written notice mailed to Grantor as provided herein
five (5) days prior to the date of public sale of the Personal
Property or prior to the date after which any private sale of the
Personal Property will be made shall constitute reasonable notice; and
(d) any sale made pursuant to the provisions of this
Paragraph shall be deemed to have been a public sale conducted in a
commercially reasonable manner if held contemporaneously with the sale
of the Mortgaged Property under power of sale as provided herein upon
giving the same notice with respect to the sale of the Personal
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Property hereunder as is required for such sale of the Mortgaged
Property under power of sale; and
(e) in the event of a foreclosure sale, whether made by
Trustee under the terms hereof, or under judgment of a court, the
Personal Property and the Mortgaged Property may, at the option of
Noteholder, be sold as a whole; and
(f) it shall not be necessary that Noteholder take
possession of the Personal Property or any part thereof prior to the
time that any sale pursuant to the provisions of this Paragraph is
conducted and it shall not be necessary that the Personal Property or
any part thereof be present at the location of such sale; and
(g) prior to application of proceeds of disposition of
the Personal Property to the Indebtedness, such proceeds shall be
applied to the reasonable expenses of retaking, holding, preparing for
sale or lease, selling, leasing and the like and the reasonable
attorneys' fees and legal expenses incurred by Noteholder; and
(h) any and all statements of fact or other recitals made
in any bill of sale or assignment or other instrument evidencing any
foreclosure sale hereunder as to nonpayment of the Indebtedness or as
to the occurrence of any Default, or as to Noteholder having declared
all of such Indebtedness to be due and payable, or as to notice of
time, place and terms of sale and of the properties to be sold having
been duly given, or as to any other act or thing having been duly done
by Noteholder, shall be taken as prima facie evidence of the truth of
the facts so stated and recited; and
(i) Noteholder may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident to
any sale held by Noteholder, including the sending of notices and the
conduct of the sale, but in the name and on behalf of Noteholder.
5.9 PARTIAL FORECLOSURE. In the event of a Default in the payment
of any part of the Indebtedness, Noteholder shall have the right to proceed
with foreclosure of the liens and security interests evidenced hereby without
declaring the entire Indebtedness due, and in such event any such foreclosure
sale may be made subject to the unmatured part of the Indebtedness; and any
such sale shall not in any manner affect the unmatured part of the
Indebtedness, but as to such unmatured part this Mortgage shall remain in full
force and effect just as though no sale had been made. The proceeds of any
such sale shall be applied as provided in Paragraph 5.6 except that the amount
paid under subparagraph SECOND thereof shall be only the matured portion of the
Indebtedness and any proceeds of such sale in excess of those provided for in
subparagraphs FIRST and SECOND (modified as provided above) shall be applied to
installments of principal of and interest on the Note in the inverse order of
maturity. Several sales may be made hereunder without exhausting the right of
sale for any unmatured part of the Indebtedness.
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5.10 REMEDIES CUMULATIVE. All remedies herein expressly provided
for are cumulative of any and all other remedies existing at law or in equity
and are cumulative of any and all other remedies provided for in any of the
other Loan Documents, or any part thereof, or otherwise benefiting Noteholder,
and Trustee and Noteholder shall, in addition to the remedies herein provided,
be entitled to avail themselves of all such other remedies as may now or
hereafter exist at law or in equity for the collection of the Indebtedness and
the enforcement of the covenants herein and the foreclosure of the liens and
security interests evidenced hereby, and resort to any remedy provided for
hereunder or under any such Loan Documents or provided for by law shall not
prevent the concurrent or subsequent employment of any other appropriate remedy
or remedies.
5.11 RESORT TO ANY SECURITY. Noteholder may resort to any security
given by this Mortgage or to any other security now existing or hereafter given
to secure the payment of the Indebtedness, in whole or in part, and in such
portions and in such order as may seem best to Noteholder in its sole and
uncontrolled discretion, and any such action shall not in anywise be considered
as a waiver of any of the rights, benefits, liens or security interests
evidenced by this Mortgage.
5.12 WAIVER. To the full extent Grantor may do so, Grantor agrees
that Grantor will not at any time insist upon, plead, claim or take the benefit
or advantage of any law now or hereafter in force pertaining to the rights and
remedies of sureties or providing for any appraisement, valuation, stay,
extension or redemption, and Grantor, for Grantor and Grantor's heirs,
devisees, representatives, successors and assigns, and for any and all persons
ever claiming any interest in the Mortgaged Property, to the extent permitted
by law, hereby waives and releases all rights of redemption, valuation,
appraisement, stay of execution, notice of intention to mature or declare due
the whole of the Indebtedness, notice of election to mature or declare due the
whole of the Indebtedness and all rights to a marshaling of the assets of
Grantor, including, without limitation, the Mortgaged Property, or to a sale in
inverse order of alienation in the event of foreclosure of the liens and
security interests hereby created. Grantor shall not have or assert any right
under any statute or rule of law pertaining to the marshaling of assets, sale
in inverse order of alienation, the exemption of homestead, the administration
of estates of decedents or other matters whatever to defeat, reduce or affect
the right of Noteholder under the terms of this Mortgage to a sale of the
Mortgaged Property for the collection of the Indebtedness without any prior or
different resort of collection, or the right of Noteholder under the terms of
this Mortgage to the payment of such Indebtedness out of the proceeds of sale
of the Mortgaged Property in preference to every other claimant whatever. If
any law referred to in this Paragraph and now in force, of which Grantor or
Grantor's heirs, devisees, representatives, successors and assigns and such
other persons claiming any interest in the Mortgaged Property might take
advantage despite this Paragraph, shall hereafter be repealed or cease to be
enforced, such law shall not thereafter be deemed to preclude the application
of this Paragraph.
5.13 DELIVERY OF POSSESSION AFTER FORECLOSURE. In the event there
is a foreclosure sale hereunder and at the time of such sale Grantor or
Grantor's heirs, devisees, representatives,
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successors or assigns or any other persons claiming any interest in the
Mortgaged Property by, through or under Grantor are occupying or using the
Mortgaged Property, or any part thereof, each and all shall immediately become
the tenant of the purchaser at such sale, which tenancy shall be a tenancy from
day-to-day, terminable at the will of either landlord or tenant, at a
reasonable rental per day based upon the value of the property occupied, such
rental to be due daily to the purchaser. In the event the tenant fails to
surrender possession of said property upon demand, the purchaser shall be
entitled to institute and maintain an action for forcible entry and detainer of
said property in the appropriate court having jurisdiction.
5.14 TENDER AFTER ACCELERATION. If, following the occurrence of a
Default and the acceleration of the Indebtedness but prior to the foreclosure
of this Mortgage, Grantor shall tender to Noteholder payment of an amount
sufficient to pay the entire Indebtedness, such tender shall be deemed to be a
voluntary prepayment under the Note.
ARTICLE VI
MISCELLANEOUS
6.1 DEFEASANCE. If all of the Indebtedness is paid as the same
becomes due and payable and if all of the covenants, warranties, undertakings
and agreements made in this Mortgage are kept and performed, then and in that
event only, all rights under this Mortgage shall terminate and the Mortgaged
Property shall become wholly clear of the liens, security interests,
conveyances and assignments evidenced hereby, which shall be released by
Noteholder in due form at Grantor's cost.
6.2 SUCCESSOR TRUSTEE. Trustee may resign by an instrument in
writing addressed to Noteholder, or Trustee may be removed at any time with or
without cause by an instrument in writing executed by Noteholder. In case of
the death, resignation, removal or disqualification of Trustee or if for any
reason Noteholder shall deem it desirable to appoint a substitute or successor
Trustee to act instead of the herein named Trustee or any substitute or
successor Trustee, then Noteholder shall have the right and is hereby
authorized and empowered to appoint a successor Trustee, or a substitute
Trustee, without other formality than appointment and designation in writing
executed by Noteholder and the authority hereby conferred shall extend to the
appointment of other successor and substitute Trustees successively until the
Indebtedness has been paid in full or until the Mortgaged Property is sold
hereunder. In the event the Indebtedness is owned by more than one person or
entity, the holders of not less than a majority in the amount of such
Indebtedness shall have the right and authority to make the appointment of a
successor or substitute Trustee provided for in the preceding sentence. Such
appointment and designation by Noteholder or by the holder or holders of not
less than a majority of the Indebtedness shall be full evidence of the right
and authority to make the same and of all facts therein recited. If Noteholder
is a national banking association or corporation and such appointment is
executed in its behalf by an officer of such national banking association or
corporation, such appointment shall be conclusively presumed to be executed
with authority and shall be valid and sufficient without
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proof of any action by the board of directors or any superior officer of the
corporation. Upon the making of any such appointment and designation, all of
the estate and title of Trustee in the Mortgaged Property shall vest in the
named successor or substitute Trustee and he shall thereupon succeed to and
shall hold, possess and execute all the rights, powers, privileges, immunities
and duties herein conferred upon Trustee; but nevertheless, upon the written
request of Noteholder or of the successor or substitute Trustee, Trustee
ceasing to act shall execute and deliver an instrument transferring to such
successor or substitute Trustee all of the estate and title in the Mortgaged
Property of Trustee so ceasing to act, together with all the rights, powers,
privileges, immunities and duties herein conferred upon Trustee, and shall duly
assign, transfer and deliver any of the properties and moneys held by said
Trustee hereunder to said successor or substitute Trustee. All references
herein to Trustee shall be deemed to refer to Trustee (including any successor
or substitute appointed and designated as herein provided) from time to time
acting hereunder. Grantor hereby ratifies and confirms any and all acts which
the herein named Trustee or his successor or successors, substitute or
substitutes, in this trust, shall do lawfully by virtue hereof.
6.3 LIABILITY AND INDEMNIFICATION OF TRUSTEE. Trustee shall not
be liable for any error of judgment or act done by Trustee in good faith, or be
otherwise responsible or accountable under any circumstances whatsoever
(including, without limitation, Trustee's negligence), except for Trustee's
gross negligence or willful misconduct. Trustee shall have the right to rely
on any instrument, document or signature authorizing or supporting any action
taken or proposed to be taken by him hereunder, believed by him in good faith
to be genuine. All moneys received by Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated in any manner from any other monies
(except to the extent required by law), and Trustee shall be under no liability
for interest on any monies received by him hereunder. Grantor will reimburse
Trustee for, and indemnify and save him harmless against, any and all liability
and expenses (including, without limitation, reasonable attorneys' fees) which
may be incurred by him in the performance of his duties hereunder. (Trustee
shall include the directors, officers, partners, employees, representatives and
agents of Trustee and any persons or entities owned or controlled by, owning or
controlling or under common control or affiliated with Trustee.) The foregoing
indemnity shall not terminate upon release, foreclosure or other termination of
this Mortgage.
6.4 WAIVER BY NOTEHOLDER. Noteholder may at any time and from
time to time in writing:
(a) waive compliance by Grantor with any covenant herein
made by Grantor to the extent and in the manner specified in such
writing;
(b) consent to Grantor doing any act which hereunder
Grantor is prohibited from doing, or consent to Grantor failing to do
any act which hereunder Grantor is required to do, to the extent and
in the manner specified in such writing;
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(c) release any part of the Mortgaged Property, or any
interest therein, from the lien and security interest of this Mortgage
without the joinder of Trustee; or
(d) release any party liable, either directly or
indirectly, for the Indebtedness or for any covenant herein or in any
of the other Loan Documents now or hereafter securing the payment of
the Indebtedness, without impairing or releasing the liability of any
other party. No such act shall in any way impair the rights of
Noteholder hereunder except to the extent specifically agreed to by
Noteholder in such writing.
6.5 ACTIONS BY NOTEHOLDER. The lien, security interest and other
security rights of Noteholder hereunder shall not be impaired by any
indulgence, moratorium or release granted by Noteholder, including but not
limited to:
(a) any renewal, extension, increase or modification
which Noteholder may grant with respect to any of the Indebtedness;
(b) any surrender, compromise, release, renewal,
extension, exchange or substitution which Noteholder may grant in
respect of the Mortgaged Property, or any part thereof or any interest
therein; or
(c) any release or indulgence granted to any endorser,
guarantor or surety of any of the Indebtedness.
The taking of additional security by Noteholder shall not release or impair the
lien, security interest or other security rights of Noteholder hereunder or
affect the liability of Grantor or of any endorser or guarantor or other surety
or improve the rights of any permitted junior lienholder in the Mortgaged
Property.
6.6 RIGHTS OF NOTEHOLDER. Noteholder may waive any Default
without waiving any other prior or subsequent Default. Noteholder may remedy
any default without waiving the Default remedied. Neither the failure by
Noteholder to exercise, nor the delay by Noteholder in exercising, any right,
power or remedy upon any Default shall be construed as a waiver of such Default
or as a waiver of the right to exercise any such right, power or remedy at a
later date. No single or partial exercise by Noteholder of any right, power or
remedy hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right, power or remedy hereunder may be
exercised at any time and from time to time. No modification or waiver of any
provision hereof nor consent to any departure by Grantor therefrom shall in any
event be effective unless the same shall be in writing and signed by Noteholder
and then such waiver or consent shall be effective only in the specific
instances, for the purpose for which given and to the extent therein specified.
No notice to nor demand on Grantor in any case shall of itself entitle Grantor
to any other or further notice or demand in similar or other circumstances.
Acceptance by Noteholder of any payment in an amount less than the amount then
due on any of
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the Indebtedness shall be deemed an acceptance on account only and shall not in
any way affect the existence of a Default hereunder.
6.7 NOTIFICATION OF ACCOUNT DEBTORS. Noteholder may at any time
after Default by Grantor notify the account debtors or obligors of any
accounts, chattel paper, negotiable instruments or other evidences of
indebtedness included in the Personal Property to pay Noteholder directly.
6.8 REPRODUCTION AS FINANCING STATEMENT. A carbon, photographic
or other reproduction of this Mortgage or of any financing statement relating
to this Mortgage shall be sufficient as a financing statement.
6.9 FIXTURE FILING. This Mortgage shall be effective as a
financing statement filed as a fixture filing with respect to all fixtures
included within the Mortgaged Property and is to be filed for record in the
real property records in the Office of the County Clerk for the county or
counties where the Mortgaged Property (including said fixtures) is situated.
This Mortgage shall also be effective as a financing statement covering
minerals or the like (including oil and gas) and accounts subject to Subsection
9.103(e) of the Uniform Commercial Code as in effect from time to time in the
State of Texas (the "CODE") and is to be filed for record in the real property
records of the county where the Mortgaged Property is situated. The mailing
address of Grantor is set forth on the first page of this Mortgage and the
address of Noteholder from which information concerning the security interest
may be obtained is the address of Noteholder set forth in Paragraph 1.1 of this
Mortgage.
6.10 FILING AND RECORDATION. Grantor will cause this Mortgage and
all amendments and supplements thereto and substitutions therefor and all
financing statements and continuation statements relating hereto to be
recorded, filed, re-recorded and refiled in such manner and in such places as
Trustee or Noteholder shall reasonably request, and will pay all such
recording, filing, re-recording and refiling taxes, fees and other charges.
6.11 DEALING WITH SUCCESSOR. In the event the ownership of the
Mortgaged Property or any part thereof becomes vested in a person other than
Grantor, Noteholder may, without notice to Grantor, deal with such successor or
successors in interest with reference to this Mortgage and to the Indebtedness
in the same manner as with Grantor, without in any way vitiating or discharging
Grantor's liability hereunder or for the payment of the Indebtedness; provided,
however, nothing in this Paragraph shall be construed as permitting any
transfer of the Mortgaged Property which would constitute a Default under this
Mortgage. No sale of the Mortgaged Property, no forbearance on the part of
Noteholder and no extension of the time for the payment of the Indebtedness
given by Noteholder shall operate to release, discharge, modify, change or
affect, in whole or in part, the liability of Grantor hereunder or for the
payment of the Indebtedness or the liability of any other person hereunder or
for the payment of the Indebtedness, except as agreed to in writing by
Noteholder.
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6.12 PLACE OF PAYMENT. The Indebtedness shall be payable at the
place designated in the Note, or if no such designation is made, at the office
of Noteholder at the address indicated in this Mortgage, or at such other place
as Noteholder may designate in writing.
6.13 SUBROGATION. To the extent that proceeds of the Note are used
to pay indebtedness secured by any outstanding lien, security interest, charge
or prior encumbrance against the Mortgaged Property, such proceeds have been
advanced by Noteholder at Grantor's request and Noteholder shall be subrogated
to any and all rights, security interests and liens owned or held by any owner
or holder of such outstanding liens, security interests, charges or
encumbrances, irrespective of whether said liens, security interests, charges
or encumbrances are released; provided, however, that the terms and provisions
of this Mortgage shall govern the rights and remedies of Noteholder and shall
supersede the terms, provisions, rights and remedies under and pursuant to the
instruments creating the liens, security interests, charges or encumbrances to
which Noteholder is subrogated hereunder.
6.14 APPLICATION OF INDEBTEDNESS. If any part of the Indebtedness
cannot be lawfully secured by this Mortgage or if any part of the Mortgaged
Property cannot be lawfully subject to the lien and security interest hereof to
the full extent of the Indebtedness, then all payments made shall be applied on
said Indebtedness first in discharge of that portion thereof which is unsecured
by this Mortgage.
6.15 USURY. This Mortgage has been executed under, and shall be
construed and enforced in accordance with, the laws of the State of Texas,
except as such laws are preempted by federal law. This Mortgage and all of the
other Loan Documents are intended to be performed in accordance with, and only
to the extent permitted by, all applicable usury laws. If any provision hereof
or of any of the other Loan Documents or the application thereof to any person
or circumstance shall, for any reason and to any extent, be invalid or
unenforceable, neither the application of such provision to any other person or
circumstance nor the remainder of the instrument in which such provision is
contained shall be affected thereby and shall be enforced to the greatest
extent permitted by Applicable Laws. It is expressly stipulated and agreed to
be the intent of Grantor and Noteholder to at all times comply with the usury
and other applicable laws now or hereafter governing the interest payable on
the Indebtedness. If the applicable law is ever revised, repealed or
judicially interpreted so as to render usurious any amount called for under the
Note or under any of the other Loan Documents, or contracted for, charged,
taken, reserved or received with respect to the Indebtedness, or if
Noteholder's exercise of the option to accelerate the maturity of the
Indebtedness, or if any prepayment of the Indebtedness results in the payment
of any interest in excess of that permitted by law, then it is the express
intent of Grantor and Noteholder that all excess amounts theretofore collected
by Noteholder be credited on the principal balance of the Note (or, if the Note
and all of such other Indebtedness have been paid in full, refunded), and the
provisions of the Note and the other Loan Documents immediately be deemed
reformed and the amounts thereafter collectable hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the then Applicable Laws, but so as to permit the recovery of the
fullest amount otherwise called for
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<PAGE> 35
hereunder or thereunder. All sums paid, or agreed to be paid, for the use,
forbearance, detention, taking, charging, receiving or reserving on the
Indebtedness shall, to the extent permitted by Applicable Laws, be amortized,
prorated, allocated and spread throughout the full term of such Indebtedness
until payment in full so that the rate or amount of interest on account of such
Indebtedness does not exceed the usury ceiling from time to time in effect and
applicable thereto for so long as debt is outstanding under the Indebtedness.
To the extent that Noteholder is relying on TEX. REV. CIV. STAT. ANN. art.
5069-1.04, as amended, to determine the maximum rate ("MAXIMUM RATE") payable
on the Indebtedness, Noteholder will utilize the indicated rate ceiling from
time to time in effect as provided in such article. To the extent federal law
permits Noteholder to contract for, charge or receive a greater amount of
interest, Noteholder will rely on federal law instead of such article, as
amended, for the purpose of determining the Maximum Rate. Additionally, to the
extent permitted by applicable law now in effect, Noteholder may, at its option
and from time to time, implement any other method of computing the Maximum Rate
under such article, as amended, or under other applicable law by giving notice,
if required, to Grantor as provided by applicable law now or hereafter in
effect. In no event shall the provisions of TEX. REV. CIV. STAT. ANN. art.
5069, ch. 15 (which regulates certain revolving credit loan accounts and
revolving triparty accounts) apply to the Indebtedness. Notwithstanding
anything to the contrary contained herein or in any of the other Loan
Documents, it is not the intention of Noteholder to accelerate the maturity of
any interest that has not accrued at the time of such acceleration or to
collect unearned interest at the time of such acceleration.
6.16 NOTICE. Any notice, request, demand or other communication
required or permitted hereunder, or under the Note, or under any of the other
Loan Documents (unless otherwise expressly provided therein) shall be given in
writing by (a) personal delivery, (b) expedited delivery service with proof of
delivery, or (c) United States mail, postage prepaid, registered or certified
mail, return receipt requested, sent to the intended addressee at the address
shown in this Mortgage, or to such different address as the addressee shall
have designated by written notice sent in accordance herewith, and shall be
deemed to have been given and received either at the time of personal delivery
or, in the case of delivery service, as of the date of first attempted delivery
at the address and in the manner provided herein, or in the case of mail upon
deposit in a receptacle of United States mail; provided that, service of a
notice required by Texas Property Code Section 51.002 shall be considered
complete when the requirements of that statute are met.
6.17 HEIRS, SUCCESSORS AND ASSIGNS. The terms, provisions,
covenants and conditions hereof shall be binding upon Grantor, and the
successors and assigns of Grantor including all successors in interest of
Grantor in and to all or any part of the Mortgaged Property, and shall inure to
the benefit of Trustee and Noteholder and their respective heirs, successors,
substitutes and assigns and shall constitute covenants running with the Land.
All references in this Mortgage to Grantor, Trustee or Noteholder shall be
deemed to include all such heirs, devisees, representatives, successors,
substitutes and assigns.
6.18 SEVERABILITY. A determination that any provision of this
Mortgage is unenforceable or invalid shall not affect the enforceability or
validity of any other provision and any
Page 35
<PAGE> 36
determination that the application of any provision of this Mortgage to any
person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such a provision as it may apply to any other
persons or circumstances.
6.19 GENDER AND NUMBER. Within this Mortgage, words of any gender
shall be held and construed to include any other gender, and words in the
singular number shall be held and construed to include the plural and words in
the plural number shall be held and construed to include the singular, unless
in each instance the context otherwise requires.
6.20 COUNTERPARTS. This Mortgage may be executed in any number of
counterparts with the same effect as if all parties hereto had signed the same
document. All such counterparts shall be construed together and shall
constitute one instrument, but in making proof hereof it shall only be
necessary to produce one such counterpart.
6.21 NEGATION OF PARTNERSHIP. Nothing contained in the Loan
Documents is intended to create any partnership, joint venture or association
between Grantor and Noteholder, or in any way make Noteholder a co-principal
with Grantor with reference to the Mortgaged Property, and any inferences to
the contrary are hereby expressly negated.
6.22 REPORTING REQUIREMENTS. Grantor agrees to comply with any and
all reporting requirements applicable to the transaction evidenced by the Note
and secured by this Mortgage which are set forth in any law, statute,
ordinance, rule, regulation, order or determination of any governmental
authority, including but not limited to The International Investment Survey Act
of 1976, The Agricultural Foreign Investment Disclosure Act of 1978, The
Foreign Investment in Real Property Tax Act of 1980 and the Tax Reform Act of
1984 and further agrees upon request of Noteholder to furnish Noteholder with
evidence of such compliance.
6.23 HEADINGS. The Paragraph headings contained in this Mortgage
are for convenience only and shall in no way enlarge or limit the scope or
meaning of the various and several Paragraphs hereof.
6.24 CONSENT OF NOTEHOLDER. Except where otherwise provided
herein, in any instance hereunder where the approval, consent or the exercise
of judgment of Noteholder is required, the granting or denial of such approval
or consent and the exercise of such judgment shall be within the sole
discretion of Noteholder, and Noteholder shall not, for any reason or to any
extent, be required to grant such approval or consent or exercise such judgment
in any particular manner, regardless of the reasonableness of either the
request or Noteholder's judgment.
6.25 MODIFICATION OR TERMINATION. The Loan Documents may only be
modified or terminated by a written instrument or instruments executed by the
party against which enforcement of the modification or termination is asserted.
Any alleged modification or termination which is not so documented shall not be
effective as to any party. Grantor agrees that it shall be bound by any
modification of this Mortgage or any of the other Loan Documents made by
Noteholder and
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<PAGE> 37
EXHIBIT 10.4(c)
any subsequent owner of the Mortgaged Property, with or without notice to or
consent of Grantor, and no such modification shall impair the obligations of
Grantor under this Mortgage or under any other Loan Document.
6.26 ENTIRE AGREEMENT. The Loan Documents constitute the entire
understanding and agreement between Grantor and Noteholder with respect to the
transactions arising in connection with the Indebtedness and supersede all
prior written or oral understandings and agreements between Grantor and
Noteholder with respect thereto. Grantor hereby acknowledges that, except as
incorporated in writing in the Loan Documents, there are not, and were not, and
no persons are or were authorized by Noteholder to make, any representations,
understandings, stipulations, agreements or promises, oral or written, with
respect to the transaction which is the subject of the Loan Documents.
6.27 CONSTRUCTION MORTGAGE. This Mortgage is a construction
mortgage (as that term is defined in Subsection 9.313 (a) (3) of the Business
Code) and secures an obligation incurred for the construction of improvements
on the Land including the acquisition cost of the Land. It is understood and
agreed that funds to be advanced upon the Note are to be used in the
construction of certain improvements on the Land in accordance with the Loan
Documents.
6.28 LOAN AGREEMENT. This Mortgage is executed and delivered
pursuant to, and is entitled to the benefits of, the Loan Agreement.
6.29 PARTIAL RELEASES. Noteholder agrees that, upon compliance by
Grantor with the provisions of Section 4.3 of the Loan Agreement, Noteholder
will execute one or more partial releases prepared by Grantor, releasing all or
a part of the Mortgaged Property from the lien and security interests of this
Mortgage.
EXECUTED on the 29th day of November, 1996.
NEWMARK HOMES, L.P.,
a Texas limited partnership
By: Newmark Home Corporation,
a Nevada corporation,
General Partner
By: /s/ TERRY WHITE
---------------------------------
Name: Terry White
-----------------------------
Title: Senior Vice President
---------------------------
THE STATE OF TEXAS )
COUNTY OF _______________)
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<PAGE> 38
This instrument was acknowledged before me on the _______ day of
___________________, 1996, by ____________________, ______________________ of
Newmark Home Corporation, a Nevada corporation, General Partner of NEWMARK
HOMES, L.P., a Texas limited partnership, on behalf of said limited
partnership.
[SEAL] ---------------------------------------------
Notary Public, State of Texas
---------------------------------------------
Printed Name of Notary
My Commission Expires:
---------------------
Page 38
<PAGE> 1
EXHIBIT 10.5(a)
AMENDED AND RESTATED
LOAN AGREEMENT BY AND BETWEEN
NEWMARK HOME CORPORATION
and
BANK ONE, TEXAS, N.A.
Dated the 30th day of April, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. General Terms . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Certain Definitions; Use of Defined Terms; Accounting Terms;
Singular or Plural . . . . . . . . . . . . . . . . . . . . . 1
1.3 Revolving Line of Credit . . . . . . . . . . . . . . . . . . 10
1.4 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . 11
1.5 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 12
Section 2. Representations and Warranties . . . . . . . . . . . . . . . . 12
2.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Financial Condition . . . . . . . . . . . . . . . . . . . . 12
2.4 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Liabilities and Litigation . . . . . . . . . . . . . . . . . 13
2.6 Titles and Encumbrances . . . . . . . . . . . . . . . . . . 13
2.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.8 Patents, etc . . . . . . . . . . . . . . . . . . . . . . . . 13
2.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.10 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.11 Margin Securities . . . . . . . . . . . . . . . . . . . . . 14
2.12 Utilities, Access and Construction . . . . . . . . . . . . . 14
Section 3. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . 14
3.1 Reporting Requirements . . . . . . . . . . . . . . . . . . . 14
3.2 Taxes and Other Liens . . . . . . . . . . . . . . . . . . . 16
3.3 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . 16
3.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . 17
3.5 Performance of Obligations . . . . . . . . . . . . . . . . . 17
3.6 Payment of Expenses . . . . . . . . . . . . . . . . . . . . 17
3.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.8 Certificate of Compliance . . . . . . . . . . . . . . . . . 19
3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.10 Security . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.11 Residential Subdivisions . . . . . . . . . . . . . . . . . . 20
3.12 Surveys and Appraisals . . . . . . . . . . . . . . . . . . . 20
3.13 Plans; Construction in Compliance with Plans . . . . . . . . 20
3.14 Construction Contracts; Commencement of Construction . . . . 21
3.15 Governmental Permits . . . . . . . . . . . . . . . . . . . . 21
3.16 Compliance with Legal Requirements . . . . . . . . . . . . . 21
3.17 Use Violations; Notifications . . . . . . . . . . . . . . . 21
3.18 Construction of Improvements . . . . . . . . . . . . . . . . 22
3.19 Continuing Compliance with Requirements for Advances . . . . 22
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
3.20 Correction Work . . . . . . . . . . . . . . . . . . . . . . 22
3.21 Continuous Construction of the Improvements . . . . . . . . 23
3.22 Inspections . . . . . . . . . . . . . . . . . . . . . . . . 23
3.23 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . 25
4.1 Dividends and Redemptions . . . . . . . . . . . . . . . . . 25
4.2 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . 25
4.3 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . 26
4.4 Utility Rights . . . . . . . . . . . . . . . . . . . . . . . 27
4.5 Alterations . . . . . . . . . . . . . . . . . . . . . . . . 27
4.6 Restrictions on Speculative Homes, Model Homes, Single
Family Houses in Austin and Inventoried Lots . . . . . . . . 27
4.7 Limitation on Aggregate Deed of Trust Amount . . . . . . . . 28
4.8 Flood Plain . . . . . . . . . . . . . . . . . . . . . . . . 28
4.9 Financial Covenants . . . . . . . . . . . . . . . . . . . . 28
4.10 Loans and Advances to Employees, Etc. . . . . . . . . . . . 29
4.11 Investments, Loans and Advances . . . . . . . . . . . . . . 29
4.12 Merger and Consolidation . . . . . . . . . . . . . . . . . . 29
4.13 Restrictions on Undeveloped Land . . . . . . . . . . . . . . 29
Section 5. Commitment to Lend; Conditions to the Bank's
Obligations to Make Advances . . . . . . . . . . . . . . . . . 29
5.1 Bank's Commitment . . . . . . . . . . . . . . . . . . . . . 29
5.2 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . 29
5.3 Guidance Line . . . . . . . . . . . . . . . . . . . . . . . 31
5.4 Bank's Discretion . . . . . . . . . . . . . . . . . . . . . 31
5.5 Involuntary Borrowings . . . . . . . . . . . . . . . . . . . 31
Section 6. Events of Default and Remedies . . . . . . . . . . . . . . . . 32
6.1 Events of Default . . . . . . . . . . . . . . . . . . . . . 32
6.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7. Additional Agreements . . . . . . . . . . . . . . . . . . . . . 34
7.1 Change of Ownership or Control . . . . . . . . . . . . . . . 34
7.2 Change in Management . . . . . . . . . . . . . . . . . . . . 35
Section 8. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1 Counsel to Bank . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Required Documents . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.1 Survival of Various Matters . . . . . . . . . . . . . . . . 36
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . 36
9.4 Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.5 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 37
9.7 Non-Subordination . . . . . . . . . . . . . . . . . . . . . 37
9.8 Consent to Deviation . . . . . . . . . . . . . . . . . . . . 37
9.9 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.10 Payment on Non-Business Days . . . . . . . . . . . . . . . . 37
9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . 38
9.12 Controlling Document . . . . . . . . . . . . . . . . . . . . 38
9.13 Savings Clause . . . . . . . . . . . . . . . . . . . . . . . 38
9.14 Participations and Assignments . . . . . . . . . . . . . . . 38
9.15 Set Off . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.16 Form and Substance of Surveys, Appraisals and Other
Documents . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.17 Concerning the Revolving Line of Credit . . . . . . . . . . 39
9.18 Concerning Representations and Warranties . . . . . . . . . 39
9.19 Renewal and Extension of Existing Indebtedness . . . . . . . 40
9.20 No Oral Agreements . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
EXHIBITS
"A" - Form of Note
"B" - Form of Deed of Trust
"C" - Form of Supplement
"D" - Form of Loan Application
"E" - Form of Certificate of Compliance
-iii-
<PAGE> 5
AMENDED AND RESTATED
LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT made and entered into as of the
30th day of April, 1996, by and between NEWMARK HOME CORPORATION, a Nevada
corporation, with offices and place of business at 10435 Greenbough, Suite 101,
Stafford, Texas 77477 (the "Company") and BANK ONE, TEXAS, N.A., a national
banking association, with offices and banking quarters at 910 Travis, Houston,
Texas 77002, Attention: Real Estate Group (hereinafter called the "Bank").
W I T N E S S E T H:
WHEREAS, the Company and the Bank executed that certain Amended and
Restated Loan Agreement dated the 31st day of August, 1993 (said Amended and
Restated Loan Agreement, as amended or modified from time to time, is referred
to herein as the "Prior Loan Agreement"); and
WHEREAS, the Company and the Bank desire to amend and restate, pursuant
to the terms of this Agreement, the terms and provisions of the Prior Loan
Agreement, and to provide for further advances from the Bank to the Company
pursuant to the terms of this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, the Company and the Bank hereby agree as follows:
Section 1. General Terms
1.1 Indebtedness. Upon the terms and conditions hereinafter set
forth, the Bank agrees to lend the Company an aggregate of up to
$20,000,000.00, as evidenced by a Revolving Line of Credit to be extended to
the Company by the Bank, as more specifically described in Section l.3 hereof.
1.2 Certain Definitions; Use of Defined Terms; Accounting Terms;
Singular or Plural.
(a) As used herein:
"Aggregate Deed of Trust Amount" shall mean, at any given time,
the sum of (i) all Deed of Trust Amounts for all Single Family Houses
and (ii) all Deed of Trust Amounts for all Inventoried Lots.
-1-
<PAGE> 6
"Agreement" shall mean this Loan Agreement as it may be amended
or supplemented from time to time.
"Appraisal" shall mean (i) with respect to a Single Family House,
an appraisal prepared by an appraiser selected, commissioned and paid by
the Bank (but which shall be subject to reimbursement by the Company
pursuant to Section 3.6 of this Agreement), in form and substance
satisfactory to the Bank stating the appraised value of each Lot upon
completion of the Improvements thereon and (ii) with respect to an
Inventoried Lot, an appraisal prepared by an appraiser selected,
commissioned and paid by the Bank (but which shall be subject to
reimbursement by the Company pursuant to Section 3.6 of this Agreement),
in form and substance satisfactory to the Bank, stating the appraised
value of such Inventoried Lot, without taking into consideration any
improvements to be constructed thereon.
"Appraised Value" shall mean the value, or projected value, of a
Single Family House upon completion of the construction thereof (whether
or not such construction has been completed), or the value of an
Inventoried Lot, as the case may be, determined in each case by the
Appraisal thereof.
"Architect" shall mean any fully licensed architect or engineer
engaged by the Company to design Single Family Houses.
"Base Rate" shall mean the variable rate of interest announced by
the Bank from time to time as its Base Rate and, without notice to the
Company or any other person, such rate shall change as and when changes
in that Base Rate are announced. The Base Rate is set by the Bank as a
general reference rate of interest, taking into account such factors as
the Bank may deem appropriate, it being understood that many of the
Bank's commercial or other loans are priced in relation to such rate,
that it is not necessarily the lowest or best rate of interest actually
charged on any loan, and that the Bank may make various commercial or
other loans at rates of interest having no relationship to the Base
Rate.
"Borrowing Base" shall mean the collection or group or assets
satisfying the requirements set forth in Section 3.23(a) hereof.
"Borrowing Base Report" shall have the meaning set forth in
Section 3.23(b) hereof.
-2-
<PAGE> 7
"Borrowing Base Value" shall mean, as of any given date, the
Aggregate Deed of Trust Amount reflected on the most current Borrowing
Base Report delivered to the Bank by the Company and not disapproved by
the Bank pursuant to the provisions of Sections 3.22, 4.6 or 4.7 hereof.
"Borrowing Date" shall mean the date on which all conditions
contained in Section 5 of this Agreement are met.
"Business Day" shall mean any day except a Saturday, Sunday or
other day on which the Bank is authorized or required by law to close.
"Certificate of Compliance" shall mean each certificate described
in Section 3.8 of this Agreement.
"Change of Ownership or Control" shall mean the event described
in Section 7.1.
"Collateral" shall mean the property described in Section 3.10 of
this Agreement, securing payment of the Indebtedness and performance of
the obligations of the Company under this Agreement and the other
Security Instruments.
"Construction Contracts" shall mean any and all contracts or
agreements, written or oral, between either Company and any other person
in any way relating to the construction of any Improvements by such
other person.
"Cost of Construction" shall mean and include the cost of
purchasing the Lots (including costs needed to release any liens on a
Lot prior to the lien created by the applicable Deed of Trust) and the
following costs of construction of the Improvements: demolition costs
of any existing buildings; cost of labor, material and site
improvements; and amounts paid to contractors to construct the
Improvements and landscaping. In order for materials to constitute a
Cost of Construction, they must be delivered to the Company and be
installed or stored on a Lot; provided that material stored by the
Company elsewhere may constitute a Cost of Construction if (i)
identified as off-site material and (ii) assurances are furnished
satisfactory to the Bank that the security interest created by the
applicable Deed of Trust has attached and has been perfected as to such
material and there is no other security interest relating to such
material.
"Debt" shall mean all items of indebtedness, obligation or
liability, whether matured or unmatured,
-3-
<PAGE> 8
liquidated or unliquidated, direct or contingent, joint or several,
including, but without limitation:
(a) All indebtedness guaranteed, directly or
indirectly, in any manner, or endorsed (other than for collection
or deposit in the ordinary course of business) or discounted with
recourse;
(b) All indebtedness in effect guaranteed, directly or
indirectly, through agreements, contingent or otherwise: (l) to
purchase such indebtedness; or (2) to purchase, sell or lease (as
lessee or lessor) property, products, materials or supplies or to
purchase or sell services, primarily for the purpose of enabling
the debtor to make payment of such indebtedness or to assure the
owner of the indebtedness against loss; or (3) to supply funds to
or in any other manner invest in the debtor;
(c) All indebtedness secured by (or for which the
holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance upon
property owned or acquired subject to such mortgage, deed of
trust, pledge, lien, security interest, charge or encumbrance,
whether or not the liabilities secured thereby have been assumed;
and
(d) All indebtedness incurred as the lessee of goods or
services under leases that, in accordance with generally accepted
accounting principles, should not be reflected on the lessee's
balance sheet.
"Deeds of Trust" shall mean, collectively, the Initial Deeds of
Trust and the Supplements.
"Deed of Trust Amount" shall mean (i) with respect to a Single
Family House, the lesser of (a) seventy percent (70%) of the Appraised
Value of such Single Family House, (b) seventy percent (70%) of the
Sales Price of such Single Family House, (iii) ninety percent (90%) of
the Cost of Construction of such Single Family House and soft costs
approved by the Bank with respect thereto, (d) with respect to a Model
Home, $225,000.00 and (e) with respect to any other Single Family House,
$300,000.00, and (ii) with respect to an Inventoried Lot, the lesser of
(x) seventy percent (70%) of the sales price of such Inventoried Lot set
by the Company, (y) seventy percent (70%) of Appraised Value of such
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<PAGE> 9
Inventoried Lot and (z) ninety percent (90%) of the cost to the Company
of purchasing such Inventoried Lot.
"Default" shall mean an event which with the giving of notice,
the lapse of time, or both, would constitute an Event of Default.
"Event of Default" shall mean any event specified in Section 6 of
this Agreement provided that any requirement for the giving of notice,
the lapse of time, or the happening of any condition, event or act has
been satisfied.
"FHA" shall mean the Federal Housing Administration.
"Financial Statements" shall mean the audit report, annual
financial statements, and interim statements described or referred to in
Section 3.1 of this Agreement.
"Governmental Authority" shall mean any and all courts, boards,
agencies, commissions, offices or authorities of any nature whatsoever
for any governmental unit (federal, state, county, district, municipal,
city or otherwise) whether now or hereafter in existence, and any and
all providers of water, gas or electricity.
"Governmental Permits" shall mean all authorizations,
certificates, licenses, permits, correspondence and any other evidence
from any Governmental Authority regarding compliance with or performance
or satisfaction of any Legal Requirement.
"Improvements" shall mean the improvements described in the
applicable Plans, consisting of a single family residence for sale, to
be constructed on the applicable Lot as required by the Plans.
"Indebtedness" shall mean all sums owed or to be owed by the
Company to the Bank, whether principal or interest, including principal
and interest on the Note and reimbursement of monies advanced by the
Bank pursuant to Sections 3.6, 3.13 or 5.6 hereof.
"Initial Deeds of Trust" shall mean those Deeds of Trust,
Security Agreement and Assignment of Rents and Leases, executed by the
Company for the benefit of Bank and recorded in the real property
records of Brazoria, Harris, Fort Bend, Galveston, Travis, Dallas,
Collin and Williamson Counties, Texas, and any other Deed of Trust,
Security Agreement and Assignment of Rents and Leases executed by the
Company for the benefit of the Bank in
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the form attached hereto as Exhibit "B" and to be recorded in Tarrant
County, Texas and other counties approved by the Bank, each of which
shall cover (i) the first set of Lots in each such county which are
added to the Borrowing Base, and the Improvements to be constructed
thereon, and (ii) the Collateral described in Section 3.10 relating to
such Lots and Improvements.
"Inventoried Lot" shall mean a single family residential lot
meeting the requirements of clauses (i) through (iv), but not clause
(v), of the definition of "Lot" set forth herein.
"Legal Requirements" shall mean (a) any and all present and
future judicial decisions, statutes, rulings, rules, regulations,
permits, certificates or ordinances of any Governmental Authority in any
way applicable to the Company or any Lot or Improvements, including the
ownership, use, occupancy, possession, operation, maintenance,
alteration, repair or reconstruction thereof, (b) the Company's
presently or subsequently effective corporate charter and bylaws, (c)
any and all covenants, conditions or restrictions applicable to the Lots
or the Improvements or the ownership, use or occupancy thereof, (d) any
and all leases or contracts (written or oral) of any nature that relate
in any way to the Lots or the Improvements or to which the Company may
be bound, and (e) any requirement necessary to satisfy any conditions
imposed upon the Company necessary to comply with the requirements of
any permanent financing obtained through either the FHA or VA.
"Loan Application" shall mean a certificate of the chief
financial officer of the Company in the form attached hereto as Exhibit
"D," requesting approval of an advance under the Revolving Line of
Credit from the Bank to the Company.
"Lot" shall mean any single family residential lot (i) included
in the Borrowing Base, (ii) which is located in a residential
subdivision which has not been disapproved by the Bank pursuant to
Section 3.11 hereof, (iii) with respect to which all development and
construction work has been completed (including (A) completion of all
public roadways necessary to provide sufficient access to such Lot and
(B) completion of all water, sanitary and storm sewer facilities in
capacities sufficient for single family residential use) so that such
Lot is ready for a Single Family House to be constructed thereon, (iv)
which shall be of sufficient size for the construction of a Single
Family House thereon and (v) upon which the Company intends to
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commence construction of a Single Family House promptly after the first
advance under the Revolving Line of Credit with respect thereto.
"Maximum Outstanding Amount" shall mean, at any given time, the
lesser of (i) the Borrowing Base Value at such time and (ii)
$20,000,000.00.
"Maximum Rate" shall have the meaning given thereto in the Note.
"Model Home" shall mean a Single Family House constructed by the
Company to be used in promoting the sale of homes being built with the
proceeds of the Revolving Line of Credit.
"Note" shall mean the promissory note of the Company issued
pursuant to Section 1.3 of this Agreement in the form attached as
Exhibit "A" to this Agreement.
"Pacific Realty Group" shall mean Pacific Realty Group, Inc.,
which owns all of the issued and outstanding capital stock of the
Company.
"Pacific USA" shall mean Pacific USA Holdings Corp.
"Permitted Encumbrances" shall mean those outstanding liens,
easements, building lines, restrictions, mineral interests and other
matters affecting a Lot which are described in the Title Commitment
issued with respect to such Lot and are acceptable to the Bank, except
those described in printed exceptions 2, 3 and 4 of the Texas standard
mortgagee's policy and any other similar matters, however designated.
"Person" or "person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, court, government or political subdivision
or agency thereof.
"Plans" shall mean the final plans and specifications, in form
and content satisfactory to the Bank, for the construction of the
Improvements on the Lot with which they are submitted in the Loan
Application, and all amendments and modifications thereof.
"Plot Plan" shall mean, with respect to each Single Family House,
the final drawing or plan and related specifications, in form and
content satisfactory to the Bank, showing the location of such Single
Family House on
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the Lot on which it is to be constructed, and all easements, setback
lines and other applicable matters.
"Prior Financial Statements" shall mean the consolidated
financial statements for the Company for the period ended March 31,
1996, and as at such date.
"Prior Loan Agreement" shall have the meaning set forth in the
Recitals hereto.
"Released Portion" shall have the meaning set forth in Section
4.3(b) hereof.
"Required Report" shall mean a report, certified by the chief
financial officer of the Company, setting forth (1) a summary of all
single family houses (whether or not such single family houses
constitute Single Family Houses) under construction by the Company,
constructed and still owned by the Company or sold since the date of the
last Required Report, indicating the status, location and value (both
current and projected as completed) of each such single family house;
(2) a "sales and closings" report indicating the sales of single family
houses (whether or not such single family houses constitute Single
Family Houses) closed by the Company since the date of the last Required
Report, listing the gross sales price and net sales price of such
closings, any cancellations, and a summary of the then existing closings
and contracts backlog by subdivision; and (3) a "speculative and models
inventory by subdivision" report reflecting, on a subdivision by
subdivision basis, the number of Speculative Homes and Model Homes in
the Company's inventory and the date of completion (or anticipated date
of completion) of each Speculative Home and Model Home.
"Revolving Line of Credit" shall mean the line of credit pursuant
to Section 1.3.
"Sales Contract" shall mean an executed bona fide sale and
purchase contract pursuant to the terms of which a Person other than an
affiliate of the Company has contracted to purchase a lot or single
family house.
"Sales Price" shall mean the sales price of a Single Family House
set by the Company, such price to be updated monthly. For purposes of
determining the Deed of Trust Amount with respect to a Single Family
House, if the Bank determines that there exists patterns of sales with
actual sales prices below the sale prices set therefore by the Company
under this paragraph, then the Bank shall have the right to adjust such
sales prices to amounts
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which the Bank believes accurately reflect the true sales price for each
Single Family House.
"Security Instruments" shall mean this Agreement, the Note, the
Deeds of Trust, the Certificates of Compliance, and any and all other
instruments now or hereafter executed in connection with or as security
for the Note.
"Single Family House" shall mean any single family residence (i)
included in the Borrowing Base, (ii) which is located on a Lot, (iii)
which is the only single family residence located on such Lot and (iv)
which has been completely constructed, or is then under construction, by
the Company in compliance with the Plans therefor and all Legal
Requirements.
"Specified Property" shall have the meaning set forth in Section
3.23(a) hereof.
"Speculative Home" shall mean any Single Family House which is
not the subject of a Sales Contract.
"Supplement" shall mean a Supplemental Deed of Trust, Security
Agreement and Financing Statement to be executed by the Company in the
form attached hereto as Exhibit "C" whereby a Lot and the Improvements
thereon or to be constructed thereon, and the Collateral described in
Section 3.10 relating to such Lot and Improvements, are made subject to
the liens created by the Initial Deed of Trust previously filed in the
county in which such Lot is located.
"Survey" shall mean an accurate on-the-ground survey consisting
of field notes (if the applicable property has not been platted)
prepared by a licensed surveyor not disapproved by the Bank and (a)
showing the location of any easements, rights-of-way, setback lines,
encroachments, fences, ditches or overlaps thereon or thereover, at the
outside boundary lines of the applicable tract of land and all
applicable Improvements, (b) identifying all easements, setback lines
and other matters referred to on the related Title Commitment or Title
Insurance, (c) including such surveyor's registered number and seal and
the date of such survey and (d) reflecting whether such tract of land
has access to and from a publicly dedicated street or road.
"Title Commitment" shall mean the commitment to issue an owner's
and/or mortgagee's title insurance policy in the form promulgated by the
State Board of Insurance of the State of Texas issued by the Title
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Insurer and pertaining to the Lot for which a Loan Application is
submitted to the Bank.
"Title Insurance" shall mean a paid mortgagee's title insurance
policy binder on interim construction loan or paid mortgagee's title
insurance policy, as the Bank, in its sole discretion, may require prior
to the advance hereunder for the acquisition of or commencement of
construction on a Lot for which a Loan Application is being made, in
form and substance satisfactory to the Bank, issued by the Title Insurer
in the amount of the Deed of Trust Amount of such Lot and the
Improvements to be constructed thereon in accordance with the Plans
therefor (which policy may include a rider or endorsement limiting the
binder or policy to the aggregate amounts actually advanced) covering
the lien on the interest of the Company described therein.
"Title Insurer" shall mean such title insurer as the Bank, in its
sole discretion, may approve.
"VA" shall mean the Veterans Administration.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any Note, certificate, report, or other document made or
delivered pursuant to this Agreement, unless specifically required otherwise.
(c) Terms in the singular shall include the plural and those in the
plural shall include the singular unless the context shall otherwise require.
1.3 Revolving Line of Credit. The Bank, during the period from the
date of this Agreement until the date that is twelve (12) months after the date
of this Agreement for the initial advance with respect to any Lot or the
Improvements thereon or to be constructed thereon, and until the earlier to
occur of (i) the date that is twelve (12) months after the date of the initial
advance with respect to any Lot or Improvements and (ii) the maturity date of
the Note (whether occurring by the terms of the Note, by acceleration or
otherwise) for subsequent advances for such Lot and Improvements, subject in
all instances to (a) the terms and conditions of this Agreement, (b) the
condition that at the time of each borrowing hereunder, the condition of the
Company, financial and otherwise, and the condition of the Collateral, are
satisfactory to the Bank, and (c) the condition that no Default or Event of
Default has occurred and is then continuing to occur, agrees to make advances
to the Company pursuant to a Revolving Line of Credit up to but not in excess
of the Maximum Outstanding Amount upon compliance by the Company with the
provisions of Section 5.2 hereof. The Company's obligation to repay the
Revolving Line of Credit shall be evidenced by the Note. The Note shall bear
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interest at the rate or rates set forth in Section 1.5 hereof. Accrued and
unpaid interest on the Note shall be due and payable on the first day of each
month, commencing June 1, 1996. All unpaid principal and accrued and unpaid
interest on the Note shall be due and payable on January 31, 1998.
1.4 Prepayments.
(a) If at any time the outstanding balance under the Revolving Line
of Credit is in excess of the Maximum Outstanding Amount, or if required by any
other provision of this Agreement, the Company shall, immediately and without
demand, make a mandatory prepayment on the Note in an amount sufficient to
reduce the outstanding balance under the Revolving Line of Credit to the
Maximum Outstanding Amount.
(b) If any Single Family House has not been sold in a bona fide sales
transaction to a Person other than an affiliate of the Company on or before the
date that is one (1) year after the date of execution of the Deed of Trust for
such Single Family House, the Company shall make a mandatory prepayment on the
Note in an amount equal to ten percent (10%) of the Deed of Trust Amount of
such Single Family House.
(c) If any Single Family House has not been sold in a bona fide sales
transaction to a Person other than an affiliate of the Company on or before the
date that is two (2) years after the date of execution of the Deed of Trust for
such Single Family House, the Company shall make a mandatory prepayment on the
Note in an amount equal to the amount of unpaid advances made under the
Revolving Line of Credit with respect to such Single Family House.
(d) Notwithstanding any provision of Section 1.4(b) or (c) above to
the contrary, upon the maturity of the Note (whether occurring by the terms of
the Note, by acceleration or otherwise) all unpaid amounts under the Note shall
become immediately due and payable upon such maturity date.
(e) The Company shall have the right to prepay without premium at any
time, upon two (2) Business Days written notice to the Bank, any amount owing
on the Note. Such voluntary prepayments shall be limited to one (1) per
calendar week. Any prepayment made pursuant to this Section 1.4 shall be
applied first to principal.
1.5 Interest. The Note shall bear interest as follows:
(a) Subject to the provisions of paragraphs (b) and (c) of
this Section 1.5, the Company shall pay interest on the outstanding
principal amount of the Note at one-half percent (1/2%) per annum over
the Base Rate.
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(b) In the event that, and for so long as any Event of Default
shall have occurred and be continuing, then and in any such event, the
outstanding principal amount of the Note shall bear interest at the
Maximum Rate.
(c) Notwithstanding anything contained herein to the contrary,
in no event shall the interest rate payable with respect to the Note
exceed the Maximum Rate.
1.6 Use of Proceeds. Advances under the Revolving Line of Credit
shall be used for Costs of Construction and for the acquisition of Inventoried
Lots, and no other purpose.
Section 2. Representations and Warranties
The Company represents and warrants to the Bank that, except as set
forth on Schedule 1 hereof:
2.1 Existence. The Company is a corporation duly organized, legally
existing and in good standing under the laws of the State of Nevada and duly
qualified as a foreign corporation in the State of Texas and in all other
jurisdictions wherein the property owned or the business transacted by it makes
such qualification necessary.
2.2 Authority. The Company is duly authorized and empowered to
create and issue the Note, and to execute and deliver the Security Instruments,
and all other instruments referred to or mentioned herein, and all corporate
action requisite for the due creation, issuance and delivery of the Note and
the due execution and delivery of the Security Instruments has been duly and
effectively taken. This Agreement, the Note, and the other Security
Instruments, when executed and delivered, will be valid and binding obligations
of the Company enforceable in accordance with their terms (subject to any
applicable bankruptcy, insolvency or other laws generally affecting the
enforcement of creditors' rights). This Agreement, the Note, and the other
Security Instruments do not violate any provisions of the Company's corporate
charter or bylaws or any contract, agreement, law or regulation to which the
Company is subject, and the same do not require the consent or approval of any
regulatory authority or governmental body of the United States of America or
any state.
2.3 Financial Condition. The Prior Financial Statements which have
been delivered to the Bank are complete and correct, have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, and fully and accurately reflect the financial
condition and results of the operations of the Company as at the dates and for
the periods stated. No material adverse change has occurred since
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the date of the Prior Financial Statements in the condition, financial or
otherwise, of the Company.
2.4 Full Disclosure. Neither this Agreement nor any certificate or
statement or any other data furnished by the Company or any of its officers in
connection with the negotiation of this Agreement or the transactions
contemplated hereby contains any untrue statement of a material fact or omits a
material fact known to the Company necessary to make the statements contained
herein or therein not misleading. There is no material fact known to the
Company which the Company has failed to disclose to the Bank in writing which
affects the business, operations, assets, prospects or condition, financial or
otherwise, of the Company.
2.5 Liabilities and Litigation. The Company has no liabilities, and
no litigation, legal or administrative proceedings, investigation or other
action is pending or, to the best knowledge of the Company, threatened against
or affecting the Company or any Lot or Improvements, and involving the
possibility of any judgment or liability not fully covered by insurance, or
which may affect any Lot or Improvements any other business or assets of the
Company or the Company's ability to carry on business as now conducted, except
as disclosed in the Prior Financial Statements and liabilities incurred in the
ordinary course of business. To the best knowledge of the Company, no unusual
or unduly burdensome restriction, restraint or hazard exists by contract, law,
governmental regulation or otherwise relative to the business or the assets of
the Company.
2.6 Titles and Encumbrances. The Company has good title to the Lots
and Improvements for which advances are made to it under the Revolving Line of
Credit, free and clear of all mortgages, liens and encumbrances, except those
referred to in Section 4.2 hereof.
2.7 No Default. No Default or Event of Default exists under this
Agreement and the Company is not in default in any material respect under any
contract, agreement or instrument to which the Company is a party or by which
the Company or any of its property may be bound, or in any respect under any
material contract, agreement or instrument to which the Company is a party or
by which the Company or any of its property may be bound.
2.8 Patents, etc. The Company has all patents, patent rights or
licenses, trademarks, trademark rights, trade names, trade name rights,
copyrights, permits and franchises which are required in order for it to
conduct its business as now conducted without known conflict with the rights of
others. The Company is not aware of any fact or condition which might cause
any of such foregoing not to be renewed in due course.
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2.9 Taxes. The Company has filed all federal and state income tax
returns which are required to be filed as of the date of this Agreement and has
paid all taxes shown on said returns and on all assessments received by it to
the extent such taxes have become due. Neither the Company nor any of such
returns is currently the subject of, or has been threatened with, an audit
relating to such tax matters.
2.10 Compliance. The Company has complied with all material valid and
applicable statutes, rules and regulations of each jurisdiction to which it may
be subject.
2.11 Margin Securities. The Company does not own any "margin
security" or "margin stock" as defined in Regulations G, U or X of the Board of
Governors of the Federal Reserve System (12 C.F.R. Parts 207, 221 and 224,
respectively).
2.12 Utilities, Access and Construction. All utility services,
including water supply, storm and sanitary sewer facilities, electric and
telephone facilities and related services necessary for the construction of the
Improvements on Lots currently owned by the Company, and the use thereof for
their intended purposes, are available for such Lots and Improvements. Each
Lot currently owned by the Company has adequate access to public streets and
roads. The Company has not made any oral or written contract or arrangement of
any kind, the performance of which by the other party thereto would give rise
to a lien on any Lot or Improvements of equal or greater priority than the
liens created under the Security Instruments.
Section 3. Affirmative Covenants
Until the Indebtedness of the Company to the Bank has been paid or while
the Bank has a commitment to the Company hereunder:
3.1 Reporting Requirements. The Company will promptly furnish to the
Bank from time to time the following information regarding the business affairs
and financial condition of the Company:
(a) as soon as possible and in any event within five (5) days
after the occurrence of each Default or Event of Default, the statement
of the chief financial officer of the Company setting forth details of
such Default or Event of Default and the action which the Company
proposes to take with respect thereto;
(b) as soon as available, and in any event within forty-five
(45) days after the end of each calendar month, the balance sheet of the
Company, as of the end of such month, the statement of income of the
Company for such month and the statement of cash flow of the Company for
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such month, all in reasonable detail and certified by the chief
financial officer of the Company;
(c) as soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Company, the balance sheet
of the Company as at the end of such year and the statement of income,
statement of cash flow and statement of equity and changes in financial
position of the Company for such year, together with comparative figures
for the preceding fiscal year, and certified, without qualification, by
independent certified public accountants acceptable to the Bank;
(d) as soon as available, and in any event within thirty (30)
days after the last day of each month, the Required Report;
(e) concurrently with the financial statements required by
Sections 3.1(b) and 3.1(c), a Certificate of Compliance;
(f) as soon as available and in any event within ninety (90)
days after the end of each fiscal year of Pacific USA, the balance sheet
of Pacific USA and its subsidiaries as at the end of such year and the
statement of income, statement of cash flow and statement of
shareholders' equity and changes in financial position of such companies
for such year, together with comparative figures for the preceding
fiscal year, and audited by independent certified public accountants
acceptable to the Bank;
(g) as soon as available, and in any event within two (2)
Business Days following the last day of each calendar week, a Borrowing
Base Report certified by the chief financial officer of the Company;
(h) concurrently with the financial statements required by
Section 3.1(c), the report of insurance required by Section 3.7;
(i) as soon as possible, and in any event, within five (5)
days of knowledge thereof, the notice of litigation required by Section
3.9 of this Agreement; and
(j) such other information the Bank may reasonably request
from time to time.
The Company shall use its best efforts to obtain, within one hundred
twenty (120) days after the end of each fiscal year of Pacific Electric Wire &
Cable Co., Ltd., the balance sheet of such
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company as at the end of such year and the statement of income, statement of
cash flow and statement of shareholders' equity and changes in financial
position for such company for such year, together with comparative figures for
the preceding fiscal year.
The Financial Statements and other reports shall be complete and
correct, and prepared in accordance with generally accepted accounting
principles consistently applied. Each balance sheet delivered to the Bank
shall include all contingent liabilities of the Company.
The Company grants to the Bank the right to send the Bank's own
representatives and/or employees to inspect, copy, and/or audit the books of
the Company.
3.2 Taxes and Other Liens. The Company will promptly pay and
discharge, prior to the date when any interest or penalty shall accrue thereon,
all taxes, assessments, governmental charges, impositions, water and sewer
rents, claims for labor, supplies, rent and other obligations which if unpaid,
might become a lien against the property of the Company. The Company will
promptly pay and discharge all taxes, assessments and other governmental
charges or levies imposed upon the Company on the income, profits or assets of
the Company or upon any of its property (real, personal or mixed) or upon any
part thereof, not later than the due date thereof. The Company shall not
place, or permit to be placed, a lien upon, or otherwise mortgage, hypothecate
or encumber all or any portion of the Lots or Improvements (other than vendor's
liens and purchase money liens reserved by suppliers of appliances and other
similar items placed in the Improvements and which are purchased by the Company
on open account) regardless of whether same is allegedly or expressly inferior
to the Bank's liens and, if any such lien is placed or asserted against any
portion of the Lots or the Improvements, the Company shall promptly, at its own
cost and expense, (i) pay the underlying claim in full, take such other action
so as to cause the same to be released, or bond around such claim to the Bank's
satisfaction and (ii) within five (5) days after the date such lien is
asserted, give the Bank notice of the placing or assertion of such lien. Upon
request of the Bank, the Company will furnish to the Bank satisfactory evidence
to indicate the Company's compliance with this Section 3.2.
3.3 Maintenance. The Company will maintain its corporate existence
and remain in or become a corporation in good standing in each jurisdiction in
which it is required to be qualified. The Company will maintain all patents,
trademarks, franchises and licenses necessary in its business, and comply with
all Legal Requirements, and it will maintain or cause to be maintained its
properties in good and workable condition at all times. The Company shall
continue to conduct, operate and manage its business substantially as its
business is currently being conducted, managed and operated.
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<PAGE> 21
3.4 Further Assurances. The Company will promptly cure any defects
in the execution and delivery of this Agreement, the Note, the other Security
Instruments and any other instrument or instruments referred to or mentioned
herein. The Company will immediately execute and deliver to Bank upon request
all security agreements, financing statements, certificates of title, deeds of
trust, mortgages and other instruments to accomplish the covenants and
agreements of the Company under this Agreement and the other Security
Instruments. Upon the request of the Bank, the Company shall deliver to the
Bank:
(a) an endorsement from the Title Insurer in form and
substance satisfactory to the Bank (or other evidence satisfactory to
the Bank), reflecting that there have been no changes to the status of
title to a Lot or the Improvements thereon since the time the Title
Insurance with respect to such Lot or Improvements was issued;
(b) a certificate from the Architect stating that, in his or
their opinion, as the case may be, the construction of any Improvements
relating to any Lot theretofore performed has been in substantial
accordance with the Plans and all Legal Requirements;
(c) lien waivers or releases from all contractors contracting
directly with the Company in connection with the construction of any
Improvements; and
(d) such other certifications or evidence as the Bank may
request.
The Company shall, without request, on or before the date that is eleven (11)
months after the date of the issuance of each mortgagee's title insurance
policy binder on interim construction loan with respect to a Lot, and every six
(6) months thereafter until the Lot and Improvements thereon have been sold
pursuant to a Sales Contract, cause the Title Insurer to issue and deliver to
the Bank an extension of such title binder.
3.5 Performance of Obligations. The Company will pay the Note
according to the reading, tenor and effect thereof and will do and perform
every act and discharge all of the obligations provided to be performed and
discharged under this Agreement, the Note, the Security Instruments and any and
all of the instruments referred to or mentioned herein at the time or times and
in the manner therein and herein specified. The Company will perform all
obligations to be performed by it pursuant to the terms of each indenture,
agreement, contract, and other instrument by which the Company or its
properties are bound.
3.6 Payment of Expenses. The Company shall pay all out-of-pocket
costs and expenses, including, without limitation, all
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attorneys', accountants', engineers', architects', inspectors' and other
professionals' or contractors' fees and recording costs incurred by the Bank in
connection with the preparation, negotiation, execution and perfection of the
Security Instruments and the creation of the liens created thereby and the
monitoring and other administration of the Revolving Line of Credit. The
Company shall, upon request, promptly reimburse the Bank for all amounts
expended, advanced or incurred by the Bank (i) for fees of Appraisals
commissioned by the Bank, (ii) to satisfy any obligation of the Company under
the Security Instruments, (iii) to protect the lien or security interest of the
Bank on or in any of the Collateral, (iv) to collect payments due under the
Note or (v) to enforce the rights of the Bank under the Security Instruments or
any other instrument referred to or mentioned herein or executed or to be
executed in connection herewith, which amounts will include, without
limitation, all court costs, attorneys' fees, fees of auditors and accountants
and investigation expenses reasonably incurred by the Bank in connection with
any such matters, together with interest at the rate of ten percent (10%) per
annum, not to exceed the maximum non-usurious interest rate permitted by
applicable law, on each such amount from the date the same was expended,
advanced or incurred by the Bank until the date it is repaid to the Bank. A
certificate of the Bank setting forth any such amount shall be conclusive
evidence of the matters set forth therein in the absence of manifest error.
The Company shall pay all costs and expenses required to satisfy the conditions
of this Agreement and the other Security Instruments, including, without
limitation, taxes and recording expenses and fees and commissions, if any,
lawfully due to brokers in connection with the sale of any Lots or
Improvements. All amounts advanced in connection herewith shall be secured by
the Collateral.
3.7 Insurance. The Company will maintain with financially sound and
reputable insurers acceptable to the Bank, insurance with respect to its
properties and business against such liabilities, casualties, risks and
contingencies and in such types and amounts as is customary in the case of
corporations engaged in the same or similar businesses and similarly situated,
including, without limitation (a) a policy or policies of Builder's All Risk-
Completed Value fire and extended insurance, with coverage for the risks of
earthquake and collapse, covering all the Lots and Improvements for which
advances are made under the Revolving Line of Credit, (b) all insurance
required under any Deed of Trust, (c) flood insurance as may be necessary in
order for the Bank and the Revolving Line of Credit to be in full compliance
with applicable law, including the provisions of 42 U.S.C. Section 4012a and
all regulations promulgated thereunder, including a policy of flood insurance
issued pursuant to the Flood Protection Act of 1973, covering any Lot and the
Improvements constructed thereon lying within the 100-year flood plain, (d) an
owner's and contractor's liability policy or policies (including workmen's
compensation insurance) in such amounts and on such terms as the Bank may
approve or (e) from and after the date
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on which the Improvements are completed, fire and extended insurance coverage
for the full replacement cost of such Improvements (including contents
insurance). Annually, concurrently with delivery of the audited financial
statements, or upon the written request of the Bank, the Company will furnish
the Bank from time to time a summary of the insurance coverage of the Company
in form and substance satisfactory to the Bank and if requested will furnish
the Bank copies of the applicable policies. The Company will cause any and all
insurance policies insuring the Collateral, or any part thereof, to (a) name
the Bank as an additional insured and a loss payee thereunder, (b) with respect
to any hazard, casualty or Builder's All-Risk insurance maintained by the
Company on any Lot or Improvements, (i) cause the insurance policy relating to
any such insurance to name the Bank as an additional insured and loss payee and
(ii) pay, or cause the issuer of such policy to pay, the proceeds thereunder to
the Bank if, prior to the disbursement of any such proceeds, the Bank has
notified such issuer of the existence of a Default or an Event of Default, and
(c) contain a provision requiring at least ten (10) days prior notice of
cancellation to the Bank. As soon as possible, and in any event, within five
(5) days thereafter, the Company will notify the Bank of the cancellation of
any insurance coverage, whether or not the Bank is an additional insured or a
loss payee under the affected policy.
3.8 Certificate of Compliance. At the times set forth in Section
3.1(e) of this Agreement, the Company shall deliver to the Bank a certificate
in the form attached as Exhibit "E" hereto, which certificate shall be signed
by the chief financial officer of the Company and shall state that he has
reviewed the activities of the Company during the previous calendar month with
a view to determining whether the Company has kept, observed, performed and
fulfilled all of its obligations under this Agreement, the Note and the other
Security Instruments, and that the Company has kept, observed, performed and
fulfilled each and every covenant and condition contained in the Note, this
Agreement and the other Security Instruments and is not at the time in default
in the observance, performance or fulfillment of any such covenants and
conditions or if the Company shall be in default, specifying any such default,
the nature and status thereof, and what action, if any, has been taken to
remedy the default or defaults.
3.9 Litigation. As soon as possible and in any event, within five
(5) days of knowledge thereof, the Company shall give written notice to the
Bank of all litigation (other than litigation being defended by an insurance
carrier without reservation as to coverage claiming amounts within said
coverage) in which the Company may have liability in excess of $300,000.00 (or
as to which no specified amount of damages is alleged) and of all proceedings
before any governmental or regulatory agency affecting the Company.
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<PAGE> 24
3.10 Security. The Indebtedness and obligations of the Company under
this Agreement, the Note and the other Security Instruments shall be secured by
a lien in favor of the Bank prior to any other lien or encumbrance on all of
the Company's right, title and interest in and to each Lot and the Improvements
thereon or to be constructed thereon, together with a security interest in
favor of the Bank with respect to the following items located on, used in
connection with, or arising out of each Lot and the Improvements thereon or to
be constructed thereon: (i) all equipment now owned or hereafter acquired; (ii)
all accounts receivable now or hereafter existing; (iii) all chattel paper,
documents and instruments now owned or hereafter acquired; (iv) all inventory
now owned or hereafter acquired; (v) all general intangibles now owned or
hereafter acquired; (vi) all Sales Contracts; (vii) all Construction Contracts;
and (viii) the proceeds, products and accessions of and to any and all of the
foregoing.
3.11 Residential Subdivisions. Advances may not be made with respect
to any Lot or the Improvements to be constructed thereon if such Lot is located
outside the greater metropolitan area of Houston, Dallas-Fort Worth or Austin,
or in any residential subdivision which the Bank disapproves in writing. The
Company shall not be entitled to any advances with respect to any Lot or
Improvements located in a residential subdivision if the Company has not
obtained, received and approved, in accordance with prudent and reasonable
industry standards, a Phase I Environmental Audit prepared with respect to such
Lot. If requested by the Bank, the Company shall deliver to the Bank a Phase I
Environmental Audit prepared with respect to any Lot, a Title Commitment with
respect to any Lot, legible copies of all documents, instruments and plats
described in each such Title Commitment and any other documents, instruments or
information which the Bank may request with respect to such Lot.
3.12 Surveys and Appraisals. As and when requested by the Bank, the
Company shall deliver to the Bank an Appraisal and/or a Survey with respect to
any Lot and the Improvements thereon.
3.13 Plans; Construction in Compliance with Plans. All Plans shall be
in accordance with sound engineering principles, and shall otherwise be
sufficient for the construction of the Improvements. All construction
performed on the Improvements will be performed in accordance with the Plans.
No construction of any Improvements shall be commenced or performed unless and
until (a) the Plans therefor have been submitted to and approved by all
requisite Governmental Authorities and are in compliance with all applicable
Legal Requirements, (b) all requisite Governmental Permits have been obtained,
(c) all applicable Legal Requirements have been fulfilled and (d) if requested
by the Bank, the Plans therefor have been approved by the Bank. No changes
shall be made in the Plans by the Company or any other person without the prior
written
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approval of all requisite Governmental Authorities and the prior compliance
with all applicable Legal Requirements and, if such changes will result in an
increase of the Sales Price of such Improvements of more than ten percent
(10%), without the prior written approval of the Bank.
3.14 Construction Contracts; Commencement of Construction. No
Construction Contract, or an affidavit or memorandum thereof, shall be entered
into or recorded, and no operations incident to the proposed Improvements shall
begin, until the applicable Deed of Trust has been executed, acknowledged and
recorded in the real property records of the county where such Improvements are
located. At the Bank's option and the Company's expense, the Bank's inspector
shall perform a site inspection of each Lot on the date the Deed of Trust with
respect to such Lot is recorded in order to determine the Company's compliance
or non-compliance with the provisions of this Section 3.14. If requested by
the Bank, prior to the commencement of the construction of any Improvements,
the Company will submit for the Bank's approval all Construction Contracts
relating to such Improvements.
3.15 Governmental Permits. All necessary Governmental Permits shall
be obtained in a timely manner in order to permit the expeditious commencement,
prosecution and completion of the construction of all Improvements. Upon the
Bank's request, the Company shall deliver to the Bank a copy of any such
Governmental Permit and evidence of the Company's compliance therewith.
3.16 Compliance with Legal Requirements. The Company shall promptly
and faithfully comply with, conform to and obey all present and future Legal
Requirements, whether or not the same shall necessitate structural changes in,
improvements to or interfere with the use or enjoyment of the Lots or
Improvements. Upon the request of the Bank, the Company shall furnish
satisfactory evidence to the Bank of its compliance with all Legal
Requirements.
3.17 Use Violations; Notifications. The Company shall not use,
maintain, operate or occupy, or allow the use, maintenance, operation or
occupancy of, the Lots or the Improvements in any manner which (a) violates any
Legal Requirements, (b) may be dangerous, unless safeguarded as required by
law, (c) constitutes a public or private nuisance, (d) makes void, voidable or
cancelable any insurance then in force with respect thereto or (e) makes void,
voidable, or cancelable any Governmental Permit. Upon the request of the Bank,
the Company shall furnish satisfactory evidence to the Bank of its compliance
with this Section 3.17. The Company will comply with and furnish the Bank with
any official notice or claim made by any Governmental Authority. The Company
will also promptly notify the Bank of any substantial fire, casualty, or notice
of any taking by eminent domain affecting any Lots or Improvements. Any such
event shall conclusively be deemed
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<PAGE> 26
substantial if the cost of the repair or restoration of the property taken
shall exceed $10,000.
3.18 Construction of Improvements. The construction of Improvements
shall be commenced promptly after the acquisition by the Company of the Lot
upon which such Improvements are to be constructed. The construction of all
Improvements shall be prosecuted by the Company, with diligence, continually to
completion and shall be completed by the Company in a good and workmanlike
manner in accordance with the Plans therefor, all Legal Requirements, the other
provisions of this Agreement and the other Security Instruments and all usual
and customary construction and development standards relating to the
construction and operation of such Improvements, free and clear of all liens,
or claims for liens, other than the liens specifically permitted hereunder.
The Company shall file or record all requisite plats and other instruments
necessary or desirable in connection with the construction and operation of the
Improvements to the extent such plats and other instruments have not previously
been filed or recorded. At all times during construction of any Improvements,
the Company shall (a) comply strictly with any and all Legal Requirements
required to be complied with incidental to such construction, (b) deliver to
the Bank, or its representatives, immediately upon demand, counterparts of any
and all Construction Contracts executed in connection with the construction of
such Improvements and (c) permit the Bank to erect and maintain a sign in a
conspicuous location on one or more Lots stating that construction financing
has been furnished by the Bank. Within ten (10) days after the pouring of the
concrete slab within each Lot, the Company shall deliver to the Bank a form
slab survey showing the location of such slab, and whether or not the location
thereof is entirely within the property lines of such Lot and whether or not
the same encroaches upon, breaches or violates any building line, easement or
other restriction or encroachment (and if the location thereof is not entirely
within the property lines of such Lot or encroaches upon, breaches or violates
any building line, easement or other restriction or encroachment, then the
Company shall either (A) cure or remove such encroachment, breach or violation
or (B) deliver to the Bank, along with such Survey, appropriate waivers from
the appropriate persons).
3.19 Continuing Compliance with Requirements for Advances. All of the
conditions and requirements which need to be satisfied or fulfilled in order
for the Company to receive any advance under the Revolving Line of Credit shall
continue to be achieved, satisfied and fulfilled at all times during which such
Lot or Improvements are subject to a lien in favor of the Bank.
3.20 Correction Work. The Company shall immediately correct any
structural defect in any of the Improvements or any substantial or material
departure from the Plans therefor not approved by the Bank. Any advance under
the Revolving Line of Credit shall not
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constitute a waiver of the Bank's right to require compliance with this
covenant with respect to any such defects or departures from the Plans.
3.21 Continuous Construction of the Improvements.
(a) Once construction of any Improvements has commenced, construction
shall not cease prior to completion of such Improvements for any cause other
than a cause beyond the control of the Company unless consented to by the Bank.
For purposes of this Section 3.21 only, construction of any Improvements shall
be deemed complete if the only work remaining unfinished consists of
construction or installation of purchaser selected items and other items
customarily installed at the time of purchaser move-in.
(b) Once construction of any Improvements has commenced with respect
to any Lots under a Construction Contract, construction shall not cease with
reference to such Construction Contract prior to the substantial completion of
the work contemplated by such Construction Contract for any cause other than a
cause beyond the control of the Company unless consented to by the Bank.
Additionally, the time period commencing on the date construction of any such
Improvements relating to a particular Construction Contract ceases and the
first day of construction of such Improvements relating to such Lot commences
pursuant to another Construction Contract shall not exceed ninety (90) days for
any cause other than a cause beyond the control of the Company unless consented
to by the Bank.
3.22 Inspections.
(a) The Company shall permit the Bank, the Independent Supervising
Architect or any of the Bank's other representatives, to enter upon or into any
of the Lots or Improvements or any office or place of business of the Company
for the purpose of examining the Lots, the Improvements, any part thereof, all
materials to be used in construction thereof, all Plans and shop drawings, and
any of the Company's books and records including, but not limited to, the
Company's books and records in reference to such Lots, Improvements, the sale
and disposition thereof, the disposition of the proceeds thereof and for the
purpose of making copies of any such books and records. The Company shall
reimburse the Bank, on demand, for all expenses incurred by the Bank in
connection with any such inspections.
(b) If through such inspections or otherwise, the Bank, in comparing
(i) the actual amount of work completed on any Lot or Improvements to (ii) the
amount of work stated by the Company to have been completed on the Lot or
Improvements, and for which advances under the Revolving Line of Credit have
been made, determines that there exists a variance between (x) the work which
should have been completed for such Improvements and (y) the costs
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associated with such Improvements which were taken into account in determining
the Borrowing Base, and that such variance resulted in a Borrowing Base Value
which, in the Bank's judgment, is higher than that indicated by the work in
place, then the Bank shall determine a new Deed of Trust Amount for such
Improvements which shall be in effect until such variance terminates. The Bank
shall also have the right, at all times, to not make any initial advance under
the Revolving Line of Credit with respect to any Lot or Improvements if, in the
determination of the Bank in its sole discretion, there does not exist under
the Revolving Line of Credit unadvanced funds in an amount at least equal to
the amount necessary to complete all Single Family Houses for which advances
are outstanding under the Revolving Line of Credit.
3.23 Borrowing Base.
(a) Inclusion in Borrowing Base. Single Family Houses and Lots (each
such property to be included in the Borrowing Base pursuant to this Section
3.23 herein being called a "Specified Property") shall be included in the
Borrowing Base only upon the full compliance with and achievement of the
following conditions and requirements to the satisfaction of the Bank:
(i) All documents and instruments (in form and
substance satisfactory to the Bank) necessary or otherwise requested by
the Bank to create in favor of the Bank a lien against the Specified
Property, including without limitation the applicable Deed of Trust,
subject only to the Permitted Encumbrances, have been fully executed,
acknowledged, recorded or filed in the appropriate offices (where
applicable) and certified copies thereof delivered to the Bank by the
Title Insurer or its agent. The Company shall cause the recorded
originals of such instruments to be delivered to the Bank by the Title
Insurer or its agent immediately after recording.
(ii) The Title Insurance covering the Specified Property
has been issued by the Title Insurer and delivered to the Bank.
(iii) The Plans of the Specified Property have not been
disapproved by the Bank.
(iv) An Appraisal covering the Specified Property has
been delivered to the Bank and not disapproved by the Bank.
(v) The inclusion of the Specified Property in the
Borrowing Base will not give rise to a Default or an Event of Default
including, without limitation, any breach of any of the Company's
representations,
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<PAGE> 29
warranties or covenants set forth in this Agreement or any of the other
Security Instruments.
(vi) The Company shall have delivered to the Bank such
other matters, certifications and assurances that the Bank may request.
(b) Determination of Borrowing Base; Borrowing Base Reports. At the
times required by Section 3.1(g) hereof, the Company shall deliver to the Bank
a report (a "Borrowing Base Report"), in form satisfactory to the Bank, which
sets forth the Aggregate Deed of Trust Amount, and all component parts giving
rise thereto, all as the last day of the immediately preceding calendar week.
For purposes of determining the Aggregate Deed of Trust Amount as of such date,
the Company shall use the procedures set forth in this Section 3.23.
Section 4. Negative Covenants
A deviation from the provisions of this Section 4 shall not constitute
an event of default under this Agreement if such deviation is consented to in
writing (in the manner hereinafter provided) by the Bank. In the absence of
such a written consent, so long as any part of the Indebtedness shall remain
unpaid or the Bank has a commitment to the Company hereunder:
4.1 Dividends and Redemptions. The Company will not declare or pay
dividends (other than a dividend payable solely in stock of the Company) or
make any other distribution on account of, or purchase, acquire, redeem or
retire any stock of the Company, whether now or hereafter outstanding, if such
declaration, payment, purchase, acquisition or redemption results or will
result in the occurrence of a Default or an Event of Default hereunder.
4.2 Encumbrances. The Company will not create, incur, assume or
permit to exist any mortgage, pledge, lien or encumbrance on any Lots or
Improvements, nor acquire or agree to acquire any Lots or Improvements under
any conditional sale agreement or title retention contract, except that the
foregoing restrictions shall not apply to:
(a) liens for taxes not yet due or which are being diligently
contested in good faith by appropriate proceedings;
(b) pledges or deposits in connection with or to secure
workmen's compensation, unemployment insurance, pensions or other
employee benefits;
(c) liens required by this Agreement;
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<PAGE> 30
(d) Permitted Encumbrances;
(e) liens incurred in the ordinary course of the Company's
business which are not placed upon any Collateral; and
(f) lot option contracts and other similar earnest money
contracts entered into by the Company in the ordinary course of its
business.
As to the liens and encumbrances permitted pursuant to paragraph (a)
above, the Company's right to contest diligently in good faith by appropriate
proceedings is conditioned upon the Company's setting up appropriate reserves
under generally accepted accounting principles and upon stay of levy and
execution thereon.
4.3 Sale of Assets.
(a) The Company will not sell, transfer, lease or otherwise dispose
of any Lots or Improvements on which the Bank has a lien unless the Company
complies with the provisions set forth in this Section 4.3.
(b) The Company shall be entitled to releases of Lots and
Improvements from the liens thereon in favor of the Bank (each such Lot and
Improvements released is herein called a "Released Portion") upon the sale of
such Released Portion pursuant to a Sales Contract, subject to and in
accordance with the following provisions:
(i) The Company shall have delivered to the Bank, for
payment against the principal amount outstanding under the Note, the
aggregate amount of advances under the Note made by the Bank with
respect to the Released Portion, together with all accrued and unpaid
interest thereon;
(ii) At the time of the release, no Default or Event of
Default exists;
(iii) The release of the Released Portion from the liens
thereon in favor of the Bank will not result or give rise to a Default
or an Event of Default;
(iv) The instruments or documents evidencing such
release shall be prepared at the cost of the Company and shall be in
form and substance satisfactory to the Bank; and
(v) Such other documentation and information requested
by the Bank in connection with such release shall be delivered to the
Bank.
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(c) Upon the occurrence of a Default or Event of Default, or in the
event the Bank is no longer allowing the Company to receive advances under the
Revolving Line of Credit, the Bank shall have the right, at its option and in
its sole discretion, to increase the amount required under Section 4.3(b)(i)
hereof to any amount up to the full sales price of the Released Portion set
forth in the applicable Sales Contract. All such amounts in excess of the
sales price of such Released Portion shall be applied as a prepayment against
the Note.
4.4 Utility Rights. The Company shall not, without the specific
written consent of the Bank, transfer, sell, assign, or convey, either in whole
or in part, for use in connection with other property, even though such
property may be owned by the Company or otherwise, (a) any of the rights to
utility availability applicable to any Lot or Improvements granted by any
municipal utility district, other Governmental Authority or any other person,
or (b) any other utility capacity which may in the future be available to any
Lot or Improvements.
4.5 Alterations. The Company shall not commit or permit any waste of
any Lot or Improvements and shall not, without the prior written consent of the
Bank, make or permit to be made, any alterations or additions to any Lot or
Improvements other than construction of the Improvements as contemplated
herein.
4.6 Restrictions on Speculative Homes, Model Homes, Single Family
Houses in Austin and Inventoried Lots.
(a) The Company shall not, at any time during the term of this
Agreement, allow:
(i) the aggregate Deed of Trust Amounts for all
Speculative Homes (regardless of location) to be greater than
$10,000,000.00;
(ii) the number of all single family houses (other than
model homes) under construction by, or which have been completed and are
still owned, by the Company (whether or not such houses constitute
Single Family Houses) for which the Company does not have an executed
Sales Contract to constitute more than sixty percent (60%) of the number
of all single family houses (other than model homes) under construction
by, or which have been completed and are still owned by, the Company;
(iii) more than ten (10) Speculative Homes in any
residential subdivision to be included in the Borrowing Base;
(iv) the number of Model Homes included in the Borrowing
Base to be more than sixteen (16), or the
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number of Model Homes in any residential subdivision included in the
Borrowing Base to be more than two (2);
(v) the aggregate Deed of Trust Amounts for all Single
Family Houses within the greater metropolitan area of Austin, Texas to
be greater than $5,000,000.00;
(vi) the aggregate Deed of Trust Amounts for all
Inventoried Lots to exceed $2,000,000.00; or
(vii) the value (calculated at the greater of cost or
appraised value) of all lots (other than lots upon which the Company
intends to promptly commence construction of a Single Family House)
owned by the Company (whether or not such lots constitute Inventoried
Lots) to exceed $4,000,000.00.
(b) In the event of a breach of any of the provisions of subsection
(a)(i), (v) or (vi) of this Section 4.6, the Company shall immediately make a
mandatory prepayment under Section 1.4 of this Agreement on the Note in an
amount necessary to bring the Company into compliance with the provisions of
this Section 4.6. For purposes of this Section 4.6, a Single Family House
shall be deemed to be a Speculative Home unless the Bank has received a copy of
an executed Sales Contract with respect to such Single Family House.
4.7 Limitation on Aggregate Deed of Trust Amount. The Company shall
not, at any time during the term of this Agreement, allow the Aggregate Deed of
Trust Amount to exceed the Maximum Outstanding Amount. In the event, at any
time, the Aggregate Deed of Trust Amount exceeds the Maximum Outstanding
Amount, the Company shall immediately make a mandatory prepayment under Section
1.4 of this Agreement on the Note in an amount necessary to bring the Company
into compliance with the provisions of this Section 4.7.
4.8 Flood Plain. No Lots or Single Family Houses shall be located
within the 100-year flood plain.
4.9 Financial Covenants. The Company shall not, at any time during
the term of this Agreement, allow:
(a) its Tangible Net Worth to be less than $9,000,000.00;
(b) its Debt to Worth Ratio to be greater than 5.0 to 1.0; or
(c) its capital expenditures during any fiscal year to exceed
$500,000.00 (exclusive of expenditures to acquire lots and construct single
family houses in the ordinary course of its business).
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<PAGE> 33
4.10 Loans and Advances to Employees, Etc. The Company shall not at
any time allow more than an aggregate amount of $200,000.00 in loans and
advances to be outstanding to its employees, officers, directors and
shareholders.
4.11 Investments, Loans and Advances. The Company shall not make any
investment in, make any loan or advance to, or sell, transfer or otherwise
dispose of any assets to, any Person (including, without limitation Pacific USA
or any subsidiary or other affiliate of Pacific USA) except sales of assets
permitted by Section 4.3 of this Agreement and loans and advances permitted by
Section 4.10 of this Agreement. The Company will maintain separate bank
accounts for its operations, and will not commingle any of its funds with the
funds of any other Person.
4.12 Merger and Consolidation. The Company shall not merge or
consolidate with any Person, enter into any partnerships or joint ventures, or
acquire any other entity.
4.13 Restrictions on Undeveloped Land. The Company shall not own or
acquire any undeveloped land or undeveloped lots other than Lots and
Inventoried Lots.
Section 5. Commitment to Lend;
Conditions to the Bank's
Obligations to Make Advances
5.1 Bank's Commitment. Subject to the terms and provisions hereof,
the Bank agrees to lend to the Company, and the Company may borrow from the
Bank, from time to time during the term hereof, amounts not to exceed the
Maximum Outstanding Amount. The Company may borrow, repay and re-borrow
amounts under the Revolving Line of Credit as herein provided.
5.2 Borrowing Procedure.
(a) Each advance under this Agreement shall be in an aggregate
principal amount of at least $10,000.00. Any advance may be made directly to
an account maintained by the Company with the Bank or, if the Company so
requests and the Bank agrees, to any person on behalf of the Company, including
a Title Insurer or its agent acting as escrow agent in connection with the
purchase of a Lot. If requested by the Bank, the Company shall maintain a
special checking account with the Bank into which all advances hereunder shall
be deposited and against which only checks for Costs of Construction shall be
drawn.
(b) In order for the Company to obtain an advance hereunder, the
Company shall deliver to the Bank at least one (1) Business Day before the
requested date of such advance, a Loan Application in which the Company shall
specify or certify the following:
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<PAGE> 34
(i) the amount of such advance requested;
(ii) the date of such requested advance, which shall be
a Business Day;
(iii) the Maximum Outstanding Amount, the Aggregate Deed
of Trust Amount and the outstanding balance of the Revolving Line of
Credit, all as of the date on which such notice is given;
(iv) that no Default or Event of Default is then
existing;
(v) that the advance by the Bank of the requested
advance will not result in or give rise to a Default or an Event of
Default; and
(vi) that the representations and warranties of the
Company contained in this Agreement are true and correct as of the date
on which such notice is given.
(c) Simultaneously with the funding by the Bank of the initial
advance with respect to any Lot or Improvements, the Company shall cause a
Title Insurer to (i) record in the Official Public Records of Real Property of
the appropriate county, a Deed of Trust with respect to such Lot and the
Improvements to be constructed thereon and (ii) issue the Title Insurance.
(d) (i) Simultaneously with the funding by the Bank of the
initial advance with respect to any Inventoried Lot, the Company shall
pay to the Bank a fee in the amount of one-fourth percent ( 1/4%) of the
Deed of Trust Amount of such Inventoried Lot.
(ii) Simultaneously with the funding by the Bank of the
initial advance with respect to any Lot or Improvements (including any
lot which was previously an Inventoried Lot), the Company shall pay to
the Bank a fee in the amount of one-fourth percent ( 1/4%) of the Deed
of Trust Amount of such Lot or Improvements.
(e) Notwithstanding any provision to the contrary contained in this
Agreement or in any other Security Instrument, in no event shall the Company be
entitled to an advance hereunder, and the Bank shall have no obligation to
advance any amount hereunder, unless at the time of such advance (i) the
Company is in full compliance with all of the provisions of this Section 5.2,
(ii) no Default or Event of Default is then existing and (iii) such advance
will not result in the outstanding balance of the Revolving Line of Credit
being in excess of the Maximum Outstanding Amount. Once the Bank has received
notice of a requested advance, such notice shall not thereafter be revocable.
The Bank shall not be required to make
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more than four (4) advances under the Revolving Line of Credit to the Company
during any calendar week.
5.3 Guidance Line. Notwithstanding anything contained in this
Agreement, the Note or any other Security Instrument to the contrary, the Bank,
in its sole discretion, shall have the right, prior to the initial advance
under the Revolving Line of Credit with respect to any Lot or Improvements, to
disapprove of the inclusion by the Company of such Lot or Improvements in the
Borrowing Base. Upon such disapproval, such Lot or Improvement shall be
ineligible for inclusion in the Borrowing Base and shall not be used in the
calculation of the Borrowing Base Value. In deciding whether to disapprove of
the inclusion of any Lot or Improvements in the Borrowing Base, the Bank may
consider, among other matters, (i) the condition, financial or otherwise,
existing or potential, of the Company, (ii) the existing or potential condition
of the single family house construction business generally, (iii) the type of
floor plan or specifications to which the Improvements are to be built and (iv)
the residential subdivision in which the Lot is to be located. The rights of
the Bank under this Section 5.3 are in addition to any other rights the Bank
may have under this Agreement or any other Security Instrument to not make
advances under the Revolving Line of Credit, including, without limitation, any
right that may exist as a result of the Company's failure to comply with the
provisions of Section 5.2 hereof.
5.4 Bank's Discretion. All conditions precedent to the inclusion of
any Lot or Improvements in the Borrowing Base are imposed solely and
exclusively for the benefit of the Bank and are to be enforced and monitored
solely and exclusively by the Bank in accordance with the provisions of the
Security Instruments. No Person (including the Company) other than the Bank
shall have any standing to require satisfaction of any such conditions. Any
and all of such conditions may be freely waived (in whole or in part) by the
Bank, at any time or times, at the Bank's sole discretion.
5.5 Involuntary Borrowings.
(a) If the Company shall fail, refuse or neglect to make any payment
or perform any act required by the Security Instruments, then at any time after
the Bank gives five (5) days written notice of the Bank's intention to take
such action (except in case the Bank determines that an emergency exists, or
its security is imminently threatened, in which event the Bank shall not be
required to give any notice to or demand upon the Company), without waiving or
releasing any other right, remedy or recourse the Bank may have because of
same, the Bank may (but shall not be obligated to) make such payment or perform
such act for the account of and at the expense of the Company, and shall have
the right to enter upon any Lot and into any Improvements thereon for such
purpose and to take all such action thereon and with respect to such Lots and
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<PAGE> 36
Improvements as it may deem necessary or appropriate. If the Company shall
elect not to pay any real estate or personal property tax, or any other tax,
charge or assessment with respect to any Lot or any Improvements, the Bank may
do so in reliance on any bill, statement or assessment procured from the
appropriate Governmental Authority or other issuer thereof without inquiring
into the accuracy or validity thereof. Similarly, in making any payments to
protect the security intended to be created by the Security Instruments, the
Bank shall not be bound to inquire into the validity of any apparent or
threatened adverse title, lien, encumbrance or claim before making an advance
for the purpose of preventing or removing the same.
(b) THE COMPANY HEREBY AGREES TO INDEMNIFY THE BANK FOR ALL LOSSES,
EXPENSES, DAMAGES, CLAIMS AND CAUSES OF ACTION, INCLUDING ATTORNEYS' FEES,
INCURRED OR ACCRUING BY REASON OF ANY ACTS PERFORMED BY THE BANK PURSUANT TO
THE PROVISIONS OF THIS SECTION 5.5 OR BY REASON OF ANY OTHER SIMILAR PROVISION
IN ANY OTHER SECURITY INSTRUMENT. ALL SUMS PAID BY THE BANK PURSUANT TO THIS
SECTION 5.5 OR SUCH OTHER PROVISIONS OF THE SECURITY INSTRUMENTS, AND ALL OTHER
SUMS EXPENDED BY THE BANK TO WHICH IT SHALL BE ENTITLED TO BE INDEMNIFIED,
TOGETHER WITH INTEREST THEREON AT THE MAXIMUM RATE, SHALL CONSTITUTE ADVANCES
UNDER THE REVOLVING LINE OF CREDIT, SHALL BE SECURED BY THE LIENS CREATED BY
THE SECURITY INSTRUMENTS AND SHALL BE PAID BY THE COMPANY TO THE BANK
IMMEDIATELY UPON DEMAND.
Section 6. Events of Default and Remedies
6.1 Events of Default. Any of the following events which shall occur
and be continuing shall be considered an Event of Default as that term is used
herein:
(a) The Company does not pay when due any payment, whether a
regularly scheduled installment or a mandatory prepayment, required on
the Note or any other Indebtedness, if such payments remains unpaid five
(5) days after the Bank gives written notice thereof to the Company;
(b) The Company does not pay within sixty (60) days after the
originally scheduled maturity (but after expiration of any grace period
applicable to such maturity) or when due whether by acceleration or
otherwise of all or any part of any Debt of the Company to any other
Person, except that the foregoing shall not apply to indebtedness on
open account which is being disputed in good faith by the Company;
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<PAGE> 37
(c) The Company is unable to satisfy any condition of the
right to receive an advance hereunder for a period in excess of thirty
(30) calendar days; and
(d) The Company does not comply with or fails in the
performance of any covenant contained in Section 3.1(a), 4.6, 4.9 or
4.10 of this Agreement;
(e) The Company does not comply with or fails in the
performance of any other covenant contained in this Agreement or in any
of the other Security Instruments to be kept or performed by the Company
if such failure continues for fifteen (15) days after the Bank gives
written notice thereof to the Company;
(f) Any representation or warranty made by the Company herein
or in any of the other Security Instruments proves to have been untrue
in any material respect as of the date hereof, or any representation,
statement (including financial statements), certificate or data
furnished or made by the Company (or any officer, accountant or attorney
of the Company) hereunder proves to have been untrue in any material
respect, as of the date as of which the facts therein set forth were
stated or certified, and the same is not remedied, to the Bank's
satisfaction, in its sole discretion, within fifteen (15) days after the
Bank gives written notice thereof to the Company;
(g) The Company shall (i) discontinue business, (ii) make a
general assignment for the benefit of creditors, (iii) apply for or
consent to the appointment of a receiver, a trustee or liquidator of
itself or of all or a substantial part of its assets, (iv) be
adjudicated a bankrupt or insolvent, (v) file a voluntary petition in
bankruptcy or file a petition or answer seeking reorganization or an
arrangement with creditors or seeking to take advantage of any other law
(whether federal or state) relating to relief of debtors, or admit (by
answer, by default or otherwise) the material allegations of a petition
filed against it in any bankruptcy, reorganization, arrangement,
insolvency or other proceedings (whether federal or state) relating to
relief of debtors, (vi) suffer or permit to continue unstayed and in
effect for thirty (30) consecutive days any judgment, decree or order,
entered by a court of competent jurisdiction, which approves a petition
seeking reorganization of it or appoints a receiver, trustee or
liquidator of it or of all or a substantial part of its assets, or (vii)
take or omit to take any action for the purpose or with the result of
effecting or permitting any of the foregoing;
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<PAGE> 38
(h) The Company shall discontinue construction of any of the
Improvements or not carry on the construction of all of the Improvements
with reasonable dispatch and without interruption to such an extent that
it is unlikely, in the Bank's sole judgment, that the Improvements will
be completed within a reasonable period of time following the
commencement of construction thereof; or
(i) The Company is unable to satisfy any condition of the
right to receive an advance hereunder for in excess of thirty (30)
calendar days.
6.2 Remedies. Upon the happening of any Default, at the option of
the Bank, without notice to the Company, any commitment hereunder shall be
canceled. Upon the happening of an Event of Default specified in Section
6.1(g), immediately and without notice, and upon the happening of any other
Event of Default specified in Section 6.1, at the option of the Bank, without
notice to the Company, the entire aggregate principal amount of the Note then
outstanding hereunder and the interest accrued thereon shall thereupon become
and be immediately due and payable without notice and without presentment,
demand, protest, notice of protest or other notice of default or dishonor of
any kind, all of which are hereby expressly waived by the Company. In addition
to all other remedies provided herein, the Bank may, at its option, (1)
institute appropriate proceedings to specifically enforce performance hereof,
(2) institute proceedings to appoint a receiver, as a matter of strict right
without regard to the solvency of the Company, for the purpose of preserving
the Lots and Improvements, or any part thereof, prevent waste, and to protect
all rights accruing to the Bank by virtue of this Agreement and the other
Security Instruments, (3) make any and all further improvements, whether on-
site or off-site, as may be determined by the Bank for the purpose of
completing the development and construction of the Improvements in accordance
with this Agreement and (4) exercise any and all other rights, remedies and
recourses granted under the Security Instruments or otherwise now or hereafter
existing, in equity, at law, by virtue of statute or otherwise. All expenses
incurred in connection with the appointment of a receiver, or in protecting,
preserving or improving the Lots or Improvements, or any part thereof, shall be
chargeable against the Company and shall be enforced as a lien against the Lots
and Improvements.
Section 7. Additional Agreements
7.1 Change of Ownership or Control. If at any time while the Note
shall be outstanding or the Bank has a commitment hereunder, Pacific Realty
Group shall own less than all of the issued and outstanding capital stock of
the Company, a "Change of Ownership or
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<PAGE> 39
Control" shall be deemed to have occurred. The Company shall immediately give
written notice to the Bank upon obtaining knowledge of an event which is or
would constitute the occurrence of a Change of Ownership or Control. The Bank
shall, upon the happening of a Change of Ownership or Control, have the
privilege of declaring the Note to be due and payable on a date not earlier
than thirty (30) days from the date of the exercise of said privilege. The
Note shall thereupon become due and payable on the date specified in the notice
sent to the Company by the Bank including the principal amount thereof plus
accrued interest thereon to the accelerated maturity date and any amounts owed
by the Company to the Bank pursuant to this Agreement or any of the other
Security Instruments.
7.2 Change in Management. If at any time while the Note shall be
outstanding or the Bank has a commitment hereunder, Lonnie Fedrick ceases to
hold his current position with the Company or to perform the functions and
services for the Company which he currently performs, other than as a result of
a dismissal of Mr. Fedrick by the Company for cause, the Company shall
immediately give written notice of such occurrence to the Bank and the Bank
shall, upon such an occurrence, have the privilege of declining to make any
further advances under the Revolving Line of Credit other than advances with
respect to Lots and Improvements thereon, the initial advances for which were
made by the Bank prior to such occurrence.
Section 8. Closing
The commencement of advances pursuant to the Revolving Line of Credit
contemplated hereby shall be subject to the satisfaction of the following
conditions:
8.1 Counsel to Bank. All legal matters incident to the transactions
herein contemplated shall be satisfactory to Gardere Wynne Sewell & Riggs,
L.L.P., counsel to the Bank.
8.2 Required Documents. The Bank shall have received executed copies
of:
(a) this Agreement, with all exhibits;
(b) the Note;
(c) a certificate of the Secretary of the Company certifying
(1) the Certificate of Incorporation of the Company, (2) the Bylaws of
the Company and (3) the resolutions of the Board of Directors of the
Company, in form and substance satisfactory to the Bank, with respect to
authorization of this Agreement, the Note and the other Security
Instruments and the other corporate
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<PAGE> 40
instruments provided for herein, which certificate shall also contain
the names of officers of the Company authorized to sign this Agreement,
the Note, the other Security Instruments, and certificates related
thereto together with the true signatures of such officers, all of which
shall be in form and substance satisfactory to the Bank;
(d) a Notice of Final Agreement;
(e) a written legal opinion from attorneys satisfactory to the
Bank, which legal opinion shall cover such matters, and be in a form, as
required by the Bank and its counsel;
(f) such Certificates of Insurance as the Bank may require;
and
(g) such other documents and instruments as the Bank may
require.
Section 9. Miscellaneous
9.1 Survival of Various Matters. All representations and warranties
of the Company herein, and all covenants and agreements herein not fully
performed before the date of this Agreement, shall survive the execution of
this Agreement, delivery of the Note to the Bank and the making of advances
hereunder.
9.2 Notices. All notices, requests and communications hereunder
shall be in writing and shall be sufficient in all respects if delivered or
sent by registered or certified mail to the Company or the Bank, as the case
may be, at their respective addresses set forth on the first page of this
Agreement. Any party may, by proper written notice hereunder to the other
party, change the address to which notices shall thereafter be sent to it.
9.3 Successors and Assigns. All covenants and agreements herein
contained by or on behalf of the Company shall bind its successors and assigns
and shall inure to the benefit of the Bank and its successors and assigns.
9.4 Renewals. All provisions of this Agreement relating to the Note
shall apply with equal force and effect to each and all promissory notes
hereafter executed which in whole or in part represent a renewal, extension or
rearrangement of any part of the Indebtedness originally represented by the
Note.
9.5 No Waiver. No course of dealing on the part of the Bank or its
officers or employees, or any failure or delay by the Bank with respect to
exercising any right, power or privilege of the
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<PAGE> 41
Bank under this Agreement, the Note, or the other Security Instruments, shall
operate as a waiver thereof. The rights and remedies of the Bank under this
Agreement, the Note, and the other Security Instruments shall be cumulative and
the exercise or partial exercise of any such right or remedy shall not preclude
the exercise of any other right or remedy. No advance under the Revolving Line
of Credit shall constitute a waiver of any of the conditions of the Bank's
obligation to make further advances nor, in the event the Company is unable to
satisfy any such condition, shall any such waiver have the effect of precluding
the Bank from thereafter declaring such inability to be an Event of Default as
herein provided.
9.6 Governing Law. This Agreement and the Note which may be issued
hereunder shall be deemed to be contracts made under and shall be construed in
accordance with and governed by the laws of the State of Texas.
9.7 Non-Subordination. The Note shall never be in a position
subordinate to any indebtedness owing to any other creditor of the Company,
except to the extent that such other creditor may hold a lien or liens on
specific assets of the Company which do not constitute Collateral, or with the
knowledge and written consent of the Bank.
9.8 Consent to Deviation. The procedure to be followed by the
Company to obtain the consent of the Bank to any deviation from the negative
covenants in Section 4 shall be as follows:
(a) The Company shall send a written notice to the Bank
setting forth (i) the covenant(s) of Section 4 relevant to the matter,
(ii) the requested deviation from the covenant(s) involved, and (iii)
the reason for the Company's request to deviate from the covenant(s);
and
(b) The Bank, within ten (10) days after receiving the
request, shall send a written notice to the Company, signed by the
President, Vice-President or other senior officer of the Bank,
permitting or refusing the request. Failure to send said notice in such
time period shall be deemed refusal of said request.
9.9 Exhibits. The Exhibits attached to this Agreement are
incorporated herein for all purposes, and shall be considered a part of this
Agreement. Those exhibits are: Form of Note - Exhibit "A"; Form of Initial
Deed of Trust - Exhibit "B"; Form of Supplement - Exhibit "C"; Form of Loan
Application -
Exhibit "D"; and Form of Certificate of Compliance - Exhibit "E".
9.10 Payment on Non-Business Days. Except to the extent otherwise set
forth herein, whenever (i) any payment to be made hereunder or under the Note
or (ii) any certificate, report or
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<PAGE> 42
financial statement is due on a day that is not a Business Day, such payment
shall be made or such document shall be delivered on the next succeeding
Business Day and such extension of time shall be included in the computation of
interest due with any such payment.
9.11 Severability. In the event any one or more of the provisions
contained in this Agreement, the Note, or the other Security Instruments, or in
any other instrument referred to herein or executed in connection with or as
security for the Note shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, the Note, or the other
Security Instruments, or any other instrument referred to herein or executed in
connection with or as security for the Note. Furthermore, in lieu of such
invalid, illegal or unenforceable provision, there shall automatically be added
a provision as similar in terms to such invalid, illegal or unenforceable
provision as may be possible and as may be valid, legal and enforceable.
9.12 Controlling Document. Should a direct conflict exist between the
specific terms of the Note, this Agreement or any of the other Security
Instruments, the Note shall control over this Agreement and the other Security
Instruments, and this Agreement shall control over the other Security
Instruments and the exhibits attached to this Agreement.
9.13 Savings Clause. Nothing contained in this Agreement or in the
Note or in any other agreement or undertaking relating hereto shall be
construed to obligate the Company, under any circumstances whatsoever, to pay
interest in excess of the Maximum Rate. In the event that any sums received
from the Company are at any time under applicable law deemed or held to provide
a rate of interest in excess of the Maximum Rate, the effective rate of
interest on the loans hereunder shall be deemed reduced to and shall be the
Maximum Rate and the Company and all sureties, endorsers and guarantors shall
accept as their sole remedy under such circumstances either the return of any
sums of interest which may have been collected and which produced a rate in
excess of the Maximum Rate, or the application of those sums as a credit
against the unpaid principal amount of the Indebtedness, whichever remedy may
be elected by the Bank. In addition, in the event that the Note is prepaid or
the maturity of the Note is accelerated by reason of election by the Bank
hereunder, then all unearned interest shall either be canceled or, if
theretofore paid, shall either be returned to the Company or credited on the
unpaid principal amount due under the Note, whichever action may be elected by
the Bank.
9.14 Participations and Assignments. The Bank shall have the right,
at its sole discretion, at any time and from time to time,
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<PAGE> 43
to assign its entire interest in, or to invite any Person to participate in
portions of, the Revolving Line of Credit.
9.15 Set Off. Upon the occurrence and during the continuance of any
Default, the Bank is hereby authorized at any time and from time to time,
without notice to the Company (any such notice being expressly waived by the
Company) to apply an administrative hold or similar action against any and all
deposits (general or special, time or demand, provisional or final) at any time
held by the Bank for the credit or the account of the Company, it being agreed
that the Company shall not be entitled to access to any of such deposits until
such time, if at all, that such Default is cured. In addition to the
foregoing, upon the occurrence and during the continuance of any Event of
Default, the Bank is hereby authorized at any time and from time to time,
without notice to the Company (any such notice being expressly waived by the
Company), to set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other indebtedness at any
time owing by the Bank to or for the credit or the account of the Company
against any and all of the Indebtedness, irrespective of whether or not the
Bank shall have made any demand under this Agreement and although such
obligations may be unmatured. The Bank agrees promptly to notify the Company
after any such set off and application made by the Bank, provided that the
failure to give such notice shall not affect the validity of such set off and
application. The rights of the Bank under this Section 9.15 are in addition to
other rights and remedies (including, without limitation, other rights of set
off) which the Bank may have.
9.16 Form and Substance of Surveys, Appraisals and Other Documents.
All proceedings taken in connection with the transactions provided for herein,
such as the preparation of Surveys, Appraisals and other documents required or
contemplated by this Agreement, the other Security Instruments or otherwise,
and the persons responsible for the execution and preparation thereof, all
subcontractors, sureties, insurers and the forms of Construction Contracts,
Sales Contracts and policies of insurance shall be satisfactory in form,
substance and coverage to the Bank and the Company shall deliver to the Bank
certified copies of all documents which it may request in connection herewith.
9.17 Concerning the Revolving Line of Credit. The Revolving Line of
Credit is (i) a "Business Loan" as that term is used in the Depository
Institutions Regulation and Monetary Control Act of 1980, as amended, and (ii)
for business, commercial, investment or similar purposes and not primarily for
personal, family, household or agricultural use, as such terms are used in
Chapter One of the Texas Credit Code.
9.18 Concerning Representations and Warranties. No investigation at
any time made by or on behalf of the Bank shall diminish its rights to rely
upon the representations and warranties
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<PAGE> 44
contained herein. All statements contained in any certificate or other
instrument delivered by the Company or by any Person on behalf of the Company
under or pursuant to this Agreement or in connection with the transactions
contemplated hereby, shall constitute additional representations and warranties
made by the Company. The representations and warranties contained herein shall
be true and correct at all times during the term hereof including, without
limitation, at the time each Financial Statement is submitted by the Company to
the Bank and at the time of each advance hereunder.
9.19 Renewal and Extension of Existing Indebtedness. The Company
hereby acknowledges that a portion of the aggregate principal amount the Bank
is advancing to the Company pursuant to the Note constitutes a renewal and
rearrangement of the indebtedness of the Company to the Bank arising pursuant
to the Prior Loan Agreement, and all the terms and conditions of this Agreement
shall hereafter apply to all indebtedness arising pursuant to the Prior Loan
Agreement, provided that all liens, mortgages and security interests held by
the Bank securing any of said indebtedness, whether directly or indirectly, are
hereby ratified, renewed, extended and carried forward and all such security
shall continue in full force and effect as security for payment of the
Indebtedness and in the performance of all obligations pursuant to this
Agreement and the other Security Instruments.
9.20 No Oral Agreements. THIS LOAN AGREEMENT AND THE OTHER SECURITY
INSTRUMENTS REPRESENT THE FINAL AGREEMENTS BETWEEN THE BANK AND THE COMPANY AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE BANK AND THE COMPANY. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE BANK AND THE COMPANY.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the day and year first above written.
NEWMARK HOME CORPORATION
By: /s/ TERRY WHITE
---------------------------------
Name: Terry White
---------------------------
Title: SVP
--------------------------
BANK ONE, TEXAS, N.A.
By: /s/ JOHN M. TOTH
---------------------------------
Name: John M. Toth
---------------------------
Title: Vice President
--------------------------
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<PAGE> 1
EXHIBIT 10.5(b)
MODIFICATION AGREEMENT
STATE OF TEXAS )
)
COUNTY OF FORT BEND )
WITNESSETH
WHEREAS, Bank One, Texas, N.A. (hereinafter referred to as "Lender"),
has previously extended or agreed to extend credit to Newmark Home Corporation,
a Nevada corporation (hereinafter referred to as "Newmark"), as evidenced by
that certain Amended and Restated Loan Agreement dated April 30, 1996, as
amended by that certain First Amendment to Amended and Restated Loan Agreement
dated June, 1996 ("Loan Agreement"), with advances evidenced by the Promissory
Note dated April 30, 1996 in the original principal amount of Twenty Five
Million and No/100 Dollars ($25,000,000.00) (the "Note"); and
WHEREAS, the Loan Agreement is secured by Deeds of Trust and
Supplemental Deeds of Trust and Security Agreements of various dates
(hereinafter referred to as the "Deeds of Trust") covering the property
described on Exhibit "A" attached hereto and incorporated herein for all
purposes (hereinafter referred to as the "Property"); and
WHEREAS, Newmark is the present owner of the Property; and
WHEREAS, Newmark has agreed to transfer and assign the Property to NHC
Homes, Inc., a Nevada corporation (hereinafter referred to as "NHC"), which
would then immediately transfer and assign the Property to Newmark Homes, L.P.
("NHLP"); and
WHEREAS, NHLP desires to assume the obligations contained in the Loan
Agreement, Note and Deeds of Trust; and
WHEREAS, Lender is the present owner and holder of the Note and
Newmark and Lender desire to amend and modify the Loan Agreement, Note and
Deeds of Trust as set forth below; and
WHEREAS, said Deeds of Trust provide for an event of default in the
event of a conveyance of the Property by Newmark without the consent of Lender;
and
WHEREAS, the Lender is willing to consent to the transfer of title and
assumption of the obligations referred to above, on the terms and conditions
set forth below;
NOW, THEREFORE, in consideration of the mutual covenants,
considerations and agreements contained herein, it is agreed as follows:
<PAGE> 2
I.
Lender hereby consents to the transfer and conveyance of the Property
to NHC from Newmark, subject to the debt obligations associated with the
Property. Lender hereby consents to the transfer and conveyance of the Property
to NHLC from NHC, subject to the debt obligations associated with the Property.
II.
After transfer of the Property to NHC from Newmark, NHC does hereby
assume and agree to perform all of the obligations contained in the Loan
Agreement, Note and Deeds of Trust, as modified, provided, however,
notwithstanding anything to the contrary, it is expressly understood and agreed
by all parties hereto that NHC does not intend, and has not by the execution of
this Agreement, assumed or agreed to assume the payment of, nor shall NHC be
personally liable for, the payment of the Note referred to above and NHC shall
be liable upon the indebtedness evidenced by the Note, all sums to accrue or to
become payable thereon and all amounts covenanted to be paid by NHC under the
Deeds of Trust, to the extent, of the security for the payment of the Note,
including without limitation, all properties, rights and estates described in
the Deeds of Trust. In the event default occurs in the timely and prompt
payment of all or part of such indebtedness, sums or amounts at the maturity
thereof, howsoever such maturity may be brought about, any judicial proceedings
by Lender or other holder thereof against NHC shall be limited to the
preservation, enforcement and foreclosure of the liens and mortgages now or at
any time hereafter securing the payment hereof, and no attachment, execution or
other writ of process shall be sought, issued or levied upon any assets,
properties or funds of NHC other than the properties, rights, estates, and
interests, described in the Deeds of Trust securing the Note. In the event of
foreclosure of such lien and mortgage securing the payment of the Note by
private power of sale or otherwise, no judgment for any deficiency upon such
indebtedness, sums and amounts shall be obtainable by Lender or other holder
hereof against NHC or its successors, assigns, or other legal representatives,
and it is further understood and agreed by all the parties hereto that the
purpose of liability for the payment of the above described indebtedness, NHC
has taken the Property "subject to" said indebtedness, and shall have no
personal liability therefor.
III.
After transfer of the Property from NHC, NHLP does hereby assume and
agree to perform all of the obligations contained in the Loan Agreement, Note
and Deeds of Trust, as modified, it being understood and agreed by all parties
hereto that NHLP intends to assume and be liable for the payment of the Note
referred to above and that NHLP shall be liable upon the indebtedness evidenced
by the Note, all sums to accrue or to become payable thereon and all amounts
covenanted to be paid by NHLP under the Deeds of Trust for payment of the Note.
This covenant of assumption is intended for the benefit of and may be enforced
by Lender and any subsequent holder of the Note.
IV.
The Loan Agreement, Note and Deeds of Trust, as modified, are hereby
amended to include Newmark Homes, L.P., a Texas Limited Partnership, in said
documents, whether as "Maker," "Grantor," "Assignor," "Debtor" or otherwise, as
the case may be, so that all of said instruments shall, from and after this
date, be construed as if they had been originally executed by NHLP.
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<PAGE> 3
V.
In the event any item, term or provision contained in this Agreement
is in conflict, or may be hereafter held to be in conflict, with any applicable
laws, this instrument shall be effected only as to its application to such
item, term or provision, and shall in all other respects remain in full force
and effect. In no event and upon no contingency shall the maker or makers of
the Note or Notes secured hereby, or any party liable thereon or therefore, be
required to pay interest in excess of the maximum interest that may be lawfully
charged by the holder of said indebtedness under the applicable usury laws.
VI.
The Loan Agreement, Note and Deeds of Trust shall in all other
respects remain the same and shall continue as valid and binding obligations of
the respective parties, their heirs, successors and assigns. NHLP acknowledges
and agrees that (i) the Note is a valid and subsisting obligation of NHLP,
enforceable against NHLP in accordance with its terms, (ii) the Deeds of Trust
create valid and subsisting liens and security interests against the Property
and other collateral described therein, and (iii) the Note and all of the Deeds
of Trust are hereby renewed and extended, ratified, confirmed and carried
forward by NHLP in all respects.
VII.
This Agreement shall be performable in Harris County, Texas and shall
be construed in all respects in accordance with the laws of the State of Texas.
VIII.
NHLP agrees to execute such additional documents as may be reasonably
requested by Lender from time to time in order to carry out the intent of this
Agreement and to perfect or give further assurance of any of the rights granted
or provided for hereunder or under the Note, the Loan Agreement or the Deeds of
Trust.
IN WITNESS WHEREOF, the parties have hereunto executed this instrument
in multiple counterparts as of the day first above written.
NEWMARK HOME CORPORATION
By: /s/ TERRY WHITE
-----------------------------
Terry White,
Chief Financial Officer
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<PAGE> 4
NHC HOMES, INC.
By: /s/ LARRY HORNER
-----------------------------
Larry Horner, President
NEWMARK HOMES, L.P.
By: NEWMARK HOME CORPORATION,
Its Sole General Partner,
a Nevada corporation
By: /s/ TERRY WHITE
-----------------------------
Terry White,
Chief Financial Officer
BANK ONE, TEXAS, N.A.
By: /s/ JACK TOTH
-----------------------------
Jack Toth
Vice President
-4-
<PAGE> 5
STATE OF TEXAS )
)
COUNTY OF FORT BEND )
This instrument was acknowledged before me on the 30th day of
September, 1996 by Terry White, Chief Financial Officer of Newmark Home
Corporation, a Nevada corporation, on behalf of said corporation.
/s/ LINDA SOTIER
[NOTARY PUBLIC SEAL] -----------------------------------
Notary Public's Signature
STATE OF NEW YORK )
)
BOROUGH OF MANHATTAN )
This instrument was acknowledged before me on the 3rd day of October,
1996 by Larry Horner, President of NHC Homes, a Nevada corporation, on behalf
of said corporation.
/s/ DEIRDRE M. KEAG
-----------------------------------
Notary Public's Signature
[NOTARY PUBLIC SEAL]
STATE OF TEXAS )
)
COUNTY OF FORT BEND )
This instrument was acknowledged before me on the 30th day of
September, 1996 by Terry White, Chief Financial Officer of Newmark Home
Corporation, a Nevada corporation, Sole General Partner of Newmark Homes, L.P.,
on behalf of said limited partnership.
/s/ LINDA SOTIER
[NOTARY PUBLIC SEAL] -----------------------------------
Notary Public's Signature
STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 5th day of November
1996 by Jack Toth, Vice President of Bank One, Texas, N.A., on behalf of said
national association.
/s/ DOLORES T. HERNANDEZ
[NOTARY PUBLIC SEAL] -----------------------------------
Notary Public's Signature
-5-
<PAGE> 1
EXHIBIT 10.5(c)
FOURTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
THIS FOURTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this
"Fourth Amendment") is made and entered into as of the 30th day of April, 1997,
by and between NEWMARK HOMES, L.P., a Texas limited partnership (the
"Company"), and BANK ONE, TEXAS, N.A., a national banking association (the
"Lender").
WHEREAS, Newmark Home Corporation, a Nevada corporation (the "Original
Borrower"), and the Lender entered into that certain Amended and Restated Loan
Agreement dated April 30, 1996 (the "Original Loan Agreement"), which was
amended by that certain First Amendment to Amended and Restated Loan Agreement
(the "First Amendment") dated June 28, 1996 between the Original Borrower and
the Lender;
WHEREAS, all of the properties securing repayment of the indebtedness
of the Original Borrower pursuant to the Original Loan Agreement, as amended by
the First Amendment, was assigned to the Company, together with the rights and
obligations of the Original Borrower under the Original Loan Agreement, as
amended by the First Amendment; and
WHEREAS, pursuant to a Modification Agreement among the Original
Borrower, NHC Homes, Inc., the Company and the Lender, the Company assumed all
of the obligations of the Original Borrower under the Original Loan Agreement,
as amended by the First Amendment; and
WHEREAS, after giving effect to said Modification Agreement, the
Original Borrower, the Company and the Lender entered into that certain Second
Amendment to Amended and Restated Loan Agreement (the "Second Amendment") dated
October 1, 1996; and
WHEREAS, the Company and the Lender entered into that certain Third
Amendment to Amended and Restated Loan Agreement (the "Third Amendment") dated
October 1, 1996; and
WHEREAS, the Original Loan Agreement, as amended by the First
Amendment, the Second Amendment and the Third Amendment, is referred to herein
as the "Loan Agreement"; and
WHEREAS, the Company and the Lender desire to amend certain terms and
provisions of the Loan Agreement, as set forth herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
1. Section 1.1 of the Loan Agreement is deleted in its entirety,
and the following is substituted in its place:
1.1 Indebtedness. Upon the terms and conditions
hereinafter set forth, the Bank agrees to lend the Company an
<PAGE> 2
aggregate of up to $26,000,000.00, as evidenced by a Revolving Line of
Credit to be extended to the Company by the Bank in an amount up to
$25,000,000.00, as more specifically described in Section 1.3 hereof,
and the issuance of certain letters of credit for the benefit of the
Company up to the aggregate principal amount of $1,000,000.00, as more
specifically described in Section 1.7 hereof.
2. The definition of "Initial Deeds of Trust" in Section 1.2(a)
of the Loan Agreement is deleted in its entirety, and the following is
substituted in its place:
"Initial Deeds of Trust" shall mean those Deeds of Trust,
Security Agreement and Assignment of Rents and Leases executed by the
Original Borrower for the benefit of the Bank and recorded in the Real
Property Records of Brazoria, Harris, Fort Bend, Galveston, Travis,
Dallas, Collin, Tarrant and Williamson Counties, Texas, and any other
Deed of Trust, Security Agreement and Assignment of Rents and Leases
executed by the Company for the benefit of the Bank in the form
attached to the Loan Agreement or the Fourth Amendment as Exhibit "B"
and to be recorded in other counties approved by the Bank, each of
which covers or shall cover (i) the first set of Lots in each such
county which are added to the Borrowing Base, and the Improvements to
be constructed thereon, and (ii) the Collateral described in Section
3.10 hereof relating to such Lots and Improvements.
3. The definition of "Note" in Section 1.2(a) of the Loan
Agreement is deleted in its entirety, and the following is substituted in its
place:
"Note" shall mean the promissory note of the Company issued
pursuant to Section 1.3 of this Agreement in the form attached as
Exhibit "A" to the Fourth Amendment.
4. The definition of "Supplement" in Section 1.2(a) of the Loan
Agreement is deleted in its entirety, and the following is substituted in its
place:
"Supplement" shall mean a Supplemental Deed of Trust, Security
Agreement and Financing Statement executed by the Original Borrower or
the Company, or to be executed by the Company, in the form attached as
Exhibit "C" to the Loan Agreement or the Fourth Amendment, whereby a
Lot and the Improvements thereon or to be constructed thereon, and the
Collateral described in Section 3.10 hereof relating to such Lot and
Improvements, are made subject to the liens created by the Initial
Deed of Trust previously filed in the county in which such Lot is
located.
-2-
<PAGE> 3
5. Section 1.3 of the Loan Agreement is deleted in its entirety,
and the following is substituted in its place:
1.3 Revolving Line of Credit. The Bank, during the
period from the date of the Fourth Amendment until May 31, 1998, with
respect to the initial advance with respect to any Lot or the
Improvements thereon or to be constructed thereon, and until the date
that is twelve (12) months after the date of the initial advance with
respect to any Lot or Improvements, with respect to subsequent
advances for such Lot and Improvements, subject in all instances to
(a) the terms and conditions of this Agreement, (b) the condition that
at the time of each borrowing hereunder, the condition of the Company,
financial and otherwise, and the condition of the Collateral, are
satisfactory to the Bank, and (c) the condition that no Default or
Event of Default has occurred and is then continuing to occur, agrees
to make advances to the Company pursuant to a Revolving Line of Credit
up to but not in excess of the Maximum Outstanding Amount upon
compliance by the Company with the provisions of Section 5.2 hereof.
The Company's obligation to repay the Revolving Line of Credit shall
be evidenced by the Note. The Note shall bear interest at the rate or
rates set forth in Section 1.5 hereof. All unpaid principal and
accrued and unpaid interest on the Note shall be due and payable on
May 31, 1998, unless extended pursuant to the provisions of the
succeeding sentence. In the event the Bank elects to not renew
Revolving Line of Credit as of the stated maturity date of the Note,
the Company shall have the option, provided no Default or Event of
Default has occurred and is continuing, which may be exercised only by
giving written notice to the Bank of the Company's intent to extend
the stated final maturity date of the Note, which notice must be
received by the Bank on or prior to the earlier of (i) May 31, 1998 or
(ii) five (5) Business Days after the date the Bank gives written
notice to the Company of the Bank's election to not renew the
Revolving Line of Credit, and upon the issuance by each Title Insurer
of an extension to all Title Insurance that would expire between the
stated maturity date of the Note and such extended maturity date, to
extend the final maturity date of the Note for an additional one (1)
year, which extension shall not affect the obligation of the Company
to make monthly interest payments, and the principal prepayments,
required under the Note and this Agreement, or to otherwise comply
with the terms and conditions of the Note and this Agreement.
6. Section 1.4(b) of the Loan Agreement is deleted in its
entirety, and the following is substituted in its place:
-3-
<PAGE> 4
(b) If any Single Family House has not been sold in a
bona fide sales transaction to a Person other than an affiliate of the
Company on or before the date that is one (1) year after the date of
execution of the Deed of Trust for such Single Family House, the
Company shall make a mandatory prepayment on the Note in an amount
equal to (i) ten percent (10%) of the Deed of Trust Amount of such
Single Family House if the Revolving Line of Credit has been renewed
and is then in place or (ii) the unpaid advances made under the
Revolving Line of Credit with respect to such Single Family House if
the Revolving Line of Credit has not been renewed and the provisions
of the last sentence of Section 1.3 hereof are applicable.
7. The words "other than a Model Home" shall be added after the
words "Single Family House" in the first line of Section 1.4(c) of the Loan
Agreement.
8. There is added to Section 1.4 of the Loan Agreement new
paragraphs (f), (g) and (h), which shall read as follows:
(f) If any Single Family House other than a Model Home
has not been sold in a bona fide sales transaction to a Person other
than an affiliate of the Company on or before the date that is
eighteen (18) months after the date of execution of the Deed of Trust
for such Single Family House, the Company shall make a mandatory
prepayment on the Note in an amount equal to five percent (5%) of the
Deed of Trust Amount for such Single Family House.
(g) If any Model Home has not been sold in a bona fide
sales transaction to a Person other than an affiliate of the Company
on or before the date that is two (2) years after the date of
execution of the Deed of Trust for such Model Home, the Company shall
make an additional mandatory prepayment on the Note in an amount equal
to ten percent (10%) of the Deed of Trust Amount of such Model Home.
(h) If any Model Home has not been sold in a bona fide
sales transaction to a Person other than an affiliate of the Company
on or before the date that is three (3) years after the date of
execution of the Deed of Trust for such Model Home, the Company shall
make a mandatory prepayment on the Note in an amount equal to the
amount of unpaid advances made under the Revolving Line of Credit with
respect to such Model Home.
9. The reference in Section 1.4(d) of the Loan Agreement to
"Section 1.4(b) or (c)" is deleted in its entirety, and substituted therefor is
a reference to "Section 1.4(b), (c), (f), (g) or (h)".
-4-
<PAGE> 5
10. Section 1.5(a) of the Loan Agreement is deleted in its
entirety, and the following is substituted in its place:
(a) Subject to the provisions of paragraphs (b) and (c)
of this Section 1.5, the Company shall pay interest on the outstanding
principal amount of the Note at the Base Rate.
11. There is added to the Loan Agreement a new Section 1.7 which
shall read as follows:
1.7 Letters of Credit. The Company has requested that
the Bank, from time to time prior to May 31, 1998, issue or cause to
be issued, on behalf of the Company, certain letters of credit in an
aggregate amount of up to $1,000,000.00. The issuance of such letters
of credit shall be at the Bank's sole and absolute discretion, it
being agreed that, in determining whether to issue or cause to be
issued a requested letter of credit, the Bank may take into account,
without limitation, whether, at the time of the issuance of such
letter of credit, the condition of the Company, financial and
otherwise, is satisfactory to the Bank, whether a Default or Event of
Default has occurred and is then continuing to occur, and whether the
request is otherwise in compliance with the other terms of this
Agreement. The Company shall give the Bank at least two (2) Business
Days prior written notice, in the manner and containing the
information set forth in Section 5.2(b) hereof, prior to the requested
date of issuance of each letter of credit, together with a description
in reasonable detail of the purpose of such letter of credit. The
Company's obligation to repay any draws made on any such letter of
credit shall be evidenced by the Company's execution of the Bank's
standard documentation relating to the issuance of letters of credit.
Such documentation shall set forth the applicable provisions relating
to draws under such letters of credit, repayment of advances
thereunder, interest on advanced amount and such other matters as the
Bank may determine. Each advance under any letter of credit shall be
secured by the Security Documents. No letter of credit issued
hereunder (or extension thereof) may have a final expiration date of
more than two (2) years after the date of issuance (or extension). As
a fee for the issuance or extension of each letter of credit described
herein, the Company shall pay to the Bank, on or prior to the issuance
or extension of such letter of credit, an amount equal to one and
one-half percent (1-1/2%) per annum of the face amount of such letter
of credit, but in no event less than the minimum amount then currently
charged by the Bank as its minimum charge for the issuance of letters
of credit.
-5-
<PAGE> 6
12. Section 4.9(c) of the Loan Agreement is deleted in its
entirety.
13. The address of the Company for all purposes hereafter shall be
1200 Soldiers Field Drive, Sugar Land, Texas 77479.
14. Exhibit "D" to the Loan Agreement is deleted in its entirety,
and Exhibit "D" attached hereto is substituted in its place.
15. The closing of the transactions contemplated by this Fourth
Amendment is subject to the satisfaction of the following conditions:
(a) All legal matters incident to the transactions herein
contemplated shall be satisfactory to Gardere Wynne Sewell & Riggs,
L.L.P., counsel to the Lender;
(b) The Lender shall have received fully executed copies
of this Fourth Amendment, the Note and a Notice of Final Agreement;
(c) The Lender shall have received an executed copy of
resolutions of the Board of Directors of the general partner of the
Company, in form and substance satisfactory to the Lender, authorizing
the execution, delivery and performance by the Company of this Fourth
Amendment and all documents, instruments and certificates referred to
herein; and
(d) The Lender shall have received a certificate of the
Assistant Secretary of the general partner of the Company, setting
forth the names of the officers of the general partner of the Company
authorized to execute and deliver this Fourth Amendment and all
documents, instruments and certificates referred to herein on behalf
of the Company, together with the true signatures of such officers.
16. The Company hereby reaffirms each of the representations,
warranties, covenants and agreements of the Original Borrower and the Company
set forth in the Loan Agreement, as amended hereby, with the same force and
effect as if each were separately stated herein and made as of the date hereof.
Except as amended hereby, the Loan Agreement shall remain unchanged, and the
terms, conditions and covenants of the Loan Agreement shall continue and be
binding upon the parties hereto.
17. The Company hereby agrees that its liability under any and all
documents and instruments executed by the Original Borrower or the Company as
security for the Indebtedness (including, without limitation, the Security
Instruments) shall not be reduced, altered, limited, lessened or in any way
affected by the execution
-6-
<PAGE> 7
and delivery of this Fourth Amendment or any of the instruments or documents
referred to herein, except as specifically set forth herein or therein, that
all of such documents and instruments are hereby renewed, extended, ratified,
confirmed and carried forward by the Company in all respects, that all of such
documents and instruments shall remain in full force and effect and are and
shall remain enforceable against the Company in accordance with their terms and
that all of such documents and instruments shall cover all indebtedness of the
Company to the Lender described in the Loan Agreement as amended hereby.
18. Each of the terms defined in the Loan Agreement is used in
this Fourth Amendment with the same meaning, except as otherwise indicated in
this Fourth Amendment. Each of the terms defined in this Fourth Amendment is
used in the Loan Agreement with the same meaning, except as otherwise indicated
in the Loan Agreement.
19. THIS FOURTH AMENDMENT SHALL BE DEEMED TO BE A CONTRACT UNDER,
SUBJECT TO, AND SHALL BE CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS.
20. THIS LOAN AGREEMENT, AS AMENDED, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties have caused this Fourth Amendment to
be executed by their duly authorized officers as of the day and year first
above written.
NEWMARK HOMES, L.P.
By: Newmark Home Corporation,
its sole general partner
By: /s/ TERRY WHITE
------------------------------
Name: Terry White
-------------------------
Title: Senior Vice President
------------------------
BANK ONE, TEXAS, N.A.
By: /s/ JOHN M. TOTH
----------------------------------
Name: John M. Toth
-----------------------------
Title: Vice President
----------------------------
-7-
<PAGE> 1
EXHIBIT 10.5(d)
THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this
"Third Amendment") is made and entered into as of the 1st day of October, 1996,
by and between NEWMARK HOMES, L.P., a Texas limited partnership (the
"Company"), and BANK ONE, TEXAS, N.A., a national banking association (the
"Lender").
WHEREAS, Newmark Home Corporation, a Nevada corporation, (the
"Original Borrower"), and the Lender entered into that certain Amended and
Restated Loan Agreement (the "Original Loan Agreement") dated April 30, 1996,
which was amended by that certain First Amendment to Amended and Restated Loan
Agreement, (the "First Amendment") dated June 28, 1996 between the Original
Borrower and the Lender;
WHEREAS, all of the property securing repayment of the indebtedness of
the Original Borrower pursuant to the Original Loan Agreement, as amended by
the First Amendment, was assigned to the Company, together with the rights and
obligations of the Original Borrower under the Original Loan Agreement, as
amended by the First Amendment; and
WHEREAS, pursuant to a Modification Agreement among the Original
Borrower, NHC Homes, Inc., the Company and the Lender, the Company assumed all
of the obligations of the Original Borrower under the Original Loan Agreement,
as amended by the First Amendment; and
WHEREAS, after giving effect to the Modification Agreement, the
Original Borrower, the Company and the Lender entered into that certain Second
Amendment to Amended and Restated Loan Agreement (the "Second Amendment") dated
October 1, 1996; and
WHEREAS, the Original Loan Agreement, as amended by the First
Amendment and the Second Amendment, is referred to herein as the "Loan
Agreement"; and
WHEREAS, the Company and the Lender desire to amend certain terms and
provisions of the Loan Agreement, as set forth herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
1. Section 4.6(a)(i) of the Loan Agreement is deleted in its
entirety, and the following is substituted in its place:
(i) between May 1 and August 31 of any year allow (a) the
number of Speculative Homes (regardless of location) included in the
Borrowing Base to be greater than sixty percent (60%) of the number of
all Single Family Houses included in the Borrowing Base, or (b) the
aggregate Deed of
<PAGE> 2
Trust Amounts for all Speculative Homes (regardless of location)
included in the Borrowing Base to be greater than sixty percent (60%)
of the Aggregate Deed of Trust Amount. The foregoing limitations
shall be increased to sixty-five percent (65%) with respect to all
times between September 1 of any year and through April 30 of the
succeeding year;
2. Section 4.6(a)(ii) of the Loan Agreement is amended by
inserting at the end thereof the following sentence:
The foregoing limitation shall be increased to sixty-five percent
(65%) with respect to all times between September 1 of any year and
through April 30 of the succeeding year;
3. The closing of the transactions contemplated by this Third
Amendment is subject to the satisfaction of the following conditions:
(a) All legal matters incident to the transactions herein
contemplated shall be satisfactory to Gardere Wynne Sewell & Riggs,
L.L.P., counsel to the Lender;
(b) The Lender shall have received a fully executed copy
of this Third Amendment and a Notice of Final Agreement; and
(c) The Lender shall have received an executed copy of
resolutions of the Board of Directors of the general partner of the
Company, in form and substance satisfactory to the Lender, authorizing
the execution, delivery and performance by the Company of this Third
Amendment and all documents, instruments and certificates referred to
herein.
4. The Company hereby reaffirms each of the representations,
warranties, covenants and agreements of the Original Borrower and the Company
set forth in the Loan Agreement, as amended hereby, with the same force and
effect as if each were separately stated herein and made as of the date hereof.
Except as amended hereby, the Loan Agreement shall remain unchanged, and the
terms, conditions and covenants of the Loan Agreement shall continue and be
binding upon the parties hereto.
5. The Company hereby agrees that its liability under any and all
documents and instruments executed by the Original Borrower or the Company as
security for the Indebtedness (including, without limitation, the Security
Instruments) shall not be reduced, altered, limited, lessened or in any way
affected by the execution and delivery of this Third Amendment or any of the
instruments or documents referred to herein, except as specifically set forth
herein or therein, that all of such documents and instruments are hereby
renewed, extended, ratified, confirmed and carried forward
-2-
<PAGE> 3
by the Company in all respects, that all of such documents and instruments
shall remain in full force and effect and are and shall remain enforceable
against the Company in accordance with their terms and that all of such
documents and instruments shall cover all indebtedness of the Company to the
Lender described in the Loan Agreement as amended hereby.
6. Each of the terms defined in the Loan Agreement is used in
this Third Amendment with the same meaning, except as otherwise indicated in
this Third Amendment. Each of the terms defined in this Third Amendment is
used in the Loan Agreement with the same meaning, except as otherwise indicated
in the Loan Agreement.
7. THIS THIRD AMENDMENT SHALL BE DEEMED TO BE A CONTRACT UNDER,
SUBJECT TO, AND SHALL BE CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS.
8. THIS LOAN AGREEMENT, AS AMENDED, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be
executed by their duly authorized officers as of the day and year first above
written.
NEWMARK HOMES, L.P.
By: Newmark Home Corporation,
its sole general partner
By: /s/ TERRY WHITE
---------------------------------
Name: Terry White
----------------------------
Title: SVP
---------------------------
BANK ONE, TEXAS, N.A.
By: /s/ JOHN M. TOTH
-------------------------------------
Name: John M. Toth
--------------------------------
Title: Vice President
-------------------------------
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<PAGE> 1
EXHIBIT 10.5(e)
SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this
"Second Amendment") is made and entered into as of the 1st day of October,
1996, by and among NEWMARK HOME CORPORATION, a Nevada corporation (the
"Original Borrower"), NEWMARK HOMES, L.P., a Texas limited partnership (the
"Company") and BANK ONE, TEXAS, N.A., a national banking association (the
"Lender").
WHEREAS, the Original Borrower and the Lender entered into that
certain Amended and Restated Loan Agreement dated April 30, 1996, which Amended
and Restated Loan Agreement was amended by that certain First Amendment to
Amended and Restated Loan Agreement dated June 28, 1996 between the Original
Borrower and the Lender (as amended, the "Loan Agreement");
WHEREAS, the indebtedness of the Original Borrower, to the Lender
under the Loan Agreement is secured by the Deeds of Trust and the Supplements;
and
WHEREAS, all of the property covered by the Deeds of Trust and the
Supplements has been assigned to the Company, together with the rights and
obligations of the Original Borrower under the Loan Agreement; and
WHEREAS, pursuant to a Modification Agreement among the Original
Borrower, NHC Homes, Inc., the Company and the Lender, the Company has assumed
all of the obligations of the Original Borrower under the Loan Agreement; and
WHEREAS, the Original Borrower, the Company and the Lender desire to
amend certain terms and provisions of the Loan Agreement, as set forth herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
1. The definition of the "Company" in the opening paragraph of
the Loan Agreement is hereby amended to mean Newmark Homes, L.P., a Texas
limited partnership.
2. There are added to Section 1.2(a) of the Loan Agreement the
following definitions:
"Debt to Worth Ratio" shall mean the ratio of Debt to Tangible
Net Worth.
"Original Borrower" shall mean Newmark Home Corporation, a
Nevada corporation.
<PAGE> 2
"Tangible Net Worth" shall mean the total assets of the
Company (valued at cost, less normal depreciation), less all
liabilities of the Company.
3. The definition of "Initial Deeds of Trust" in Section 1.2(a)
of the Loan Agreement is deleted in its entirety, and the following is
substituted in its place:
"Initial Deeds of Trust" shall mean those Deeds of Trust,
Security Agreement and Assignment of Rents and Leases executed by the
Original Borrower for the benefit of the Bank and recorded in the Real
Property Records of Brazoria, Harris, Fort Bend, Galveston, Travis,
Dallas, Collin, Tarrant and Williamson Counties, Texas, and any other
Deed of Trust, Security Agreement and Assignment of Rents and Leases
executed by the Company for the benefit of the Bank in the form
attached to the Second Amendment as Exhibit "B" and to be recorded in
other counties approved by the Bank, each of which covers or shall
cover (i) the first set of Lots in each such county which are added to
the Borrowing Base, and the Improvements to be constructed thereon,
and (ii) the Collateral described in Section 3.10 hereof relating to
such Lots and Improvements.
4. Subsection (b) of the definition of "Legal Requirements" in
Section 1.2(a) of the Loan Agreement is deleted in its entirety, and the
following is substituted in its place:
(b) the Company's presently or subsequently effective partnership
agreement,
5. The definition of "Note" in Section 1.2(a) of the Loan
Agreement is deleted in its entirety, and the following is substituted in its
place:
"Note" shall mean the promissory note of the Company issued
pursuant to Section 1.3 of this Agreement in the form attached as
Exhibit "A" to the Second Amendment.
6. The definition of "Pacific Realty Group" in Section 1.2(a) of
the Loan Agreement is deleted in its entirety, and the following is substituted
in its place:
"Pacific Realty Group" shall mean Pacific Realty Group, Inc.,
which owns all of the issued and outstanding capital stock of the
Original Borrower.
7. The definition of "Supplement" in Section 1.2(a) of the Loan
Agreement is deleted in its entirety, and the following is substituted in its
place:
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<PAGE> 3
"Supplement" shall mean a Supplemental Deed of Trust, Security
Agreement and Financing Statement executed by the Original Borrower,
or to be executed by the Company in the form attached as Exhibit "C"
to the Second Amendment, whereby a Lot and the Improvements thereon or
to be constructed thereon, and the Collateral described in Section
3.10 hereof relating to such Lot and Improvements, are made subject to
the liens created by the Initial Deed of Trust previously filed in the
county in which such Lot is located.
8. Sections 2.1 and 2.2 of the Loan Agreement are deleted in
their entirety, and the following are substituted in their place:
2.1 Existence. The Company is a limited partnership duly
organized, legally existing and in good standing under the laws of the
State of Texas and duly qualified as a foreign limited partnership in
all jurisdictions wherein the property owned or the business
transacted by it make such qualification necessary. The Original
Borrower is the sole general partner of the Company. The Original
Borrower is a corporation duly organized, legally existing and in good
standing under the laws of the State of Nevada and duly qualified as a
foreign corporation in the State of Texas and in all other
jurisdictions wherein the property owned or the business transacted by
it makes such qualification necessary.
2.2 Authority. The Company is duly authorized and
empowered to create and issue the Note, and to execute and deliver the
Security Instruments, and all other instruments referred to or
mentioned herein, and all partnership action requisite for the due
creation, issuance and delivery of the Note and the due execution and
delivery of the Security Instruments has been duly and effectively
taken. This Agreement, the Note and the other Security Instruments,
when executed and delivered, will be valid and binding obligations of
the Company enforceable in accordance with their terms (subject to any
applicable bankruptcy, insolvency or other laws generally affecting
the enforcement of creditors' rights). This Agreement, the Note and
the other Security Instruments do not violate any provision of the
Company's partnership agreement, or any contract, agreement, law or
regulation to which the Company is subject, and the same do not
require the consent or approval of any regulatory authority or
governmental body of the United States of America or any state.
9. Section 3.3 of the Loan Agreement is deleted in its entirety,
and the following is substituted in its place:
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<PAGE> 4
3.3 Maintenance. The Company will maintain its partnership
existence and remain in or become a limited partnership in good
standing in each jurisdiction in which it is required to be qualified.
The Company will maintain all patents, trademarks, franchises and
licenses necessary in its business, and comply with all Legal
Requirements, and it will maintain or cause to be maintained its
properties in good and workable condition at all times. The Company
shall continue to conduct, operate and manage its business
substantially as its business is currently being conducted, managed
and operated.
10. Section 4.1 of the Loan Agreement is deleted in its entirety,
and the following is substituted in its place:
4.1 Distributions and Redemptions. The Company will not
declare or pay any distributions on account of, or purchase, acquire,
redeem or retire, any partnership interest in the Company, whether now
or hereafter outstanding, if such declaration, payment, purchase,
acquisition or redemption results or will result in the occurrence of
a Default or an Event of Default hereunder.
11. Section 4.10 of the Loan Agreement is deleted in its entirety,
and the following is substituted in its place:
4.10 Loans and Advances to Employees, Etc. The Company
shall not at any time allow more than an aggregate amount of
$200,000.00 in loans and advances to be outstanding to its employees
or partners, or to the employees, officers, directors and shareholders
of any partner of the Company.
12. The first sentence of Section 7.1 of the Loan Agreement is
deleted in its entirety, and the following is substituted in its place:
Section 7.1 Change of Ownership or Control. If at any
time while the Note shall be outstanding or the Bank has a commitment
hereunder, Pacific Realty Group shall own, directly or indirectly,
less than all of the limited partnership interests of the Company, the
Original Borrower shall own less than all of the general partnership
interests of the Company, or Pacific Realty Group shall own less than
all of the issued and outstanding capital stock of the Original
Borrower, then, in any such event, a "Change of Ownership or Control"
shall be deemed to have occurred.
-4-
<PAGE> 5
13. Exhibit "D" to the Loan Agreement is deleted in its entirety,
and Exhibit "D" attached hereto is substituted in its place.
14. The closing of the transactions contemplated by this Second
Amendment is subject to the satisfaction of the following conditions:
(a) All legal matters incident to the transactions herein
contemplated shall be satisfactory to Gardere Wynne Sewell & Riggs,
L.L.P., counsel to the Lender;
(b) The Lender shall have received fully executed copies
of this Second Amendment and the Note;
(c) The Lender shall have received an executed copy of
resolutions of the Board of Directors of the Original Borrower, in
form and substance satisfactory to the Lender, authorizing the
execution, delivery and performance by the Company of this Second
Amendment and all documents, instruments and certificates referred to
herein;
(d) The Lender shall have received a certificate of the
Assistant Secretary of the Original Borrower, setting forth the names
of the officers of the Original Borrower authorized to execute and
deliver this Second Amendment and all documents, instruments and
certificates referred to herein on behalf of the Company, together
with the true signatures of such officers; and
(e) The Lender shall have received an opinion of counsel
to the Company and the Original Borrower, satisfactory in form and
scope to the Lender and its counsel.
15. The Company hereby makes each of the representations,
warranties, covenants and agreements of the Original Borrower set forth in the
Loan Agreement, as amended hereby, with the same force and effect as if each
were separately stated herein and made as of the date hereof. Except as
amended hereby, the Loan Agreement shall remain unchanged, and the terms,
conditions and covenants of the Loan Agreement shall continue and be binding
upon the parties hereto.
16. The Company hereby agrees that its liability under any and all
documents and instruments executed by the Original Borrower as security for the
Indebtedness (including, without limitation, the Security Instruments) shall
not be reduced, altered, limited, lessened or in any way affected by the
execution and delivery of this Second Amendment or any of the instruments or
documents referred to herein, except as specifically set forth herein or
-5-
<PAGE> 6
therein, that all of such documents and instruments are hereby renewed,
extended, ratified, confirmed and carried forward by the Company in all
respects, that all of such documents and instruments shall remain in full force
and effect and are and shall remain enforceable against the Company in
accordance with their terms and that all of such documents and instruments
shall cover all indebtedness of the Company to the Lender described in the Loan
Agreement as amended hereby.
17. Each of the terms defined in the Loan Agreement is used in
this Second Amendment with the same meaning, except as otherwise indicated in
this Second Amendment. Each of the terms defined in this Second Amendment is
used in the Loan Agreement with the same meaning, except as otherwise indicated
in the Loan Agreement.
18. THIS SECOND AMENDMENT SHALL BE DEEMED TO BE A CONTRACT UNDER,
SUBJECT TO, AND SHALL BE CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS.
19. THIS LOAN AGREEMENT, AS AMENDED, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to
be executed by their duly authorized officers as of the day and year first
above written.
NEWMARK HOME CORPORATION
By: /s/ TERRY WHITE
-------------------------------
Name: Terry White
-------------------------
Title: SVP
-------------------------
NEWMARK HOMES, L.P.
By: Newmark Home Corporation,
its sole general partner
By: /s/ TERRY WHITE
-------------------------
Name: Terry White
--------------------
Title: SVP
-------------------
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<PAGE> 7
BANK ONE, TEXAS, N.A.
By: /s/ JOHN M. TOTH
------------------------------
Name: John M. Toth
-------------------------
Title: Vice President
------------------------
-7-
<PAGE> 1
EXHIBIT 10.5(f)
FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this
"First Amendment") is made and entered into as of the ____ day of June, 1996,
by and between NEWMARK HOME CORPORATION, a Nevada corporation (the "Borrower"),
and BANK ONE, TEXAS, N.A., a national banking association (the "Lender").
WHEREAS, the Borrower and the Lender entered into that certain Amended
and Restated Loan Agreement dated April 30, 1996 (the "Loan Agreement");
WHEREAS, the Borrower and the Lender desire to amend certain terms and
provisions of the Loan Agreement, as set forth herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
1. The definition of "Initial Deeds of Trust" in Section 1.2(a)
of the Loan Agreement is deleted in its entirety, and the following is
substituted in its place:
"Initial Deeds of Trust" shall mean those Deeds of Trust,
Security Agreement and Assignment of Rents and Leases executed by the
Company for the benefit of the Bank and recorded in the Real Property
Records of Brazoria, Harris, Fort Bend, Galveston, Travis, Dallas,
Collin, Tarrant and Williamson Counties, Texas, and any other Deed of
Trust, Security Agreement and Assignment of Rents and Leases executed
by the Company for the benefit of the Bank in the form attached to the
First Amendment as Exhibit "B" and to be recorded in other counties
approved by the Bank, each of which covers or shall cover (i) the
first set of Lots in each such county which are added to the Borrowing
Base, and the Improvements to be constructed thereon, and (ii) the
Collateral described in Section 3.10 hereof relating to such Lots and
Improvements.
2. The definition of "Maximum Outstanding Amount" in Section
1.2(a) of the Loan Agreement is deleted in its entirety, and the following is
substituted in its place:
"Maximum Outstanding Amount" shall mean, at any given time,
the lesser of (i) the Borrowing Base Value at such time and (ii)
$25,000,000.00.
3. The definition of "Note" in Section 1.2(a) of the Loan
Agreement is deleted in its entirety, and the following is substituted in its
place:
<PAGE> 2
"Note" shall mean the promissory note of the Company issued
pursuant to Section 1.3 of this Agreement in the form attached as
Exhibit "A" to the First Amendment.
4. The definition of "Supplement" in Section 1.2(a) of the Loan
Agreement is deleted in its entirety, and the following is substituted in its
place:
"Supplement" shall mean a Supplemental Deed of Trust, Security
Agreement and Financing Statement to be executed by the Company in the
form attached as Exhibit "C" to the First Amendment, whereby a Lot and
the Improvements thereon or to be constructed thereon, and the
Collateral described in Section 3.10 hereof relating to such Lot and
Improvements, are made subject to the liens created by the Initial
Deed of Trust previously filed in the county in which such Lot is
located.
5. Section 1.1 of the Loan Agreement is deleted in its entirety,
and the following is substituted in its place:
1.1 Indebtedness. Upon the terms and conditions
hereinafter set forth, the Bank agrees to lend the Company an
aggregate of up to $25,000,000.00, as evidenced by a Revolving Line of
Credit to be extended to the Company by the Bank, as more specifically
described in Section 1.3 hereof.
6. The last sentence of Section 1.3 of the Loan Agreement is
deleted in its entirety, and the following is substituted in its place:
All unpaid principal and accrued and unpaid interest on the Note shall
be due and payable on April 30, 1997, unless extended pursuant to the
provisions of the succeeding sentence. In the event the Bank elects
to not renew the Revolving Line of Credit as of the stated maturity
date of the Note, the Company shall have the option, provided no
Default or Event of Default has occurred and is continuing, by giving
written notice to the Bank of the Company's intent to extend the
stated final maturity date of the Note, which notice must be received
by the Bank on or prior to the earlier of (i) April 30, 1997 or (ii)
five (5) Business Days after the date the Bank gives written notice to
the Company of the Bank's election to not renew the Revolving Line of
Credit, and upon the issuance by each Title Insurer of an extension to
all Title Insurance that would expire between the stated maturity date
of the Note and such extended maturity date, to extend the final
maturity date of the Note for an additional two hundred seventy (270)
days, which extension shall not affect the obligation of
-2-
<PAGE> 3
the Company to make monthly interest payments and prepayments required
under the Note and this Agreement, or to otherwise comply with the
terms and conditions of the Note and this Agreement.
7. Subsection 4.6(a)(v) of the Loan Agreement is deleted in its
entirety, and all references to such subsection in the Loan Agreement and the
other Security Instruments are hereby deleted.
8. Exhibit "D" to the Loan Agreement is deleted in its entirety
and Exhibit "D" attached hereto is substituted in its place.
9. The closing of the transactions contemplated by this First
Amendment is subject to the satisfaction of the following conditions:
(a) All legal matters incident to the transactions herein
contemplated shall be satisfactory to Gardere Wynne Sewell & Riggs,
L.L.P., counsel to the Lender;
(b) The Lender shall have received fully executed copies
of this First Amendment and the Note;
(c) The Lender shall have received an executed copy of
resolutions of the Board of Directors of the Borrower, in form and
substance satisfactory to the Lender, authorizing the execution,
delivery and performance of this First Amendment and all documents,
instruments and certificates referred to herein; and
(d) The Lender shall have received a certificate of the
Assistant Secretary of the Borrower, setting forth the names of the
officers of the Borrower authorized to execute and deliver this First
Amendment and all documents, instruments and certificates referred to
herein, together with the true signatures of such officers.
10. The Borrower hereby reaffirms each of the representations,
warranties, covenants and agreements of the Borrower set forth in the Loan
Agreement with the same force and effect as if each were separately stated
herein and made as of the date hereof. Except as amended hereby, the Loan
Agreement shall remain unchanged, and the terms, conditions and covenants of
the Loan Agreement shall continue and be binding upon the parties hereto.
11. The Borrower hereby agrees that its liability under any and
all documents and instruments executed by the Borrower as security for the
Indebtedness (including, without limitation, the Security Instruments) shall
not be reduced, altered, limited,
-3-
<PAGE> 4
EXHIBIT 10.5(f)
lessened or in any way affected by the execution and delivery of this First
Amendment or any of the instruments or documents referred to herein, except as
specifically set forth herein or therein, that all of such documents and
instruments are hereby renewed, extended, ratified, confirmed and carried
forward by the Borrower in all respects, that all of such documents and
instruments shall remain in full force and effect and are and shall remain
enforceable against the Borrower in accordance with their terms and that all of
such documents and instruments shall cover all indebtedness of the Borrower to
the Lender described in the Loan Agreement as amended hereby.
12. Each of the terms defined in the Loan Agreement is used in
this First Amendment with the same meaning, except as otherwise indicated in
this First Amendment. Each of the terms defined in this First Amendment is
used in the Loan Agreement with the same meaning, except as otherwise indicated
in the Loan Agreement.
13. THIS FIRST AMENDMENT SHALL BE DEEMED TO BE A CONTRACT UNDER,
SUBJECT TO, AND SHALL BE CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS.
14. THIS LOAN AGREEMENT, AS AMENDED, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
executed by their duly authorized officers as of the day and year first above
written.
NEWMARK HOME CORPORATION
By: /s/ TERRY WHITE
---------------------------------
Name: Terry White
---------------------------
Title: Senior Vice President
--------------------------
BANK ONE, TEXAS, N.A.
By: /s/ JOHN M. TOTH
---------------------------------
Name: John M. Toth
---------------------------
Title: Vice President
--------------------------
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<PAGE> 1
EXHIBIT 10.7
- -------------------------------------------------------------------------------
LOT ACQUISITION LOAN AGREEMENT
BY AND BETWEEN
THE ADLER COMPANIES, INC., a Florida corporation
AND
BANK UNITED OF TEXAS FSB,
a federal savings bank
Dated
March 13, 1996
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Customary Complying Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Developed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Financed Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Lot(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 Subdivision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17 Title Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Disbursement of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 The Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Payment of the Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Loan Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. CONDITIONS TO LENDER'S OBLIGATION TO FUND THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Title Company's Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Note and Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Mortgage Security Agreement and other
Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 Affidavits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7.1 Public Liability and Worker's
Compensation Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7.2 Other Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Soil Test and Hazardous Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.9 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.10 Public Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Opinion of Borrower's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.13 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.14 Soil Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.15 Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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<TABLE>
<S> <C> <C>
3.16 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.17 No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5. WARRANTIES AND REPRESENTATIONS OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Organization Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Construction and Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4 Authority to Enter into Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.5 Validity of Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.6 Priority of Lien on Personalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.7 Conflicting Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.8 Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.9 Availability of Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.10 Condition of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.11 Availability of Roads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.12 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.13 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. ADDITIONAL COVENANTS OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 No Transfer, Subordinate Mortgage Financing or other Encumbrance of Financed Property . . . . . . . 11
6.2 Compliance with Restrictions and Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Brokerage Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Financial Statements and Reporting Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.7 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.8 Further Assurances and Preservation of Security . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.9 Utilization of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.10 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.11 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.13 Survival of Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.14 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.15 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.16 Third-Party Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.17 Change of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Failure to Satisfy Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Breach of Covenants, Warranties and Representations . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Material Adverse Change of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. REMEDIES OF LENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<TABLE>
<S> <C> <C>
9. RELEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10. GENERAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.1 Rights of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 Borrower is not Lender's Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.3 Lender Not Liable for Damage or Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.4 Lender Not Obligated to Insure Proper Disbursement of
Funds to Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 Indemnification from Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.6 Evidence of Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.8 Invalid Provisions to Affect No Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.9 Application of Interest to Reduce Principal Sums . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.11 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.12 Extraneous Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.13 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.14 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.15 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.16 Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.17 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
-iii-
<PAGE> 5
LOT ACQUISITION LOAN AGREEMENT
THIS LOT ACQUISITION LOAN AGREEMENT (the "Agreement") is made and
entered into as of the 13th day of March, 1996, by and between THE ADLER
COMPANIES, INC., a Florida corporation with an address at 2601 South Bayshore
Drive, Coconut Groves, Florida 33133 ("Borrower"); and BANK UNITED OF TEXAS
FSB, a federal savings bank, with an address at 3200 Southwest Freeway, Suite
2000, Houston, Texas 77027 ("Lender").
RECITALS
WHEREAS, Borrower has applied to Lender for a lot acquisition loan (the
"Loan") in the principal sum of Three Million Seven Hundred Twelve Thousand Five
Hundred Dollars ($3,712,500.00), the proceeds of which shall be used to acquire
certain Lots in Parcel "B" of the Windsor Palms Subdivision, as more
particularly described on Exhibit "A" attached hereto and made a part hereof.
WHEREAS, Borrower and Lender have negotiated, and desire to enter
into, this Agreement to set forth the terms and conditions of the Loan;
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants and agreements set forth below, Borrower and Lender agree as follows:
1. DEFINITIONS. As used in this Agreement the terms listed below
shall have the following meanings unless otherwise required by the context:
1.1 Business Day. Each day, other than a Saturday,
Sunday, national holiday or other day when Lender's offices or branch banking
facilities are not open for business to the general public.
1.2 Customary Complying Substance. Any customary
Hazardous Substance which is necessary to the business operations of Borrower
at the Financed Property and which is manufactured, produced, distributed,
used, treated, transported, stored, released, disposed of or otherwise handled
in compliance with all applicable Environmental Laws.
1.3 Developed. Improved with all necessary roadway,
drainage, utility and other infrastructure, and ready to be improved with a
residential dwelling unit.
1.4 Escrow Agreement. An escrow agreement in form and
substance acceptable to the Lender regarding certain development work to be
completed with respect to the Subdivision among the Borrower, the Lender,
Windsor Palms Corporation and an escrow agent acceptable to the Lender.
1.5 Environmental Laws. All existing and future federal,
state and local laws, statutes, ordinances, rules, and regulations pertaining
to health, industrial hygiene, pollution or the environment, including, without
limitation: (i) the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq.; (ii) the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq.; (iii) the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; (iv)
the Pollution Spill Prevention and Control Act (Chapter 376 of the Florida
Statutes), (v) the Florida Air and Water Pollution Control Act, the Florida
Resource Recovery and Management Act and other Acts included within Chapter 403
of the Florida Statutes, and (vi) all other
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<PAGE> 6
laws relating to Pollution or the protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without limitation,
ambient air, surface water, groundwater, or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
1.6 Financed Property. The land and all of the
Improvements thereon which are to any extent and at any time financed under
this Agreement.
1.7 Financing Statements. One or more financing
statements from the Borrower to Lender to perfect Lender's security interest in
the personal property described in the Mortgage and Security Agreement.
1.8 Guarantor. NHC Holdings Corp., a Nevada corporation.
1.9 Hazardous Substance. Asbestos, polychlorinated
biphenyls, and petroleum products, and any other substance(s), material(s) and
waste(s) now or hereafter regulated under any Environmental Laws, including,
without limitation, any "hazardous substance(s)", "hazardous material(s)",
"toxic substance(s), "solid waste(s)", "waste(s)", "hazardous waste(s)",
"pollutant(s)", or "pollution", as defined in any Environmental Laws; and those
substances listed in the United States Department of Transportation Table (49
CFR 172. 101 and amendments thereto) or by the Environmental Protection Agency
(40 CFR Part 302 and amendments thereto) as hazardous substances.
1.10 Loan Documents. This Agreement, the Note, the
Guaranty, the Mortgage, the Security Agreement, the Financing Statements, and
each of the other documents or instruments now or hereafter evidencing or
securing the payment or performance of any of the Loan obligations of Borrower.
All Loan Documents shall be satisfactory to Lender in form and in substance.
1.11 Lot(s). A residential building lot as shown on the
plat of the Subdivision.
1.12 Maturity Date. April 1, 1998.
1.13 Mortgage. One or more Mortgage and Security
Agreements from Borrower to Lender, securing the Loan and granting to Lender a
valid first mortgage lien on, inter alia, the Financed Property.
1.14 Note. That certain promissory note of even date
herewith made by the Borrower payable to the order of the Lender in the
principal amount of Three Million Seven Hundred Twelve Thousand Five Hundred
Dollars ($3,712,500.00), evidencing the Loan.
1.15 Security Agreement. One or more Security Agreements
from the Borrower to Lender securing the Loan and granting to Lender a valid
and perfected first priority security interest in all fixtures and personal
property now or hereafter located on, arising out of, or used in connection
with the Financed Property.
1.16 Subdivision. That certain residential subdivision
known as Parcel "B" in the Windsor Palms Subdivision being developed on that
certain Parcel of land located in Broward County,
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<PAGE> 7
Florida, as more particularly described on Exhibit "A", attached hereto and
made a part hereof, to include one hundred one (101) Developed Lots.
1.17 Title Company. Wampler, Buchanan & Breen, as agent
for Ticor Title Insurance Company or a title insurance company accepted by
Lender in writing. The Lender reserves the right to require Borrower to change
the Title Company at any time.
2. THE LOAN.
2.1 Loan. Subject to the terms and conditions contained
in this Agreement, the Lender agrees to fund and Borrower may borrow, the
principal sum of Three Million Seven Hundred Twelve Thousand Five Hundred
Dollars ($3,712,500.00) to acquire one hundred one (101) Developed Lots within
the Subdivision.
2.2 Disbursement of Loan Proceeds. At closing, subject
to the terms and conditions contained in this Agreement, the Lender shall
disburse the full principal amount of the Loan to or for the account of the
Borrower to finance the acquisition of the Lots; provided, however, a portion
of the Loan proceeds, in an amount to be approved by the Lender, shall be
disbursed at closing directly to an escrow agent, acceptable to the Lender, to
be held, administered and disbursed in accordance with terms and conditions
contained in the Escrow Agreement for completion of the development work with
respect to the Subdivision. The Borrower acknowledges and agrees that the
Lender shall have no obligation to disburse any portion of the proceeds of the
Loan until such time as the Lender has approved and entered into an acceptable
Escrow Agreement among the parties thereto.
2.3 The Loan Documents. The Loan shall be evidenced by
the Note, and shall be secured by the Mortgage and other Loan Documents. The
Borrower shall take the Loan and comply with and perform all of the terms and
conditions of this Agreement and other Loan Documents.
2.4 Payment of the Note.
2.4.1 Payments of accrued interest only as provided
in the Note on the unpaid principal amount outstanding under the Note from time
to time shall be due and payable to Lender on the first (1st) day of each
month, commencing on the first (1st) day of the first (1st) month following the
date of this Agreement and continuing until the first (1st) day of the month
immediately preceding the Maturity Date.
2.4.2 In the event the Lender shall reasonably
determine that the outstanding principal balance of the Loan at any time
exceeds the value of the Financed Property (discounted on a bulk value basis)
securing the Loan, the Lender shall have the right to require a mandatory
principal reduction payment under the Loan in such amount as will reduce the
outstanding principal balance of the Loan to an amount which does not exceed
the value of the Financed Property (discounted on a bulk value basis).
2.4.3 Upon the sale of any Lot by the Borrower, a
release price shall be due and payable hereunder in an amount equal to the
release price set forth in Section 14 hereof.
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<PAGE> 8
2.4.4 Unless sooner paid, the entire unpaid
principal balance of the Loan together with all accrued but unpaid interest and
any other sum due under any of the other Loan Documents, shall be due and
payable in full on or before the Maturity Date.
2.4.5 Borrower may at any time prepay the Loan in
whole or in party without penalty or premium.
2.5 Loan Fee. As consideration for committing to make the
Loan in accordance with this Agreement, Borrower shall pay Lender a fee equal
to $37,125.00 upon the execution of this Agreement, which fee shall be deemed
fully earned and nonrefundable.
3. CONDITIONS TO LENDER'S OBLIGATION TO FUND THE LOAN. In
addition to applicable conditions set forth elsewhere in this Agreement, each
of the conditions listed below shall be complied with in form and substance
satisfactory to Lender at least four (4) Business Days prior to the funding of
the Loan:
3.1 Title Insurance. Borrower shall have delivered to
Lender an original policy or policies of title insurance or (or commitment for
such title insurance marked to delete all requirements and "standard"
exceptions) issued by the Title Company, in an amount equal to the face
principal amount of the Note plus the principal amount of all other promissory
notes from time to time evidencing the Loan, which title insurance policy or
policies (i) shall insure Lender against loss or damage on account of
construction liens upon the Financed Property, (ii) shall insure that the
Mortgage is a valid first lien on the Financed Property, (iii) shall insure
that title to the Financed Property is good and marketable and free and clear
of all liens, encumbrances, easements, exceptions, reservations and
restrictions except for those approved by Lender, in its sole and absolute
discretion, without exception for ingress and egress, and (iv) shall provide
such other coverages and include such endorsements as Lender may reasonably
request, including, without limitation, Florida Form 9 coverage.
3.2 Survey. Borrower shall have delivered to Lender a
current survey of the Financed Property certified as true and correct to the
Lender, Title Company and Lender's counsel to their satisfaction and which has
been prepared by a surveyor acceptable to Lender showing the following:
A. the location of the perimeter of such
property;
B. the location of and the identification by
reference to recording data of all easements, rights of way,
conditions and restrictions on or appurtenant to the Lots;
C. the lines of the streets abutting the
property and the width thereof;
D. all encroachments upon the property and the
extent thereof in feet and inches;
E. the location of any improvements, to the
extent constructed, and the relation of the improvements by
distances to the perimeter of the property, the building
setback lines and the streetlines;
F. if any portion of the property is described
as being on a filed map, a legend relating the plat of survey
to such map;
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<PAGE> 9
G. a certificate reflecting whether or not all,
or any portion, of the property lies within the boundary of
any applicable flood zone; and
H. any other requirements reasonably requested
by Lender.
3.3 Title Company's Agreement. A standard form
indemnification agreement (closing protection letter) by the Title Company
shall have been executed and delivered to Lender.
3.4 Note and Guaranty. The Note shall have been duly
authorized, executed and delivered to Lender by Borrower, and a Guaranty of the
Note, in form and substance acceptable to the Lender shall have been duly
executed and delivered to the Lender by the Guarantor.
3.5 Mortgage Security Agreement and other Loan Documents.
The Mortgage shall have been duly authorized, executed, acknowledged, delivered
to Lender, and recorded. The Security Agreement, Financing Statements, and
other Loan Documents shall have been duly authorized, executed, and
acknowledged by Borrower, and delivered to Lender. All Financed Property shall
be encumbered by a valid first priority lien under the Mortgage, and all
fixtures and personal property now or hereafter located on, arising out of, or
used in connection with the Financed Property shall be encumbered by a valid
and perfected first priority security interest under the Security Agreement.
3.6 Affidavits. Title and loan to one borrower
affidavits of the Borrower shall have been executed and delivered to Lender in
substantially the forms attached hereto as Exhibit "B" and Exhibit "C",
respectively (collectively, "Affidavits").
3.7 Insurance.
3.7.1 Public Liability and Worker's Compensation
Insurance. Borrower at its expense shall have delivered evidence satisfactory
to Lender of the existence of public liability and worker's compensation
insurance in amounts and issued by companies approved by Lender. All liability
policies shall name Lender as an additional insured as its interest may appear.
3.7.2 Other Insurance. Borrower at its expense
shall also have furnished to Lender from time to time such other insurances as
may be required by the Loan Documents or as Lender may from time to time
reasonably request. Borrower shall furnish Lender with original certificates of
insurance and, if requested, copies of all policies for all insurance required
under this Agreement and each such policy shall be written by an insurer
satisfactory to Lender that is licensed to issue insurance in Florida and that
possesses a general policy holder's rating of "A" or better and financial
rating of Class VII or better according to Best's Key Rating Guide as the same
may change from time to time. Each such policy must be furnished to Lender
with proof of payment of the full premium due therefor (subject to the right of
the Borrower to make premium payments in monthly installment, if applicable)
and shall provide that it shall not be cancelled or materially modified without
thirty (30) days prior written notice to Lender. Borrower agrees that Lender
shall have the right to take any action necessary to continue any such
insurance in full force and effect including, but not limited to, paying
premiums. Any funds advanced to continue any of said policies in full force
and effect shall be considered as Advances hereunder and shall bear interest
from the date of disbursement at the same rate as other Advances and payment of
said funds and interest shall be secured by the Mortgage and other Loan
Documents.
5
<PAGE> 10
3.8 Soil Test and Hazardous Waste. Satisfactory
environmental audits and soil test reports shall have been submitted to Lender
for its review from an environmental engineer satisfactory to Lender certifying
that, except for Customary Complying Substances, no Hazardous Substances exists
on or about the Financed Property (including in any surface or ground water),
that the Financed Property is in compliance with all Environmental Laws, and
that there are no actual or potential environmental concerns in respect of the
Financed Property, the costs of which shall have been paid by Borrower.
3.9 Appraisal. A current appraisal of the Financed
Property complying with all applicable regulatory requirements shall have been
delivered to and approved by Lender, the costs of which shall have been paid by
Borrower. In addition, Lender reserves the right to require updated appraisal
reports with respect to the Financed Property if and when requested by the
Lender in its complete discretion, to be provided at Borrower's expense.
3.10 Public Requirements. Borrower shall have delivered
to Lender the following with respect to the Subdivision:
A. letters from local utility companies stating
that electricity, telephone, sewer and water will be available to each Lot on a
permanent and adequate basis upon the completion of the Improvements;
B. a certified copy of the zoning map and
ordinance (including all conditions to any specially approved use, such as a
special exception or conditional use) applicable to the Subdivision and a
current letter from the appropriate zoning official confirming the zoning
classification for the Subdivision;
C. evidence satisfactory to the Lender that all
roads, drainage and other infrastructure necessary for the development of the
Subdivision have been completed to the boundary of the Subdivision and that the
necessary easements and rights of way therefor have been acquired or dedicated
to public use and duly accepted;
D. copies of subdivision plats, restrictive
covenants, plans of developments, and all other documents required by the local
zoning and subdivision ordinances together with evidence satisfactory to Lender
that the Final Plans conform to all federal, state, and local laws, ordinances,
rules and regulations, including, but not limited to, all Environmental Laws
and all laws of the State of Florida regulating building and land use; and
E. copies of permits from the water management
district for the construction and generation of facilities for the collection
and discharge of storm and surface water, certificates of concurrency
determination, reservation, or exemption, and all other licenses,
authorizations, permits and approvals, if any, required as a prerequisite to
the lawful development of the Subdivision.
3.11 Corporate Documents. Borrower shall have delivered
to Lender the following documents:
A. a certificate by the appropriate official of
the state of the Borrower's and Guarantor's incorporation to the effect that
the Borrower and the Guarantor are both corporations whose status is active
and, if other than Florida, accompanied by a certificate of the Florida
Department of State showing that the Borrower is authorized to transact
business in the State of Florida;
6
<PAGE> 11
B. articles of incorporation of the Borrower and
the Guarantor, with all amendments thereto, certified by the appropriate
official of their respective states of incorporation, and bylaws of the
Borrower and Guarantor certified by the Secretary of the Borrower and the
Guarantor respectively;
C. an incumbency certificate specifying by name
and title the officers and directors of the Borrower and the Guarantor,
certified by the secretary of the Borrower and the Guarantor respectively; and
D. certified resolutions of the Board of
Directors of the Borrower authorizing the execution and delivery of this
Agreement, the Mortgage, Note and all other documents necessary or desirable
for the consummation of the transactions contemplated by this Agreement and
certified resolutions of the Board of Directors of the Guarantor authorizing
the execution and delivery of the Guaranty to and in favor of the Lender
3.12 Opinion of Borrower's Counsel. Borrower shall have
delivered to Lender an opinion or opinions of counsel to Borrower and the
Guarantor addressed to Lender, such counsel to be reasonably satisfactory to
Lender, to the effect that:
A. this Agreement and all other Loan Documents,
including, without limitation, the Guaranty, have been duly authorized,
executed and delivered and are valid, binding and enforceable in accordance
with their terms, subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the right of creditors
generally;
B. that Borrower is duly incorporated and
organized, with an active status under the laws of the state of its
incorporation, is authorized to transact business in Florida, and has all the
necessary power and authority to undertake its obligations under the Loan
Documents;
C. that Guarantor is duly incorporated and
organized, with an active status under the laws of the state of its
incorporation and has all the necessary power and authority to undertake its
obligations under the Loan Documents;
D. that, to its knowledge after inquiry of
appropriate officers of the Borrower, Borrower and its properties are in
compliance with all laws, regulations, ordinances and orders of all
governmental authorities;
E. that there is no charter or by-law of
Borrower and no provision of any existing mortgage, indenture, contract or
agreement known to such counsel binding on Borrower or affecting its property
which would conflict with or in any way prevent the execution, delivery and
carrying out of the terms of this Agreement;
F. that, to its knowledge after inquiry of the
executive officers of the Borrower and the Guarantor, there are no proceedings
pending or threatened before any court or administrative agency which will
materially and adversely affect the Borrower or the Guarantor;
G. that the Note and the interest provided for
therein do not violate any usury or other laws of the State of Florida;
7
<PAGE> 12
H. such other matters as Lender may reasonably
require.
3.13 Expenses. Borrower shall have paid all those fees
and charges due and payable or ordered paid by Lender as provided herein under
Paragraph 9 of this Agreement entitled Expenses.
3.14 Soil Reports. The Lender shall have received and
approved a written report from an engineer acceptable to the Lender which
set(s) forth the results of subsurface soil tests (including, but not limited
to, composition and compaction results), and recommendations, if any, and a
density/compaction certification acceptable to Lender. The Lender shall also
have received and approved such additional report(s) as shall be appropriate,
including additional reports made after implementation of the recommendations,
to show that the recommendations have been satisfied.
3.15 Other Documents. Borrower shall deliver to Lender
such other documents and information as Lender may reasonably require.
3.16 Representations and Warranties. The representations
and warranties of Borrower as set forth in this Agreement and other Loan
Documents shall be true and correct.
3.17 No Event of Default. No Event of Default
(hereafter defined), or circumstance or event which upon the lapse of time, the
giving of notice, or both, could become an Event of Default, shall have
occurred.
4. EXPENSES. Borrower shall pay all reasonable fees, charges,
expenses, and costs incurred in the procuring and making of the Loan, and all
other reasonable expenses incurred by Lender during the term of the Loan,
including, without limitation, Title Company's fees and premiums, charges for
examination of title to the Financed Property and any endorsements, expenses of
surveys, Florida documentary stamp taxes and intangible personal property
taxes, recording expenses, fees of the Inspector, and the fees of the attorneys
for Lender. The Borrower shall also pay any and all other charges, liens and
encumbrances upon the Financed Property, any other expenses necessary to
complete the construction of the Improvements in accordance with the terms and
conditions of this Agreement, and the costs of such inspections, evaluations
and tests of the Financed Property as Lender may require from time to time,
including, but not limited to, appraisals, structural and environmental
engineering audits and other professional, engineering and architectural
reports, as provided elsewhere in the Loan Documents. Such amounts, unless
sooner paid, shall be paid from time to time as and when Lender shall request
either to the person to whom such payments are due or to Lender if Lender has
paid the same, or Lender may, at its option, deduct from any Advance any
amounts necessary for the payment of these items, and apply such amounts in
making such payments, and all sums so applied shall be deemed Advances under
this Agreement. Further, Borrower agrees to pay all such fees, charges,
expenses and costs incurred in connection with any modification or assumption
of the Loan.
5. WARRANTIES AND REPRESENTATIONS OF BORROWER. Borrower
represents and warrants (which representations and warranties shall be deemed
continuing) as follows:
5.1 Organization Status. Borrower and the Guarantor (i)
are each duly incorporated, organized and active corporations under the laws of
their respective states of incorporation and (ii) the Borrower is authorized to
transact business in Florida.
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<PAGE> 13
5.2 Construction and Compliance with Laws. With respect
to the Financed Property, no violation of any applicable zoning, building or
any other local, state or federal laws, ordinances and regulations exists with
respect to the anticipated use and construction of improvements thereon. The
Borrower (i) has obtained or is entitled to receive all licenses, permits and
approvals required by all local, state and federal agencies regulating such
construction and use and (ii) is in compliance with all laws, regulations,
ordinances and orders of all governmental authorities.
5.3 Financial Statements. The financial statements of
Borrower heretofore delivered to Lender are true and correct in all respects,
have been prepared in accordance with consistently applied generally accepted
accounting principles, and fairly present the respective financial conditions
of the Borrower as of the respective dates thereof, and no material adverse
change has occurred in the financial conditions reflected therein since the
respective dates thereof.
5.4 Authority to Enter into Loan Documents. Borrower has
full power and authority to enter into this Agreement and the other Loan
Documents and consummate the transactions contemplated thereby, and the facts
and matters expressed or implied in the opinions of its legal counsel are true
and correct.
5.5 Validity of Loan Documents. The Loan Documents have
been approved by those persons having proper authority, and are in all respects
legal, valid and binding according to their terms.
5.6 Priority of Lien on Personalty. No chattel mortgage,
bill of sale, security agreement, financing statement or other title retention
agreement (except those executed in favor of Lender) has been or will be
executed with respect to any personal property, chattel or fixture granted to
Lender under the Loan Documents as security for the payment and performance of
the Loan obligations.
5.7 Conflicting Transactions. The consummation of the
transaction hereby contemplated and the performance of the obligations of
Borrower and the Guarantor under and by virtue of the other Loan Documents will
not result in any breach of, or constitute a default under, any lease, bank
loan or credit agreement, or other agreement or instrument to which either the
Borrower or the Guarantor is a party, bound or affected.
5.8 Pending Litigation. There are no actions, suits or
proceedings pending against the Borrower, the Guarantor or against the Financed
Property, and, to the knowledge of Borrower, there are no circumstances which
could lead to any action, suits or proceedings against or affecting Borrower or
the Financed Property, or involving the validity or enforceability of any of
the Loan Documents, before or by any government authority; and to Borrower's
knowledge, it is not in default with respect to any order, writ, injunction,
decree or demand of any court or any governmental authority. The aforesaid
does not pertain to pending or threatened actions, suits or proceedings which
are in the ordinary course of business, the outcome of which will not
materially and adversely affect the financial condition of the Borrower or
impair its operations.
5.9 Availability of Utilities. All utility services
necessary for the construction of the Improvements and the operation thereof
for their intended purpose will be available upon completion of the development
of the Subdivision, including water supply, storm and sanitary sewer
facilities, and electric and telephone facilities. All necessary permits and
permissions required from governmental authorities have been obtained for
unrestricted access to and use of such services in connection with the
9
<PAGE> 14
construction and use of the Improvements and adequate capacities exist to fully
service the Financed Property.
5.10 Condition of Premises. No proceeding to condemn any
part of the Financed Property has been threatened or commenced by any authority
having the power of eminent domain, the Financed Property is not now damaged or
injured as a result of any fire, explosion, accident, flood or other casualty,
and there are no soil conditions which would interfere with the construction of
the Improvements.
5.11 Availability of Roads. All roads necessary to
provide adequate access to the Subdivision have either been completed or the
necessary rights of way therefor have either been acquired by the appropriate
local authorities or have been dedicated to public use and accepted by such
local authorities and all necessary steps have been taken by Borrower and such
local authorities to assure the complete construction and installation thereof.
5.12 Environmental. The Borrower warrants as follows with
respect to the Financed Property:
5.12.1 To the best knowledge of Borrower, neither
the Financed Property nor the Borrower is in violation of any Environmental
Laws.
5.12.2 Neither the Borrower nor the Financed
Property is the subject of any existing, pending, or to the best of Borrower's
knowledge, threatened investigation, proceeding, claim or lawsuit with respect
to any Environmental Laws or any Hazardous Substance.
5.12.3 Neither the Borrower nor, to the best
knowledge of Borrower, any predecessor in title to the Financed Property have
received any notice of any violation or alleged violation of any Environmental
Laws or of any investigation, proceeding, claim or lawsuit, the basis of which
is a violation or alleged violation of any Environmental Laws or which involves
the existence or alleged existence of any Hazardous Substance at or on the
Financed Property.
5.12.4 Borrower has inspected or has caused the
Financed Property to be inspected and found it, to the best of its knowledge,
to be free from every Hazardous Substance.
5.12.5 Borrower has made inquiry into the previous
uses and ownership of the Financed Property and has determined that, to the
best knowledge of Borrower, except as referenced in the environmental report
submitted to the Lender, no Hazardous Substance has been manufactured,
produced, distributed, used, treated, transported, stored, released, disposed
of or otherwise handled at, on or near the Financed Property. To the best
knowledge of the Borrower, all of the recommendations and remedial action
called for by the referenced environmental report have been completed and
complied with.
5.12.6 Borrower has not caused nor allowed the
manufacture, processing, distribution, use, treatment, transport, storage,
release, disposal or other handling of any Hazardous Substance at or on the
Financed Property.
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5.12.7 If required, Borrower has secured, or prior
to conducting any operations at the Financed Property shall secure, all
permits, licenses and approvals necessary to conduct its operations at the
Financed Property in compliance with all Environmental Laws. No such permit,
license, or approval has lapsed or been terminated and the Borrower is in
compliance with the terms and conditions of each such permit, license and
approval which has been heretofore issued.
5.12.8 Borrower's intended use of the Financed
Property will not violate any Environmental Laws, or result in the manufacture,
processing, distribution, use, treatment, transport, release, disposal or other
handling of any Hazardous Substance at, on or near the Property (except for
Customary Complying Substances).
5.12.9 The Borrower has no knowledge of any material
undisclosed liability of the Borrower with respect to any Environmental Laws or
Hazardous Materials, whether pertaining to the Financed Property or otherwise.
5.13 No Default. There is no monetary or material
non-monetary default on the part of Borrower under this Agreement, or any of
the other Loan Documents and no event has occurred and is continuing which with
notice, or the passage of time, or either, would constitute a default under any
provision thereof.
6. ADDITIONAL COVENANTS OF BORROWER. Borrower covenants and
agrees with Lender as follows:
6.1 No Transfer, Subordinate Mortgage Financing or other
Encumbrance of Financed Property. No portion of the Financed Property shall be
sold, leased, conveyed, mortgaged or encumbered in any way without the prior
written consent of Lender provided, however, prior to the occurrence of an
Event of Default, Borrower may enter into contracts for the sale of Lots in the
ordinary course of Borrower's business. All easements, covenants and
restrictions or other agreements affecting the Financed Property shall be
submitted to Lender for its written approval prior to the execution thereof by
Borrower, accompanied by an appropriate survey showing the portion of the
Financed Property affected, and any other information requested.
6.2 Compliance with Restrictions and Laws. Borrower will
comply promptly with all restrictions of record, all federal, state and local
laws, ordinances and regulations, and all requirements of governmental
authority pertaining to the Financed Property, including, but not limited to
(i) the Interstate Land Sales Full Disclosure Act, if applicable, (ii) all
applicable federal and state securities laws, and (iii) all laws of the State
of Florida and all zoning, building and other local codes applicable to
developments of the type to be constructed. Borrower will also obtain and keep
in good standing all licenses, Permits and approvals required for construction
and use of the Improvements.
6.3 Brokerage Commissions. Borrower will not knowingly
engage in any activity or enter into any relationship which will give rise to
any loan or brokerage commission with regard to the Loan, and Borrower will
indemnify Lender from the claims of brokers arising by reason of the execution
hereof or the consummation of the transactions contemplated hereby.
6.4 Financial Statements and Reporting Obligations. The
Borrower shall furnish to Lender:
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6.4.1 Within one hundred twenty (120) days after
the end of each fiscal year, consolidated and consolidating financial
statements for the Borrower, the Guarantor and their respective subsidiaries,
all audited and presented with an unqualified opinion by a nationally
recognized accounting firm showing that the various statements fairly present
the financial condition of the Borrower, the Guarantor and their respective
subsidiaries as of the close of such year, prepared in accordance with
generally accepted accounting principles.
6.4.2 Within forty five (45) days following the end
of each fiscal quarter, the Borrower shall provide management prepared
financial statements for the Borrower, the Guarantor and their respective
subsidiaries, on a consolidated and consolidating basis, prepared as of the end
of that fiscal quarter. All such financial statements shall be prepared in
accordance with consistently applied generally accepted accounting principles,
and certified by the Borrower's chief financial officer of the Borrower and the
Guarantor as true and correct.
6.4.3 If requested by Lender, copies of the
Borrower's and the Guarantor's federal income tax returns.
6.4.4 Within forty five (45) days following the end
of each fiscal quarter, Borrower shall deliver a quarterly inventory report,
prepared as of the end of that quarter, reflecting all of the Borrower's then
existing construction and development projects, in form and substance, and
containing such additional information as may be required by the Lender from
time to time.
6.4.5 Promptly, from time to time, such other
information regarding the Financed Property or the operations, business,
affairs and financial condition of Borrower, its subsidiaries or affiliates as
Lender may reasonably request.
6.5 Insurance. Borrower will maintain in effect, for the
benefit of the Lender as its interest may appear, such insurance coverages as
may be required under the Loan Documents or by Lender, shall pay all premiums
therefor when due, and shall not permit any termination or material change to
any such coverage without Lender's prior written consent. Borrower shall also
cooperate with Lender in obtaining for Lender the benefits of any insurance or
other proceeds lawfully or equitably payable to it in connection with the
transaction contemplated hereby and in the collection of any indebtedness or
obligation of Borrower to Lender incurred hereunder (including the payment by
Borrower of the expense of an independent appraisal on behalf of Lender in case
of a fire or other casualty affecting the Premises).
6.6 Taxes. Borrower shall pay all personal property and
other taxes and assessments of whatever nature now or hereafter levied against
or which could result in a lien on all or any part of the Financed Property
prior to delinquency.
6.7 Indebtedness. Borrower will not incur, create,
assume or permit to exist with respect to the Financed Property any
indebtedness or liability for borrowed money, any indebtedness constituting the
deferred purchase price of any property or assets, of any indebtedness owed
under any conditional sale or title retention agreement, or any other
indebtedness or liability evidenced by notes, bonds, debentures or similar
obligations without the written approval of Lender, except:
6.7.1 indebtedness owed Lender;
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6.7.2 indebtedness incurred on open accounts for
materials, equipment and supplies purchased in the or course of business,
payment for which shall be made promptly when due;
6.7.3 indebtedness to Pacific United Development
Corp., a Nevada corporation pursuant to that certain unsecured promissory note
of even date herewith made by the Borrower payable to the order of Pacific
United Development Corp. in the principal amount of _______________________
Dollars ($_______________), subject to that certain Subordination Agreement of
even date herewith among the Lender, the Borrower and Pacific United
Development Corp.
6.8 Further Assurances and Preservation of Security.
Borrower will do all acts and execute all documents for the better and more
effective carrying out of the intent and purposes of this Agreement, as Lender
shall reasonably require from time to time, and will do such other acts
necessary or desirable to preserve and protect the collateral at any time
securing or intended to secure the Loan, as Lender may require.
6.9 Utilization of Loan Proceeds. Borrower will utilize
the proceeds of the Loan solely to finance the acquisition of the Lots.
6.10 No Assignment. Borrower shall not assign this
Agreement or any interest herein or right hereunder or allow any party other
than Borrower to act as general contractor for the Improvements, without
Lender's prior written consent.
6.11 Environmental.
6.11.1 Neither Borrower, or any party acting by,
through or under Borrower, nor any other party will manufacture, produce,
distribute, use, treat, transport, release, discharge, dispose of or otherwise
handle any Hazardous Substance on, at or about the Financed Property, except
for Customary Complying Substances.
6.11.2 Borrower shall regularly monitor the Financed
Property and all parties acting by, through or under Borrower to assure that
the representations and covenants contained in this Agreement remain true and
correct at all times.
6.11.3 Borrower shall give prompt written notice to
Lender of:
6.11.3.1 the violation or alleged
violation of any Environmental Laws at the Financed Property;
or
6.11.3.2 the presence or alleged
presence of any Hazardous Substance at, on or near the
Financed Property, other than Customary Complying Substances;
or
6.11.3.3 any and all notices issued,
or investigations, proceedings, claims or lawsuits threatened
or instituted, with respect to any Environmental Laws or the
alleged presence of any Hazardous Substance at, on or near the
Financed Property; or
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6.11.3.4 any discovery by Borrower of
any occurrence or condition that could cause the Financed
Property or any part thereof to violate any Environmental Laws
or become subject to any Hazardous Substance.
6.11.4 Lender, and its agents and representatives,
shall have the right from time to time, during normal business hours, and in a
manner so as not to unreasonably interfere with Borrowers' business, to enter
upon and inspect the Financed Property, collect earth and water samples
therefrom, and perform such other audits, evaluations and tests thereof as
Lender may reasonably deem advisable to ensure that the Financed Property
complies with all Environmental Laws, all at the cost and expense of the
Borrower; provided, however, Lender shall not require any such testing or
evaluations unless Lender has reasonable grounds to suspect that the Financed
Property may be subject to contamination. Lender shall also have the right to
join and participate in, as a party if it so elects, any legal proceedings or
actions affecting the Financed Property or the Borrower which involve any
Hazardous Substance or Environmental Laws.
6.11.5 In the event that any Hazardous Substance,
other than Customary Complying Substances, are found at or on the Financed
Property, Borrower shall take all necessary actions and shall spend all
necessary sums to cause the same to be timely eliminated, cleaned up and
removed from the Financed Property in accordance with all applicable
Environmental Laws, and Lender shall in no event be liable or responsible for
any costs or expenses incurred in connection therewith.
6.11.6 Borrower shall at all times observe and
satisfy the requirements of, and maintain the Financed Property in compliance
with, all Environmental Laws.
6.12 Indemnification. Without limiting any rights or
remedies available to Lender under this Agreement, the Mortgage or other Loan
Documents, or otherwise at law or in equity, if Borrower at any time shall
default in or fail to perform or observe any of its obligations under this
Agreement, Lender shall have the right, but not the duty, to perform such
obligations, and Borrower agrees to pay to Lender, on demand, all costs and
expenses incurred by Lender in connection therewith, and all costs and expenses
which Lender may incur in exercising any of its rights under or enforcing this
Agreement, including, without limitation, reasonable attorneys fees, together
with interest thereon from the date of expenditure at the highest rate of
interest allowed by law. Borrower also agrees to indemnify Lender and hold
Lender harmless from any and all liability, which may be imposed upon Lender
and any and all loss which Lender may incur (including, but not limited to,
attorneys' fees), by reason of:
6.12.1 the existence of any Hazardous Substance now
or hereafter on, in, under, at, or around the Financed Property;
6.12.2 the operation, effect or violation of any
Environmental Laws; and/or
6.12.3 the breach by Borrower of any warranty,
representation or covenant contained on this Agreement.
6.13 Survival of Indemnity. Notwithstanding anything
contained in this Agreement or in any of the Loan Documents or otherwise to the
contrary, the obligations of Borrower under this Agreement shall be secured by
the Mortgage and other Loan Documents and the indemnity obligations of Borrower
under this Agreement concerning Hazardous Substances and Environmental Laws
shall survive the foreclosure of the Mortgage or other Loan Documents, the
taking by Lender of any deed or
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deeds in lieu of foreclosure, the repayment of the indebtedness secured by the
Mortgage, and the satisfaction or other termination of the Mortgage and other
Loan Documents.
6.14 Financial Covenants. So long as any Loan indebtedness
remains outstanding, Guarantor shall at all times:
6.14.1 maintain a minimum tangible net worth of not
less than Ten Million Five Hundred Thousand Dollars ($10,500,000.00); and
6.14.2 maintain a maximum debt to tangible net worth
ratio of no more than 5:1,
all as determined in accordance with generally accepted accounting principles.
6.15 Advertising. Lender shall have the right to install
and maintain at the Subdivision one sign identifying Lender as the institution
financing the Financed Property.
6.16 Third-Party Defaults. Borrower shall immediately
give Lender written notice of any default by Borrower under any obligation to
any person other than Lender, if such default involves nonpayment or liability
of $100,000.00 or more.
6.17 Change of Ownership. So long as any portion of the
Loan remains outstanding or this Loan Agreement remains in effect, there shall
be no change in the ownership of any capital stock of the Borrower and Borrower
shall remain a solely owned subsidiary of the Guarantor.
7. DEFAULT. Upon the occurrence of any one or more of the
following events (individually, an "Event of Default"), all obligations on the
part of Lender to make any further Advance hereunder shall, if Lender elects,
terminate, and Lender may at its option then or thereafter exercise any of its
remedies set forth herein, but Lender may make any Advances or parts of
Advances after the happening of any Event of Default without thereby waiving
the right to then or thereafter exercise such remedies and without becoming
liable to make any further Advance:
7.1 Failure to Satisfy Conditions. If Borrower fails to
satisfy any condition under this Agreement; or
7.2 Bankruptcy. If there is filed by or against Borrower
a Petition in bankruptcy or a petition for the appointment of a receiver or
trustee of the property of Borrower, and any such petition not filed by
Borrower is not dismissed within sixty (60) days of the date of filing
(provided Lender shall not be obligated to fund any additional Advances pending
such dismissal), or if Borrower files a petition for reorganization under any
of the provisions of the Bankruptcy Code or of any similar law, state, federal,
or foreign, or if Borrower makes a general assignment for the benefit of
creditors or makes any insolvency assignment or is adjudicated insolvent by any
court of competent jurisdiction; or
7.3 Breach of Covenants, Warranties and Representations.
If (i) any warranty or representation made by Borrower in this Agreement or in
connection with the Loan shall at any time be false or misleading in any
material respect, or (ii) if Borrower shall fail to keep, observe or perform
any of the terms, covenants, representations or warranties contained in the
Agreement, or (iii) any default shall occur under the Note, the Mortgage, or
any of the other Loan Documents, or (iv) Borrower shall
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<PAGE> 20
default in any of its other obligations to Lender, including, but not limited
to, that certain Construction Line of Credit Loan Agreement of even date
herewith between the Borrower and the Lender or under any other promissory
note, loan agreement, mortgage or other evidence of indebtedness existing
between the Borrower and the Lender, or (v) if Borrower shall default in any
obligation to any person other than Lender, if such default involves non
payment or liability of $100,000.00 or more; or
7.4 Material Adverse Change of Borrower. If any material
adverse change shall occur in the financial condition of Borrower at any time
during the term of the Loan from the financial condition revealed in statements
already presented to and accepted by Lender.
8. REMEDIES OF LENDER. Upon the happening of any Event of
Default, after written notice and ten (10) days opportunity to cure in the
event of a monetary default or thirty (30) days opportunity to cure in the
event of a non-monetary default (unless either a longer or shorter cure period
is specifically provided the Note, Mortgage or other Loan Document for a
particular default or breach thereof, in which event such longer or shorter
cure period shall govern), then Lender may, at its option, exercise any one or
more of the following remedies (provided Lender shall not be required to give
written notice of any default of the same type or nature more than twice in any
twelve (12) month period prior to exercising such remedies):
8. 1 terminate this Agreement;
8.2 commence an appropriate legal or equitable action to
enforce performance of this Agreement;
8.3 require that the Loan, including all amounts due
under the Note and all amounts due under this Agreement or any of the other
Loan Documents, be paid immediately in full, apply all or any portion of the
equity funds toward payment of the Loan, and commence appropriate legal and
equitable action to foreclose the Mortgage and collect and otherwise all such
amounts due Lender;
8.4 take such action as may be reasonable to preserve and
protect the Financed Property and any construction materials stored thereon;
and
8.5 exercise any other rights or remedies Lender may have
under the Mortgage or other Loan Documents or which may be available in equity
or under applicable law.
9. RELEASES. Lender agrees to release any Lot from the
lien of the Mortgage and other Loan Documents by appropriate instrument of
partial release at Borrower's sole cost and expense in substantially the form
attached hereto as Exhibit "D", provided that prior to and as a condition to
each such release:
9.1 Borrower pays to Lender in immediately available
funds, a release payment equal to one hundred ten percent (110%) of the average
aggregate amount of all sums advanced hereunder (determined on per Lot basis),
as determined by the Lender; and
9.2 there shall not have occurred any Event of Default
hereunder or under any of the other Loan Documents nor any event of omission or
commission which with the passage of time or notice or both would constitute an
Event of Default hereunder or under any of the other Loan Documents.
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9.3 In addition, Lender agrees to release from the lien
of the Mortgage and other Loan Documents, without payment of a release price,
those portions of the Financed Property, not encompassing any part of the Lots,
which constitute common areas within the Subdivision upon recordation of a plat
of the Subdivision or a conveyance of such common areas to a homeowner's
association or dedication to a public authority.
10. GENERAL TERMS. The following shall be applicable throughout
the period of this Agreement or thereafter as provided herein:
10.1 Rights of Third Parties. All conditions of the
Lender hereunder are imposed solely and exclusively for the benefit of Lender
and its successors and assigns, and no other person shall have standing to
require satisfaction of such conditions or be entitled to assume that Lender
will make advances in the absence of strict compliance with any or all thereof,
and no other person shall, under any circumstances, be deemed to be a
beneficiary of this Agreement or the Loan Documents, any provisions of which
may be freely waived in whole or in part by the Lender at any time if, in its
sole discretion, it deems it desirable to do so. In particular, Lender makes no
representations and assumes no duties or obligations as to Borrower or any
third parties concerning the quality of the construction by Borrower of the
Improvements or the absence therefrom of defects.
10.2 Borrower is not Lender's Agent. Nothing in this
Agreement, the Note, the Mortgage or any other Loan Documents shall be
construed to make Borrower the Lender's agent for any purpose whatsoever, or
Borrower and Lender partners, or joint or co-venturers. The relationship of the
Borrower and Lender shall, at all times, be that of debtor and creditor.
10.3 Lender Not Liable for Damage or Loss. All
inspections and other services rendered by or on behalf of Lender shall be
rendered solely for the protection and benefit of the Lender. Neither Borrower
nor any third Persons shall be entitled to claim any loss or damage against the
Lender or against its agents or employees for failure to properly discharge
their duties.
10.4 Lender Not Obligated to Insure Proper Disbursement of
Funds to Third Parties. Nothing contained in this Agreement, or any of the
other Loan Documents, shall impose upon Lender any obligation to oversee the
proper use or application of any disbursements of funds made in connection with
the Loan.
10.5 Indemnification from Third Party Claims. Borrower
shall indemnify Lender from any liability, claims or losses resulting from the
disbursement of any Loan proceeds the construction of the Improvements, or the
condition of the Financed Property, whether related to the quality of
construction or otherwise, and whether arising during or after the term of the
Loan. This provision shall survive the repayment of the Loan and shall continue
in full force and effect so long as the possibility of such liability, claims,
or losses exists.
10.6 Evidence of Satisfaction of Conditions. Lender
shall, at all times, be free independently to establish to its good faith and
satisfaction, and in its reasonable discretion, the existence or nonexistence
of a fact or facts which are disclosed in documents or other evidence required
by the terms of this Agreement.
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10.7 Headings. The headings of the sections, paragraphs
and subdivisions of this Agreement are for the convenience of reference only,
and shall not limit or otherwise affect any of the terms hereof.
10.8 Invalid Provisions to Affect No Others. If
performance of any provision hereof or any transaction related hereto is
limited by law, then the obligation to be performed shall be reduced
accordingly to its maximum lawful scope; and if any clause or provision herein
contained operates or would prospectively operate to invalidate this Agreement
in part, then the invalid part of said clause or provision only shall be held
for naught, as though not contained herein, and the remainder of this Agreement
shall remain operative and in full force and effect.
10.9 Application of Interest to Reduce Principal Sums.
Nothing herein contained, nor any transaction related hereto, shall be
construed or so operate to require Borrower, or any other person liable for
repayment of the Note or any other amount pursuant to the Loan Documents, to
pay interest at a greater rate than is now lawful in such case to contract for,
or to make any payment, or to do any act contrary to law. Should any interest
or other charges in connection with the Loan payable or paid by Borrower, or
any other person, whether under the Note or any of the other Loan Documents,
result in the computation or earning of interest in excess of the maximum rate
of interest which is legally permitted under applicable laws, then any and all
of such excess shall be and the same is hereby waived by Lender hereof, and any
and all such excess paid shall be automatically credited against and in
reduction of the principal balance due under the Note or, at the option of
Lender, paid directly by Lender to the Borrower or any other person liable for
the payment of the Note.
10.10 Governing Law. The laws of the State of Florida
shall govern the interpretation and enforcement of this Agreement.
10.11 Number and Gender. Whenever the singular or plural
number, masculine or feminine or neuter gender is used herein, it shall equally
include the others and shall apply jointly and severally.
10.12 Extraneous Agreements. No prior or present
agreements or representations, whether written or oral, shall be binding upon
Lender unless expressed in this Agreement, it being intended that each and
every such agreement and representation shall be either merged herein or
extinguished.
10.13 Waiver. If Lender shall waive any provisions of any
of the Loan Documents, or shall fail to enforce any of the conditions or
provisions of this Agreement, such waiver shall not be deemed to be a
continuing waiver and shall never be construed as such; and Lender shall
thereafter have the right to insist upon the enforcement of such conditions or
provisions. Furthermore, no provision of this Agreement shall be amended,
waived, modified, discharged or terminated, except by instrument in writing
signed by the parties hereto.
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10.14 Notices. All notices, to be effective, must be in
writing and sent by certified U.S. mail, federal express or other reputable
courier, addressed (as applicable), in the case of Borrower, to Borrower at its
address first set forth above, Attn: Luis R. Rabell, Vice-President, with copy
to NHC Holdings, Corp., a Nevada corporation, 3200 Southwest Freeway, Suite
1220, Houston, Texas 77027, Attn: Cathryn L. Porter and Blackwell & Walker,
P.A., One Southeast Third Avenue, 2500 Sun Bank International Center, Miami,
Florida 33131-1774, Attn: Chuck Robins and, in the case of Lender, to Lender
at its address first set forth above, Attn: Loan Administration and to Paul
Garland, Vice President, Commonwealth United Mortgage, 222 South Westmonte
Drive, Suite 307, Altamonte Springs, Florida 32714, with postage and courier
charges prepaid. Any notice may also be delivered by facsimile transmission,
if to Borrower, then to 305/854-4507 (Attn: Luis R. Rabell) and 305/372-1468
(Attn: Chuck Robins) and if to Lender, then to (713) 965-6928 (Attn: Loan
Administration) and (407) 786-0259 (Attn: Paul Garland). Lender or Borrower may
change their respective addresses or facsimile numbers, for notice purposes,
or their designated recipients of notices, by delivering notice of the change
to the other in accordance with this paragraph. Any notice shall be deemed
"delivered" when sent as aforesaid and received, unless receipt is refused, in
which case the notice shall be deemed "delivered" when refused.
10.15 Successors and Assigns. This Agreement shall inure
to the benefit of and be binding on the parties hereto and their heirs, legal
representatives, successors and assigns; but nothing herein shall authorize the
assignment hereof or any rights or interest hereunder by Borrower.
10. 16 Time is of the Essence. Time is of the essence of
this Agreement, including the performance of each of the terms, conditions and
provisions hereof.
10.17 Attorney's Fees. If either party hereto shall ever
seek to enforce its rights or engage an attorney to defend it or to assist it
in enforcing any of the terms, conditions or provisions under this Agreement or
any of the other Loan Documents, the prevailing party to such action shall be
entitled to collect all reasonable sums incurred in connection therewith,
whether or not suit shall be brought, and, if so, then at all pre-trial,
appellate, post-judgment, bankruptcy and other proceedings.
11. ARBITRATION.
11.1 To the maximum extent not prohibited by law, any controversy,
dispute or claim arising out of, in connection with, or relating to this
Agreement or the Loan Documents or any transaction provided for therein,
including, but not limited to, any claim based on or arising from an alleged
tort or an alleged breach of any agreement contained in any of the Loan
Documents, shall, at the request of any party to this Agreement or the Loan
Documents (either before or after the commencement of judicial proceedings), be
settled by arbitration pursuant to Title 9 of the United States Code, which the
parties hereto acknowledge and agree applies to the transaction involved
herein, and in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA"). In any such arbitration proceedings: (i)
all statutes of limitations which would otherwise be applicable shall apply;
and (ii) the proceeding shall be conducted in Orlando, Florida, by a single
arbitrator, if the amount in controversy is $1,000,000.00 or less, or by a
panel of three (3) arbitrators if the amount in controversy is over
$1,000,000.00. All arbitrators shall be selected by the process of appointment
from a panel pursuant to Section 13 of the AAA Commercial Arbitration Rules and
each arbitrator will have AAA acknowledged expertise in the appropriate subject
matter. Any award rendered in any such arbitration proceeding shall be final
and binding, and judgment upon any such award may be entered in any court
having jurisdiction. Notwithstanding the foregoing, to the extent the matter
in controversy is covered by insurance, no award shall be binding unless
binding arbitration is consented to by all applicable insurers. Borrower will
exercise its best efforts to obtain such consents.
11.2 If any party to this Agreement or the Loan Documents
files a proceeding in any court to resolve any such controversy, dispute or
claim, such action shall not constitute a waiver of the right of such party or
a bar to the right of any other party to seek arbitration under the provisions
of this
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Section of that or any other claim, dispute or controversy, and the court
shall, upon motion of any party to the proceeding, direct that such
controversy, dispute or claim be arbitrated in accordance with this Section.
11.3 Notwithstanding any of the foregoing, the parties
hereto agree that no arbitrator or panel of arbitrators shall possess or have
the power to (i) assess punitive damages, (ii) dissolve, rescind or reform
(except that the arbitrator may construe ambiguous terms) of this Agreement or
the Loan Documents, (iii) enter judgment on the debt, (iv) exercise equitable
powers or issue or enter any equitable remedies, or (v) allow discovery of
attorney/client privileged information, and the parties hereby waive the
aforementioned remedies. The Commercial Arbitration Rules of the AAA are hereby
modified to this extent for the purpose of arbitration of any dispute,
controversy or claim arising out of, in connection with, or relating to this
Agreement or the Loan Documents.
11.4 No provision of, or the exercise of any rights under,
this Section shall limit or impair the right of any party to the Loan Documents
before, during or after any arbitration proceeding to: (i) exercise self-help
remedies such as setoff for repossession: (ii) foreclose (judicially or
otherwise) any lien on or security interest in any real or personal property
collateral; or (iii) obtain emergency relief hypothecation, pledging or
concealment of assets or of collateral securing any indebtedness, obligation or
guaranty referenced in the Loan Documents. Such emergency relief may be in the
nature of, but is not limited to: pre-judgment attachments, garnishments,
sequestrations, appointments of receivers, or other emergency injunctive relief
to preserve the status quo.
11.5 In the event arbitration is prohibited by law with
respect hereto, any actions or proceedings with respect to the Note, this
Agreement or the other Loan Documents may be instituted in the courts of the
State of Florida, or elsewhere to the extent that jurisdiction shall exist
apart from the provisions of this Section, as the Lender may elect, and by
execution and delivery of this Agreement, the Borrower irrevocably and
unconditionally submits to the jurisdiction (both subject matter and personal)
of each such court, and irrevocably and unconditionally waives (i) any
objection the Borrower may now or hereafter have to the laying of venue in any
of such courts, and (ii) any claim that any action or proceeding brought in any
of such courts has been brought in an inconvenient forum.
12. WAIVER OF JURY TRIAL. EACH OF THE UNDERSIGNED HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY
WITH RESPECT TO ANY LITIGATION BETWEEN THEM, INCLUDING, BUT NOT LIMITED TO,
WITH RESPECT TO ANY AND ALL CAUSE OR CAUSES OF ACTION, DEFENSES, COUNTERCLAIMS,
CROSS CLAIMS, THIRD PARTY CLAIMS, AND INTERVENOR'S CLAIMS, REGARDLESS OF THE
CAUSE OR CAUSES OF ACTION, DEFENSES OR COUNTERCLAIMS ALLEGED OR THE RELIEF
SOUGHT BY ANY PARTY, AND REGARDLESS OF WHETHER SUCH CAUSES OF ACTION, DEFENSES
OR COUNTERCLAIMS ARE BASED ON, OR ARISE OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE OBLIGATIONS
COVERED THEREBY.
THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SHALL SUPERSEDE AND
REPLACE ALL PRIOR AGREEMENTS OR UNDERSTANDINGS, WRITTEN OR ORAL, RELATING TO
THE MATTERS SET FORTH HEREIN. THIS AGREEMENT MAY ONLY BE
20
<PAGE> 25
EXHIBIT 10.7
AMENDED IN WRITING AND NO ORAL REPRESENTATIONS OR AGREEMENTS SHALL BE BINDING
UPON THE LENDER UNLESS REDUCED TO A WRITING SIGNED BY THE LENDER.
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to
be executed on the date first above written.
Signed, sealed and delivered
in the presence of: LENDER:
BANK UNITED OF TEXAS FSB
/s/ LAURA L. HUNTER By: /s/ PAUL GARLAND
- ---------------------------------- --------------------------------------
Witness Laura L. Hunter PAUL GARLAND, Vice-President
- ----------------------------------
/s/ GREGORY GLASS (Print Name)
- ----------------------------------
Witness Gregory Glass
- ----------------------------------
(Print Name)
BORROWER:
THE ADLER COMPANIES, INC., A FLORIDA
CORPORATION
/s/ CHARLES D. ROBBINS By: /s/ L. RABELL
- ---------------------------------- --------------------------------------
Witness Name: LUIS RABELL
CHARLES D. ROBBINS ------------------------------------
- ---------------------------------- Title: Vice President
(Print Name) -----------------------------------
/s/ MONICA A REY-MORAN
- ----------------------------------
Witness
MONICA A REY-MORAN
- ----------------------------------
(Print Name)
21
<PAGE> 26
EXHIBIT 10.7
STATE OF FLORIDA )
)
COUNTY OF _________ )
The foregoing instrument was acknowledged before me this _____ day of
March, 1996, by PAUL GARLAND as Vice-President of BANK UNITED OF TEXAS FSB, a
federal savings bank, on behalf of the Bank, who is personally known to me.
/s/ LAURA L. HUNTER
-------------------------------------
NOTARY PUBLIC
Laura L. Hunter
-------------------------------------
(Print Name)
My Commission Expires:
(Seal)
STATE OF FLORIDA )
)
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this 9th day of
March, 1996, by Luis Rabell as Vice-President of THE ADLER COMPANIES, INC., on
behalf of the corporation, who is personally known to me or who has produced
________________________ as identification.
/s/ MONICA A. REY-MORAN
-------------------------------------
NOTARY PUBLIC
MONICA A. REY-MORAN
-------------------------------------
(Print Name)
My Commission Expires: Mar. 28, 1998
(Seal)
22
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EXHIBIT 10.8(a)
- --------------------------------------------------------------------------------
CONSTRUCTION LINE OF CREDIT LOAN AGREEMENT
BY AND BETWEEN
THE ADLER COMPANIES, INC., a Florida corporation
AND
BANK UNITED OF TEXAS FSB,
a federal savings bank
Dated
March 13, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Approved Subdivision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Construction Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Customary Complying Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Developed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Draw Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Final Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Financed Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 Inspector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 Loan Requisition Affidavit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 Lot(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 Lot Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 Model Unit(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.24 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.25 Sale Contract(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.26 Scattered Lots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.27 Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.28 Sold Units(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.29 Spec Unit(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.30 Title Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.31 Unit(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 Unused Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Advances for Acquisition of Scattered Lots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Advances for Construction of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Additional Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 The Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Payment of the Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Loan Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. CONSTRUCTION OF IMPROVEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Commencement and Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Compliance with and Changes to the Final Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Right to Lender to Inspect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. CONDITIONS TO LENDER'S OBLIGATION TO FUND THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Title Company's Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Note and Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Mortgage Security Agreement and other Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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4.6 Affidavits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7.1 Public Liability and Worker's Compensation Insurance . . . . . . . . . . . . . . . . . . . . 8
4.7.2 Builder's Risk and Hazard Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7.3 Flood Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7.4 Other Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Soil Test and Hazardous Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.9 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.10 Public Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.11 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.12 Opinion of Borrower's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.14 Sales Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.15 Design Review and Cost Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.16 Soil Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 Notice of Commencement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 Contracts and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.19 Contracts and Subcontractors Statements: and Release of Lien . . . . . . . . . . . . . . . . . . . . 12
4.20 Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.21 Foundation and Form Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.22 Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.23 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.24 No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. REQUESTS FOR ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. RIGHT TO WITHHOLD FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7. PAYMENT OF ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8. FINAL ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10. WARRANTIES AND REPRESENTATIONS OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.1 Organization Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 Construction and Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.4 Authority to Enter into Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.5 Validity of Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.6 Priority of Lien on Personalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.7 Conflicting Transactions of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.8 Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.9 Availability of Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.10 Condition of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.11 Availability of Roads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.12 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.13 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11. ADDITIONAL COVENANTS OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.1 Construction Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.2 No Transfer, Subordinate Mortgage Financing or other Encumbrance of
Financed Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.3 Compliance with Restrictions and Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.4 Brokerage Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.5 Title to Personalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.6 Correction of Defects and Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . 19
11.7 Financial Statements and Reporting Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.8 Borrower to Maintain Bookkeeping System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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11.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
11.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
11.11 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
11.12 Further Assurances and Preservation of Security . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.13 Utilization of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.14 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.15 Sales Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.16 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.17 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.18 Survival of Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.19 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.20 Actual Construction Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.21 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.22 Third-Party Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.23 Change of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.1 Failure to Satisfy Conditions to an Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
12.2 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
12.3 Improper Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
12.4 Breach of Covenants, Warranties and Representations . . . . . . . . . . . . . . . . . . . . . . . 24
12.5 Material Adverse Change of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13. REMEDIES OF LENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
14. RELEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15. GENERAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15.1 Rights of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15.2 Borrower is not Lender's Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.3 Lender Not Liable for Damage or Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.4 Lender Not Obligated to Insure Proper Disbursement of Funds to Third Parties . . . . . . . . . . . 26
15.5 Indemnification from Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.6 Rights of Subcontractors, Laborers and Materialmen . . . . . . . . . . . . . . . . . . . . . . . . 26
15.7 Evidence of Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.9 Invalid Provisions to Affect No Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.10 Application of Interest to Reduce Principal Sums . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.12 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.13 Extraneous Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.14 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.15 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.16 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
15.17 Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
15.18 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
16. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
17. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
iii
<PAGE> 5
CONSTRUCTION LINE OF CREDIT LOAN AGREEMENT
THIS CONSTRUCTION LINE OF CREDIT LOAN AGREEMENT (the "Agreement") is
made and entered into as of the 13th day of March, 1996, by and between THE
ADLER COMPANIES, INC., a Florida corporation with an address at 2601 South
Bayshore Drive, Coconut Grove, Florida 33133 ("Borrower"); and BANK UNITED OF
TEXAS FSB, a federal savings bank, with an address at 3200 Southwest Freeway,
Suite 2000, Houston, Texas 77027 ("Lender").
RECITALS
WHEREAS, Borrower has applied to Lender for a revolving line of credit
loan (the "Loan") in an amount not to exceed the principal sum of Ten Million
Dollars ($10,000,000.00) outstanding at any time, the proceeds of which shall
be used (i) to finance the construction of Model Units, Sold Units and Unsold
Units in Parcel "B" of the Windsor Palms Subdivision, as more particularly
described on Exhibit "A" attached hereto and made a part hereof and (ii) to
acquire and construct Model Units, Sold Units and Unsold Units on Scattered
Lots as may be approved by the Lender hereunder from time to time, all in
accordance with certain plans and specifications prepared or to be prepared by
or on behalf of Borrower and acceptable to Lender in all respects;
WHEREAS, Borrower and Lender have negotiated, and desire to enter
into, this Agreement to set forth the terms and conditions of the disbursement
of the Loan;
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants and agreements set forth below, Borrower and Lender agree as follows:
1. DEFINITIONS. As used in this Agreement the terms listed
below shall have the following meanings unless otherwise required by the
context:
1.1 Advance. An advance of loan proceeds by the Lender
in accordance with this Agreement.
1.2 Approved Subdivision. Residential subdivision
developments which Lender may approve in writing from time to time in its sole
and absolute discretion, including, without limitation, Parcel "B" of the
Windsor Palm Subdivision.
1.3 Business Day. Each day, other than a Saturday,
Sunday, national holiday or other day when Lender's offices or branch banking
facilities are not open for business to the general public.
1.4 Construction Advance. A disbursement by Lender of a
portion of the proceeds of the Loan for Costs incurred in connection with the
construction of a Unit.
1.5 Costs. The actual cost of all labor, materials,
services, including, without limitation, architectural and engineering
services, and other work to be performed and costs to be incurred in connection
with the construction and completion of the Improvements financed hereunder
from time to time, in accordance with the Final Plans and the terms and
conditions of this Agreement.
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<PAGE> 6
1.6 Customary Complying Substance. Any customary
Hazardous Substance which is necessary to the business operations of Borrower
at the Financed Property and which is manufactured, produced, distributed,
used, treated, transported, stored, released, disposed of or otherwise handled
in compliance with all applicable Environmental Laws.
1.7 Developed. Improved with all necessary roadway,
drainage, utility and other infrastructure, and ready to be improved with a
Unit.
1.8 Draw Schedule. The draw schedule attached hereto as
Exhibit "B".
1.9 Environmental Laws. All existing and future federal,
state and local laws, statutes, ordinances, rules, and regulations pertaining
to health, industrial hygiene, pollution or the environment, including, without
limitation: (i) the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq.; (ii) the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq.; (iii)
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.;
(iv) the Pollution Spill Prevention and Control Act (Chapter 376 of the Florida
Statutes), (v) the Florida Air and Water Pollution Control Act, the Florida
Resource Recovery and Management Act and other Acts included within Chapter 403
of the Florida Statutes, and (vi) all other laws relating to Pollution or the
protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, surface water,
groundwater, or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
1.10 Final Plans. The plans and specifications for the
construction of the Improvements, in each case as prepared by or on behalf of
Borrower and reviewed and approved in writing by Lender, together with all
amendments and modifications thereto as approved by Lender.
1.11 Financed Property. The land and all of the
Improvements thereon which are to any extent and at any time financed under
this Agreement.
1.12 Financing Statements. One or more financing
statements from the Borrower to Lender to perfect Lender's security interest in
the personal property described in the Mortgage and Security Agreement.
1.13 Guarantor. NHC Holdings Corp., a Nevada corporation.
1.14 Hazardous Substance. Asbestos, polychlorinated
biphenyls, and petroleum products, and any other substance(s), material(s) and
waste(s) now or hereafter regulated under any Environmental Laws, including,
without limitation, any "hazardous substance(s)", "hazardous material(s)",
"toxic substance(s), "solid waste(s)", "waste(s)", "hazardous waste(s)",
"pollutant(s)", or "pollution", as defined in any Environmental Laws; and those
substances listed in the United States Department of Transportation Table (49
CFR 172.101 and amendments thereto) or by the Environmental Protection Agency
(40 CFR Part 302 and amendments thereto) as hazardous substances.
2
<PAGE> 7
1.15 Improvements. All work accomplished in accordance
with the Final Plans, which shall consist of all work necessary to construct
the residential dwelling Units and other related improvements to a Lot.
1.16 Inspector. Any inspecting engineer, architect or
other consultant appointed or employed by Lender from time to time, the costs
of which shall be paid by the Borrower.
1.17 Loan Requisition Affidavit. An affidavit
substantially in the form of Exhibit "C", attached hereto, sworn to and duly
executed by an authorized officer of Borrower.
1.18 Loan Documents. This Agreement, the Note, the
Guaranty, the Mortgage, the Security Agreement, the Financing Statements, and
each of the other documents or instruments now or hereafter evidencing or
securing the payment or performance of any of the Loan obligations of Borrower.
All Loan Documents shall be satisfactory to Lender in form and in substance.
1.19 Lot(s). A Lot, as shown on a recorded Plat of a
Developed subdivision, on which a Unit shall be constructed. To constitute a
Lot, the platted subdivision containing the Lot must be fully Developed and a
building permit for the construction of a Unit on the Lot must be capable of
being immediately obtained. Lots do not include raw or partially developed
land.
1.20 Lot Advance. A disbursement by Lender of a portion
of the proceeds of the Loan for acquisition of Scattered Lots in Approved
Subdivisions.
1.21 Maturity Date. April 1, 1997.
1.22 Model Unit(s). A Unit used to display or demonstrate
Units to potential buyers of Lots and Improvements.
1.23 Mortgage. One or more Mortgage and Security
Agreements from Borrower to Lender, securing the Loan and granting to Lender a
valid first mortgage lien on, inter alia, the Financed Property.
1.24 Note. That certain promissory note of even date
herewith made by the Borrower payable to the order of the Lender in the
principal amount of Ten Million Dollars ($10,000,000.00), evidencing the Loan.
1.25 Sale Contract(s). A binding arm-length written
contract for sale and purchase between Borrower as seller and a bona fide
buyer, free from defaults, pursuant to which the Borrower shall sell a Unit or
Units to such buyer and such buyer shall be obligated to purchase such Unit or
Units from the Borrower.
1.26 Scattered Lots. A Developed Lot in an Approved
Subdivision other than Parcel "B" of the Windsor Palms Subdivision.
1.27 Security Agreement. One or more Security Agreements
from the Borrower to Lender securing the Loan and granting to Lender a valid
and perfected first priority security interest in all fixtures and personal
property now or hereafter located on, arising out of, or used in connection
with the Financed Property.
3
<PAGE> 8
1.28 Sold Units(s): A Unit to be constructed on a Lot
and sold in accordance with a Sale Contract. To qualify as a Sold Unit, (i)
the Sale Contract must be in full force and effect, free from default and all
contingencies to the buyer's obligations to purchase the Unit, and (ii) either
(1) an earnest money deposit in at least ten percent (10%) of the gross
selling price of the Unit shall have been paid and not be refundable if the
buyer defaults or (2) the buyer shall have been pre-qualified and approved for
a mortgage loan to finance the purchase by an institutional lender reasonably
acceptable to Lender for an amount not less than the gross selling price, less
any deposit paid or to be paid.
1.29 Spec Unit(s): Units, other than Model Units, which
do not qualify as Sold Units.
1.30 Title Company: Sobering, Gray & White, P.A., as
agent for Commonwealth Land Title Insurance Company or a title insurance
company accepted by Lender in writing. The Lender reserves the right to require
Borrower to change the Title Company at any time.
1.31 Unit(s): Sold Units, Model Units and Spec Units.
1.32 Unused Commitment: The difference between Ten
Million Dollars ($10,000,000.00), and the aggregate amount of all Advances
previously approved or in process hereunder (whether actually disbursed or
reserved for future disbursement for construction of a Unit, subject to the
limitations set forth in Section 2.2 hereof which establish the maximum amount
of the aggregate Advances for construction of Units), net of principal
repayments hereunder which are available for redisbursement in accordance with
the terms of this Agreement.
2. THE LOAN.
2.1 Loan. Subject to the terms and conditions contained
in this Agreement, the Lender agrees to fund and Borrower may borrow, pay,
reborrow or repay Advances from time to time from the date hereof until the
Maturity Date; provided, however, at no time shall the principal balance of all
the Advances outstanding hereunder at any time exceed the sum of Ten Million
Dollars ($10,000,000.00).
2.2 Advances for Acquisition of Scattered Lots. Subject
to the terms and conditions contained herein, the Lender shall fund Advances
hereunder for the acquisition of Scattered Lots in Approved Subdivisions which
are specifically approved by the Lender for funding hereunder on a Lot by Lot
basis, provided the amount of such Lot Advances shall not exceed seventy five
percent (75%) of the appraised value of such Scattered Lot (determined by an
appraiser acceptable to Lender).
2.3 Advances for Construction of Units. Subject to the
terms and conditions contained herein, the Lender shall fund Advances under the
Loan to finance the construction of Units in Parcel "B" of the Windsor Palms
Subdivision or on Scattered Lots in Approved Subdivisions, provided the amount
of such Advances shall not exceed the lesser of (i) eighty percent (80%) of the
appraised value of the Unit (determined by an appraiser acceptable to the
Lender), less the amount of any Lot Advance outstanding hereunder (or the
amount outstanding with respect to any Lot under that certain Lot Acquisition
and Development Loan Agreement of even date herewith between the Borrower and
the Lender) (ii) one hundred percent (100%) of the Cost to construct the Unit
(determined by the Lender).
2.4 Additional Limitations. In addition to the
limitations set forth above, the Lender's obligation to fund Advances hereunder
shall be subject to the following additional limitations:
4
<PAGE> 9
2.4.1 At no time shall any Advance hereunder exceed
the Unused Commitment nor shall the unpaid principal balance of all the
Advances outstanding hereunder exceed Ten Million Dollars ($10,000,000.00) at
any time; provided, however, so long as the outstanding principal balance under
that certain Lot Acquisition Loan Agreement of even date herewith between the
Borrower and the Lender shall exceed the sum of Three Million Five Hundred
Thousand Dollars ($3,500,000.00), the principal balance of all Advances
hereunder shall not exceed Nine Million Seven Hundred Eighty Seven Thousand
Five Hundred Dollars ($9,787,500.00).
2.4.2 Advances shall not be funded (i) to finance
more than four (4) Model Units at any time, (ii) to finance more than ten (10)
Spec Units at any time or (iii) to finance more than ten (10) Scattered Lots at
any time in any one subdivision.
2.4.3 No Advance shall be funded hereunder to
finance or refinance the acquisition of any undeveloped or partially
developed land.
2.5 The Loan Documents. The Loan shall be evidenced by
the Note, and shall be secured by the Mortgage and other Loan Documents. The
Borrower shall take the Loan and comply with and perform all of the terms and
conditions of this Agreement, the Commitment, and other Loan Documents.
2.6 Payment of the Note.
2.6.1 Payments of accrued interest only as provided
in the Note on the unpaid principal amount outstanding under the Note from time
to time shall be due and payable to Lender on the first (1st) day of each
month, commencing on the first (1st) day of the first (1st) month following the
date of this Agreement and continuing until the first (1st) day of the month
immediately preceding the Maturity Date.
2.6.2 In the event the Lender shall reasonably
determine that the outstanding principal balance of the Loan at any time
exceeds the value of the Financed Property (on a discounted bulk value basis)
securing the Loan, the Lender shall have the right to require a mandatory
principal reduction payment under the Loan in such amount as will reduce the
outstanding principal balance of the Loan to an amount which does not exceed
the value of the Financed Property (on a discounted bulk value basis).
2.6.3 The entire unpaid principal amount of each
Construction Advance funded hereunder for the construction of a Unit shall be
due and payable in full on the earlier of (i) the Maturity Date, unless
extended by Lender or (ii) (a) twenty-four (24) months from the construction
start date with respect to any Model Unit, (b) twelve (12) months from the
construction start date with respect to any Spec Unit and (c) twelve (12)
months from the constriction start date with respect to any Sold Unit, unless
extended by Lender; provided, however, the Lender may, in its sole and complete
discretion, and with no obligation to do so, grant extensions with respect to
any individual Construction Advance hereunder for up to ninety (90) days upon
payment of an extension fee by Borrower in the amount of one eighth of one
percent (.125 %) of the principal amount of such Construction Advance. For
purposes hereof, the construction start date shall be deemed to be the date on
which a notice of commencement is timely filed with respect to a Unit.
5
<PAGE> 10
2.6.4 At the time of closing upon the sale of any
Unit or a Lot by the Borrower, a release price shall be due and payable
hereunder in an amount equal to the release price set forth in Section 14.1
hereof.
2.6.5 Unless sooner paid, the entire unpaid
principal amount of the Loan, together with all accrued but unpaid interest and
any other sum due under any of the Loan Documents, shall be due and payable in
full on or before the Maturity Date.
2.6.6 Borrower may at any time prepay the Loan in
whole or in part without penalty or premium.
2.7 Loan Fee. As consideration for committing to make
the Loan in accordance with this Agreement, Borrower shall pay Lender a fee
equal to one half percent (1/2%) of the committed amount of each Advance, which
shall be paid and shall be deemed fully earned and nonrefundable upon approval
of each Advance.
3. CONSTRUCTION OF IMPROVEMENTS.
3.1 Commencement and Completion. A complete set of the
Final Plans for the Improvements to be constructed for each Unit model type
shall be delivered to Lender for approval. The construction of all Improvements
must be prosecuted with diligence and dispatch so that such Improvements are
fully completed in accordance with the Final Plans and are ready for occupancy
within six (6) months following the date construction commences (on a Unit by
Unit basis); provided, however, so long as no Event of Default has occurred or
exists, this six (6) month completion period shall be extended for the period
of any delay caused by acts of God, unusual labor or material shortages, or
other unforeseen events not reasonably within the Borrower's control. Upon such
completion, the Improvements shall be free and clear of all liens or claims for
materials, labor, services, or other item furnished in the construction of the
Improvements, and in full compliance with all building, zoning and other
applicable local, state and federal ordinances and regulations. Completion for
such purposes shall be evidenced by issuance of a certificate of occupancy
(with respect to a Unit) issued by the governmental authorities having
jurisdiction.
3.2 Compliance with and Changes to the Final Plans. All
changes in the Final Plans which involve more than $10,000.00 on an individual
basis or $50,000.00 in the aggregate must be submitted to Lender in writing and
shall be conditioned upon the written consent of Lender, which consent shall
not be unreasonably withheld and may be subject to such conditions and
qualifications as Lender in its reasonable discretion may prescribe, it being
understood that Lender at all times shall have the right to require compliance
with the original Final Plans, except to the extent modified with Lender's
written approval.
3.3 Right to Lender to Inspect. Lender, Inspector, and
any other agent or representative of Lender shall have the right to enter the
Financed Property from time to time during normal business hours before and
after completion of the Improvements for any purpose, including inspection of
construction and the condition of the Improvements. Inspector shall provide
Lender with written reports from time to time for the Improvements and whether
they are in accordance with the Final Plans and this Agreement. The Borrower
shall bear all reasonable expense associated with each such inspection and
report by the Inspector, and shall pay each invoice within thirty (30) days of
receipt or, at Lender's option, funds to pay such invoice may be withheld by
the Lender from the next or subsequent
6
<PAGE> 11
disbursements hereunder. Borrower shall cause any contractor and all
subcontractors to cooperate with Lender, Inspector, and such agents and
representatives in the exercise of their rights and performance of their duties
hereunder. This provision shall not impose on Lender any obligation to
inspect, or to correct any defects discovered, or to notify any person with
respect thereto, or for the quantity or quality of workmanship or materials
incorporated into the Improvements nor shall any such inspection or lack
thereof otherwise result in any liability of Lender to Borrower or any other
person.
4. CONDITIONS TO LENDER'S OBLIGATION TO FUND THE LOAN. In
addition to applicable conditions set forth elsewhere in this Agreement, each
of the conditions listed below shall be complied with in form and substance
satisfactory to Lender at least four (4) Business Days prior to the funding of
the Loan, and shall remain in effect when any Advance is made with respect to
any financial Property:
4.1 Title Insurance. Borrower shall have delivered to
Lender an original policy or policies of title insurance (or commitment for
such title insurance policy, marked to delete all requirements and "standard
exceptions") issued by the Title Company, in an amount equal to the face
principal amount of the Note plus the principal amount of all other promissory
notes from time to time evidencing the Loan, which title insurance policy or
policies (i) shall insure Lender against loss or damage on account of
construction liens upon the Financed Property, (ii) shall insure that the
Mortgage is a valid first lien on the Financed Property, including, but not
limited to, at the time of the Loan or Advance, (iii) shall insure that title
to the Financed Property is good and marketable and free and clear of all
liens, encumbrances, easements, exceptions, reservations and restrictions
except for those approved by Lender, in its sole and absolute discretion,
without exception for ingress and egress, and (iv) shall provide such other
coverages and include such endorsements as Lender may reasonably request,
including, without limitation, Florida Form 9 coverage and Revolving Credit
endorsements. Once issued, Lender shall receive monthly, if it so requests,
construction loan endorsement(s) to the policy of title insurance, updating the
policy to the date of the most current Advance and, if necessary, increasing
the insurance coverage to an amount equal to the sum of the unpaid principal
amount of the Loan plus the current Advance without additional exceptions or
objections, except those specifically approved in writing by Lender, in its
sole and absolute discretion.
4.2 Survey. At or prior to the first construction draw
with respect to each Lot, Borrower shall have delivered to Lender a current
survey of such Lot certified as true and correct to the Lender, Title Company
and Lender's counsel to their satisfaction and which has been prepared by a
surveyor acceptable to Lender showing the following:
A. the location of the perimeter of such
property;
B. the location of and the identification by
reference to recording data of all easements, rights of way,
conditions and restrictions on or appurtenant to the Lot
C. the lines of the streets abutting the
property and the width thereof;
D. all encroachments upon the property and the
extent thereof in feet and inches;
E. the Improvements, to the extent constructed,
and the relation of the Improvements by distances to the
perimeter of the property, the building setback lines and the
streetlines;
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<PAGE> 12
F. if any portion of the property is described
as being on a filed map, a legend relating the plat of survey
to such map;
G. a certificate reflecting whether or not all,
or any portion, of the property lies within the boundary of
any applicable flood zone; and
H. any other requirements reasonably requested
by Lender.
4.3 Title Company's Agreement. A standard form
indemnification agreement (closing protection letter) by the Title Company
shall have been executed and delivered to Lender.
4.4 Note and Guaranty. The Note shall have been duly
authorized, executed and delivered to Lender by Borrower, and a Guaranty of the
Note, in form and substance acceptable to the Lender shall have been duly
executed and delivered to the Lender by the Guarantor.
4.5 Mortgage Security Agreement and other Loan Documents.
The Mortgage shall have been duly authorized, executed, acknowledged, delivered
to Lender, and recorded. The Security Agreement, Financing Statements, and
other Loan Documents shall have been duly authorized, executed, and
acknowledged by Borrower, and delivered to Lender. Ail Financed Property shall
be encumbered by a valid first priority lien under the Mortgage, and all
fixtures and personal property now or hereafter located on, arising out of, or
used in connection with the Financed Property shall be encumbered by a valid
and perfected first priority security interest under the Security Agreement;
and the encumbrance of the Mortgage and the Security Agreement may be spread to
additional Financed Property from time to time, to satisfy this condition, by
execution, delivery and recording of a Mortgage Spreading Agreement
substantially in the form of Exhibit "D", attached hereto, together with UCC-3
Statements of Change, and if Borrower executes and delivers current Affidavits
(described in Section 4.6 below) and such other Loan Documents as Lender may
reasonably require. The Loan shall be funded as provided in this Agreement only
to finance Financed Property encumbered by the Mortgage, fixtures and personal
property, provided said fixtures and personal property are encumbered by the
Security Agreement as aforesaid, and if all other Loan Documents remain in full
force and effect.
4.6 Affidavits. Title and loan to one borrower
affidavits of the Borrower shall have been executed and delivered to Lender in
substantially the forms attached hereto as Exhibit "E" and Exhibit "F",
respectively (collectively, "Affidavits").
4.7 Insurance.
4.7.1 Public Liability and Worker's Compensation
Insurance. Borrower at its expense shall have delivered evidence satisfactory
to Lender of the existence of public liability and worker's compensation
insurance in amounts and issued by companies approved by Lender. All liability
policies shall name Lender as an additional insured as its interest may appear.
4.7.2 Builder's Risk and Hazard Insurance.
Borrower at its expense shall have delivered to Lender an original certificate
of insurance and, if requested, a copy of the Borrower's policy of builder's
risk and hazard insurance, in completed value form with extended coverage in
the amount of the full insurable value of the Improvements as completed, issued
by a company satisfactory to Lender, duly endorsed to show the interest of
Lender under a standard noncontributing mortgagee clause
8
<PAGE> 13
addressed to Lender at its address set forth above. The policy shall also
provide that all insurance proceeds will be paid directly to Lender.
4.7.3 Flood Insurance. If the Financed Property is
at any time within a hazardous flood area as designated by the Department of
Housing and Urban Development, Borrower at its expense shall have delivered to
Lender satisfactory evidence that the Financed Property is covered by flood
insurance supplied by the Federal Insurance Administration to the maximum
amount available, all as provided in the Flood Disaster Protection Act of 1973,
as amended, together with appropriate endorsements thereto providing for
Lender's interests in the same manner as the builder's risk insurance.
4.7.4 Other Insurance. Borrower at its expense
shall also have furnished to Lender from time to time such other insurances as
may be required by the Loan Documents or as Lender may from time to time
reasonably request. Borrower shall furnish Lender with original certificates of
insurance and, if requested, copies of all policies for all insurance required
under this Agreement and each such policy shall be written by an insurer
satisfactory to Lender that is licensed to issue insurance in Florida and that
possesses a general policy holder's rating of "A" or better and financial
rating of Class VII or better according to Best's Key Rating Guide as the same
may change from time to time. Each such policy must be furnished to Lender with
proof of payment of the full premium due therefor and shall provide that it
shall not be cancelled or materially modified without thirty (30) days prior
written notice to Lender. Borrower agrees that Lender shall have the right to
take any action necessary to continue any such insurance in full force and
effect including, but not limited to, paying premiums. Any funds advanced to
continue any of said policies in full force and effect shall be considered as
Advances hereunder and shall bear interest from the date of disbursement at the
same rate as other Advances and payment of said funds and interest shall be
secured by the Mortgage and other Loan Documents.
4.8 Soil Test and Hazardous Waste. If and when required
by Lender from time to time, satisfactory environmental audits and soil test
reports shall have been submitted to Lender for its review from an
environmental engineer satisfactory to Lender certifying that, except for
Customary Complying Substances, no Hazardous Substances exists on or about the
Financed Property (including in any surface or ground water), that the Financed
Property is in compliance with all Environmental Laws, and that there are no
actual or potential environmental concerns in respect of the Financed Property,
the costs of which shall have been paid by Borrower.
4.9 Appraisal. A current appraisal of the Financed
Property complying with all applicable regulatory requirements shall have been
delivered to and approved by Lender, the costs of which shall have been paid by
Borrower. In addition, Lender reserves the right to require updated appraisal
reports with respect to the Financed Property if and when requested by the
Lender in its complete discretion, to be provided at Borrower's expense.
4.10 Public Requirements. If requested by the Lender, the
Borrower shall deliver to the Lender with respect to each Approved Subdivision,
each of the following as may be required by Lender:
A. letters from local utility companies stating
that electricity, telephone, sewer and water will be available to each Lot on a
permanent and adequate basis upon the completion of the Improvements;
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B. a certified copy of the zoning map and
ordinance (including all conditions to any specially approved use, such as a
special exception or conditional use) applicable to the Subdivision and a
current letter from the appropriate zoning official confirming the zoning
classification for the Subdivision;
C. evidence satisfactory to the Lender that all
roads, drainage and other infrastructure necessary for the development of the
Subdivision have been completed to the boundary of the Subdivision and that the
necessary easements and rights of way therefor have been acquired or dedicated
to public use and duly accepted;
D. copies of subdivision plats, restrictive
covenants, plans of developments, and all other documents required by the local
zoning and subdivision ordinances together with evidence satisfactory to Lender
that the Final Plans conform to all federal, state, and local laws, ordinances,
rules and regulations, including, but not limited to, all Environmental Laws
and all laws of the State of Florida regulating building and land use; and
E. copies of permits from the water management
district for the construction and generation of facilities for the collection
and discharge of storm and surface water, certificates of concurrency
determination, reservation, or exemption, and all other licenses,
authorizations, permits and approvals, if any, required as a prerequisite to
the lawful and immediate construction of the Improvements in accordance with
the Final Plans.
4.11 Corporate Documents. Borrower shall have delivered
to Lender the following documents:
A. a certificate by the appropriate official of
the state of the Borrower's and Guarantor's incorporation to the effect that
the Borrower and the Guarantor are both corporations whose status is active
and, if other than Florida, accompanied by a certificate of the Florida
Department of State showing that the Borrower is authorized to transact
business in the State of Florida;
B. articles of incorporation of the Borrower and
the Guarantor, with all amendments thereto, certified by the appropriate
official of their respective states of incorporation, and bylaws of the
Borrower and Guarantor certified by the Secretary of the Borrower and the
Guarantor respectively;
C. an incumbency certificate specifying by name
and title the officers and directors of the Borrower and the Guarantor,
certified by the secretary of the Borrower and the Guarantor respectively; and
D. certified resolutions of the Board of
Directors of the Borrower authorizing the execution and delivery of this
Agreement, the Mortgage, Note and all other documents necessary or desirable
for the consummation of the transactions contemplated by this Agreement and
certified resolutions of the Board of Directors of the Guarantor authorizing
the execution and delivery of the Guaranty to and in favor of the Lender .
4.12 Opinion of Borrower's Counsel. Borrower shall have
delivered to Lender an opinion or opinions of counsel to Borrower and the
Guarantor addressed to Lender, such counsel to be reasonably satisfactory to
Lender, to the effect that:
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A. this Agreement and all other Loan Documents,
including, without limitation, the Guaranty, have been duly authorized,
executed and delivered and are valid, binding and enforceable in accordance
with their terms, subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the right of creditors
generally;
B. that Borrower is duly incorporated and
organized, with an active status under the laws of the state of its
incorporation, is authorized to transact business in Florida, and has all the
necessary power and authority to undertake its obligations under the Loan
Documents;
C. that Guarantor is duly incorporated and
organized, with an active status under the laws of the state of its
incorporation and has all the necessary power and authority to undertake its
obligations under the Loan Documents;
D. that, to its knowledge after inquiry of
appropriate officers of the Borrower, Borrower and its properties are in
compliance with all laws, regulations, ordinances and orders of all
governmental authorities;
E. that there is no charter or by-law of
Borrower and no provision of any existing mortgage, indenture, contract or
agreement known to such counsel binding on Borrower or affecting its property
which would conflict with or in any way prevent the execution, delivery and
carrying out of the terms of this Agreement;
F. that, to its knowledge after inquiry of the
executive officers of the Borrower, there are no proceedings pending or
threatened before any court or administrative agency which will materially and
adversely affect the Borrower;
G. that the Note and the interest provided for
therein do not violate any usury or other laws of the State of Florida;
H. such other matters as Lender may reasonably
require.
4.13 Expenses. Borrower shall have paid all those fees
and charges due and payable or ordered paid by Lender as provided herein under
Paragraph 9 of this Agreement entitled Expenses.
4.14 Sales Contracts.
A. Borrower shall have delivered to Lender
copies of its sample Sales Contract form and copies of an executed Sales
Contracts; and
B. each Sales Contract shall be in full force
and effect (unless terminated by Borrower because of a default by the buyer, or
because of the failure of a condition to the buyer's performance), and no event
or omission shall have occurred to give any buyer a right to cancel or
terminate such a Sales Contract, due to a default by Borrower thereunder.
4.15 Design Review and Cost Certification. Borrower shall
have submitted to Lender for each Unit model type to be financed hereunder (on
a model by model basis) and Lender shall have approved: (i) the Final Plans and
(ii) a complete list of the type and amount of all Costs (including, without
limitation, Unit option costs) for the type of Improvements to be constructed.
The Inspector shall
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also have furnished Lender with the report described in Section 3.3 above,
current to the satisfaction of Lender, and shall have certified to the
satisfaction of Lender in a project evaluation report acceptable to Lender as
to the progress, workmanship and value of the Improvements then in place at the
Financed Property and Such Other matters as may be required by the Lender from
time to time.
4.16 Soil Reports. For each Approved Subdivision, if
requested by the Lender, the Lender shall have received and approved written
report(s) from an engineer acceptable to the Lender which set(s) forth the
results of subsurface soil tests (including, but not limited to, composition
and compaction results), and recommendations, if any, and a density/compaction
certification acceptable to Lender. The Lender shall also have received and
approved such additional report(s) as shall be appropriate, including
additional reports made after implementation of the recommendations, to show
that the recommendations have been satisfied.
4.17 Notice of Commencement. The Notice of Commencement
required by Section 713.13, Florida Statutes, shall have been properly
executed, recorded and posted at the job site subsequent to the date and time
of recording of the Mortgage, and prior to (but not more than ninety (90) days
prior to) the commencement of construction of each Unit on the Financed
Property and a copy thereof shall have been furnished to Lender. The Notice of
Commencement shall designate the Lender as an additional person to receive
notices to owner and shall show Lender as the lender financing the
Improvements. No Advance shall be made if a Notice of Commencement, as required
by Section 713 13, Florida Statutes. is recorded on any Financed Property prior
to the Mortgage.
4.18 Contracts and Permits. The representations and
warranties of Borrower as set forth in this Agreement and other Loan Documents
shall be true and correct.
4.19 Contracts and Subcontractors Statements: and Release
of Lien. No Event of Default (hereafter defined), or circumstance or event
which upon the lapse of time, the giving of notice, or both, could become an
Event of Default, shall have occurred.
A. stating the amount of its contract and the
amount paid to date; and
B. acknowledging full payment and the release
and waiver of any lien as provided in Chapter 713 of the Florida Statutes (less
retainage, if applicable) for all work done and/or materials supplied.
4.20 Contracts and Subcontractors Statements: and Release
of Lien. Borrower shall at any time and from time to time, upon request of
Lender, have exhibited to Lender receipts, vouchers, statements, bills Of sale
or other evidence satisfactory to Lender of actual payment of Costs.
4.21 Foundation and Form Surveys. Upon completion of the
foundation for any Unit, Borrower shall have finished Lender with at least two
(2) original prints of a survey of the Lot on which such foundation is located
showing the Improvements to be within Lot lines and building setback lines, and
otherwise complying with the survey requirements set forth in Section 4.2
above. In addition, Borrower shall have delivered to Lender a copy of any form
survey required by and delivered to any governmental authority.
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4.22 Other Documents. Borrower shall deliver to Lender
such other documents and information as Lender may reasonably require.
4.23 Representations and Warranties. The representations
and warranties of Borrower as set forth in this Agreement and other Loan
Documents shall be true and correct.
4.24 No Event of Default. No Event of Default (hereafter
defined), or circumstance or event which upon the lapse of time, the giving of
notice, or both, could become an Event of Default, shall have occurred.
5. REQUESTS FOR ADVANCES. At least five (5) business days prior
to the date on which the Borrower requests char the proceeds of a Construction
Advance be made available, the Borrower shall deliver to the Lender a written
loan requisition request in the form of Exhibit "C" attached hereto and made a
part hereof (or in such other form as Lender may request from time to time),
which written request shall set forth (a) the amount sought. (b) shall
constitute a covenant and affirmation of Borrower that (i) the warranties and
representations in this Agreement are correct and true, (ii) that no Event of
Default has occurred and (iii) that all the covenants, terms, and conditions
of this Agreement are being complied with as of the date of the Advance.
Construction Advances for construction of Units shall not be funded more
frequently than twice per month for all Units under construction. Each request
Cor an Advance shall be accompanied by a certificate of completion, on standard
AIA forms or such other forms as may be required by Lender, together with such
other evidence supporting such request for an Advance as Lender may from Lime
to time require, all of which shall show:
5.1 the percentage of completion of the Improvements and
the value of the Improvements completed at that time;
5.2 that all outstanding claims for labor, materials, and
fixtures have been paid, and liens therefor have been waived (which if
requested by Lender shall be in the form of partial releases of lien executed
by any and all lienors pursuant to Chapter 713 of the Florida Statutes), except
for any unpaid claims not past due which will be paid by the Borrower in the
ordinary course of its business or which have been approved by Lender in
writing and are being contested in good faith by Borrower by appropriate legal
proceedings;
5.3 that there are no liens or encumbrances outstanding
against the Financed Property except for liens and security interests in favor
of Lender granted by the Loan Documents, other than liens for property taxes
not yet payable and other liens approved in writing by Lender;
5.4 that Borrower has complied with all of Borrower's
obligations under the Loan Documents as of the date of the request for an
Advance;
5.5 that all work prior to the date of the request for an
Advance has been done in a workmanlike manner by Borrower, and any contractor
and all subcontractors, in accordance with the Final Plans; and
5.6 that the amount of available undisbursed Loan
proceeds are sufficient to pay the cost of completing the Improvements in
accordance with the Final Plans.
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The request for an Advance shall contain claims for labor and
materials to the date of the last inspection and nor for labor and materials
rendered thereafter. No request for an Advance shall include a request for
payment for materials stored on or off sire. All materials must be incorporated
into the Improvements in order to qualify for payment. Each request for an
Advance shall be accompanied by such other evidence as may from time to time be
reasonably requested by Lender, including but not limited to, applications,
certificates and affidavits of Borrower, Inspector, and any Title Company
showing, as applicable, the percentage of completion of the Improvements and
the value of that portion of the Improvements completed at the time and
further, that the warranties and representations are true and correct and that
the covenants, terms and conditions in this Agreement are being complied with.
6. RIGHT TO WITHHOLD FUNDS. Lender may elect to withhold any
Advance, notwithstanding any documentation submitted to Lender in connection
with a request for an Advance, if Lender determines at any time that the actual
cost budget for the Improvements is in excess of the breakdown of costs
approved by Lender. Furthermore, if any instrument or document submitted by
Borrower in connection with any Advance request shall not, in the reasonable
exercise of Lender's discretion, comply in all respects with the conditions and
requirements of this Agreement, then Lender may amend, reduce or withhold
funding of an Advance request as Lender, in its reasonable and timely
discretion, shall deem proper under the circumstances. In addition, if Lender,
in its sole and absolute discretion, ever determines chat the cost to complete
any Improvements in accordance with the Final Plans will exceed the amount
approved for disbursement hereunder, the Lender may require the Borrower to
deposit with the Lender an amount equal to the difference between the actual
cost to complete, as determined by the Lender, and the amount approved for
disbursement hereunder, in which event such deposited funds shall be disbursed
by the Lender for payment of Costs prior to any additional disbursements of
Loan proceeds hereunder.
7. PAYMENT OF ADVANCES. If all conditions precedent to Lender's
obligations hereunder and to the Advance have been performed to the
satisfaction of Lender, Lender shall make the Advance to Borrower by wire
transfer in accordance with wire transfer instructions to be provided by
Borrower or by check payable to Borrower or jointly to Borrower and any
contractor or subcontractor, or as Lender may elect acting in good faith. Each
Advance shall be in the amount justified by the applications, affidavits,
certificates and other evidence submitted to Lender, subject to the other terms
and conditions in this Agreement; but Lender may retain until completion such
amount of the Costs which Borrower may retain under its construction contract
or any subcontracts. The proceeds of each Advance hereunder shall be applied
solely and exclusively to payment of Costs, or to reimbursement of Borrower for
payment of Costs. Each Advance shall be deemed to be an advance under the Note.
Notwithstanding the foregoing, Lender may apply any amounts due to Borrower
hereunder towards satisfaction of any of the terms or conditions of this
Agreement, and amounts so applied shall be part of the Loan and shall be
secured by the Mortgage and other Loan Documents.
8. FINAL ADVANCE.
8.1 When any Improvements have been completed, Borrower
shall supply Lender with the following documents in addition to satisfying all
of the conditions and supplying all of the documents required under Section 5
and elsewhere in this Agreement prior to payment of the final Advance for such
Improvements and any retainage held by Lender:
8.1.1 certificates from the Inspector that the
Improvements have been completed in accordance with the Final Plans, in a good
and workman-like manner, and in accordance
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with all laws, ordinances, rules and regulations of all governmental
authorities having, or purporting to have, jurisdiction over the Financed
Property;
8.1.2 a certified "as built" survey of the Financed
Property, acceptable to Lender and Title Company showing the Improvements as
completed to be within the lot lines and building setback lines, and also
showing easements, roads, curb cuts, etc. and otherwise complying with the
survey requirements set forth in Section 4.2 above;
8.1.3 contractors' and Borrower's final affidavit
as to payment of all possible lienors. and if requested by Lender, a final
release of construction liens, executed by any contractor in privity with
Borrower and from each subcontractor giving a statutory Notice to Owner, in
form and substance satisfactory to Lender and the Title Company;
8.1.4 a certificate from Borrower stating the
total Costs; and
8.1.5 a photocopy of an executed final certificate
of occupancy for the Improvements issued by the appropriate official of the
jurisdiction in which the Financed Property is located, and any other
governmental certificates necessary to evidence that the completed Improvements
comply with all zoning and land use ordinances and building regulations.
8.1.6 all other instruments and documents
reasonably required by Lender within the spirit of this Agreement.
8.2 The Borrower's request for a final Advance shall
constitute a representation and warranty by the Borrower that the Improvements
have been completed in accordance with the Final Plans.
9. EXPENSES. Borrower shall pay all reasonable fees,
charges, expenses, and costs incurred in the procuring and making of the Loan,
and all other reasonable expenses incurred by Lender during the term of the
Loan, including, without limitation, Title Company's fees and premiums, charges
for examination of title to the Financed Property and any endorsements,
expenses of surveys, Florida documentary stamp taxes and intangible personal
property taxes, recording expenses, fees of the Inspector, and the fees of the
attorneys for Lender. The Borrower shall also pay any and all other charges,
liens and encumbrances upon the Financed Property, any other expenses necessary
to complete the construction of the Improvements in accordance with the terms
and conditions of this Agreement, and the costs of such inspections,
evaluations and tests of the Financed Property as Lender may require from time
to time, including, but not limited to, appraisals, structural and
environmental engineering audits and other professional, engineering and
architectural reports. Such amounts, unless sooner paid, shall be paid from
time to time as and when Lender shall request either to the person to whom such
payments are due or to Lender if Lender has paid the same, or Lender may, at
its option, deduct from any Advance any amounts necessary for the payment of
these items, and apply such amounts in making such payments, and all sums so
applied shall be deemed Advances under this Agreement. Further, Borrower agrees
to pay all such fees, charges, expenses and costs incurred in connection with
any modification, transfer or assignment of the Loan.
10. WARRANTIES AND REPRESENTATIONS OF BORROWER. Borrower
represents and warrants (which representations and warranties shall be deemed
continuing) as follows:
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10.1 Organization Status. Borrower and the Guarantor (i)
are each duly incorporated, organized and active corporations under the laws of
their respective states of incorporation and (ii) the Borrower is authorized to
transact business in Florida.
10.2 Construction and Compliance with Laws. With respect
to the Financed Property, no violation of any applicable zoning, building or
any other local, state or federal laws, ordinances and regulations exists with
respect to the anticipated use and construction of the Improvements. The
Borrower (i) has obtained all licenses, permits and approvals required by all
local, state and federal agencies regulating such construction and use and (ii)
is in compliance with all laws, regulations, ordinances and orders of all
governmental authorities.
10.3 Financial Statements. The financial statements of
Borrower heretofore delivered to Lender are true and correct in all respects,
have been prepared in accordance With consistently applied generally accepted
accounting principles, and fairly present the respective financial conditions
of the Borrower as of the respective dates thereof, and no material adverse
change has occurred in the financial conditions reflected therein since the
respective dates thereof.
10.4 Authority to Enter into Loan Documents. Borrower has
full power and authority to enter into this Agreement and the other Loan
Documents and consummate the transactions contemplated thereby, and the facts
and matters expressed or implied in the opinions of its legal counsel are true
and correct.
10.5 Validity of Loan Documents. The Loan Documents have
been approved by those persons having proper authority, and are in all respects
legal, valid and binding according to their terms.
10.6 Priority of Lien on Personalty. No chattel mortgage,
bill of sale, security agreement, financing statement or other title retention
agreement (except those executed in favor of Lender) has been or will be
executed with respect to any personal property, chattel or fixture granted to
Lender under the Loan Documents as security for the payment and performance of
the Loan obligations.
10.7 Conflicting Transactions of Borrower. The
consummation of the transaction hereby contemplated and the performance of the
obligations of Borrower and the Guarantor under and by virtue of the other Loan
Documents will not result in any breach of, or constitute a default under, any
lease, bank loan or credit agreement, or other agreement or instrument to which
either the Borrower or the Guarantor is a party, bound or affected.
10.8 Pending Litigation. There are no actions, suits or
proceedings pending against Borrower or against the Financed Property, and, to
the knowledge of Borrower, there are no circumstances which could lead to any
action, suits or proceedings against or affecting Borrower or the Financed
Property, or involving the validity or enforceability of any of the Loan
Documents, before or by any governmental authority; and to Borrower's
knowledge, it is not in default with respect to any order, writ, injunction,
decree or demand of any court or any governmental authority. The aforesaid does
not pertain to pending or threatened actions, suits or proceedings which are in
the ordinary course of business, the outcome of which will not materially and
adversely affect the financial condition of the Borrower or impair its
operations.
10.9 Availability of Utilities. All Utility services
necessary for the construction of the Improvements and the operation thereof
for their intended purpose are available at the boundaries of the
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Financed Property, including water supply, storm and sanitary sewer facilities,
and electric and telephone facilities. All necessary permits and permissions
required from governmental authorities have been obtained for unrestricted
access to and use of such services in connection with the construction and use
of the Improvements and adequate capacities exist to fully service the Financed
Property.
10.10 Condition of Premises. No proceeding to condemn any
part of the Financed Property has been threatened or commenced by any authority
having the power of eminent domain, the Financed Property is not now damaged or
injured as a result of any fire, explosion, accident, flood or other casualty,
and there are no soil conditions which would interfere with the construction of
the improvements.
10.11 Availability of Roads. All roads necessary for the
full utilization of the Improvements for their intended purposes have either
been completed or the necessary rights of way therefor have either been
acquired by the appropriate local authorities or have been dedicated to public
use and accepted by such local authorities and all necessary steps have been
taken by Borrower and such local authorities to assure the complete
construction and installation thereof.
10. 12 Environmental. The Borrower warrants as follows
with respect to the Financed Property:
10.12.1 To the best knowledge of Borrower, neither
the Financed Property nor the Borrower is in violation of any Environmental
Laws.
10.12.2 Neither the Borrower nor the Financed
Property is the subject of any existing, pending, or to the best of Borrower's
knowledge, threatened investigation, proceeding, claim or lawsuit with respect
to any Environmental Laws or any Hazardous Substance.
10.12.3 Neither the Borrower nor, to the best
knowledge of Borrower, any predecessor in title to the Financed Property have
received any notice of any violation or alleged violation of any Environmental
Laws or of any investigation, proceeding, claim or lawsuit, the basis of which
is a violation or alleged violation of any Environmental Laws or which involves
the existence or alleged existence of any Hazardous Substance at or on the
Financed Property.
10.12.4 Borrower has inspected or caused the
Financed Property to be inspected and found it, to the best of its knowledge,
to be free from every Hazardous Substance.
10.12.5 Borrower has made inquiry into the previous
uses and ownership of the Financed Property and has determined that, to the
best knowledge of Borrower, except as referenced in the environmental report
submitted to Lender, no Hazardous Substance has been manufactured, produced,
distributed, used, treated, transported, scored, released, disposed of or
otherwise handled at, on or near the Financed Property. To the best knowledge
of the Borrower, all of the recommendations and remedial action called for by
the referenced environmental report have been completed and complied with.
10.12.6 Borrower has not caused nor allowed the
manufacture, processing, distribution, use, treatment, transport, storage,
release, disposal or other handling of any Hazardous Substance at or on the
Financed Property.
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10.12.7 If required, Borrower has secured, or prior
to conducting any operations at the Financed Property shall secure, all
permits, licenses and approvals necessary to conduct its operations at the
Financed Property in compliance with all Environmental Laws. No such permit,
license, or approval has lapsed or been terminated and the Borrower is in
compliance with the terms and conditions of each such permit, license and
approval which has been heretofore issued.
10.12.8 Borrower's intended use of the Financed
Property will not violate any Environmental Laws, or result in the manufacture,
processing, distribution, use, treatment, transport, release, disposal or other
handling of any Hazardous Substance at, on or near the Property (except for
Customary Complying Substances).
10.12.9 The Borrower has no knowledge of any material
undisclosed liability of the Borrower with respect to any Environmental Laws or
Hazardous Materials, whether pertaining to the Financed Property or otherwise.
10.13 No Default. There is no monetary or material
non-monetary default on the part of Borrower under this Agreement, or any of
the other Loan Documents and no event has occurred and is continuing which with
notice, or the passage of time, or either, would constitute a default under any
provision thereof.
11. ADDITIONAL COVENANTS OF BORROWER. Borrower covenants and
agrees with Lender as follows:
11.1 Construction Liens. Borrower (i) will allow no work
or construction to be commenced on the Financed Property, or goods specially
fabricated for incorporation therein, which has not been fully paid for prior
to the recording of the Mortgage and Notice of Commencement or which could
constitute a lien on the Financed Property, (ii) will cause a Notice of
Commencement to be recorded and a certified copy of the Notice of Commencement
to be posted as required by Chapter 713, Florida Statutes, showing the Lender
as an additional person to receive notices to owner and Lender as the lender
financing the Improvements, (iii) shall notify Lender of any and all Notices to
Borrower as Owner as that term is defined in Chapter 713, Florida Statutes,
within five (5) days of receipt thereof, and (iv) will comply with all
provisions of the Florida Construction Lien Law, including but not limited to,
payment and notice provisions contained therein. Borrower shall save and hold
Lender harmless from the claims of any construction lien or equitable lien and
pay promptly upon demand any loss or losses which Lender may incur as a result
of the filing of any such lien, including the reasonable cost of defending same
and the Lender's reasonable attorneys fees in connection therewith.
In addition, Borrower agrees, at its sole cost and expense, to
have any construction lien or equitable lien which may be filed against the
Financed Property or undisbursed funds of the Loan released or bonded within ten
(10) days of the date of filing same, or else Borrower shall file a notice of
contest in respect of the lien as provided in Section 713.22 of the Florida
Statutes within said ten (10) day period, time being of the essence. If Borrower
files a notice of contest as aforesaid and a suit is instituted by the lienor,
then the Borrower shall cause the lien to be released or bonded within ten (10)
days after the suit is filed. Lender shall be under no obligation to make other
disbursements while any such lien remains outstanding against the Financed
Property. If Borrower fails, after demand, to cause said lien or items to be
released or bonded as aforesaid, Lender may take such steps as it deems
necessary and any funds expended shall be charged to the Loan account and shall
bear interest as provided by the Loan Documents.
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Borrower hereby authorizes Lender to demand, on Borrower's behalf, the
statement of account referred to in Section 713.16(2) of the Florida Statutes,
of any potential lienor filing a Notice to Owner. It is specifically understood
and agreed, however, that Lender's right to request such statements of account
will in no way impose any obligation on Lender to use such authority.
Furthermore, the exercise of such authority on any one or more occasions shall
not create or imply any obligation to exercise such authority on any subsequent
occasion.
11.2 No Transfer, Subordinate Mortgage Financing or other
Encumbrance of Financed Property. No portion of the Financed Property shall
be sold, leased, conveyed, mortgaged or encumbered in any way without the prior
written consent of Lender provided, however, prior to the occurrence of an
Event of Default, Borrower may enter into Sale Contracts in the ordinary course
of Borrower business. All easements, covenants and restrictions, or other
agreements affecting the Financed Property shall be submitted to Lender for its
written approval prior to the execution thereof by Borrower, accompanied by an
appropriate survey showing the portion of the Financed Property affected, and
any other information requested.
11.3 Compliance with Restrictions and Laws. Borrower will
comply promptly with all restrictions of record, all federal, state and local
laws, ordinances and regulations, and all requirements of governmental
authority pertaining to the Financed Property, including, but not limited to
(i) the Interstate Land Sales Full Disclosure Act, if applicable, (ii) all
applicable federal and state securities laws, and (iii) all laws of the State
of Florida and all zoning, building and other local codes applicable to
developments of the type to be constructed. Borrower will also obtain and keep
in good standing all licenses, Permits and approvals required for construction
and use of the Improvements.
11.4 Brokerage Commissions. Borrower will not knowingly
engage in any activity or enter into any relationship which will give rise to
any loan or brokerage commission with regard to the Loan, and Borrower will
indemnify Lender from the claims of brokers arising by reason of the execution
hereof or the consummation of the transactions contemplated hereby.
11.5 Title to Personalty. Borrower will deliver to
Lender, on demand, any contracts, bills of sale, statements, receipted vouchers
or agreements under which Borrower claims title to any materials, Fixtures or
articles incorporated in the Improvements or subject to the lien of the
Mortgage.
11.6 Correction of Defects and Satisfaction of Conditions.
Borrower will, upon demand of Lender or Inspector, correct any structural
defect in the Improvements or any departure from the Final Plans not approved
by Lender, or perform any condition to Lender's obligations hereunder not
satisfied or no longer satisfied. The Advance of any Loan Proceeds shall not
constitute a waiver of Lender's right to require compliance with this covenant
with respect to any such defects or departures from the Final Plans nor
theretofore discovered by, or called to the attention of Lender and the
Inspector, or with respect to Borrower's failure to satisfy or continue to
satisfy any condition under this Agreement, whether or not Lender required
performance thereof.
11.7 Financial Statements and Reporting Obligations. The
Borrower shall furnish to Lender:
11.7.1 Within one hundred twenty (120) days after
the end of each fiscal year, consolidated and consolidating financial
statements for the Borrower, the Guarantor and their respective subsidiaries,
all audited and presented with an unqualified opinion by a nationally
recognized accounting
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firm showing that the various statements fairly present the financial condition
of the Borrower, the Guarantor and their respective subsidiaries as of the
close of such year, prepared in accordance with generally accepted accounting
principles.
11.7.2 Within forty five (45) days following the end
of each fiscal quarter, the Borrower shalt provide management prepared
financial statements for the Borrower, the Guarantor and their respective
subsidiaries, on a consolidated and consolidating basis, prepared as of the end
of that fiscal quarter. All such financial statements shall be prepared in
accordance with consistently applied generally accepted accounting principles,
and certified by the Borrower's chief financial officer of the Borrower and the
Guarantor as true and correct.
11.7.3 If requested by Lender, copies of the
Borrower's and the Guarantor's federal income tax returns.
11.7.4 Within forty five (45) days following the end
of each Fiscal quarter, Borrower shall deliver a quarterly inventory report,
prepared as of the end of that quarter, reflecting all of the Borrower's then
existing construction and development projects, in form and substance, and
containing such additional information as may be required by the Lender from
time to time.
11.7.5 Promptly, from time to time, such other
information regarding the Financed Property or the operations, business,
affairs and financial condition of Borrower, its subsidiaries or affiliates as
Lender may reasonably request.
11.8 Borrower to Maintain Bookkeeping System. Borrower
shall, if required by Lender, maintain a bookkeeping system for the
construction project in form and content sufficient for Lender and Inspector to
conduct reviews, inspections, certifications and reports required by this
Agreement. Lender shall have full (but confidential) access at any reasonable
time during normal business hours, to the books, records and contracts
pertaining to the Financed Property or Borrower to determine the accuracy,
correctness and reasonableness of the sums in each Advance.
11.9 Insurance. Borrower will maintain in effect, for the
benefit of the Lender as its interest may appear, such insurance coverages as
may be required under the Loan Documents or by Lender, shall pay all premiums
therefor when due, and shall not permit any termination or material change to
any such coverage without Lender's prior written consent. Borrower shall also
cooperate with Lender in obtaining for Lender the benefits of any insurance or
other proceeds lawfully or equitably payable to it in connection with the
transaction contemplated hereby and in the collection of any indebtedness or
obligation of Borrower to Lender incurred hereunder (including the payment by
Borrower of the expense of an independent appraisal on behalf of Lender in case
of a fire or other casualty affecting the Premises).
11.10 Taxes. Borrower shall pay all personal property and
other taxes and assessments of whatever nature now or hereafter levied against
or which could result in a lien on all or any pan of the Premises prior to
delinquency.
11.11 Indebtedness. Borrower will not incur, create,
assume or permit to exist with respect to the Financed Property any
indebtedness or liability for borrowed money, any indebtedness constituting the
deferred purchase price of any property or assets, or any indebtedness owed
under any
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conditional sale or title retention agreement, or any other indebtedness or
liability evidenced by notes, bonds, debentures or similar obligations without
the written approval of Lender, except:
11.11.1 indebtedness owed Lender;
11.11.2 indebtedness incurred on open accounts for
materials, equipment and supplies purchased in the ordinary course of business,
payment for which shall be made promptly when due;
11.11.3 indebtedness to Pacific United Development
Corp., a Nevada corporation pursuant to that certain unsecured promissory note
of even date herewith made by the Borrower payable to the order of Pacific
United Development Corp. in the principal amount of ___________________________
Dollars ($________), subject to chat certain Subordination Agreement of even
date herewith among the Lender, the Borrower and Pacific United Development
Corp.
11.12 Further Assurances and Preservation of Security.
Borrower will do all acts and execute all documents for the better and more
effective carrying out of the intent and purposes of this Agreement, as Lender
shall reasonably require from time to time, and will do such other acts
necessary or desirable to preserve and protect the collateral at any time
securing or intended to secure the Loan, as Lender may require.
11.13 Utilization of Loan Proceeds. Borrower will utilize
the proceeds of the Loan solely to pay Costs for Improvements, borrow Loan
proceeds only at regular intervals, and will not procure a loan or loans from
any source other than Lender for the work contemplated under this Agreement.
11.14 No Assignment. Borrower shall not assign this
Agreement or any interest herein or right hereunder or allow any party other
than Borrower to act as general contractor for the Improvements, without
Lender's prior written consent.
11.15 Sales Contracts. If requested by Lender, Borrower
shall furnish to Lender copies of all Sales Contracts. Borrower will not amend
(to decrease the purchase price or in another manner adverse to Lender's
interests) or terminate any Sales Contract or waive or forbear from exercising
any right or remedy thereunder without Lender's prior written consent. If any
Sold Unit shall cease to be a Sold Unit, Borrower shall promptly notify Lender
accordingly.
11.16 Environmental.
11.16.1 Neither Borrower, or any party acting by,
through or under Borrower, nor any other party will manufacture, produce,
distribute, use, treat, transport, release, discharge, dispose of or otherwise
handle any Hazardous Substance on, at or about the Financed Property, except
for Customary Complying Substances.
11.16.2 Borrower shall regularly monitor the Financed
Property and all parties acting by, through or under Borrower to assure that
the representations and covenants contained in this Agreement remain true and
correct at all times.
11.16.3 Borrower shall give prompt written notice to
Lender of:
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11.16.3.1 the violation or alleged
violation of any Environmental Laws at the Financed Property;
or
11.16.3.2 the presence or alleged
presence of any Hazardous Substance at, on or near the
Financed Property, other than Customary Complying Substances;
or
11.16.3.3 any and all notices
issued, or investigations, proceedings, claims or lawsuits
threatened or instituted, with respect to any Environmental
Laws or the alleged presence of any Hazardous Substance at, on
or near the Financed Property; or
11.16.3.4 any discovery by Borrower
of any occurrence or condition that could cause the Financed
Property or any part thereof to violate any Environmental Laws
or become subject to any Hazardous Substance.
11.16.4 Lender, and its agents and
representatives, shall have the right from time to time,
during normal business hours, and in a manner so as not to
unreasonably interfere with Borrowers' business, to enter
upon and inspect the Financed Property, collect earth and
water samples therefrom, and perform such other audits,
evaluations and tests thereof as Lender may reasonably deem
advisable to ensure that the Financed Property complies with
all Environmental Laws, all at the cost and expense of the
Borrower; provided, however, Lender shall not unreasonably
require any such testing or evaluations. Lender shall also
have the right to join and participate in, as a party if it
so elects, any legal proceedings or actions affecting the
Financed Property or the Borrower which involve any Hazardous
Substance or Environmental Laws.
11.16.5 In the event that any Hazardous
Substance, other than Customary Complying Substances, are
found at or on the Financed Property, Borrower shall take all
necessary actions and shall spend all necessary sums to cause
the same to be timely eliminated, cleaned up and removed from
the Financed Property in accordance with all applicable
Environmental Laws, and Lender shall in no event be liable or
responsible for any costs or expenses incurred in connection
therewith.
11.16.6 Borrower shall at all times observe
and satisfy the requirements of, and maintain the Financed
Property in compliance with, all Environmental Laws.
11.17 Indemnification. Without limiting any rights
or remedies available to Lender under this Agreement, the
Mortgage or other Loan Documents, or otherwise at law or in
equity, if Borrower at any time shall default in or fail to
perform or observe any of its obligations under this
Agreement, Lender shall have the right, but not the duty, to
perform such obligations, and Borrower agrees to pay to
Lender, on demand, all costs and expenses incurred by Lender
in connection therewith, and all costs and expenses which
Lender may incur in exercising any of its rights under or
enforcing this Agreement, including, without limitation,
reasonable attorneys fees, together with interest thereon
from the date of expenditure at the highest rate of interest
allowed by law. Borrower also agrees to indemnify Lender and
hold Lender harmless from any and all liability, which may be
imposed upon Lender and any and all loss which Lender may
incur (including, but not limited to, attorneys' fees), by
reason of:
11.17.1 the existence of any Hazardous
Substance now or hereafter on, in, under, at, or around the
Financed Property;
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11.17.2 the operation, effect or violation of any
Environmental Laws; and/or
11.17.3 the breach by Borrower of any warranty,
representation or covenant contained in this Agreement.
11.18 Survival of Indemnity. Notwithstanding anything
contained in this Agreement or in any of the Loan Documents or otherwise to the
contrary, the obligations of Borrower under this Agreement shall be secured by
the Mortgage and other Loan Documents and the indemnity obligations of Borrower
under this Agreement concerning Hazardous Substances and Environmental Laws
shall survive the foreclosure of the Mortgage or other Loan Documents, the
taking by Lender of any deed or deeds in lieu of foreclosure, the repayment of
the indebtedness secured by the Mortgage, and the satisfaction or other
termination of the Mortgage and other Loan Documents.
11.19 Financial Covenants. So long as any Loan
indebtedness remains outstanding, Guarantor shall at all times:
11.19.1 maintain a minimum tangible net worth of not
less than Ten Million Five Hundred Thousand Dollars ($10,500,000.00); and
11.19.2 maintain a maximum debt to tangible net worth
ratio of no more than 5:1,
all as determined in accordance with generally accepted accounting principles.
11.20 Actual Construction Budget. Borrower shall furnish
to Lender, within three (3) days after written request by Lender, a copy of the
actual construction budget for construction of any Unit as may be requested by
Lender from time to time.
11.21 Advertising. Lender shall have the right to install
and maintain at each Approved Subdivision one sign identifying Lender as the
institution financing the Financed Property.
11.22 Third-Party Defaults. Borrower shall immediately
give Lender written notice of any default by Borrower under any obligation to
any person other than Lender, if such default involves nonpayment or liability
of $100,000.00 or more.
11.23 Change of Ownership. So long as any portion of the
Loan remains outstanding or this Loan Agreement remains in effect, there shall
be no change in the ownership of any capital stock of the Borrower and the
Borrower shall remain the wholly owned subsidiary of the Guarantor.
12. DEFAULT. Upon the occurrence of any one or more of the
following events (individually, an "Event of Default"), all obligations on the
part of Lender to make any further Advance hereunder shall, if Lender elects,
terminate, and Lender may at its option then or thereafter exercise any of its
remedies set forth herein, but Lender may make any Advances or parts of
Advances after the happening of any Event of Default without thereby waiving
the right to then or thereafter exercise such remedies and without becoming
liable to make any further Advance:
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12.1 Failure to Satisfy Conditions to an Advance. If
Borrower fails to satisfy any condition to an Advance under this Agreement; or
12.2 Bankruptcy. If there is filed by or against Borrower
a Petition in bankruptcy or a petition for the appointment of a receiver or
trustee of the property of Borrower, and any such petition not filed by
Borrower is not dismissed within sixty (60) days of the date of filing
(provided Lender shall not be obligated to fund any additional Advances pending
such dismissal), or if Borrower files a petition for reorganization under any
of the provisions of the Bankruptcy Code or of any similar law, state, federal,
or foreign, or if Borrower makes a general assignment for the benefit of
creditors or makes any insolvency assignment or is adjudicated insolvent by any
court of competent jurisdiction; or
12.3 Improper Construction. If for any cause whatsoever
the construction of the Improvements or the business of Borrower or any of its
subsidiaries or affiliates as a going concern is at any time discontinued or
not carried on with diligence and dispatch, in the reasonable judgment of
Lender, or if the Improvements, in the reasonable judgment of Lender, are not
being constricted or have not been completed in a good and workmanlike manner
in accordance with the Final Plans, this Agreement and all laws, rules,
regulations and requirements of all governmental authorities having or claiming
jurisdiction, now existing or hereafter enacted, adopted or promulgated, or if
the certificate of occupancy for any Improvements or other certificates of
compliance with zoning ordinances and building regulations have not been issued
by the completion date required hereunder; or
12.4 Breach of Covenants, Warranties and Representations.
If (i) any warranty or representation made by Borrower in this Agreement or in
connection with the Loan shall at any time be false or misleading in any
material respect, or (ii) if Borrower shall fail to keep, observe or perform
any of the terms, covenants, representations or warranties contained in this
Agreement, or (iii) any default shall occur under the Note, the Mortgage, or
any of the other Loan Documents, or (iv) Borrower shall default in any of its
ocher obligations to Lender, including, but not limited to, that certain Lot
Acquisition Loan Agreement of even date herewith between the Borrower and the
Lender or under any other promissory note, loan agreement, mortgage or other
evidence of indebtedness existing between the Borrower and the Lender, or (v)
if Borrower shall default in any obligation to any person other than Lender, if
such default involves non payment or liability of $100,000.00 or more; or
12.5 Material Adverse Change of Borrower. If any
material adverse change shall occur in the financial condition of Borrower at
any time during the term of the Loan from the financial condition revealed in
statements already presented to and accepted by Lender.
13. REMEDIES OF LENDER. Upon the happening of any Event of
Default, after written notice and ten (10) days opportunity to cure in the
event of a monetary default or thirty (30) days opportunity to cure in the
event of a non-monetary default (unless either a longer or shorter cure period
is specifically provided the Note, Mortgage or other Loan Document for a
particular default or breach thereof, in which event such longer or shorter
cure period shall govern), then Lender may, at its option, exercise any one or
more of the following remedies (provided Lender shall not be required to give
written notice of any default of the same type or nature more than twice in any
twelve (12) month period prior to exercising such remedies):
13.1 terminate this Agreement;
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13.2 commence an appropriate legal or equitable action to
enforce performance of this Agreement;
13.3 require that the Loan, including all amount due under
the Note and all amounts due under this Agreement or any of the other Loan
Documents, be paid immediately in full, apply all or any portion of the equity
funds toward payment of the Loan, and commence appropriate legal and equitable
action to foreclose the Mortgage and collect and otherwise all such amounts due
Lender;
13.4 take such action as may be reasonable to preserve and
protect the Financed Property and any construction materials stored thereon;
and
13.5 exercise any other rights or remedies Lender may have
under the Mortgage or other Loan Documents or which may be available in equity
or under applicable law.
14. RELEASES. Lender agrees to release any Lot (and any Unit
thereon) from the lien of the Mortgage and other Loan Documents by appropriate
instrument of partial release at Borrower's sole cost and expense in
substantially the form attached hereto as Exhibit "G", provided that prior to
and as a condition to each such release:
14.1 Borrower pays to Lender in immediately available funds,
a release payment equal to the entire principal amount of the Construction
Advance for such Unit plus (a) the entire principal amount of any Lot Advance
with respect to such Lot (if such Lot is financed hereunder) or (b) the lot
release price with respect to such Lot as may be required under that certain
Lot Acquisition Loan Agreement of even date herewith between the Borrower and
the Lender (if such Lot is financed under such loan agreement), as determined
by the Lender; and
14.2 there shall not have occurred any Event of Default
hereunder or under any of the other Loan Documents nor any event of omission or
commission which with the passage of time or notice or both would constitute an
Event of Default hereunder or under any of the other Loan Documents.
14.3 In addition, the Lender agrees to release from the lien
of the Mortgage and other Loan Documents, without payment of a release price,
those portions of the Financed Property, not encompassing part of the Lots,
which constitute common areas within the Subdivision upon recordation of a Plat
of the Subdivision or conveyance of such common areas to a homeowner's
association or dedication to a public authority.
15. GENERAL TERMS. The following shall be applicable through the
period of this Agreement or thereafter as provided herein:
15.1 Rights of Third Parties. All conditions of the
Lender hereunder are imposed solely and exclusively for the benefit of Lender
and its successors and assigns, and no other person shall have standing to
require satisfaction of such conditions or be entitled to assume that Lender
will make advances in the absence of strict compliance with any or all thereof,
and no other person shall, under any circumstances, be deemed to be a
beneficiary of this Agreement or the Loan Documents, any provisions of which
may be freely waived in whole or in part by the Lender at any time if, in its
sole discretion, it deems it desirable to do so. In particular, Lender makes
no representations and assumes no duties or obligations as to Borrower or any
third parties concerning the quality of the construction by Borrower of the
Improvements or the absence therefrom of defects.
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15.2 Borrower is not Lender's Agent. Nothing in this
Agreement, the Commitment, the Note, the Mortgage or any other Loan Documents
shall be construed to make Borrower the Lender's agent for any purpose
whatsoever, or Borrower and Lender partners, or joint or co-venturers. The
relationship of the Borrower and Lender shall, at all times, be that of debtor
and creditor.
15.3 Lender Not Liable for Damage or Loss. All inspections
and other services rendered by or on behalf of Lender shall be rendered solely
for the protection and benefit of the Lender. Neither Borrower nor any third
Persons shall be entitled to claim any loss or damage against the Lender or
against its agents or employees for failure to properly discharge their duties.
15.4 Lender Not Obligated to Insure Proper Disbursement of
Funds to Third Parties. Nothing contained in this Agreement, or any of the
other Loan Documents, shall impose upon Lender any obligation to oversee the
proper use or application of any disbursements of funds made in connection with
the Loan.
15.5 Indemnification from Third Party Claims. Borrower
shall indemnify Lender from any liability, claims or losses resulting from the
disbursement of any Loan proceeds the construction of the Improvements, or the
condition of the Financed Property, whether related to the quality of
construction or otherwise, and whether arising during or after the term of the
Loan. This provision shall survive the repayment of the Loan and shall continue
in full force and effect so long as the possibility of such liability, claims,
or losses exists.
15.6 Rights of Subcontractors, Laborers and Materialmen.
In no event shall this Agreement be construed to make Lender, Title Company or
any agent of Lender liable to any contractor or any subcontractors, labormen,
materialmen, craftsmen, or others for labor, materials, or services delivered
to the Financed Property or goods specially fabricated for incorporation
therein, or for debts or claims accruing or arising to such persons or parties
against Borrower or any contractor. It is distinctly understood and agreed that
there is no relation of any type whatsoever, contractual or otherwise, either
express or implied, between Lender and any contractor, materialman,
subcontractor, craftsman, laborer or any other person or entity supplying any
labor, materials or services to the Financed Property or specially fabricating
goods to be incorporated therein, No such persons or entities are intended to
be third party beneficiaries of this Agreement or any document or instrument
related to the Loan or to have any claim or claims in or to any undisbursed or
retained Loan Proceeds.
15.7 Evidence of Satisfaction of Conditions. Lender
shall, at all times, be free independently to establish to its good faith and
satisfaction, and in its reasonable discretion, the existence or nonexistence
of a fact or facts which are disclosed in documents or other evidence required
by the terms of this Agreement.
15.8 Headings. The headings of the sections, paragraphs
and subdivisions of this Agreement are for the convenience of reference only,
and shall not limit or otherwise affect any of the terms hereof.
15.9 Invalid Provisions to Affect No Others. If
performance of any provision hereof or any transaction related hereto is
limited by law, then the obligation to be performed shall be reduced
accordingly to its maximum lawful scope; and if any clause or provision herein
contained operates or would prospectively operate to invalidate this Agreement
in part, then the invalid part of said clause or
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provision only shall be held for naught, as though not contained herein, and
the remainder of this Agreement shall remain operative and in full force and
effect.
15.10 Application of Interest to Reduce Principal Sums.
Nothing herein contained, nor any transaction related hereto, shall be
construed or so operate to require Borrower, or any other person liable for
repayment of the Note or any other amount pursuant to the Loan Documents, to
pay interest at a greater rate than is now lawful in such case to contract for,
or to make any payment, or to do any act contrary to law. Should any interest
or other charges in connection with the Loan payable or paid by Borrower, or
any other person, whether under the Note or any of the other Loan Documents,
result in the computation or earning of interest in excess of the maximum rate
of interest which is legally permitted under applicable laws, then any and all
of such excess shall be and the same is hereby waived by Lender hereof, and any
and all such excess paid shall be automatically credited against and in
reduction of the principal balance due under the Note or, at the option of
Lender, paid directly by Lender to the Borrower or any other person liable for
the payment of the Note.
15.11 Governing Law. The laws of the State of Florida
shall govern the interpretation and enforcement of this Agreement.
15.12 Number and Gender. Whenever the singular or plural
number, masculine or feminine or neuter gender is used herein, it shall equally
include the others and shall apply jointly and severally.
15.13 Extraneous Agreements. No prior or present
agreements or representations, whether written or oral, shall be binding upon
Lender unless expressed in this Agreement, it being intended that each and
every such agreement and representation shall be either merged herein or
extinguished.
15.14 Waiver. If Lender shall waive any provisions of any
of the Loan Documents, or shall fail to enforce any of the conditions or
provisions of this Agreement, such waiver shall not be deemed to be a
continuing waiver and shall never be construed as such; and Lender shall
thereafter have the right to insist upon the enforcement of such conditions or
provisions. Furthermore, no provision of this Agreement shall be amended,
waived, modified, discharged or terminated, except by instrument in writing
signed by the parties hereto.
15.15 Notices. All notices, to be effective, must be in
writing and sent by certified U. S. mail, federal express or other reputable
courier, addressed (as applicable), in the case of Borrower, to Borrower at its
address first set forth above, Attn: Luis R. Rabell, Vice-President, with copy
to NHC Holdings, Corp., a Nevada corporation, 3200 Southwest Freeway, Suite
1220, Houston, Texas, 77027, Attn: Caduyn L. Porter and Blackwell & Walker,
P.A., One Southeast Third Avenue, 2500 Sun Bank International Center, Miami,
Florida, 33131-1774, Attn: Chuck Robins and, in the case of Lender, to Lender
at its address first set forth above, Attn: Loan Administration and to Paul
Garland, Vice President, Commonwealth United Mortgage, 222 South Westmonte
Drive, Suite 307, Altamonte Springs, Florida 32714, with postage and courier
charges prepaid. Any notice may also be delivered by facsimile transmission, if
to Borrower, then to 305/854-4507 (Attn: Luis R. Rabell) and 305/372-1468
(Attn: Chuck Robins) and if to Lender, then to (713) 965-6928 (Attn: Loan
Administration) Md (407) 786-0259 (Attn: Paul Garland). Lender or Borrower may
change their respective addresses or facsimile numbers, for notice purposes, or
their designated recipients of notices, by delivering notice of the change to
the other in accordance with this paragraph. Any notice shall be deemed
"delivered" when sent as aforesaid
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and received, unless receipt is refused, in which case the notice shall be
deemed "delivered" when refused.
15.16 Successors and Assigns. This Agreement shall inure
to the benefit of and be binding on the parties hereto and their heirs, legal
representatives, successors and assigns; but nothing herein shall authorize the
assignment hereof or any rights or interest hereunder by Borrower.
15.17 Time is of the Essence. Time is of the essence of
this Agreement, including the performance of each of the terms, conditions and
provisions hereof.
15.18 Attorney's Fees. If either party hereto shall ever
seek to enforce its rights or engage an attorney to defend it or to assist it
in enforcing any of the terms, condition or provisions under this Agreement or
any of the other Loan Documents, the prevailing party to such action shall be
entitled to collect all reasonable sums incurred in connection therewith,
whether or not suit shall be brought, and, if so, then at all pre-trial,
appellate, post-judgment, bankruptcy and other proceedings.
16. ARBITRATION.
16.1 To the maximum extent not prohibited by law, any
controversy, dispute or claim arising our of, in connection with, or relating
to this Agreement or the Loan Documents or any transaction provided for herein.
including, but not limited to, any claim based on or arising from an alleged
tort or an alleged breach of any agreement contained in any of the Loan
Documents, shall, at the request of any party to this Agreement or the Loan
Documents (either before or after the commencement of judicial proceedings), be
settled by arbitration pursuant to Title 9 of the United States Code, which the
parties hereto acknowledge and agree applies to the transaction involved
herein, and in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA") In any such arbitration proceedings: (i)
all statutes of limitations which would otherwise be applicable shall apply;
and (ii) the proceeding shall be conducted in Orlando, Florida, by a single
arbitrator, if the amount in controversy is $1,000,000.00 or less, or by a
panel of three (3) arbitrators if the amount in controversy is over
$1,000,000.00. All arbitrators shall be selected by the process of appointment
from a panel pursuant to Section 13 of the AAA Commercial Arbitration Rules and
each arbitrator will have AAA-acknowledged expertise in the appropriate subject
matter. Any award rendered in any such arbitration proceeding shall be final
and binding, and judgment upon any such award may be entered in any court
having jurisdiction. Notwithstanding the foregoing, to the extent the matter in
controversy is covered by insurance, no award shall be binding unless binding
arbitration is consented to by all applicable insurers. Borrower will exercise
its best efforts to obtain such consents.
16.2 If any party to this Agreement or the Loan Documents
files a proceeding in any court to resolve any such controversy, dispute or
claim, such action shall not constitute a waiver of the right of such party or
a bar to the right of any other party to seek arbitration under the provisions
of this Section of that or any other claim, dispute or controversy, and the
court shall, upon motion of any party to the proceeding, direct that such
controversy, dispute or claim be arbitrated in accordance with this Section.
16.3 Notwithstanding any of the foregoing, the parties
hereto agree that no arbitrator or panel of arbitrators shall possess or have
the power to (i) assess punitive damages, (ii) dissolve, rescind or reform
(except that the arbitrator may construe ambiguous terms) of this Agreement or
the Loan Documents, (iii) enter judgment on the debt, (iv) exercise equitable
powers or issue or enter any equitable
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remedies, or (v) allow discovery of attorney/client privileged information, and
the parties hereby waive the aforementioned remedies. The Commercial
Arbitration Rules of the AAA are hereby modified to this extent for the purpose
of arbitration of any dispute, controversy or claim arising out of, in
connection with, or relating to this Agreement or the Loan Documents.
16.4 No provision of, or the exercise of any rights under,
this Section shall limit or impair the right of any party to the Loan Documents
before, during or after any arbitration proceeding to: (i) exercise self-help
remedies such as setoff for repossession: (ii) foreclose (judicially or
otherwise) any lien on or security interest in any real or personal property
collateral: or (iii) obtain emergency relief from a court of competent
jurisdiction to prevent the dissipation, damage, destruction, transfer,
hypothecation, pledging or concealment of assets or of collateral securing any
indebtedness, obligation or guaranty referenced in the Loan Documents. Such
emergency relief may be in [he nature of, but is nor limited to: pre-judgment
attachments, garnishments, sequestrations, appointments of receivers, or other
emergency injunctive relief to preserve the status quo.
16.5 In the event arbitration is prohibited by law with
respect hereto, any actions or proceedings with respect to the Note, this
Agreement or the ocher Loan Documents may be instituted in the courts of the
Stare of Florida, or elsewhere to the extent that jurisdiction shall exist
apart from the provisions of this Section, as the Lender may elect, and by
execution and delivery of this Agreement, the Borrower irrevocably and
unconditionally submits to the jurisdiction (both subject matter and personal)
of each such court, and irrevocably and unconditionally waives (i) any
objection the Borrower may now or hereafter have to the laying of venue in any
of such courts, and (ii) any claim that any action or proceeding brought in any
of such courts has been brought in an inconvenient forum.
17. WAIVER OF JURY TRIAL. EACH OF THE UNDERSIGNED HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY
WITH RESPECT TO ANY LITIGATION BETWEEN THEM, INCLUDING, BUT NOT LIMITED TO,
WITH RESPECT TO ANY AND ALL CAUSE OR CAUSES OF ACTION, DEFENSES, COUNTERCLAIMS,
CROSS CLAIMS, THIRD PARTY CLAIMS, AND INTERVENOR'S CLAIMS, REGARDLESS OF THE
CAUSE OR CAUSES OF ACTION, DEFENSES OR COUNTERCLAIMS ALLEGED OR THE RELIEF
SOUGHT BY ANY PARTY, AND REGARDLESS OF WHETHER SUCH CAUSES OF ACTION, DEFENSES
OR COUNTERCLAIMS ARE BASED ON, OR ARISE OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE OBLIGATIONS
COVERED THEREBY.
THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SHALL SUPERSEDE AND
REPLACE ALL PRIOR AGREEMENTS OR UNDERSTANDINGS, WRITTEN OR ORAL, RELATING TO
THE MATTERS SET FORTH HEREIN. THIS AGREEMENT MAY ONLY BE AMENDED IN WRITING AND
NO ORAL REPRESENTATIONS OR AGREEMENTS SHALL BE BINDING UPON THE LENDER UNLESS
REDUCED TO A WRITING SIGNED BY THE LENDER.
29
<PAGE> 34
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to
be executed on the date first above written.
Signed, sealed and delivered
in the presence of: LENDER:
BANK UNITED OF TEXAS FSB
/s/ LAURA L. HUNTER
- ------------------------------ By: /s/ PAUL GARLAND
Witness -----------------------------
Laura L. Hunter PAUL GARLAND, Vice-President
- ------------------------------
(Print Name)
/s/ GREGORY GLASS
- ------------------------------
Witness
Gregory Glass
- ------------------------------
(Print Name)
BORROWER:
THE ADLER COMPANIES, INC., a Florida
corporation
/s/ CHARLES D. ROBBINS By: /s/ LUIS RABELL
- ------------------------------ ----------------------------------
Witness Name: Luis Rabell
Charles D. Robbins Title: Vice President
- ------------------------------ ------------------------------
(Print Name)
/s/ MONICA A. REY-MORAN
- ------------------------------
Witness
MONICA A. REY-MORAN
- ------------------------------
(Print Name)
30
<PAGE> 35
STATE OF FLORIDA )
)
COUNTY OF ________ )
The foregoing instrument was acknowledged before me this ____ day of
March, 1996, by PAUL GARLAND as Vice-President of BANK UNITED OF TEXAS FSB, a
federal savings bank, on behalf of the Bank, who is personally known to me.
/s/ LAURA L. HUNTER
-------------------------------------
NOTARY PUBLIC
My Commission Expires: Laura L. Hunter
-------------------------------------
(Seal) (Print Name)
STATE OF FLORIDA )
)
COUNTY OF ________ )
The foregoing instrument was acknowledged before me this 9th day of
March, 1996, by LUIS RABELL as Vice President of THE ADLER COMPANIES, INC.,
on behalf of the corporation, who is personally known to me or has produced
_________________________________ as identification.
/s/ MONICA A. REY-MORAN
-------------------------------------
NOTARY PUBLIC
My Commission Expires: Monica A. Rey-Moran
-------------------------------------
(Seal) (Print Name)
31
<PAGE> 36
My Commission Expires:
(Seal)
STATE OF FLORIDA )
)
COUNTY OF ________ )
The foregoing instrument was acknowledged before me this 9th day of
March, 1996, by Luis Rabell as Vice President of THE ADLER COMPANIES, INC., on
behalf of the corporation, who is personally known to me or who has produced
______________ as identification.
/s/ MONICA A. REY-MORAN
-----------------------------------
NOTARY PUBLIC
-----------------------------------
(Print Name)
My Commission Expires:
(Seal) MONICA REY-MORAN
My Commission CO359744
Expires Mar. 28, 1998
Bonded by HAI
800-422-1555
31
<PAGE> 1
EXHIBIT 10.8 (b)
AMENDMENT TO CONSTRUCTION LINE OF CREDIT LOAN AGREEMENT
THIS AMENDMENT TO CONSTRUCTION LINE OF CREDIT LOAN AGREEMENT (the
"Amendment") is made and entered into as of the 30th day of December, 1996, by
and between:
(i) BANK UNITED, formerly known as Bank United of Texas FSB, a
Federal savings bank with principal office and place of
business in Houston, Texas (the "Lender"), and
(ii) THE ADLER COMPANIES, INC., a Florida corporation with
principal office and place of business in Coral Gables,
Florida (the "Borrower")
W I T N E S S E T H:
WHEREAS, pursuant to the that certain Construction Line of Credit Loan
Agreement dated as of March 13, 1996 between the Borrower and the Lender, as
amended by that certain Amendment to Construction Line of Credit Loan Agreement
dated as of May 6, 1996, between the Borrower and the Lender (as amended, the
"Loan Agreement"), the Lender made a revolving loan (the "Loan") to the
Borrower in the maximum principal amount of Ten Million Dollars
($10,000,000.00), to provide financing for the construction of single family
residences.
WHEREAS, the parties now desire to amend the terms of the Loan
Agreement to provide for an Advance under the Loan Agreement to provide bridge
financing for the acquisition by the Borrower of certain real property located
in Broward County, Florida, and the parties hereto agreed to further amend the
Loan Agreement, all as provided herein.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby amend the Loan Agreement and agree as
follows:
1. Definitions. All capitalized terms used herein and not
otherwise defined shall have their same respective meanings herein as defined
in the Loan Agreement.
2. Lot Acquisition Advance. Subject to the terms contained in
the Loan Agreement, the Lender shall fund an Advance under the Loan in the
amount of Three Million Two Hundred Sixty Thousand Dollars ($3,260,000.00) for
the Acquisition by the Borrower of one hundred thirteen (113) Developed Lots
situated on that certain real property located in Broward County, Florida, as
more particularly described on Exhibit A attached hereto and made a part
hereof. The entire unpaid principal balance of the Advance funded hereunder
shall be due and payable in full on April 1, 1997; provided, however, the Loan
shall not be available to finance the construction of any Units on such Lots
until the Advance funded hereunder has been repaid in full.
1
<PAGE> 2
3. Loan Fee. As consideration for the Lender funding its
Advance hereunder for acquisition of the property described on Exhibit A, the
Borrower shall pay Lender a fee equal to Sixteen Thousand Three Hundred Dollars
($16,300.00), which fee shall be paid and shall be deemed fully earned and
nonrefundable upon the execution hereof. If, prior to January 31, 1997, the
Lender shall refinance the Advance made hereunder through a new credit facility
extended by the Lender to the Borrower, the Borrower shall receive a credit for
the loan fee paid hereunder against the fees payable in connection with such
new credit facility; provided, however, nothing contained herein shall be
deemed to obligate the Lender to refinance such Advance or to extend any
additional credit to the Borrower.
4. Reaffirmation. Except as modified hereby, the Borrower hereby
reaffirms and confirms and incorporates herein by reference each of the terms,
covenants and conditions contained in the Loan Agreement.
5. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Florida.
6. Parties Bound. This Amendment shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
BANK UNITED
By: /s/
---------------------------------
Title: Vice President
(the "Lender")
THE ADLER COMPANIES, INC.
By: /s/ TERRY WHITE
---------------------------------
Title: Vice President
(the "Borrower")
2
<PAGE> 3
GUARANTOR'S JOINDER AND CONSENT
The undersigned, NHC HOLDINGS CORP., a Nevada corporation (the
"Guarantor") hereby (i) consents to, and agrees to be bound by, the terms,
covenants and conditions contained in the foregoing Amendment to Construction
Line of Credit Loan Agreement and (ii) hereby reaffirms, confirms and
incorporates herein by reference each of the terms, covenants and conditions
contained in that certain Guaranty of the Loan dated March 13, 1996, made by
the Guarantor to and in favor of the Lender.
NHC HOLDINGS CORP.,
a Nevada corporation
By: /s/ MICHAEL K. MCCRAW
---------------------------------
Title: CFO
(the "Guarantor")
3
<PAGE> 1
EXHIBIT 10.8(c)
AMENDMENT TO CONSTRUCTION LINE OF CREDIT LOAN AGREEMENT
THIS AMENDMENT TO CONSTRUCTION LINE OF CREDIT LOAN AGREEMENT (the
"Amendment") is made and entered into as of the 15th day of January, 1997, by
and between:
(i) BANK UNITED, formerly known as Bank United of Texas
FSB, a Federal savings bank with principal office and place of
business in Houston, Texas (the "Lender"), and
(ii) THE ADLER COMPANIES, INC., a Florida corporation with
principal office and place of business in Coral Gables,
Florida (the "Borrower")
WITNESSETH:
WHEREAS, pursuant to that certain Construction Line of Credit Loan
Agreement dated as of March 13, 1996 between the Borrower and the Lender, as
amended by (a) that certain Amendment to Construction Line of Credit Loan
Agreement dated as of May 6, 1996 between Borrower and Lender and (b) that
certain Amendment to Construction Line of Credit Loan Agreement dated as of
December 30, 1996, between the Borrower and the Lender (as amended, the "Loan
Agreement"), the Lender made a revolving loan (the "Loan") to the Borrower in
the maximum principal amount of Ten Million Dollars ($10,000,000.00) to provide
financing for the construction of single family residences.
WHEREAS, the parties now desire to amend the terms of the Loan
Agreement to provide for a future increase to the amount of the Loan and to
establish a "Maximum Amount of Revolving Credit", all as provided herein,
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby amend the Loan Agreement and agree as
follows:
1. Definitions. All capitalized terms used herein and not
otherwise defined shall have their same respective meanings herein as defined
in the Loan Agreement.
2. The Loan. Section 2.1 of the Loan Agreement is hereby amended
and restated, as
2.1 Loan. Subject to the terms and conditions contained in
this Agreement, the Lender agrees to fund and Borrower may borrow,
pay, reborrow or repay Advances from time to time from the date hereof
until the Maturity Date; provided, however, at no time shall the
principal balance of all the Advances outstanding hereunder at any
time exceed the "Maximum Amount of Revolving Credit", as hereinafter
defined. As used herein, the term "Maximum Amount of ' Revolving
Credit" shall mean Ten Million Dollars ($10,000,000.00) or such other
amount as may be requested by the Borrower from time to time up to the
sum of Fifteen Million Dollars ($15,000,000.00). Any increase to the
Maximum Amount of Revolving Credit shall be subject to the Borrower's
continued compliance with the terms,
<PAGE> 2
covenants and conditions contained in this Agreement and upon the
execution and delivery of such additional Loan Documents as the lender
may require in order to evidence and secure such increase.
3. Additional Limitations. Section 2.4.2 of the Loan Agreement is
hereby amended and restated as follows:
2.4.2 Advances shall not be funded (i) to finance more than
six (6) Model Units at any time, (ii) to finance more than fifteen (15) Spec
Units at any time or (iii) to finance more than ten (10) Scattered Lots at any
time in any one subdivision.
4. Note. Whenever reference is made in the Loan Agreement or in
any of the other Loan Documents to the term Note, the same shall be deemed to
mean that certain promissory note dated March 13, 1996, made by the Borrower
payable to the order of the Lender in the principal amount of Ten Million
Dollars ($10,000,000.00), together with such additional or substitute
promissory notes that may be executed and delivered by the Borrower to the
Lender pursuant to the terms, covenants and conditions of this Agreement now or
hereafter evidencing the Loan, and all renewals, modifications, increases and
extensions thereof.
5. Unused Commitment. Whenever reference is made in the Loan
Agreement or in any of the other Loan Documents to the term "Unused
Commitment", the same shall be deemed to mean the difference between the
Maximum Amount of Revolving Credit and the aggregate amount of all Advances
previously approved or in process hereunder (whether actually disbursed or
reserved for future disbursement for construction of a Unit, subject to the
limitations set forth in Section 2.2 of the Agreement which establishes the
maximum amount of the aggregate Advances for construction of Units), net of
principal repayments hereunder which are available for redisbursement in
accordance with the terms of the Agreement.
6. Maturity Date. Whenever reference is made in the Loan
Agreement to the term "Maturity Date", the same shall be deemed to mean July 1,
1998, unless extended by the Lender in writing from time to time in its sole
and complete discretion.
7. Reaffirmation. Except as modified hereby, the Borrower hereby
reaffirms and confirms and incorporates herein by reference each of the terms,
covenants and conditions contained in the Loan Agreement.
8. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Florida.
9. Parties Bound. This Amendment shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
THE ADLER COMPANIES, INC. BANK UNITED
By: /s/ LUIS RABELL By: /s/ PAUL GARLAND
------------------------------ --------------------------------
Name: LUIS RABELL Name: PAUL GARLAND
Title: Vice President Title: Vice President
(the "Borrower") (the "Lender")
3
<PAGE> 4
GUARANTOR'S JOINDER AND CONSENT
The undersigned, NHC HOLDINGS CORP., a Nevada corporation (the
"Guarantor") hereby (i) consents to, and agrees to be bound by, the terms,
covenants and conditions contained in the foregoing Amendment to Construction
Line of Credit Loan Agreement and (ii) hereby reaffirms, confirms and
incorporates herein by reference each of the terms, covenants and conditions
contained in the certain Guaranty of the Loan dated March 13, 1996, made by the
Guarantor to and in favor of the Lender.
NCH HOLDINGS, CORP., a
Nevada corporation
By: /s/ MICHAEL MCCRAW
----------------------------------
Title: CFO
-------------------------------
(the "Guarantor")
4
<PAGE> 1
EXHIBIT 10.8(d)
THE MORTGAGE MODIFIED HEREBY SECURES A REVOLVING LINE OF CREDIT.
CONTEMPORANEOUSLY HEREWITH, THE MORTGAGEE HAS MADE ADVANCES IN THE
AMOUNT OF $5,625,000.00 AND $1,069,760.00, ON WHICH FLORIDA INTANGIBLE
TAX HAS BEEN COMPUTED AND IS PAID HEREWITH. ADDITIONAL INTANGIBLE TAX
WILL BE PAID ON ALL FUTURE DISBURSEMENTS SECURED HEREBY.
MORTGAGE MODIFICATION AND SPREADING AGREEMENT
AND NOTICE OF FUTURE ADVANCE
THIS MORTGAGE MODIFICATION AND SPREADING AGREEMENT AND NOTICE OF
FUTURE ADVANCE (the "Agreement"), is made and entered into as of the 15th day
of January, 1997, by and between:
(i) THE ADLER COMPANIES, INC., a Florida corporation, with
mailing address at 2600 Douglas Road, Suite 510, Coral Gables,
Florida 33134 (the "Mortgagor"), to and in favor of
(ii) BANK UNITED, formerly known as Bank United of Texas FSB,
a federal savings bank with mailing address at 3200 Southwest
Freeway, Suite 2000, Houston. Texas 77027 (the 'Mortgagee").
WITNESSETH:
WHEREAS, pursuant to that certain Construction Line of Credit Loan
Agreement dated as of March 13, 1996, Mortgagor executed and delivered a
revolving promissory note (the "$10,000,000.00 Note") payable to the order of
the Mortgagee in the face principal amount of Ten Million Dollars
($10,000,000.00), which promissory note is secured, in part, by that certain
Mortgage and Security Agreement dated as of March 13, 1996, made by
the Mortgagor to and in favor of the Mortgagee, as recorded in Official
Records Book 24624, Page 556, Public Records of Broward County, Florida, as
amended by that certain Mortgage Spreading Agreement dated as of December 30,
1996, between the Mortgagor and the Mortgagee, as recorded in Official Records
Book 25846, Page 596, Public records of Broward County, Florida (as amended, the
"Mortgage").
WHEREAS, pursuant to that certain Lot Acquisition Loan Agreement of
even date herewith between the Mortgagor and the Mortgagee, the Mortgagee made
an additional loan to the Mortgagor in the amount of Five Million Six Hundred
Twenty Five Thousand Dollars ($5,625,000.00), to be secured as a future advance
under the terms of the Mortgage, as evidenced by that certain Promissory Note
(the "$5,625,000.00 Note") of even date herewith made by the Mortgagor payable
to the order of the
<PAGE> 2
Mortgagee in the face principal amount of Five Million Six Hundred Twenty Five
Thousand Dollars ($5,625,000.00), and the parties hereto agreed to modify the
Mortgage, all as provided herein.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Mortgagor and Mortgagee hereby amend the Mortgage as follows:
1. Definitions. All capitalized terms used herein, unless
otherwise defined, shall have their same respective meanings herein as defined
in the Mortgage.
2. Additional Land. The Mortgagor hereby grants, bargains, sells,
conveys, assigns, transfers, mortgages, pledges, delivers, sets over, warrants,
confirms and hypothecates to the Lender, and grants Lender a security interest
in all those certain lots, pieces, or parcels of land lying and being in
Broward County, Florida, together with the buildings and improvements now or
hereafter situated thereon, said land being legally described as follows:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF
(the "Additional Land") as security for the payment of the Note, together with
interest thereon as provided therein, and all other obligations and
indebtedness of the Mortgagor to the Lender, whether now existing or hereafter
arising and all of the obligations of the Mortgagor to the Lender under the
Loan Documents, subject to each of the terms, covenants and conditions
contained in the Mortgage. Whenever reference is made in the Mortgage to the
term "Land", the same shall be deemed to include, without limitation, the
Additional Land.
3. Notice of Future Advance. Notice is hereby given of a future
advance under the Mortgage in the amount of Five Million Six Hundred Twenty
Five Thousand Dollars ($5,625,000.00), as evidenced by the $5,625,000.00 Note,
the proceeds of which are to be disbursed in accordance with the terms,
covenants and conditions contained in the Lot Acquisition Loan Agreement. The
$5,625,000.00 Note shall be secured by the Mortgage to the same extent, and
with the same priority, as if said promissory note had been executed and
delivered by the Mortgagor on the date of the Mortgage.
4. Note. Whenever reference is made herein or in the Mortgage to
the term "Note", the same shall be deemed to collectively mean (i) the
$10,000,000.00 Note and (ii) the $5,625.000.00 Note.
4. Loan Agreement. Whenever reference is made in the Mortgage to
the term Loan Agreement, the same shall collectively mean (i) that certain
Construction Line of Credit Loan Agreement dated March 13, 1996, between the
Mortgagor and the Mortgagee, as amended by (a) that certain Amendment to
Construction Line of Credit Loan Agreement dated as of May 6, 1996 between the
Mortgagor and the Mortgagee, (b) that certain Amendment to Construction Line of
Credit Loan Agreement dated as of December 30, 1996 between the Mortgagor and
the Mortgagee and (c) that certain Amendment to Construction Line of Credit
Loan Agreement of even date herewith between the Mortgagor and the Mortgagee
(as amended, the "Construction Line of Credit Loan Agreement") and (ii) that
certain Lot Acquisition Loan Agreement (the "Lot Acquisition Loan Agreement")
of even date herewith between the Mortgagor and the Mortgagee.
5. Acknowledgment. Mortgagor agrees that Mortgagee has complied
with each and every term, covenant and condition of the Mortgage, and all other
agreements relating thereto, and that
2
<PAGE> 3
Mortgagor, as of the date hereof has no set off, claim or defense of any nature
against the Mortgagee relating to the Mortgage, or any agreement relating
thereto.
6. Representations and Warranties. The Mortgagor hereby makes and
remakes each of the representations and warranties contained in the Mortgage
as of the date hereof, which representations and warranties shall be deemed
continuing and shall survive the execution and delivery hereof.
7. Reaffirmation. Except as modified hereby, the Mortgage and
each of the other Loan Documents shall remain in full force and effect
according to its original terms, covenants and conditions (which are hereby
incorporated herein by reference), and the modifications contained herein shall
not be deemed to be a waiver by Mortgagee of any rights contained in the
Mortgage or in any of the other Loan Documents, including, but not limited to,
the right to demand payment in full of the Note (including both the
$10,000,000.00 Note and the $5,625,000.00 Note) and to foreclose the Mortgage
should the Mortgagor default in any of its obligations contained in the Note,
the Mortgage, the Construction Line of Credit Loan Agreement, the Lot
Acquisition Loan Agreement or in any of the other Loan Documents.
8. Parties Bound. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE ADLER COMPANIES, INC., a Florida
corporation
By: /s/ LUIS RABELL
-------------------------------------
Name: LUIS RABELL
Title: Vice President
Address: 2600 Douglas Road
Suite 510
Coral Gables, FL 33134
(the "Mortgagor")
STATE OF FLORIDA )
) S.S.:
COUNTY OF DADE )
The foregoing instrument was acknowledged before me, an officer duly
authorized in the State and County aforesaid, to take acknowledgments, this
11th day of January, 1997 by LUIS RABELL as Vice President of The Adler
Companies, Inc., a Florida corporation, on behalf of said corporation, who [X]
is personally known to me or [ ] who has produced _______________________ as
identification.
/s/ ERICA L. ENGLISH
-------------------------------------
NOTARY PUBLIC
ERICA L. ENGLISH
-------------------------------------
(Print Name)
My Commission Expires:
(Seal)
3
<PAGE> 1
EXHIBIT 10.8(E)
PROMISSORY NOTE
PRINCIPAL AMOUNT
Orlando, Florida
$5,625,000.00 January 15, 1997
FOR VALUE RECEIVED, the undersigned, THE ADLER COMPANIES, INC., a
Florida corporation, having an office at 2600 Douglas Road, Suite 510, Coral
Gables, Florida 33134 (hereinafter referred to as "Maker"), does hereby promise
to pay to BANK UNITED, a federal savings bank, having an address at 3200
Southwest Freeway, Suite 2000, Houston, Texas 77027 (hereinafter referred to as
"Lender"), or order, without set-off, at Lender's address above or at such
other address as the holder hereof shall, from time to time, designate, the
principal sum of Five Million Six Hundred Twenty Five Thousand Dollars
($5,625,000.00), or, if less, so much thereof as shall be advanced by Lender
hereunder, together with interest accruing thereon from the date hereof on sums
advanced hereunder at the rate hereinafter provided calculated on the daily
principal balance outstanding from time to time. This Note is issued pursuant
to a Lot Acquisition Loan Agreement of even date herewith between the Maker and
Lender (the "Loan Agreement") and evidences the loan provided for in the Loan
Agreement, which shall be funded by Lender in Advances from time to time
subject to the terms and conditions set forth in the Loan Agreement.
Any capitalized term not defined in this Note shall have the meaning
set forth in the Loan Agreement.
All payments hereunder will be made in such coin or currency of the
United States of America as at the time of payment shall be legal tender for
the payment of public and private debts.
Interest shall be charged hereunder on the basis of a three hundred
sixty (360) day year counting the actual number of days elapsed and shall
accrue on the daily principal balance outstanding from time to time at a
floating per annum rate equal to one percent (1.00%) in excess of the Lender's
prime rate determined by Lender from time to time (which interest rate is only
a bench mark, is purely discretionary, and is not necessarily the best or
lowest rate charged borrowing customers of Lender) (the "Applicable Interest
Rate"). Any such change in the prime rate will increase or decrease the
Applicable Interest Rate and the periodic interest payments required hereunder.
Any change in the prime rate and Applicable Interest Rate shall be effective at
the beginning of the business day on which such change in the prime rate is
effective.
Payments of interest only, in arrears, shall be due and payable on the
first (1st) days of each month, and the entire unpaid principal amount of this
Note, plus all accrued and unpaid interest and any and all other sums owing
hereunder or under the other Loan Documents, shall be immediately due and
payable on the Maturity Date, as provided in the Loan Agreement.
Maker shall also reduce the principal amount outstanding under this
Note as required by the Loan Agreement, and may prepay this Note in whole or in
part at any time without penalty.
1
<PAGE> 2
Any payment under this Note shall be applied first to sums due under
this Note or the other Loan Documents other than principal or interest, second
to accrued interest, and lastly to the principal amount outstanding hereunder.
No partial prepayment shall postpone the due date or decrease the amount of any
subsequent payment of principal due under this Note.
Nothing herein contained, nor any transaction related hereto, shall be
construed or so operate to require Maker, or any other person liable for
repayment of this Note, to pay interest at a greater rate than is now lawful in
such case to contract for, or to make any payment, or to do any act contrary to
law. Should any interest or other charges in connection with the Loan payable
or paid by Maker, or any other party liable for the payment of this Note,
whether under this Note or any of the other Loan Documents, result in the
computation or earning of interest in excess of the maximum rate of interest
which is legally permitted under applicable laws, then any and all of such
excess shall be and the same is hereby waived by the holder hereof, and any and
all such excess paid shall be automatically credited against and in reduction
of the principal balance due under this Note or, at the option of the holder,
paid directly by the holder to the Maker or other parties liable for the
payment of this Note. If any clause or provision in this Note shall be
unenforceable under applicable law, in whole or in part, then such clause or
provision or part thereof shall be operative as though not contained herein and
the remainder of this Note shall remain operative and in full force and effect.
The Maker does further covenant and agree to abide by and comply with
each and every term, covenant and condition set forth in the Loan Documents,
and agrees that any "Event of Default," as defined under any of the Loan
Documents, shall also be an Event of Default hereunder.
If any payment of principal or interest or any other sum payable
hereunder is not received by the holder when due, subject to any grace period
provided in the Loan Agreement, or if any event of default occurs under any of
the other Loan Documents and is not cured without any applicable notice and
cure period provided therein, then the entire unpaid principal indebtedness and
all arrearages of interest and other sums due hereunder plus any and all other
amounts due under the other Loan Documents (collectively, the "indebtedness")
shall, at the option of the holder hereof, become due and payable (an
"Acceleration") immediately without presentation, notice, demand or further
action of any kind, anything herein or in any of the other Loan Documents to
the contrary notwithstanding. As of the Maturity Date of this Note or any
sooner Acceleration of the Indebtedness, interest shall accrue on the
outstanding principal balance of this Note at the lesser of eighteen percent
(18%) per annum or the highest rate permitted by law (the "Default Rate"),
instead of at the Applicable Rate set forth above. Unless prohibited by law,
interest accruing under this Note, whether at the Default Rate or otherwise,
shall be paid in addition to any applicable late charges, prepayment premium or
other fees.
In the event any payment of principal or interest is not received by
the holder within ten (10) days following the due date thereof, Maker shall pay
a late charge in the amount of five percent (5%) of the payment due,
irrespective of the exercise or non-exercise by the holder hereof of any of its
rights hereunder or under any of the other Loan Documents.
2
<PAGE> 3
In the event that any holder of this Note shall exercise or endeavor
to exercise any of its remedies hereunder or under any of the other Loan
Documents or place this Note into the hands of an attorney for collection, the
Maker shall pay on demand all costs and expenses incurred in connection
therewith, whether or not suit shall be instituted, including, without
limitation, attorneys' fees incurred at pre-trial, trial, appellate and
post-judgment proceedings, and the holder may take judgment for all such
amounts in addition to all other sums due hereunder.
The holder's remedies under this Note are in addition to all other
remedies available under the Loan Documents, at law or in equity. The holder
hereof may exercise any one or more of such remedies, including, without
limitation, collecting under this Note or foreclosing its first lien under the
Mortgage, and the exercise of any such remedy shall not exhaust the concurrent
or later exercise by the holder of any other remedy.
The Maker and endorsers or guarantors of this Note hereby waive
presentment for payment, protest and demand for payment and notice of protest,
demand, dishonor and non-payment of this Note, notice of any event of default
under the Loan Documents unless specifically otherwise provided therein, notice
of intent to accelerate and notice of acceleration and all other notices or
demands otherwise required by law that may lawfully be waived. This Note, and
any payment hereunder, may be extended or otherwise modified from time to time
by the holder hereof, without prior notice to or further consent of and without
in any way affecting, impairing, or discharging the liability or obligation of
any endorser or guarantor of this Note. The holder hereof may also from time
to time release any security for or any party liable for payment of this Note,
and grant any forbearance or other indulgence with respect hereto, without
prior notice to or further consent of and without in any way affecting,
impairing, or discharging the liability or obligation of the Maker or any
endorser or guarantor.
No waiver or consent by the holder with respect to this Note shall be
valid and binding unless in writing and signed by the holder, and any such
waiver or consent by the holder which may be granted shall be effective only
within the limitations stated in such waiver and only for the particular event
for which such waiver is given.
The liability of Maker, if more than one, shall be joint and several.
This Note shall bind the respective successors and assigns of Maker, and shall
inure to the benefit of Lender, its successors and assigns.
To the extent Maker may lawfully do so, Maker hereby waives the
benefit of any laws which now or hereafter authorize a stay of execution to be
issued on any judgment recovered by this Note and the exemption of any property
from levy and sale thereunder.
This Note is executed and delivered in, and shall be construed in
accordance with, the laws of the State of Florida.
This Note may not be amended or modified except by an instrument in
writing executed by the holder hereof and Maker.
3
<PAGE> 4
IN WITNESS WHEREOF, the Maker has executed this Note as of the date first
above written.
THE ADLER COMPANIES, INC., a Florida
corporation
By: /s/ Luis Rabell
-----------------------------------
Name: LUIS RABELL
Title: Vice President
FLORIDA DOCUMENTARY STAMPS IN THE AMOUNT OF $19,687.50 AND INTANGIBLE TAX IN
THE AMOUNT OF $11,250.00 HAVE BEEN PAID AND ARE AFFIXED TO THE MORTGAGE
MODIFICATION AND SPREADING AGREEMENT AND NOTICE OF FUTURE ADVANCE OF EVEN DATE
HEREWITH SECURING THIS NOTE.
4
<PAGE> 1
EXHIBIT 10.9
* * * * *
CONSTRUCTION LOAN AGREEMENT
* * * * *
April 23, 1997
* * * * *
Between
BANKTEXAS N.A.,
as Lender
and
NEWMARK HOMES, L.P.,
a Limited Partnership,
as Borrower
* * * * *
<PAGE> 2
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.
<PAGE> 3
"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.
- 2 -
<PAGE> 4
"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.
- 3 -
<PAGE> 5
"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.
- 4 -
<PAGE> 6
"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 Robert Weakley, 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
- 5 -
<PAGE> 7
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.
- 6 -
<PAGE> 8
"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.
- 7 -
<PAGE> 9
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.
- 8 -
<PAGE> 10
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).
- 9 -
<PAGE> 11
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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<PAGE> 12
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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<PAGE> 13
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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<PAGE> 14
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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<PAGE> 15
(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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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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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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<PAGE> 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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<PAGE> 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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<PAGE> 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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<PAGE> 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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<PAGE> 22
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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<PAGE> 25
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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<PAGE> 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.
- 25 -
<PAGE> 27
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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<PAGE> 28
(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
- 27 -
<PAGE> 29
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
- 28 -
<PAGE> 30
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.
8820 Westheimer
P. O. Box 630369
Houston, Texas 77263
Attention: Real Estate Lending
(b) If to Borrower: Newmark Homes, L. P.
---------------------------------
1200 Soldiers Field Drive
---------------------------------
Sugar Land, Texas 77479
---------------------------------
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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<PAGE> 31
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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<PAGE> 32
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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<PAGE> 33
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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<PAGE> 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
SUE 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. Ann. 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.
- 33 -
<PAGE> 35
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/ TERRY WHITE
---------------------------
Name: Terry White
-------------------------
Title: SVP
------------------------
LENDER:
BANKTEXAS N.A.
By: /s/ ROBERT WEAKLEY
---------------------------
Name: Robert Weakley
-------------------------
Title: Vice President
------------------------
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<PAGE> 1
EXHIBIT 10.10
- -------------------------------------------------------------------------------
LOT ACQUISITION LOAN AGREEMENT
BY AND BETWEEN
THE ADLER COMPANIES, INC., a Florida corporation
AND
BANK UNITED,
a federal savings bank
Dated
January 15, 1997
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<PAGE> 2
TABLE OF CONTENTS
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1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Customary Complying Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Developed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Financed Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Lot(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Subdivision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 Title Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Disbursement of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 The Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Payment of the Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Loan Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. CONDITIONS TO LENDER'S OBLIGATION TO FUND THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Title Company's Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Note and Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Mortgage Security Agreement and other Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 Affidavits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7.1 Public Liability and Worker's Compensation Insurance . . . . . . . . . . . . . . . . 5
3.7.2 Other Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Soil Test and Hazardous Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.10 Public Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Opinion of Borrower's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.13 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.14 Soil Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.15 Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.17 No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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TABLE OF CONTENTS
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4. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5. WARRANTIES AND REPRESENTATIONS OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Organization Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Construction and Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 Authority to Enter into Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.5 Validity of Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.6 Priority of Lien on Personalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.7 Conflicting Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.8 Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.9 Availability of Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.10 Condition of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.11 Availability of Roads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.12 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.13 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. ADDITIONAL COVENANTS OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 No Transfer, Subordinate Mortgage Financing or other Encumbrance of Financed Property . . . . . . . 11
6.2 Compliance with Restrictions and Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Brokerage Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Financial Statements and Reporting Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.7 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.8 Further Assurances and Preservation of Security . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.9 Utilization of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.10 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.11 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.13 Survival of Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.14 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.15 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.16 Third-Party Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.17 Change of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Failure to Satisfy Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Breach of Covenants, Warranties and Representations . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Material Adverse Change of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8. REMEDIES OF LENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9. RELEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10. GENERAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
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10.1 Rights of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 Borrower is not Lender's Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.3 Lender Not Liable for Damage or Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.4 Lender Not Obligated to Insure Proper Disbursement of Funds to Third Parties . . . . . . . . . . . . 17
10.5 Indemnification from Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.6 Evidence of Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.8 Invalid Provisions to Affect No Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.9 Application of Interest to Reduce Principal Sums . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.11 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.12 Extraneous Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.13 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.14 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.15 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.16 Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.17 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 5
LOT ACQUISITION LOAN AGREEMENT
THIS LOT ACQUISITION LOAN AGREEMENT (the "Agreement") is made and
entered into as of the 15th day of January, 1997, by and between THE ADLER
COMPANIES, INC., a Florida corporation with an address at 2600 Douglas Road,
Suite 510, Coral Gables, Florida 33134 ("Borrower"); and BANK UNITED, a
federal savings bank, with an address at 3200 Southwest Freeway, Suite 2000,
Houston, Texas 77027 ("Lender").
RECITALS
WHEREAS, Borrower has applied to Lender for a lot acquisition loan
(the "Loan") in the principal sum of Five Million Six Hundred Twenty Five
Thousand Dollars ($5,625,000.00), the proceeds of which shall be used to
acquire certain Lots in the Windsor Palms Subdivision, as more particularly
described on Exhibit "A" attached hereto and made a part hereof.
WHEREAS, Borrower and Lender have negotiated, and desire to enter
into, this Agreement to set forth the terms and conditions of the Loan;
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants and agreements set forth below, Borrower and Lender agree as follows:
1. DEFINITIONS. As used in this Agreement the terms listed below
shall have the following meanings unless otherwise required by the context:
1.1 Business Day. Each day, other than a Saturday,
Sunday, national holiday or other day when Lender's offices or branch banking
facilities are not open for business to the general public.
1.2 Customary Complying Substance. Any customary
Hazardous Substance which is necessary to the business operations of Borrower
at the Financed Property and which is manufactured, produced, distributed,
used, treated, transported, stored, released, disposed of or otherwise handled
in compliance with all applicable Environmental Laws.
1.3 Developed. Improved with all necessary roadway,
drainage, utility and other infrastructure, and ready to be improved with a
residential dwelling unit.
1.4 Environmental Laws. All existing and future federal,
state and local laws, statutes, ordinances, rules, and regulations pertaining
to health, industrial hygiene, pollution or the environment, including, without
limitation: (i) the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq.; (ii) the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq.; (iii) the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; (iv)
the Pollution Spill Prevention and Control Act (Chapter 376 of the Florida
Statutes), (v) the Florida Air and Water Pollution Control Act, the Florida
Resource Recovery and Management Act and other Acts included within Chapter 403
of the Florida Statutes, and (vi) all other laws relating to Pollution or the
protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, surface water,
groundwater, or land), or otherwise relating to the manufacture, processing,
distribution, use,
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<PAGE> 6
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
wastes.
1.5 Financed Property. The land and all of the
Improvements thereon which are to any extent and at any time financed under
this Agreement.
1.6 Financing Statements. One or more financing
statements from the Borrower to Lender to perfect Lender's security interest in
the personal property described in the Mortgage and Security Agreement.
1.7 Guarantor. NHC Holdings Corp., a Nevada corporation.
1.8 Hazardous Substance. Asbestos, polychlorinated
biphenyls, and petroleum products, and any other substance(s), material(s) and
waste(s) now or hereafter regulated under any Environmental Laws, including,
without limitation, any "hazardous substance(s)", "hazardous material(s)",
"toxic substance(s), "solid waste(s)", "waste(s)", "hazardous waste(s)",
"pollutant(s)", or "pollution", as defined in any Environmental Laws; and those
substances listed in the United States Department of Transportation Table (49
CFR 172.101 and amendments thereto) or by the Environmental Protection Agency
(40 CFR Part 302 and amendments thereto) as hazardous substances.
1.9 Loan Documents. This Agreement, the Note, the
Guaranty, the Mortgage, the Security Agreement, the Financing Statements, and
each of the other documents or instruments now or hereafter evidencing or
securing the payment or performance of any of the Loan obligations of Borrower.
All Loan Documents shall be satisfactory to Lender in form and in substance.
1.10 Lot(s). A residential building lot as shown on the
plat of the Subdivision.
1.11 Maturity Date. February 1, 2000.
1.12 Mortgage. One or more Mortgage and Security
Agreements from Borrower to Lender, securing the Loan and granting to Lender a
valid first mortgage lien on, inter alia, the Financed Property.
1.13 Note. That certain promissory note of even date
herewith made by the Borrower payable to the order of the Lender in the
principal amount of Five Million Six Hundred Twenty Five Thousand Dollars
($5,625,000.00), evidencing the Loan.
1.14 Security Agreement. One or more Security Agreements
from the Borrower to Lender securing the Loan and granting to Lender a valid
and perfected first priority security interest in all fixtures and personal
property now or hereafter located on, arising out of, or used in connection
with the Financed Property.
1.15 Subdivision. That certain residential subdivision
known as the Windsor Palms Subdivision being developed on that certain Parcel
of land located in Broward County, Florida.
1.16 Title Company. Katz, Barrow, Squitero, Faust and
Berman, P.A., as agent for Ticor Title Insurance Company or a title insurance
company accepted by Lender in writing. The Lender reserves the right to
require Borrower to change the Title Company at any time.
2
<PAGE> 7
2. THE LOAN.
2.1 Loan. Subject to the terms and conditions contained
in this Agreement, the Lender agrees to fund and Borrower may borrow, the
principal sum of Five Million Six Hundred Twenty Five Thousand Dollars
($5,625,000.00) to acquire one hundred ninety-five (195) Developed Lots within
the Subdivision, as more particularly described on Exhibit "A", attached hereto
and made a part hereof.
2.2 Disbursement of Loan Proceeds. At closing, subject
to the terms and conditions contained in this Agreement, the Lender shall
disburse the proceeds of the Loan to or for the account of the Borrower to
finance the acquisition of the Lots.
2.3 The Loan Documents. The Loan shall be evidenced by
the Note, and shall be secured by the Mortgage and other Loan Documents. The
Borrower shall take the Loan and comply with and perform all of the terms and
conditions of this Agreement and other Loan Documents.
2.4 Payment of the Note.
2.4.1 Payments of accrued interest only as provided
in the Note on the unpaid principal amount outstanding under the Note from time
to time shall be due and payable to Lender on the first (1st) day of each
month, commencing on the first (1st) day of the first (1st) month following the
date of this Agreement and continuing until the first (1st) day of the month
immediately preceding the Maturity Date.
2.4.2 In the event the Lender shall reasonably
determine that the outstanding principal balance of the Loan at any time
exceeds the value of the Financed Property (discounted on a bulk value basis)
securing the Loan, the Lender shall have the right to require a mandatory
principal reduction payment under the Loan in such amount as will reduce the
outstanding principal balance of the Loan to an amount which does not exceed
the value of the Financed Property (discounted on a bulk value basis).
2.4.3 Upon the sale of any Lot by the Borrower, a
release price shall be due and payable hereunder in an amount equal to the
release price set forth in Section 14 hereof.
2.4.4 Unless sooner paid, the entire unpaid
principal balance of the Loan together with all accrued but unpaid interest and
any other sum due under any of the other Loan Documents, shall be due and
payable in full on or before the Maturity Date.
2.4.5 Borrower may at any time prepay the Loan in
whole or in party without penalty or premium.
2.5 Loan Fee. As consideration for committing to make
the Loan in accordance with this Agreement, Borrower shall pay Lender a fee
equal to $54,012.50 (1.25 % of the amount of the Loan less a credit in the
amount of $16,300.00 for fees previously paid) upon the execution of this
Agreement, which fee shall be deemed fully earned and nonrefundable.
3. CONDITIONS TO LENDER'S OBLIGATION TO FUND THE LOAN. In
addition to applicable conditions set forth elsewhere in this Agreement, each
of the conditions listed below shall be
3
<PAGE> 8
complied with in form and substance satisfactory to Lender at least four (4)
Business Days prior to the funding of the Loan:
3.1 Title Insurance. Borrower shall have delivered to
Lender an original policy or policies of title insurance or (or commitment for
such title insurance marked to delete all requirements and "standard"
exceptions) issued by the Title Company, in an amount equal to the face
principal amount of the Note plus the principal amount of all other promissory
notes from time to time evidencing the Loan, which title insurance policy or
policies (i) shall insure Lender against loss or damage on account of
construction liens upon the Financed Property, (ii) shall insure that the
Mortgage is a valid first lien on the Financed Property, (iii) shall insure
that title to the Financed Property is good and marketable and free and clear
of all liens, encumbrances, easements, exceptions, reservations and
restrictions except for those approved by Lender, in its sole and absolute
discretion, without exception for ingress and egress, and (iv) shall provide
such other coverages and include such endorsements as Lender may reasonably
request, including, without limitation, Florida Form 9 coverage.
3.2 Survey. Borrower shall have delivered to Lender a
current survey of the Financed Property certified as true and correct to the
Lender, Title Company and Lender's counsel to their satisfaction and which has
been prepared by a surveyor acceptable to Lender showing the following:
A. the location of the perimeter of such
property;
B. the location of and the identification by
reference to recording data of all easements, rights of way,
conditions and restrictions on or appurtenant to the Lots;
C. the lines of the streets abutting the
property and the width thereof;
D. all encroachments upon the property and the
extent thereof in feet and inches;
E. the location of any improvements, to the
extent constructed, and the relation of the improvements by
distances to the perimeter of the property, the building
setback lines and the streetlines;
F. if any portion of the property is described
as being on a filed map, a legend relating the plat of survey
to such map;
G. a certificate reflecting whether or not all,
or any portion, of the property lies within the boundary of
any applicable flood zone; and
H. any other requirements reasonably requested
by Lender.
3.3 Title Company's Agreement. A standard form
indemnification agreement (closing protection letter) by the Title Company
shall have been executed and delivered to Lender
3.4 Note and Guaranty. The Note shall have been duly
authorized, executed and delivered to Lender by Borrower, and a Guaranty of the
Note, in form and substance acceptable to the Lender shall have been duly
executed and delivered to the Lender by the Guarantor.
4
<PAGE> 9
3.5 Mortgage Security Agreement and other Loan Documents.
The Mortgage shall have been duly authorized, executed, acknowledged, delivered
to Lender, and recorded. The Security Agreement, Financing Statements, and
other Loan Documents shall have been duly authorized, executed, and
acknowledged by Borrower, and delivered to Lender. All Financed Property shall
be encumbered by a valid first priority lien under the Mortgage, and all
fixtures and personal property now or hereafter located on, arising out of, or
used in connection with the Financed Property shall be encumbered by a valid
and perfected first priority security interest under the Security Agreement.
3.6 Affidavits. Title and loan to one borrower
affidavits of the Borrower shall have been executed and delivered to Lender in
substantially the forms attached hereto as Exhibit "B" and Exhibit "C",
respectively (collectively, "Affidavits").
3.7 Insurance.
3.7.1 Public Liability and Worker's Compensation
Insurance. Borrower at its expense shall have delivered evidence satisfactory
to Lender of the existence of public liability and worker's compensation
insurance in amounts and issued by companies approved by Lender. All liability
policies shall name Lender as an additional insured as its interest may appear.
3.7.2 Other Insurance. Borrower at its expense
shall also have furnished to Lender from time to time such other insurances as
may be required by the Loan Documents or as Lender may from time to time
reasonably request. Borrower shall furnish Lender with original certificates of
insurance and, if requested, copies of all policies for all insurance required
under this Agreement and each such policy shall be written by an insurer
satisfactory to Lender that is licensed to issue insurance in Florida and that
possesses a general policy holder's rating of "A" or better and financial
rating of Class VII or better according to Best's Key Rating Guide as the same
may change from time to time. Each such policy must be furnished to Lender
with proof of payment of the full premium due therefor (subject to the right of
the Borrower to make premium payments in monthly installment, if applicable)
and shall provide that it shall not be cancelled or materially modified without
thirty (30) days prior written notice to Lender. Borrower agrees that Lender
shall have the right to take any action necessary to continue any such
insurance in full force and effect including, but not limited to, paying
premiums. Any funds advanced to continue any of said policies in full force and
effect shall be considered as Advances hereunder and shall bear interest from
the date of disbursement at the same rate as other Advances and payment of said
funds and interest shall be secured by the Mortgage and other Loan Documents.
3.8 Soil Test and Hazardous Waste. Satisfactory
environmental audits and soil test reports shall have been submitted to Lender
for its review from an environmental engineer satisfactory to Lender certifying
that, except for Customary Complying Substances, no Hazardous Substances exists
on or about the Financed Property (including in any surface or ground water),
that the Financed Property is in compliance with all Environmental Laws, and
that there are no actual or potential environmental concerns in respect of the
Financed Property, the costs of which shall have been paid by Borrower.
3.9 Appraisal. A current appraisal of the Financed
Property complying with all applicable regulatory requirements shall have been
delivered to and approved by Lender, the costs of which shall have been paid by
Borrower. In addition, Lender reserves the right to require updated appraisal
reports with respect to the Financed Property if and when requested by the
Lender in its complete discretion, to be provided at Borrower's expense.
5
<PAGE> 10
3.10 Public Requirements. Borrower shall have delivered
to Lender the following with respect to the Subdivision:
A. letters from local utility companies stating
that electricity, telephone, sewer and water will be available to each Lot on a
permanent and adequate basis upon the completion of the Improvements;
B. a certified copy of the zoning map and
ordinance (including all conditions to any specially approved use, such as a
special exception or conditional use) applicable to the Subdivision and a
current letter from the appropriate zoning official confirming the zoning
classification for the Subdivision;
C. evidence satisfactory to the Lender that all
roads, drainage and other infrastructure necessary for the development of the
Subdivision have been completed to the boundary of the Subdivision and that the
necessary easements and rights of way therefor have been acquired or dedicated
to public use and duly accepted;
D. copies of subdivision plats, restrictive
covenants, plans of developments, and all other documents required by the local
zoning and subdivision ordinances together with evidence satisfactory to Lender
that the Final Plans conform to all federal, state, and local laws, ordinances,
rules and regulations, including, but not limited to, all Environmental Laws
and all laws of the State of Florida regulating building and land use; and
E. copies of permits from the water management
district for the construction and generation of facilities for the collection
and discharge of storm and surface water, certificates of concurrency
determination, reservation, or exemption, and all other licenses,
authorizations, permits and approvals, if any, required as a prerequisite to
the lawful development of the Subdivision.
3.11 Corporate Documents. Borrower shall have delivered
to Lender the following documents:
A. a certificate by the appropriate official of
the state of the Borrower's and Guarantor's incorporation to the effect that
the Borrower and the Guarantor are both corporations whose status is active
and, if other than Florida, accompanied by a certificate of the Florida
Department of State showing that the Borrower is authorized to transact
business in the State of Florida;
B. articles of incorporation of the Borrower and
the Guarantor, with all amendments thereto, certified by the appropriate
official of their respective states of incorporation, and bylaws of the
Borrower and Guarantor certified by the Secretary of the Borrower and the
Guarantor respectively;
C. an incumbency certificate specifying by name
and title the officers and directors of the Borrower and the Guarantor,
certified by the secretary of the Borrower and the Guarantor respectively; and
D. certified resolutions of the Board of
Directors of the Borrower authorizing the execution and delivery of this
Agreement, the Mortgage, Note and all other documents necessary or
6
<PAGE> 11
desirable for the consummation of the transactions contemplated by this
Agreement and certified resolutions of the Board of Directors of the Guarantor
authorizing the execution and delivery of the Guaranty to and in favor of the
Lender.
3.12 Opinion of Borrower's Counsel. Borrower shall have
delivered to Lender an opinion or opinions of counsel to Borrower and the
Guarantor addressed to Lender, such counsel to be reasonably satisfactory to
Lender, to the effect that:
A. this Agreement and all other Loan Documents,
including, without limitation, the Guaranty, have been duly authorized,
executed and delivered and are valid, binding and enforceable in accordance
with their terms, subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the right of creditors
generally;
B. that Borrower is duly incorporated and
organized, with an active status under the laws of the state of its
incorporation, is authorized to transact business in Florida, and has all the
necessary power and authority to undertake its obligations under the Loan
Documents;
C. that Guarantor is duly incorporated and
organized, with an active status under the laws of the state of its
incorporation and has all the necessary power and authority to undertake its
obligations under the Loan Documents;
D. that, to its knowledge after inquiry of
appropriate officers of the Borrower, Borrower and its properties are in
compliance with all laws, regulations, ordinances and orders of all
governmental authorities;
E. that there is no charter or by-law of
Borrower and no provision of any existing mortgage, indenture, contract or
agreement known to such counsel binding on Borrower or affecting its property
which would conflict with or in any way prevent the execution, delivery and
carrying out of the terms of this Agreement;
F. that, to its knowledge after inquiry of the
executive officers of the Borrower and the Guarantor, there are no proceedings
pending or threatened before any court or administrative agency which will
materially and adversely affect the Borrower or the Guarantor;
G. that the Note and the interest provided for
therein do not violate any usury or other laws of the State of Florida;
H. such other matters as Lender may reasonably
require.
3.13 Expenses. Borrower shall have paid all those fees
and charges due and payable or ordered paid by Lender as provided herein under
Paragraph 9 of this Agreement entitled Expenses.
3.14 Soil Reports. The Lender shall have received and
approved a written report from an engineer acceptable to the Lender which
set(s) forth the results of subsurface soil tests (including, but not limited
to, composition and compaction results), and recommendations, if any, and a
density/compaction certification acceptable to Lender. The Lender shall also
have received and approved such additional report(s) as shall be appropriate,
including additional reports made after implementation of the recommendations,
to show that the recommendations have been satisfied.
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3.15 Other Documents. Borrower shall deliver to Lender
such other documents and information as Lender may reasonably require.
3.16 Representations and Warranties. The representations
and warranties of Borrower as set forth in this Agreement and other Loan
Documents shall be true and correct.
3.17 No Event of Default. No Event of Default
(hereafter defined), or circumstance or event which upon the lapse of time, the
giving of notice, or both, could become an Event of Default, shall have
occurred.
4. EXPENSES. Borrower shall pay all reasonable fees, charges,
expenses, and costs incurred in the procuring and making of the Loan, and all
other reasonable expenses incurred by Lender during the term of the Loan,
including, without limitation, Title Company's fees and premiums, charges for
examination of title to the Financed Property and any endorsements, expenses of
surveys, Florida documentary stamp taxes and intangible personal property
taxes, recording expenses, fees of the Inspector, and the fees of the attorneys
for Lender. The Borrower shall also pay any and all other charges, liens and
encumbrances upon the Financed Property, any other expenses necessary to
complete the construction of the Improvements in accordance with the terms and
conditions of this Agreement, and the costs of such inspections, evaluations
and tests of the Financed Property as Lender may require from time to time,
including, but not limited to, appraisals, structural and environmental
engineering audits and other professional, engineering and architectural
reports, as provided elsewhere in the Loan Documents. Such amounts, unless
sooner paid, shall be paid from time to time as and when Lender shall request
either to the person to whom such payments are due or to Lender if Lender has
paid the same, or Lender may, at its option, deduct from any Advance any
amounts necessary for the payment of these items, and apply such amounts in
making such payments, and all sums so applied shall be deemed Advances under
this Agreement. Further, Borrower agrees to pay all such fees, charges,
expenses and costs incurred in connection with any modification or assumption
of the Loan.
5. WARRANTIES AND REPRESENTATIONS OF BORROWER. Borrower
represents and warrants (which representations and warranties shall be deemed
continuing) as follows:
5.1 Organization Status. Borrower and the Guarantor (i)
are each duly incorporated, organized and active corporations under the laws of
their respective states of incorporation and (ii) the Borrower is authorized to
transact business in Florida.
5.2 Construction and Compliance with Laws. With respect
to the Financed Property, no violation of any applicable zoning, building or
any other local, state or federal laws, ordinances and regulations exists with
respect to the anticipated use and construction of improvements thereon. The
Borrower (i) has obtained or is entitled to receive all licenses, permits and
approvals required by all local, state and federal agencies regulating such
construction and use and (ii) is in compliance with all laws, regulations,
ordinances and orders of all governmental authorities.
5.3 Financial Statements. The financial statements of
Borrower heretofore delivered to Lender are true and correct in all respects,
have been prepared in accordance with consistently applied generally accepted
accounting principles, and fairly present the respective financial conditions
of the Borrower as of the respective dates thereof, and no material adverse
change has occurred in the financial conditions reflected therein since the
respective dates thereof.
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5.4 Authority to Enter into Loan Documents. Borrower has
full power and authority to enter into this Agreement and the other Loan
Documents and consummate the transactions contemplated thereby, and the facts
and matters expressed or implied in the opinions of its legal counsel are true
and correct.
5.5 Validity of Loan Documents. The Loan Documents have
been approved by those persons having proper authority, and are in all respects
legal, valid and binding according to their terms.
5.6 Priority of Lien on Personalty. No chattel mortgage,
bill of sale, security agreement, financing statement or other title retention
agreement (except those executed in favor of Lender) has been or will be
executed with respect to any personal property, chattel or fixture granted to
Lender under the Loan Documents as security for the payment and performance of
the Loan obligations.
5.7 Conflicting Transactions. The consummation of the
transaction hereby contemplated and the performance of the obligations of
Borrower and the Guarantor under and by virtue of the other Loan Documents will
not result in any breach of, or constitute a default under, any lease, bank
loan or credit agreement, or other agreement or instrument to which either the
Borrower or the Guarantor is a party, bound or affected.
5.8 Pending Litigation. There are no actions, suits or
proceedings pending against the Borrower, the Guarantor or against the Financed
Property, and, to the knowledge of Borrower, there are no circumstances which
could lead to any action, suits or proceedings against or affecting Borrower or
the Financed Property, or involving the validity or enforceability of any of
the Loan Documents, before or by any government authority; and to Borrower's
knowledge, it is not in default with respect to any order, writ, injunction,
decree or demand of any court or any governmental authority. The aforesaid does
not pertain to pending or threatened actions, suits or proceedings which are in
the ordinary course of business, the outcome of which will not materially and
adversely affect the financial condition of the Borrower or impair its
operations.
5.9 Availability of Utilities. All utility services
necessary for the construction of the Improvements and the operation thereof
for their intended purpose will be available upon completion of the development
of the Subdivision, including water supply, storm and sanitary sewer
facilities, and electric and telephone facilities. All necessary permits and
permissions required from governmental authorities have been obtained for
unrestricted access to and use of such services in connection with the
construction and use of the Improvements and adequate capacities exist to fully
service the Financed Property.
5.10 Condition of Premises. No proceeding to condemn any
part of the Financed Property has been threatened or commenced by any authority
having the power of eminent domain, the Financed Property is not now damaged or
injured as a result of any fire, explosion, accident, flood or other casualty,
and there are no soil conditions which would interfere with the construction of
the Improvements.
5.11 Availability of Roads. All roads necessary to
provide adequate access to the Subdivision have either been completed or the
necessary rights of way therefor have either been acquired by the appropriate
local authorities or have been dedicated to public use and accepted by such
local authorities and all necessary steps have been taken by Borrower and such
local authorities to assure the complete construction and installation thereof.
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5.12 Environmental. The Borrower warrants as follows with
respect to the Financed Property:
5.12.1 To the best knowledge of Borrower, neither
the Financed Property nor the Borrower is in violation of any Environmental
Laws.
5.12.2 Neither the Borrower nor the Financed
Property is the subject of any existing, pending, or to the best of Borrower's
knowledge, threatened investigation, proceeding, claim or lawsuit with respect
to any Environmental Laws or any Hazardous Substance.
5.12.3 Neither the Borrower nor, to the best
knowledge of Borrower, any predecessor in title to the Financed Property have
received any notice of any violation or alleged violation of any Environmental
Laws or of any investigation, proceeding, claim or lawsuit, the basis of which
is a violation or alleged violation of any Environmental Laws or which involves
the existence or alleged existence of any Hazardous Substance at or on the
Financed Property.
5.12.4 Borrower has inspected or has caused the
Financed Property to be inspected and found it, to the best of its knowledge,
to be free from every Hazardous Substance.
5.12.5 Borrower has made inquiry into the previous
uses and ownership of the Financed Property and has determined that, to the
best knowledge of Borrower, except as referenced in the environmental report
submitted to the Lender, no Hazardous Substance has been manufactured,
produced, distributed, used, treated, transported, stored, released, disposed
of or otherwise handled at, on or near the Financed Property. To the best
knowledge of the Borrower, all of the recommendations and remedial action
called for by the referenced environmental report have been completed and
complied with.
5.12.6 Borrower has not caused nor allowed the
manufacture, processing, distribution, use, treatment, transport, storage,
release, disposal or other handling of any Hazardous Substance at or on the
Financed Property.
5.12.7 If required, Borrower has secured, or prior
to conducting any operations at the Financed Property shall secure, all
permits, licenses and approvals necessary to conduct its operations at the
Financed Property in compliance with all Environmental Laws. No such permit,
license, or approval has lapsed or been terminated and the Borrower is in
compliance with the terms and conditions of each such permit, license and
approval which has been heretofore issued.
5.12.8 Borrower's intended use of the Financed
Property will not violate any Environmental Laws, or result in the manufacture,
processing, distribution, use, treatment, transport, release, disposal or
handling of any Hazardous Substance at, on or near the Property (except for
Customary Complying Substances).
5.12.9 The Borrower has no knowledge of any material
undisclosed liability of the Borrower with respect to any Environmental Laws or
Hazardous Materials, whether pertaining to the Financed Property or otherwise.
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<PAGE> 15
5.13 No Default. There is no monetary or material
non-monetary default on the part of Borrower under this Agreement, or any of
the other Loan Documents and no event has occurred and is continuing which with
notice, or the passage of time, or either, would constitute a default under any
provision thereof.
6. ADDITIONAL COVENANTS OF BORROWER. Borrower covenants and
agrees with Lender as follows:
6.1 No Transfer, Subordinate Mortgage Financing or other
Encumbrance of Financed Property. No portion of the Financed Property shall be
sold, leased, conveyed, mortgaged or encumbered in any way without the prior
written consent of Lender provided, however, prior to the occurrence of an
Event of Default, Borrower may enter into contracts for the sale of Lots in the
ordinary course of Borrower's business. All easements, covenants and
restrictions or other agreements affecting the Financed Property shall be
submitted to Lender for its written approval prior to the execution thereof by
Borrower, accompanied by an appropriate survey showing the portion of the
Financed Property affected, and any other information requested.
6.2 Compliance with Restrictions and Laws. Borrower will
comply promptly with all restrictions of record, all federal, state and local
laws, ordinances and regulations, and all requirements of governmental
authority pertaining to the Financed Property, including, but not limited to
(i) the Interstate Land Sales Full Disclosure Act, if applicable, (ii) all
applicable federal and state securities laws, and (iii) all laws of the State
of Florida and all zoning, building and other local codes applicable to
developments of the type to be constructed. Borrower will also obtain and keep
in good standing all licenses, Permits and approvals required for construction
and use of the Improvements.
6.3 Brokerage Commissions. Borrower will not knowingly
engage in any activity or enter into any relationship which will give rise to
any loan or brokerage commission with regard to the Loan, and Borrower will
indemnify Lender from the claims of brokers arising by reason of the execution
hereof or the consummation of the transactions contemplated hereby.
6.4 Financial Statements and Reporting Obligations. The
Borrower shall furnish to Lender:
6.4.1 Within one hundred twenty (120) days after
the end of each fiscal year, consolidated and consolidating financial
statements for the Borrower, the Guarantor and their respective subsidiaries,
all audited and presented with an unqualified opinion by a nationally
recognized accounting firm showing that the various statements fairly present
the financial condition of the Borrower, the Guarantor and their respective
subsidiaries as of the close of such year, prepared in accordance with
generally accepted accounting principles.
6.4.2 Within forty five (45) days following the end
of each fiscal quarter, the Borrower shall provide management prepared
financial statements for the Borrower, the Guarantor and their respective
subsidiaries, on a consolidated and consolidating basis, prepared as of the end
of that fiscal quarter. All such financial statements shall be prepared in
accordance with consistently applied generally accepted accounting principles,
and certified by the Borrower's chief financial officer of the Borrower and the
Guarantor as true and correct.
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<PAGE> 16
6.4.3 If requested by Lender, copies of the
Borrower's and the Guarantor's federal income tax returns.
6.4.4 Within forty five (45) days following the end
of each fiscal quarter, Borrower shall deliver a quarterly inventory report
prepared as of the end of that quarter, reflecting all of the Borrower's then
existing construction and development projects, in form and substance, and
containing such additional information as may be required by the Lender from
time to time.
6.4.5 Promptly, from time to time, such other
information regarding the Financed Property or the operations, business,
affairs and financial condition of Borrower, its subsidiaries or affiliates as
Lender may reasonably request.
6.5 Insurance. Borrower will maintain in effect, for the
benefit of the Lender as its interest may appear, such insurance coverages as
may be required under the Loan Documents or by Lender, shall pay all premiums
therefor when due, and shall not permit any termination or material change to
any such coverage without Lender's prior written consent. Borrower shall also
cooperate with Lender in obtaining for Lender the benefits of any insurance or
other proceeds lawfully or equitably payable to it in connection with the
transaction contemplated hereby and in the collection of any indebtedness or
obligation of Borrower to Lender incurred hereunder (including the payment by
Borrower of the expense of an independent appraisal on behalf of Lender in case
of a fire or other casualty affecting the premises).
6.6 Taxes. Borrower shall pay all personal property and
other taxes and assessments of whatever nature now or hereafter levied against
or which could result in a lien on all or any part of the Financed Property
prior to delinquency.
6.7 Indebtedness. Borrower will not incur, create,
assume or permit to exist with respect to the Financed Property any
indebtedness or liability for borrowed money, any indebtedness constituting the
deferred purchase price of any property or assets, or any indebtedness owed
under any conditional sale or title retention agreement, or any other
indebtedness or liability evidenced by notes, bonds, debentures or similar
obligations without the written approval of Lender, except:
6.7.1 indebtedness owed Lender;
6.7.2 indebtedness incurred on open accounts for
materials, equipment and supplies purchased in the ordinary course of business,
payment for which shall be made promptly when due;
6.7.3 indebtedness to Pacific United Development
Corp., a Nevada corporation pursuant to those certain unsecured promissory
notes dated December 30, 1996 and January 13, 1997 made by the Borrower payable
to the order of Pacific United Development Corp. in the aggregate principal
amount of Two Million Three Hundred Seventy Three Thousand Three Hundred and
Three Dollars ($2,373,303.00), subject to that certain Subordination Agreement
of even date herewith among the Lender, the Borrower and Pacific United
Development Corp.
6.8 Further Assurances and Preservation of Security.
Borrower will do all acts and execute all documents for the better and more
effective carrying out of the intent and purposes of this Agreement, as Lender
shall reasonably require from time to time, and will do such other acts
necessary or desirable to preserve and protect the collateral at any time
securing or intended to secure the Loan, as Lender may require.
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<PAGE> 17
6.9 Utilization of Loan Proceeds. Borrower will utilize
the proceeds of the Loan solely to finance the acquisition of the Lots.
6.10 No Assignment. Borrower shall not assign this
Agreement or any interest herein or right hereunder or allow any party other
than Borrower to act as general contractor for the Improvements, without
Lender's prior written consent.
6.11 Environmental.
6.11.1 Neither Borrower, or any party acting by,
through or under Borrower, nor any other party will manufacture, produce,
distribute, use, treat, transport, release, discharge, dispose of or otherwise
handle any Hazardous Substance on, at or about the Financed Property, except
for Customary Complying Substances.
6.11.2 Borrower shall regularly monitor the Financed
Property and all parties acting by, through or under Borrower to assure that
the representations and covenants contained in this Agreement remain true and
correct at all times.
6.11.3 Borrower shall give prompt written notice to
Lender of:
6.11.3.1 the violation or alleged
violation of any Environmental Laws at the Financed Property;
or
6.11.3.2 the presence or alleged
presence of any Hazardous Substance at, on or near the
Financed Property, other than Customary Complying Substances;
or
6.11.3.3 any and all notices issued,
or investigations, proceedings, claims or lawsuits threatened
or instituted, with respect to any Environmental Laws or the
alleged presence of any Hazardous Substance at, on or near the
Financed Property; or
6.11.3.4 any discovery by Borrower of
any occurrence or condition that could cause the Financed
Property or any part thereof to violate any Environmental Laws
or become subject to any Hazardous Substance.
6.11.4 Lender, and its agents and representatives,
shall have the right from time to time, during normal business hours, and in a
manner so as not to unreasonably interfere with Borrowers' business, to enter
upon and inspect the Financed Property, collect earth and water samples
therefrom, and perform such other audits, evaluations and tests thereof as
Lender may reasonably deem advisable to ensure that the Financed Property
complies with all Environmental Laws, all at the cost and expense of the
Borrower; provided, however, Lender shall not require any such testing or
evaluations unless Lender has reasonable grounds to suspect that the Financed
Property may be subject to contamination. Lender shall also have the right to
join and participate in, as a party if it so elects, any legal proceedings or
actions affecting the Financed Property or the Borrower which involve any
Hazardous Substance or Environmental Laws.
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<PAGE> 18
6.11.5 In the event that any Hazardous Substance,
other than Customary Complying Substances, are found at or on the Financed
Property, Borrower shall take all necessary actions and shall spend all
necessary sums to cause the same to be timely eliminated, cleaned up and
removed from the Financed Property in accordance with all applicable
Environmental Laws, and Lender shall in no event be liable or responsible for
any costs or expenses incurred in connection therewith.
6.11.6 Borrower shall at all times observe and
satisfy the requirements of, and maintain the Financed Property in compliance
with, all Environmental Laws.
6.12 Indemnification. Without limiting any rights or
remedies available to Lender under this Agreement, the Mortgage or other Loan
Documents, or otherwise at law or in equity, if Borrower at any time shall
default in or fail to perform or observe any of its obligations under this
Agreement, Lender shall have the right, but not the duty, to perform such
obligations, and Borrower agrees to pay to Lender, on demand, all costs and
expenses incurred by Lender in connection therewith, and all costs and expenses
which Lender may incur in exercising any of its rights under or enforcing this
Agreement, including, without limitation, reasonable attorneys fees, together
with interest thereon from the date of expenditure at the highest rate of
interest allowed by law. Borrower also agrees to indemnify Lender and hold
Lender harmless from any and all liability, which may be imposed upon Lender
and any and all loss which Lender may incur (including, but not limited to,
attorneys' fees), by reason of:
6.12.1 the existence of any Hazardous Substance now
or hereafter on, in, under, at, or around the Financed Property;
6.12.2 the operation, effect or violation of any
Environmental Laws; and/or
6.12.3 the breach by Borrower of any warranty,
representation or covenant contained in this Agreement.
6.13 Survival of Indemnity. Notwithstanding anything
contained in this Agreement or in any of the Loan Documents or otherwise to the
contrary, the obligations of Borrower under this Agreement shall be secured by
the Mortgage and other Loan Documents and the indemnity obligations of Borrower
under this Agreement concerning Hazardous Substances and Environmental Laws
shall survive the foreclosure of the Mortgage or other Loan Documents, the
taking by Lender of any deed or deeds in lieu of foreclosure, the repayment of
the indebtedness secured by the Mortgage, and the satisfaction or other
termination of the Mortgage and other Loan Documents.
6.14 Financial Covenants. So long as any Loan indebtedness
remains outstanding, Guarantor shall at all times:
6.14.1 maintain a minimum tangible net worth of not
less than Fourteen Million Dollars ($14,000,000.00); and
6.14.2 maintain a maximum debt to tangible net worth
ratio of no more than 5:1,
all as determined in accordance with generally accepted accounting principles.
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6.15 Advertising. Lender shall have the right to install
and maintain at the Subdivision one sign identifying Lender as the institution
financing the Financed Property.
6.16 Third-Party Defaults. Borrower shall immediately
give Lender written notice of any default by Borrower under any obligation to
any person other than Lender, if such default involves nonpayment or liability
of $100,000.00 or more.
6.17 Change of Ownership. So long as any portion of the
Loan remains outstanding or this Loan Agreement remains in effect, there shall
be no change in the ownership of any capital stock of the Borrower and Borrower
shall remain a solely owned subsidiary of the Guarantor.
7. DEFAULT. Upon the occurrence of any one or more of the
following events (individually, an "Event of Default"), all obligations on the
part of Lender to make any further Advance hereunder shall, if Lender elects,
terminate, and Lender may at its option then or thereafter exercise any of its
remedies set forth herein, but Lender may make any Advances or parts of
Advances after the happening of any Event of Default without thereby waiving
the right to then or thereafter exercise such remedies and without becoming
liable to make any further Advance:
7.1 Failure to Satisfy Conditions. If Borrower fails to
satisfy any condition under this Agreement; or
7.2 Bankruptcy. If there is filed by or against Borrower
a Petition in bankruptcy or a petition for the appointment of a receiver or
trustee of the property of Borrower, and any such petition not filed by
Borrower is not dismissed within sixty (60) days of the date of filing
(provided Lender shall not be obligated to fund any additional Advances pending
such dismissal), or if Borrower files a petition for reorganization under any
of the provisions of the Bankruptcy Code or of any similar law, state, federal,
or foreign, or if Borrower makes a general assignment for the benefit of
creditors or makes any insolvency assignment or is adjudicated insolvent by any
court of competent jurisdiction; or
7.3 Breach of Covenants, Warranties and Representations.
If (i) any warranty or representation made by Borrower in this Agreement or in
connection with the Loan shall at any time be false or misleading in any
material respect, or (ii) if Borrower shall fail to keep, observe or perform
any of the terms, covenants, representations or warranties contained in this
Agreement, or (iii) any default shall occur under the Note, the Mortgage, or
any of the Other Loan Documents, or (iv) Borrower shall default in any of its
other obligations to Lender, including, but not limited to, that certain
Construction Line of Credit Loan Agreement dated March 13, 1996, between the
Borrower and the Lender, as amended, or under any other promissory note, loan
agreement, mortgage or other evidence of indebtedness existing between the
Borrower and the Lender, or (v) if Borrower shall default in any obligation to
any person other than Lender, if such default involves non payment or liability
of $100,000.00 or more, unless such non payment or liability is contested by
Borrower in good faith and no judgment or Final determination adverse to
Borrower shall have been rendered thereon; or
7.4 Material Adverse Change of Borrower. If any material
adverse change shall occur in the financial condition of Borrower at any time
during the term of the Loan from the financial condition revealed in statements
already presented to and accepted by Lender.
8. REMEDIES OF LENDER. Upon the happening of any Event of
Default, after written notice and ten (10) days opportunity to cure in the
event of a monetary default or thirty (30) days
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<PAGE> 20
opportunity to cure in the event of a non-monetary default (unless either a
longer or shorter cure period is specifically provided the Note, Mortgage or
other Loan Document for a particular default or breach thereof, in which event
such longer or shorter cure period shall govern), then Lender may, at its
option, exercise any one or more of the following remedies (provided Lender
shall not be required to give written notice of any default of the same type or
nature more than twice in any twelve (12) month period prior to exercising such
remedies):
8.1 terminate this Agreement;
8.2 commence an appropriate legal or equitable action to
enforce performance of this Agreement;
8.3 require that the Loan, including all amounts due
under the Note and all amounts due under this Agreement or any of the other
Loan Documents, be paid immediately in full, apply all or any portion of the
equity funds toward payment of the Loan, and commence appropriate legal and
equitable action to foreclose the Mortgage and collect and otherwise all such
amounts due Lender;
8.4 take such action as may be reasonable to preserve and
protect the Financed Property and any construction materials stored thereon;
and
8.5 exercise any other rights or remedies Lender may have
under the Mortgage or other Loan Documents or which may be available in equity
or under applicable law.
9. RELEASES. Lender agrees to release any Lot from the
lien of the Mortgage and other Loan Documents by appropriate instrument of
partial release at Borrower's sole cost and expense in substantially the form
attached hereto as Exhibit "D", provided that prior to and as a condition to
each such release:
9.1 Borrower pays to Lender in immediately available
funds, a release payment equal to one hundred percent (100%) of the average
aggregate amount of all sums advanced hereunder (determined on per Lot basis),
as determined by the Lender; and
9.2 there shall not have occurred any Event of Default
hereunder or under any of the other Loan Documents nor any event of omission or
commission which with the passage of time or notice or both would constitute an
Event of Default hereunder or under any of the other Loan Documents.
9.3 In addition, Lender agrees to release from the lien
of the Mortgage and other Loan Documents, without payment of a release price,
those portions of the Financed Property, not encompassing any part of the Lots,
which constitute common areas within the Subdivision upon recordation of a plat
of the Subdivision or a conveyance of such common areas to a homeowner's
association or dedication to a public authority.
10. GENERAL TERMS. The following shall be applicable throughout
the period of this Agreement or thereafter as provided herein:
10.1 Rights of Third Parties. All conditions of the
Lender hereunder are imposed solely and exclusively for the benefit of Lender
and its successors and assigns, and no other person shall have standing to
require satisfaction of such conditions or be entitled to assume that Lender
will make
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<PAGE> 21
advances in the absence of strict compliance with any or all thereof, and no
other person shall, under any circumstances, be deemed to be a beneficiary of
this Agreement or the Loan Documents, any provisions of which may be freely
waived in whole or in part by the Lender at any time if, in its sole
discretion, it deems it desirable to do so. In particular, Lender makes no
representations and assumes no duties or obligations as to Borrower or any
third parties concerning the quality of the construction by Borrower of the
Improvements or the absence therefrom of defects.
10.2 Borrower is not Lender's Agent. Nothing in this
Agreement, the Note, the Mortgage or any other Loan Documents shall be
construed to make Borrower the Lender's agent for any purpose whatsoever, or
Borrower and Lender partners, or joint or co-venturers. The relationship of the
Borrower and Lender shall, at all times, be that of debtor and creditor.
10.3 Lender Not Liable for Damage or Loss. All
inspections and other services rendered by or on behalf of Lender shall be
rendered solely for the protection and benefit of the Lender. Neither Borrower
nor any third Persons shall be entitled to claim any loss or damage against the
Lender or against its agents or employees for failure to properly discharge
their duties.
10.4 Lender Not Obligated to Insure Proper Disbursement of
Funds to Third Parties. Nothing contained in this Agreement, or any of the
other Loan Documents, shall impose upon Lender any obligation to oversee the
proper use or application of any disbursements of funds made in connection with
the Loan.
10.5 Indemnification from Third Party Claims. Borrower
shall indemnify Lender from any liability, claims or losses resulting from the
disbursement of any Loan proceeds the construction of the Improvements, or the
condition of the Financed Property, whether related to the quality of
construction or otherwise, and whether arising during or after the term of the
Loan. This provision shall survive the repayment of the Loan and shall continue
in full force and effect so long as the possibility of such liability, claims,
or losses exists.
10.6 Evidence of Satisfaction of Conditions. Lender
shall, at all times, be free independently to establish to its good faith and
satisfaction, and in its reasonable discretion, the existence or nonexistence
of a fact or facts which are disclosed in documents or other evidence required
by the terms of this Agreement.
10.7 Headings. The headings of the sections, paragraphs
and subdivisions of this Agreement are for the convenience of reference only,
and shall not limit or otherwise affect any of the terms hereof.
10.8 Invalid Provisions to Affect No Others. If
performance of any provision hereof or any transaction related hereto is
limited by law, then the obligation to be performed shall be reduced
accordingly to its maximum lawful scope; and if any clause or provision herein
contained operates or would prospectively operate to invalidate this Agreement
in part, then the invalid part of said clause or provision only shall be held
for naught, as though not contained herein, and the remainder of this Agreement
shall remain operative and in full force and effect.
10.9 Application of Interest to Reduce Principal Sums.
Nothing herein contained, nor any transaction related hereto, shall be
construed or so operate to require Borrower, or any other person liable for
repayment of the Note or any other amount pursuant to the Loan Documents, to
pay interest
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<PAGE> 22
at a greater rate than is now lawful in such case to contract for, or to make
any payment, or to do any act contrary to law. Should any interest or other
charges in connection with the Loan payable or paid by Borrower, or any other
person, whether under the Note or any of the other Loan Documents, result in
the computation or earning of interest in excess of the maximum rate of
interest which is legally permitted under applicable laws, then any and all of
such excess shall be and the same is hereby waived by Lender hereof, and any
and all such excess paid shall be automatically credited against and in
reduction of the principal balance due under the Note or, at the option of
Lender, paid directly by Lender to the Borrower or any other person liable for
the payment of the Note.
10.10 Governing Law. The laws of the State of Florida
shall govern the interpretation and enforcement of this Agreement.
10.11 Number and Gender. Whenever the singular or plural
number, masculine or feminine or neuter gender is used herein, it shall equally
include the others and shall apply jointly and severally.
10.12 Extraneous Agreements. No prior or present
agreements or representations, whether written or oral, shall be binding upon
Lender unless expressed in this Agreement, it being intended that each and
every such agreement and representation shall be either merged herein or
extinguished.
10.13 Waiver. If Lender shall waive any provisions of any
of the Loan Documents, or shall fail to enforce any of the conditions or
provisions of this Agreement, such waiver shall not be deemed to be a
continuing waiver and shall never be construed as such; and Lender shall
thereafter have the right to insist upon the enforcement of such conditions or
provisions. Furthermore, no provision of this Agreement shall be amended,
waived, modified, discharged or terminated, except by instrument in writing
signed by the parties hereto.
10.14 Notices. All notices, to be effective, must be in
writing and sent by certified U.S. mail, federal express or other reputable
courier, addressed (as applicable), in the case of Borrower, to Borrower at its
address first set forth above, Attn: Luis R. Rabell, Vice-President, with copy
to NHC Holdings, Corp., a Nevada corporation, 3200 Southwest Freeway, Suite
1220, Houston, Texas, 77027, Attn: Cathryn L. Porter and Katz, Barron,
Squitero, Faust & Berman, P.A., 2699 South Bayshore Drive, Seventh Floor,
Miami, FL 33133-5408, Attn: Erica L. English and, in the case of Lender, to
Lender at its address first set forth above, Attn: Loan Administration and to
Commonwealth United Mortgage, 222 South Westmonte Drive, Suite 307, Altamonte
Springs, Florida 32714, Attn: Loan Administration, with postage and courier
charges prepaid. Any notice may also be delivered by facsimile transmission, if
to Borrower, then to (305) 854-4507 (Attn: Luis R. Rabell) and (305) 285-9227
(Attn: Erica L. English) and (713) 871- 0155 (Attn: Cathy Porter) and if to
Lender, then to (713) 965-6928 (Attn: Loan Administration) and (407) 786-0259
(Attn: Loan Administration). In the event any notice is serviced hereunder by
facsimile, a copy of such notice shall also be sent by U.S. mail or other
reputable courier within a reasonable time after such facsimile delivery.
Lender or Borrower may change their respective addresses or facsimile numbers,
for notice purposes, or their designated recipients of notices, by delivering
notice of the change to the other in accordance with this paragraph. Any notice
shall be deemed "delivered" when sent as aforesaid and received, unless receipt
is refused, in which case the notice shall be deemed "delivered" when refused.
18
<PAGE> 23
10.15 Successors and Assigns. This Agreement shall inure
to the benefit of and be binding on the parties hereto and their heirs, legal
representatives, successors and assigns; but nothing herein shall authorize the
assignment hereof or any rights or interest hereunder by Borrower.
10.16 Time is of the Essence. Time is of the essence of
this Agreement, including the performance of each of the terms, conditions and
provisions hereof.
10.17 Attorney's Fees. If either party hereto shall ever
seek to enforce its rights or engage an attorney to defend it or to assist it
in enforcing any of the terms, conditions or provisions under this Agreement or
any of the other Loan Documents, the prevailing party to such action shall be
entitled to collect all reasonable sums incurred in connection therewith,
whether or not suit shall be brought, and, if so, then at all pre-trial,
appellate, post-judgment, bankruptcy and other proceedings.
11. ARBITRATION.
11.1 To the maximum extent not prohibited by law, any
controversy, dispute or claim arising out of, in connection with, or relating
to this Agreement or the Loan Documents or any transaction provided for
therein, including, but not limited to, any claim based on or arising from an
alleged tort or an alleged breach of any agreement contained in any of the Loan
Documents, shall, at the request of any party to this Agreement or the Loan
Documents (either before or after the commencement of judicial proceedings), be
settled by arbitration pursuant to Title 9 of the United States Code, which the
parties hereto acknowledge and agree applies to the transaction involved
herein, and in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA") In any such arbitration proceedings: (i)
all statutes of limitations which would otherwise be applicable shall apply;
and (ii) the proceeding shall be conducted in Orlando, Florida, by a single
arbitrator, if the amount in controversy is $1,000,000.00 or less, or by a
panel of three (3) arbitrators if the amount in controversy is over
$1,000,000.00. All arbitrators shall be selected by the process of appointment
from a panel pursuant to Section 13 of the AAA Commercial Arbitration Rules and
each arbitrator will have AAA acknowledged expertise in the appropriate subject
matter. Any award rendered in any such arbitration proceeding shall be final
and binding, and judgment upon any such award may be entered in any court
having jurisdiction. Notwithstanding the foregoing, to the extent the matter
in controversy is covered by insurance, no award shall be binding unless
binding arbitration is consented to by all applicable insurers. Borrower will
exercise its best efforts to obtain such consents.
11.2 If any party to this Agreement or the Loan Documents
files a proceeding in any court to resolve any such controversy, dispute or
claim, such action shall not constitute a bar to the right of any other party
to seek arbitration under the provisions of this Section of that or any other
claim, dispute or controversy, and the court shall, upon motion of any party to
the proceeding, direct that such controversy, dispute or claim be arbitrated in
accordance with this Section.
11.3 Notwithstanding any of the foregoing, the parties
hereto agree that no arbitrator or panel of arbitrators shall possess or have
the power to (i) assess punitive damages, (ii) dissolve, rescind or reform
(except that the arbitrator may construe ambiguous terms) of this Agreement or
the Loan Documents, (iii) enter judgment on the debt, (iv) exercise equitable
powers or issue or enter any equitable remedies, or (v) allow discovery of
attorney/client privileged information, and the parties hereby waive the
aforementioned remedies. The Commercial Arbitration Rules of the AAA are hereby
modified to this extent for the purpose of arbitration of any dispute,
controversy or claim arising out of, in connection with, or relating to this
Agreement or the Loan Documents.
19
<PAGE> 24
11.4 No provision of, or the exercise of any rights under,
this Section shall limit or impair the right of any party to the Loan Documents
before, during or after any arbitration proceeding to: (i) exercise self-help
remedies such as setoff for repossession: (ii) foreclose (judicially or
otherwise) any lien on or security interest in any real or personal property
collateral; or (iii) obtain emergency relief hypothecation, pledging or
concealment of assets or of collateral securing any indebtedness, obligation or
guaranty referenced in the Loan Documents. Such emergency relief may be in the
nature of, but is not limited to: pre-judgment attachments, garnishments,
sequestrations, appointments of receivers, or other emergency injunctive relief
to preserve the status quo.
11.5 In the event arbitration is prohibited by law with
respect hereto, any actions or proceedings with respect to the Note, this
Agreement or the other Loan Documents may be instituted in the courts of the
State of Florida, or elsewhere to the extent that jurisdiction shall exist
apart from the provisions of this Section, as the Lender may elect, and by
execution and delivery of this Agreement, the Borrower irrevocably and
unconditionally submits to the jurisdiction (both subject matter and personal)
of each such court, and irrevocably and unconditionally waives (i) any
objection the Borrower may now or hereafter have to the laying of venue in any
of such courts, and (ii) any claim that any action or proceeding brought in any
of such courts has been brought in an inconvenient forum.
12. WAIVER OF JURY TRIAL. EACH OF THE UNDERSIGNED HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY
WITH RESPECT TO ANY LITIGATION BETWEEN THEM, INCLUDING, BUT NOT LIMITED TO,
WITH RESPECT TO ANY AND ALL CAUSE OR CAUSES OF ACTION, DEFENSES, COUNTERCLAIMS,
CROSS CLAIMS, THIRD PARTY CLAIMS, AND INTERVENOR'S CLAIMS, REGARDLESS OF THE
CAUSE OR CAUSES OF ACTION, DEFENSES OR COUNTERCLAIMS ALLEGED OR THE RELIEF
SOUGHT BY ANY PARTY, AND REGARDLESS OF WHETHER SUCH CAUSES OF ACTION, DEFENSES
OR COUNTERCLAIMS ARE BASED ON, OR ARISE OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE OBLIGATIONS
COVERED THEREBY.
THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SHALL SUPERSEDE AND
REPLACE ALL PRIOR AGREEMENTS OR UNDERSTANDINGS, WRITTEN OR ORAL, RELATING TO
THE MATTERS SET FORTH HEREIN. THIS AGREEMENT MAY ONLY BE AMENDED IN WRITING AND
NO ORAL REPRESENTATIONS OR AGREEMENTS SHALL BE BINDING UPON THE LENDER UNLESS
REDUCED TO A WRITING SIGNED BY THE LENDER.
20
<PAGE> 25
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to
be executed on the date first above written.
Signed, sealed and delivered
in the presence of: LENDER:
BANK UNITED
By: /s/ PAUL GARLAND
/s/ LUTRICIA FREEMAN --------------------------------
- ------------------------------------ PAUL GARLAND, Vice-President
Witness LUTRICIA FREEMAN
- ------------------------------------
(Print Name)
/s/ GREGORY W. GLASS
- ------------------------------------
Witness GREGORY W. GLASS
- ------------------------------------
(Print Name)
BORROWER:
THE ADLER COMPANIES, INC., A FLORIDA
CORPORATION
/s/ ERICA L. ENGLISH By: /s/ LUIS RABELL
- ------------------------------------ --------------------------------
Witness ERICA L. ENGLISH Name: LUIS RABELL
- ------------------------------------ Title: Vice President
(Print Name)
/s/ BARBARA BRISETT
- ------------------------------------
Witness BARBARA BRISETT
- ------------------------------------
(Print Name)
STATE OF FLORIDA )
)
COUNTY OF ORANGE )
The foregoing instrument was acknowledged before me this 14th day of
January, 1997, by PAUL GARLAND as Vice President of BANK UNITED, a federal
savings bank, on behalf of the Bank, who is personally known to me.
/s/ GREGORY W. GLASS
---------------------------------------
NOTARY PUBLIC
GREGORY W. GLASS
-------------------------------------
(Print Name)
My Commission Expires:
(Seal)
21
<PAGE> 26
STATE OF FLORIDA )
)
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this 14th day of
January, 1997, by LUIS RABELL, as Vice President of BANK UNITED, a federal
savings bank, on behalf of the Bank, who is personally known to me.
/s/ ERICA L. ENGLISH
-------------------------------------
NOTARY PUBLIC
ERICA L. ENGLISH
-------------------------------------
(Print Name)
My Commission Expires:
(Seal)
22
<PAGE> 1
EXHIBIT 10.11(a)
LOAN NO. ______________________
MASTER LOAN AGREEMENT
Date: August _______, 1997
This Master Loan Agreement (this "Loan Agreement") is made by and
between NEWMARK HOMES, L.P., a Texas limited partnership (hereinafter called
"Borrower" whether one or more), whose address is 1200 Soldiers Field Drive,
Sugarland, Texas 77479, and GUARANTY FEDERAL BANK, F.S.B., a federal savings
bank, organized and existing under the laws of the United States (hereinafter
called "Lender"), whose address is 8333 Douglas Avenue, Dallas, Texas 75225, in
connection with a revolving loan (hereinafter called the "Loan"), from Lender
to Borrower, for the acquisition and/or refinancing of residential lots (the
"Lots"), and the construction of single-family residences thereon (the
"Residences") (the Lots and the Residences thereon are sometimes collectively
called hereinafter the "Properties" and individually "Property"). The
Properties shall be in residential subdivisions approved by Lender, as set
forth in Exhibit A attached hereto, and incorporated herein by reference, and
in additional residential subdivisions, as may hereafter be approved by Lender
from time to time. The number of Residences to be constructed shall be limited
and the price range of the Residences shall be as stipulated on Exhibit A
attached hereto. The Loan shall be in the amount of $10,000,000.00 (the "Loan
Amount"). This Loan Agreement is a master agreement and shall govern all of
the advances made under a revolving promissory note (the "Note"), secured by
one or more deeds or trust, from time to time executed by Borrower, for the
benefit of Lender, covering certain Lots and Residences constructed or to be
constructed thereon.
In connection with the Loan, Borrower and Lender hereby agree as
follows:
1. NOTE, AUTHORITY, ETC. Simultaneously with the execution and
delivery of this Loan Agreement, Borrower shall execute and deliver to, procure
for and deposit with and pay to Lender the following, all in form and substance
satisfactory to Lender:
(a) The Note evidencing the Loan.
(b) Such documents and instruments as Lender may require
to evidence the status, organization or authority of Borrower and any
guarantor of the Loan.
(c) Continuing guaranty (the "Guaranty") of the Loan
executed by the guarantor(s) set forth on Exhibit A attached hereto
and incorporated herein by reference "Guarantor" whether one or more).
(d) An Approved Budget, in the form attached hereto as
Exhibit B and incorporated herein by reference.
(e) Financial statements of Borrower and any Guarantor of
the Loan (the "Financial Statements").
(f) Loans to One Borrower Affidavit.
2. REQUIREMENTS FOR FIRST ADVANCE. Prior to the first advance
secured by a Mortgage (as hereinafter defined), Borrower shall execute and
deliver to, procure for and deposit with and pay to Lender the following, all
in form and substance satisfactory to Lender, such requirements also being
applicable prior to the first advance secured by each additional Mortgage:
(a) Such documents as Lender may require to evidence,
govern or secure the payment or the Loan, including a deed of trust
(each individual deed trust hereinafter called a Mortgage and all
deeds of trust securing the Loan are hereinafter called the
MASTER LOAN AGREEMENT - Page 1
<PAGE> 2
"Mortgages"), securing the payment of the Note and Loan and evidencing
a first lien or charge on that portion of the Properties covered by
the Mortgage.
(b) Mortgagee Title Policy Binder on Interim Construction
Loan (the "Binder "), issued by a title insurance company or companies
acceptable to Lender (Lender hereby approving Pacific Title, L.P., as
agent, subject to Lender's approval of such title insurance company),
agreeing to insure Lender, in the aggregate amount of the Loan
Allocation (as hereinafter defined) for each Property covered by such
Mortgage (the "Aggregate Loan Allocation"), that such Mortgage and any
other liens securing the payment of the Note and Loan have the
priority required by Lender. If required by Lender, the Binder shall
be extended to cover each and every advance at the time such advance
is made; provided, however, the maximum title insurance for title
insurance underwriters must be acceptable to Lender, and if required
by Lender, from time to time, Borrower shall cause to be issued to
Lender an additional Binder or Binders, in such amounts and from such
title insurance underwriters, as are acceptable to Lender.
(c) Policies of all-risk builder's risk insurance on each
Property covered by such Mortgage, owner's liability insurance,
worker's compensation insurance, and such other insurance as Lender
may require, with standard mortgagee clauses attached naming Guaranty
Federal Bank, F.S.B., 8333 Douglas Avenue, Dallas, Texas 75215,
Attention: Commercial Loan Insurance Administrator, as the insured
mortgagee thereunder, such policies to be issued by companies
satisfactory to Lender, with copies, or certificates thereof, being
delivered to Lender.
(d) A representative set of plans with respect to each
type or model of Residence to be constructed by Borrower on every Lot
covered by such Mortgage.
(e) Recorded Subdivision Plat pertaining to all Lots
covered by such Mortgage. approved by all applicable governmental
authorities having jurisdiction.
(f) Appraisal of the Lot(s) and the Residence(s) to be
constructed thereon (if applicable) covered by such Mortgage, which
shall be ordered directly by Lender, at Borrower's expense (not to
exceed $225.00 per Property), prepared by all appraiser satisfactory
to Lender.
(g) Such sums for insurance, taxes, expenses, charges and
fees customarily required by Lender.
(h) Loan Finance Charge in the amount set forth on
Exhibit A attached hereto.
(i) Evidence that each Lot covered by such Mortgage is
not located within any designated flood plain or special flood hazard
area.
(j) True, correct and complete copies of all executed
Contracts of Sale (the "Contracts"), for the sale of a Property,
covered by such Mortgage.
(k) Inspection fee as set forth on Exhibit A attached
hereto.
(1) Lender may require as a condition to each advance, a
bills-paid affidavit from each original contractor and subcontractor,
to be submitted with each draw request, together with responses to
requests for information as provided under Texas Property Code Section
53.159.
(m) If and as requested by Lender, (i) evidence that all
applicable zoning ordinances and restrictive covenants affecting the
Property covered by such Mortgage permit the use for which the
Residences to be constructed thereon are intended and have been or
will be complied with, (ii) evidence of the availability of all
Utilities to and for the Property covered by such Mortgage, (iii)
evidence that all streets providing access to the Property covered by
such Mortgage have been dedicated to public use and installed
MASTER LOAN AGREEMENT - Page 2
<PAGE> 3
and accepted by the applicable governmental authorities, (iv) an
environmental site assessment report with respect to the Property
covered by such Mortgage which is prepared by a qualified firm
acceptable to Lender and which certifies as follows: (A) there is no
evidence that any hazardous materials have been generated, treated,
stored, or disposed of on any of the Property covered by such Mortgage
and none exists, on under or at such Property; (B) there is no
publicly available information or records, or evidence at the Property
covered by such Mortgage, of environmental matters that could restrict
the development or use of such Property or of any high voltage
transmission lines, wetlands, or hazardous material, and (v) such
other information and evidence as Lender shall require relating to
Borrower or such Property.
(n) A detailed cost breakdown for the construction of
each Residence covered by such Mortgage.
This Loan Agreement, the Note, the Mortgage, the Guaranty and any
other documents evidencing or securing the Loan are collectively called
hereinafter the "Loan Instruments."
3. REQUIREMENTS FOR SUBSEQUENT ADVANCES. Prior to any subsequent
advances secured by a Mortgage, Borrower shall satisfy the following
requirements and, if required by Lender, deliver to Lender evidence of such
satisfaction, such requirements also being applicable prior to any subsequent
advances secured by each additional Mortgage:
(a) All conditions precedent to the First advance shall
have been satisfied.
(b) Such certificates, approvals and evidence of
completion, in whole or in part, of the applicable construction item
described on the Approved Budget, bills and invoices as Lender may
request prior to making any disbursement hereunder.
(c) Building permit(s) and all other permits required
with respect to the Residences covered by such Mortgage.
4. PROCEDURE FOR ADVANCES. Advances under the Loan shall be and
in accordance with the terms and provisions of Paragraph 4(b) below prior to
the giving of the notice described in Paragraph 4(f) below. Advances under the
Loan shall be made in accordance with the following:
(a) Upon Borrower's compliance with the provisions of
this Loan Agreement, provided that Borrower is not in default
hereunder, and subject to all other provisions of this Loan Agreement,
Lender will advance and disburse the Loan and Borrower's Deposit
(hereinafter defined) in installments to Borrower for the payment of
the acquisition or refinancing costs for any Lots and/or, after actual
commencement of construction hereunder, for the payment of costs of
labor, materials or services for the construction of the Residences
for work actually done. As to all advances, a residential draw
request therefor shall be executed and certified to by Borrower and
shall be accompanied by such information as Lender may request.
Advances under the Loan shall not exceed the amounts provided in the
Approved Budget. If requested by Lender following a default (and the
expiration of any applicable notice and/or cure period), Borrower
shall maintain a special account at a bank selected by Borrower,
satisfactory to Lender, into which all advances and other payments in
connection with the construction of the Residences shall be deposited
by Borrower, and against which checks shall be drawn only for costs
incident to the Loan and the Property.
(b) Borrower shall be entitled only to payment in the
amount approved by Lender, based upon the stage, as identified on
Exhibit B attached hereto (the "Stage") of the Properties for which
Lender has received appraisals and commitments for title insurance
acceptable to Lender and on which Lender has not released its lien of
record. On a monthly basis, Borrower shall submit to Lender a
borrowing base application for advance (in the form attached hereto as
Exhibit C) which identifies each Property, its address, lot and block,
plan type, sales price, and its Stage, according to the Approved
MASTER LOAN AGREEMENT - Page 3
<PAGE> 4
Budget. In addition, on a weekly basis, Borrower a work in progress
report (the "WIP Report") which also identifies each Property, its
address, lot and block, plan type, Sales price, and its Stage,
according to the Approved Budget. The aggregate amount, from time to
time, of the lot acquisition Stage and the actual work in progress
("WIP") Stage of the Properties is referred to herein as the
"Borrowing Base" and shall be determined by Lender in its sole
discretion. Notwithstanding any provision herein to the contrary,
Lender shall have no obligation to make any advance under this Loan
which exceeds the Borrowing Base, as it exists from time to time.
At any given time, the "Borrowing Base" will be determined by
the most recent WIP Report, as received and accepted by Lender.
However, if inspections by Lender reveal that the WIP Report
overstates the actual work in progress, the Borrowing Base for that
and subsequent WIP Reports will be reduced by the amount of
overstatement until another inspection has been performed by Lender.
If inspection by Lender reveals that more than one WIP Report by
Borrower overstates the actual WIP, or if Lender deems itself
insecure, Lender may restrict the Borrowing Base to that amount
determined by the last inspection by Lender; nevertheless, Lender will
conduct inspections at least once per month or waive this restriction.
(c) Any provision herein to the contrary notwithstanding,
the amount of the Loan allocated to be advanced for a Property (the
"Loan Allocation" or if applicable to more than one Property, the
"Loan Allocations") shall not exceed the lesser of (1) the percentage
set forth on Exhibit A attached hereto of the direct costs of such
Property, as determined by Lender (the "Loan to Cost Ratio"), or (2)
the percentage set forth on Exhibit A attached hereto of the lowest of
the following values which is applicable to such Property (the "Loan
to Value Ratio"):
(i) The value established by Lender or by an
appraisal prepared by all appraiser
satisfactory to Lender and otherwise in form
and substance satisfactory to Lender.
(ii) Borrower's purchase price for the Lot (to be
used only if the Loan is strictly for
acquisition of the Lot).
(iii) The sales price of the Property.
(d) Notwithstanding any other requirements contained
herein. if required by Lender, (i) credit for the final Stage (Stage
10 on Exhibit B) under the Loan for a Property will not be earned, or
(ii) the final advance under a Loan Allocation will not be made (as
appropriate) until Lender has received an affidavit or certificate
executed by Borrower stating that (1) all requirements of governmental
authorities having jurisdiction have been satisfied, (2) no mechanics'
or materialmen's liens or other encumbrances have been filed against
the Property, (3) a copy of the final certificate of occupancy or all
unconditional temporary certificate of occupancy issued by the
governing municipal authority, and (4) all invoices, bills, and other
payments have been paid in full to the appropriate parties with
respect to all of the Residences; however, Lender shall have the right
to require at any time the following evidence and documents: (1)
evidence that all requirements of governmental authorities having
jurisdiction have been satisfied, (2) evidence that no mechanics' or
materialmen's liens or other encumbrances have been filed and remain
in effect against such Lot and Residence thereon, (3) evidence that
either (i) the Property has been "completed," as that term is defined
in Section 53.106 of the Texas Property Code or (ii) an affidavit of
completion has been filed with the county clerk of the county in
which such Property is located, in compliance with Section 53.106 of
the Texas Property Code, and (4) final lien releases or waivers by all
parties who have supplied labor, materials, or services for the
construction of such Property, or who otherwise might he entitled to
claim a contractual. statutory, or constitutional lien against such
property.
(e) Anything herein or in any of the other Loan
Instruments to the contrary notwithstanding, at no time shall Lender
be obligated to make any advance hereunder if
MASTER LOAN AGREEMENT - Page 4
<PAGE> 5
the outstanding balance of the Loan equals or exceeds the Loan Amount,
or the loans-to-one-borrower limitation imposed upon Lender by any
applicable laws, rules, and regulations of entities having
jurisdiction over Lender in connection with indebtedness owing by
Borrower and its affiliates to Lender (the "Loans-to-One-Borrower
Limitation").
(f) Notwithstanding anything to the contrary in this Loan
Agreement or the other Loan Instruments, at any time (and from time to
time) Lender may (in its sole discretion) declare, pursuant to written
notice thereof given to Borrower, that any and all future advances
under the Loan shall be in accordance with the terms and provisions
of Paragraph 4(a) above. From and after the date of such written
notice, Paragraph 4(b) above shall be of no force and effect.
Thereafter, advances under Paragraph 4(a) shall be based upon work
actually done during the preceding period less retainage (if required
by Lender), and all draw requests executed and certified by Borrower
shall contain the information as set forth in Exhibit D attached
hereto, and such other information as may be requested by Lender from
time to time (including, without limitation, down date waivers from
those contractors and subcontractors to whose contract the advance is
allocable). Borrower agrees that Lender may make advances under the
Loan before receiving Borrower's executed residential draw request and
Borrower acknowledges that any such advance shall be deemed to be the
amount requested by Borrower in such residential draw request even
though the amount reflected in such executed residential draw request
may differ from the amount of the advance made by Lender.
5. BORROWER'S DEPOSIT. If there are insufficient funds remaining
in the Loan for the completion of the Residences and, in Lender's judgment,
Borrower does not have sufficient cash on hand to complete the Residences and
meet its other obligations, it shall constitute a default hereunder, if, in
such case, Borrower does not deposit with Lender, within ten (10) days after
demand by Lender, such sums, either in the form of cash or letter(s) of credit
acceptable to Lender (the "Borrower's Deposit"), as Lender may deem necessary,
in addition the Loan, for the completion of the Residences, the payment of all
costs in connection with the construction of the Residences, and the
performance of any obligation of Borrower to Lender. Borrower hereby agrees
that Lender (a) shall have a security interest in any Borrower's Deposit, and
(b) may apply any proceeds of any Borrower's Deposit for the purposes
contemplated herein without any further consent or action on Borrower's part.
Lender shall not be required to pay interest on the Borrower's Deposit. Lender
may advance all or a portion of the Borrower's Deposit prior to any advance of
any portion of the Loan proceeds. Borrower shall promptly notify Lender in
writing if and when the cost of the construction of the Residences exceeds, or
appears likely to exceed, the amount of the unadvanced portion of the Loan and
the unadvanced portion of the Borrower's Deposit.
6. WARRANTIES, REPRESENTATIONS, COVENANTS AND AGREEMENT Borrower
warrants, represents, covenants and agrees as follows:
(a) Prior to the recordation of any Mortgage, no work (as
that term is defined in Section 53.001 of the Texas Property Code) of
any kind (including the destruction or removal of any existing
improvements, site work, clearing, grubbing, draining, erection of
temporary utilities or fencing of the Property) pertaining to the
construction of any of the Residences, has been or will be commenced
or performed upon the Property and no material (as that term is
defined in Section 53.001[4] of the Texas Property Code) or equipment
has been or will be delivered to or upon the Property, and no
construction contract for the construction or erection of any of the
Residences has been or will be let.
(b) Borrower will commence actual construction of a
Residence within thirty (30) days from the date a Mortgage, covering
such Residence, is recorded in the Real Property Records (as
hereinafter defined), and will complete same, including all necessary
utility connections, in accordance with the plans and specifications
submitted to and approved by Lender, and in accordance with good
building practice and all applicable laws, ordinances, rules,
regulations and restrictions, within six (6) months from the date of
such commencement. After construction of a Residence has been
commenced, Borrower shall diligently proceed with said construction
and will not permit cessation of
MASTER LOAN AGREEMENT - Page 5
<PAGE> 6
the work of construction for a period in excess of fifteen (15)
consecutive days without the written consent of Lender except for
causes beyond the reasonable control of Borrower, and then not more
than thirty (30) days in any event without such consent provided that
Borrower is proceeding diligently in all other respects.
(c) Without the prior written consent of Lender, Borrower
will make no material change in the plans and specifications submitted
to Lender (as used in this sentence, "material change" shall mean any
change to such plans and specifications other than additions or
upgrades totaling less than ten percent [10%]of the sales price of the
applicable Residence).
(d) After a default hereunder or under any other Loan
Instrument (a "default") (and the expiration of any applicable notice
and/or cure period), Lender shall have the right, but not the
obligation, to disburse and directly apply the proceeds of any advance
under the Loan 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 Mortgages, except an advance of a
Borrower's Deposit. Borrower hereby authorizes Lender to hold, use,
disburse, and apply the Loan and the Borrower's Deposit for payment of
costs of construction of the Residences, expenses incident to the Loan
and the Property, costs of completion of all necessary off-site
development of the Property, and the payment or performance of any
obligation of Borrower hereunder. Borrower hereby assigns and pledges
the proceeds of the Loan and Borrower's Deposit to Lender for such
purposes. Lender may advance and incur such expenses as Lender deems
necessary for the completion of construction of the Residences and to
preserve the Property and any other security for the Loan, and such
expenses, even though in excess of the amount of the Loan, shall be
secured by the Mortgages, and payable to Lender upon demand. 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 herein
irrespective of the provisions of Paragraph 4 hereof, and the amount
of advances to which Borrower shall thereafter be entitled shall be
correspondingly reduced.
(e) All advances and disbursements of the Loan and
Borrower's Deposit are subject to inspection of the Residences by
Lender's appraiser, and Lender at its election may require five (5)
business days after receipt of notice in writing before making any
advance or payment, for the purpose of making an inspection or other
determination.
(f) Borrower will accept advances and disbursements in
accordance with the provisions hereof and, if made to Borrower, will
use or cause each such disbursement to be used solely for the payment
of materials, labor, services, costs and expenses incurred in
connection with the construction of the Residences or for such
additional costs and expenses as may be approved in writing by Lender,
and in payment or performance of any obligation of Borrower to Lender,
and for no other purpose.
(g) Borrower will permit Lender and Lender's agents and
representatives (who may be a third-party designated from time to time
by Lender), at any and all times, during regular business hours, to
inspect said construction and the Residences and to examine and copy
all of Borrower's books and records and all contracts and bills
pertaining to said construction and the Residences. If applicable,
Borrower shall pay Lender at the time of each inspection of a
Residence, an inspection fee in the amount provided in Exhibit A
attached hereto, for having Lender's representative (who may be a
third-party designated from time to time by Lender) inspect the
Property. After a default hereunder, if Lender shall examine the
aforesaid books and records, Borrower shall pay on demand by Lender,
subject to Paragraph 12 hereof, reasonable expenses incurred by Lender
as a result of such examination.
(h) Lender has no liability or obligation whatsoever for
the Residences or the construction or completion thereof or work
performed thereon, and has no obligation except to advance the Loan as
herein agreed, and is not obligated to inspect the Residences, nor is
Lender liable for the performance or default of any contractor of
MASTER LOAN AGREEMENT - Page 6
<PAGE> 7
subcontractor, or for any failure to construct, complete, protect or
insure the Residences, or for the payment of any cost or expense
incurred in connection therewith, or for the performance or
nonperformance of any obligation of Borrower to Lender; and nothing,
including without limitation any disbursement hereunder or the deposit
or acceptance of any document or instrument, shall be construed as a
representation or warranty, express or implied, on Lender's part.
(i) In the event of any default by Borrower as defined in
Paragraph 10 hereof, Lender (in addition to any and all other remedies
permitted by law) may (i) exercise any of the rights provided in the
Mortgages in event of default; (ii) enter upon the Property: (iii)
employ watchmen to protect the Property (including personal property
located thereon) from damage, injury or loss; (iv) continue any or all
existing contracts for the completion of the Residences or enter into
any new, additional or substitute contracts for the completion of the
Residences, either in Lender's own name or in the name of Borrower;
(v) advance such of the undisbursed Loan proceeds and/or Lender's own
funds as may be necessary to remedy such default, including completion
of the Residences, and in such event, all such advances shall be
secured by the Mortgages and by all other security for the Loan, and
Borrower will pay the same, together with interest thereon at the
maximum lawful rate, to Lender upon demand; and (vi) elect not to make
any further advances of the undisbursed Loan proceeds, and in such
event Borrower shall not be entitled to any further advances under the
Loan.
(j) Without the prior written consent of Lender and
except for ordinary and customary purchases of appliances that are
timely paid (with Loan proceeds or from other sources of Borrower) in
accordance with the ordinary and customary financing terms for such
purchases, no materials, equipment, fixtures or any other part of the
Residences shall be purchased or installed under security agreements,
conditional sale contracts or lease agreements, or other arrangement
wherein a security interest or title to said property is retained or
the right is reserved or accrues to anyone to remove or repossess any
such items or to consider them as personal property.
(k) Lender may (but shall not be obligated to) commence,
appear in or defend any action or proceeding purporting to affect the
Property or the rights or duties of Lender or Borrower or the payment
of any funds hereunder, and in connection therewith may pay all
necessary expenses, including reasonable attorneys' fees, which
Borrower agrees to pay to Lender upon demand. Borrower hereby
irrevocably appoints and authorizes Lender, as Borrower's
attorney-in-fact under a power of attorney coupled with an interest,
to execute, file and record any notice of completion or cessation of
labor or any other notice which Lender deems necessary or advisable to
protect its interest hereunder or the security for the Loan.
(l) Borrower may not assign or otherwise transfer this
Loan Agreement or any right hereunder, and this Loan Agreement shall
be binding upon Borrower and the representatives and successors of
Borrower. In the event of the termination or dissolution of Borrower
prior to the completion of the Residences or prior to the use, release
or disbursement of all proceeds of the Loan and any Borrower's
Deposit, this Loan Agreement shall not, at the option of Lender, be
terminated or affected by such dissolution or termination.
(m) If Borrower is more than one person, firm or
corporation, all receipts, requests and instructions pertaining to the
Loan, or for any advance thereof, may be made by any one of the
undersigned Borrower with the same effect as if signed by all.
(n) Borrower shall promptly inform Lender of (i) any
litigation against Borrower or Guarantor or affecting the Property,
which, if determined adversely, might have a material adverse effect
upon the financial condition of Borrower of guarantor or upon the
Properties, or might cause a default, (ii) any material claim or
controversy which might become the subject of such litigation, and
(iii) any material adverse change in the financial condition of
Borrower or Guarantor. For purposes hereof, material adverse
MASTER LOAN AGREEMENT - Page 7
<PAGE> 8
change and/or material adverse effect shall mean a decline of fifteen
percent (15%) in the net worth of Borrower or Guarantor as shown on
the Financial Statements delivered to Lender from time to time in
connection with the Loan.
(o) Borrower shall promptly inform Lender if any
Contracts are canceled and/or materially modified or if any lending
institution cancels or materially modifies its commitment to finance a
prospective buyer's acquisition of a Residence.
(p) As required by Lender. Borrower shall provide Lender
with the following matters relating to Borrower: (1) (i) audited
Financial Statements within ninety (90) days, or (ii) unaudited
Financial Statements within sixty (60) days of Borrower's fiscal year
end; (2) unaudited Financial Statements within forty-five (45) days of
each calendar month end; and (4) sales, closings and inventory reports
of Residences, acceptable to Lender, within thirty (30) days of each
calendar month end, during the term of the Loan. Borrower shall also
cause any other party obligated for the Loan to provide Lender its
Financial Statement on or before April 15 of each calendar year, or
more frequently as required by Lender. All Financial Statements shall
be true, correct, and complete as of, the dates specified therein and
fully and accurately present the financial condition of Borrower and
any other party obligated for the Loan, as appropriate, as of the
dates specified. Borrower represents to Lender that on the date
hereof, no material adverse change has occurred in the financial
condition of Borrower or, to Borrower's knowledge, any other party
obligated for the Loan since the dates the initial Financial
Statements of Borrower and any other party obligated for the Loan
were delivered to Lender.
(q) The Mortgages additionally secure all other
indebtedness, of whatever kind or character, now owing or which may
hereinafter become owing to Lender by the entities listed on Exhibit A
attached hereto, whether such indebtedness is evidenced by note, open
account, overdraft, endorsement, surety agreement, guaranty, or
otherwise, it being reasonably contemplated that such additional
indebtedness owing to Lender may be incurred, from time to time,
subsequent to the date hereof (the "Additional Loans"). A default
under any Additional Loans shall constitute a default under the Loan
Instruments and a default under the Loan Instruments shall constitute
a default under the Additional Loans.
(r) From and after a default hereunder or an "Event of
Default" under any other of the Loan Instruments, at the request of
Lender, Borrower shall provide to Lender, within thirty (30) days
after such request, a Mortgagee Policy of Title Insurance (the
"Policy"), issued by the title company which issued the Binder,
insuring Lender, in the amount of the Aggregate Loan Allocation for
each Property covered by such Mortgage, that such Mortgage and any
other liens securing the payment of the Note and Loan have the
priority required by Lender. If further required by Lender, the Policy
shall be extended to cover each and every advance under such Aggregate
Loan Allocation at the time such advance is made.
(s) Subject to the provisions of Paragraph 16 hereof,
Borrower shall cause a Property to be released from a Mortgage at such
times as provided in Exhibit A attached hereto (the "Required Release
Date").
(t) Neither Borrower nor any other party shall occupy any
Residence which is covered by a Mortgage.
7. REQUIRED PRINCIPAL PAYMENTS. Borrower shall pay the principal
of the Note as therein provided and as provided in Exhibit A attached hereto.
Further, if, at any time, the outstanding balance of the Loan exceeds (1) the
Loan Amount, (2) the Loans-to-One-Borrower Limitation, or (3) the Borrowing
Base as determined by Lender, or if, at any time, the amount of the Loan
advanced by Lender for a particular Property exceeds the Loan to Value Ratio
for such Property, Borrower shall immediately pay in cash to Lender, following
demand therefor, the amount of such excess. Further, after nine (9) months
from the recording of a Mortgage in the Real Property Records, Lender shall
have the right to obtain an
MASTER LOAN AGREEMENT - Page 8
<PAGE> 9
appraisal of the Property covered by such Mortgage. from an appraiser
satisfactory to Lender, paid for by Borrower, and in the event such appraisal
determines that the portion of the Loan advanced by Lender for such Property
exceeds the Loan to Value Ratio for such Property, then Borrower shall also
immediately pay in cash to Lender, following demand therefor, the amount of
such excess.
8. REVOLVING LOAN. All or any portion of the principal of the
Loan in any he borrowed, paid, prepaid, repaid and be borrowed from time to
time prior to maturity in accordance with the provisions of the Loan
Instruments. The excess of borrowing (advances and re-advances) over
repayments shall evidence the principal balance of the Loan from time to time
and at any time. The aggregate amount of all advances under the Loan may exceed
the Loan Amount, but neither the outstanding principal balance of the Loan nor
the outstanding aggregate amount of the Loan Allocations shall ever exceed the
Loan Amount. The Loan shall not be governed by or be subject to Chapter 15 of
the Texas Credit Code Title 79, Revised Civil Statutes of Texas, 1925, as
amended.
9. MATURITY AND EXTENSION. Notwithstanding any provision in the
Note to the contrary, the Note and Loan shall mature and may be extended as
provided in Exhibit A attached hereto.
10. DEFAULT. The term "default" as used herein shall include a
breach by Borrower of any agreement, warranty, representation or covenant
contained in this Loan Agreement and as may be set forth on Exhibit A attached
hereto, and any default or "Event of Default" by Borrower under any of the Loan
Instruments; provided, however, notwithstanding anything to the contrary
contained herein or in the other Loan Instruments, as a condition to any such
default or Event of Default involving any covenant other than the payment of
money, Lender shall give Borrower thirty (30) days written notice to perform
such covenant. In the event of a default by Borrower, as aforesaid, Lender, at
its election, may declare all sums owing on account of the Loan to be
immediately due and payable, exercise any and all remedies provided in the Loan
Instruments or otherwise at law or in equity and/or make no additional advances
hereunder. No waiver of any default on the part of Borrower shall be
considered a waiver of any other or subsequent default, and no delay or
omission in exercising or enforcing the rights and powers of Lender shall be
construed as a waiver of such rights and powers, and likewise no exercise or
enforcement of any rights or powers hereunder by Lender shall be held to
exhaust such rights and powers, and every such right and power may be exercised
from time to time.
11. ADDITIONAL LOAN COVENANTS. If there are any additional loan
covenants (the "Additional Loan Covenants") listed on Exhibit A attached
hereto, and in the event Borrower or Guarantor (if applicable to Guarantor)
breaches any of the Additional Loan Covenants (and such breach continues for
thirty (30) days following written notice thereof to Borrower), or if Lender
elects (in Lender's sole and absolute discretion based upon market or economic
conditions, upon Borrower's or Guarantor's then Financial condition or upon
Lender's business judgment), after giving notice thereof to Borrower, to limit
future advances of the Loan, then in either event at Lender's election, no
additional Mortgages shall be recorded in the Real Property Records and
advances under the Loan shall be limited to the then existing Borrowing Base
(as determined by Lender); provided, however, in the event of any such breach
or election, if Lender shall have given Borrower the notice described in
Paragraph 4(f) above, then all future advances under the Loan shall be limited
to the unadvanced portion of the Loan Allocation for Properties covered by then
existing recorded Mortgages and no additional Mortgages shall be recorded in
the Real Property Records; provided, however, that a breach of any of the
Additional Loan Covenants shall not be considered a default under the Loan
Instruments.
12. LIMITATION ON INTEREST. All agreements between Borrower and
Lender, whether now existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency, whether by reason of acceleration
of the maturity of the Note or otherwise, shall the interest contracted for,
charged or received by Lender exceed the maximum amount permissible under
applicable law. If, from any circumstance Lender shall ever receive and thing
of value declined interest by applicable law in excess of the maximum lawful
amount, an amount equal to any excessive interest shall be applied to the
reduction of the principal of the Note and
MASTER LOAN AGREEMENT - Page 9
<PAGE> 10
not to the payment of interest, or if such excessive interest exceeds the
unpaid balance of principal of the Note such excess shall be refunded to
Borrower. All interest paid or agreed to be paid to the holder of the Note
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full period from the date of the Note
until payment in full of the principal so that the interest thereon for such
full period shall not exceed tile maximum amount permitted by applicable law.
This paragraph shall control all agreements between Borrower and Lender.
13. CHOICE OF LAW. EXCEPT WHERE FEDERAL LAW IS APPLICABLE
(INCLUDING, WITHOUT LIMITATION, ANY FEDERAL USURY CEILING OR OF THE FEDERAL LAW
WHICH, FROM TIME TO TIME, IS APPLICABLE TO 111 INDEBTEDNESS HEREIN AND WHICH
PREEMPTS STATE USURY LAWS), THIS LOAN AGREEMENT, THE NOTE, THE MORTGAGES AND
THE OTHER LOAN INSTRUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS.
14. NOTICES. All notices, demands, requests, and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given when presented personally or deposited in a regularly
maintained receptacle for the United States Postal Service, postage prepaid,
registered or certified, return receipt requested, addressed to Borrower or
Lender, as the case may be, at the respective addresses set forth on the first
page of this Loan Agreement, or such other address as Borrower or Lender may
from time to time designate by written notice to the other as herein required.
15. FEES AND EXPENSES. Borrower agrees to pay when due Lender's
fees, as set forth herein, the reasonable attorneys' fees and expenses of
Lender's counsel, title insurance and examination charges, survey costs, hazard
insurance premiums, filing and recording fees, and other reasonable expenses
payable to third parties incurred by Lender in connection with the consummation
of the transactions contemplated by this Loan Agreement, including all
renewals, extensions and modifications thereof. Further, Borrower agrees to
make each payment which it owes under the Loan Instruments not later than
twelve o'clock, noon, Dallas, Texas time, on the date such payment becomes due
and payable (or the date any voluntary prepayment is made), in immediately
available funds. Any payment received by Lender after such time will be deemed
to have been made on the next following business day.
16. PARTIAL RELEASES. Borrower shall have the right to any
partial releases of the Property subject to the following terms and conditions:
(a) Borrower shall not be in default hereunder or under
any other of the Instruments;
(b) 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 Residence
to be released. In addition, the Partial Release should be accompanied
with information 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, numbers
that reference the Partial Release (i.e., order numbers, release
numbers, etc.) and the date when the Partial Release is to become
effective;
(c) If required by Lender, all accrued and unpaid
interest on the principal amount of the Loan being prepaid shall be
paid at the time such Partial Release is requested, provided that any
payment received by Lender after twelve o'clock, noon, Dallas, Texas
time, will be deemed to have been made on the next following business
day;
(d) Payment to Lender loan amount in cash as provided on
Exhibit A attached hereto;
MASTER LOAN AGREEMENT - Page 10
<PAGE> 11
(e) Payment to Lender of any applicable extension fee, as
provided in Exhibit A attached hereto; and
(f) Payment to Lender of all costs and expenses arising
in connection with any Partial Release.
Notwithstanding any provision herein to the contrary, at such time as Lender
provides to the title company (which is closing the sale of a Residence) a
"pay-off" quote for a Residence being released from a Mortgage, in accordance
with this Paragraph 16, Borrower shall not be entitled to any further advances
under the Loan with respect to such Residence.
17. WAIVER OF JUDICIAL PROCEDURAL MATTERS. BORROWER HEREBY
EXPRESSLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING BROUGHT BY LENDER IN CONNECTION WITH ANY OF THE LOAN INSTRUMENTS,
ANY AND EVERY RIGHT IT MAY HAVE TO (I) INJUNCTIVE RELIEF, (II) A TRIAL BY JURY,
(III) INTERPOSE ANY COUNTERCLAIM THEREIN (OTHER THAN A COMPULSORY COUNTERCLAIM)
AND (IV) HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR SEPARATE SUIT, ACTION OR
PROCEEDING. Nothing herein contained shall prevent or prohibit Borrower from
instituting or maintaining a separate action against Lender with respect to any
asserted claim.
18. HEADINGS. The Paragraph headings hereof and in the Exhibits
hereto are inserted for convenience of reference only and shall not alter,
define, or be used in construing the text of such Paragraphs.
[The balance of this page is intentionally left blank.]
MASTER LOAN AGREEMENT - Page 11
<PAGE> 12
EXHIBIT 10.11(a)
19. FINAL AGREEMENT. THE LOAN INSTRUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN LENDER AND BORROWER CONCERNING THE LOAN, AND THE LOAN
INSTRUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF LENDER AND BORROWER OR ANY AGENT, BROKER,
EMPLOYEE OR REPRESENTATIVE OF EITHER OF THEM. THERE ARE NO ORAL AGREEMENTS
BETWEEN LENDER AND BORROWER.
BORROWER:
NEWMARK HOMES, L.P.,
a Texas limited partnership
BY: NEWMARK HOME CORPORATION,
a Nevada corporation,
General Partner
By: /s/ TERRY WHITE
-----------------------------------
Name: Terry White
-------------------------
Title: Senior Vice President
------------------------
LENDER:
GUARANTY FEDERAL BANK, F.S.B,
a federal savings bank
By: /s/ RONALD MCLEOD
--------------------------------------------
Name: Ronald McLeod
-----------------------------------
Title: Vice President
-----------------------------------
MASTER LOAN AGREEMENT - Page 12
<PAGE> 1
EXHIBIT 10.11(b)
LOAN NO. _________
REVOLVING PROMISSORY NOTE
$10,000,000.00 August ____, 1997
FOR VALUE RECEIVED, the undersigned (sometimes referred to herein as
"Maker"), jointly and severally if more than one, promise to pay to the order
of GUARANTY FEDERAL BANK, F.S.B., a federal savings bank organized and existing
under the laws of the United States (sometimes referred to herein as "Payee"),
at its principal offices at 8333 Douglas Avenue, Dallas, Texas 75225, or at
such other place as the holder hereof may from time to time designate the
principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00), or so much
thereof as may be advanced, with interest on the principal balance from time to
time remaining unpaid prior to default or maturity at the rate hereinafter
provided, interest only being payable on the first day of each month
commencing September, 1997, and continuing until and including April 30, 1998,
when, unless extended pursuant to the terms of Loan Agreement (hereafter
defined), the unpaid principal balance or this Note, together with all accrued
and unpaid interest shall be due and payable. The principal of this Note shall
otherwise be payable in accordance with the Loan Agreement. All payments due
under this Note shall be delivered to the holder hereof no later than twelve
o'clock, noon, Dallas, Texas time, on the date such payment becomes due and
payable (or the date any voluntary prepayment of this Note is made), in
immediately available funds. Any payment received by the holder hereof after
such time will be deemed to have been made on the next following business day.
As herein provided, the unpaid principal Amount (hereafter defined) of
this Note (or portions thereof) from time to time outstanding shall bear
interest prior to maturity at a varying rate per anum equal to, at Maker's
option, (i) the Commercial Base Rate (hereafter defined), or (ii) the
applicable LIBOR Base Rate (hereafter defined) (as elected in the manner
specified in this Note), provided that in no event shall the Applicable Rate
(hereafter defined) exceed the Maximum Rate (hereafter defined).
Notwithstanding the foregoing, if at any time the Applicable Rate exceeds the
Maximum Rate, the rate of interest payable under this Note shall be limited to
the Maximum Rate, but any subsequent reductions in the Commercial Base Rate or
the LIBOR Base Rate, as the case may be, shall not reduce the Applicable Rate
below the Maximum Rate until the total amount of interest accrued on this Note
equals the total amount of interest which would have accrued at the Applicable
Rate if the Applicable Rate had at all times been in effect. Interest on this
Note shall be calculated at a daily rate equal to 1/360 of the annual
percentage rate stated above, subject to the provisions hereof specifying the
Maximum amount of interest which may be charged or collected hereunder.
As used in this Note, the following terms shall have the meanings
indicated opposite them:
"Additional Costs" -- Any costs, losses or expenses incurred by Payee
which it determines are attributable to its making or maintaining the Loan
(hereafter defined), or its obligation to make any Loan advances, or any
reduction in any amount receivable by Payee under the Loan or this Note.
"Applicable Rate" -- The Commercial Base Rate (as to that portion of
Principal Amount bearing interest at The Commercial Base Rate) and the LIBOR
Base Rate (as to each Euro-Dollar Amount) as elected in the manner specified
in this Note.
"Assessments" -- Any impositions and assessments imposed on Payee with
respect to any Euro-Dollar Amount for insurance or other fees, assessments and
surcharges.
"Commercial Base Rate" -- One-quarter of one percent (1/4%) per annum
in excess of the base rate announced or published from time to time by Payee,
which rate may not be the
<PAGE> 2
lowest rate charged by Payee; it being understood and agreed that the
Commercial Base Rate shall increase or decrease, as the case may be, from time
to time as of the effective date of each change in such base rate, and may not
correspond with future increases or decreases in interest rates charged by
other lenders or market rates in general.
"Euro-Dollar Amount" -- Each portion of the Principal Amount bearing
interest at the applicable LIBOR Base Rate pursuant to a Euro-Dollar Rate
Request. There shall be no more than five (5) portions of the Principal Amount
bearing interest at an applicable LIBOR Base Rate outstanding at any time, each
such portion shall be in amounts of not less than $1,000,000.00 each and in no
event shall the total portions of the Principal Amount bearing interest at the
LIBOR Base Rate exceed seventy percent (70%) of the Principal Amount at the
time of any Euro-Dollar Rate Request.
"Euro-Dollar Business Day" -- Any day on which commercial banks are open
for domestic and international business (including dealings in U.S. Dollar
deposits) in New York City, and Dallas, Texas.
"Euro-Dollar Rate Request" -- Maker's telephonic notice (to be promptly
confirmed in a written notice which must be received by Payee before such Euro-
Dollar Rate Request will be put into effect by Payee), to be received by Payee
by twelve o'clock noon (Dallas, Texas time) three (3) Euro-Dollar Business Days
prior to the Euro-Dollar Business Day specified in the Euro-Dollar Rate Request
for the commencement of the Interest Period, of (a) its intention to have (1)
all or any portion of the Principal Amount which is not then the subject of an
Interest Period (other than an Interest Period which is terminating on such
Euro-Dollar Business Day), and/or (2) all or any portion of any advance of Loan
proceeds which is to be made on such Euro-Dollar Business Day, bear interest at
the LIBOR Base Rate, and (b) the Interest Period desired by Maker in respect of
the amount specified. there shall be no more than five (5) such requests for
an election outstanding at any time.
"Euro-Dollar Rate Request Amount" -- The amount, to be specified by Maker
in each Euro-Dollar Rate Request and stated in increments of $1,000,000.00,
which maker desires to bear interests at the LIBOR Base Rate; provided,
however, in no event shall any such amount be less than $1,000,000.00 in each
instance.
"Euro-Dollar Reference Source" -- The display for Euro-Dollar rates
provided on The Bloomberg (a data service), viewed by accessing Page One (1) of
the global deposits segment of money-market rates (or such other page as may
replace Page One [1] for the purposes of displaying Euro-Dollar rates); or, at
the option of Payee the display for Euro-Dollar rates on such other service
selected from time to time by Payee and determined by Payee to be comparable to
The Bloomberg, which other service may include Reuters Monitor Money Rates
Service.
"Interest Period" -- The period during which interest at the LIBOR Base
Rate, determined as provided in this Note, shall be applicable to the
applicable Euro-Dollar Rate Request Amount; provided, however, that each such
period shall be either thirty (30), sixty (60), ninety (90) and one hundred
eighty (180), which shall be measured from the date specified by Maker in each
Euro-Dollar Rate Request for the commencement of the computation or interest at
the LIBOR Base Rate, to the numerically corresponding day in the calendar month
in which such period terminates (or, if there be no numerical correspondent in
such month, or if the date selected by Maker for such commencement is the last
Euro-Dollar Business Day of a calendar month, then the last Euro-Dollar
Business Day of the calendar month in which such period terminates, or, if the
numerically corresponding day is not a Euro-Dollar Business Day, then the next
succeeding Euro-Dollar Business Day, unless such next succeeding Euro-Dollar
Business Day enters a new calendar month, in which case such period shall end
on the next preceding Euro-Dollar Business Day); and in no event shall any such
period be elected which extends beyond the Maturity Date.
"LIBOR Base Rate" -- With respect to any Euro-Dollar Amount, the rate
per annum (expressed as a percentage) determined by Payee to be equal to the
sum of (a) the quotient of the LIBOR Rate for the applicable Euro-Dollar amount
and the applicable Interest Period divided by (1 minus the applicable Reserve
Requirement) rounded up to the nearest 1/100 of 1%, plus (b) the applicable
Assessments, plus (c) two and one-half percent (2.5%).
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<PAGE> 3
"LIBOR Rate" -- The rate determined by Payee (rounded upward, if
necessary, to the nearest 1/16 of 1%) equal to the offered rate (and not the
bid rate) for deposits in U.S. Dollars of amounts comparable to the Euro-Dollar
Rate Request Amount for the same period of time as the Interest Period
selected by Maker in the Euro-Dollar Rate Request, as set forth on the Euro-
Dollar Reference Source at approximately 10:00 a.m. (Dallas, Texas time) on the
first day of the applicable Interest Period.
"Loan" -- The $10,000,000.00 loan evidenced hereby.
"Maturity Date" -- April 30, 1998, being the date this Note becomes due
and payable in its entirety, unless extended pursuant to the terms of the Loan
Agreement.
"Maximum Rate" -- The maximum interest rate permitted under applicable
law.
"Principal Amount" -- That portion of the Loan evidenced hereby as is
from time to time outstanding.
"Regulation D" -- Regulation D of the Board of Governors of the Federal
Reserve System, as from time to time amended or supplemented.
"Regulation" -- With respect to the charging and collecting of interest
at the LIBOR Base Rate, any United States federal, state or foreign laws,
treaties, rules or regulations whether now in effect or hereinafter enacted or
promulgated (including Regulation D) or any interpretations, directives or
requests applying to a class of depository institutions including Payee under
any United States federal, state or foreign laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof, excluding any change
the effect of which is determined by Payee to be reflected in a change in the
LIBOR Base Rate.
"Reserve Requirement" -- The average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are required to be
maintained under Regulation D by member banks of the Federal Reserve System in
New York City with deposits exceeding one billion U.S. Dollars against
"Eurocurrency Liabilities," as such quoted term is used in Regulation D.
Without limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks by
reason of any regulatory change against (a) any category of liabilities which
includes deposits by reference to which the LIBOR Rate is to be determined as
provided in this Note, or (b) any category of extensions of credit or other
assets which includes loans the interest rate on which is determined on the
basis of rates referred to in the definition of "LIBOR Rate" set forth above.
If Maker desires the application of the LIBOR Base Rate, it shall submit
a Euro-Dollar Rate Request to Payee. Such Euro-Dollar Rate request shall
specify the Interest Period and the Euro-Dollar Amount and shall be
irrevocable, subject to Payee's right to convert the rate of interest payable
hereunder with respect to any Euro-Dollar Amount from the LIBOR Base Rate to
the Commercial Base Rate as hereinafter provided. In the event that Maker
fails to submit Euro-Dollar Rate Request with respect to an existing Euro-
Dollar Amount not later than twelve o'clock noon (New York time) three (3)
Euro-Dollar Business Days prior to the last day of the relevant Interest
Period, then the applicable Euro-Dollar Amount shall bear interest, commencing
at the end of such Interest Period, at the Commercial Base Rate.
In no event shall Maker have more than five (5) Interest Periods
involving Euro-Dollar Amounts in effect at any one time, whether or not any
portion of the Principal Amount is then bearing interest at the Commercial Base
Rate.
Any portion of the Principal Amount to which the LIBOR Base Rate is not
(or pursuant to the terms hereof cannot be) applicable shall bear interest at
the Commercial Base Rate.
Maker shall pay to Payee, promptly upon demand, such amounts as are
necessary to compensate Payee for Additional Costs resulting from any
Regulation which (i) subjects Payee to any tax, duty or other charge with
respect to the Loan or this Note, or changes the basis of
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<PAGE> 4
taxation of any amounts payable to Payee under the Loan or this Note (other
than taxes imposed on the overall net income of Payee or of its applicable
lending office by the jurisdiction in which Payee's principal office or such
applicable lending office is located), (ii) imposes, modifies or deems
applicable any reserve, special deposit or similar requirements relating to
any extensions of credit or other assets of, or any deposits with or other
liabilities of, Payee, or (iii) imposes on Payee or on the interbank Euro-
Dollar market any other condition affecting the Loan or this Note, or any of
such extensions of credit or liabilities. Payee will notify Maker of any event
which would entitle Payee to compensation pursuant to this paragraph as
promptly as practicable after Payee obtains knowledge thereof and determines to
request such compensation.
Without limiting the effect of the immediately preceding paragraph, in
the event that, by reason of any Regulation (i) Payee incurs Additional Costs
based on or measured by the amount of (1) a category of deposits or other
liabilities of Payee which includes deposits by reference to which the LIBOR
Rate is determined as provided in this Note and/or (2) a category of extensions
of credit or other assets of Payee which includes loans the interest on which
is determined on the basis of rates referred to in the definition of "LIBOR
Rate" set forth above, (ii) Payee becomes subject to restrictions on the amount
of such a category of liabilities or assets which it may hold, or (iii) it
shall be unlawful or impractical for Payee to make or maintain the Loan (or any
portion thereof) at the LIBOR Base Rate, then Payee's obligation to make or
maintain the Loan (or portions thereof) at the LIBOR Base Rate (and Maker's
right to request the same) shall be suspended and Payee shall give notice
thereof to Maker and, upon the giving of such notice, interest payable
hereunder at the LIBOR Base Rate shall be converted to the Commercial Base
Rate, unless Payee may lawfully continue to maintain the Loan (or any portion
thereof) then bearing interest at the LIBOR Base Rate to the end of the current
Interest Period(s), at which time the interest rate shall convert to the
Commercial Base Rate. If subsequently Payee determines that such Regulation
has ceased to be in effect, Payee will so advise Maker and Maker may convert
the rate of interest payable hereunder with respect to those portions of the
Principal Amount bearing interest at the Commercial Base Rate to the LIBOR Base
Rate by submitting a Euro-Dollar Rate Request in respect thereof and otherwise
complying with the provisions of this Note with respect thereto.
Determinations by Payee of the existence or effect of any Regulation on
its costs of making or maintaining the Loan, or portions thereof, at the LIBOR
Base Rate, or on amounts receivable by it in respect thereof, and of the
additional amounts required to compensate Payee with respect to Additional
Costs and/or Assessments, shall be conclusive; provided, however, that such
determinations are made without manifest error.
Anything herein to the contrary notwithstanding, if, at the time of or
prior to the determination of the LIBOR Base Rate in respect of any Euro-Dollar
Rate Request Amount as herein provided, Payee determines (which determination
shall be conclusive [provided that such determination is made on a reasonable
basis] absent manifest error) that (i) by reason of circumstances affecting the
interbank Euro-Dollar market generally, adequate and fair means do not or will
not exist for determining the LIBOR Base Rate applicable to all Interest
Period, or (ii) the LIBOR Rate, as determined by Payee, will not accurately
reflect the cost to Payee of making or maintaining the Loan (or any portion
thereof) at the LIBOR Base Rate, then Payee shall give Maker prompt notice
thereof, and the applicable Euro-Dollar Rate Request Amount shall bear
interest, or continue to bear interest, as the case may be, at the Commercial
Base Rate. If at any time subsequent to the giving of such notice, Payee
determines that because of a change in circumstances the LIBOR Base Rate is
again available to Maker hereunder, Payee shall so advise Maker and Maker may
convert the rate of interest payable hereunder from the Commercial Base Rate to
the LIBOR Base Rate by submitting a Euro-Dollar Rate Request to Payee and
otherwise complying with the provisions of this Note with respect thereto.
Maker shall pay to Payee, immediately upon request and notwithstanding
contrary provisions contained in the Deeds of Trust (as hereafter defined) or
other Loan Instruments (as hereafter defined), such amounts as shall, in the
conclusive judgment of Payee reasonably exercised, compensate Payee for any
loss, cost or expense incurred by it as a result of (i) any payment or
prepayment, under any circumstances whatsoever, of any portion of the Principal
Amount bearing interest at the LIBOR Base Rate on a date other than the last
day of an applicable Interest Period, (ii) the conversion, for any reason
whatsoever, of the rate of interest
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<PAGE> 5
payable hereunder from the LIBOR Base Rate to the Commercial Base Rate with
respect to any portion of the Principal Amount then bearing interest at the
LIBOR Base Rate on a date other than the last day of all applicable Interest
Period, (iii) the failure of all or a portion of an advance, which was to have
borne interest at the LIBOR Base Rate pursuant to a Euro-Dollar Rate Request, to
be made under the Loan Agreement, or (iv) the failure of Maker to borrow in
accordance with a Euro-Dollar Rate Request submitted by it to Payee.
Maker shall have the right to prepay, in whole or in part, the Principal
Amount of this Note accruing interest at the Commercial Base Rate, without
premium or penalty upon the payment of all accrued interest on the amount
prepaid (and any interest which has accrued at the Default Rate (hereafter
defined) and other sums that may be payable hereunder); provided, however, that
any Euro-Dollar Amount may be prepaid only on the last day of the applicable
Interest Period.
All payments of principal shall be credited first against principal
amounts bearing interest at the Commercial Base Rate and then toward the
payment of Euro-Dollar Amounts. Payments of Euro-Dollar Amounts shall be
applied in such manner as Maker shall select; provided, however, that Maker
shall select Euro-Dollar Amounts to be repaid in a manner designed to minimize
any losses incurred by virtue of such payment. If Maker shall fail to select
the Euro-Dollar Amounts to which such payments are to be applied, or if an
event of default has occurred and is continuing at the time of payment, then
Payee shall be entitled to apply the payment to such Euro-Dollar Amounts in the
manner it deems appropriate. Maker shall compensate Payee for any losses
incurred by virtue of any payment of those portions of the Loan accruing
interest at the LIBOR Base Rate prior to the last day of the relevant Interest
Period, which compensation shall be determined in accordance with the
provisions set forth in this Note, and any payment received pursuant to this
paragraph shall be applied first to losses incurred by Payee by reason of such
payment.
If a default shall occur under the Deeds of Trust, interest on the
Principal Amount shall, at the option of Payee, immediately and without notice
to Maker, be converted to the Commercial Base Rate. The foregoing provisions
shall not be construed as a waiver by Payee of its right to pursue any other
remedies available to it under the Deeds of Trust or any other instrument
evidencing or securing the Loan, nor shall it be construed to limit in any way
the application of the Default Rate.
Maker hereby agrees that it shall the bound by any agreement extending
the time or modifying the above terms of payment, made by Payee and the owner
or owners of the Property, whether with or without notice to Maker, and Maker
shall continue liable to pay the amount due hereunder, but with interest at a
rate no greater than the LIBOR Base Rate or the Commercial Base Rate, as the
case may be, according to the terms of any such agreement of extension or
modification.
ALL OR ANY PORTION OF THE PRINCIPAL OF THIS NOTE MAY BE BORROWED, PAID,
PREPAID, REPAID AND REBORROWED, FROM TIME TO TIME PRIOR TO MATURITY, IN
ACCORDANCE WITH THE PROVISIONS OF THIS NOTE AND THE OTHER LOAN INSTRUMENTS (AS
HEREAFTER DEFINED). THE EXCESS OF BORROWING (ADVANCES AND READVANCES) OVER
REPAYMENTS SHALL EVIDENCE THE PRINCIPAL BALANCE DUE HEREON FROM TIME TO TIME
AND AT ANY TIME. THE AGGREGATE OF ALL ADVANCES MADE UNDER THIS NOTE MAY EXCEED
THE FACE AMOUNT OF THIS NOTE, BUT THE OUTSTANDING PRINCIPAL BALANCE OF THIS
NOTE AT ANY TIME SHALL NEVER EXCEED THE FACE AMOUNT OF THIS NOTE.
At the option of the holder hereof, the entire principal balance and
accrued interest owing hereon shall, subject to applicable laws, at once become
due and payable without notice or demand upon the occurrence at any time of any
of the following events ("events of default"):
1. Default in the payment of any installment of principal, interest
or any other sum due hereunder or under any document evidencing,
governing, securing or guaranteeing the Loan (individually and
collectively, the "Loan Instruments") and the continuation of
such default of a period of fifteen (15) days following the due
date thereof; or defaults in the performance of any of the
covenants or provisions of any of the Loan Instruments (other
than those covenants or provisions involving
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<PAGE> 6
the payment of sums described in the preceding clause in this
paragraph 1) and the continuation of such default of a period of
thirty (30) days following the due date thereof.
2. The liquidation, termination, dissolution or (if any of the
undersigned is a natural person) the death of any of the
undersigned or any guarantor hereof.
3. The bankruptcy or insolvency of, the assignment for the benefit
of creditors by, or the appointment of a receiver for any of the
property of any party liable for the payment of this Note,
whether as maker, endorser, guarantor, surety or otherwise.
4. Default in the payment of any other indebtedness due the holder
hereof, or default in the performance of any other obligation to
the holder hereof by the undersigned or any other party liable
for the payment hereof, whether as endorser, guarantor, surety or
otherwise, it being reasonably contemplated by the undersigned
that it may incur additional indebtedness owing to the holder
hereof, from time to time subsequent to the date hereof.
The failure to exercise the option to accelerate the maturity of this
Note upon the happening of any one or more of the events of default hereunder
shall not constitute a waiver of the right of the holder hereof to exercise the
same or any other option at that time or at any subsequent time with respect to
such uncured default or any other event of uncured default hereunder or under
any other of the Loan Instruments. The remedies of the holder hereof, as
provided in this Note and in any other of the Loan Instruments, shall be
cumulative and concurrent and may be pursued separately, successively or
together, as often as occasion therefor shall arise, at the sole discretion of
the holder hereof. The acceptance by the holder hereof of any payment under this
Note which is less than payment in full of all amounts due and payable at the
time of such payment shall not constitute a waiver of or impair, reduce,
release or extinguish any of the rights or remedies of the holder hereof to
exercise the foregoing option or any other option granted to the holder hereof
or in any other of the Loan Instruments, at that time or at any subsequent
time, or nullify any prior exercise of any such option.
The unpaid principal of and, to the extent permitted by applicable law,
unpaid interest on this Note from time to time outstanding shall bear interest
from and after maturity at the rate (hereafter called the "Default Rate") of
five percent (5%) per annum above the Commercial Base Rate (as such rate may
change from time to time as provided above), provided that in no event shall
such interest rate be more than the Maximum Rate. Notwithstanding anything to
the contrary contained in this Note, at the option of the holder hereof and
upon notice to the undersigned at any time after the occurrence of a default,
as defined in the Deeds of Trust, from and after such notice and during the
continuance of such default the unpaid principal of this Note from time to time
outstanding and all past due installments of interest shall, to the extent
permitted by applicable law, bear interest at the default Rate (as such rate
may change from time to time with each change in the Commercial Base Rate),
provided that in no event shall such interest rate be more than the Maximum
Rate.
The undersigned and all other parties now or hereafter liable for the
payment hereof, whether as endorser, guarantor, surety or otherwise, severally
waive demand, presentment, notice of dishonor, notice of intention to
accelerate the indebtedness evidenced hereby, notice of the acceleration of the
maturity hereof, diligence in collecting, grace, notice and protest, and
consent to all extensions which from time to time may be granted by the holder
hereof and to payments hereon, whether before or after maturity.
If this Note is not paid when due, whether at maturity or by
acceleration, or if it is collected through a bankruptcy, probate or other
court, whether before or after maturity, the undersigned agrees to pay all
costs of collection, including but not limited to reasonable attorneys' fees
and expenses, incurred by the holder hereof.
This Note is executed pursuant to a Master Loan Agreement, dated of even
date herewith between the undersigned and the payee named herein (the "Loan
Agreement"), which Loan Agreement contains provisions for acceleration of the
maturity hereof upon the happening of
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<PAGE> 7
certain events, and all advances made hereunder shall be made pursuant to the
Loan Agreement. This Note is secured by one or more Deeds of Trust (With
Security Agreement and Assignment of Rents and Leases) (collectively, the
"Deeds of Trust") covering certain property situated in various Counties in
Texas. The proceeds of this Note are to be used for business, commercial,
investment or other similar purposes and no portion thereof will be used for
personal, family or household use.
All agreements between the undersigned and the holder hereof, whether
now existing or hereafter arising and whether written or oral, are hereby
limited so that in no contingency, whether by reason of acceleration of the
maturity hereof or otherwise, shall the interest contracted for, charged,
received, paid or agreed to be paid to the holder hereof exceed the Maximum
Rate. If from any circumstance the holder hereof shall ever receive anything
of value deemed interest by applicable law in excess of the Maximum Rate, an
amount equal to any excessive interest shall be applied to the reduction of the
principal hereof and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal hereof, such excess shall be
refunded to the undersigned. All interest paid or agreed to be paid to the
holder hereof shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full period until payment in
full of the principal so that the interest hereon for such full period shall
not exceed the Maximum Rate. This paragraph shall control all agreements
between the undersigned and the holder hereof.
The undersigned acknowledges and agrees that the holder hereof may,
from time to time, sell or offer to sell interests in the Loan to one or more
participants. The undersigned authorizes the holder hereof to disseminate any
information it has pertaining to the Loan, including, without limitation,
complete and current credit information on the undersigned, any of its
principals and any grantor of this Note, to any such participant or prospective
participant.
(The balance of this page is intentionally left blank.)
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<PAGE> 8
EXCEPT WERE FEDERAL LAW IS APPLICABLE (INCLUDING, WITHOUT LIMITATION,
ANY FEDERAL USURY CEILING OR OTHER FEDERAL LAW WHICH, FROM TIME TO TIME, IS
APPLICABLE TO THE INDEBTEDNESS EVIDENCED HEREIN AND WHICH PREEMPTS STATE USURY
LAWS), THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS, AND THE LAWS OF THE UNITED STATES APPLICABLE TO TRANSACTIONS IN SUCH
STATE. THE UNDERSIGNED ACKNOWLEDGES THAT THE LIEN OF THE DEEDS OF TRUST
CONSTITUTES A FIRST LIEN ON RESIDENTIAL REAL PROPERTY WITHIN THE MEANING OF
PART A, TITLE V, OF THE DEPOSITORY INSTITUTIONS DEREGULATION AND MONETARY
CONTROL ACT OF 1980, AND THE REGULATIONS PROMULGATED THEREUNDER.
NEWMARK HOMES, L.P.,
a Texas limited partnership
By: NEWMARK HOME CORPORATION,
a Nevada corporation,
General Partner
By:/s/ TERRY WHITE
--------------------------------
Name: Terry White
------------------------------
Title: Senior Vice President
-----------------------------
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<PAGE> 1
EXHIBIT 10.11(c)
MASTER FORM LOAN NO. ________
DEED OF TRUST
RECORDED BY
____________________________
VICE PRESIDENT
GUARANTY FEDERAL BANK, F.S.B.
8333 DOUGLAS AVENUE
DALLAS, TEXAS 75225
MASTER FORM OF DEED OF TRUST
(WITH SECURITY AGREEMENT AND
ASSIGNMENT OF RENTS AND LEASES)
By this agreement dated, _____________, 1997, the undersigned, NEWMARK
HOMES, L.P., a Texas limited partnership ("Grantor," whether one or more), whose
address is 1200 Soldiers Field Drive, Sugarland, Texas 77479, to secure the
indebtedness and obligations hereinafter described, does hereby GRANT, BARGAIN,
SELL, ASSIGN, and CONVEY unto Thomas M. Covert, as trustee ("Trustee"), for the
benefit of GUARANTY FEDERAL BANK, F.S.B., a federal savings bank organized and
existing under the laws of the United States ("Beneficiary"), whose address is
8333 Douglas Avenue, Dallas, Texas 75225, the real property (the "Land")
situated in the County or Counties in the State of Texas as more particularly
described in Deed(s) of Trust Incorporating by Reference a Master Form Deed Of
Trust that specifically incorporates by reference provisions of this Master Form
of Deed of Trust (this "Deed of Trust").
TOGETHER WITH the following, whether now owned or hereafter acquired by
Grantor: (a) all improvements (the "Improvements") now or hereafter attached to
or placed, elected, constructed or developed on the Land; (b) all equipment,
fixtures, furnishings, inventory and articles of personal property (the
"Personal Property") now or hereafter attached to or used in or about the
Improvements or which are necessary or useful for the complete and comfortable
use and occupancy of the Improvements for the purposes for which they are to be
constructed, and all replacements or substitutions for any of the foregoing,
whether or not the same are or shall be attached to the Land or Improvements;
(c) all building materials and equipment now or hereafter delivered to and
intended to be installed in or on the Land or the Improvements; (d) all plans
and specifications for the Improvements; (e) all of Grantor's rights (but not
its obligations) under any contracts relating to the Land, the Improvements or
the Personal Property; (f) all permits, licenses, and other rights and
privileges obtained in connection with the Land, the Improvements or the
Personal Property; (g) all proceeds arising from or by virtue of the sale,
lease or other disposition of the Land, (the Improvements or the Personal
Property; (h) all proceeds (including premium refunds) of each policy of
insurance relating to the Land, the Improvements or the Personal Property; (i)
all proceeds from the taking of any of the Land, the Improvements, the Personal
Property or any rights appurtenant thereto by right of eminent domain or by
private or other purchase in lieu thereof; (j) all right, title and interest of
Grantor in and to all streets, roads, public places, easements and rights-of-
way, existing or proposed, public or private, adjacent to or used in connection
with, belonging or pertaining to the Land; (k) all of the leases, rents,
royalties, bonuses, issues, profits, revenues or other benefits of the Land,
the Improvements or the Personal Property, including without limitation, cash
or securities deposited pursuant to leases to secure performance by the lessees
of their obligations thereunder; (l) all rights, hereditaments and
appurtenances pertaining to the foregoing; and (m) other interests of every
kind and character that Grantor now has or at any time hereafter acquires in
and to the Land, Improvements and Personal Property described herein and all
property described herein and all property that is used or useful in connection
therewith, including rights of ingress and egress and all reversionary rights
or interests of Grantor with respect to such property. The above-described
property is collectively called the "Mortgaged Property."
TO HAVE AND TO HOLD the Mortgaged Property, together with the rights,
privileges and appurtenances thereto belonging, unto the Trustee and his
substitutes or successors, forever,
<PAGE> 2
and Grantor hereby binds itself and its heirs, executors, administrators,
personal representatives, successors and assigns to warrant and forever defend
the Mortgaged Property unto the Trustee, his substitutes or successors and
assigns, against the claim or claims of all persons claiming or to claim the
same or any part thereof.
ARTICLE I
INDEBTEDNESS
This Deed of Trust is given to secure the following:
Section 1.1 Note. Payment of the indebtedness evidenced by the
promissory note (such note and all amendments thereto, if any, collectively
referred to as the "Note"), dated ______________________________, 199_, in the
stated principal amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00),
executed by Grantor, payable to the order of Beneficiary and bearing interest
and being payable as set forth therein, and all modifications, increases,
refinancings, renewals and extensions thereof.
Section 1.2 Loan Agreement. Performance of all obligations of Grantor
under any loan agreement (the "Loan Agreement") between Grantor and Beneficiary
pertaining to the use of the proceeds of the Note.
Section 1.3 Deed of Trust. Payment of all sums advanced by Beneficiary
to or for the benefit of Grantor contemplated hereby and performance of all
obligations and covenants herein contained.
Section 1.4 Other Indebtedness. (a) Payment of all other indebtedness,
of whatever kind or character, now owing or which may hereafter become owing by
Grantor to Beneficiary, and (b) payment of all other indebtedness, of whatever
kind or character, now owing or which may hereafter become owing to
Beneficiary, by any of the entities set forth in Exhibit A to the Loan
Agreement, whether such indebtedness is evidenced by note, open account,
overdraft, endorsement, surety agreement, guaranty, letter(s) of credit, or
otherwise, it being reasonably contemplated that such additional indebtedness
owing to Beneficiary may be incurred, from time to time, subsequent to the date
hereof.
The obligations above described are hereinafter collectively called the
"Indebtedness." This Deed of Trust, the Note, the Loan Agreement, any guaranty
guaranteeing the payment and performance of any of the Indebtedness, and any
other instrument given to evidence or further secure the Indebtedness are
hereinafter collectively called the "Loan Instruments."
ARTICLE II
ASSIGNMENT OF RENTS AND LEASES
Section 2.1 Assignment of Rents, Profits, etc. All of the rents,
royalties, bonuses, issues, profits, revenue, income, and other benefits
derived from the Mortgaged Property or arising from the use or enjoyment of any
portion thereof or from any lease or agreement pertaining thereto and
liquidated damages following default under such leases, and all proceeds
payable under any policy of insurance covering loss of rents resulting from
untenantability caused by damage to any part of the Mortgaged Property,
together with any and all rights that Grantor may have against any tenant under
such leases or any subtenants or occupants of any part of the Mortgaged
Property (hereinafter called the "Rents") are hereby absolutely and
unconditionally assigned to Beneficiary to be applied by Beneficiary in payment
of the Indebtedness. Notwithstanding any provision of this Deed of Trust or
any other of the Loan Instruments which might be construed to the contrary, the
assignment in this Section is an absolute assignment and not merely a security
interest. However, Beneficiary's rights as to the assignment shall be exercised
only upon the occurrence of an Event of Default (as hereinafter defined).
Prior to an Event of Default, Grantor shall have a license to collect and
receive all Rents as trustee for the
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<PAGE> 3
benefit of Beneficiary and Grantor, and Grantor shall apply the funds so
collected first to the payment of the Indebtedness in such manner as
Beneficiary elects and thereafter to the account of Grantor. All Rents not
actually paid to Beneficiary to apply on the Indebtedness shall not constitute
payment on the Indebtedness.
Section 2.2 Assignment of Leases. Grantor hereby assigns to Beneficiary
all existing and future leases, including subleases thereof, and any and all
extensions, renewals, modifications, and replacements thereof, upon any part of
the Mortgaged Property (the "Leases"), Grantor hereby further assigns to
Beneficiary all guaranties of tenants' performance under the Leases. Prior to
an Event of Default, Grantor shall have the right, without joinder of
Beneficiary, to enforce the Leases, unless Beneficiary directs otherwise.
Section 2.3 Leasing. Grantor covenants and agrees that, without the
prior written consent of Beneficiary, it shall not enter into any Lease of the
Mortgaged Property.
Section 2.4 Beneficiary in Possession; Indemnification. Beneficiary's
acceptance of this assignment shall not, prior to entry upon and taking
possession of the Mortgaged Property by Beneficiary, be deemed to constitute
Beneficiary a "mortgagee in possession," nor obligate the Beneficiary to appear
in or defend any proceeding relating to any of the Leases or to the Mortgaged
Property, take any action hereunder, expend any money, incur any expenses, or
perform any obligation or liability under the Leases, or assume any obligation
for any deposits delivered to Grantor by any lessee and not delivered to
Beneficiary. Beneficiary shall not be liable for any injury or damage to
person or property in or about the Mortgaged Property. Grantor hereby
indemnifies and holds Beneficiary harmless from all liability, damage or
expense incurred by Beneficiary from any claims under the Leases, including,
without limitation, claims by Tenants for security deposits or for rental
payments more than one (1) month in advance and not delivered to Beneficiary.
All amounts indemnified against hereunder, including reasonable attorneys'
fees, if paid by Beneficiary shall bear interest at the maximum lawful rate and
shall be payable by Grantor immediately without demand, and shall be secured
hereby.
ARTICLE III
SECURITY AGREEMENT
Section 3.1 Security Interest. This Deed of Trust shall be a security
agreement between Grantor, the debtor, and Beneficiary, as the secured party,
covering the Mortgaged Property constituting personal property or fixtures
governed by the Texas Uniform Commercial Code (hereinafter called the "Code"),
and Grantor grants to Beneficiary a security interest in such portion of the
Mortgaged Property. In addition to Beneficiary's other rights hereunder,
Beneficiary shall have all rights of a secured party under the Code. Grantor
shall execute and deliver to Beneficiary all financing statements that may be
required by Beneficiary to establish and maintain the validity and priority of
Beneficiary's security interest, and Grantor shall bear all costs thereof,
including all Uniform Commercial Code searches reasonably required by
Beneficiary. If Beneficiary should dispose of any of the Mortgaged Property
pursuant to the Code, ten (10) days' written notice by Beneficiary to Grantor
shall be deemed to be reasonable notice; provided, however, Beneficiary may
dispose of such property in accordance with the foreclosure procedures of this
Deed of Trust in lieu of proceeding under the Code.
Section 3.2 Notice of Changes. Grantor shall give advance notice in
writing to Beneficiary of any proposed change in Grantor's name, identity, or
structure and will execute and deliver to Beneficiary, prior to or concurrently
with the occurrence of any such change all additional financing statements that
Beneficiary may require to establish and maintain the validity and priority of
Beneficiary's security interest with respect to any of the Mortgaged Property
described or referred to herein.
Section 3.3 Fixtures. Some of the items of the Mortgaged Property
described herein are goods that are or are to become fixtures to the Land, and
it is intended that, as to those goods, this Deed of Trust shall be effective
as a financing statement filed as a fixture filing from the date of its filing
for record in the real estate records of the county in which the
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Mortgaged Property is situated. Information concerning the security interest
created by this instrument may be obtained from Beneficiary, as secured party,
at the address of Beneficiary stated above. The mailing address of the Grantor,
as debtor, is as stated above.
ARTICLE IV
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF GRANTOR
Grantor does hereby covenant, warrant and represent to and agree with
Beneficiary as follows:
Section 4.1 Payment and Performance. Grantor shall make all payments
on the Indebtedness when due and shall punctually and properly perform all of
Grantor's covenants, obligations and liabilities under the Loan Instruments.
Section 4.2 Title to Mortgaged Property and Lien of this Deed of Trust.
Grantor has good and indefeasible fee simple title to the Land and the
Improvements, and good and indefeasible title to the Personal Property, free
and clear of any liens, charges, encumbrances, security interests, and adverse
claims whatsoever, except as otherwise provided herein. If the interest of
Beneficiary in the Mortgaged Property, or any part thereof, shall be endangered
or shall be attacked, directly or indirectly, Grantor hereby authorizes
Beneficiary, at Grantor's expense, to take all necessary and proper steps for
the defense of such interest, including the employment of counsel, the
prosecution or defense of litigation, and the compromise or discharge of claims
made against such interest.
Section 4.3 Organization, Power, and Existence. Grantor (a) is duly
organized and validly existing under applicable state laws and in good standing
under the laws of the state of its formation and the laws of the State of
Texas, (b) has complied with all conditions prerequisite to its lawfully doing
business in the state where the Land is situated, and (c) has all requisite
power and all governmental certificates of authority, licenses, permits,
qualifications, and documentation to own, lease and operate its properties and
to carry on its business as it is now being, and as it is proposed to be,
conducted. All Loan Instruments are within Grantor's powers, have been duly
authorized by all requisite action and are not in contravention of law or the
powers of Grantor's organizational documents. Grantor will preserve and keep
in full force and effect its existence, rights, franchises, and trade names.
Section 4.4 Insurance. Grantor shall, at its sole cost and expense,
obtain and maintain title insurance, public liability insurance and builder's
risk and casualty insurance in such forms and amounts as are required by the
Loan Agreement, or otherwise required by Beneficiary. Grantor shall deliver the
policies of insurance to Beneficiary promptly as issued; and, if Grantor fails
to do so, Beneficiary, at its option, may procure such insurance at Grantor's
expense. All renewal and substitute policies of insurance shall be delivered
at the office of Beneficiary, premiums paid, at least ten (10) days before
termination of policies theretofore delivered to Beneficiary. In case of loss,
Beneficiary, at its option, shall be entitled to receive and retain the
proceeds of the insurance policies, applying the same on the Indebtedness in
such manner as Beneficiary may elect. If any loss shall occur at any time when
Grantor shall be in default hereof, Beneficiary shall be entitled to the
benefit of all insurance held by or for any Grantor, to the same extent as if
it had been made payable to Beneficiary, and upon foreclosure hereunder,
Beneficiary shall become the owner thereof.
Section 4.5 Taxes and Assessments. Grantor will pay all taxes and
assessments against or affecting the Mortgaged Property as the same become due
and payable, and, upon request by Beneficiary, Grantor will deliver to
Beneficiary such evidence of the payment thereof as Beneficiary may require,
and, if Grantor fails to do so, Beneficiary may pay them, together with all
costs and penalties thereon, at Grantor's expense.
Section 4.6 Tax and Insurance Escrow. At the request of Beneficiary,
Grantor shall create a fund or reserve for the payment of all insurance
premiums, taxes and assessments against
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or affecting the Mortgaged property in such amount and in such manner as
Beneficiary shall request.
Section 4.7 Condemnation. All judgments, decrees and awards for injury
or damage to the Mortgaged Property, and all awards pursuant to proceedings for
condemnation thereof are hereby assigned in their entirely to Beneficiary, who
may apply the same to the Indebtedness in such manner as it may elect; and
Beneficiary is hereby authorized, in the name of Grantor, to execute and
deliver valid acquittance for, and to appeal from, any such award, judgment or
decree. Immediately upon its obtaining knowledge of the institution or the
threatened institution of any proceedings for the condemnation of the Mortgaged
Property, Grantor shall notify Beneficiary of such fact. Grantor shall then,
if requested by Beneficiary, file or defend its claim thereunder and prosecute
same with due diligence to its final disposition, and shall cause any awards or
settlements to be paid over to Beneficiary for disposition pursuant to the
terms of this Deed of Trust. Beneficiary shall be entitled to participate in
and to control same and to be represented therein by counsel of its own choice,
and Grantor will deliver, or cause to be delivered, to Beneficiary such
instruments as may be requested by it from time to time to permit such
participation. In the event Beneficiary, as a result of any such judgment,
decree or award, reasonably believes that the payment or performance of any
obligation secured by this Deed of Trust is impaired, Beneficiary may, without
notice, declare all of the indebtedness immediately due and payable.
Section 4.8 Taxes on Note or Deed of Trust. If any time any law shall
be enacted imposing or authorizing the imposition of any tax upon this Deed of
Trust, or upon any rights, titles, liens, or security interests created hereby,
or upon the Note, or any part thereof, Grantor shall immediately pay all such
taxes; provided, that if it is unlawful for Grantor to pay such taxes, Grantor
shall prepay the Note in full after demand therefor by Beneficiary.
Section 4.9 Statements by Grantor. At the request of Beneficiary,
Grantor shall furnish promptly a written statement or affidavit, in such form
as may be required by Beneficiary, stating the unpaid balance of the Note, the
date to which interest has been paid and that there are no offsets or defenses
against full payment of the Note and performance of the terms of the Loan
Instruments, or if there are any such offsets or defenses, specifying them.
Section 4.10 Repair, Waste, etc. Grantor will keep every part of the
Mortgaged Property in good operating order, repair and condition and shall not
commit or permit any waste thereof. Grantor will make promptly all repairs,
renewals and replacements necessary to such end. Grantor will discharge all
claims for labor performed and material furnished therefor, and will not suffer
any lien of mechanics or materialmen to attach to any part of the Mortgaged
Property. Grantor shall have the right to contest in good faith the validity
or any such mechanics' or materialmen's lien, provided Grantor shall first
deposit with Beneficiary a bond or other security satisfactory to Beneficiary
in such amount as Beneficiary shall require, and provided further that Grantor
shall thereafter diligently proceed to cause such lien to be removed and
discharged. Grantor will guard every part of the Mortgaged Property from
removal, destruction and damage, and will not do or suffer to be done any act
whereby the value of any part of the Mortgaged Property may be lessened.
Section 4.11 No Pledge or Change of Stock or Partnership Interest. If
Grantor is a corporation, the shareholders of Grantor shall not sell, pledge or
assign any shares of the stock of Grantor without the prior written consent of
Beneficiary. If Grantor is a partnership or joint venture, the partners or
joint venturers of Grantor shall not sell, pledge or assign any of their
partnership or joint venture interest in Grantor and no general partners or
joint venturers shall withdraw from or be admitted into Grantor without the
prior written consent of Beneficiary; provided, however, in no event shall this
section apply with respect to the sale, pledge or assignment of limited
partnership interests.
Section 4.12 Compliance with Laws. Grantor, the Mortgaged Property, and
the use thereof by Grantor shall comply with all laws, rules, ordinances,
regulations, covenants, conditions, restrictions, orders and decrees of any
governmental authority or court applicable to Grantor, Mortgaged Property, and
its use, and Grantor shall pay all fees or charges of any kind in connection
therewith.
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Section 4.13 Hold Harmless. Grantor will defend, at its own cost and
expense, and hold Beneficiary harmless from, any proceeding or claim in any way
relating to the Mortgaged Property or the Loan Instruments. All costs and
expenses incurred by Beneficiary in protecting its interests hereunder,
including all court costs and reasonable attorneys' fees, shall be borne by
Grantor. The provisions of this Section shall survive the payment in full of
the Indebtedness and the release of this Deed of Trust as to events occurring
and causes of action arising before such payment and release.
Section 4.14 Further Assurances. Grantor, upon the request of
Beneficiary, will execute, acknowledge, deliver, and record such further
instruments and do such further acts as may be necessary, desirable or proper
to carry out the purposes of the Loan Instruments and to subject to the liens
and security interests created thereby any property intended by the terms
thereof to be covered thereby, including specifically but without limitation,
any renewals, additions, substitutions, replacements, improvements, or
appurtenances to the Mortgaged Property.
Section 4.15 Payment of Debts. Grantor shall promptly pay when due all
obligations regarding the ownership and operation of the Mortgaged Property
except any such obligations which are being diligently contested in good faith
by appropriate proceedings and as to which Grantor, if requested by
Beneficiary, shall have furnished to Beneficiary security satisfactory to
Beneficiary.
Section 4.16 Modification by Subsequent Owners. Unless and until such
time as this Deed of Trust is released with respect to any applicable portion
of the Mortgaged Property, each Grantor agrees that it shall be bound by any
modification of this Deed of Trust or any of the other Loan Instruments made by
Beneficiary and any subsequent owner of such Mortgaged Property, with or
without notice to such Grantor, and no such modifications shall impair the
obligations of such Grantor under this Deed of Trust or any other of the Loan
Instruments. Nothing in this Section shall be construed as permitting any
transfer of the Mortgaged Property which would constitute an Event of Default
under other provisions of this Deed Of Trust.
ARTICLE V
ADDITIONAL LIENS
Except as expressly set forth in the Loan Agreement, Grantor will not,
without the prior written consent of Beneficiary, grant any lien, security
interest, or other encumbrance affecting any of the Mortgaged Property
("Additional Lien"). If Beneficiary consents to an Additional Lien or if the
foregoing prohibition is determined by a court of competent jurisdiction to be
unenforceable, any such Additional Lien shall contain express covenants to the
effect that the Additional Lien is unconditionally subordinate to this Deed of
Trust and all modifications, renewals, extensions or increases thereof. Any
default under an Additional Lien shall be an Event of Default hereunder.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Collection. If the Indebtedness shall be collected by
legal proceedings, whether through a probate or bankruptcy court or otherwise,
or shall be placed in the hands or an attorney for collection after default or
maturity, Grantor agrees to pay the reasonable attorneys' and collection fees
in the amount set forth in the Note, and such fees shall be a part of the
Indebtedness.
Section 6.2 Change in Ownership. If the ownership of the Mortgaged
Property or any part thereof becomes vested in a person other than Grantor, or
in the event of a change of ownership of Grantor, Beneficiary may, without
notice to Grantor, deal with such successor or successors in interest with
reference to this Deed of Trust and to the Indebtedness in the same
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manner as with Grantor without in any way vitiating or discharging Grantor's
liability hereunder or on the Indebtedness. No sale of the Mortgaged Property,
and no forbearance on the part of Beneficiary, and no extension of the time for
the payment of the Indebtedness, shall operate to release or affect the
original liability of Grantor.
Section 6.3 Release of Lien. Grantor shall perform each of the
covenants and agreements herein contained, then this conveyance shall become
null and void and shall be released at Grantor's written request and expense;
otherwise, it shall remain in full force and effect. No release or
modification of this conveyance, or of any of the liens, security interests or
assignments created and evidenced hereby shall be valid unless executed by
Beneficiary.
Section 6.4 Partial Release of Lien, Extension, etc. Any part of' the
Mortgaged property may be released by Beneficiary without affecting the liens,
security interests and assignments hereof against the remainder. The lien,
security interest and other rights granted hereby shall not affect or be
affected by any other security taken for the Indebtedness. The taking of
additional security, or the extension or renewal of the Indebtedness or any
part thereof, shall not release or impair the then, security interest and other
rights granted hereby, or affect the liability of any endorser or guarantor or
improve the right of any permitted junior lienholder; and this Deed of Trust,
as well as any instrument given to secure any renewal or extension of the
Indebtedness, or any part thereof, shall be and remain a first and prior lien,
except as otherwise provided herein, on all of the Mortgaged Property not
expressly released until the Indebtedness is paid.
Section 6.5 Waiver of Marshalling and Certain Rights. To the extent
that Grantor may lawfully do so, Grantor hereby expressly waives any right
pertaining to the marshaling of assets, the exemption of homestead,
administration of estates of decedents, or other matter to defeat, reduce or
affect the right of Beneficiary to sell the Mortgaged Property for the
collection of the Indebtedness (without any prior or different resort for
collection), or the right of Beneficiary to the payment of the Indebtedness out
of the proceeds of sale of the Mortgaged Property in preference to every other
person and claimant.
Section 6.6 No Waiver. No waiver of any default on the part of Grantor
or breach of any of the provisions of this Deed of Trust or of any other
instrument executed in connection with the Indebtedness shall be considered a
waiver of any other or subsequent default or breach, and no delay or omission
in exercising or enforcing the rights and powers herein granted shall be
construed as a waiver of such rights and powers, and likewise no exercise or
enforcement of any rights or powers hereunder shall be held to exhaust such
rights and powers, and every such rights and powers may be exercised from time
to time. Acceptance by Beneficiary of partial payments shall not constitute a
waiver of the default by failure to make full payments.
Section 6.7 Limitation on Interest. All agreements between Grantor and
Beneficiary, whether now existing or hereafter arising and whether written or
oral, are hereby limited, in accordance with the Note and the other Loan
Instruments, so that in no contingency shall the interest contracted for,
charged or received by Beneficiary exceed the maximum amount permissible under
applicable law.
Section 6.8 Successor and Assigns; Use of Terms. The covenants herein
contained shall bind, and the benefits and advantages shall inure to, the
respective heirs, executors administrators, personal representatives,
successors, and assigns of the parties hereto. Whenever used, the singular
number shall include the plural and the plural the singular, and the use of any
gender shall be applicable to all genders. The term "Grantor" shall include in
their individual capacities and jointly all parties hereinabove named as a
Grantor. The term "Beneficiary" shall include any lawful owner, holder,
pledgee, or assignee of any of the Indebtedness. The duties, covenants,
conditions, obligations, and warranties of Grantor in this Deed of Trust shall
be joint and several obligations of Grantor and each Grantor, if more than one,
and Grantor's heirs, executors, administrators, personal representatives,
successors and assigns. Each party who executes this Deed of Trust and each
subsequent owner of the Mortgaged Property, or any part thereof (other than
Beneficiary), covenants and agrees that it will perform, or cause to be
performed, each term and covenant of this Deed of Trust.
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Section 6.9 Beneficiary's Consent. In any instance hereunder where
Beneficiary's approval or consent is required or the exercise of Beneficiary's
judgment is required, the granting or denial of such approval or consent and
the exercise of such judgment shall be within the sole discretion of
Beneficiary, and Beneficiary shall not, for any reason or to any extent, be
required to grant such approval or consent or exercise judgment in any
particular manner regardless of the reasonableness of either the request or
Beneficiary's judgment.
Section 6.10 Severability. If any provision of this Deed of Trust is
held to be illegal, invalid, or unenforceable under present or future laws
effective while this Deed or Trust is in effect, the legality, validity and
enforceability or the remaining provisions of this Deed of Trust shall not be
affected thereby, and in lieu of each such illegal, invalid or unenforceable
provision there shall be added automatically as a part of this Deed of Trust a
provision which is legal, valid and enforceable and as similar in terms to such
illegal, invalid or unenforceable provision as may be possible. If any of the
Indebtedness should be unsecured, the unsecured portion of the Indebtedness
shall be completely paid prior to the payment of the secured portion of such
Indebtedness, and all payments made on account of the Indebtedness shall be
considered to have been paid on and applied first to the complete payment of
the unsecured portion of the Indebtedness.
Section 6.11 Modification or Termination. The Loan Instruments may
only be modified or terminated by a written instrument or instruments executed
by the party against which enforcement of the modification or termination is
asserted. Any alleged modification or termination which is not so documented
shall not be effective as to any party.
Section 6.12 No Partnership. Nothing contained in the Loan Instruments
is intended to create any partnership, joint venture or association between
Grantor and Beneficiary, or in any way make Beneficiary a co-principal with
Grantor with reference to the Mortgaged Property, and any inferences to the
contrary are hereby expressly negated.
Section 6.13 No Homestead. With respect to each Grantor who is an
individual, no part of the Mortgaged Property constitutes any part of his
business or residential homestead.
Section 6.14 Headings. The Article, paragraph and Subparagraph
headings hereof are inserted for convenience of reference only and shall not
alter, define, or be used in construing the text of such Articles, Paragraphs
or Subparagraphs
Section 6.15 Construction Deed of Trust. This Deed of Trust constitutes
a "construction mortgage" as defined in Section 9.313 of the Code and secures
an obligation incurred for the construction of the Improvements, including the
acquisition cost of the Land.
Section 6.16 Notices. Except as otherwise provided in subparagraph (c)
of Section 8.1 of this Deed of Trust, all notices, demands, requests, approvals
and other communications required or permitted hereunder shall be in writing
and shall be deemed to have been given when presented personally or deposited
in a regularly maintained mail receptacle of the United States Postal Service,
postage prepaid, registered or certified, return receipt requested, addressed
to Grantor at its address set forth in the first paragraph of this Deed of
Trust or to Beneficiary at its address set forth in Section 1.1 hereof, or such
other address as Grantor or Beneficiary may from time to time designate by
written notice to the other as herein required.
ARTICLE VII
EVENTS OF DEFAULT
The occurrence of any one of the following shall be a default hereunder
("Event of Default"):
Section 7.1 Failure to Pay Indebtedness. Any of the Indebtedness is
not paid when due, whether by acceleration or otherwise.
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Section 7.2 Non-Performance of Covenants. Any covenant in the Loan
Instruments (other than any covenant involving the payment of money) is not
fully and timely performed, or the occurrence of any default thereunder
(following thirty [30] days written notice thereof).
Section 7.3 False Representation. Any statement, representation or
warranty in the Loan Instruments, any financial statement or any other writing
delivered to Beneficiary in connection with the Indebtedness or by any
guarantor thereof is false, misleading or erroneous in any material respect.
Section 7.4 Bankruptcy or Insolvency. If the owner of the Mortgaged
Property or any person obligated to pay the Indebtedness: (a) does not pay its
debts as they become due or admits in writing its inability to pay its debts or
makes a general assignment for the benefit of creditors; or (b) commences, or
involuntarily becomes the subject of, any case, proceeding or other action
seeking reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors; or (c) has a trustee,
receiver, custodian or other similar official appointed for or take possession
of all or any part of the Mortgaged Property or any other of its property, or
has any court take jurisdiction of any other of its property through
attachment, sequestration, or similar writ.
Section 7.5 Transfer of the Mortgaged Property. Except with respect to
a Partial Release (as defined in the Loan Agreement) as permitted under
Paragraph 16 of the Loan Agreement, title to all or any part of the Mortgaged
Property (other than obsolete or worn Personal Property replaced by adequate
substitutes of equal or greater value than the replaced items when new) shall
become vested in any party other than Grantor, whether by operation of law or
otherwise.
Section 7.6 Abandonment. Grantor abandons any of the Mortgaged
Property.
Section 7.7 Foreclosure of Other Liens. If the holder of any lien,
security interest or assignment on the Mortgaged Property or any other property
securing the payment or performance of any of the Indebtedness institutes
foreclosure or other proceedings for the enforcement of its remedies
thereunder.
ARTICLE VIII
REMEDIES
Section 8.1 Exercise of Specific Remedies. If an Event of Default shall
occur, Beneficiary may exercise any one or more of the following remedies,
without notice:
(a) Acceleration. Beneficiary may declare the Indebtedness
immediately due and payable, without notice (except as required under
Article VII above) whether the same shall become immediately due and
payable. Grantor hereby waives notice of intent to accelerate and
notice of acceleration.
(b) Enforcement of Assignment of Rents and Leases.
Beneficiary may:
(1) terminate the license granted to Grantor to collect
the Rents, collect and sue for the Rents in Beneficiary's own
name, give receipts and releases therefor, and after deducting
all expenses of collection, including reasonable attorneys' fees,
apply the net proceeds thereof to any Indebtedness as Beneficiary
may elect; and
(2) make, modify, enforce, cancel, terminate or accept
surrender of any Leases, evict tenants, adjust the Rents,
maintain, decorate, refurbish, repair, clean, and make space
ready for renting, and otherwise do anything Beneficiary deems
advisable in connection with the Mortgaged Property.
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(c) Foreclosure. Beneficiary may require the Trustee to
foreclose this Deed of Trust and sell all or part of the Mortgaged
Property, at public auction, in which case Beneficiary or Beneficiary's
agent shall give notice of the foreclosure sale as provided by the Texas
Property Code, as then amended, and/or otherwise in accordance with the
requirements of the applicable laws of the State of Texas in effect at
the time of such sale. Trustee may sell all or any portion of the
Mortgaged Property. together or in lots or parcels, and may execute and
deliver to the purchaser or purchasers of such property, good and
sufficient deeds of conveyance of fee simple title with covenants of
general warranty made on behalf of Grantor. In no event shall Trustee
be required to exhibit, present or display at any such sale, any of the
personalty described herein to be sold at such sale. Trustee making such
sale shall receive the proceeds thereof and shall apply the same as
follows: first, he shall pay the reasonable expenses of Trustee and a
reasonable Trustee's fee or commission; second, he shall pay, so far as
may be possible, the Indebtedness, discharging first that portion of the
Indebtedness arising under the covenants or agreements herein contained
and not evidenced by the Note, and third, he shall pay the residue, if
any, to the persons legally entitled thereto. Payment of the purchase
price to Trustee shall satisfy the obligation of the purchaser at such
sale therefor, and such purchaser shall not be responsible for the
application thereof. The sale or sales by Trustee of less than the
whole of the Mortgaged Property shall not exhaust the power of sale
herein granted, and Trustee is specifically empowered to make successive
sale or sales under such power until the whole of the Mortgaged Property
shall be sold; and if the proceeds of such sale or sales of less than
the whole of the Mortgaged Property shall be less than the aggregate of
the Indebtedness and the expenses thereof, this Deed of Trust and the
lien, security interest and assignment hereof shall remain in full force
and effect as to the unsold portion of the Mortgaged Property just as
though no sale or sales had been made; provided, however, that Grantor
shall never have any right to require the sale or sales of less than the
whole of the Mortgaged Property, but Beneficiary shall have the right,
at its sole election, to request Trustee to sell less than the whole of
the Mortgaged Property. If default is made hereunder, the holder of the
Indebtedness or any part thereof on which the payment is delinquent
shall have the option to proceed with foreclosure in satisfaction of
such item either through judicial proceedings or by directing Trustee to
proceed as if under a full foreclosure, conducting the sale as herein
provided without declaring the entire Indebtedness due, and if sale is
made because of default of an installment, or a part of an installment,
such sale may be made subject to the unmatured part of the Indebtedness;
and it is agreed that such sale, if so made, shall not in any manner
affect the unmatured part of the Indebtedness, but as to such unmatured
part, this Deed of Trust shall remain in full force and effect as though
no sale had been made under the provisions of this paragraph. Several
sales may be made hereunder without exhausting the right of sale for any
unmatured part of the Indebtedness. At any such sale (1) Grantor hereby
agrees, in its behalf and in behalf of its heirs, executors,
administrators, successors, personal representatives and assigns, that
any and all recitals made in any deed of conveyance given by Trustee
with respect to the identity of Beneficiary, the occurrence or existence
of any default, the acceleration of the maturity of any of the
Indebtedness, the request to sell, the notice of sale, the giving of
notice to all debtors legally entitled thereto, the time, place, terms,
and manner of sale, and receipt, distribution and application of the
money realized therefrom, or the due and proper appointment of a
substitute Trustee, and, without being limited by the foregoing, with
respect to any other act or thing having been duly done by Beneficiary
or by Trustee hereunder, shall be taken by all courts of law and equity
as prima facie evidence that the statements or recitals state facts and
are without further question to be so accepted, and Grantor hereby
ratifies and confirms every act that Trustee or any substitute Trustee
hereunder may lawfully do in the premises by virtue hereof, (2) the
purchaser may disaffirm any easement granted, or rental, lease or other
contract made, in violation of any provision of this Deed of Trust, and
may take immediate possession of the Mortgaged Property free from, and
despite the terms of, such grant of easement and rental or lease
contract; and (3) Beneficiary may bid and become the purchaser of all or
any part of the Mortgaged Property at any trustee's or foreclosure sale
hereunder, and the amount of Beneficiary's successful bid may be
credited on the Indebtedness.
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(d) Lawsuits. Beneficiary may proceed by a suit or suits in
equity or at law, whether for the specific performance of any covenant
or agreement herein contained or in aid of the execution or any power
herein granted, or for any foreclosure hereunder or for the sale of the
Mortgaged Property under the judgment or decree of any Court or courts
of competent jurisdiction.
(e) Entry on Mortgaged Property. Upon occurrence of an event of
default hereunder, Beneficiary may enter into and upon and take
possession of all or any part of the Mortgaged Property, and may exclude
Grantor, and all persons claiming under Grantor, and its or their agents
or servants, wholly or partly therefrom; and, holding the same,
Beneficiary may use, administer, manage, operate, and control the
Mortgaged Property and may exercise all rights and powers of Grantor in
the name, place and stead of Grantor, or otherwise, as Beneficiary shall
deem best; and in the exercise of any of the foregoing rights and powers
Beneficiary shall not be liable to Grantor for any loss or damage
thereby sustained unless due solely to the willful misconduct or gross
negligence of Beneficiary.
(f) Trustee or Receiver. Beneficiary may make application to
a court of competent jurisdiction as a matter of strict right and
without notice to Grantor or regard to the adequacy of the Mortgaged
Property for the repayment of the Indebtedness, for appointment of a
receiver of the Mortgaged Property and Grantor does hereby irrevocably
consent to such appointment. Any such receiver shall have all the usual
powers and duties of receivers in similar cases, including the full
power to rent, maintain and otherwise operate the Mortgaged Property
upon such terms as may be approved by the Court, and shall apply the
Rents in accordance with the provisions of Section 2.1 hereof.
Section 8.2 Tenancy at Will. In the event of a trustee's sale
hereunder, if at the time of such sale Grantor occupies the portion of the
Mortgaged Property so sold or any part thereof, Grantor shall immediately
become the tenant of the purchaser at such sale, which tenancy shall be a
tenancy from day to day, terminable at the will of either tenant or landlord,
at a reasonable rental per day based upon the value of the portion of the
Mortgaged Property so occupied, such rental to be due and payable daily to the
purchaser. An action of forcible detainer shall lie if the tenant holds over
after a demand in writing for possession of such Mortgaged Property.
Section 8.3 Substitute Trustee. If, for any reason, Beneficiary
prefers to appoint a substitute Trustee hereunder, Beneficiary may, from time
to time, by written instrument, appoint one or more substitute Trustees, who
shall succeed to all the estate, rights, powers, and duties of the original
Trustee named herein. Such appointment may be executed by anyone acting in a
representative capacity, and such appointment shall be conclusively presumed to
have been executed with appropriate authority.
Section 8.4 Indemnification of Trustee. Trustee shall not be liable
for any act or omission or error of judgment. Trustee may rely on any document
believed by him in good faith to be genuine. All money received by Trustee
shall, until used or applied as herein provided, be held in trust, but need not
be segregated (except to the extent required by law), and Trustee shall not be
liable for interest thereon. Grantor hereby indemnifies Trustee against all
liability and expenses which he may incur in the performance of his duties
hereunder (other than for the gross negligence or willful misconduct of
Trustee).
Section 8.5 Beneficiary's Right to Perform. Upon Grantor's failure to
make any payment or perform any act required by the Loan Instruments, then at
any time thereafter, and without notice to or demand upon Grantor and without
waiving or releasing any other right, remedy or recourse, Beneficiary may (but
shall not be obligated to) make such payment or perform such act for the
account of and at the expense of Grantor, and shall have the right to enter the
Mortgaged Property for such purpose and to take all such action thereon as it
may deem necessary or appropriate.
Section 8.6 Reimbursement of Expenditure. If Beneficiary shall expend
any money chargeable to Grantor or subject to reimbursement by Grantor under
the terms of the Loan Instruments, Grantor will repay the same to Beneficiary
immediately at the place where the Note
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<PAGE> 12
is payable. together with interest thereon at the highest rate permitted by
applicable law from and after the date of each such expenditure by Beneficiary.
Section 8.7 Other. Beneficiary may exercise any and all other rights,
remedies and recourse granted under the Loan Instruments now or hereafter
existing in equity or at law for the protection and preservation of the
Mortgaged Property.
Section 8.8 Remedies Cumulative, Concurrent and Nonexclusive.
Beneficiary shall have all rights, remedies and recourse granted in the Loan
Instruments available at law or equity (including, without limitation, those
granted by the Code and applicable to the Mortgaged Property, or any portion
thereof) and same (a) shall be cumulative and concurrent, (b) may be pursued
separately, successively or concurrently against Grantor or others obligated
for the Indebtedness, or any part thereof or against any one or more of them,
or against the Mortgaged Property, at the sole discretion of Beneficiary, (c)
may be exercised as often as occasion therefor shall arise, it being agreed by
Grantor that the exercise or failure to exercise any of same shall in no event
be construed as a waiver or release thereof or of any other right, remedy or
recourse, and (d) are intended to be, and shall be, nonexclusive.
Section 8.9 Rights and Remedies of Sureties. Grantor waives any right
or remedy which Grantor may have or be able to assert pursuant to Chapter 34 of
the Business and Commerce Code of the State of Texas pertaining to the rights
and remedies of sureties.
ARTICLE IX
HAZARDOUS MATERIAL
Section 9.1 Grantor's Warranties. Grantor hereby represents and
warrants that, to the best of Grantor's knowledge, no hazardous waste (as
defined in 42 U.S.C. Section 6901, et seq.) or hazardous substance (as defined
in 42 U.S.C. Section 9601, et seq.), or other prohibited materials (together
"Hazardous Materials") are now located on the Mortgaged Property and that
neither Grantor nor, to the best of Grantor's knowledge, any other person has
ever caused or permitted any Hazardous Materials to be placed, held, located or
disposed of on, under or at the Mortgaged Property or any part thereof. To the
best of Grantor's knowledge, no part of the Mortgaged Property has ever been
used as a manufacturing, storage or dump site for Hazardous Materials nor is
any part of the Mortgaged Property affected by an Hazardous Materials
("Hazardous Materials Contamination").
Section 9.2 Grantor's Covenants. Grantor agrees to (a) give notice to
Beneficiary immediately upon Grantor's acquiring knowledge of the presence of
any Hazardous Materials on the Mortgaged Property or of any Hazardous Materials
Contamination with a full description thereof; (b) promptly comply with any
governmental requirement requiring the removal, treatment or disposal of such
Hazardous Materials or Hazardous Materials Contamination and provide
Beneficiary with satisfactory evidence of such compliance; and (c) provide
Beneficiary, within thirty (30) days after demand by Beneficiary, with a bond,
letter of credit or similar financial assurance evidencing to Beneficiary's
satisfaction that the necessary funds are available to pay the cost of
removing, treating and disposing of such Hazardous Materials or Hazardous
Materials Contamination and discharging any assessments which may be
established on the Mortgaged Property as a result thereof; provided, however,
in any event the terms and provisions of this section shall be of no force and
effect for such portions of the Mortgaged Property that Grantor has obtained a
Partial Release (in accordance with the terms of the Loan Agreement) from this
Deed of Trust and the Deeds of Trust Incorporated By Reference a Master Form
Deed of Trust described in Article X below (and in no event shall any breach of
this section be a basis for a refusal by Beneficiary to grant such Partial
Release).
Section 9.3 Indemnification. Grantor shall defend, indemnify and hold
harmless Beneficiary and Trustee from any and all liabilities (including,
without limitation, reasonable attorneys' fees and remedial costs), suits,
costs of any settlement or judgment and claims of any and every kind whatsoever
which may now or in the future (whether before or after the release of this
Deed of
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<PAGE> 13
Trust) be paid, incurred or suffered by or asserted against, Beneficiary or
Trustee by any person or entity or governmental agency for, with respect to, or
as a direct or indirect result of, the presence on or under, or the escape,
seepage, leakage, spillage, discharge, emission, discharging or release from
the Mortgaged Property of any Hazardous Materials or any Hazardous Materials
Contamination or which arise out of or result from the environmental condition
of the Mortgaged Property or the applicability of any governmental requirement
relating to Hazardous Materials caused by Grantor, regardless of whether or not
caused by or within the control of Beneficiary or Trustee; provided, however,
in no event shall this Section 9.3 apply with respect to matters solely caused
by or arising solely out of the gross negligence or willful misconduct of
Beneficiary, nor shall this Section 9.3 limit or preclude any other right or
remedy available to Beneficiary, either at law or in equity. The
representations, covenants and warranties contained in this Article 9 shall
survive the foreclosure, deed-in-lieu of foreclosure and/or release of this
Deed of Trust.
Section 9.4 Beneficiary's Right to Remove Hazardous Materials.
Beneficiary shall have the right (but not the obligation), without in any way
limiting Beneficiary's other rights and remedies under this Deed of Trust, to
enter onto the Mortgaged Properly or to take such other actions as if deems
necessary or advisable to clean up, remove, resolve or minimize the impact of,
or otherwise deal with, any Hazardous Materials or Hazardous Materials
Contamination on the Mortgaged Property following receipt of any notice from
any person or entity asserting the existence of any Hazardous Materials or
Hazardous Materials Contamination pertaining to the Mortgaged Property. All
reasonable costs and expenses paid or incurred by Beneficiary in the exercise
of any such rights shall be secured by this Deed of Trust and shall be payable
by Grantor to Beneficiary upon demand.
ARTICLE X
ADDITIONAL DEEDS OF TRUST
It is anticipated that Grantor from time to time will execute one or
more Deeds of Trust Incorporating by Reference a Master Form Deed of Trust
incorporating by reference this Deed of Trust, to further secure the
Indebtedness from time to time. A release of this Deed of Trust shall not
effect a full release of this Deed of Trust so long as any Deed of Trust
Incorporating by Reference a Master Form Deed of Trust that incorporates by
reference this Deed of Trust is not released. Notwithstanding the previous
sentence, if this Deed of Trust is released at such time as a Deed of Trust
Incorporating by Reference a Master Form Deed of Trust that incorporates by
reference provisions of this Deed of Trust is not released, then the Deed of
Trust Incorporating by Reference a Master Form Deed of Trust shall continue in
full force and effect, including the applicable provisions of this Deed of
Trust incorporated by reference.
(The balance of this page is intentionally left blank.)
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<PAGE> 14
DATED AND EFFECTIVE AS OF the date first set forth above.
GRANTOR:
NEWMARK HOMES, L.P.,
a Texas limited partnership
By: NEWMARK HOME CORPORATION,
a Nevada corporation,
General Partner
By: /s/ TERRY WHITE
---------------------------
Name: Terry White
----------------------
Title:
---------------------
STATE OF TEXAS )
)
COUNTY OF FORT BEND )
This instrument was acknowledged before me on September 3, 1997, by Terry
White, Sr. Vice President of NEWMARK HOME CORPORATION, a Nevada corporation,
General Partner of NEWMARK HOMES, L.P., a Texas limited partnership, on behalf
of said limited partnership.
(SEAL) /s/ LINDA SOTIER
-------------------------------------------
Notary Public in and for the State of Texas
My Commission Expires:
3-10-2001 Linda Sotier
- ----------------------------- -------------------------------------------
Printed Name of Notary
[SEAL]
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<PAGE> 1
EXHIBIT 10.12(a)
REVOLVING LINE OF CREDIT LOAN AGREEMENT
BETWEEN
FIRST AMERICAN BANK TEXAS, SSB
AND
NEWMARK HOMES, L.P.
DATED
DECEMBER 17, 1996
<PAGE> 2
REVOLVING LINE OF CREDIT LOAN AGREEMENT
THIS REVOLVING LINE OF CREDIT LOAN AGREEMENT (the "Agreement") dated
December 17, 1996 is made by and between First American Bank Texan, SSB,
("Lender"), whose legal address in 14651 Dallas Parkway, Suite 400, Dallas,
Texas 75240; and Newmark Homes, L.P., a Texas limited partnership ("Borrower")
with its principal offices at 10435 Greenbough, Stafford, Texas 77477.
ARTICLE I.
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings assigned to them.
1.1 Advance. The term "Advance" shall mean a disbursement of money
from Lender to or for the benefit of Borrower of any of the proceeds of the
Loans or the Master Note.
1.2 Approved Purchase Agreement. The term "Approved Purchase
Agreement" shall mean a legally binding purchase agreement with requirement for
earnest money deposit by purchaser covering a House and Lot entered into by
Borrower with a non-related bona fide purchaser, for which Lender has received
(a) a copy of such executed contract satisfactory in form and content to
Lender, with no conditions to purchase except as are approved by Lender, and
specifically without a condition or contingency for sale of purchaser's
existing residence, and (b) satisfactory evidence that ouch prospective
purchaser is expected to qualify for any financing required to consummate such
purchase agreement.
1.3 Build to Suit House- The term "Build to Suit House" shall mean
a House which is subject to an Approved Purchase Agreement.
1.4 Code. The term "Code" shall mean the Uniform Commercial
Code of the State of Texas.
1.5 Committed Loan Amount. The term "Committed Loan Amount" shall
mean with respect to a particular Loan the amount requested by Borrower and
approved by Lender pursuant to the provisions of this Agreement and the other
Loan Documents.
1.6 Constituent Party. Any signatory to this Revolving Line
of Credit Loan Agreement or any other Loan Document that signs on Borrower's
behalf that is a corporation (whether in its corporate capacity or in its
capacity as a shareholder of any entity comprising Borrower), general
partnership, limited partnership, joint venture, trust, or other type of
business organization.
<PAGE> 3
1.7 Debtor Relief Laws. The term "Debtor Relief Laws" shall
mean any applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, insolvency, reorganization, or similar laws affecting the rights
or remedies of creditors generally, as in effect from time to time.
1.8 Deed of Trust. The term "Deed of Trust" shall mean the Master
Deed of Trust, and each individual Deed of Trust conveying each Property, House
or Lot to a Trustee for the benefit of Lender as security for the payment of
the Master Note and any Loan, and the payment and performance of all
obligations specified in the Master Deed of Trust, such Individual Deeds of
Trust, or this Agreement.
1.9 Default Rate. The rate of interest specified in the Master
Note to be paid by the maker of the Master Note from and after the occurrence
of a default in payment under the provisions of the Master Note and the other
Loan Documents, but not in excess of the Maximum Lawful Rate.
1.10 FHA. The term "FHA"shall mean the Federal Housing
Administration and any successors or assigns thereof.
1.11 FNMA. The term "FNMA" shall mean the Federal National Mortgage
Association and any successor or assigns thereof.
1.12 Financial Statements. The term "Financial Statements" shall
mean the balance sheets, profit and loss statements, reconciliations of capital
and surplus, changes in financial condition, schedules of sources and
applications of funds, Federal Income Tax returns, and other financial
information of Borrower and any Guarantor.
1.13 Financing Statements. The term "Financing Statements" shall
mean the Master Deed of Trust, the Individual Deeds of Trust, the Form UCC-1 or
other Code financing statements perfecting the security interest on any
personal property and fixtures securing the Master Note or any Loan, to be
filed with the appropriate offices for the perfection of a security interest in
such property.
1.14 Fixtures. All materials, supplies, equipment, systems,
apparatus, and other items now owned or hereafter acquired by Borrower, and now
or hereafter attached to, installed in, or used in connection with (temporarily
or permanently) any of the improvements or the Land, which are now owned or
hereafter acquired by Borrower and are now or hereafter attached to the Land or
the Improvements, and including but not limited to any and all partitions,
dynamos, window screens and shades, draperies, rugs and other floor coverings,
awnings, motors, engines, boilers, furnaces, pipes, cleaning, wall and
sprinkler systems, fire extinguishing apparatus and equipment, water tanks,
swimming pools, heating, ventilating, refrigeration, plumbing, laundry,
lighting, generating, cleaning, waste disposal, transportation (of people or
things, including but not limited to, stairways, elevators, escalators, and
conveyors), incinerating, air conditioning and air cooling equipment and
systems, gas and electric machinery, appurtenances and equipment, disposals,
dishwashers, refrigerators and ranges, recreational equipment and facilities of
all kinds, and water, gas, electrical, storm and sanitary sewer facilities, and
all other utilities whether or not situated in easements, together with all
accessions, appurtenances, replacements, betterments, and substitutions for any
of the foregoing and the proceeds thereof.
<PAGE> 4
1.15. Governmental Authority. The term "'Governmental Authority "
shall mean the United States, the State, the County, the city, and/or any other
political subdivision in which the Property is located, and any other political
subdivision, authority, agency, court, department, or instrumentality
exercising jurisdiction over Borrower, the Property or the improvements.
1.16 Governmental Requirements. The term "Governmental
Requirements" shall mean all laws, ordinances, rules, orders, writs and
regulations of any Governmental Authority applicable to Borrower or the
Property.
1.17 Guarantor. There are no guarantors.
1.18 House. The term "House" shall mean a detached single family
residential structure and related structures, fixtures, and personal property,
and the Lot on which such House will be constructed, for which Borrower has, or
desires to obtain a Loan from Lender pursuant to this Agreement. As used
herein, the term House shall be inclusive of Build to Suit Houses, Speculative
Houses, and Model Houses.
1.19 Improvements. The term "Improvements" shall mean Houses along
with all related structures, fixtures, and personal property to be or which
have been constructed on Lots including all utility hookups, routes of ingress
and egress, landscaping and finish work required by the Plans.
1.20 Indebtedness. (i) The principal of, interest on, or other
sums evidenced by the Master Note or the other Loan Documents; (ii) any other
amounts, payments, or premiums payable under the Loan Documents; and (iii) any
and all other indebtedness, obligations, and liabilities of any kind or
character of the Borrower to Lender, now or hereafter existing, absolute or
contingent, due or not due, arising by operation of law or otherwise, or direct
or indirect, primary or secondary, joint, several, joint and several, fixed or
contingent, secured or unsecured by additional or different security or
securities, including indebtedness, obligations, and liabilities to Lender of
the Borrower as a member of any partnership, joint venture, trust or other type
of business association, or other group, and whether incurred by Borrower as
principal, surety, endorser, guarantor, accommodation party or otherwise, it
being contemplated by Borrower and Lender that Borrower may hereafter become
indebted to Lender in further sum or sums.
1.21 Individual Deed of Trust. The term "Individual Deed of Trust"
shall mean any "Deed of Trust, Security Agreement and Financing Statement"
executed by Borrower prior to or at the closing of each Loan for the purpose of
the purchase of a Lot and the Construction of a House. For purposes of this
Agreement, it is agreed that each Individual Deed of Trust shall incorporate by
reference all of the applicable provisions of the Master Deed of Trust.
1.22 Initial Interest Rate. The term "Initial Interest Rate, shall
mean the interest rate applicable to a Loan on the date that the Individual
Deed of Trust securing such Loan is executed.
1.23 Land. Any real estate, or other interest therein attached as
Exhibit "A" to each Individual Deed of Trust, together with all right, title,
interest, and privileges of Borrower in and to
<PAGE> 5
(a) all streets, ways, roads, alleys, easements. rights-of-way, licenses,
rights of ingress and egress, vehicle parking rights and public places,
existing or proposed, abutting, adjacent, used in connection with or pertaining
to such real property or the improvements thereon; (b) any strips of real
property between such real property and abutting or adjacent properties; (c)
all water and water rights, timber, crops, pertaining to such real estate; and
(d) all appurtenances and all reversions and remainders in or to such real
property.
1.24 Line. The term "Line" shall mean the Revolving Line of
Credit being extended to Borrower by Lender pursuant to this Agreement, the
Master Note, the Master Deed of Trust, and the Loan Documents. For purposes of
this Agreement, the term Line shall be inclusive of all funds advanced on all
of the Loans.
1.25 Loan. The term "Loan" shall mean the funds advanced under the
Line by Lender to borrower for the construction of a House or the purchase of a
Lot pursuant to the terms of this Agreement, the Master Note, the Master Deed
of Trust, individual Deeds of Trust, and the other Loan Documents. Each Loan
must be separately approved by the Lender prior to being funded. Although all
Loans will be funded pursuant to the Master Note and the other Loan Documents,
each Loan shall be separately accounted for by Lender.
1.26 Loan Documents. The term "Loan Documents" shall mean the
documents evidencing and securing the Line, any Loan or Loans made by Lender to
Borrower pursuant to the Master Note, and any documents related thereto,
including specifically but not limited to, this Loan Agreement, the Master Deed
of Trust, each Individual Deed of Trust, each Loan, the Financing Statements,
and such other instruments evidencing, securing, or pertaining to any Loan as
shall, from time to time, be executed and delivered by Borrower to Lender.
1.27 Lot. The term "Lot" shall mean a subdivided lot or similar
parcel in a Subdivision, on which one House along with related Improvements is
or is to be located, and which is encumbered by a Deed of Trust.
1.28 Master Deed of Trust. The term "Master Deed of Trust" shall
mean the "Deed of Trust, Security Agreement and Financing Statement" to be
executed and/or recorded at closing of this Agreement. For purposes of this
Agreement, it is agreed that the Borrower shall execute the Master Deed of
Trust at closing, and shall subsequently execute an Individual Deed of Trust
(which shall incorporate all of the applicable provisions of the Master Deed of
Trust) prior to or at the closing of each Loan for the purpose of the purchase
of a Lot and the construction of a House.
1.29 Master Note. The term "Master Note" shall mean the Revolving
Line of Credit Promissory Note made payable by Borrower on the same date
herewith to the order of Lender for the purchase of Late and the construction
of Houses.
1.30 Material Adverse Effect. Any material and adverse effect on
(i) the business condition (financial or otherwise) , operations, prospects,
results of operations, capitalization, liquidity or any properties of the
Borrower, taken as a whole, (ii) the value of the Mortgaged Property, (iii) the
ability of Borrower (or if the Borrower is a partnership, joint venture, trust
or other
<PAGE> 6
type of business association, of any of the parties comprising Borrower or of
the ground lessor if the estate held by Borrower in the Land is a leasehold
estate) to pay and perform the Indebtedness and the Obligations, respectively,
or (iv) the validity, enforceability or binding effect of any of the Loan
Documents.
1.31 Maximum Lawful Rate. The term "Maximum Lawful Rate" shall
mean the maximum permissible amount which may be paid or agreed to be paid to
Lender or the holder of the Master Note, or collected by Lender or such holder,
for the use, forbearance, or detention of amounts funded under the Master Note
or for the payment of or performance of any covenant or obligation contained in
any of the Loan Documents under applicable federal or Texas usury laws.
1.32 Minerals. All substances in, on, or under the Land which are
now, or may become in the future, intrinsically valuable, that is, valuable
in themselves, and which now or may be in the future enjoyed through extraction
or removal from the property, including without limitation, oil, gas, and all
other hydrocarbons, coal, lignite, carbon dioxide and all other nonhydrocarbon
gases, uranium and all other radioactive substances, and gold, silver, copper,
iron and all other metallic substances or ores.
1.33 Model House. The term "Model House" shall mean a House held by
Borrower for exhibiting a representative House to the public and not at that
time being held or offered for sale, which shall not be subject to an Approved
Purchase Agreement.
1.34 Mortgaged Property. The Land, Minerals, Fixtures,
Improvements, and Personalty, and any interest of Borrower now owned or
hereafter acquired in and to the Land, Minerals, Fixtures, and Personalty,
together with any and all other security and collateral of any nature
whatsoever, now or hereafter given under this Loan Agreement or any other Loan
Document including the Master Deed of Trust and any Individual Deed of Trust
for the repayment of the Indebtedness or the performance and discharge of the
Obligations. As used in this Loan Agreement or any other Loan Document
including the Master Deed of Trust, the term "Mortgaged Property" shall be
expressly defined as meaning all or, where the context permits or requires, any
portion of the above and all or, where the context permits or requires, any
interest therein.
1.35 Obligations. Any and all of the covenants, conditions,
warranties, representations, and other obligations made or undertaken by
Borrower, any Guarantor, or any Constituent Party to Lender, Trustee, or others
as set forth in the Loan Documents, and in any deed, lease, sublease, or ocher
form of conveyance, or any other agreement pursuant to which Borrower is
granted a possessory interest in the Land.
1.36 Original Line. Borrower and Lender entered into a Revolving
Line of Credit Loan Agreement, Master Revolving Line of Credit Promissory Note
and Master Deed of Trust, Security Agreement and Financing Statement on
September 27, 1994, whereby Lender committed a Fifteen Million and No/100
dollars ($15.000,000.00) Revolving Line of Credit (the "Original Line") to
Borrower. (The original Borrower was Newmark Home Corporation, a Texas
corporation which was subsequently known as Newmark Home Corp., a Nevada
corporation which was subsequently known as Newmark Home Corporation, a Nevada
Corporation which is now known as Newmark
<PAGE> 7
Homes, L.P., a Texas limited partnership). Lender has made loans to Borrower
under the Original Line, with each loan being documented by an Individual Deed
of Trust. This Agreement is intended to amend and replace the original
relationship between Borrower and Lender, and the Line granted by Lender
hereunder is intended to be a modification, renewal and extension of the
original Line. After the execution of this Agreement by Lender and Borrower,
the original relationship will no longer be effective; however, each loan made
under the Original Line will continue to be governed by the Master Revolving
Line of Credit Loan Agreement. Master Revolving Line of Credit Promissory Note
and Master Deed of Trust, Security Agreement and Financing Statement and
Individual Deed of Trust executed in connection therewith. For purposes of
applying the lending limitations, property ratios, loan-to-value ratios, and
other limitations set forth in this Agreement, the individual loans made under
the Original Line will be counted in the calculation of such limitations and
ratios. Specifically, but without limitation, such individual loans shall be
considered in applying the provisions set forth in Article Il. The individual
loans made under the original Line are listed on Exhibit "I", attached hereto
and incorporated herein by reference.
1.37 Permitted Exceptions. The outstanding liens, easements,
building lines, restrictions, security interests and other matters (if any)
listed in a mortgagee title policy binder or a mortgagee policy at title
insurance, to the extent same are valid and subsisting, in full force and
effect and do, in fact, cover or affect the Land described in Exhibit "A"
attached to each individual Deed of Trust.
1.38. Personalty. All of the right, title, and interest of
Borrower in and to (i) furniture, furnishings, equipment, machinery, goods
(including, but not limited to, crops, farm products, timber and timber to be
cut, and extracted minerals); (ii) general intangibles, notes, chattel paper,
money, insurance proceeds, accounts, contract and subcontract rights,
trademarks, tradenames, inventory; (iii) all refundable, returnable, or
reimbursable fees, deposits or other funds or evidences of credit or
indebtedness deposited by or on behalf of Borrower with any governmental
agencies, boards, corporations, providers of utility services, public or
private, including specifically, but without limitation, all refundable,
returnable, or reimbursable tap fees, utility deposits, origination fees and
development costs, any awards, remunerations, reimbursements, settlements, or
compensation heretofore made or hereafter to be made by any Governmental
Authority pertaining to the Land, Improvements, Fixtures, Contracts, or
Personalty, including but not limited to those for any vacation of, or change
of grade in, any streets affecting the Land or the Improvements and those for
municipal utility district or other utility costs incurred or deposits made in
connection With the Land; and (iv) all other personal property of any kind or
character as defined in and subject to the provisions of the Code (Article 9 -
Secured Transactions); any and all of which are now owned or hereafter acquired
by Borrower, and which are now or hereafter situated in, on, or about the Land
or the Improvements, or used in or necessary to the complete and proper
planning, development, construction, financing, use, occupancy, or operation
thereof, or acquired (whether delivered to the Land or stored elsewhere) for
use in or on the Land or the Improvements, together with all accessions,
replacements, and substitutions thereto or therefor and the proceeds thereof.
1.39 Plans. The term "Plaza" shall mean the representative
drawings and specifications, together with any amendments or modifications
thereto, for the construction of the improvements.
<PAGE> 8
1.40 Prime Rate. The term "Prime Rate- shall mean the rate of
interest announced or published from time to Lime by Nations Bank of Texas,
N.A. ("Bank") or any successor institution designated in writing by Lender and
designated as its Prime Rate, which may not necessarily be the lowest interest
rate charged by Bank. If such Prime Rate shall cease cc be published or is
published infrequently or sporadically, then the Prime Rate shall be determined
by reference to another Prime Rate or similar lending rate index, generally
accepted an a national basis, as selected by Lender in Its sale and absolute
discretion. Fluctuations in the Prime Rate shall become effective on the date
such changes in Bank's Prime Rate are effective.
1.41 Property. The term "Property" shall be inclusive of Lots,
Houses, and Improvements.
1.42 Residential Draw Request. The term "Residential Draw Request"
shall mean a writ application on Lender's prescribed form or other form
acceptable to Lender, certified by Borrower, requesting an advance of funds on
a particular Loan for the payment of costs and expenses of acquisition of a Lot
or the construction of a House, accompanied by such schedules, affidavits,
releases, waivers, statements, invoices, bills, and other documents am Lender
may reasonably request.
1.43 Speculative House. The term "Speculative House" shall mean a
House which is not subject to an Approved Purchase Agreement, and is not a
Model House.
1.44 Subdivision. The term "Subdivision" shall mean a subdivision
which has been finally approved by the applicable Governmental Authority, the
plat of which has been filed and recorded with the County Clerk of the county
in which the property is located, and which has received the approval of
Lender, in writing.
1.45 Term of the Loan. The term "Term of the Loan" shall have the
following meaning: twelve (12) months on Loans for the construction of Build to
Suit Houses; twelve (12) months an Loans for the construction of speculative
Houses; and eighteen (18) months on Loans for the construction of Model houses.
1.46 Trustee. The individual described as Trustee in the initial
paragraph of the Master Deed of Trust.
1.47 VA. The term "VA" shall mean the United States Veterans
Administration and any successors or assigns thereof.
ARTICLE II.
LOAN COMMITMENT
2.1 Revolving Line of Credit. Lender agrees to make and disburse
the Line in the manner and upon the terms and conditions herein provided. The
Line is an agreement under which a Loan or a series of Loans may be made by
Lender to Borrower for the construction of Houses, and for the purchase of the
related Lots. Lender and Borrower agree that for each House constructed,
Borrower
<PAGE> 9
will be required to obtain from Lender an approved Loan for such purpose.
Each Loan will be separately accounted for by Lender and Borrower, but all such
Loans will be made in accordance with, and subject to this Agreement, the
Master Deed of Trust, the Master Note, and the other Loan Documents. Lender
shall have no obligation to fund or make advances on the Line prior to
fulfillment of any and all conditions and prior performances herein required to
be kept or performed by Borrower as a condition of such Advances.
2.2 Maximum Loan Amount. The maximum aggregate outstanding
principal balance, along with amounts committed but unfunded, on the Line shall
not exceed Fifteen Million and No/100 Dollars ($15,000,000.00) at any time.
Lender and Borrower agree, however, that should the aggregate outstanding
principal balance, along with amounts committed but unfunded, on the Line
exceed Fifteen Million and No/100th Dollars ($15.000,000.00) at any time, then
no new Loans will be processed or approved by Lender until such time that the
outstanding principal balance, along with amounts committed but unfunded, falls
below Fifteen Million and No/100th Dollars ($15,000,000.00). During any period
of time that no new Loans are being processed or approved pursuant to this
paragraph, the Lender will continue to disburse funds under the Line which have
been committed but not yet funded.
<PAGE> 10
2.3 Term of the Line. Lender's obligation to accept requests for
Loans, or process Loans for approval shall terminate on April 30, 1997. Each
Loan shall be subject to its identified maturity date as provided for in this
Agreement. Each request by Borrower for a Loan must be approved in advance by
Lender in accordance with the terms of this Agreement. Lender may in its sole
discretion renew and extend this Agreement, but Borrower agrees that Lender has
made no commitment, promise, or assurance to renew or extend this Agreement.
Should Lender, in its sole discretion, determine to renew and extend this
Agreement, such renewal and extension may be conditioned upon the execution and
delivery of documents required by Lender, the payment of an extension and
renewal fee to Lender, the provision by Borrower of additional financial
information or collateral to secure this Agreement and the Master Note, or
other conditions or stipulations as required by Lender in its sole discretion.
Any extension of a Loan will require a fee of One Quarter of One percent
(0.25%) of the then current outstanding principal balance of such Loan, plus
any amount committed but unfunded, for each three (3) months of the extension
period. Any extension of a Loan for a period of time less than three (3)
months will require payment of an extension fee based on the number of months,
divided by three (3), multiplied by One Quarter of One percent (0.25%).
Further, the extension of the maturity date on a Loan may be conditioned on the
reduction of the principal balance so as to comply with the Lender's then
current loan policy.
2.4 Subdivisions. Loans shall be made by Lender for the
construction of Houses and the purchase of the related Lots only in
Subdivisions which have been approved in advance by the Lender's Construction
Loan Committee Lender's approval of Subdivisions hereunder shall be at Lender's
sole discretion, and Lender makes no assurance to Borrower that any particular
Subdivision shall be approved, or that any particular guidelines shall be used
in approving Subdivisions.
2.5 Loan-to-Value Ratio on Houses. The amount advanced on any
individual Loan for the construction of a House shall not exceed the following:
A. For Build to Suit Houses, the lesser of (i) seventy-five
Percent (75%) of the appraised value of the house and Lot or (ii)
seventy-five Percent (75%) of the sales price of the House and Lot,
but never more than one hundred Percent (100%) of the cost of the
House and Lot.
B. For Speculative Houses, the lesser of (i) seventy-five Percent
(75%) of the appraised value of the House and Lot or (ii) seventy-five
Percent (75%) of the sales price of the House and Lot, but never more
than one hundred Percent (100%) of the cost of the House and Lot.
C. For Model Houses, the lesser of (i) seventy-five Percent (75%)
of the appraised value of the House and Lot or (ii) seventy-five
Percent (75%) of the sales price of the House and Lot, but never more
than one hundred Percent (100%) of the cost of the House and Lot.
However, notwithstanding these loan-to-value limitations, Lender may
with respect to a specific Loan make an Advance under Article III below for the
purchase of a Lot by Borrower, where the ratio of the amount of the Advance to
the appraised value of the Lot may be as high as one hundred fifteen percent
(115%).
<PAGE> 11
2.6 Right to Loan Funds. Borrower acknowledges that it has no
right to the funds to be loaned by Lender pursuant to this Agreement other than
to have the same disbursed by Lender in accordance with the provisions of this
Agreement. Borrower agrees that any assignment or transfer, voluntary or
involuntary, of this Agreement, or any rights hereunder, shall not be binding
upon, or in any way affect Lender, without Lender's written consent.
2.7 Release of Houses. So long as Borrower is not in default on
any of the obligations under this Agreement, the Master Note, the Master Deed
of Trust, or the other Loan Documents, and the guarantee of each Guarantor is
in full force and effect, and so long as there does not exist any act, omission
or event, which with notice or the passage of time would constitute an Event of
Default as defined herein, the release of a House and related Lot encumbered by
the Master Deed of Trust or an Individual Deed of Trust, and the release from
the lien created thereby shall be granted to Borrower upon application to
Lender and upon satisfaction of the terms and conditions net forth for a
release in this Agreement, the Master Deed of Trust, the applicable Individual
Deed of Trust, or the other Loan Documents. The requirement for a release
pursuant to this paragraph shall include, but not be limited to, payment by
Borrower of all principal and accrued interest on the Loan applicable to the
House for which Borrower has requested a release.
2.8 Payment of Principal and Maturity. The outstanding principal
balance on any and every Loan shall be due and payable at the earlier of (a)
the maturity of the Loan as defined in this paragraph, or (b) the release of
any Property securing such Loan. The maturity of each Loan for the construction
of Speculative Houses shall be twelve (12) months from the date of the
execution of the Individual Deed of Trust. The maturity of each Loan for the
construction of Build to Suit Houses shall be twelve (12) months from the date
of the execution of the Individual Deed of Trust. The maturity of each Loan for
the construction of Model Houses shall be eighteen (18) months from the date of
the execution of the Individual Deed of Trust.
2.9 Interest. The interest rate applicable to the Line shall be
calculated, accrued, and paid separately and independently for each Loan on the
basin of a 365 day year or 366 day year as in applicable, and shall accrue on
the actual number of days any principal and interest balance hereof in
outstanding. All accrued and unpaid interest on each Loan shall be paid
monthly. Interest accrued but not owing shall be paid in full at the earlier
of the payoff or the maturity of each Loan. The interest rate on each Loan
shall be a floating rate calculated on a daily basin equal to the Prime Rate
plus One Half of One Percent (0.50%).
2.10 Loan Origination Fees. The Borrower agrees to pay an
origination fee in connection with each Loan for the construction of a House,
such origination fee to be calculated as a percentage of the Committed Loan
Amount. The origination fee shall he paid by Borrower upon execution of the
Individual Deed of Trust applicable to such Loan. The amount of the
origination fee shall be calculated as follows:
A. One Quarter of One Percent (0.25%) for Build to suit houses.
B. One Quarter of One Percent (0.25%) for Speculative Houses.
C. One Quarter of One Percent (0.25%) for Model Houses.
<PAGE> 12
2.11 Inspection Fees. The Borrower agrees to pay an inspection fee
of Twenty-five and No/l00 Dollars ($25.00) per advance, such inspection fee to
be paid to Lender out of the amounts advanced to Borrower on the Loan.
2.12 Appraisal Fees. The Borrower agrees to pay any appraisal fees
reasonably incurred by Lender with respect to each Loan, such appraisal fees to
be paid to Lender out of the amounts advanced to Borrower on the Loan.
2.13 Legal and Other Fees. Borrower will reimburse Lender for all
expenses of Lender, including reasonable attorneys' fees incurred an hourly
basis, not to exceed ten percent (lot) of the principal and interest
outstanding under the Line, incurred in connection with the preparation,
execution, delivery, administration, and performance of the Loan Documents, as
well as all expenses of Lender, including attorneys' fees, incurred in
connection with the preparation of the Loan Documents applicable to each Loan,
or in connection with any renewal, modification, or amendment of this Agreement
or the Loan Documents.
2.14 Sale of Houses. Borrower covenants not to rent, sell, or
contract to sell any House terms which do not include the payment of amounts
due to Lender pursuant to this Agreement, including the assumption of the Loan
Documents by the purchaser, Without first obtaining the prior written consent
of the Lender. A violation of this provision shall constitute on an Event of
Default hereunder, and under the Loan Documents.
2.15 Application of Sale Proceeds. Borrower shall pay to Lender
the proceeds from the sale of each House to be applied to the repayment of
amounts due under the Loan applicable to such House in accordance with the
terms of the Loan Documents; provided, however, that the foregoing shall not be
construed to imply that such proceeds shall be the only source of payment for
amounts due under a particular Loan or the Line, and it is understood that
Borrower shall use any and all funds available to Borrower for the purpose of
such repayment.
2.16 Model and Speculative Houses. Notwithstanding the number of
Subdivisions in which Borrower is constructing Houses, Borrower shall not have
more than twelve (12) Loans outstanding at any time for the construction of
model Houses. Further, the total outstanding committed balance of the Loans
outstanding under the Line Speculative and Model Houses shall not exceed Ten
Million and No/100 Dollars ($10,000,000.00) from the date of this Agreement
until April 30, 1997 or Seven Million Five Hundred Thousand and No/100th
Dollars ($7,500,000.00) from May 1, 1997 until the termination date as set out
in Section 2.3 under this Agreement.
ARTICLE III.
ADVANCES ON LOANS
3.1 Advances. Subject to the provisions of this Agreement, and
provided that (a) neither on an Event of Default, nor on an event or condition
which with the giving of notice or the passage of time, or both, as prescribed
herein, would constitute on an Event of Default, has occurred and is
continuing, and (b) Lender has not made demand for payment of the applicable
Loan, Lender will make advances to Borrower from or out of the Committed Loan
Amount relating to a particular Loan
<PAGE> 13
for the construction of a House as construction progresses, in accordance with
the Residential Draw Request indicating the stage of completion requested for
disbursement. Notwithstanding any limitations or other provisions hereof to the
contrary, with respect to the initial Residential Draw Request a specific Loan
for the purchase of a Lot, Lender may fund the lesser of (i) one hundred
fifteen percent (115%) of the appraised value of the Lot; or (ii) one hundred
percent (100%) of the cost of the Lot plus all related costs to include but not
be limited to, attorneys' fees, loan origination fees, appraisal fees,
inspection fees, title insurance costs, and related fees. The total advances
made under all Residential Draw Requests with respect to a specific Loan should
not exceed the loan-to-value ratios set forth in Section 2.5 above.
Prior to Lender making any advance on a Loan, Borrower shall submit to
Lender a request in writing for each advance, along with a Borrower's Affidavit
in the form attached hereto as Exhibit "F". After receipt of the request for
an advance, along with Borrower's Affidavit, and following inspection of the
Property, Lender will make advances as determined to be appropriate for the
then current stage of completion.
Lender may require evidence that no laborer's or materialmen's liens
have been filed prior to advancing funds. Borrower further agrees that, upon
receipt of any advance on a Loan hereinbefore mentioned, said funds shall be
immediately disbursed to pay in full all contractors and/or materialmen and/or
laborers (other than the Borrower) then or theretofore engaged in said
construction, to the end that all funds disbursed hereunder shall be used to
pay all charges incurred for material and/or labor used in said construction.
Lender, at its option, but without obligation to do so, upon on an
Event of Default or the occurrence of on an event which with the passage of
time or giving of notice, or both, would constitute on an Event of Default, may
apply amounts advanced to any Loan or any portion thereof relating to a House in
payment of insurance premiums, taxes, assessments, liens or exceptions existing
against the applicable House, interest accrued and payable upon the Loan and
any charges or matters necessary to preserve or protect the Property or to cure
any default by Borrower under this Agreement or any other of the Loan
Documents.
Advances for the payment of costs of labor, materials or services for
the construction of Houses shall be made by Lender to Borrower or, upon on an
Event of Default which has not been cured, directly to third parties at
Lender's option, upon compliance by Borrower with this Agreement after actual
commencement of construction hereunder, for work actually done during the
preceding period. Advances shall be made no more frequently than weekly for
each Loan, with a maximum of five (5) advances for each Loan.
3.2 Advances to Borrower. 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 understands its
responsibility under the prior sentence and assumes all risks in connection
with any disbursement to such designee. Disbursements by Lender pursuant to
any disbursement request executed by Borrower shall be conclusively presumed to
be a proper disbursement under this Agreement.
<PAGE> 14
3.3 Lien Waivers. Lender is expressly authorized to withhold in
its discretion any payment or portion thereof until releases of lien, waivers,
liens or paid bills in form satisfactory to it are furnished. Lender shall
have no obligation to require and/or obtain lien waivers or receipts, and
although Lender requires presentation to it of lien waivers and/or receipts,
Lender shall have no responsibility for the validity thereof nor for the
correctness of the amounts indicated thereon. No disbursement by Lender shall
constitute approval of any certification or relieve any person making such
certification or responsibility therefor.
3.4 Charges. Upon on an Event of Default which has not been cured,
all charges and expenses relating to the Loan which are the obligation of
Borrower under this Agreement or any of the other Loan Documents may, from time
to time, be paid by Lender and charged against undisbursed Loan funds. Each
advance of Loan funds for the purpose of paying any charge or expense shall be
treated as on an advance of principal under the Master Note or Loan Documents.
3.5 Use of Loan Funds. Upon on an Event of Default which has not
been cured, the Loan funds may be used, in Lender's discretion, for payment
first, of accrued interest or late charges, second, of dischargeable exceptions
against the Property related thereto, third, of any expenses of title
insurance, legal fees, or other costs in connection with such Property, and
fourth, of the costs of the acquisition of such Lot and the costs of
construction of Improvements such Lot. However, no portion of the Loan funds
shall be used to pay accrued interest.
3.6 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 previously disbursed Loan funds and the remaining undisbursed Loan funds
as to any Property are less than one hundred percent (100%) of the then total
costs of the Improvements contemplated for such Property, and payment of all
fees, charges, costs and contingencies which are the obligation of Borrower
pursuant to the terms hereof for such Property, then Lender may demand in
writing that the amount which, when added to the then undisbursed Loan funds,
will be sufficient to complete the Improvements and make such payments with
respect to such Property, shall be deposited with Lender to insure such
completion and payment. Such deposit shall be defined herein as the "Borrower's
Deposit." Borrower shall, within ten (10) days after demand, deposit with
Lender the amount of such deficiency as determined by Lender, which may be held
in on an interest bearing account (and if held by Lender in its general
accounts or separate interest bearing account any earnings thereon shall be
payable to or accrue to the benefit of Borrower). Until such funds have been
deposited with Lender, Lender shall have no duty to make any further advances
of Loan funds. All funds so deposited by Borrower pursuant to this paragraph
shall be disbursed by Lender in the manner provided herein for disbursement of
the Loan funds and in such order as Lender may select. All such funds are
hereby assigned to Lender as additional security for the indebtedness of
Borrower arising hereunder, and may be applied in satisfaction of Borrower's
obligations to Lender the occurrence of on an Event of Default.
<PAGE> 15
ARTICLE IV
CONDITIONS OF LENDING
The obligations of the Lender to fund the Line, and make the Loans
pursuant to this Agreement are subject to the conditions precedent stated in
this Article IV.
4.1 Revolving Line of Credit Closing. In addition to the
requirements and conditions stated elsewhere in this Agreement, the obligation
of Lender to fund the Line, and make the first Advance thereunder in subject to
the satisfaction, occurrence and/or existence of each of the conditions set
forth in Exhibit "A" attached hereto or prior to the Cloning Date. Lender may
make the initial Advance under the Line notwithstanding the fact that one or
more of such conditions have not been satisfied, have not occurred or do not
exist, but such action by Lender shall not be deemed to be a waiver of the
requirement that any such condition be satisfied, have occurred and/or exist as
a condition precedent to any subsequent Advance.
4.2 Conditions to Approval of Loans. Prior to Lender approving a
Loan, or making any advance of funds to a Loan for the purchase of a Lot and the
construction of a House, Borrower shall satisfy, with respect to each
Property, the following express conditions precedent:
A. Borrower shall have executed and delivered to Lender the
following:
1. On an appropriate Loan request satisfactory to the
Lender.
2. On an Individual Deed of Trust granting to Lender a
valid and enforceable first lien security interest in the
Property to be purchased and improved with the proceeds of the
Loan, such Individual Deed of Trust to be in the form attached
hereto as Exhibit "D".
<PAGE> 16
3. Any other security documents, including UCC-1
financing statements, that may be reasonably required by
Lender with respect to the Property.
B. Plans and Budgets. Plans and construction budgets for each
House to be constructed for any Lot shall have been approved by Lender.
No material changes, modifications or supplements shall be made in the
plans or budgets without obtaining Lender's consent. Borrower shall
have also provided to Lender a current schedule of sales prices for
each House or Lot.
C. Public Utilities. Borrower shall, at its expense, provide
evidence satisfactory to Lender that water, sewer, gas, electric,
telephone, and other public utilities are available without impediment
or delay and are provided to the Property in amounts which are
adequate to service the Property. Borrower represents that all roads,
curbs, gutters and other off-site and on-site development improvements
have been completed and are sufficient to permit the construction of
the Houses in accordance with the plans and applicable Governmental
Requirements and will provide to Lender acceptance letters of such
improvements from the applicable Governmental Authorities, as
required.
D. Insurance. Borrower will obtain and maintain insurance upon
and relating to the Property with such insurers, in such amounts and
covering such risks as shall be satisfactory to Lender, from time to
time, including but not limited to: (i) owner's and contractors'
policies of comprehensive general public liability insurance
(including automobile coverage); (ii) hazard insurance against all
risks of loss, including collapse, in on an amount not less than the
full replacement coat of all Improvements, including the cost of
debris removal, with annual agreed amount endorsement and sufficient
at all times to prevent Borrower from becoming a coinsurer; (iii) if
the Property is in a "Flood Hazard Area," a flood insurance policy, or
binder therefore, in on an amount equal to the principal amount of the
Line or the maximum amount available under the Flood Disaster
Protection Act of 1973, and regulations issued pursuant thereto, as
amended from time to time, whichever is less, in form complying with
the "insurance purchase requirement" of that act; and (iv) such other
insurance, if any, as Lender may require from time to time. Each
insurance policy issued in connection herewith shall provide by way of
endorsements, riders or otherwise that (a) with respect to liability
insurance, it shall name Lender as on an additional insured, with
respect to the other insurance, it shall be payable to Lender as a
mortgagee and not as a coinsured; (b) the coverage of Lender shall not
be terminated, reduced, or affected in any manner regardless of any
breach or violation by Lender of any warranties, declarations, or
conditions in such policy; (c) no such insurance policy shall be
canceled, endorsed, altered, or reissued to effect a change in
coverage for any reason and to any extent whatsoever unless such
insurer shall have first given Lender thirty (30) days' prior written
notice thereof; and (d) Lender may, but shall not be obligated to,
make premium payments to prevent any cancellations, endorsement,
alteration, or reissuance, and such payments shall be accepted by the
insurer to prevent same. Lender shall be furnished with the original
of each such initial policy coincident with the execution of the
Individual Deed of Trust listing the relevant portion of the Property,
and the original of each renewal policy not less than ten (10) days'
prior to the expiration of the initial, or each immediately preceding
renewal policy, together with receipts
<PAGE> 17
or other evidence that the premiums thereon have been paid for a
period acceptable to the Lender.
E. Insurance Reporting. Borrower shall furnish to Lender, or
before thirty (30) days after the close of each of Borrower's fiscal
years, a statement certified by Borrower or a duly authorized officer
of Borrower of the amounts of insurance maintained in compliance
herewith, of the risks covered by such insurance and of the insurance
company or companies which carry such insurance.
F. Foundation Survey. Borrower shall, at its expense, furnish to
Lender a foundation survey, showing that the Improvements are located
within all applicable building and set-back lines and that the
Improvements otherwise conform to all applicable Governmental
Requirements.
G. Mortgagee Title Policy Binder and Interim Construction Loan.
Borrower shall, at its expense, have provided Lender with a Mortgagee
Title Policy Binder Interim Construction Loan providing for the
issuance of a Mortgagee Policy of Title insurance insuring the lien of
the Master Deed of Trust to be a first lien upon the Property subject
only to such other exceptions as Lender may expressly approve in
writing contingent only payment of the premium coat for the policy.
Such binders and any policies shall be issued by a title insurance
company and underwriter satisfactory to Lender. Lender shall have the
right, at Borrower's expense, to receive endorsements to such binders
at the time of each disbursement, insuring such matters as Lender may
require, including that no liens or other exceptions have been placed
against the Property, adjacent property or easement as well as upon
extension of the Loan. Any endorsement required to extend ouch
coverage or otherwise protect Lender's interests shall be obtained at
Borrower's expense.
H. Taxes. Borrower shall, at its expense, have provided evidence
satisfactory to Lender that all taxes and assessments levied against
or affecting the Property have been paid and are current. Borrower
shall not be required to supply tax receipts unless specifically
requested by Lender.
I. Flood Hazard. Borrower shall, at its expense, have provided a
certificate from the project engineer certifying as to the existence
of any "special flood hazard area" affecting the Property. If the
Property, or any part thereof, lies within a "special flood hazard
area" as designated maps prepared by the Department of Housing and
Urban Development, and if National Flood Insurance is available,
Borrower shall, at its expense, provide Lender with a National Flood
insurance Association Standard Flood Insurance Policy of the Property
for the duration of the Loan in on an amount acceptable to Lender. If
such coverage is not available, or if no part of the Property falls
within a special flood hazard area, then Borrower shall, at its
expense, provide Lender with a statement to that effect from
Borrower's insurance agent or engineer.
J. Building Permits. If requested by Lender, Borrower shall, at
its expense, provide Lender with copies of all building permits and
approvals required to be issued under all
<PAGE> 18
applicable Governmental Requirements (including zoning, subdivision and tract
map requirements) or restrictive covenants affecting the construction of the
Improvements, and shall furnish Lender with evidence of compliance with all
applicable "environmental protection" laws, rules and regulations, whether
federal, state or municipal. To this end, if requested by Lender, Borrower
shall provide to Lender: (i) a copy of the zoning ordinance for the Property
(or if none a letter from the applicable municipal or county authority so
stating addressed to Lender, (ii) FHA/VA/FNMA subdivision approval letters
(forms 92258 and 92051), if applicable, (iii) a copy of any Subdivision
restrictive covenants or other deed restrictions affecting the Property, and
(iv) three (3) full size blueline copies of the final recorded plat of each
Subdivision.
K. Warranty Program. If Borrower is a member of the Home
Warranty Council or any similar warranty program, if Lender so
requests, Borrower shall deliver evidence of such membership to
Lender.
L. Contractors. If requested by Lender, Borrower shall furnish
Lender correct lists of all contractors and subcontractors employed in
connection with the construction of Houses. The list shall show the
name, address, and telephone number of each such contractor and
subcontractor, a general statement of the nature of the work to be
done, the labor and material to be supplied, the names of materialmen,
if known, and the approximate dollar value of such labor or work with
respect to each. Lender shall have the right to make direct contact
with each contractor, subcontractor, and materialman to verify the
facts disclosed by said list or for any other purpose as well as to
require a collateral assignment of such contracts to Lender (with the
contractor's or materialman's consent thereto) as additional security
for the Loan. All contracts let by Borrower or its contractors
relating to construction of a House shall require them to disclose to
Lender information sufficient to make said verification.
M. Damage or Lose of Property. No portion of the Property, which
portion would materially and adversely affect any Property for which
on an advance has been requested the Property as a whole, shall (i)
have been damaged by fire or other casualty and not restored to the
satisfaction of Lender; (ii) have been taken by condemnation, eminent
domain or similar proceeding; or (iii) be subject to any actual or
threatened action or proceeding in condemnation, eminent domain or
similar proceeding before any court, administrative agency or other
Governmental Authority, unless Lender shall have
<PAGE> 19
received insurance proceeds or additional Borrower's funds sufficient
in the judgment of Lender to effect the satisfactory restoration of
the Property and to permit completion thereof.
N. Inspection. A satisfactory inspection of the Property by a
representative of Lender shall have been completed and such
representative shall have certified to Lender that the construction to
date is in accordance with the plans.
0. Appraisals. At Borrower's expense, Lender shall order and
obtain appraisals from a licensed appraiser acceptable to Lender,
valuing proposed Houses as if they were completed based upon the plans
for the Houses, such appraisals to be satisfactory to FHA, VA or FNMA,
as applicable.
P. Property Reports. Borrower shall have furnished to Lender
such Property reports as Lender may from time to time request, either
with respect to each Subdivision as a whole or to individual
Properties, which may be requested prior to funding the Loan with
respect to any Property and prior to any subsequent advance with
respect to any Property. The Property reports will include, but not
be limited to, any one or more of the following: (i) a soils report,
acceptable in form and content to Lender, from a licensed soils
engineer accompanied by a letter from the engineer stating that the
soil conditions are satisfactory to support the Improvements and
recommending the appropriate foundation design for the Houses _?_ such
Property and other recommendations for construction of the
improvements, all of which recommendations shall be reflected in t lie
plans; and (ii) on an environmental engineering report, the form and
content of which and the individual or firm preparing the report must
be acceptable to Lender, presenting the results of on an investigation
of the Property and such contiguous property as may be appropriate in
light of the environmental laws and regulations relating to toxic or
hazardous wastes, waste products or other hazardous substances and
emissions affecting the Property.
Q. Architect. If Lender requests, Borrower shall furnish to
Lender a certification by the architect or engineer for any approved
Subdivision, who must be satisfactory to Lender, or other evidence
satisfactory to Lender, that the improvements to be constructed and
the intended use of the Lot and Property comply with all applicable
zoning, subdivision, building, health, traffic, environmental, safety
and other laws, regulations and rules applicable to the Property, and
with other fire, safety and health standards deemed to be reasonable
and applicable to the Property by Lender or Lender's engineer.
R. Purchase Agreement. Borrower shall have furnished to Lender a
copy of (i) the purchase agreement for each Property, (ii) the
purchaser's closing statement from the title company closing the
purchase identifying the Property, (iii) the deed of such Property
into Borrower, and (iv) a current price list for each House to be
built.
<PAGE> 20
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants the following to Lender, as
material inducements to Lender entering into this Agreement and making Advances
hereunder:
5.1 Accuracy of Financial Statements and Other information. All
information, financial statements, reports, papers, and data given or to be
given to Lender with respect to Borrower, each Constituent Party, each
Guarantor, others obligated under the terms Of the Loan Documents, or the
Property are, or at the time of delivery will be, accurate, complete, and
correct in all material respects and do not, or will not, omit any fact, the
inclusion of which is necessary to prevent the facts contained therein from
being materially misleading. Since the date of the financial statements
of Borrower, any Constituent Party, or of any Guarantor or other party liable
for payment of the Indebtedness or performance of the obligations or any part
thereof heretofore furnished to Lender, no Material Adverse Effect has
occurred, and except as heretofore disclosed in writing to Lender, Borrower,
each Constituent Party, each Guarantor, or any other such party has not
incurred any material liability, direct or indirect, fixed or contingent.
5.2 Taxes. Borrower, each Constituent Party, and each Guarantor
have filed all federal, state, county, municipal, and city income and other tax
returns required to have been filed by them and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by them. Neither Borrower, any Constituent Party, nor any
Guarantor knows of any basis for any additional assessment in respect of any
such taxes and related liabilities.
5.3 Suits, Actions. Etc. There are no (i) material actions,
suits, or proceedings at law or in equity pending or, to the best of Borrower's
knowledge and belief, after due inquiry, threatened in any court or before or
by any Governmental Authority or arbitrator against or affecting Borrower, any
Guarantor or any Constituent Party or involving the Property, or involving the
validity, enforceability, or priority of any of the Loan Documents,
(ii)outstanding or unpaid judgments against the Borrower, any Guarantor, any
Constituent Party, or the Property; or (iii) defaults by Borrower, any
Guarantor, or any Constituent Party with respect to any order, writ,
injunction, decree, or demand of any Governmental Authority or arbitrator. The
consummation of the transactions contemplated hereby, and the performance of
any of the terms and conditions hereof and of the other Loan Documents, will
not result in a breach of, or constitute a default in, any mortgage, deed of
trust, deed to secure debt, lease, promissory note, loan agreement, credit
agreement, partnership agreement, or other agreement to which Borrower, any
Guarantor, or any Constituent Party is a party or by which Borrower, any
Guarantor, or any Constituent Party may be bound or affected.
5.4 Valid and Binding Obligation. The execution, delivery, and
performance by Borrower of the Loan Documents (other than the Guaranty), (a)
if Borrower, or any signatory who signs its behalf, is a corporation, general
partnership, limited partnership, joint venture, trust, or other type of
business association, as the case may be, are within Borrower's and each
Constituent Party's powers and have been duly authorized by Borrower's and
each Constituent Party's a board of
<PAGE> 21
directors, shareholders, partners, venturers, trustees, or other necessary
parties, and all other requisite action for such authorization has been taken,
(b) have received any and all requisite prior governmental approvals in order
to be legally binding and enforceable in accordance with the terms thereof, and
(c) will not violate, be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time, or both) a default under or violation of any
Legal Requirement or result in the creation or imposition of any lien, charge,
or exception of any nature whatsoever upon any of Borrower's and any
Constituent Party's or Guarantor's property or assets, except as contemplated
by the provisions of the Loan Documents. The Loan Documents constitute the
legal, valid, and binding obligations of Borrower, each Guarantor, and others
obligated under the terms of the Loan Documents, enforceable in accordance with
their respective terms.
5.5 Title to the Borrower. Borrower has good and indefeasible
title to the Land (in fee simple, if the lien created hereunder be the fee, or
a first and prior leasehold estate, if it be created the leasehold estate) and
Improvements, and good and marketable title to the Fixtures and Personalty,
free and clear of any liens, charges, exceptions, security interests, claims,
easements, restrictions, options, leases, covenants, and other rights, titles,
interests, or estates of any nature whatsoever, except the Permitted
Exceptions. The Master Deed of Trust constitutes a valid, subsisting first
lien the Land, the Improvements, and the Fixtures, and a valid, subsisting
first priority security interest in and to the Personalty.
5.6 Commencement of Construction. Prior to the recordation of any
Individual Deed of Trust, no work of any kind (including the destruction or
removal of any existing improvements, site work, clearing, grubbing, draining,
or fencing of the Property) commenced or was performed the Property by
Borrower, no equipment or material shall have been delivered to or upon the
Property 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 mechanic's
lien or other, appropriate recorda iii the county where the Property is
located.
5.7 Continuing Effect. All representations and warranties made by
Borrower in this Agreement and the Master Deed of Trust shall be true and
correct on an the date hereof, and the date of execution of each Loan and
Individual Deed of Trust and related documents each Property, and shall
continue to be true and correct for the term of this Agreement.
<PAGE> 22
ARTICLE VI.
COVENANTS AND AGREEMENTS OF BORROWER
6.1 Payment and Performance. Borrower will pay the Indebtedness
as and when specified in the Loan Documents, and will perform and discharge all
of the obligations, in full and or before the dates same are required to be
performed.
6.2 Compliance with Governmental Requirements. Borrower shall
timely comply with all Governmental Requirements and deliver to Lender and to
Lender's legal counsel ouch evidence thereof as shall be acceptable to such
legal counsel. Borrower assumes full responsibility for the compliance of the
plans and, from and after the date of acquisition of the Property with respect
to all actions Borrower is required to take to perform hereunder, of the
Property with all Governmental Requirements and with sound building and
engineering practices and, notwithstanding any approvals by Lender, Lender
shall have no obligation or responsibility whatsoever for the Plans or any
other matter incident to the Property or the construction of the Improvements.
6.3 No Security Interests. Borrower will protect the first lien
and security interest status of the Master Deed of Trust, each Individual
Deed of Trust and the other Loan Documents and will not permit to be created or
to exist in respect of the Mortgaged Property, or any part thereof, any lien or
security interest in party with, superior to, or inferior to any of the liens
or security interests hereof, except for the Permitted Exceptions and UCC
Financing statements covering the fixtures to be included in each House.
Without the prior written consent of Lender, no materials, equipment, fixtures
or any other part of the Improvements shall be purchased or installed under
security agreements, conditional sale contracts or lease agreements, or other
arrangement wherein a security interest or title to said property is retained
or the right is reserved or accrues to anyone to remove or repossess any such
items or to consider them as personal property.
6.4 Construction Quality. The Improvements shall be constructed
in a good and workmanlike manner, with new materials of good quality, in
keeping with current construction standards, and shall comply with all
applicable ordinances and statutes, zoning laws, all covenants and restrictions
running with the land, and all regulations and environmental protection, use
and building codes, laws, ordinances and regulations of any Governmental
Authority. All Improvements shall be constructed entirely their respective
Lots, and shall not encroach upon or overhang any easement or right of way.
6.5 Commencement of Construction. Unless otherwise agreed in
writing by Lender, Borrower covenants that work the Improvements to any Lot
and House shall commence within fourteen (14) days after execution of the
Individual Deed of Trust relating to the construction of Improvements with
respect to such Lot and House, subject to forces of nature beyond the control
of Borrower, and that upon commencement, construction shall proceed without
interruption. Construction of Houses shall be completed or before eight (8)
months from the date of the Individual Deed of Trust relating to such Lot and
House. The Improvements shall be completed according to the plans, and be free
and clear of all liens, claims of or right to liens, and other
<PAGE> 23
exceptions of all kinds whatsoever other than current tax or assessment liens
or any other liens or exceptions approved by Lender.
6.6 Use of Materials. Borrower represents and warrants to Lender
that all materials contracted or purchased for delivery to the Property or for
use in construction, and all labor contracted or hired for or in connection
with construction of the Improvements, shall be used and employed solely the
Property or for construction of Improvements the Property and for no other
purpose. Borrower will promptly pay all bills for labor, materials, and
specifically fabricated materials incurred in connection with the Mortgaged
Property and no materials, equipment, fixtures or any other part of the
Improvements, or articles of personal property placed the Lots, shall be
purchased or installed under any conditional sales contract, security agreement
or other arrangement wherein the seller reserves or purports to reserve title
to or the right to remove or to repossess any such items or to consider them
personal property after their incorporation in the work of construction, unless
specifically authorized by Lender in writing.
6.7 Additional Documents. Borrower shall execute and deliver to
Lender, from time to time as requested by Lender, such other documents as shall
be reasonably necessary to provide the rights and remedies to Lender granted or
provided for by the Loan Documents. From time to time, at the request of
Lender, Borrower will (i) promptly correct any defect, error, or omission which
may be discovered in the contents of the Loan Documents or in the execution or
acknowledgment thereof; (ii) execute, acknowledge, deliver, record and/or file
such further instruments (including, without limitation, further deeds of
trust, security agreements, financing statements, continuation statements and
assignments of rents or leases) and perform such further acts and provide such
further assurances as may be necessary, desirable, or proper, in Lender's
opinion, to carry out more effectively the purposes of this Loan Agreement and
the Loan Documents and to subject to the liens and security interests hereof
and thereof any property intended by the terms hereof or thereof to be covered
hereby or thereby, including without limitation, any renewals, additions,
substitutions. replacements, or appurtenances to the Mortgaged Property; (iii)
execute, acknowledge, deliver, procure, file, and/or record any document or
instrument (including without limitation, any financing statement) deemed
advisable by Lender to protect the liens and the security interests herein
granted against the rights or interests of third persons; and (iv) pay all
costs connected with any of the foregoing.
6.8 No Liability of Lender. Lender shall have no liability,
obligation, or responsibility whatsoever with respect to the construction of
the Improvements except to fund the Line pursuant to this Agreement. Lender
shall not be obligated to inspect the Property or the construction of the
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 Loan or acceptance of any document or instrument, shall be construed as a
representation or warranty, express or implied, to any party by Lender.
<PAGE> 24
6.9 Financial Statements and Reports. The Borrower will promptly
furnish to the Lender from time to time upon request such information regarding
the business and affairs and financial condition of the Borrower as Lender may
reasonably request, and the Borrower will furnish to the Lender.
A. Annual Reports. Promptly after becoming available and in any
event within ninety (90) days after the close of each fiscal year of
the Borrower a balance sheet of the Borrower, as at the end of such
year; the statements of profit and loss of the Borrower for such year;
and the statements of reconciliation of capital accounts of the
Borrower for such year, accompanied by the related report of
independent public accountants of nationally recognized standing,
which report shall be to the effect that such statements have been
prepared in accordance with generally accepted accounting principles
consistently followed throughout the period indicated except for such
changes and such principles with which the independent public
accountants shall have concurred;
B. Quarterly Financial Reports. Promptly after becoming
available and in any event within thirty (30) days after the end of
each calendar quarter and each fiscal year of the Borrower, the
consolidated balance sheet of the Borrower as of the end of such
calendar quarter, and the consolidated statements of profit and lose
of the Borrower for such quarter and for the period from the beginning
of the fiscal year to the end of such quarter;
C. Inventory Status Report. Promptly after becoming available
and in any event within ninety (90) days after the end of each
calendar quarterly, the Borrower shall provide to Lender on an
Inventory Status Report and a Sales Report with respect to all Lots
and Houses financed under this Agreement indicating (i) sales of Lots
or Houses, (ii) as to completed Houses, whether or not they are
subject to a contract for Sale, (iii) as to Houses under construction,
whether or not they are Build to Suit Houses, Speculative Houses, or
Model Houses, and (iv) such other information as the Lender may
reasonably request;
D. Contingent Liabilities. As soon as available, and in any
event, within ninety (90) days after the end of each fiscal year of
the Borrower, a statement of contingent liabilities of the Borrower;
E. Reviewed Reports. Promptly upon receipt thereof, one copy of
each other report submitted to the Borrower by independent accountants
in connection with any annual, interim, or special audit made by them
of the books of the Borrower.
6.10 Mergers; Ownership. Borrower will and will cause each
Constituent Party to preserve and keep in full force and effect its existence
(separate and apart from its affiliates), rights, franchises and trade names.
The Borrower will not merge or consolidate with or sell, assign, lease or
otherwise dispose of all or substantially all of its assets (whether now owned
or hereafter acquired) to any person; nor will the Borrower permit any
amendment, alteration, dissolution, or other substantial change to the limited
partnership agreement evidencing the existence of Borrower nor will Borrower
transfer or assign any partnership interest. Further, during the term of the
Loan,
<PAGE> 25
Newmark Home Corporation and NHC Homes, the greater of the face or market value
thereof, any of its Inc. shall remain the only equity interest owner(s) of
Borrower.
6.11 Sale or Discount of Receivables. The Borrower will not
discount or sell with recourse, or sell for less than notes receivable or
accounts receivable.
6.12 Ratio of Total Liabilities to Tangible Net Worth. The
Borrower will not permit its ratio of (i) total liabilities, including
contingent liabilities, to (ii) tangible net worth to be greater than five to
one at any time. As used in this section, "tangible net worth" shall mean the
sum of the partner's capital accounts. The ratio shall be calculated monthly,
and in the event that Borrower's total liabilities to tangible net worth ratio
shall exceed 5 to 1 the calculation date, Borrower shall have ninety (90) days
to reestablish the proper ratio. If the ratio is not properly reestablished
within such ninety (90) day period, Lender shall not approve any new Loans
pursuant to this Agreement until such time that Borrower provides. Financial
Statements demonstrating a total liabilities to tangible net worth ratio no
greater than 5 to 1. Lender may in its sole discretion waive the requirements
of this paragraph, but any such waiver shall not be, nor be construed as a
continuing waiver, and Lender can enforce the provision of this paragraph at
anytime following such waiver.
6.13 Costs and Expenses. Borrower will pay demand all reasonable
and bona fide out-of-pocket costs, fees, and expenses and other expenditures,
including, but not limited to, reasonable attorneys' fees and expenses, paid or
incurred by Lender or Trustee to third parties incident to these Loan Documents
(including without limitation, reasonable attorneys' fees and expenses in
connection with the negotiation, preparation, and execution hereof and of any
other Loan Document and any amendment hereto or thereto, any release hereof,
any consent, approval or waiver hereunder or under any other Loan Document, the
making of any advance under the Note, and any suit to which Lender or Trustee
is a party involving these Loan Documents or the Mortgaged Property, third
party inspection fees paid by Lender, closing costs, title insurance premiums
and survey costs) or incident to the enforcement of the indebtedness or the
exercise of any right or remedy of Lender under any Loan Document.
6.14 Reporting Requirements. Within thirty (30) days after the end
of each quarter, Borrower shall furnish to Lender, in a form acceptable to
Lender, a report containing, but not limited to the following information: (1)
quarterly inventory report covering Lots and Houses; (2) quarterly sales report
covering Houses; (3) quarterly starts Houses; (4) quarterly closings Houses;
(5) new subdivisions in which Borrower intends to purchase Lots and construct
Houses; (6) any new lenders from whom Borrower has or will be obtaining
financing or loans of any kind; (7) if requested by Lender, current list of all
subcontractor being used by Borrower; and (8) if requested by Lender, current
list of all suppliers being used by Borrower.
6.15 Tangible Net Worth. Borrowers tangible net worth shall not be
less than Nine Million and No/100th Dollars ($9,000,000.00) at any time during
the period that amounts are outstanding under the Line. As used in this
section, "tangible net worth" shall have the same meaning as set out in
Section 6.12 above. The tangible net worth shall be calculated quarterly, and
in the event that Borrower's tangible net worth shall be less than Nine Million
and No/100 Dollars ($9,000,000.00) any calculation date, Borrower shall have
ninety (90) days to reestablish the proper
<PAGE> 26
tangible net worth. If the tangible net worth is not properly reestablished
within such ninety (90) day period, Lender shall not approve any new Loans
pursuant to this Agreement Until such time that Borrower provides Financial
Statements demonstrating a tangible net worth of at least Nine Million and
No/100th Dollars ($9,000,000.00). Lender may in its sole discretion waive the
requirements of this paragraph, but any such waiver shall not be, nor be
construed as a continuing waiver, and Lender can enforce the provisions of this
paragraph at anytime following such waiver.
6.16 Books and Records. Borrower will maintain full and
accurate books of account and records reflecting the results of its ownership
of the Mortgaged Property. At any time and from time to time Borrower shall
deliver to Lender such financial data as Lender shall reasonably request with
respect to the ownership, maintenance, use and operation of the Mortgaged
Property, and Lender shall have the right, at reasonable times and upon
reasonable notice, to audit, examine, and make copies or extracts of Borrower's
books of account and records relating to the Mortgaged Property, all of which
shall be maintained and made available to Lender and Lender's representatives
for ouch purpose at the address specified herein for Borrower or at such other
location as Lender may approve. Upon Lender's request, Borrower shall also
furnish Lender with convenient facilities and all books and records necessary
for on an audit of such statements.
6.17 Statement of Unpaid Balance. At any time and from time to
time, Borrower will furnish promptly, upon the request of Lender, a written
statement or affidavit, in form satisfactory to Lender, stating the unpaid
balance of the indebtedness and that there are no offsets or defenses against
full payment of the Indebtedness and the terms hereof, or if there are any such
offsets or defenses, specifying them.
6.18 Indemnity. Borrower agrees to exonerate, protect, indemnify
defend and hold harmless Lender from and against any and all liability,
expense, loss or damage of any kind or nature, including reasonable legal fees
and expenses, and from any actions, suits, claims or demands, account of any
matter or thing, whether in suit or not, arising out of this Agreement or in
connection with the Line, including without limitation thereto claims of
brokers, disputes between Borrower and any contractor, subcontractor,
materialman or supplier, or between Borrower and any municipal or public
authority, and any claims of any brokers which may be asserted by reason of the
execution of this Agreement or the consummation of the transaction contemplated
hereby arising out of Borrower's actions.
<PAGE> 27
ARTICLE VII.
INSPECTIONS
7.1 Inspection of the Property. With respect to each Loan, Lender
and its agents, at all times, shall have the right, but not the obligation, to
enter upon the applicable Property and if the work being done is unsatisfactory
to Lender, or in the event on an inspector disapproves (a) the quality of
construction, (b) the conformity of construction with the Plans and applicable
Governmental Requirements, (c) a requested disbursement, or (d) the status of
construction; it shall be a default hereunder and Lender shall have the right
to stop said work and order that the unsatisfactory work be replaced or
repaired whether said unsatisfactory work has theretofore been incorporated
into the Improvements or not, and to withhold all advances such Loan until
said work is satisfactory to Lender. All such work shall be made satisfactory
to Lender within fifteen (15) days from the date of stoppage by Lender.
Borrower shall pay for (or reimburse Lender for) the cost of each and every
inspection made by a third party inspector at the time of each advance, but
Lender shall first notify Borrower and give Borrower a reasonable time within
which to supply the information.
Borrower agrees that any inspection by Lender or its agents is for the
purpose of protecting the security of Lender, and that no such inspection shall
be a representation by Lender that there has been compliance the part of the
general contractor or any subcontractor with the Plans or that the construction
is free from faulty material or workmanship, nor shall any inspection by Lender
constitute approval of any certification given to Lender or relieve any person
making such certification of responsibility therefor. Lender may obtain
information from any subcontractor or supplier directly as it may deem helpful
in making any such determinations, but Lender shall first notify Borrower and
give Borrower a reasonable time within which to supply the information.
7.2 Inspection of Books and Records. Borrower shall permit
Lender, at all reasonable times, to examine and copy the books and records of
Borrower pertaining to the Line and the Property, and all contracts,
statements, invoices, bills, and claims for labor, materials, and services
supplied for the construction of the Improvements. Such books and records of
Borrower shall be kept in accordance with generally accepted accounting
principles.
ARTICLE VIII.
EVENTS OF DEFAULT
8.1 Default. The term "Event of Default," as used herein and in
the Loan Documents, shall mean the occurrence or happening, at any time and
from time to time, of any one or more of the following:
A. A failure by Borrower to deposit the Borrower's Deposit with
Lender within ten (10) days of written request from Lender to do so.
<PAGE> 28
B. If work shall cease the construction of any House for ten
(10) days after the commencement thereof, provided that it shall not
be on an Event of Default if (i) the work stoppage is due to causes
beyond the reasonable control of Borrower, and (ii) the House can be
completed by the maturity date of the Loan notwithstanding such
stoppage.
C. If Borrower commits any act or omission, breaches any
representation, agreement, covenant or condition, the effect of which
would be to impair or impede the qualification of the Houses for FHA,
VA or FNMA permanent financing.
D. If Lender determines from its own inspection that (i) the
Improvements have not been or are not being constructed in substantial
accordance with the Plans, or requirements of applicable Governmental
Authorities; or (ii) construction is not in conformance with the cost
estimates approved by Lender, or (iii) requisite standards of
workmanship are not being met or (iv) the construction in not
proceeding to completion in a timely manner; then, in any such event,
Lender may at its option regard the same as a breach of the conditions
and covenants of this Agreement, the Master Deed of Trust and any
other Loan Documents, and the whole of the Line or any Loan shall, if
the Maker refuses or neglects to cure the default within thirty (30)
days after written notice from Lender to Borrower, at the option of
Lender, be immediately due and payable, without further notice or
demand, and Lender may cease disbursements hereunder (if it has not
already done so) and shall be entitled to the immediate foreclosure of
or sale under the Loan Documents and may, additionally or
alternatively, avail itself of any other relief to which Lender may be
legally or equitably entitled.
E. It Borrower is unable to satisfy any condition specified
herein on an a condition precedent to the obligation of Lender to make
on an advance within thirty (30) days after a Residential Draw Request
has been submitted by Borrower to Lender.
F. If Borrower, any Constituent Party, or any Guarantor, shall
die, dissolve, terminate or liquidate, or merge with or be
consolidated into any other entity.
G. If Lender determines, in its sole and absolute discretion the
basis of on an independent party's inspection report, that any House
cannot be completed within the Term of the Loan for that House,
Borrower shall be in default of the specific Loan for that House. For
purposes of this subparagraph, prior to exercising its remedies upon
default, Lender shall give Borrower five (5) days notice and right to
cure.
H. The occurrence of on an Event of Default as defined in any of
the other Loan Documents.
ARTICLE IX.
RIGHTS AND REMEDIES OF LENDER
9.1 Lender's Rights. In addition to Lender's other remedies
whether hereunder or in any other Loan Document, Lender shall have the right,
but not the obligation to: (i) apply all of
<PAGE> 29
Borrower's proceeds from the sale of any House to the payment of amounts due
under any Loan or the Line, in such order as Lender may determine in its sole
discretion, (ii) take over and complete construction of the Improvements by or
through any agent, contractor, or subcontractor of its selection, and may
disburse any part or all of the then balance of the Loan funds, any funds
deposited with Lender by Borrower in payment of the costs, expenses, fees,
attorneys' fees, and other charges incurred in, or in connection with, such
taking over and completion, together with reasonable allowances for
supervision, and in the event other Loan funds and amounts deposited by
Borrower are insufficient to pay all of the same, any unpaid amounts thereof
shall be on an indebtedness of Borrower to Lender, payable immediately without
demand or notice, shall bear interest at the default rate stated in the Master
Note, and shall be secured by the lien of the Master Deed of Trust or any
Individual Deed of Trust; or (iii) order that unsatisfactory work be replaced
and withhold all advances until said work is satisfactory.
9.2 Cessation of Advances. Upon the occurrence of on an Event of
Default or on an eve which with the passage of time, the giving of notice, or
both, would be on an Event of Default, the obligation of Lender to make any
advance and to make disbursements from the Borrower's Deposit and all other
obligations of Lender hereunder and under the Loan Documents shall, at Lender's
option, immediately terminate; provided, however, that nothing in this
paragraph shall be deemed to limit the other provisions of this Agreement
setting forth the conditions precedent to Lender's obligation to make any
advance or the conditions under which Lender may refuse to make further
advances or to limit Lender's option to make further advances at Lender's sole
option notwithstanding the occurrence of one or more Events of Default.
9.3 No-Waiver or Exhaustion. No waiver by Lender of any of its
rights or remedies hereunder, in the other Loan Documents, or otherwise, shall
be considered a waiver of any other or subsequent right or remedy of Lender; no
delay or omission in the exercise or enforcement by Lender of any rights or
remedies shall ever be construed as a waiver of any right or remedy of Lender;
and, no exercise or enforcement of any such rights or remedies shall ever be
held to exhaust any right or remedy of Lender. Lender may, at its sole
discretion, make advances prior to the time all conditions precedent to such
advances have been satisfied without waiving or releasing any of the
requirements or conditions of this Agreement, and, notwithstanding the making
of any such advances, Lender may, at its discretion, discontinue any further
disbursements at any time until all of the conditions, prior performances and
other requirements of this Agreement have been strictly fulfilled, performed
and complied with.
9.4 Legal Fees. In the event it becomes necessary for Lender to
employ legal counsel or to bring on an action at law or any other proceeding to
enforce any of the terms, covenants or conditions of this Agreement or the Loan
Documents, Lender shall be entitled to recover costs and reasonable attorneys,
fees incurred on an hourly basis, not to exceed ten percent (10%) of the
principal and interest outstanding under the Line, or shall be placed in the
hands of on an attorney for collection after maturity, whether matured by the
expiration of time or by on an option given to the Lender to mature same, or if
Lender becomes a party to any suit where the Master Deed of Trust or the
Mortgaged Property or any part thereof is involved, Borrower agrees to pay
Lender's attorneys' fees and expenses incurred, and such fees shall be and
become a part of the Indebtedness and shall bear interest from the date such
costs are incurred at the Default Rate.
<PAGE> 30
9.5 Limitation Remedy for Death/Disability of a Guarantor. In the
event that a Guarantor dies or becomes totally and permanently disabled,
thereby causing on an Event of Default to occur, Lender shall have the right to
refuse to make any advance with regard to any Property which would initiate a
Loan that is not then evidenced by on an Individual Deed of Trust and secured
by same, but Lender shall continue to make advances under any Loan then in
effect, unless and until the occurrence of any other Event of Default.
9.6 Funds of Lender. Any funds of Lender used for any purpose
referred to in the Article shall constitute advances secured by the Master Deed
of Trust and the other Loan Documents, and shall bear interest at the Default
Rate.
9.7 Miscellaneous. In addition to the remedies Bet forth herein,
any other remedies as set forth in any other Loan Documents.
ARTICLE X.
GENERAL TERMS AND CONDITIONS
10.1 Tax Assessment/Prepayment Option. If any law, ordinance or
regulation is enacted or issued by a Governmental Authority imposing any tax
upon Lender with respect to any Property or changing the manner of taxation of
mortgages or debts secured by any Property, Borrower shall reimburse Lender for
the amount of any such taxes paid by Lender within ten (10) days of Lender's
demand therefor. If Lender pays any such taxes and chooses to demand
reimbursement rather than waiving such right to reimbursement, Borrower shall
have the right to repay the then outstanding principal balance of the Loan,
plus accrued interest and any other costs, fees or expenses due to Lender,
without penalty or premium, within ten (10) days of Lender's demand for
reimbursement and thereby avoid liability to Lender for such Lax reimbursement
amount.
10.2 Modifications. No provision of this Agreement or the other
Loan Documents maybe modified, waived, or terminated except by instrument in
writing executed by the Party against whom a modification, waiver or
termination is sought to be enforced.
<PAGE> 31
10.3 Severability. In case any of the provisions of this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein; provided,
however, if the disregard of such provision would frustrate the intent and
purposes of this Agreement, Lender may petition any court having jurisdiction
in equity to render a judgment modifying the disregarded provision(s) of this
Agreement so as to carry out such intent and purposes.
10.4 Election of Remedies. Lender shall have all of the rights and
remedies granted in the Loan Documents in addition to such rights and remedies
that may be available to Lender at law or in equity, and these same rights and
remedies shall be cumulative and may be pursued separately, successively, or
concurrently against Borrower or any Property covered under the Loan Documents
at the sole discretion of Lender. The exercise or failure to exercise any of
the same shall not constitute a waiver or release thereof or of any other right
or remedy, and such exercise or failure to exercise shall be nonexclusive.
10.5 Form and Substance. All documents, certificates, insurance
policies, and other items required under this Agreement to be executed and/or
delivered to Lender shall be in form and substance satisfactory to Lender and
its legal counsel.
1. 10.6 Savings Clause. It is the intention of the parties
hereto to comply with all applicable federal and state laws relating
to usury; that is, laws limiting changes for the use, detention or
forbearance of money and governing contracts relating thereto;
accordingly, all agreements between Borrower and Lender, whether now
existing or hereafter arising and whether written or oral, are
expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of the maturity hereof, or
otherwise, shall the amount paid or agreed to be paid to Lender for
the use, forbearance or detention of the money to be loaned hereunder
or otherwise, or for the performance or payment of any covenant or
obligation contained herein or in any other document evidencing
securing or pertaining to any Loan or the Line, exceed the Maximum
Lawful Rate. If from any circumstance Lender shall ever receive
anything of value deemed interest by applicable law which would exceed
the maximum Lawful Rate, on an amount equal to any excessive interest
shall be applied to the reduction of the principal amount owing under
the Master Note or account of any other principal indebtedness of
Borrower to Lender, and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of such principal and
such other indebtedness, such excess shall be refunded to Borrower.
All sums paid or agreed to be paid to Lender for the use, forbearance
or detention of the indebtedness of Borrower to Lender shall, to the
extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment
in full, in such manner as permitted by law so as to avoid any portion
of the interest the Master Note becoming usurious. To the extent
that Texas law governs the determination of the Maximum Lawful Rate,
Borrower and Lender agree to rely Article 5069-1.04, of the Revised
Civil Statutes of Texas, as the same may from time to time be amended,
supplemented or revised, to determine the Maximum Lawful Rate, and
that Lender will utilize the indicated (weekly) rate ceiling from time
to time in effect t as provided in Article 5069-1.04. In no event
shall the provision of Ch. 15 of
<PAGE> 32
Article 5069 of the Revised Civil Statutes of Texas (which regulates
certain revolving credit loan accounts and revolving tri-party
accounts) apply to the Loan.
10.7 Rights of Third Parties. All conditions of the obligations of
Lender hereunder, including the obligation to make advances to any Loan, are
imposed solely and exclusively for the benefit of Lender and its successors and
assigns and no other person or entity shall have standing to require
satisfaction of such conditions in accordance with their terms or be entitled
to assume that Lender will refuse to make advances in the absence of strict
compliance with any or all thereof, and no other person or entity shall, under
any circumstances, be deemed to be a beneficiary of this Agreement; any and all
of the terms and conditions of which may be freely waived in whole or in part
by Lender at any time if in its sole discretion it deems it desirable to do so,
and Lender reserves the right to enter into modifications or amendments of this
Agreement with Borrower without notification to or the consent of any other
party. In particular, Lender makes no representations and assumes no
obligations as to third parties concerning the quality of the construction of
the Improvements by Borrower or the absence therefrom of defects. In this
connection Borrower agrees to and shall indemnify Lender from any liability,
claims or losses resulting from the disbursement of the proceeds of the Loan or
from the condition of the Property whether related to the quality of
construction or otherwise and whether arising during or after the term of the
Loan arising out of Borrower's actions. This provision shall survive the
repayment of the Loan and shall continue in full force and effect so long am
the possibility of much liabilities, claims or losses exists.
10.8 Evidence of Satisfaction of Conditions. Any condition of this
Agreement which requires the submission of evidence with respect to the
existence or non-existence of a specified fact or facts implied as a condition
of the existence or non-existence, as the case may be, of such fact or facts
and Lender shall, at all times, be free independently to establish to its
satisfaction and in its sole reasonable discretion such existence or
non-existence.
10.9 All Matters Satisfactory to Lender. All proceedings taken in
connection with the transactions provided for herein, all surveys, appraisals
and documents required or contemplated by this Agreement or the other Loan
Documents, and the person responsible for the execution and preparation
thereof, contractor and all subcontractors, all sureties, insurers, the form of
the construction contract and all subcontractors, all leases, bonds, guaranties
and policies of insurance shall be satisfactory to Lender and to Lender's
counsel which shall receive copies (or certified copies where appropriate in
Lender's counsel's judgment) of all documents which it may request in
connection therewith.
10.10 No Agency. 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 Property or for debts or
claims accruing against Borrower. Nothing herein shall be construed to create
a relationship ex-contract or ex-delicto between Lender and anyone supplying
labor or materials to the Property.
10.11 No Partnership or Joint Venture. 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.
<PAGE> 33
10.12 Number and Gender. Whenever used herein, the singular number
shall include the plural and the singular, and the use of any gender shall be
applicable to all genders. The duties, covenants, obligations, and warranties
of Borrower in this Agreement shall be joint and several obligations of
Borrower, and of each Borrower if more than one.
10.13 Time of Essence. Time is of the essence in performance of
this Agreement by Borrower.
10.14 Participation. Lender shall have the right, at its sole
discretion, to invite participants to participate in or to purchase allow
portions of the Line, and Borrower agrees to execute any documents reasonably
requested by Lender in connection with any such participation or purchase.
10.15 Further Assurances. Borrower shall do, execute, acknowledge
and deliver, at the sole cost and expense of Borrower, all and every such
further acts, deeds, conveyances, mortgages, assignments, estoppel
certificates, notices of assignment, transfers and assurances as Lender may
reasonably require from time to time in order to better assure, convey, assign,
transfer and confirm unto the Lender, the rights now or hereafter intended to
be granted to the Lender under the Loan Documents for carrying out the
intention of facilitating the performance of the terms of this Agreement.
10.16 Captions. The captions, headings, and arrangements used in
this Agreement are for convenience only and do not in any way affect, limit,
amplify, or modify the terms and provisions hereof.
10.17 Applicable Law. This Agreement and the other Loan Documents
shall be governed by and construed in accordance with the laws of the State of
Texas and the laws of the United States of America applicable to transactions
within such state.
10.18 Notices. All notices by Lender to Borrower pursuant to any
provisions of this Agreement or of the other Loan Documents which require the
giving of notice as a condition to creating or effectuating on an obligation of
Borrower to Lender or a right the part of Lender to exercise rights or
remedies against Borrower or any collateral, and any notice by Borrower to
Lender to the effect that Lender has not fulfilled one or more of any
obligations to Borrower under this Agreement or under any other Loan Document,
must be in writing. Such notice shall be given by messenger, telegram or mail
(registered or certified, return receipt requested) to such address, and shall
be addressed to the parties at the addresses given below. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given shall be deemed to be receipt of the notice, demand
or request sent. By giving at least thirty (30) days written notice thereof,
Borrower or Lender shall have the right from time to time, and at any time,
during the term of this Agreement to change their respective addresses and each
shall have the right to specify as its address any other address within the
United States of America.
<PAGE> 34
If to Lender: First American Bank Texan, SSB
14651 Dallas Parkway, Suite 400
Dallas, Texas 75240
Attention: Larry Stroud
FAX: 972/419-3394
with a copy to: Michael H. Gentry
West, Webb, Allbritton & Gentry, P.C.
3000 Briarcrest Drive, Suite 502
Bryan, Texas 77802
FAX: 409-776-1531
If to Borrower: Newmark Homes, L.P.
10435 Greenbough
Stafford, Texas 77477
Attention: Terry White
FAX: 713/261-4663
with a copy to: Barry Snowden Morris,
Lendais, Hollrah & Snowden
1980 Post Oak Blvd., Suite 700
Houston, Texas 77056
FAX: 713-966-7229
10.19 Counterparts. This Agreement may be executed in counterparts,
all of which taken together shall constitute one agreement.
10.20 Survival. This Agreement and the terms, covenants and
conditions hereof shall survive the completion of the Improvements and the
disbursement of the Line to Borrower and shall continue in full force and
effect until the entire indebtedness evidenced by the Master Note, and any
renewal, extension, replacement, or consolidation thereof, or by any other Wan
Document, is paid in full.
10.21 Indemnification. 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, incurred
by, or asserted against Lender in any way relating to, or &rising out of, any
of the Loan Documents or any other transaction contemplated therein, including
claims arising out of Borrower-9 actions. The obligation of Borrower under
this Section shall survive any termination of this Agreement.
10.22 Non-Assignability. Neither the Line nor any Loan made under
the Line shall be assignable by Borrower without the advance written consent of
Lender, such consent to be given at Lender's sole discretion.
<PAGE> 35
EXECUTED AND DELIVERED the date first above recited.
LENDER:
FIRST AMERICAN BANK TEXAS, SSB
By: /s/ LARRY STROUD
-------------------------------------
Larry Stroud, Vice President
BORROWER:
NEWMARK HOMES, L.P.,
a Texas limited partnership
By: Newmark Home Corporation
its General Partner
By: /s/ TERRY WHITE
-------------------------------------
Terry White, Chief Financial Officer
STATE OF TEXAS )
)
COUNTY OF )
THIS INSTRUMENT WAS ACKNOWLEDGED before me this ____ day of
_____________, 1996, by Larry Stroud, Vice President of First American Bank
Texas, SSB.
/s/
-------------------------------------
Notary Public, State of Texas
STATE OF TEXAS )
)
COUNTY OF ________ )
THIS INSTRUMENT WAS ACKNOWLEDGED before me this _________ day of
______________________, 1996, by Terry White, Chief Financial Officer of
Newmark (Home Corporation, as the general partner of Newmark Homes, L.P., a
Texas limited partnership, on behalf of said entity.
/s/
-------------------------------------
Notary Public, State of Texas
<PAGE> 1
EXHIBIT 10.12(b)
MASTER REVOLVING LINE OF CREDIT
PROMISSORY NOTE
$15,000,000.00 December 17, 1996
I. COVENANT TO PAY.
1.1 Promise to Pay. FOR VALUE RECEIVED, NEWMARK HOMES, L.P., (herein
called "Maker") , promises to pay to the order of FIRST AMERICAN BANK TEXAS,
SSB [herein, together with all subsequent holders of this Promissory Note
("Note" or "Revolving Line of Credit"), called "Payee"], on or before the
individual maturity date set forth below for each specific Loan (with respect
to each specific Loan the "Maturity Date"), as hereinafter provided, the
amount of the principal advances which actually become outstanding hereunder,
together with interest on the unpaid principal balance from time to time
outstanding, at the rates herein specified and otherwise in strict accordance
with the terms and provisions hereof. The total outstanding advances hereunder
at any point in time shall not exceed Fifteen Million and No/100ths Dollars
($15,000,000.00), with every advance hereunder being subject to all of the
terms and conditions set forth hereinafter:
1.2 Loan Agreement. This Note is being made pursuant to that certain
Revolving Line of Credit Loan Agreement of even date herewith between the Maker
(as Borrower) and the Payee (as Lender), whereby such parties agreed to certain
terms and conditions relating to this Fifteen Million and No/100ths Dollars
($15,000,000.00) loan (the "Loan Agreement"), the Loan Agreement and the
documents relating thereto being defined therein as the "Loan Documents." The
capitalized terms used herein but not defined shall have the meanings given to
such terms in the Loan Documents. The Loan Agreement provides that advances on
this Revolving Line of Credit shall be made with respect to each "Loan" made
for the purchase of a "Lot" and the construction of a "House" thereon. A House
shall be a "Build to Suit House," a "Speculative House" or a "Model House."
Each Lot and each House built on a Lot shall be located in a "Subdivision."
1.3 Term of the Line. Payee's obligation to accept requests for
Loans, or process Loans for approval shall terminate on April 30, 1997. Each
Loan shall be subject to its identified maturity date as provided for in this
Note and the Loan Documents. Each request by Maker for a Loan must be approved
in advance by Payee in accordance with the terms of this Note and the Loan
Documents. Payee may in its sole discretion renew and extend this Note and the
Loan Documents, but Maker agrees that Payee has made no commitment, promise, or
assurance to renew or extend this Note. Should Payee, in its sole discretion,
determine to renew and extend this Note and the Loan Documents, such renewal
and extension may be conditioned upon the execution and delivery of documents
required by Payee, the payment of an extension and renewal fee to Payee, the
provision by maker of additional financial information or collateral to secure
the Loan Agreement and this Master Note, or other conditions or stipulations as
required by Payee in its sole discretion.
II. GENERAL TERMS.
Advances on each Loan shall be subject to the conditions, agreements,
rules, and limitations set forth in the Loan Agreement.
The maturity of each Loan for the construction of Speculative Houses
shall be twelve (12) months from the date of execution of the Individual Deed
of Trust. The maturity of each Loan for the construction of Build to Suit
Houses shall be twelve (12) months from the date of the execution of the
Individual Deed of Trust. The maturity of each Loan for the construction of
Model Houses shall be eighteen (18) months from the date of the execution of
the Individual Deed of Trust.
III. INTEREST RATE COMPUTATION.
3.1 Interest Rate. Except as otherwise provided herein, interest on
the principal balance of this Note outstanding from time to time shall accrue
at the lesser of (a) the Applicable Rate (as defined herein, floating daily) or
(b) the Maximum Lawful Rate (as defined herein), calculated on the principal
and interest outstanding on the basis of a 365 day year or 366 day year as is
applicable, and shall accrue on the actual number of days any principal and
interest balance hereof is outstanding.
3.2 Default Rate. Upon the occurrence of a default hereunder or
under any of the Loan Documents (as defined herein, at the option of the Payee,
the principal balance of this Note then outstanding shall bear interest for the
period beginning with the date of occurrence of such default at the Default
Rate (as defined herein).
3.3 Definitions.. As used in this Note and the Loan Documents, the
following terms shall have the respective meanings indicated below:
"Applicable Rate" with respect to a particular Loan shall mean one of
the following rates of interest:
MASTER REVOLVING LINE OF CREDIT PROMISSORY NOTE -- PAGE 1
<PAGE> 2
Loan for Speculative House - Prime Rate plus One Half of one
Percent (0.50%), per annum.
Loan for Build to Suit House - Prime Rate plus One Half of One
Percent (0.50%), per annum.
Loan for Model House - Prime Rate plus One Half of One Percent
(0.50%), per annum.
The Applicable Rate for each Loan shall be calculated, accrued, and paid
separately and independently. The Applicable Rate for each Loan shall be
adjusted daily to reflect any changes in the Prime Rate.
"Charges" shall mean all fees and charges, if any, contracted for,
charged, received, taken or reserved by Payee in connection with the
transactions relating to this Note and the indebtedness evidenced hereby
or by the Loan Documents, which are treated as interest under applicable
law.
"Default Rate" shall mean the Maximum Lawful Rate, or if no Maximum
Lawful Rate exists, the sum of the Applicable Rate in effect from day to
day plus five percent (5%) per annum.
"Maximum Lawful Rate" shall mean the maximum lawful rate of interest
which may be contracted for, charged, taken, received or reserved by
Payee in accordance with the applicable laws of the State of Texas (or
applicable United States federal law to the extent that it permits Payee
to contract for, charge, take, receive or reserve a greater amount of
interest than under Texas law), taking into account all Charges made in
connection with the Loans evidenced by this Note and the Loan Documents.
"Prime Rate" shall mean the rate of interest per annum established from
time to time by NationsBank of Texas, N.A. or any successor institution
designated in writing by Payee ("Bank") and designated as its prime
rate, which may not necessarily be the lowest interest rate charged by
NationsBank. If such Prime Rate shall cease to be published or is
published infrequently or sporadically, then the Prime Rate shall be
determined by reference to another prime rate or similar lending rate
index, generally accepted on a national basis, as selected by Payee in
its sole and absolute discretion. Fluctuations in the Prime Rate shall
become effective on the date such changes in Bank's prime rate are
effective.
3.4 Interest Limitation Recoupment. Notwithstanding anything in this
Note to the contrary, if at any time (i) interest at the Applicable Rate. (ii)
interest at the Default Rate, if applicable, and (iii) the Charges computed
over the full term of this Note, exceed the Maximum Lawful Rate, then the rate
of interest payable hereunder, together with all Charges, shall be limited to
the Maximum Lawful Rate. Changes in the Applicable Rate resulting from a change
in the Prime Rate shall be subject to the provisions of this paragraph.
3.5 Computation Period. Interest on the indebtedness evidenced by
this Note shall be computed on the basis of a 365 day year or 366 day year as
is applicable, and shall accrue on the actual number of days any principal
balance on each loan made hereunder is outstanding during the period for which
interest is being calculated.
IV. PAYMENTS.
4.1 Payment Schedule.
4.1.1 Interest. Interest only at the Applicable Rate (as
initially determined and thereafter adjusted), calculated on a
daily basis, shall be calculated separately for each Loan and
paid monthly. With respect to each particular Loan, interest
payments shall begin on the first day of the second month
beginning after the date the first advance is funded with respect
thereto and shall continue monthly until such Loan has been paid
in full.
4.1.2 Principal. The principal balance of each Loan
shall be paid on or before the earlier of (i) Maturity Date
thereof or (ii) the release of any Property securing such Loan as
set forth in Section 4.1.3 below. The Maturity Date shall be the
date following the expiration of the Term of the Loan, which
shall be with respect to:
Loan for Speculative House - twelve (12) months
Loan for Build to Suit House - twelve (12) months
Loan for Model House - eighteen (18) months
Such Term of the Loan may be extended pursuant to the provisions
of the Loan Agreement, in which case the Maturity Date would
follow the extended Term of the Loan.
MASTER REVOLVING LINE OF CREDIT PROMISSORY NOTE -- PAGE 2
<PAGE> 3
4.1.3 Release of Houses and Lots. So long as Maker is not
in default on any of the obligations under this Note, the Loan
Agreement, the Master Deed of Trust, or the other Loan Documents,
and the guarantee of each Guarantor is in full force and effect,
and so long as there does not exist any act, omission or event,
which with notice or the passage of time would constitute an
Event of Default as defined in the Loan Documents, the release of
a House and the related Lot encumbered by the Master Deed of
Trust and an Individual Deed of Trust, and the release from the
lien created thereby shall be granted to Maker upon application
to Payee and upon satisfaction of the terms and conditions set
forth for a release in the Loan Agreement, the Master Deed of
Trust, the applicable Individual Deed of Trust, or the other Loan
Documents. The requirement for a release pursuant to this
paragraph shall include, but not be limited to, payment by Maker
of all principal and accrued interest on the Loan applicable to
such House and Lot for which Maker has requested a release.
4.2 Place. All payments hereunder shall be made to Payee at its
offices located in Dallas County, Texas, at the address of Payee as specified
herein or as Payee may from time to time designate in writing to Maker.
4.3 Business Days. If any payment of principal or interest on this
Note shall become due and payable on a Saturday, Sunday or any other day on
which Payee is not open for normal business, such payment shall be made on the
next succeeding business day of Payee. Any such extension of time for payment
shall be included in computing interest which has accrued and shall be payable
in connection with such payment.
4.4 Legal Tender. All amounts payable hereunder are payable in
lawful money or legal tender of the United States of America.
4.5 Prepayment. Maker shall have the right to prepay, at any time
and from time to time without premium or penalty, the entire unpaid principal
balance of any Loan or any portion thereof, but must also pay the amount of
then accrued but unpaid interest on the amount of principal being so prepaid.
4.6 Escrow Payment. In addition to the payment of principal and
interest as otherwise specified herein, Maker may, at Payee's discretion, be
required to make a payment to establish an escrow account for the payment of ad
valorem taxes and insurance premiums, all as specified in the Deed of Trust (as
herein defined).
4.7 Late Charge. In addition to the payments otherwise specified
herein, subject to the provisions of Section 6.3 hereof, if Maker fails,
refuses or neglects to pay, in full, any installment or portion of the
indebtedness evidenced hereby, as and when same shall be due and payable, then
Maker shall be obligated to pay to Payee a late charge equal to five percent
(5%) of the amount of such delinquent payment to compensate Payee for Maker's
default and the additional costs and administrative efforts required by reason
of such default.
V. DEFAULT AND REMEDIES.
5.1 Default. An "Event of Default" shall occur hereunder if (i)
Maker shall fail, refuse or neglect to pay, in full, any installment or portion
of the indebtedness evidenced hereby, within ten (10) days after the same shall
become due and payable, provided that such grace period shall not be applicable
to sums due and payable at the Maturity Date or upon acceleration hereof, (ii)
Maker shall refuse or neglect to cure non-monetary obligations within thirty
(30) days after written notice from Payee to Maker, however, subject to such
further cure period requirements as are required by Payee as set forth in the
Deed of Trust or Loan Agreement, or (iii) an Event of Default (as defined and
used in any of the other Loan Documents) shall occur under any of the other
Loan Documents.
5.2 Remedies. If a default shall occur under this Note or any of the
Loan Documents (as herein defined), then Payee may, at its option, without
notice or demand, declare the unpaid principal balance of, and the accrued but
unpaid interest on, this Note immediately due and payable, foreclose all liens
and security interests securing payment hereof, pursue any and all other
rights, remedies and recourses available to Payee or pursue any combination of
the foregoing. All remedies hereunder, under the Loan Documents and at law or
in equity shall be cumulative.
5.3 Waiver. Except as specifically provided in the Loan Documents,
Maker and any endorsers or guarantors hereof severally waive presentment and
demand for payment, protest and notice of protest and non-payment, bringing of
suit and diligence in taking any action to collect any sums owing hereunder or
in proceeding against any of the rights and collateral securing payment hereof.
Maker and any endorsers or guarantors hereof agree (i) that the time for any
payments hereunder may be extended from time to time without notice and
consent, (ii) to the acceptance of further collateral, and/or (iii) the release
of any existing collateral for the payment of this Note, all without in any
manner affecting their liability under or with respect to this Note. No
extension of
MASTER REVOLVING LINE OF CREDIT PROMISSORY NOTE -- PAGE 3
<PAGE> 4
time for the payment of this Note or any installment hereof shall affect the
liability of Maker under this Note or any endorser or guarantor hereof even
though the Maker or such endorser or guarantor is not a party to such
agreement.
5.4 No Waiver. Failure of Payee to exercise any of the options
granted herein to Payee upon the happening of one or more of the events giving
rise to such options shall not constitute a waiver of the right to exercise the
same or any other option at any subsequent time in respect to the same or any
other event. The acceptance by Payee of any payment hereunder that is less than
payment in full of all amounts due and payable at the time of such payment
shall not constitute a waiver of the right to exercise any of the options
granted herein to Payee at that time or at any subsequent time or nullify any
prior exercise of any such option without the express written acknowledgment of
the Payee.
5.5 Collection Costs. Maker agrees to pay all costs of collection
hereof when incurred, including attorneys' fees, whether or not any legal
action shall be instituted to enforce this Note.
VI. MISCELLANEOUS.
6.1 Notices. All notices or other communications required or
permitted to be given pursuant to this Note shall be in writing and shall be
deemed properly given if (i) mailed by first class United States Mail, postage
prepaid, registered or certified with return receipt requested (ii) by
delivering same in person to the intended addressee, or (iii) by delivery to an
independent third party commercial delivery service for same day or next day
delivery and providing for evidence of receipt at the office of the intended
addressee. Notice so mailed shall be effective upon its deposit with the United
States Postal Service or any successor thereto; notice sent by such a
commercial delivery service shall be effective upon delivery to such commercial
delivery service; notice given by personal delivery shall be effective only if
and when received by the addressee; and notice given by other means shall be
effective only if and when received at the designated address of the intended
addressee. Either party shall have the right to change its address for notice
hereunder to any other location within the continental United States by the
giving of thirty (30) days' notice to the other party in the manner set forth
herein. For purposes of such notices, the addresses of the parties shall be as
follows:
Maker: Newmark Homes, L.P.
10435 Greenbough
Stafford, Texas 77477
Attention: Terry White
FAX: 713/261-4663
with a copy to:
Barry Snowden
Morris, Lendais, Hollrah & Snowden
1980 Post Oak Blvd., Suite 700
Houston, Texas 77056
FAX: 713/966-7229
Payee: First American Bank Texas, SSB
14651 Dallas Parkway, Suite 400
Dallas, Texas 75240
Attention: Larry Stroud
FAX: 972/419-3394
with a copy to:
West, Webb, Allbritton & Gentry, P.C.
3000 Briarcrest Drive
Suite 502
Bryan, Texas 77802
Attention: Michael H. Gentry
FAX: 409/776-1531
6.2 Governing Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. THIS NOTE IS PERFORMABLE IN DALLAS COUNTY, TEXAS.
Any action or proceeding under or in connection with this Note against Maker or
any other party ever liable for payment of any sums of money payable on this
Note may be brought in any state or federal court in Dallas County, Texas.
Maker and each such other party hereby irrevocably (i) submits to the
nonexclusive jurisdiction of such courts, and (ii) waives any objection it may
now or hereafter have as to the venue of any such action or proceeding brought
in such court or that such court is an inconvenient forum.
MASTER REVOLVING LINE OF CREDIT PROMISSORY NOTE -- PAGE 4
<PAGE> 5
6.3 Interest Limitation. It is expressly stipulated and agreed to be
the intent of Maker and Payee at all times to comply with the applicable Texas
law governing the maximum rate or amount of interest payable on this Note or
the indebtedness evidenced hereby and by the other Loan Documents (or
applicable United States federal law to the extent that it permits Payee to
contract for, charge, take, reserve or receive a greater amount of interest
than under Texas law). If (i) the applicable law is ever judicially
interpreted so as to render usurious any amount called for under this Note or
under any of the other Loan Documents, or contracted for, charged, taken,
reserved or received with respect to the indebtedness evidenced by this Note
and the other Loan Documents, or (ii) Payee's exercise of the option herein
contained to accelerate the maturity of this Note, or (iii) any prepayment by
Maker results in Maker having paid any interest in excess of that permitted by
applicable law, then it in Maker's and Payee's express intent that (i) all
excess amounts theretofore collected by Payee be credited on the principal
balance of this Note (or, if this Note has been or would thereby be paid in
full, refunded to Maker) , and (ii) the provisions of this Note and the other
Loan Documents immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for hereunder
and thereunder. All sums paid or agreed to be paid to Payee for the use,
forbearance and detention of the indebtedness evidenced hereby and by the other
Loan Documents shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the usury ceiling from time to time in effect and
applicable to such indebtedness for so long as debt is outstanding. To the
extent that Payee is relying on Article 5069-1.04, as amended, of the Revised
Civil Statutes of Texas to determine the Maximum Lawful Rate payable on such
indebtedness, Payee will utilize the indicated (weekly) rate ceiling from time
to time in effect as provided in Article 5069-1.04, as amended. To the extent
United States federal law permits Payee to contract for, charge or receive a
greater amount of interest than Texas law, Payee will rely on United States
federal law instead of such Article 5069-1.04, as amended, for the purpose of
determining the Maximum Lawful Rate. Additionally, to the extent permitted by
applicable law now or hereafter in effect, Payee may, at its option and from
time to time, implement any other method of computing the Maximum Lawful Rate
tinder such Article 5069-1.04, as amended, or under other applicable law by
giving notice, if required, to Maker as provided by applicable law now or
hereafter in effect. IN NO EVENT SHALL THE PROVISIONS OF ARTICLE 5069, CH. 15
OF THE REVISED CIVIL STATUTES OF TEXAS (WHICH REGULATES CERTAIN REVOLVING
CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) APPLY TO THE
INDEBTEDNESS EVIDENCED HEREBY. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, it is not the intention
of Payee to accelerate the maturity of any interest that has not accrued at the
time of such acceleration or to collect unearned interest at the time of such
acceleration.
6.4 Captions. The article and section headings used in this Note are
for convenience of reference only and shall not affect, alter or define the
meaning or interpretation of the text of any article or section contained in
this Note.
6.5 Joint and Several Liability. Maker and each general partner of
maker shall be jointly and severally liable hereunder, and each such general
partner of Maker shall be jointly and severally liable hereunder, and each such
general partner hereby waives any requirement of law that in the event of a
default hereunder Payee exhaust any assets of Maker before proceedings against
such general partner's assets.
6.6 NO ORAL AGREEMENTS. THIS NOTE AND ALL THE OTHER LOAN DOCUMENTS
EMBODY THE FINAL, ENTIRE AGREEMENT OF MAKER AND PAYEE AND SUPERSEDE ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF MAKER AND PAYEE. THERE ARE NO ORAL
AGREEMENTS BETWEEN MAKER AND PAYEE. The provisions of this Note and the Loan
Documents may be amended or revised only by a written instrument signed by the
Maker and Payee.
EXECUTED as of the date and year first above written.
MAKER:
NEWMARK HOMES, L.P.,
a Texas limited partnership
BY: Newmark Home Corporation
its General Partner
By: /s/ TERRY WHITE
-------------------------------------
Name: Terry White
Title: Chief Financial Officer
MASTER REVOLVING LINE OF CREDIT PROMISSORY NOTE -- PAGE 5
<PAGE> 6
PREPARED IN THE LAW OFFICE OF:
WEST, WEBB, ALLBRITTON & GENTRY, P.C.
3000 Briarcrest Drive, Fifth Floor
Bryan, Texas 77802
(Michael H. Gentry)
299-3567
MASTER REVOLVING LINE OF CREDIT PROMISSORY NOTE -- PAGE 6
<PAGE> 1
EXHIBIT 10.12(c)
AMENDMENT TO REVOLVING LINE OF CREDIT
LOAN AGREEMENT AND RELATED PROMISSORY NOTE
This Amendment to Revolving Line of Credit Loan Agreement and Related
Promissory Note (this "Amendment") is dated this 4th day of February, 1997 by
and between Newmark Homes, L.P. a Texas limited partnership, ("Newmark") and
First American Bank Texas, SSB ("FAB").
WITNESSETH
WHEREAS, Newmark and FAB entered into that certain Revolving Line of
Credit Loan Agreement (the "Loan Agreement") dated December 17, 1996, that
certain Master Deed of Trust, Security Agreement and Financing Statement dated
the same date therewith (the "Master Deed of Trust") and that certain Master
Revolving Line of Credit Promissory Note dated the same date therewith (the
"Master Note"). The Loan Agreement, Master Note, Master Deed of Trust and the
documents related thereto are referred to collectively herein as the "Loan
Documents";
WHEREAS. Newmark and FAB agreed the interest rate on each Loan
would be a floating rate calculated on a daily basis equal to the
Prime Rate plus One Half of One Percent (0.50%);
WHEREAS, Newmark and FAB now desire to amend the Loan Documents to
decrease the interest rate on each Loan to be a floating rate calculated on a
daily basis equal to the Prime Rate.
NOW THEREFORE, for and in consideration of the promises and other good
and valuable consideration described herein, the sufficiency of which is hereby
acknowledged, the parties agree to amend the Loan Documents as follows:
SECTION I
General Agreements of Parties
Any capitalized terms not defined herein shall have the meanings given
to such terms in the Loan Documents.
SECTION II
Amendment to Limit Agreement
The last sentence of Paragraph 2.9 under Article II of the Loan
Agreement dated December 17, 1996 shall he amended to read as follows:
2.9 The interest rate on each Loan shall be a floating rate calculated
on a daily basis equal to the Prime Rate.
SECTION III
Amendment to Master Note
The term "Applicable Rate" under Paragraph 3.3 under Article III of
the Master Note dated December 17, 1996 shall be amended to read as follows:
<PAGE> 2
3.3 Definitions. As used in this Note and the Loan Documents, the
following terms shall have the respective meanings indicated below:
"Applicable Rate" with respect to a particular Loan shall mean one of
the following rates of interest:
Loan for Speculative House - Prime Rate, per annum.
Loan for Build to Suit House - Prime Rate, per annum.
Loan for Model House - Prime Rate, per annum.
The Applicable Rate for each Loan shall be calculated, accrued, and
paid separately and independently. The Applicable Rate for each Loan
shall be adjusted daily to reflect any changes in the Prime Rate.
SECTION IV
Extension or Liens
All liens created by the above referenced Loan Documents are hereby
extended until said indebtedness and note as so amended has been fully paid,
and Newmark agrees that such amendment shall in no manner affect or impair said
note or the liens securing the same and that said liens shall not in any manner
be waived, the purpose of this instrument being simply to amend the Loan
Agreement as stated and to carry forward all liens securing the same, which are
acknowledged by Newmark to be valid and subsisting, and Newmark further agrees
that all Terms and provisions of said note and of the instrument or instruments
creating or fixing the liens securing the same shall be and remain in full
force and effect as therein written, except as otherwise provided herein.
SECTION V
Statute Of Frauds Notice
NEWMARK AND FAB AGREE THAT THIS AMENDMENT, AND THE LOAN DOCUMENTS,
REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES AND THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE> 3
IN WITNESS WHEREOF, the parties herein have executed this Amendment to
Revolving Line of Credit Loan Agreement effective as of the date first written
above.
NEWMARK HOMES, L.P. , a Texas limited partnership
By: Newmark Home Corporation, a Nevada corporation
its general partner
By: /s/ TERRY WHITE
-------------------------------
Name: Terry White
-------------------------
Title: SVP
------------------------
FIRST AMERICAN BANK TEXAS, SSB
By: /s/ LARRY STROUD
---------------------------------
Larry Stroud, Vice President
STATE OF TEXAS )
)
COUNTY OF )
---------
This instrument was acknowledged before me on the ______________day of
1997 ___________________________ by _________________________________________,
of Newmark Home Corporation, a Nevada Corporation, as the general partner
of Newmark Homes, L.P., a Texas limited partnership, on behalf of said entity.
---------------------------------
Notary Public
STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 4th day of February,
1997 by LARRY STROUD, VICE PRESIDENT of First American Bank Texas, SSB, on
behalf of said bank.
---------------------------------
Notary Public, State of Texas
PREPARED IN THE LAW OFFICE OF:
WEST, WEBB, ALLBRITTON & GENTRY, P.C.
3000 Briarcrest Drive, Fifth Floor
Bryan, Texas 77802
(Walter S. Campbell)
<PAGE> 1
EXHIBIT 10.12(d)
AMENDMENT TO REVOLVING LINE OF CREDIT
LOAN AGREEMENT AND RELATED PROMISSORY NOTE
This Amendment to Revolving Line of Credit Loan Agreement and Related
Promissory Note (this "Amendment") is effective this 30th day of April, 1997 by
and between Newmark Homes, L.P. a Texas limited partnership, ("Newmark") and
First American Bank Texas, SSB ("FAB").
WITNESSETH
WHEREAS, Newmark and FAB entered into that certain Revolving Line of
Credit Loan Agreement dated December 17, 1996, (the "Loan Agreement") that
certain Master Deed of Trust, Security Agreement and Financing Statement dated
the same date therewith (the "Master Deed of Trust") and that certain Master
Revolving Line of Credit Promissory Note dated the same date therewith (the
"Master Note"). The Loan Agreement, Master Note, Master Deed of Trust and the
documents related thereto are referred to collectively herein as the "Original
Loan Documents".
WHEREAS, the Loan Agreement and Master Note were amended pursuant to
that Amendment to Revolving Line of Credit Loan Agreement and Related
Promissory Note dated February 4, 1997 between Newmark and FAB (referred to
herein as the "First Amended Loan Documents");
WHEREAS, the Original Loan Documents and First Amended Loan Documents
are referred to collectively herein as the "Loan Documents";
WHEREAS, Newmark and FAB desire to extend the maturity date of the line to May
30, 1998.
NOW THEREFORE, for and in consideration of the promises and other good
and valuable consideration described herein, the sufficiency of which is hereby
acknowledged, the parties agree to amend the Loan Documents as follows:
SECTION I
General Agreements of Parties
Any capitalized (all listed) terms not defined herein shall have the
meanings given to such terms in the Loan Documents.
SECTION II
Amendment to Loan Agreement
1. The first sentence of Paragraph 2.3 under Article II of Loan Agreement
dated December 17, 1997 shall be amended to read as follows:
2.3 Term of the Line. Lender's obligation to accept requests for
Loans, or process Loans for approval shall terminate on May
30, 1998.
<PAGE> 2
2. Paragraph 2.16 under Article II of Loan Agreement dated December 17,
1997 shall be amended to read as follows:
2.16 Model and Speculative Houses. Notwithstanding the number of
Subdivisions in which Borrower is constructing Houses, Borrower shall
not have more than twelve (12) Loans outstanding at any time for the
construction of Model Houses. Further, the total outstanding committed
balance of the Loans outstanding under the Line on Speculative and
Model Houses shall not exceed Ten Million and No/100 Dollars
($10,000,000.00) at any time.
SECTION III
Amendment to Master Note
The first sentence of Paragraph 1.3 under Section I of the Master Note
dated December 17, 1996 shall be amended to read as follows
1.3 Term of the Line. Payees's obligation to accept requests for
Loans, or process Loans for approval shall terminate on May
30, 1998.
SECTION IV
Extension of Liens
All liens created by the above referenced Loan Documents are hereby
extended until said indebtedness and note as so amended has been fully paid,
and agrees that such amendment shall in no manner affect or impair said note or
the liens securing the same and that said I lines shall nor in any manner be
waived, the purpose of this instrument being simply to amend the Loan Documents
as stated and to carry forward all liens securing the same, which are
acknowledged by Newmark to be valid and subsisting, and Newmark further agrees
that all terms and provisions of said note and of the instrument or instruments
creating or fixing the liens securing die same shall be and remain in full
force and effect as therein written. except as otherwise provided herein.
SECTION V
Statute of Frauds Notice
NEWMARK AND FAB AGREE THAT THIS AMENDMENT AND THE LOAN DOCUMENTS,
REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, AND THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Revolving Line of Credit Loan Agreement effective as of the date first written
above.
Newmark Homes, L.P.
a Texas limited partnership
By: Newmark Home Corporation
a Nevada corporation
its general partner
By: /s/ TERRY WHITE
-----------------------------
Name: Terry White
----------------------------
Title: SVP
---------------------------
FIRST AMERICAN BANK TEXAS, SSB
By: /s/ LARRY STROUD
----------------------------------
Larry Stroud
Vice President
STATE OF TEXAS )
)
COUNTY OF FORT BEND )
This instrument was acknowledged before me on the 16th day of May,
1997 by Terry White, Sr. Vice President of Newmark Home Corporation, a Nevada
Corporation, as the general partner of Newmark Homes, L.P., a Texas limited
partnership, on behalf of said entity.
-------------------------------------
Notary Public
STATE OF TEXAS )
)
COUNTY OF )
------------
This instrument was acknowledged before me on the _____ day of
________________________________, 1997 LARRY STROUD, VICE PRESIDENT of First
American Bank Texas, SSB, on behalf of said bank.
-------------------------------------
Notary Public
PREPARED IN THE LAW OFFICE OF:
WEST, WEBB, ALLBRITTON & GENTRY, P.C.
3000 Briarcrest Drive, Fifth Floor
Bryan, Texas 77802
<PAGE> 1
EXHIBIT 10.12(e)
ATTENTION: COUNTY CLERK -- THIS INSTRUMENT COVERS GOODS THAT ARE OR ARE TO
BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR
RECORD IN THE RECORDS WHERE MORTGAGES ON REAL ESTATE ARE RECORDED.
ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT ONLY AS A
MORTGAGE, BUT ALSO AS A GENERAL FINANCING STATEMENT AND ALSO AS A FINANCING
STATEMENT COVERING GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL
PROPERTY DESCRIBED HEREIN (THAT IS, A FIXTURE FILING). THE MAILING ADDRESSES
OF THE GRANTOR (DEBTOR) AND BENEFICIARY (SECURED PARTY) ARE SET FORTH IN THIS
INSTRUMENT.
MASTER DEED OF TRUST, SECURITY AGREEMENT AND FINANCING STATEMENT
This MASTER DEED OF TRUST (herein referred to as the "Master Deed of
Trust"); entered into as of the 17th day of December, 1996, by Newmark Homes,
L.P., as Grantor, whose mailing address for notice hereunder is at 10435
Greenbough, Stafford, Texas 77477, to Roger L. Kern, Trustee, whose address is
14651 Dallas Parkway, Suite 400, Dallas, Texas 75240, for the benefit of the
hereinafter described Beneficiary.
W I T N E S S E T H:
It is anticipated that from time to time a Deed of Trust, Security
Agreement and Financing Statement (each an "Individual Deed of Trust") shall be
entered into for the benefit of the Beneficiary pursuant to which the Grantor
named in such Individual Deed of Trust will BARGAIN, GRANT, SELL, ASSIGN,
MORTGAGE, TRANSFER and CONVEY unto the Trustee named in such Individual Deed of
Trust, and his successors and substitutes in trust thereunder, for the use and
benefit of the Beneficiary, an interest in certain real and personal property
described in each such Individual Deed of Trust.
It is intended that each Individual Deed of Trust will incorporate by
reference various provisions of this Master Deed of Trust, and it is intended
that such provisions shall be effective in each Individual Deed of Trust as if
set forth therein originally and in full. Any capitalized terms used in the
language incorporated into each such Individual Deed of Trust shall have the
meaning assigned such term in this Master Deed of Trust.
ARTICLE I
DEFINITIONS
1.1 Definitions. The capitalized terms used herein, but not defined,
shall have the meanings given to such terms in the Revolving Line of Credit
Loan Agreement by and between First American Bank Texas, SSB and Newmark Homes,
L.P., dated December 17, 1996. As used herein, the following terms shall have
the following meanings:
Beneficiary: FIRST AMERICAN BANK TEXAS, SSB, whose address for
notice hereunder is 14651 Dallas Parkway, Suite 400, Dallas, Texas 75240,
Attention: Roger L. Kern, and the subsequent holder or holders, from time to
time, of the Note.
Borrower: Shall have the same meaning as Grantor.
Disposition: Any sale, lease (except as permitted under this
Deed of Trust), exchange, assignment, conveyance, transfer, trade, or other
disposition of all or any portion of the Mortgaged Property (or any interest
therein) or all or any part of the beneficial ownership interest in Grantor (if
Grantor is a corporation, partnership, general partnership, limited
partnership, joint venture, trust, or other type of business association or
legal entity).
Event of Default: Any happening or occurrence described in
Article VI hereof.
Environmental Law: Any federal, state, or local law, statute,
ordinance, or regulation pertaining to health, industrial hygiene, or the
environmental conditions on, under, or about the Mortgaged Property, including
without limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 ("CERCLA") as amended, 42 U.S.C. Section 9601 et seq.
("RCRA"), the Texas Water Code ("TWC"), the Texas Solid Waste Disposal Act,
Tex. Rev. Civ Stat. Ann. Art. 4477-7, and regulations, rules, guidelines, or
standards promulgated pursuant to such laws, as such statutes, regulations,
rules, guidelines, and standards are amended from time to time.
Grantor: The individual or entity described as Grantor in the
initial paragraph of this Deed of Trust and any successor in interest thereto.
Guaranty (individually and/or collectively, as the context may
require): That or those instruments of guaranty now or hereafter in effect
from Guarantor to Beneficiary guaranteeing the repayment of all or any part of
the Indebtedness or the satisfaction of, or continued compliance with, the
Obligations, or both.
Hazardous Substance: Hazardous Substance is any substance,
product, waste, or other material which is or becomes listed, regulated, or
addressed as
MASTER REVOLVING LINE OF CREDIT PROMISSORY NOTE -- PAGE 1
<PAGE> 2
being a toxic, hazardous, polluting, or similarly harmful substance under any
Environmental Law, including without limitation: (i) any substance included
within the definition of "hazardous waste" pursuant to Section 1004 of RCRA;
(ii) any substance included within the definition of "hazardous substance"
pursuant to Section 101 of CERCLA; and (iii) any substance included within (a)
the definition of "waste" pursuant to Section 26.342(9) of TWC or (b) the
definition of "hazardous substance" pursuant to Section 30.003(b) of TWC or (c)
the definition of "pollutant" pursuant to Section 26.001(13) of the TWC.
Impositions: (i) All real estate and personal property taxes,
charges, assessments, standby fees, excises, and levies and any interest,
costs, or penalties with respect thereto, general and special, ordinary and
extraordinary, foreseen and unforeseen, of any kind and nature whatsoever which
at any time prior to or after the execution hereof may be assessed, levied, or
imposed upon the Mortgaged Property or the ownership, use, occupancy, or
enjoyment thereof, or any portion thereof, or the sidewalks, streets, or
alleyways adjacent thereto; (ii) any charges, fees, license payments, or other
sums payable for or under any easement, license, or agreement maintained for
the benefit of the Mortgaged Property, (iii) water, gas, sewer, electricity,
and other utility charges and fees relating to the Mortgaged Property, and (iv)
assessments and charges arising under any subdivision, condominium, planned
unit development, or other declarations, restrictions, regimes, or agreements
affecting the Mortgaged Property.
Indebtedness: (i) The principal of, interest on, or other sums
evidenced by the Master Note or the other Loan Documents; (ii) any other
amounts, payments, or premiums payable under the Loan Documents; and (iii) any
and all other indebtedness, obligations, and liabilities of any kind or
character of the Grantor to Beneficiary, now or hereafter existing, absolute or
contingent, due or not due, arising by operation of law or otherwise, or direct
or indirect, primary or secondary, joint, several, joint and several, fixed or
contingent, secured or unsecured by additional or different security or
securities, including indebtedness, obligations, and liabilities to Beneficiary
of the Grantor as a member of any partnership, joint venture, trust or other
type of business association, or other group, and whether incurred by Grantor
as principal, surety, endorser, guarantor, accommodation party or otherwise, it
being contemplated by Grantor and Beneficiary that Grantor may hereafter become
indebted to Beneficiary in further sum or sums.
Legal Requirements: (i) Any and all present and future judicial
decisions, statutes, rulings, rules, regulations, permits, certificates, or
ordinances of any Governmental Authority in any way applicable to Grantor, any
Guarantor or the Mortgaged Property, including, without limiting the generality
of the foregoing, the ownership, use, occupancy, possession, operation,
maintenance, alteration, repair, or reconstruction thereof, (ii) any and all
covenants, conditions, and restrictions contained in any deeds, other forms of
conveyance, or in any other instruments of any nature that relate in any way or
are applicable to the Mortgaged Property or the ownership, use, or occupancy
thereof, (iii) Grantor's or any Guarantor's presently or subsequently effective
bylaws and articles of incorporation or partnership, limited partnership, joint
venture, trust, or other form of business association agreement, and (iv) any
and all leases and other contracts (written or oral) of any nature that relate
in any way to the Mortgaged Property and to which Grantor or any Guarantor may
be bound, including, without limiting the generality of the foregoing, any
lease or other contract pursuant to which Grantor is granted a possessory
interest in and to the Land and/or the Improvements.
Lender: Shall have the same meaning as Beneficiary.
Loan Agreement: The Revolving Line of Credit Loan Agreement of
even date herewith by and between Grantor, as borrower, and Beneficiary, as
lender, governing the loan evidenced by the Master Note and secured, inter
alia, by this Deed of Trust and each Individual Deed of Trust;
Release: "Release," "removal," "environment," and "disposal"
shall have the meanings given such terms in CERCLA, and the term "disposal"
shall also have the meaning given it in RCRA; provided that in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment, and provided further that to the extent the laws of the state
of Texas establish a meaning for "release," "removal," "environment," or
"disposal" which is broader than that specified in either CERCLA and RCRA,
such broader meaning shall apply.
Remedial Work: Any investigation, site monitoring, containment,
cleanup, removal, restoration, or other work of any kind or nature reasonably
necessary under any applicable Environmental Law in connection with the current
or future presence, suspected presence, release, or suspected release of a
Hazardous Substance in or into the air, soil, ground water, surface water, or
soil vapor at, on, under, or within the Mortgaged Property, or any part
thereof.
Rents: All of the rents, revenues, income, proceeds, profits,
security and other types of deposits (after Grantor acquires title thereto),
and
Deed of Trust -- Page 2 Newmark Homes, L.P.
<PAGE> 3
other benefits paid or payable by parties to a contract and/or lease, other
than Grantor, for using, leasing, licensing, possessing, operating from,
residing in, selling, or otherwise enjoying all or any portion of the Mortgaged
Property.
Subordinate Mortgage: any mortgage, deed of trust, pledge, lien
(statutory, constitutional, or contractual) , security interest, encumbrance or
charge, or conditional sale or other title retention agreement, covering all or
any portion of the Mortgaged Property executed and delivered by Grantor. the
lien of which is subordinate and inferior to the lien of this Deed of Trust.
Trustee: The individual described as Trustee in the initial
paragraph of this Deed of Trust.
1.2 Additional Definitions. As used herein, the following terms
shall have the following meanings:
(a) "Hereof", "hereby", "hereto", "Hereunder", "herewith", and
similar terms mean of, by, to, under and with respect to, this Deed of
Trust or to the other documents or matters being referenced.
(b) "Heretofore" means before, "hereafter" means after, and
"herewith" means concurrently with, the date of this Deed of Trust.
(c) All pronouns, whether in masculine, feminine or neuter
form, shall be deemed to refer to the object of such pronoun whether
same is masculine, feminine or neuter in gender, as the context may
suggest or require.
(d) All terms used herein, whether or not defined in Section
1.1 hereof, and whether used in singular or plural form, shall be deemed
to refer to the object of such term whether such is singular or plural
in nature, as the context may suggest or require.
ARTICLE II
GRANT
2.1 Grant. To secure the full and timely payment of the Indebtedness
and the Line and the full and timely performance and discharge of the
Obligations, Grantor has GRANTED, BARGAINED, SOLD and CONVEYED, and by these
presents does GRANT, BARGAIN, SELL and CONVEY, unto Trustee, in trust, the
Mortgaged Property, subject, however, to the Permitted Exceptions, TO HAVE AND
TO HOLD the Mortgaged Property unto Trustee, forever, and Grantor does hereby
bind itself, its successors, and assigns to WARRANT AND FOREVER DEFEND the
title to the Mortgaged Property unto Trustee against every person whomsoever
lawfully claiming or to claim the same or any part thereof; provided, however
that if Grantor shall pay (or cause to be paid) the Indebtedness as and when
the same shall become due and payable and shall fully perform and discharge (or
cause to be fully performed and discharged) the Obligations on or before the
date same are to be performed and discharged, then the liens, security
interests, estates, and rights granted by the Loan Documents shall terminate,
in accordance with the provisions hereof. Otherwise same shall remain in full
force and effect. A certificate or other written statement executed on behalf
of Trustee or Beneficiary confirming that the Indebtedness has not been fully
paid or the obligations have not been fully performed or discharged shall be
sufficient evidence thereof for the purpose of reliance by third parties on
such fact.
ARTICLE III
WARRANTIES AND REPRESENTATIONS
Grantor hereby unconditionally warrants and represents to Beneficiary,
as of the date hereof and at all times during the term of this Deed of Trust,
as follows:
3.1 Organization and Power. If Grantor or any Constituent Party is a
corporation, general partnership, limited partnership, joint venture, trust, or
other type of business association, as the case may be, Grantor and any
Constituent Party, if any, (a) is either a corporation duly incorporated with a
legal status separate from its affiliates, or a partnership or trust, joint
venture or other type of business association duly organized, validly existing,
and in good standing under the laws of the state of its formation or existence,
and has complied with all conditions prerequisite to its doing business in the
state in which the Mortgaged Property is located, and (b) has all requisite
power and all governmental certificates of authority, licenses, all requisite
power and all governmental certificates of authority, licenses, permits,
qualifications, and documentation to own, lease, and operate its properties and
to carry on its business as now being, and as proposed to be, conducted.
3.2 Mailing Address. Grantor's mailing address, as set forth in the
opening paragraph hereof or as changed pursuant to the provisions hereof, is
true and correct.
Deed of Trust -- Page 3 Newmark Homes, L.P.
<PAGE> 4
3.3 No Reliance by Beneficiary. Grantor is experienced in the
ownership and operation of properties similar to the Mortgaged Property, and
Grantor and Beneficiary have and are relying solely upon Grantor's expertise
and business plan in connection with the ownership and operation of the
Mortgaged Property. Grantor is not relying on Beneficiary's expertise or
business acumen in connection with the Mortgaged Property.
3.4 Environmental and Hazardous Substances.
To the beat of Grantor's knowledge:
(a) The Mortgaged Property and the operations conducted thereon
do not violate any applicable law, statute, ordinance, rule, regulation,
order, or determination of any Governmental Authority or any restrictive
covenant or deed restriction (recorded or otherwise), including without
limitation all applicable zoning ordinances and building codes, flood
disaster laws and Environmental Laws.
(b) Without limitation of Section 3.4 (a) immediately
preceding, the Mortgaged Property and operations conducted thereon by
the current owner or operator of such Mortgaged Property, are not in
violation of or subject to any existing, pending, or threatened action,
suit, investigation, inquiry, or proceeding by any governmental or
nongovernmental entity or person or to any remedial obligations under
any Environmental Law.
(c) All notices, permits, licenses, or similar authorizations,
if any, required to be obtained or filed in connection with the
ownership, operation, or use of the Mortgaged Property, including,
without limitation, the past or present generation, treatment, storage,
disposal, or release of a Hazardous Substance (as hereinafter defined)
into the environment, have been duly obtained or filed.
(d) The Mortgaged Property does not contain any Hazardous
Substance.
(e) Grantor has taken all steps necessary to determine and has
determined that no Hazardous Substances have been generated, treated,
placed, held, located, or otherwise released on, under or from the
Mortgaged Property.
(f) Grantor has not undertaken, permitted, authorized, or
suffered and will not undertake, permit, authorize, or suffer the
presence, use, manufacture, handling, generation, transportation,
storage, treatment, discharge, release, burial, or disposal on, under or
from the Mortgaged Property of any Hazardous Substance or the
transportation to or from the Mortgaged Property of any Hazardous
Substance.
(g) There is no pending or threatened litigation. proceedings,
or investigations before or by any administrative agency in which any
person or entity alleges or is investigating any alleged presence,
release, threat of release, placement on, under or from the Mortgaged
Property, or the manufacture, handling, generation, transportation,
storage, treatment, discharge, burial, or disposal on, under, from or
about the Mortgaged Property, or the transportation to or from the
Mortgaged Property, of any Hazardous Substance.
(h) Grantor has not received any notice, and has no actual or
constructive knowledge, that any Governmental Authority or any employee
or agent hereof has determined, or threatens to determine, or is
investigating any allegation that there is a presence, release, threat
of release, placement on, under or from the Mortgaged Property, or the
use, manufacture, handling, generation, transportation, storage,
treatment, discharge, burial, or disposal on, under, from or about the
Mortgaged Property, or the transportation to or from the Mortgaged
Property, of any Hazardous substance.
(i) There have been no communications or agreements with any
Governmental Authority thereof or any private entity, including, but not
limited to, any prior owners or operators of the Mortgaged Property,
relating in any way to the presence, release, threat of release,
placement on or under the Mortgaged Property, or the use, manufacture,
handling, generation, transportation, storage, treatment, discharge,
burial, or disposal on, under or about the Mortgaged Property, or the
transportation to or from the Mortgaged Property, of any Hazardous
Substance.
(j) Neither Grantor nor, to the best knowledge of Grantor, any
other person, including, but not limited, to any predecessor owner,
tenant, licensee, occupant, user, or operator of all or any portion of
the Mortgaged Property, has ever caused, permitted, authorized or
suffered, and Grantor will not cause, permit, authorize, or suffer, any
Hazardous Substance to be placed, held, located, or disposed of, on or
under any other real property, all or any portion of which is legally or
beneficially owned (or any interest or estate therein which is owned) by
Deed of Trust -- Page 4 Newmark Homes, L.P.
<PAGE> 5
Grantor in any jurisdiction now or hereafter having in effect a so-
called "superlien" law or ordinance or any part thereof, the effect of
which law or ordinance would be to create a lien on the Mortgaged
Property to secure any obligation in connection with the "superlien" law
of such other jurisdiction.
(k) Grantor has been issued all required federal, state, and
local licenses, certificates, or permits relating to, and Grantor and
its facilities, business assets, property, leaseholds, and equipment are
in compliance in all respects with all applicable federal, state, and
local laws, rules, and regulations relating to, air emissions, water
discharge, noise emissions, solid or liquid waste disposal, hazardous
waste or materials, or other environmental, health, or safety matters.
ARTICLE IV
AFFIRMATIVE COVENANTS
Grantor hereby unconditionally covenants and agrees with Beneficiary,
until the entire Indebtedness shall have been paid in full and all of the
obligations shall have been fully performed and discharged as follows:
4.1 Compliance with Legal Requirements. Grantor will promptly and
faithfully comply with, conform to, and obey all Legal Requirements, whether
the same shall necessitate structural changes in, improvements to, or interfere
with the use or enjoyment of, the Mortgaged Property.
4.2 Payment of Impositions: Grantor will duly pay and discharge, or
cause to be paid and discharged, the Impositions not later than the earlier to
occur of (i) the due date thereof, (ii) the day any fine, penalty, interest, or
cost may be added thereto or imposed, or (iii) the day any lien may be filed
for the nonpayment thereof (if such day is used to determine the due date of
the respective item), and Grantor shall deliver to Beneficiary a written
receipt evidencing the payment of each Imposition.
4.3 Repair: Grantor will keep the Mortgaged Property in first-class
order and condition and will make all repairs, replacements, renewals,
additions, betterments, improvements, and alterations thereof and thereto,
interior and exterior, structural and nonstructural, ordinary and
extraordinary, foreseen and unforeseen, which are necessary or reasonably
appropriate to keep same in such order and condition. Grantor will prevent any
act, occurrence, or neglect which might impair the value or usefulness of the
Mortgaged Property for its intended usage. In instances where repairs,
replacements, renewals, additions, betterments, improvements, or alterations
are required in and to the Mortgaged Property on an emergency basis to prevent
loss, damage, waste, or destruction thereof, Grantor shall proceed to repair,
replace, add to, better, improve, or alter same, or cause same to be repaired,
replaced, added to, bettered, improved, or altered, notwithstanding anything to
the contrary contained in Section 5.2 hereof; provided, however, that in
instances where such emergency measures are to be taken, Grantor will notify
Beneficiary in writing of the commencement of same and the measures to be
taken, and, when same are completed, the completion date and the measures
actually taken.
4.4 Insurance. Grantor will obtain and maintain insurance upon and
relating to the Mortgaged Property with such insurers, in much amounts and
covering such risks as shall be satisfactory to Beneficiary, from time to time,
including but not limited to: (i) owner's and contractors' policies of
comprehensive general public liability insurance (including automobile
coverage); (ii) hazard insurance against all risks of loss, including collapse,
in an amount not less than the full replacement cost of all Improvements,
including the cost of debris removal, with annual agreed amount endorsement and
sufficient at all times to prevent Grantor from becoming a coinsurer; (iii) if
the Mortgaged Property is in a "Flood Hazard Area," a flood insurance policy,
or binder therefore, in an amount equal to the principal amount of the note or
the maximum amount available under the Flood Disaster Protection Act of 1973,
and regulations issued pursuant thereto, as amended from time to time,
whichever is less, in form complying with the "insurance purchase requirement"
of that act; and (iv) such other insurance, if any, as Beneficiary may require
from time to time. Each insurance policy issued in connection herewith shall
provide by way of endorsements, riders or otherwise that (a) with respect to
liability insurance, it shall name Beneficiary as an additional insured, with
respect to the other insurance, it shall be payable to Beneficiary as a
mortgagee and not as a coinsured, and with respect to all policies of insurance
carried by each Lessee for the benefit of the Grantor, it shall be payable to
Beneficiary as Beneficiary's interest may appear; (b) the coverage of
Beneficiary shall not be terminated, reduced, or affected in any manner
regardless of any breach or violation by Grantor of any warranties,
declarations, or conditions in such policy; (c) no such insurance policy shall
be canceled, endorsed, altered, or reissued to effect a change in coverage for
any reason and to any extent whatsoever unless such insurer shall have first
given Beneficiary thirty (30) days' prior written notice thereof; and (d)
Beneficiary may, but shall not be obligated to, make premium payments to
prevent any cancellations, endorsement, alteration, or reissuance, and such
payments shall be accepted by the insurer to
Deed of Trust -- Page 5 Newmark Homes, L.P.
<PAGE> 6
prevent same. Beneficiary shall be furnished with the original of each such
initial policy coincident with the execution of the Individual Deed of Trust
listing the relevant portion of the Mortgaged Property on Exhibit "A" thereof,
and the original of each renewal policy not less than ten (10) days' prior to
the expiration of the initial, or each immediately preceding renewal policy,
together with receipts or other evidence that the premiums thereon have been
paid for a period acceptable to the Beneficiary. Grantor shall furnish to
Beneficiary, as requested by Beneficiary, a statement certified by Grantor or a
duly authorized officer of Grantor of the amounts of insurance maintained in
compliance herewith, of the risks covered by such insurance and of the
insurance company or companies which carry such insurance.
4.5 Hold Harmless. Grantor will defend, at its own cost and expense,
and hold Trustee and Beneficiary harmless from, any action, proceeding, or
claim affecting the Mortgaged Property or the Loan Documents arising out of
Grantor's actions, and all costs and expenses incurred by Beneficiary in
protecting its interests hereunder in such an event (including all court costs
and reasonable attorney's fees incurred on an hourly basis, not to exceed ten
percent (10%) of the principal and interest outstanding under the Line) shall
be borne by Grantor. If Grantor is a partnership or joint venture, each partner
or venturer of Grantor jointly and severally agrees that in the event any
dispute whatsoever arises among any or all of the partners or venturers, each
partner or venturer will indemnify Trustee and Beneficiary and any corporation
controlling, controlled by, or under common control with either Trustee or
Beneficiary, and any shareholder, officer, director, employee and agent of
either Trustee or Beneficiary or any such corporation, and will hold Trustee
and Beneficiary and any such corporation and any such shareholder, officer,
director, employee and agent of such corporation or Beneficiary, harmless from
and against all expenses, including without limiting the generality of the
foregoing, all legal fees, damages, and other liabilities of any type
whatsoever (including but not limited to, any liabilities arising out of
demands by any of the partners for undisbursed loan funds) suffered or incurred
as a result of or in connection with any such dispute. This indemnity provision
shall survive repayment of the Indebtedness, shall be binding upon the
respective heirs, legal representatives, successors, and assigns of Grantor,
and if Grantor is a partnership or joint venture, each partner or venturer of
Grantor, and shall inure to the benefit of Trustee and Beneficiary, their
successors, and assigns, any corporation controlling, controlled by, or under
common control with either Trustee or Beneficiary and the corporation's
shareholder, directors, officers, employees and agents.
4.6 Further Assurances and Corrections. From time to time, at the
request of Beneficiary, Grantor will (i) promptly correct any defect, error, or
omission which may be discovered in the contents of this Deed of Trust or in
any other Loan Document or in the execution or acknowledgment thereof; (ii)
execute, acknowledge, deliver, record and/or file such further instruments
(including, without limitation, further deeds of trust, security agreements,
financing statements, continuation statements and assignments of rents or
leases) and perform such further acts and provide such further assurances as
may be necessary, desirable, or proper, in Beneficiary's opinion, to carry out
more effectively the purposes of this Deed of Trust and the Loan Documents and
to subject to the liens and security interests hereof and thereof any property
intended by the terms hereof or thereof to be covered hereby or thereby,
including without limitation, any renewals, additions, substitutions,
replacements, or appurtenances to the Mortgaged Property; (iii) execute,
acknowledge, deliver, procure, file, and/or record any document or instrument
(including without limitation, any financing statement) deemed advisable by
Beneficiary to protect the liens and the security interests herein granted
against the rights or interests of third persons; and (iv) pay all costs
connected with any of the foregoing.
4.7 Tax on Deed of Trust. At any time any law shall be enacted
imposing or authorizing the imposition of any tax upon this Deed of Trust, or
upon any rights, titles, liens, or security interests created hereby, or upon
the Indebtedness or any part thereof, Grantor will immediately pay all such
taxes, provided that if such law as enacted makes it unlawful for Grantor to
pay such tax, Grantor shall not pay nor be obligated to pay such tax.
Nevertheless, if a law is enacted making it unlawful for Grantor to pay such
taxes, then Grantor must prepay the Indebtedness in full within sixty (60) days
after demand therefor by Beneficiary.
4.8 Address: Grantor shall give written notice to Beneficiary and
Trustee of any change of address of Grantor at least five (5) days prior to the
effective date of such change of address. Absent such official written notice
of a change in address for Grantor, then Beneficiary and Trustee shall be
entitled for all purposes under the Loan Documents to rely upon Grantor's
address as set forth in the initial paragraph of this Deed of Trust, as same my
have been theretofore changed in accordance with the provisions hereof.
4.9 Environment and Hazardous Substances: Grantor will:
(a) not use, generate, manufacture, produce, store, release,
discharge, treat, or dispose of on, under from or about the Mortgaged
Property or transport to or from the Mortgaged
Deed of Trust -- Page 6 Newmark Homes, L.P.
<PAGE> 7
Property any Hazardous Substance or allow any other person or entity to
do so;
(b) keep and maintain the Mortgaged Property in compliance
with, and shall not cause or permit the Mortgaged Property to be in
violation of, any Environmental Law;
(c) establish and maintain, at Grantor's sole expense, a
system to assure and monitor continued compliance with Environmental
Laws and the exclusion of Hazardous Substances from the Mortgaged
Property, by any and all owners or operators of the Mortgaged Property;
(d) give prompt written notices to Beneficiary of: (i) any
proceeding or inquiry by any governmental or nongovernmental entity or
person with respect to the presence of any Hazardous Substance on,
under, from or about the Mortgaged Property, the migration thereof from
or to other property, the disposal, storage, or treatment of any
Hazardous Substance generated or used on, under or about the Mortgaged
Property, (ii) all claims made or threatened by any third party against
Grantor or the Mortgaged Property or any other owner or operator of the
Mortgaged Property relating to any loss or injury resulting from any
Hazardous Substance, and (iii) Grantor's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of the
Mortgaged Property that could cause the Mortgaged Property or any part
thereof to be subject to any investigation or cleanup of the Mortgaged
Property pursuant to any Environmental Law;
(e) permit Beneficiary to join and participate in, as a party
if it so elects, any legal proceedings or actions initiated with respect
to the Mortgaged Property in connection with any Environmental Law or
Hazardous Substance, and Grantor shall pay all reasonable attorneys'
fees incurred on an hourly basis, not to exceed ten percent (10%) of the
principal and interest outstanding under the Line incurred by
Beneficiary in connection therewith;
(f) protect, indemnify, and hold harmless Trustee and
Beneficiary, their parents, subsidiaries, directors, officers,
employees, representatives, agents, successors, and assigns from and
against any and all loss, damage, costs, expense, action, causes of
action, or liability (including reasonable attorneys' fees incurred on
an hourly basis, not to exceed ten percent (10%) of the principal and
interest outstanding under the Line and costs) directly or indirectly
arising from or attributable to the use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal,
or presence of a Hazardous Substance on, under the Mortgaged Property,
whether known or unknown at the time of the execution hereof, including
without limitation (i) all foreseeable consequential damages of any such
use, generation, manufacture, production, storage, release, threatened
release, discharge, disposal, or presence, and (ii) the costs of any
required or necessary environmental investigation or monitoring, any
repair, cleanup, or detoxification of the Mortgaged Property, and the
preparation and implementation of any closure, remedial, or other
required plans. This covenant and the indemnity contained herein shall
survive the release of the lien of this Deed of Trust, or the
extinguishment of the lien by foreclosure or action in lieu thereof; and
(g) in the event that any Remedial Work is reasonably
necessary or Grantor shall commence and thereafter diligently prosecute
to completion all such Remedial Work within thirty (30) days after
written demand by Beneficiary for performance thereof (or such shorter
period of time as may be required under any Legal Requirement). All
Remedial Work shall be performed by contractors approved in advance by
Beneficiary, and under the supervision of a consulting engineer approved
by Beneficiary. All costs and expenses of such Remedial Work shall be
paid by Grantor including, without limitation, Beneficiary's reasonable
attorneys' fees incurred on an hourly basis, not to exceed ten percent
(10%) of the principal and interest outstanding under the Line and costs
incurred in connection with monitoring or review of such Remedial Work.
In the event Grantor shall fail to timely commence, or cause to be
commenced, or fail to diligently prosecute to completion, such Remedial
Work, Beneficiary may, but shall not be required to, cause such Remedial
Work to be performed, and all costs and expenses thereof, or incurred in
connection therewith, shall become part of the Indebtedness.
ARTICLE V
NEGATIVE COVENANTS
Grantor hereby unconditionally covenants and agrees with Beneficiary
until the entire Indebtedness shall have been paid in full and all of the
obligations shall have been fully performed and discharged as follows:
Deed of Trust -- Page 7 Newmark Homes, L.P.
<PAGE> 8
5.1 Use Violations. Grantor will not use, maintain, operate, or
occupy, or allow the use, maintenance, operation, or occupancy of, the
Mortgaged Property in any manner which (a) violates any Legal Requirement, (b)
may be dangerous unless safeguarded as required by law and/or appropriate
insurance, (c) constitutes a public or private nuisance, or (d) makes void,
voidable, or cancelable, or increases the premium of, any insurance then in
force with respect thereto.
5.2 Waste; Alterations. Grantor will not commit or permit any waste
or impairment of the Mortgaged Property and will not (subject to the provisions
of Sections 4.1 and 4.3 hereof), without the prior written consent of
Beneficiary, make or permit to be made any alterations or additions to the
Mortgaged Property of a material nature that are inconsistent with the
provisions of the Loan Documents.
5.3 Replacement of Fixtures and Personalty. Grantor will not,
without the prior written consent of Beneficiary, permit any of the Fixtures or
Personalty to be removed at any time from the Land or Improvements unless the
removed item in removed temporarily for maintenance and repair or, if removed
permanently, is replaced by an article of equal suitability and value, owned
by Grantor, free and clear of any lien or security interest, except as may be
approved in writing by Beneficiary.
5.4 Change in Zoning. Grantor will not seek or acquiesce in a zoning
reclassification of all or any portion of the Mortgaged Property or grant or
consent to any easement, dedication, plat, or restriction (or allow any
easement to become enforceable by prescription), or any amendment or
modification thereof, covering all or any portion of the Mortgaged Property,
without Beneficiary's prior written consent.
5.5 No Drilling. Grantor will not, without the prior written consent
of Beneficiary, permit any drilling or exploration for or extraction, removal,
or production of, any Minerals from the surface or subsurface of the Land
regardless of the depth thereof or the method of mining or extraction thereof.
5.6 No Disposition. Grantor will not make a Disposition without
obtaining Beneficiary's prior written consent to the Disposition, except in the
ordinary course of selling Houses.
5.7 No Subordinate Mortgages. Grantor will not create, place, or
permit to be created or placed, or through any act or failure to act, acquiesce
in the placing of, or allow to remain any Subordinate Mortgage regardless of
whether such Subordinate Mortgage is expressly subordinate to the liens or
security interests of the Loan Documents with respect to the Mortgaged
Property, other than the Permitted Exceptions and UCC Financing Statements
covering the fixtures to be included in each House.
ARTICLE VI
EVENTS OF DEFAULT
The term "Event of Default", as used herein and in the Loan Documents,
shall mean the occurrence or happening, at any time and from time to time, of
any one or more of the following:
6.1 Payment of Indebtedness. If Grantor shall fail, refuse, or
neglect to pay, in full, any installment or portion of the Indebtedness as and
when the same shall become due and payable, whether at the due date thereof
stipulated in the Loan Documents, upon acceleration or otherwise and such
failure, refusal or neglect continues for a period of ten (10) days after
delivery to Borrower of written notice from Lender of such failure, refusal or
neglect.
6.2 Performance of Obligations. If Grantor shall fail, refuse or
neglect or cause the failure, refusal, or neglect to comply with, perform and
discharge fully and timely any of the Obligations as and when called for, other
than repayment of the Indebtedness and such failure, refusal or neglect
continues for a period of 30 days after delivery to Borrower of written notice
from Lender of such failure, refusal or neglect.
6.3 False Representation. If any representation, warranty, terms,
covenants, conditions or statements made by Grantor, any Guarantor, or
Constituent Party in, under, or pursuant to the Loan Documents or any
Residential Draw Request (as defined in the Loan Agreement) or any affidavit or
other instrument executed or delivered with respect to the Loan Documents or
the Indebtedness is determined by Beneficiary to be false or misleading in any
material respect as of the date hereof or thereof or shall become so at any
time prior to the repayment in full of the Indebtedness.
6.4 Default Under other Lien Documents. If Grantor shall default or
commit an Event of Default under and pursuant to any other mortgage or security
agreement which covers or affects any part of the Mortgaged Property, including
any Individual Deed of Trust, or if any event or condition shall occur which
gives rise to a right in Beneficiary to accelerate the Line or any Loan or
Deed of Trust -- Page 8 Newmark Homes, L.P.
<PAGE> 9
exercise any remedy as a consequence of a default under this Deed of Trust, any
individual Deed of Trust (as defined in the Loan Agreement) or any other of the
Loan Documents, or the occurrence of an Event of Default as defined in any
of the other Loan Documents.
6.5 Insolvency; Bankruptcy. If Grantor, any Guarantor, or any
Constituent Party, as applicable (i) shall execute an assignment for the
benefit of creditors or an admission in writing by Grantor or any Guarantor
of Grantor's inability to pay, or Grantor's failure to pay, debts generally as
the debts become due; or (ii) shall allow the levy against the Mortgaged
Property or any part thereof, of any execution, attachment, sequestration or
other writ which is not vacated within thirty days after the levy; or (iii)
shall allow the appointment of a receiver, liquidator, trustee or custodian of
Grantor, any Guarantor, or any Constituent Party or of the Mortgaged Property
or any part thereof, which receiver, liquidator, trustee or custodian is not
discharged within sixty days after the appointment; or (iv) files as a debtor a
petition, case, proceeding or other action pursuant to, or voluntarily seeks of
the benefit or benefits of any Debtor Relief Law, or takes any action in
furtherance thereof; or (v) files either a petition, complaint, answer or other
instrument which seeks to effect a suspension of, or which has the effect of
suspending any of the rights or powers of Beneficiary or Trustee granted in
the Note, herein or in any Loan Document; or (vi) allows the filing of a
petition, case, proceeding or other action against Grantor, any Guarantor, or
any Constituent Party as a debtor under any Debtor Relief Law or seeks
appointment of a receiver, trustee, custodian or liquidator of Grantor, any
Guarantor, or any Constituent Party or of the Mortgaged Property, or any part
thereof, or of any significant portion of Grantor's, any Guarantors, or any
Constituent Party's other property; and (a) Grantor, any Guarantor, or any
Constituent Party admits, acquiesces in or fails to contest diligently the
material allegations thereof, or (b) the petition, case, proceeding or other
action results in the entry of an order for relief or order granting the
relief sought against Grantor, any Guarantor, or any Constituent Party, or (c)
the petition, case, proceeding or other action is not permanently dismissed or
discharged on or before the earlier of trial thereon or thirty days next
following the date of filing.
6.6 Dissolution; Death. If Grantor, any Constituent Party, or any
Guarantor, shall die, become totally and permanently disabled, dissolve,
terminate or liquidate, or merge with or be consolidated into any other entity,
or if Grantor or any of its partners, officers, or directors, as applicable,
shall cause, institute or fail to contest any proceeding for the dissolution or
termination of Grantor, or if Grantor ceases to do business or terminates its
business as presently conducted for any reason whatsoever.
6.7 No Further Encumbrances. If Grantor creates, places, or permits
to be created or placed, or through any act or failure to act, acquiesces in
the placing of, or allows to remain during construction or upon completion of
the Improvements, any Subordinate Mortgage lien or encumbrance not approved by
Beneficiary, regardless of whether such Subordinate Mortgage lien or
encumbrance is expressly subordinate to the liens or security interests of the
Loan Documents, with respect to the Mortgaged Property, other than the
Permitted Exceptions, or if a deficiency tax assessment be made or tax lien
filed against Grantor or the Property.
6.8 Disposition of Mortgaged Property and Beneficial Interest in
Grantor. If Grantor makes a Disposition, except in the ordinary course of
selling Houses, without the prior written consent of Beneficiary.
6.9 Condemnation. If any condemnation, eminent domain or other
taking proceeding is instituted or threatened which would, in Beneficiary's
sole judgment, materially impair the use and enjoyment of the Mortgaged
Property for its intended purposes.
6.10 Destruction of Improvements. If the Mortgaged Property is
demolished, destroyed, or substantially damaged so that, in Beneficiary's
judgment, it cannot be restored or rebuilt with available funds to the
condition existing immediately prior to such demolition, destruction, or damage
within a reasonable period of time.
6.11 Material Adverse Change. If Beneficiary, in good faith,
reasonably determines that any event shall have occurred that will have a
Material Adverse Effect. This subparagraph shall be subject to the requirement
that Beneficiary give notice to Grantor of the Material Adverse Effect, and
Grantor shall then have thirty (30) days to cure such Material Adverse Effect.
6.12 Abandonment. If Grantor abandons all or any portion of the
Mortgaged Property.
6.13 Loan Documents. The occurrence of an Event of Default as
defined in any of the other Loan Documents.
Deed of Trust -- Page 9 Newmark Homes, L.P.
<PAGE> 10
ARTICLE VII
REMEDIES
7.1 Beneficiary's Remedies Upon Default. Upon the occurrence of
an Event of Default which has not been cured or any event or circumstance
which, with the lapse of time, or the giving of notice, or both, would
constitute an Event of Default, Beneficiary may, at Beneficiary's option,
and by or through Trustee, by Beneficiary itself or otherwise, do any one or
more of the following:
(a) Right to Perform Grantor's Covenants. If Grantor has
failed to keep or perform any covenant whatsoever contained in this Deed
of Trust or the other Loan Documents, Beneficiary may, but shall not be
obligated to any person to do so, perform or attempt to perform said
covenant, and any payment made or expense incurred in the performance or
attempted performance of any such covenant shall be deemed advanced to
or for the account of Grantor and secured by this Deed of Trust and any
of the other Loan Documents, as applicable and become a part of the
Indebtedness, and Grantor promises, upon demand, to pay to Beneficiary,
at the place where the Note is payable, all sums so advanced or paid by
Beneficiary, with interest from the date when paid or incurred by
Beneficiary at the Default Rate. No such payment by Beneficiary shall
constitute a waiver of any Event of Default. In addition to the liens
and security interests hereof, Beneficiary shall be subrogated to all
rights, titles, liens, and security interests securing the payment of
any debt, claim, tax, or assessment for the payment of which Beneficiary
may make an advance, or which Beneficiary may pay. Grantor hereby
constitutes and appoints Beneficiary its true and lawful attorney-in-
fact with full power of substitution to complete the Improvements in the
name of Grantor and hereby empowers Beneficiary to use any funds of
Grantor, including any balance which may be held in escrow and any funds
which may remain unadvanced for the purpose of completing the
Improvements on Property, to make such additions and changes and
corrections in the contract documents which may be necessary or
desirable to complete the Improvements on the Mortgaged Property, to
employ such contractors, subcontractors, and agents, architects, and
inspectors as shall be required for such purposes, to pay, settle or
compromise existing bills and claims which may be liens against the
Property, to execute all applications and certifications in the name of
Grantor which may be required by any of the contract documents, and to
do any and every act which Grantor might do in Grantor's own behalf. It
is further understood and agreed that this power of attorney shall be
deemed to be a power coupled with an interest, given as security and
is irrevocable. Grantor hereby assigns and quitclaims to Beneficiary all
sums unadvanced hereunder for the completion of the Improvements, such
assignment to become effective only in case of the occurrence of an
Event of Default.
(b) Right of Entry. Beneficiary may, prior or subsequent to
the institution of any foreclosure proceedings, enter upon the Mortgaged
Property, or any part thereof, and take exclusive possession of the
Mortgaged Property and of all books, records, and accounts relating
thereto and exercise without interference from Grantor any and all
rights which Grantor has with respect to the management, possession,
operation, protection, or preservation of the Mortgaged Property,
including without limitation the right to rent the same for the account
of Grantor and to deduct from such Rents all costs, expenses, and
liabilities of every character incurred by the Beneficiary in collecting
such Rents and in managing, operating, maintaining, protecting, or
preserving the Mortgaged Property and to apply the remainder of such
Rents on the Indebtedness in such manner as Beneficiary may elect. All
such costs, expenses, and liabilities incurred by the Beneficiary in
collecting such Rents and in managing, operating, maintaining,
protecting, or preserving the Mortgaged Property, if not paid out of
Rents as hereinabove provided, shall constitute a demand obligation
owing by Grantor and shall bear interest from the date of expenditure
until paid at the Default Rate, all of which shall constitute a portion
of the Indebtedness. If necessary to obtain the possession provided for
above, the Beneficiary may invoke any and all legal remedies to
dispossess Grantor, including specifically one or more actions for
forcible entry and detainer, trespass to try title, and restitution. In
connection with any action taken by the Beneficiary pursuant to this
subsection, the Beneficiary shall not be liable for any loss sustained
by Grantor resulting from any failure to let the Mortgaged Property, or
any part thereof, or from any other act or omission of the Beneficiary
in managing the Mortgaged Property unless such loss is caused by the
willful misconduct of the Beneficiary, nor shall the Beneficiary be
obligated to perform or discharge any obligation, duty, or liability
under any Lease or under or by reason hereof or the exercise of rights
or remedies hereunder. Grantor shall and does hereby agree to indemnify
the Beneficiary for, and to hold the Beneficiary harmless from, any and
all liability, loss, or damages, which may or might be incurred by the
Beneficiary under any such Lease or under or by reason hereof or the
exercise of rights or remedies hereunder, and from any and all claims
and demands whatsoever which may be asserted against the Beneficiary by
reason of any alleged obligations or undertakings on its part to perform
Deed of Trust -- Page 10 Newmark Homes, L.P.
<PAGE> 11
or discharge any of the terms, covenants, or agreements contained in any
such Lease. Should the Beneficiary incur any such liability, the amount
thereof, including without limitation costs, expenses, and reasonable
attorneys' fees, together with interest thereon from the date of
expenditure until paid at the Default Rate, shall be secured hereby, and
Grantor shall reimburse the Beneficiary therefor immediately upon
demand. Nothing in this subsection shall impose any duty, obligation, or
responsibility upon the Beneficiary for the control, care, management,
leasing, or repair of the Mortgaged Property, nor for the carrying out
of any of the terms and conditions of any such Lease; nor shall it
operate to make the Beneficiary responsible or liable for any waste
committed on the Mortgaged Property by the tenants or by any other
parties, or for any Hazardous Substance on or under the Mortgaged
Property, or for any dangerous or defective condition of the Mortgaged
Property or for any negligence in the management, leasing, upkeep,
repair, or control of the Mortgaged Property resulting in loss or injury
or death to any tenant, licensee, employee, or stranger. Grantor hereby
assents to, ratifies, and confirms any and all actions of the
Beneficiary with respect to the Mortgaged Property taken under this
subsection.
The remedies in this subsection are in addition to other remedies
available to the Beneficiary and the exercise of the remedies in this
subsection shall not be deemed to be an election of nonjudicial or
judicial remedies otherwise available to the Beneficiary. The remedies
in this Article VII are available under and governed by the real
property laws of Texas and are not governed by the personal property
laws of Texas, including but not limited to, the power to dispose of
personal property in a commercially reasonable manner under Section
9.504 of the Code. No action by Beneficiary, taken pursuant to this
subsection, shall be deemed to be an election to dispose of personal
property under Section 9.505 of the Code. Any receipt of consideration
received by Beneficiary pursuant to this subsection shall be immediately
credited against the Indebtedness (in the inverse order of maturity) and
the value of said consideration shall be treated like any other payment
against the Indebtedness.
(c) Right to Accelerate. Upon the occurrence of an Event
of Default as defined herein and in the Loan Agreement, Beneficiary may,
without notice, demand, presentment, notice of nonpayment or
nonperformance, protest, notice of protest, notice of intent to
accelerate, notice of acceleration, or any other notice or any other
action, all of which are hereby waived by Grantor and all other parties
obligated in any manner whatsoever on the Indebtedness, declare the
entire unpaid balance of the Indebtedness immediately due and payable,
and upon such declaration, the entire unpaid balance of the Indebtedness
shall be immediately due and payable. The failure to exercise any remedy
available to the Beneficiary shall not be deemed to be a waiver of any
rights or remedies of the Beneficiary under the Loan Documents, at law
or in equity.
(d) Foreclosure-Power of Sale. Beneficiary may request
Trustee to proceed with foreclosure under the power of sale which is
hereby conferred, such foreclosure to be accomplished in accordance with
the following provisions:
(i) Public Sale. Trustee is hereby authorized and
empowered, and it shall be Trustee's special duty, upon such
request of Beneficiary, to sell the Mortgaged Property, or any
part thereof, at public auction to the highest bidder for cash,
with or without having taken possession of same. Any such sale
(including notice thereof) shall comply with the applicable
requirements, at the time of the sale, of Section 51.002 of the
Texas Property Code or, if and to the extent such statute is not
then in force, with the applicable requirements, at the time of
the sale, of the successor statute or statutes, if any, governing
sales of Texas real property under powers of sale conferred by
deeds of trust. If there is no statute in force at the time of
the sale governing sales of Texas real property under powers of
sale conferred by deeds of trust, such sale shall comply with
applicable law, at the time of the sale, governing sales of Texas
real property under powers of sale conferred by deeds of trust.
(ii) Right to Require Proof of Financial Ability and/or
Cash Bid. At any time during the bidding, the Trustee may
require a bidding party (A) to disclose its full name, state and
city of residence, occupation, and specific business office
location, and the name and address of the principal the bidding
party is representing (if applicable), and (B) to demonstrate
reasonable evidence of the bidding party's financial ability (or,
if applicable, the financial ability of the principal of such
bidding party), as a condition to the bidding party submitted
bids at the foreclosure sale. If any such bidding party (the
"Questioned Bidder") declines to comply with the Trustee's
requirement in this regard, or if such Questioned Bidder does
respond but the Trustee, in Trustee's sole and absolute
discretion, deems the information or
Deed of Trust -- Page 11 Newmark Homes, L.P.
<PAGE> 12
the evidence of the financial ability of the Questioned Bidder
(or, if applicable, the principal of such bidding party) to be
inadequate, then the Trustee may continue the bidding with
reservation; and in such event (1) the Trustee shall be
authorized to caution the Questioned Bidder concerning the legal
obligations to be incurred in submitting bids, and (2) if the
Questioned Bidder is not the highest bidder at the sale, or if
having been the highest bidder the Questioned Bidder fails to
deliver the cash purchase price payment promptly to the Trustee,
all bids by the Questioned Bidder shall be null and void. The
Trustee may, in Trustee's sole and absolute discretion, determine
that a credit bid may be in the best interest of the Grantor and
Beneficiary, and elect to sell the Mortgaged Property for credit
or for a combination of cash and credit; provided, however, that
the Trustee shall have no obligation to accept any bid except an
all cash bid. In the event the Trustee requires a cash bid and
cash is not delivered within a reasonable time after conclusion
of the bidding process, as specified by the Trustee, but in no
event later than 3:45 p.m. local time on the day of sale, then
said contingent sale shall be null and void, the bidding process
may be recommenced, and any subsequent bids or sale shall be made
as if no prior bids were made or accepted.
(iii) Sale Subject to Unmatured Indebtedness. In
addition to the rights and power of sale granted under the
preceding provisions of this subsection, if default is made in
the payment of any installment of the Indebtedness, Beneficiary
may, at Beneficiary's option, at once or at any time thereafter
while any matured installment remains unpaid, without declaring
the entire Indebtedness to be due and payable, orally or in
writing direct Trustee to enforce this trust and to sell the
Mortgaged Property subject to such unmatured Indebtedness and to
the rights, powers, liens, security interests, and assignments
securing or providing recourse for payment of such unmatured
Indebtedness, in the same manner, all as provided in the
preceding provisions of this subsection. Sales made without
maturing the Indebtedness may be made hereunder whenever there is
a default in the payment of any installment of the Indebtedness,
without exhausting the power of sale granted hereby, and without
affecting in any way the power of sale granted under this
subsection, the unmatured balance of the Indebtedness or the
rights, power, liens, security interests, and assignments
securing or providing recourse for payment of the Indebtedness.
(iv) Partial Foreclosure. Sale of a part of the
Mortgaged Property shall not exhaust the power of sale, but sales
may be made from time to time until the Indebtedness is paid and
the obligations are performed and discharged in full. It is
intended by each of the foregoing provisions of this subsection
that Trustee may, after any request or direction by Beneficiary,
sell not only the Land and the Improvements, but also the
Fixtures and Personalty and other interests constituting a part
of the Mortgaged Property or any part thereof, along with the
Land and the Improvements or any part thereof, as a unit and as a
part of a single sale, or may sell at any time or from time to
time any part or parts of the Mortgaged Property separately from
the remainder of the Mortgaged Property. It shall not be
necessary to have present or to exhibit at any sale any of the
Mortgaged Property.
(v) Trustee's Deeds. After any sale under this
subsection, Trustee shall make good and sufficient deeds,
assignments, and other conveyances to the purchaser or purchasers
thereunder in the name of Grantor, conveying the Mortgaged
Property or any part thereof so sold to the purchaser or
purchasers with general warranty of title by Grantor. It is
agreed that in any deeds, assignments or other conveyances given
by Trustee, any and all statements of fact or other recitals
therein made as to the identity of Beneficiary, the occurrence or
existence of any Event of Default, the notice of intention to
accelerate, or acceleration of, the maturity of the Indebtedness,
the request to sell, notice of sale, time, place, terms and
manner of sale, and receipt, distribution, and application of the
money realized therefrom, the due and proper appointment of a
substitute trustee, and without being limited by the foregoing,
any other act or thing having been duly done by or on behalf of
Beneficiary or by or on behalf of Trustee, shall be taken by all
courts of law and equity as prima facie evidence that such
statements or recitals state true, correct, and complete facts
and are without further question to be so accepted, and Grantor
does hereby ratify and confirm any and all acts that Trustee may
lawfully do in the premises by virtue hereof.
(e) Beneficiary's Judicial Remedies. Beneficiary, or
Trustee, upon written request of Beneficiary, may proceed by suit or
suits, at law or in equity, to enforce the payment of the Indebtedness
and the
Deed of Trust -- Page 12 Newmark Homes, L.P.
<PAGE> 13
performance and discharge of the obligations in accordance with the
terms hereof, of the Note, and the other Loan Documents, to foreclose
the liens and security interests of this Deed of Trust as against all or
any part of the Mortgaged Property, and to have all or any part of the
Mortgaged Property sold under the judgment or decree of a court of
competent jurisdiction. This remedy shall be cumulative of any other
nonjudicial remedies available to the Beneficiary with respect to the
Loan Documents. Proceeding with a request or receiving a judgment for
legal relief shall not be or be deemed to be on an election of remedies
or bar any available nonjudicial remedy of the Beneficiary.
(f) Beneficiary's Right to Appointment of Receiver.
Beneficiary, as a matter of right and without regard to the sufficiency
of the security for repayment of the Indebtedness and performance and
discharge of the Obligations, without notice to Grantor and without any
showing of insolvency, fraud, or mismanagement on the part of Grantor,
and without the necessity of filing any judicial or other proceeding
other than the proceeding for appointment of a receiver, shall be
entitled to the appointment of a receiver or receivers of the Mortgaged
property or any part thereof, and of the Rents, and Grantor hereby
irrevocably consents to the appointment of a receiver or receivers. Any
receiver appointed pursuant to the provisions of this subsection shall
have the usual powers and duties of receivers in much matters.
(g) Beneficiary's Uniform Commercial Code Remedies. The
Beneficiary may exercise its rights of enforcement with respect to
Fixtures and Personalty under the Code, and in conjunction with, in
addition to or in substitution for the rights and remedies under the
Code, the Beneficiary may:
(i) without demand or notice to Grantor, enter upon the
Mortgaged Property to take possession of, assemble, receive, and
collect the Personalty, or any part thereof, or to render it
unusable; and
(ii) require Grantor to assemble the Personalty and make
it available at a place the Beneficiary designates which is
mutually convenient to allow the Beneficiary to take possession
or dispose of the Personalty; and
(iii) written notice mailed to Grantor as provided herein
at least ten (10) days prior to the date of public sale of the
Personalty or prior to the date after which private sale of the
Personalty will be made shall constitute reasonable notice; and
(iv) any sale made pursuant to the provisions of this
subsection shall be deemed to have been a public sale conducted
in a commercially reasonable manner if held contemporaneously
with the sale of the other Mortgaged Property under power of sale
as provided herein upon giving the same notice with respect to
the sale of the Personalty hereunder as is required for such sale
of the other Mortgaged Property under power of sale and such sale
shall be deemed to be pursuant to a security agreement covering
both real and personal property under 9.501(d) of the Code; and
(v) in the event of a foreclosure sale, whether made by
the Trustee under the terms hereof, or under judgment of a court,
the Personalty and the other Mortgaged Property may, at the
option of the Beneficiary, be sold as a whole; and
(vi) it shall not be necessary that the Beneficiary take
possession of the Personalty, or any part thereof, prior to the
time that any sale pursuant to the provisions of this subsection
is conducted, and it shall not be necessary that the Personalty
or any part thereof be present at the location of such sale; and
(vii) prior to application of proceeds of disposition of
the Personalty to the Indebtedness, such proceeds shall be
applied to the reasonable expenses of retaking, holding,
preparing for sale or lease, selling, leasing and the like, and
the reasonable attorneys' fees and legal expenses incurred by the
Beneficiary; and
(viii) after notification, if any, hereafter provided in
this subsection, Beneficiary may sell, lease, or otherwise
dispose of the Personalty, or any part thereof, in one or more
parcels at public or private sale or sales, at Beneficiary's
offices or elsewhere, for cash, on credit, or for future
delivery. Upon the request of Beneficiary, Grantor shall assemble
the Personalty and make it available to Beneficiary at any place
designated by Beneficiary that is reasonably convenient to
Grantor and Beneficiary. Grantor agrees that Beneficiary shall
not be obligated to give more than ten (10) days' written notice
of the time and place of any public sale or of the time after
which any private sale may take place and that such
Deed of Trust -- Page 13 Newmark Homes, L.P.
<PAGE> 14
notice shall constitute reasonable notice of such matters.
Grantor shall be liable for all expenses of retaking, holding,
preparing for sale, or the like, and all attorneys' fees, legal
expenses, and all other costs and expenses incurred by
Beneficiary in connection with the collection of the Indebtedness
and the enforcement of Beneficiary's rights under the Loan
Documents. Beneficiary shall apply the proceeds of the sale of
the Personalty against the Indebtedness in accordance with the
provisions of Section 7.4 of this Deed of Trust. Grantor shall
remain liable for any deficiency if the proceeds of any sale or
disposition of the Personalty are insufficient to pay the
Indebtedness in full. Grantor waives all rights of marshaling in
respect of the Personalty; and
(ix) any and all statements of fact or other recitals
made in any bill of sale or assignment or other instrument
evidencing any foreclosure sale hereunder, the nonpayment of the
Indebtedness, the occurrence of any Event of Default, the
Beneficiary having declared all or a portion of such Indebtedness
to be due and payable, the notice of time, place, and terms of
sale and of the properties to be sold having been duly given, or
any other act or thing having been duly done by the Beneficiary,
shall be taken as prima facie evidence of the truth of the facts
so stated and recited; and
(x) the Beneficiary my appoint or delegate any one or
more persons as agent to perform any act or acts necessary or
incident to any sale held by the Beneficiary, including the
sending of notices and the conduct of the sale, but in the name
and on behalf of the Beneficiary.
(h) Other Rights. Beneficiary (i) may surrender the insurance
policies maintained pursuant to Section 4.4 hereof or any part thereof,
and upon receipt shall apply the unearned premiums as a credit on the
Indebtedness, in accordance with the provisions of Section 7.4 hereof,
and, in connection therewith, Grantor hereby appoints Beneficiary as
agent and attorney-in-fact (which is coupled with on an interest and is
therefore irrevocable) for Grantor to collect such premiums; and (ii)
apply the reserve for Impositions and insurance premiums, if any,
required by the provisions of this Deed of Trust, toward payment of the
Indebtedness; and (iii) shall have and may exercise any and all other
rights and remedies which Beneficiary may have at law or in equity, or
by virtue of any Loan Document or under the Code, or otherwise.
(i) Beneficiary as Purchaser. Beneficiary may be the purchaser
of the Mortgaged Property or any part thereof, at any sale thereof,
whether such sale be under the power of sale herein vested in Trustee or
upon any other foreclosure of the liens and security interests hereof,
or otherwise, and Beneficiary shall, upon any such purchase, acquire
good title to the Mortgaged Property so purchased, free of the liens and
security interests hereof, unless the sale was made subject to an
unmatured portion of the Indebtedness. The Beneficiary, as purchaser,
shall be treated in the same manner as any third party purchaser and the
proceeds of the Beneficiary's purchaser shall be applied in accordance
with Section 7.4 hereof.
7.2 Other Rights of Beneficiary. Should any part of the Mortgaged
Property come into the possession of Beneficiary, whether before or after
default, Beneficiary may (for itself or by or through other persons, firms, or
entities) hold, lease, manage, use, or operate the Mortgaged Property for such
time and upon such terms as Beneficiary may deem prudent under the
circumstances (making such repairs, alterations, additions, and improvements
thereto and taking such other action as Beneficiary may from time to time deem
necessary or desirable) for the purpose of preserving the Mortgaged Property or
its value, pursuant to the order of a court of appropriate jurisdiction or in
accordance with any other rights held by Beneficiary in respect of the
Mortgaged Property. Grantor covenants to promptly reimburse and pay to
Beneficiary on demand, at the place where the Note is payable, the amount of
all reasonable expenses (including without limitation the cost of any
insurance, Impositions, or other charges) incurred by Beneficiary in connection
with Beneficiary's custody, preservation, use, or operation of the Mortgaged
Property, together with interest thereon from the date incurred by Beneficiary
at the Default Rate; and all such expenses, costs, taxes, interest, and other
charges shall be and become a part of the Indebtedness. It is agreed, however,
that the risk of loss or damage to the Mortgaged Property is on Grantor, and
Beneficiary shall have no liability whatsoever for decline in value of the
Mortgaged Property, for failure to obtain or maintain insurance, or for failure
to determine whether insurance in force is adequate as to amount or as to the
risks insured. Possession by the Beneficiary shall not be deemed an election
of judicial relief, if any such possession is requested or obtained, with
respect to any Mortgaged Property or collateral not in Beneficiary's
possession.
7.3 Possession After Foreclosure. If the liens or security interests
hereof shall be foreclosed by power of sale granted herein, by judicial action
or otherwise, the purchaser at any such sale shall receive, as an incident to
Deed of Trust -- Page 14 Newmark Homes, L.P.
<PAGE> 15
purchaser's ownership, immediate possession of the property purchased, and if
Grantor or Grantor's successors shall hold possession of said property or any
part thereof subsequent to foreclosure, Grantor and Grantor's successors shall
be considered as tenants at sufferance of the purchaser at foreclosure sale
(without limitation of other rights or remedies, at a reasonable rental per
day, due and payable daily, based upon the value of the portion of the
Mortgaged Property so occupied and sold to such purchaser), and anyone
occupying such portion of the Mortgaged Property, after demand is made for
possession thereof, shall be guilty of forcible detainer and shall be subject
to eviction and removal, forcible or otherwise, with or without process of law,
and all damages by reason thereof are hereby expressly waived.
7.4 Application of Proceeds. The proceeds from any sale, lease, or
other disposition made pursuant to this Article VII, or the proceeds from the
surrender of any insurance policies pursuant hereto, or any Rents collected by
Beneficiary from the Mortgaged Property, or the reserve for Impositions and
insurance premiums, if any, required by the provisions of this Deed of Trust or
sums received pursuant to Section 8.1 hereof, or proceeds from insurance which
Beneficiary elects to apply to the Indebtedness pursuant to Section 8.2 hereof,
shall be applied by Trustee, or by Beneficiary, as the case may be, to the
Indebtedness in the following order and priority: (1) to the payment of all
expenses of advertising, selling, and conveying the Mortgaged property or part
thereof, and/or prosecuting or otherwise collecting Rents, proceeds, premiums,
or other sums including reasonable attorneys' fees and a reasonable fee or
commission to Trustee, not to exceed five percent of the proceeds thereof or
sums so received; (2) to the remainder of the Indebtedness as follows: first,
to the remaining accrued but unpaid interest, second, to the matured portion of
principal of the Indebtedness, and third, to prepayment of the unmatured
portion, if any, of principal of the Indebtedness applied to installments of
principal in inverse order of maturity; and (3) the balance, if any and to the
extent applicable, remaining after the full and final payment of the
Indebtedness and full performance and discharge of the Obligations to the
holder or beneficiary of any inferior liens covering the Mortgaged Property, if
any, in order of the priority of such inferior liens (Trustee and Beneficiary
shall hereby be entitled to rely exclusively upon a commitment for title
insurance issued to determine such priority) ; and (4) the cash balance, if
any, to the Grantor. The application of proceeds of sale or other proceeds as
otherwise provided herein shall be deemed to be a payment of the Indebtedness
like any other payment. The balance of the Indebtedness remaining unpaid, if
any, shall remain fully due and owing in accordance with the terms of the
Master Note or the other Loan Documents.
7.5 Abandonment of Sale. In the event a foreclosure hereunder is
commenced by Trustee in accordance with Subsection 7.1(d) hereof, at any time
before the sale, Trustee may abandon the sale, and Beneficiary may then
institute suit for the collection of the Indebtedness and for the foreclosure
of the liens and security interests hereof and of the Loan Documents. If
Beneficiary should institute a suit for the collection of the Indebtedness and
for a foreclosure of the liens and security interests, Beneficiary may, at any
time before the entry of a final judgment in said suit, dismiss the same and
require Trustee to sell the Mortgaged property or any part thereof in
accordance with the provisions of this Deed of Trust.
7.6 Payment of Fees. If the Note or any other part of the
Indebtedness shall be collected or if any of the Obligations shall be enforced
by legal proceedings, whether through a probate or bankruptcy court or
otherwise, or shall be placed in the hands of an attorney for collection
after maturity, whether matured by the expiration of time or by an option
given to the Beneficiary to mature same, or if Beneficiary becomes a party to
any suit where this Deed of Trust or the Mortgaged Property or any part thereof
is involved, Grantor agrees to pay Beneficiary's reasonable attorneys' fees
incurred on an hourly basis, not to exceed ten percent (10%) of the principal
and interest outstanding under the Line and expenses incurred, and such fees
shall be and become a part of the Indebtedness and shall bear interest from the
date such costs are incurred at the Default Rate.
7.7 Miscellaneous.
(a) In case Beneficiary shall have proceeded to invoke any right,
remedy, or recourse permitted under the Loan Documents and shall
thereafter elect to discontinue or abandon same for any reason,
Beneficiary shall have the unqualified right so to do and, in such
event, Grantor and Beneficiary shall be restored to their former
positions with respect to the Indebtedness, the Loan Documents, the
Mortgaged Property or otherwise, and the rights, remedies, recourses and
power of Beneficiary shall continue as if same had never been invoked.
(b) In addition to the remedies set forth in this Article,
upon the occurrence of an Event of Default, the Beneficiary and
Trustee shall, in addition, have all other remedies available to them at
law or in equity, or under any of the other Loan Documents.
Deed of Trust -- Page 15 Newmark Homes, L.P.
<PAGE> 16
(c) All rights, remedies, and recourses of Beneficiary granted
in the Master Note, this Deed of Trust, the other Loan Documents, any
other pledge of collateral, or otherwise available at law or equity: (i)
shall be cumulative and concurrent; (ii) may be pursued separately,
successively, or concurrently against Grantor, the Mortgaged Property,
or any one or more of them, at the sole discretion of Beneficiary; (iii)
may be exercised as often as occasion therefor shall arise, it being
agreed by Grantor that the exercise or failure to exercise any of same
shall in no event be construed as a waiver or release thereof or of any
other right, remedy, or recourse; (iv) shall be nonexclusive; (v) shall
not be conditioned upon Beneficiary exercising or pursuing any remedy in
relation to the Mortgaged Property prior to Beneficiary bringing suit to
recover the Indebtedness or suit on the Obligations; and (vi) in the
event Beneficiary elects to bring suit on the Indebtedness and/or the
Obligations and obtains a judgment against Grantor prior to exercising
any remedies in relation to Mortgaged Property, all liens and security
interests, including the lien of this Deed of Trust and each Individual
Deed of Trust, shall remain in full force and effect and may be
exercised at Beneficiary's option.
(d) Beneficiary may release, regardless of consideration, any
part of the Mortgaged Property without, as to the reminder, in any way
impairing, affecting, subordinating, or releasing the lien or security
interests evidenced by this Deed of Trust or the other Loan Documents or
affecting the obligations of Grantor or any other party to pay the
Indebtedness or perform and discharge the Obligations. For payment of
the Indebtedness, Beneficiary may resort to any of the collateral
therefor in such order and manner as Beneficiary may elect. No
collateral heretofore, herewith, or hereafter taken by Beneficiary shall
in any manner impair or affect the collateral given pursuant to the Loan
Documents, and all collateral shall be taken, considered, and held as
cumulative.
(e) Grantor hereby irrevocably and unconditionally waives and
releases: (i) all benefits that might accrue to Grantor by virtue of any
present or future law exempting the Mortgaged Property from attachment,
levy or sale on execution or providing for any appraisement, valuation,
stay of execution, exemption from civil process, redemption, or
extension of time for payment and (ii) any right to a marshaling of
assets or a sale in inverse order of alienation.
(f) Grantor and Beneficiary mutually agree that there are no, nor
shall there be any, implied covenants of good faith and fair dealing or
other similar covenants or agreements in this Deed of Trust and the
other Loan Documents. All agreed contractual duties are set forth in
this Deed of Trust, the Master Note, and the other Loan Documents.
(g) The remedies in this Article VII are available under and
governed by the real property laws of Texas and are not governed by the
personal property laws of Texas, including but not limited to, the power
to dispose of personal property in a commercially reasonable manner
under Section 9.504 of the Code.
(h) No waiver by Beneficiary of any of its rights or remedies
hereunder, in the other Loan Documents, or otherwise, shall be
considered a waiver of any other or subsequent right or remedy of
Beneficiary; no delay or omission in the exercise or enforcement by
Beneficiary of any rights or remedies shall ever be construed as a
waiver of any right or remedy of Beneficiary; and, no exercise or
enforcement of any such rights or remedies shall ever be held to exhaust
any right or remedy of Beneficiary. Beneficiary may, at its sole
discretion, make advances prior to the time all conditions precedent to
such advances have been satisfied without waiving or releasing any of
the requirements or conditions of this Deed of Trust, and,
notwithstanding the making of any such advances, Beneficiary may, at its
discretion, discontinue any further disbursements at any time until all
of the conditions, prior performances and other requirements of this
Deed of Trust have been strictly fulfilled, performed and complied with.
Deed of Trust -- Page 16 Newmark Homes, L.P.
<PAGE> 17
ARTICLE VIII
SPECIAL PROVISIONS
8.1 Condemnation Proceeds. Beneficiary shall be entitled to receive
any and all sums which may be awarded and become payable to Grantor for
condemnation of the Mortgaged Property or any part thereof, for public or
quasi-public use, or by virtue of private sale in lieu thereof, and any sums
which may be awarded or become payable to Grantor for damages caused by public
works or construction on or near the Mortgaged Property. All such sums are
hereby assigned to Beneficiary, and Grantor shall, upon request of Beneficiary,
make, execute, acknowledge, and deliver any and all additional assignments and
documents as may be necessary from time to time to enable Beneficiary to
collect and receipt for any such sums. Beneficiary shall not be, under any
circumstances, liable or responsible for failure to collect, or exercise
diligence in the collection of, any of such sums. Any sum received by
Beneficiary as a result of condemnation shall be applied to the Indebtedness in
accordance with the provisions of Section 7.4 hereof.
8.2 Insurance Proceeds. The proceeds of any and all insurance upon
the Mortgaged Property (other than proceeds of general public liability
insurance) shall be collected by Beneficiary, and Beneficiary shall have the
option, in Beneficiary's sole discretion, to apply any proceeds so collected
either to the restoration of the Mortgaged Property, in the amounts, manner,
method and pursuant to such requirements and documents as Beneficiary may
require, or to the liquidation of the Indebtedness in accordance with the
provisions of Section 7.4 hereof.
8.3 Indemnity. If Beneficiary is made a party defendant to any
litigation concerning this Deed of Trust, any Individual Deed of Trust, or the
Mortgaged property or any interest therein, or the occupancy thereof by
Grantor, then Grantor shall indemnify, defend, and hold harmless Beneficiary
from all liability, claim, loss, cost, or expense by reason of such litigation,
including without limitation reasonable attorneys' fees incurred on an hourly
basis, not to exceed ten percent (10%) of the principal and interest
outstanding under the Line and expenses incurred by Beneficiary in any such
litigation, whether or not any such litigation is prosecuted to judgment. If
Beneficiary brings an action against Grantor hereunder, Grantor shall pay to
Beneficiary, Beneficiary's reasonable attorneys' fees incurred on an hourly
basis, not to exceed ten percent (10%) of the principal and interest
outstanding under the Line and expenses, and the right to such attorneys' fees
and expenses shall be deemed to have accrued on the commencement of such
action, and shall be enforceable whether or not such action is prosecuted to
judgment. If Grantor breaches any term of this Deed of Trust or if Beneficiary
believes it is necessary or desirable to take any action to protect or enforce
the lien or security interest hereby created in the Mortgaged Property or the
covenants herein or in the other Loan Documents, Beneficiary may employ an
attorney or attorneys to protect its rights hereunder and thereunder, and in
the event of such employment, Grantor shall pay Beneficiary the reasonable
attorneys' fees incurred on an hourly basis, not to exceed ten percent (10%)
of the principal and interest outstanding under the Line and expenses incurred
by Beneficiary, whether or not an action in actually commenced against
Grantor by reason of such breach and including, without limitation, a judicial
foreclosure action or a foreclosure proceeding pursuant to the power of sale
provided herein.
8.4 Subrogation. Grantor waives any and all right to claim, recover,
or subrogation against Beneficiary or its officers, directors, employees,
agents, attorneys, or representatives for loss or damage to Grantor, the
Mortgaged Property, Grantor's property or the property of others under
Grantor's control from any cause insured against or required to be insured
against by the provisions of the Loan Documents.
8.5 Waiver of Setoff. The Indebtedness, or any part thereof, shall
be paid by Grantor without notice, demand counterclaim, set off, deduction, or
defense and without abatement, suspension, deferment, diminution, or reduction
by reason of: (i) any damage to, destruction of, or any condemnation or similar
taking of the Mortgaged Property; (ii) any restriction or prevention of or
interference with any use of the Mortgaged Property; (iii) any title defect or
encumbrance or any eviction from the Mortgaged Property by superior title or
otherwise; (iv) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation, or other like proceeding relating to
Trustee, Beneficiary, or Grantor, or any action taken with respect to this Deed
of Trust by any trustee or receiver of Beneficiary or Grantor, or by any court,
in any such proceeding; or (vi) any default or failure on the part of
Beneficiary to perform or comply with any of the terms hereof or of any other
agreement with Grantor. Except as expressly provided herein, Grantor waives all
rights now or hereafter conferred by statute or otherwise to any abatement,
suspension, deferment, diminution, or reduction of the Indebtedness.
8.6 Setoff. Beneficiary shall be entitled to exercise both the
rights of setoff and banker's lien, if applicable, against the interest of
Grantor in and to each and every account and other property of Grantor which
are in the possession of Beneficiary to the full extent that Grantor is liable
for the
Deed of Trust -- Page 17 Newmark Homes, L.P.
<PAGE> 18
outstanding balance of the Indebtedness, as provided in all of the Loan
Documents.
8.7 Consent to Disposition. It is expressly agreed that Beneficiary
may predicate Beneficiary's decision to grant or withhold consent to a
Disposition on such terms and conditions as Beneficiary may require, in
Beneficiary's sole discretion, including without limitation (i) consideration
of whether the security for repayment of the Indebtedness and the performance
and discharge of the obligations, or Beneficiary's ability to enforce its
rights, remedies, and recourses with respect to such security, will be impaired
in any way by the proposed Disposition, (ii) payment to Beneficiary of a
transfer fee to cover the cost of documenting the Disposition in its records,
and (iii) payment of Beneficiary's reasonable attorneys' fees in connection
with such Disposition.
8.8 Consent to Subordinate Mortgage. In the event of consent by
Beneficiary to the granting of a Subordinate Mortgage, or in the event the
above-described right of Beneficiary to declare the Indebtedness to be
immediately due and payable upon the granting of a Subordinate Mortgage without
the prior written consent of Beneficiary is determined by a court of competent
jurisdiction to be unenforceable under the provisions of any applicable law,
Grantor will not execute or deliver any Subordinate Mortgage unless (i) it
shall contain express covenants to the effect: (a) that the Subordinate
Mortgage is in all respects unconditionally subject and subordinate to the lien
and security interest evidenced by this Deed of Trust and each term and
provision hereof; (b) that if any action or proceeding shall be instituted to
foreclose the Subordinate Mortgage (regardless of whether the same is judicial
proceeding or pursuant to a power of sale contained therein), no action be
taken with respect to the Mortgaged Property which would terminate any
occupancy or tenancy of the Mortgaged Property without the prior written
consent of Beneficiary; and (c) that if any action or proceeding shall be
brought to foreclose the Subordinate Mortgage (regardless of whether the same
is a judicial proceeding or pursuant to a power of sale contained therein),
written notice of the commencement thereof will be given to Beneficiary
contemporaneously with the commencement of such action or proceeding; and (ii)
a copy thereof shall have been delivered to Beneficiary not less than ten (10)
days prior to the date of the execution of such Subordinate Mortgage.
8.9 Contest of Certain Claims. Notwithstanding the provisions of
Sections 4.1 and 4.2 hereof and 6.7 of the Loan Agreement, Grantor shall not be
in default for failure to satisfy any Legal Requirement or to pay or discharge
any Imposition or mechanic's or materialman's lien asserted against the
Mortgaged Property if, and so long as, (a) Grantor shall have notified
Beneficiary of same within five (5) days of obtaining knowledge thereof; (b)
Grantor shall diligently and in good faith contest the same by appropriate
legal proceedings which shall operate to prevent the enforcement or collection
of the same and the sale of the Mortgaged Property or any part thereof, to
satisfy the same; (c) Grantor shall have furnished to Beneficiary a cash
deposit, or on an indemnity bond satisfactory to Beneficiary with a surety
satisfactory to Beneficiary, in the amount of the Imposition or mechanic's or
materialman's lien claim, or with respect to a Legal Requirement, an amount
determined by Beneficiary in its sole and absolute discretion, plus a
reasonable additional sum to pay all costs, interest and penalties that may be
imposed or incurred in connection therewith, to assure payment or performance
of the matters under contest and to prevent any sale or forfeiture of the
Mortgaged property or any part thereof; (d) Grantor shall promptly upon final
determination thereof satisfy any such Legal Requirement or pay the amount of
any such Imposition or claim so determined, together with all costs, interest
and penalties which may be payable in connection therewith; (e) the failure to
satisfy any such Legal Requirement or pay the Imposition or mechanic's or
materialman's lien claim does not constitute a default under any other deed of
trust, mortgage or security interest covering or affecting any part of the
Mortgaged Property; and (f) notwithstanding the foregoing, Grantor shall
immediately upon request of Beneficiary satisfy such Legal Requirement (and if
Grantor shall fail so to do, Beneficiary may, but shall not be required to,
satisfy or cause to be satisfied, any such Legal Requirement) or pay (and if
Grantor shall fail so to do, Beneficiary may, but shall not be required to, pay
or cause to be discharged or bonded against) any such Imposition or claim,
notwithstanding such contest, if in the reasonable opinion of Beneficiary the
Mortgaged Property shall be in jeopardy or in danger of being forfeited or
foreclosed. Beneficiary may pay over any such cash deposit or part thereof to
the claimant entitled thereto at any time when, in the judgment of Beneficiary,
the entitlement of such claimant is established.
ARTICLE IX
SECURITY AGREEMENT
9.1 Security Interest. This Master Deed of Trust (a) shall be
construed as a deed of trust on real property, and (b) shall also constitute
and serve as a "Financing Statement" on personal property within the meaning
of, and shall constitute until the grant of this Deed of Trust shall terminate
as provided in Article II hereof, a first and prior security interest under,
the Code as to property within the scope thereof and in the state where the
Mortgaged Property is located with respect to the Personalty and Fixtures.
Further, and
Deed of Trust -- Page 18 Newmark Homes, L.P.
<PAGE> 19
specifically, this Master Deed of Trust shall constitute and serve as a
financing statement on fixtures, and its filing in the real property records is
intended to be a "Fixture Filing" under the Code. To this end, Grantor has
GRANTED, BARGAINED, CONVEYED, ASSIGNED, TRANSFERRED, and SET OVER, and by these
presents does GRANT, BARGAIN, CONVEY, ASSIGN, TRANSFER and SET OVER, unto
Trustee and Beneficiary, a first and prior security interest and all of
Grantor's right, title and interest in, to, under and with respect to the
Personalty and Fixtures to secure the full and timely payment of the
Indebtedness and the full and timely performance and discharge of the
Obligations. The Grantor (Debtor) and Beneficiary (Secured Party) hereby agree
that filing a carbon, photographic or other reproduction of this Master Deed of
Trust in the appropriate records for making fixture filings and financing
statement filings shall be permissible in lieu of the original hereof.
9.2 Financing Statements. Grantor hereby agrees with Beneficiary to
execute and deliver to Beneficiary, in form and substance satisfactory to
Beneficiary, such Financing Statements and such further assurances as
Beneficiary may, from time to time, reasonably consider necessary to create,
perfect, and preserve Beneficiary's security interest herein granted, and
Beneficiary may cause such statements and assurances to be recorded and filed,
at such times and places as may be required or permitted by law to so create,
perfect, and preserve such security interest.
9.3 Fixture Filing. As discussed above, this Master Deed of Trust is
also intended and shall constitute a "fixture filing" for the purposes of the
Code. All or part of the Mortgaged Property is or is to become fixtures;
information concerning the security interest herein granted may be obtained
from the parties at the address of the parties set forth herein. For purposes
of the security interest herein granted, the address of Debtor (Grantor) is set
forth in the first paragraph of this Deed of Trust and the address of the
Secured Party (Beneficiary) is set forth in Article I hereof.
ARTICLE X
CONCERNING THE TRUSTEE
10.1 No Required Action. Trustee shall not be required to take any
action toward the execution and enforcement of the trust hereby created or to
institute, appear in, or defend any action, suit, or other proceeding in
connection therewith where, in his opinion, such action would be likely to
involve him in expense or liability, unless requested so to do by a written
instrument signed by Beneficiary and, if Trustee so requests, unless Trustee is
tendered security and indemnity satisfactory to Trustee against any and all
cost, expense, and liability arising therefrom. Trustee shall not be
responsible for the execution, acknowledgment, or validity of the Loan
Documents, or for the proper authorization thereof, or for the sufficiency of
the lien and security interest purported to be created hereby, and Trustee
makes no representation in respect thereof or in respect of the rights,
remedies, and recourses of Beneficiary.
10.2 Certain Rights. With the approval of Beneficiary, Trustee shall
have the right to take any and all of the following actions: (i) to select,
employ, and advise with counsel (who may be, but need not be, counsel for
Beneficiary) upon any matters arising hereunder, including the preparation,
execution, and interpretation of the Loan Documents, and shall be fully
protected in relying as to legal matters on the advice of counsel, (ii) to
execute any of the trusts and power hereof and to perform any duty hereunder
either directly or through his agents or attorneys, (iii) to select and employ,
in and about the execution of his duties hereunder, suitable accountants,
engineers and other experts, agents and attorneys-in-fact, either corporate or
individual, not regularly in the employ of Trustee, and Trustee shall not be
answerable for any act, default. negligence, or misconduct of any such
accountant, engineer or other expert, agent or attorney-in-fact, if such
accountant, engineer or other expert, agent or attorney-in-fact, if selected
with reasonable care, or for any error of judgment or act done by Trustee in
good faith, or be otherwise responsible or accountable under any circumstances
whatsoever, except for Trustee's gross negligence or bad faith, and (iv) any
and all other lawful action as Beneficiary may instruct Trustee to take to
protect or enforce Beneficiary's rights hereunder. Trustee shall not be
personally liable in case of entry by Trustee, or anyone entering by virtue of
the powers herein granted to Trustee, upon the Mortgaged Property for debts
contracted for or liability or damages incurred in the management or operation
of the Mortgaged Property. Trustee shall have the right to rely on any
instrument, document, or signature authorizing or supporting any action taken
or proposed to be taken by Trustee hereunder, believed by Trustee in good faith
to be genuine. Trustee shall be entitled to reimbursement for expenses incurred
by Trustee in the performance of Trustee's duties hereunder and to reasonable
compensation for such of Trustee's services hereunder as shall be rendered.
Grantor will, from time to time, pay the compensation due to Trustee hereunder
and reimburse Trustee for, and save Trustee harmless against, any and all
liability and expenses which may be incurred by Trustee in the performance of
Trustee's duties.
10.3 Retention of Money. All moneys received by Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
they
Deed of Trust -- Page 19 Newmark Homes, L.P.
<PAGE> 20
were received, but need not be segregated in any manner from any other moneys
(except to the extent required by applicable law) and Trustee shall be under no
liability for interest on any moneys received by Trustee hereunder.
10.4 Successor Trustees. Trustee may resign by the giving of notice
of such resignation in writing or verbally to Beneficiary. If Trustee shall
die, resign, or become disqualified from acting in the execution of this trust,
or if, for any reason, Beneficiary shall prefer to appoint a substitute trustee
or multiple substitute trustees, or successive substitute trustees or
successive multiple substitute trustees, to act instead of the forenamed
Trustee, Beneficiary shall have full power to appoint a substitute trustee (or,
if preferred, multiple substitute trustees) in succession who shall succeed
(and if multiple substitute trustees are appointed, each of such multiple
substitute trustees shall succeed) to all the estates, rights, powers, and
duties of the forenamed Trustee. Such appointment may be executed by any
authorized agent of Beneficiary, and if such Beneficiary be a corporation and
such appointment be executed in its behalf by any officer of such corporation,
such appointment shall be conclusively presumed to be executed with authority
and shall be valid and sufficient without proof of any action by the board of
directors or any superior officer of the corporation. Grantor hereby ratifies
and confirms any and all acts which the forenamed Trustee, or his successor or
successors in this trust, shall do lawfully by virtue hereof. If multiple
substitute Trustees are appointed, each of such multiple substitute Trustees
shall be empowered and authorized to act alone without the necessity of the
joinder of the other multiple substitute trustees, whenever any action or
undertaking of such substitute trustees is requested or required under or
pursuant to this Deed of Trust or applicable law.
10.5 Perfection of Appointment. Should any deed, conveyance, or
instrument of any nature be required from Grantor by any Trustee or substitute
Trustee to more fully and certainly vest in and confirm to the Trustee or
substitute Trustee such estates, rights, powers, and duties, then, upon request
by the Trustee or substitute Trustee, any and all such deeds, conveyances and
instruments shall be made, executed, acknowledged, and delivered and shall be
caused to be recorded and/or filed by Grantor.
10.6 Succession Instruments. Any substitute Trustee appointed
pursuant to any of the provisions hereof shall, without any further act, deed,
or conveyance, become vested with all the estates, properties, rights, powers,
and trusts of its or his predecessor in the rights hereunder with like effect
as if originally named as Trustee herein; but nevertheless, upon the written
request of Beneficiary or of the substitute Trustee, the Trustee ceasing to act
shall execute and deliver any instrument transferring to such substitute
Trustee, upon the trusts herein expressed, all the estates, properties, rights,
powers, and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver any of the property and moneys held by such Trustee to the
substitute Trustee so appointed in the Trustee's place.
10.7 No Representation by Trustee or Beneficiary. By accepting or
approving anything required to be observed, performed, or fulfilled or to be
given to Trustee or Beneficiary pursuant to the Loan Documents, including
without limitation, any officer's certificate, balance sheet, statement of
profit and loss or other financial statement, survey, appraisal, or insurance
policy, neither Trustee nor Beneficiary shall be deemed to have warranted,
consented to, or affirmed the sufficiency, legality, effectiveness, or legal
effect of the same, or of any term, provision, or condition thereof, and such
acceptance or approval thereof shall not be or constitute any warranty or
affirmation with respect thereto by Trustee or Beneficiary.
ARTICLE XI
MISCELLANEOUS
11.1 Release. If the Indebtedness is paid in full in accordance with
the terms of this Deed of Trust, the Master Note, and the other Loan Documents,
and if Grantor shall well and truly perform each and every of the Obligations
to be performed and discharged in accordance with the terms of this Deed of
Trust, the Master Note and the other Loan Documents, then this conveyance shall
become null and void and be released at Grantor's request and expense, and
Beneficiary shall have no further obligation to make advances under and
pursuant to the provisions hereof or in the other Loan Documents.
11.2 Performance at Grantor's Expense. Grantor shall (i) pay all
legal fees incurred by Beneficiary in connection with the preparation of the
Loan Documents (including any amendments thereto or consents, releases, or
waivers granted thereunder); (ii) reimburse Beneficiary, promptly upon demand,
for all amounts expended, advanced, or incurred by Beneficiary to satisfy any
obligation of Grantor under the Loan Documents, which amounts shall include all
court costs, attorneys' fees (including, without limitation, for trial, appeal,
or other proceedings), fees of auditors and accountants and other investigation
expenses reasonably incurred by Beneficiary in connection with any such
matters; and (iii) pay any and all other costs and expenses of performing or
complying with any and all of the obligations. Except to the extent that costs
and expenses are
Deed of Trust -- Page 20 Newmark Homes, L.P.
<PAGE> 21
included within the definition of "Indebtedness", the payment of such costs and
expenses shall not be credited, in any way and to any extent, against any
installment on or portion of the Indebtedness.
11.3 Survival of Obligations. Each and all of the Obligations shall
survive the execution and delivery of the Loan Documents and the consummation
of the loan called for therein and shall continue in full force and effect
until the Indebtedness shall have been paid in full; provided, however, that
nothing contained in this Section 11.3 shall limit the obligations of Grantor
as otherwise set forth herein.
11.4 Recording and Filing. Grantor will cause the Loan Documents
(requested by the Beneficiary) and all amendments and supplements thereto and
substitutions therefor to be recorded, filed, re-recorded, and refiled in such
manner and in such places as Trustee or Beneficiary shall reasonably request,
and will pay all such recording, filing, re-recording and refiling, taxes,
documentary stamp taxes, fees, and other charges.
11.5 Notices. All notices or other communications required or
permitted to be given pursuant to this Deed of Trust shall be in writing and
shall be considered as properly given if (i) mailed by first class United
States mail, postage prepaid, registered or certified with return receipt
requested, (ii) by delivering same in person to the intended addressee, (iii)
by delivery to an independent third party commercial delivery service for
same day or next day delivery and providing for evidence of receipt at the
office of the intended addressee, or (iv) by prepaid telegram, telex, or
telefacsimile to the addressee. Notice so mailed shall be effective upon its
deposit with the United States Postal Service or any successor thereto; notice
sent by such a commercial delivery service shall be effective upon delivery to
such commercial delivery service; notice given by personal delivery shall be
effective only if and when received by the addressee; and notice given by other
means shall be effective only if and when received at the office or designated
place or machine of the intended addressee. For purposes of notice, the
addresses of the parties shall be as set forth on page 1 of this Deed of Trust;
provided, however, that either party shall have the right to change its address
for notice hereunder to any other location within the continental United States
by the giving of thirty (30) days' notice to the other party in the manner set
forth herein.
11.6 Covenants Running with the Land. All Obligations contained in
this Deed of Trust and the other Loan Documents are intended by Grantor,
Beneficiary, and Trustee to be, and shall be construed as, covenants running
with the Mortgaged Property until the lien of this Deed of Trust has been fully
released by Beneficiary.
11.7 Successors and Assigns. Subject to the provisions of Article VI
hereof, all of the terms of the Loan Documents shall apply to, be binding upon,
and inure to the benefit of the parties thereto, their successors, assigns,
heirs, and legal representatives, and all other persons claiming by, through,
or under them.
11.8 No Waiver; Severability. Any failure by Trustee or Beneficiary
to insist, or any election by Trustee or Beneficiary not to insist, upon strict
performance by Grantor or others of any of the terms, provisions, or conditions
of the Loan Documents shall not be deemed to be a waiver of same or of any
other terms, provisions, or conditions thereof, and Trustee or Beneficiary
shall have the right at any time or times thereafter to insist upon strict
performance by Grantor or others of any and all of such terms, provisions, and
conditions. The Loan Documents are intended to be performed in accordance with,
and only to the extent permitted by, all applicable Legal Requirements. If any
provision of any of the Loan Documents or the application thereof to any person
or circumstance shall, for any reason and to any extent, be invalid or
unenforceable, then neither the remainder of the instrument in which such
provision is contained nor the application of such provision to other persons
or circumstances nor the other instruments referred to herein shall be affected
thereby, but rather shall be enforced to the greatest extent permitted by law.
11.9 Counterparts. To facilitate execution, this Deed of Trust may be
executed in as many counterparts as may be convenient or required. It shall not
be necessary that the signature and acknowledgment of, or on behalf of, each
party, or that the signature and acknowledgment of all persons required to bind
any party, appear on each counterpart. All counterparts shall collectively
constitute a single instrument. It shall not be necessary in making proof of
this Deed of Trust to produce or account for more than a single counterpart
containing the respective signatures and acknowledgment of, or on behalf of,
each of the parties hereto. Any signature and acknowledgment page to any
counterpart may be detached from such counterpart without impairing the legal
effect of the signatures and acknowledgments thereon and thereafter attached to
another counterpart identical thereto except having attached to it additional
signature and acknowledgment pages.
11.10 Applicable Law. The Loan Documents shall be governed by and
construed according to the laws of the State of Texas from time to time in
effect except to the extent preempted by United States federal law.
Deed of Trust -- Page 21 Newmark Homes, L.P.
<PAGE> 22
11.11 Controlling Agreement. It is expressly stipulated and agreed to
be the intent of Grantor, Trustee and Beneficiary at all times to comply with
applicable Texas law or applicable United States federal law (to the extent
that it permits Beneficiary to contract for, charge, take, reserve, or receive
a greater amount of interest than under Texas law) and that this section shall
control every other covenant and agreement in this Deed of Trust and the other
Loan Documents. If the applicable law is ever judicially interpreted so as
to render usurious any amount called for under the Master Note or under any of
the other Loan Documents, or contracted for, charged, taken, reserved, or
received with respect to the Indebtedness, or if Beneficiary's exercise of the
option to accelerate the maturity of the Master Note, or if any prepayment by
Grantor results in Grantor having paid any interest in excess of that permitted
by applicable law, then it is Grantor's, Trustee's and Beneficiary's express
intent that all excess amounts theretofore collected by Beneficiary shall be
credited on the principal balance of the Master Note and all other
Indebtedness (or, if the Note and all other Indebtedness have been or would
thereby be paid in full, refunded to Grantor), and the provisions of the Master
Note and the other Loan Documents immediately be deemed reformed and the
amounts thereafter collectible hereunder and thereunder reduced, without the
necessity of the execution of any new documents, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder or thereunder. All sums paid or agreed to be
paid to Beneficiary for the use, forbearance, or detention of the Indebtedness
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Indebtedness until
payment in full so that the rate or amount of interest on account of the
Indebtedness does not exceed the Maximum Lawful Rate from time to time in
effect and applicable to the Indebtedness for so long as the Indebtedness is
outstanding. In no event shall the provisions of Article 5069, Ch. 15 of the
Revised Civil Statutes of Texas (which regulates certain revolving credit loan
accounts and revolving tri-party accounts) apply to the loan evidenced by the
Loan Documents and/or secured hereby. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, it is not the intention
of Trustee and/or Beneficiary to accelerate the maturity of any interest that
has not accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration.
11.12 Subrogation. If any or all of the proceeds of the Master Note
have been used to extinguish, extend or renew any indebtedness heretofore
existing against the Mortgaged Property, then, to the extent of such funds so
used, Beneficiary shall be subrogated to all of the rights, claims, liens,
titles, and interests existing against the Mortgaged Property heretofore held
by, or in favor of, the holder of such indebtedness and such former rights,
claims, liens, titles, and interests, if any, are not waived but rather are
continued in full force and effect in favor of Beneficiary and are merged with
the lien and security interest created herein as cumulative security for the
repayment of the Indebtedness and the performance and discharge of the
Obligations.
11.13 Rights Cumulative. Beneficiary shall have all rights, remedies,
and recourses granted in the Loan Documents and available at law or in equity
(including, without limitation, those granted by the Code and applicable to the
Mortgaged Property or any portion thereof), and the same (i) shall be
cumulative and concurrent, (ii) may be pursued separately, successively, or
concurrently against Grantor or others obligated for the Indebtedness or any
part thereof, or against any one or more of them, or against the Mortgaged
Property, at the sole discretion of Beneficiary, (iii) may be exercised as
often as occasion therefor shall arise, it being agreed by Grantor that the
exercise, discontinuance of the exercise of or failure to exercise any of the
same shall in no event be construed as a waiver or release thereof or of any
other right, remedy, or recourse, and (iv) are intended to be, and shall be,
nonexclusive. All rights and remedies of Beneficiary hereunder and under the
other Loan Documents shall extend to any period after the initiation of
foreclosure proceedings, judicial or otherwise, with respect to the Mortgaged
Property.
11.14 Payments. Remittances in payment of any part of the Indebtedness
other than in the required amount in funds immediately available at the place
where the Master Note is payable shall not, regardless of any receipt or credit
issued therefor, constitute payment until the required amount is actually
received by Beneficiary in funds immediately available at the place where the
Master Note is payable (or such other place as Beneficiary, in Beneficiary's
sole discretion, may have established by delivery of written notice thereof to
Grantor) and shall be made and accepted subject to the condition that any check
or draft may be handled for collection in accordance with the practice of the
collecting bank or banks. Acceptance by Beneficiary of any payment in an
amount less than the amount then due shall be deemed an acceptance on
account only, and the failure to pay the entire amount then due shall be and
continue to be an Event of Default.
11.15 Exceptions to Covenants. Grantor shall not be deemed to be
permitted to take any action or to fail to take any action with respect to any
particular covenant or condition contained herein or in any of the Loan
Documents if the action or omission would result in the breach of any other
covenant or condition contained herein or in any of the Loan Documents which
has not been specifically waived or consented to by Beneficiary, nor shall
Beneficiary be deemed to have
Deed of Trust -- Page 22 Newmark Homes, L.P.
<PAGE> 23
consented to any such act or omission if the same would provide cause for
acceleration of the Indebtedness as a result of the breach of any other
covenant or condition contained herein or in any of the Loan Documents which
has not been specifically waived or consented to by Beneficiary.
11.16 Reliance. Grantor recognizes and acknowledges that in entering
into the loan transaction evidenced by the Loan Documents and accepting this
Deed of Trust and each Individual Deed of Trust, Beneficiary is expressly and
primarily relying on the truth and accuracy of the foregoing warranties and
representations set forth in Article III hereof without any obligation to
investigate the Mortgaged Property and notwithstanding any investigation of the
Mortgaged Property by Beneficiary; that such reliance exists on the part of
Beneficiary prior hereto; that such warranties and representations are a
material inducement to Beneficiary in making the loan evidenced by the Loan
Documents and accepting of this Deed of Trust; and that Beneficiary would not
be willing to make the loan evidenced by the Loan Documents and accept this
Deed of Trust in the absence of any of such warranties and representations.
11.17 Change of Security. Any part of the Mortgaged Property may be
released, regardless of consideration, by Beneficiary from time to time without
impairing, subordinating, or affecting in any way the lien, security interest,
and other rights hereof against the remainder. The lien, security interest, and
other rights granted hereby shall not be affected by any other security taken
for the Indebtedness or obligations, or any part thereof. The taking of
additional collateral, or the amendment, extension, renewal, or rearrangement
of the Indebtedness or Obligations, or any part thereof, shall not release or
impair the lien, security interest, and other rights granted hereby, or affect
the liability of any endorser or guarantor or improve the right of any junior
lienholder; and this Deed of Trust, as well as any instrument given to secure
any amendment, extension, renewal, or rearrangement of the Indebtedness or
obligations, or any part thereof, shall be and remain a first and prior lien,
except as otherwise provided herein, on all of the Mortgaged Property not
expressly released until the Indebtedness is fully paid and the obligations are
fully performed and discharged.
11.18 Headings. The Article, Section, and Subsection entitlements
hereof are inserted for convenience of reference only and shall in no way
alter, modify, or define, or be used in construing the text of such Articles,
Sections, or Subsections.
11.19 ENTIRE AGREEMENT; AMENDMENT. THIS DEED OF TRUST AND THE OTHER
LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NOT ORAL AGREEMENTS AMONG THE PARTIES HERETO. The provisions
of this Agreement and the Loan Documents may be amended or waived only by an
instrument in writing signed by the Grantor and Beneficiary.
EXECUTED as of the date first above written.
NEWMARK HOMES, L.P.,
a Texas limited partnership
BY: Newmark Home Corporation
its General Partner
By: /s/ TERRY WHITE
----------------------------
Name: Terry White
Title: Chief Financial Officer
STATE OF TEXAS )
)
COUNTY OF FT. BEND )
THIS INSTRUMENT was ACKNOWLEDGED before me this 17th day of December,
1997, by Terry White, Chief Financial Officer of Newmark Home Corporation, as
the general partner of Newmark Homes, L.P., a Texas limited partnership, on
behalf of said entity.
/s/ LINDA SOTIER
----------------------------
Linda Sotier
Notary Public, State of Texas
Deed of Trust -- Page 23 Newmark Homes, L.P.
<PAGE> 24
PREPARED IN THE LAW OFFICE OF:
WEST, WEBB, ALLBRITTON & GENTRY, P.C.
3000 Briarcrest Drive, Fifth Floor
Bryan, Texas 778O2
Michael H. Gentry
299-3567
AFTER RECORDING RETURN TO:
First American Bank Texas, SSB
14651 Dallas Parkway, Suite 400
Dallas, Texas 75240
Attention: Judy Gibson
Deed of Trust -- Page 24 Newmark Homes, L.P.
<PAGE> 1
EXHIBIT 10.13
CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT (the "Loan Agreement") is made
and executed this __________ day of December, 1995 by and between THE
ADLER COMPANIES, INC., A FLORIDA CORPORATION, located at 2601 South
Bayshore Drive, Coconut Grove, Florida 33133, thereinafter referred to
as "Borrower") and BARNETT BANK OF SOUTH FLORIDA, N.A., a national
banking association, located at 701 Brickell Avenue, Sixth Floor,
Miami, Florida 33131, attention: Commercial Real Estate Lending
Department (hereinafter referred to as "Lender").
W I T N E S S E T H:
WHEREAS, Borrower has negotiated with Lender for an
acquisition and development loan in the amount of Two Million Four
Hundred Seventy-Three Thousand and 00/100 Dollars ($2,473,000.00);
and a revolving line of credit construction loan in the amount of
Five Million and 00/100 Dollars ($5,000,000.00) (collectively, the
"Loan") to be secured by a mortgage and security agreement
encumbering land encompassing approximately 21 acres to be developed
by Borrower and used by Borrower to construct 58 single-family
residences and related improvements (the "Improvements") which
Improvements are more specifically defined in that certain loan
commitment letter by Lender to Borrower dated November 29, 1995 (the
"Commitment");
WHEREAS, the Improvements are located upon certain real property
as described in Exhibit "All (the "Land") located in the Kensington
North subdivision located in Coral Springs, Broward County, Florida
(the Improvements and the Land hereinafter being referred to
collectively as the "Property"); and
WHEREAS, Borrower and Lender wish to enter into this Loan
Agreement in order to set forth the terms and conditions of the
disbursement of the Loan.
NOW, THEREFORE,in consideration of the foregoing, the mutual
covenants, representations, warranties and agreements contained
herein, the sum of TEN AND 00/100 DOLLARS ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Lender agree as follows:
ARTICLE I
LOAN DOCUMENTS
Subject to the conditions contained in the Commitment and prior
to any disbursement, Borrower shall execute and deliver, or cause to
be executed and delivered to Lender the following documents
(hereinafter collectively and together with this Loan Agreement
referred to as the "Loan Documents"), all in a form satisfactory to
Lender:
1. Notes. A promissory note of even date herewith payable
to the order of Lender in the original principal amount of Two
Million Four Hundred Seventy-Three Thousand and 00/100 Dollars
($2,473,000.00) ("Note I") and a revolving line of credit
promissory note in the original principal amount of Five Million
and 00/100 Dollars ($5,000,000.00) ("Note II") (Note I and Note II
are hereinafter collectively referred to as the "Note"), which shall
include such terms and conditions as have heretofore been mutually
agreed upon between Borrower and Lender. An interest reserve as set
forth in the Loan Budget attached hereto as Exhibit B shall be
established from a portion of the Loan proceeds from Note I and from
Note II. Borrower hereby authorizes Lender to deduct from the
interest reserve the accrued interest on the outstanding balance of
the Loan on the first day of each month of the term of the Loan in
accordance with the provisions of the Note I and from Note II.
Borrower and Lender agree that the accrued interest shall be
disbursed from the interest reserve so long as no Event of Default
has occurred and sufficient amounts remain in the
<PAGE> 2
interest reserve so long as the construction is proceeding as
scheduled in the construction schedule approved by Lender; provided,
however, that Lender shall at all times be authorized even if not
otherwise obligated to disburse accrued interest from the interest
reserve. Interest shall be payable by Borrower in local funds to the
extent that same is not disbursed from the interest reserve. Upon the
expiration of the interest reserve, which will be calculated on a per
Unit, as hereinafter defined, basis with respect to Note II,
Borrower shall be required to pay the interest out of pocket. In
addition, with respect to the model units and the Speculative Units,
as hereinafter defined, Borrower shall be required to pay the
interest out of pocket with respect to each such Unit commencing
seven (7) months after the initial advance with respect to each such
Unit.
2. Mortgage and Security Agreement. A mortgage and
security agreement encumbering the Property which, upon recordation,
shall constitute a first lien on the Property (the "Mortgage") and
which Mortgage shall be in a form satisfactory to Lender and shall be
subject only to those exceptions and matters satisfactory to Lender.
3. Assignment of Rents and Leases. An assignment of
rents and leases from Borrower to Lender assigning any and all leases
and rents now in existence or which may come into existence during
the life of this Loan from Borrower to Lender.
4. UCC-1 Financing Statements (Local and State).
UCC-1 Financing Statements (local and state) covering all personal
property fixtures and equipment placed or to be placed on or under
the Property, and such other documents as will insure Lender a first
perfected security interest in and to said personal property, fixtures
and equipment.
5. Mortgage Title Insurance Commitment and Policy. A
mortgagee title insurance commitment and policy in the face amount of
Seven Million Four Hundred Seventy-Three Thousand and 00/100 Dollars
($7,473,000.00), insuring the Mortgage as a valid first lien on the
Property subject only to exceptions as shall be approved in writing by
Lender, issued by a title company satisfactory to Lender ("Title
Insurer"), and in a form satisfactory to and approved by Lender and
satisfying the requirements set forth in the Commitment, including
such reinsurance and/or coinsurance agreements, if any, and any
affirmative coverage required by Lender. Borrower, at Borrower's
expense, shall deliver to Lender copies of any documents which may
affect the Property in any manner (as determined by Lender's counsel)
at any time prior to or during the term of the Loan.
6. Opinion of Counsel. An opinion of counsel licensed
in the State of Florida and satisfactory to Lender which covers such
matters as may be required by Lender.
7. Mortgagor's Affidavit. Mortgagor's Affidavit, in
form and content sufficient to permit the Title Insurer to delete any
exception for parties in possession, matters of survey, mechanic's or
materialmen's liens, the gap, and taxes and assessments which are due
and payable.
8. Borrowing Authority Instruments. Documents
evidencing the necessary authorization for all actions taken by
Borrower in connection with this Loan as may be required by Lender.
Appropriate documents may include corporate resolutions and
certificates of incumbency, certificates of active status,
certificates of authority, articles of incorporation and bylaws.
9. General Construction Contract. A general
construction contract (the "Construction Contract") in form and
content acceptable to Lender, between Borrower and Adro Construction,
Inc., a licensed Florida contractor (the "Contractor"), to construct
the
2
<PAGE> 3
Improvements in accordance with plans and specifications (the "Plans
and Specifications") to be prepared by ____________________ (the
"Architect"). Borrower shall also deliver to Lender a copy of the
Architect's Contract by and between the Borrower and the Architect,
and the Engineer's Contract by and between the Borrower and _________
(the "Engineer"), which shall be in form and content acceptable to
Lender and which shall provide that the Architect and Engineer shall
submit to Lender any certificates, as-built plans or specifications
or other information which shall be a prerequisite to disbursements
of Loan proceeds, including the final disbursement, as provided
herein.
10. Major Subcontracts. Contracts in form and content
acceptable to Lender, which have been executed by and between
Contractor and all major subcontractors, materialmen and suppliers
("Subcontractors") to construct the Improvements in accordance with
the Plans and Specifications. For the purposes hereof, a major
subcontract for site development shall be any contract which is a
contract for Twenty Thousand and 00/100 Dollars ($20,000.00) or more
and a Major Subcontract for the construction of a Unit shall be any
contract for Twenty Thousand and 00/100 Dollars ($20,000.00) or more
per Unit. If Major Subcontracts have not been executed, Borrower
shall furnish to Lender firm bids or internal estimates of the work
to be covered by the Major Subcontract, and such supporting
documentation therefor as Lender may require. Borrower shall submit
to Lender a list of all other Subcontractors working on the
Improvements and shall keep the list current until the Improvements
are completed. All subcontracts for work, labor and materials entered
into by Contractor or directly by Borrower, either with Major
Subcontractors, other subcontractors or with Borrower's own employees
or agents, shall cover completion of the Improvements shown on the
Plans and Specifications. The aggregate contract price for
constructing and equipping the Improvements in accordance with the
Plans and Specifications and representations made to Lender and all
other costs of the project being financed with the Loan proceeds and
pursuant to the terms and conditions hereof (the "Project") shall
not, exceed the amount allocated and described in the budget for the
Loan (the "Loan Budget") approved in writing by Lender and attached
hereto and made a part hereof as Exhibit "1B." Borrower shall
furnish such additional supporting documentation for the cost of the
items described in the Loan Budget as may be required by Lender.
11. Survey. Three (3) original copies of a recent
(not more than three [3] months old) survey, satisfactory to Lender
and prepared by a registered land surveyor in accordance with
Lender's requirements, of all properties encumbered by the Mortgage,
showing the location and dimensions of all Improvements thereon and
indicating the routes of ingress and egress for public access to the
Property, all utility lines, walks, drives, recorded or visible
easements and rights-of-way on the Property, and showing that there
are no encroachments, improvements, projections or easements
(recorded or unrecorded) on the property lines. Foundation perimeters
are to be added to the survey by the surveyor as soon as they are in
place for all buildings. The survey shall certify the acreage of the
Land and shall indicate whether the Land is located within any flood
hazard area. The survey must be prepared in accordance with the
Minimum Technical Standards set forth by the Florida Board of Land
Surveyors pursuant to the provisions of Section 472.027 of the
Florida Statutes and must be certified in favor of Lender and Title
Insurer. The surveyor's certificate placed on the survey shall include
a statement that said survey locates any and all items set forth as
exceptions in the mortgagee title insurance policy (the "Title
Policy") as Lender may require, shall satisfy all of the survey
requirements in the Commitment, and shall include any other
requirements of Lender. A final survey shall be furnished after all
Improvements are completed on the Property.
3
<PAGE> 4
12. Notice of Commencement. A Notice of Commencement
signed by Borrower at closing or prior to the commencement of
construction of each Unit but not more than thirty (30) days prior to
such commencement, shall be placed of record by Lender prior to any
funding pursuant to the Loan for each Unit and subsequent to the
Mortgage in Broward County, Florida, with a certified copy thereof
being posted at the job site in accordance with the Florida
Construction Lien Law, Chapter 713, Florida Statutes (the "Florida
Construction Lien Law") and a copy thereof furnished to Lender. Proof
acceptable to Lender, in its sole discretion, that the Notice of
Commencement has been properly posted at the job site in accordance
with the requirements of the Florida Construction Lien Law, shall be
delivered to Lender and to the Title Insurer. The Notice of
Commencement shall name the Lender and Title Insurer as additional
parties to whom all notices shall be given. The Notice of
Commencement shall state that it is in effect throughout the duration
of the construction period as set forth in the Construction Contract.
13. Borrower's Architect's/Engineer's Opinions and
Agreements. Written opinions from Borrower's Architect/Engineer
("Engineer" or "Architect") covering such matters as may be required
by Lender and stating that the proposed Improvements, when completed
in accordance with the Plans and Specifications, will comply with all
governmental restrictions, ordinances and regulations. Further,
Borrower will provide Lender with an agreement by Borrower's
Architect in form and content acceptable to Lender, regarding
Lender's right to use the Plans and Specifications at no cost to
Lender upon an Event of Default, as defined in the Mortgage and this
Loan Agreement.
14. Lender's Construction Inspector's Plan and Cost Review.
Written plan and cost review from Lender's construction inspector
("Inspector") covering such matters as may be required by Lender and
stating that the proposed Improvements can feasibly be constructed
within the Loan Budget and that the proposed Improvements, when
completed in accordance with the Plans and Specifications, will
comply with all governmental restrictions, ordinances and regulations.
15. Assignment of Contract Rights. An assignment to Lender
of all of Borrower's contract rights under the Construction Contract,
the Major Subcontracts, the Architect's Contract, the Engineer's
Contract and all other contracts.
16. Commitment Fee. The non-refundable commitment fee
of Twenty-Four Thousand Seven Hundred Thirty 00/100 Dollars
($24,730.00) for Note I (which shall be reduced to Twelve Thousand
Three Hundred Sixty Five and 00/100 Dollars ($12,365.00) in the event
Borrower elects to utilize Lender's cash management services during
the entire term of the Loan) and Fifty Thousand and no/100 Dollars
($50,000.00) for Note II (which shall be reduced to Twenty Five
Thousand and 00/100 Dollars ($25,000.00) in the event Borrower elects
to utilize Lender's cash management services during the entire term
of the Loan), plus out-of-pocket expenses. The amount of
Twenty-Thousand and 00/100 Dollars ($20,000,00) of the commitment
fee was paid simultaneously with Borrower's acceptance of the
Commitment, and the balance of the commitment fee has been paid by
Borrower simultaneously with the execution of this Loan Agreement. It
is understood and agreed that no part of such fee will be returned to
the Borrower in any event, including, but not limited to as a credit
against closing costs or expenses. In the event Borrower pays the
reduced commitment fee as a result of Borrower's election to utilize
Lender's cash management services and Borrower ceases to utilize
these services at any time during the term of the Loan, Borrower
shall pay to Lender the pro rata portion of the commitment fee,
calculated at the full amount, for the time period that Borrower does
not utilize Lender's cash management services. In addition to the
commitment fee, Borrower shall pay to Lender a construction draw fee
in the amount of one
4
<PAGE> 5
quarter one percent (.25%) of the amount of each advance under Note
II at the time of each advance under Note II.
17. Guaranties. The unqualified and unconditional guaranty
of payment of the Note by NHC Holding Corp., a Nevada corporation
(the "Guarantor"). Further, a guaranty of completion shall be given
by the Guarantor.
18. Taxes. Proof of payment of real property and personal
property taxes for 1995 and all prior years, and information as to
tax identification numbers, tax rates, estimated tax values and the
identities of the taxing authorities and evidence of payment of any
outstanding liens or other outstanding obligations or encumbrances
against the Property or Improvements.
19. Utilities. Commitment letters addressed to Lender
evidencing the availability and sufficiency of water, sewer,
electric, telephone and natural gas utility services to
satisfactorily service the proposed Improvements on the Property and
that such facilities are available and will be furnished.
20. Permits. Building permit(s) and satisfactory evidence
that the Land and the Improvements and the intended uses of the
Property are in compliance with all applicable laws, regulations and
ordinances. Such evidence may include letters, licenses, permits,
certificates and other correspondence from the appropriate
governmental authorities, opinions of Borrower's attorney or other
attorneys and opinions or certifications from Borrower's Architect,
as Lender may determine. Those laws, regulations and ordinances with
which compliance should be evidenced include, by way of illustration
but not limitation, the following: (a), environmental protection
laws; (b) erosion control ordinances; (c) doing business and/or
licensing laws; (d) laws protecting disabled or handicapped persons;
and (e) zoning laws (in this regard, the evidence submitted should
include (i) the zoning designation made for the Land; (ii) the
permitted uses of the Land under such zoning designation, (iii) zoning
requirements as to parking, lot size, ingress and egress and building
setbacks, (iv) the absence of moratoriums that would prohibit
construction of the Improvements, (v) site plan approval, and (vi)
the length of time of the validity of all such approvals, variances
and permits).
21. Cost Breakdown. A detailed construction and
nonconstruction cost breakdown on Lender approved forms of all
construction and non-construction costs including specification of
which items are to be funded from sources other than the Loan. Lender
reserves the right to require, at Borrower's expense, a construction
cost take-off by Lender's Inspector or by an expert in the
construction cost field to be designated by Lender. If, in the
judgment of such Inspector or such cost expert, the total estimated
costs of constructing the Improvements on the Property to the
Borrower exceed the principal amount of the Loan, Lender may require
Borrower to invest immediately the amount of the difference in
accordance with the equity requirements of this Loan Agreement and
the Commitment. Borrower's request for the initial disbursement must
be submitted and approved by Lender prior to any advance with respect
to the Loan.
22. Soil Tests. A report as to soil borings and compaction
reports and analysis made at the Land by a soil testing firm
satisfactory to Lender and Lender's Inspector. The number and
location of such borings shall be in accordance with the
recommendations of the soil testing firm and must also be
satisfactory to Lender. The report shall include the recommendations
of the soil testing firm as to the preparation of the soil needed in
order to adequately support the Improvements. (During the course of
construction, Borrower shall also provide such reports as to concrete
tests and additional soil tests as are requested or required by
Lender.)
5
<PAGE> 6
23. Financial Statements. Current financial statements,
tax returns, and such other credit information as Lender may require
for Borrower, the Guarantor and General Contractor, in form and
content satisfactory to Lender, and including evidence of the
availability of Borrower's funds necessary, in Lender's sole opinion,
to pay the total costs (hard construction and indirect costs) of the
Project in excess of the amount of the Loan. The Commitment contains
further requirements with respect to the foregoing financial
statements and credit information.
24. Certification of Cash Investment. Certification,
executed by Borrower, stating that Borrower has invested at least Six
Hundred Twenty-Two Thousand Nine Hundred Five and 00/100 Dollars
($622,905.00) in cash in the Property, including an enumeration
of the items for which this amount was paid.
25. Plans and Specifications.
(a) Two (2) sets of the approved site plan and the
complete and detailed Plans and Specifications for the development of
the site improvements which Borrower shall have approved in writing
and which shall be satisfactory to Lender in Lender's sole
discretion, including any changes or modifications thereto to the
date of receipt by Lender, and any and all construction contracts or
other documents in the possession or control of Borrower or any
general contractor relating to the construction of the Improvements.
The two (2) sets must include plans and specifications for all site
development (including storm drainage, utility lines, erosion control
and landscaping) work, and must be stamped with all required
approvals from all applicable governmental authorities; certified
under seal by Architect and signed by Borrower and Contractor to be
true copies of the Plans and Specifications architecturally and
structurally approved by all authorities and agencies having
jurisdiction thereon. The set must also incorporate the
recommendations made in the soil testing report. No material changes
shall be made thereafter in the Plans and Specifications without the
prior written consent of the Lender, except as set forth herein.
(b) Not less than fifteen (15) days prior to the
first disbursement of Note II two (2) sets of the approved site plan
and the complete and detailed Plans and Specifications which Borrower
shall have approved in writing and which shall be satisfactory to
Lender, including any changes or modifications thereto to the date of
receipt by Lender, and any and all construction contracts over
$20,000 or other documents in the possession or control of Borrower
or any general contractor relating to the construction of the Unit
over $20,000. The set must include plans and specifications for
architectural, structural, mechanical, plumbing and electrical work,
and must be stamped with all required approvals from all applicable
governmental authorities; certified under seal by Architect and
signed by Borrower and Contractor to be true copies of the Plans and
Specifications architecturally and structurally approved by all
authorities and agencies having jurisdiction thereon and for which a
building permit has been issued. The set must also incorporate the
recommendations made in the soil testing report. No changes shall be
made thereafter in the Plans and Specifications without the prior
written consent of the Lender, except as set forth herein.
26. Certificate of Architect. Certificate of Architect
preparing the Plans and Specifications addressed to Lender and
stating that the Plans and Specifications have been approved by all
governmental authorities, meet all State construction, energy
conservation, and environmental codes and meet all applicable Federal
laws and regulations adopted pursuant to the Fair Housing Act of 1968
(as amended) and the Americans with Disabilities Act of 1990; that
provisions have been made for the handicapped in
6
<PAGE> 7
27. Certificate of Engineer. Certificate of Engineer
preparing the Plans and Specifications addressed to Lender and
stating that any necessary soil testing has been performed and soil
conditions are satisfactory for the structural support of the
Improvements; that there is adequate ingress and egress; that the
Plans and Specifications have been approved by all governmental
authority to meet all State construction, energy conservation, and
environmental codes; that the zoning is proper; that the permit has
been properly issued; that all utilities necessary to service the
improvements on the Property are available with adequate capacity;
that all required governmental permits and approvals have been
obtained; and such additional items as may be required by Lender.
The Certificate of Engineer shall include submission of reports and
certifications regarding fill, foundation, design, settlement, and
such other reports and certifications as reasonably required by
Lender.
28. Lien Waivers. Waivers of lien from each and every
contractor, subcontractor, laborer or material supplier performing
services or supplying material to the Property within the past
ninety (90) days and an affidavit listing all of said entities and
certifying that no work has been performed and no materials have been
supplied for which the costs remain unpaid prior to closing.
29. Form of Contract. Copy of form of contract for the sale
of the resold residences, which shall be acceptable to Lender and its
counsel and shall be subordinate to the first lien of the Mortgage.
Such contract must provide for an escrow agent acceptable to Lender.
30. Insurance. Evidence of insurance in form and content
satisfactory to Lender, as set forth herein.
31. Collateral Assignment of Sales Contracts and Deposits.
A collateral assignment from Borrower to Lender of all of Borrower's
rights and interest in and to any and all sales contracts and
deposits held thereunder, and providing that all purchasers, deposits
shall be held in an escrow account at Lender with an escrow agent
acceptable to Lender. The Borrower's rights to all monies in said
escrow account shall also be assigned to Lender.
32. Collateral Assignment of Licenses and Permits. A
Collateral Assignment of all licenses, permits, approvals and
certifications relating to the use and construction of the
Improvements on the Property, including but not limited to trade and
fictitious names, all of which must be transferable during the entire
term of the Loan, in form and content acceptable to Lender.
33. Appraisal. Appraisal in accordance with the
requirements as set forth in the Commitment.
34. Construction Loan Disbursement Agreement. The
Construction Loan Disbursement Agreement shall be executed by
Borrower, Contractor, Lender and the Borrower's counsel, as
Disbursing Agent.
35. Environmental Audit. An environmental audit or
assessment report of the Property and the Improvements thereon, at
Borrower's expense performed to Lender's satisfaction by an
acceptable and qualified environmental contamination on the Property
has occurred or is imminent and containing adequately supported and
documented conclusions (which conclusions must be satisfactory to
Lender, in its sole discretion) which evaluate (i) whether any
hazardous or toxic substances, hazardous wastes, pollutants,
contaminants or an other environmental hazards are
7
<PAGE> 8
present in the soil, surface water or groundwater at or adjacent to
the Property; (ii) whether operations at the Property are in
compliance with all federal, state and local air quality and water
quality regulations and other applicable environmental laws and (iii)
whether there are any other potential or actual environmental
concerns from current or prior ownership and uses of the Property.
The contract between the Borrower and consultant for the conducting
an environmental audit or assessment shall contain a provision which
expressly states that the Lender is an intended beneficiary of the
contract and is entitled to rely on any report of findings or
conclusions or the results of the environmental audit or, in the
alternative, the consultant shall provide a reliance letter
confirming that Lender shall be entitled to rely on any report of
finds or conclusions or the results of the environmental audit. In
order to evaluate the environmental risks associated with this
transaction, the Borrower will, upon request, give permission to the
Lender and its agents and contractors to enter the Property for the
purpose of conducting its own environmental assessment or
hydrogeologic study of the Property including soil borings,
installation of piezometers, the collection of soil and surface water
samples, geophysical or geotechnical testing, soil vapor surveys and
the installation and sampling of groundwater monitoring wells. All
such assessments, studies, inspections and investigations deemed
necessary by Lender shall be conducted at Borrower's expense.
36. Miscellaneous. Such other matters, insurance or
documents as Lender shall require.
All of the Loan Documents shall be in form and content
satisfactory to the Lender, and shall comply with all of the
requirements set forth in the Loan Agreement and the Commitment.
ARTICLE II
INITIAL FUNDING
1. The proceeds of this Loan which are approved by the
Lender for the initial funding under the Loan shall be funded
subsequent to the following:
(a) Execution of all such documents as Lender and
Lender's counsel may require to insure that the Lender has a valid
first lien in the amount of the Loan.
(b) Recording of all documents as required by Lender's
counsel.
(c) Receipt by Lender of the marked-up Title Insurance
Commitment insuring Lender's Mortgage, which marked commitment must be
approved by Lender's counsel.
(d) Evidence reasonably satisfactory to Lender and
Lender's counsel of the fulfillment of any other condition to
funding.
(e) Delivery to Lender of the documents required
above as a condition to funding.
2. The proceeds of this Loan which are intended for
subdivision improvements under Note I will not be disbursed by Lender
until all of the conditions set forth on Schedule I attached hereto
and made a part hereof have been satisfied.
3. The proceeds of the Loan which are approved by Lender
for the initial funding of any Unit, as hereinafter defined, shall
be funded subsequent to the following:
8
<PAGE> 9
(a) receipt by Lender of building permit for the Unit
for which funding is requested;
(b) execution and recordation of a Notice of
Commencement for the Unit for which funding is requested;
(c) receipt by Lender of an Approved Sales Contract,
as hereinafter defined, for the Unit for which funding is requested
(unless the Unit is a Model Unit or Speculative Unit), as hereinafter
defined;
(d) receipt by Lender of builder's risk insurance
coverage for the Unit for which funding is requested; and
(e) updated list of subcontractors for the Unit for
which funding is requested.
(f) satisfaction of those conditions set forth in
Schedule II attached hereto and made a part hereof.
ARTICLE III
A. METHOD AND CONDITIONS OF DISBURSEMENT OF LOAN PROCEEDS FOR SITE
DEVELOPMENT
1. Funding. Requisitions for disbursements for site
development under Note I shall be in an amount not to exceed the
percentage of work completed and incorporated into the Project, times the
total amount of Note I available for site development, less the amount
previously advanced for site development, as approved by Lender's
Inspector.
2. Request for Advance. Lender agrees that Wampler,
Buchanan & Breen, P.A. ("Disbursing Agent") shall make disbursements
pursuant to the Construction Loan Disbursement Agreement of even date
herewith up to the full principal amount of Note I in accordance with the
Loan Budget, and in accordance with and subject to the following
procedure:
(a) Certificate for Payment. At such time as
Borrower shall desire to obtain a disbursement of any portion of
the proceeds of Note I for site development, subject to the
other requirements hereof, Borrower shall complete, execute and
deliver to Lender a request for an advance on a form of draw
request approved by Lender, with copies to the Lender's
Inspector and the Disbursing Agent, setting forth a detailed
breakdown of the requested disbursement, and the original cost
breakdown approved by Lender together with the percentage of
completion of each item and the balance remaining to complete
each item. The Certificate for Payment shall be certified by the
Borrower, the Engineer and the Contractor.
(b) Evidence of Progress of Construction. The
above said Certificate for Payment shall be accompanied by such
evidence, at Borrower's expense, in form and content
satisfactory to Lender, which shall include but not be limited
to Lender's Inspector's report, approval of the Certificate of
Payment by Lender's Inspector, Lender's Inspector's
certification that there are sufficient funds remaining
available under the Loan to complete the Improvements, properly
executed certificate, affidavits, waivers and releases of lien
from Borrower, Engineer, Contractor and/or such other persons as
Lender may require, showing:
(i) The value of the portion of the work
completed at that time;
(ii) That all outstanding claims for labor,
materials and fixtures for which Lender has funded prior
Requests for Advance, have been properly paid;
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<PAGE> 10
(iii) That there are no liens outstanding
against the Property except for Lender's lien and other than
inchoate liens for property taxes not yet due;
(iv) That Borrower has complied with all
of Borrower's obligations, as of the date thereof, under the
Loan Documents;
(v) That all construction prior to the
date of the request for an advance has been completed in a good
and workmanlike manner in accordance with the Plans and
Specifications and as required by all inspecting governmental
authorities having jurisdiction thereof;
(vi) That all funds previously disbursed
by Lender have been applied in accordance with the Loan Budget;
(vii) That copies of all bills or
statements for indirect expenses for which the advance is
requested are attached to said Certificate of Payment; and
(viii) Except as otherwise may be provided,
that all change orders shall have been approved in writing by
Lender.
Where the draw request relates to items other than
payments for work performed or materials furnished under the
Construction Contract, there shall be included a statement of
the purposes for which the advance is desired and invoices for
the same, as Lender shall reasonably require and approve.
(c) Final Disbursement Date. Subject to the
provisions of this Article, Lender shall not be required to
make any disbursement from the proceeds of this Loan later than
the maturity date of Note I.
(d) Lien Priority as Prerequisite for Construction.
As of the date hereof, the Mortgage shall be of first lien
priority as to the Property. Lender shall in no event disburse
funds from the Loan proceeds for the construction of any of the
Improvements unless (a) the Mortgage then shall constitute a
first lien on such Improvement, and (b) there shall exist no
other lien of any sort, whether prior or inferior, than the lien
of the Mortgage with respect to the Property except for the
inchoate liens for property taxes not yet due and any mechanic's
lien which has no later than fifteen (15) days after filing been
either (i) bonded off or (ii) Borrower has filed a Notice of
Contest and placed an amount equal to one hundred ten percent
(110%) of the amount of the lien with TICOR Title Insurance
Company Borrower and Lender acknowledge and agree that in the
event the Borrower's Notice of Contest is unanswered within
sixty (60) days of proper filing, the one hundred ten percent
(110%) amount held in escrow by TICOR Title Insurance Company
("Escrow Monies") shall be returned to Borrower. The parties
further acknowledge and agree that if an answer or other
pleading is filed relating to the Notice of Contest, Borrower
shall be required within ten (10) days thereof to bond off the
lien at which time the Escrow Monies shall be returned to
Borrower. If Borrower does not bond off the lien within ten (10)
days, TICOR title Insurance Company shall be permitted to use
the Escrow Monies to pay off the lien.
(e) Materials Stored On-Site. Lender is willing to
make loan disbursements based on the invoice value of insured
materials properly stored on the construction site. All invoices
for materials stored on-site and the reasonableness of the
quantity of such materials are subject to Lender's review and
approval. Lender must have a first lien on the
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<PAGE> 11
materials stored on-site, and a disbursement therefor must not be
in conflict with the terms of the Construction Contract. A list
must be submitted to Lender of the materials to be stored on-site
for which loan disbursements will be requested. Such list must
include a breakdown by type, number of units and cost per unit.
(f) Materials Stored Off-Site. Lender will not make
any loan disbursements based on the value of materials stored
off-site, unless Lender has given its approval to a disbursement
based thereon because of the difficulty or danger of storing
such materials on-site, but Lender shall have absolute
discretion in determining whether to approve such disbursement
and upon what terms and conditions such disbursement will be
made. In the event Lender elects to make a loan disbursement for
materials stored off-site, the conditions of Paragraph (e) above
shall apply to such disbursement.
(g) Continuation of Title Insurance Coverage. The
Certificate for Payment shall be accompanied by a date down
endorsement to the Title Policy, which endorsement shall (a)
indicate that since the effective date of the Title Policy (or
the effective date of the last such endorsement, if any), there
has been no change in the status of title to the Property as set
out in the Title Policy, and (b) have the effect of increasing
the coverage of the Title Policy by an amount equal to the
advance then being made, unless the Title Policy expressly
provides automatically and unconditionally for such increase in
coverage upon each such disbursement.
3. Conditions Precedent to Each Disbursement. At no time
and in no event shall Lender be obligated to disburse funds:
(a) if any Event of Default as described herein or in
the Mortgage shall have occurred and shall not have been cured,
except that Lender may, at Lender's option, pay itself accrued
interest to the extent that Loan proceeds allocated to an
interest reserve in the Loan Budget remain undisbursed; or
(b) if Lender determines that construction of the
Improvements cannot be completed within the time required by
this Loan Agreement; or
(c) if, prior to the Loan closing and at all times
during the term of the Loan, Lender is not satisfied, in its
sole discretion, that the proceeds of the Loan remaining
undisbursed will be sufficient to complete all of the site
development according to the Plans and Specifications and to pay
for all labor, materials and costs and all other costs and
disbursements required to complete the site development,
including interest and other non-construction costs. If
required by Lender, Borrower shall pay with its own funds and
furnish written documentation which satisfactorily accounts to
Lender for all acquisition, development, or other construction
costs in excess of the proceeds of this Loan necessary to fully
complete the construction of the Improvements. Each such payment
shall be expended before any or any other Loan disbursement
will be made, and it shall be advanced as construction
progresses; or
(d) if the Property shall have been damaged by fire
or other casualty.
4. Conditions Precedent to Final Disbursement. All Loan
disbursements shall be subject to the following condition:
The final Loan disbursement with respect to Note I
shall be withheld by Lender, and shall be disbursed only upon
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<PAGE> 12
compliance with the following requirements (in addition to the
requirements for all other disbursements as set forth above):
(a) Evidence of Completion. Receipt by Lender of
satisfactory evidence of the completion of the site development
substantially in accordance with the Plans and Specifications
and approval of such completion by local governmental
authorities.
(b) Final Releases of Lien; Contractor's Affidavit.
Receipt by Lender of all final releases of lien by Contractor
and any Subcontractors and of the requisite affidavit of
Contractor sufficient in the opinion of Lender's counsel to
comply with the Florida Construction Lien Law, and the removal
of any mechanics' and materialmen's liens (inchoate or
otherwise) affecting title to the Property.
(c) Borrower's Supervising Engineer's Certification.
Certification from the supervising engineer that all on-site and
off-site Improvements required to be constructed have been
completed substantially in accordance with the approved Plans
and Specifications and are free of deficiency.
(d) Contractor's Certification. Certification from
Contractor that all on-site and off-site Improvements required
to be constructed have been completed strictly in accordance
with the approved Plans and Specifications and are free of
structural deficiency.
(e) Borrower's Affidavit. Certification by Borrower
that all on-site and off-site Improvements required to be
constructed have been completed substantially in accordance
with the approved Plans and Specifications and are free of
deficiency.
5. Notice, Frequency and Place of Disbursements. At
Lender's option (a) the above said draw request shall be submitted to
Lender at least five (5) business days prior to the date of the
requested advance, (b) disbursements shall be made no more frequently
than monthly, (c) all disbursements shall be made by transfer to
Borrower's account at Lender or at such other place as Lender may
designate from time to time.
6. Deposit of Funds Advanced. The above notwithstanding,
following any Event of Default, as defined herein and in the Mortgage
at Lender's option, Borrower shall deposit all loan proceeds advanced
by Lender in a separate and exclusive account to be withdrawn and
used solely for the payment of bills for labor, materials and
fixtures used or to be used in construction of the Improvements and
other costs contemplated by the approved budget, and Borrower will
promptly furnish Lender with evidence thereof.
7. Advances Do Not Constitute a Waiver. No advance of
Loan proceeds hereunder 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
waiver have the effect of precluding Lender from thereafter declaring
such inability to be an event of default described herein or in the
Mortgage.
B. METHOD AND CONDITIONS OF DISBURSEMENT OF LOAN PROCEEDS FOR UNIT
DEVELOPMENT
1. Funding. Requisitions for disbursements shall be
in an amount not to exceed the percentage of work completed and
incorporated for each Unit, times the total amount of the loan
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<PAGE> 13
available under Note II for the Unit being funded, less the amount
previously advanced for that Unit.
2. Number of Units. Lender shall only fund the
construction at any one time of a maximum of thirty-two (32) Units on
the Property which Units shall include: (i) a maximum of three (3)
model homes, not subject to a Approved Sales Contract which is to be
constructed, furnished and equipped primarily as a means of promoting
the sale of other Units of the Project ("Model Units"); (ii) four (4)
speculative homes not subject to an Approved Sales Contract, which
has been, is being, or is to be constructed for sale in the Project
("Speculative Unit(s)"); and (iii) Units which have been sold
pursuant to a legally enforceable sales agreement form approved by
Lender to a bona fide third party purchaser at a sales price of not
less than the applicable Release Price for the Unit in question, with
a purchaser's deposit of not less than five percent (5%) of the total
purchase price paid in cash or immediately available funds and
deposited into an escrow account maintained at Lender (unless the
purchaser has expressly authorized the use of the deposit, or any
portion thereof, for the payment of construction costs, in which
event such deposit, or portion thereof, may be used by the Borrower
to pay construction costs in full compliance with applicable law) and
otherwise complying with all applicable laws and regulations so that
the purchaser shall have no election or right to terminate such
contract without the loss of its deposit except as a result of a
financing contingency (the "Approved Sales Contract"). For the
purposes of determining what constitutes a bona fide third party
purchaser, no purchaser shall be permitted to purchase more than
three (3) Units without the prior written consent of Lender. No sales
agreement shall be considered bona fide if the purchaser thereunder
is a principal of Borrower or the Guarantor, or of any person, firm
or corporation (including members of their families or their
stockholders, officers of directors) who has rendered services or
provided materials to the Project or is a member of the
immediate, family of any such person. The sales agreement shall
provide that it may not be assigned by the purchaser thereunder
without the prior written consent of Lender. ("Sold Units"), (Model
Unit(s), Speculative Unit(s) and Sold Units are collectively
referred to as "Unit(s)").
3. Limits on Advancements of Funds. The funds advanced to
Borrower under Note II for each Unit shall not exceed one hundred
percent (100%) of the total construction hard costs of each Unit. In
absolutely no event will the total amount available for any Unit
under Note II exceed the smallest of the following amounts: (i)
eighty percent (80%) of the gross sales price of any Unit (exclusive
of any lot premiums) after deducting the amount of Note I allocated
to the Unit, (ii) eighty percent (80%) of the appraised value for any
completed Unit as approved by Lender after deducting the amount of
the Note I allocated to the Unit, or (iii) the aggregate amount
actually paid by or on behalf of Borrower in connection with the
construction of the Unit.
If Lender at any time determines that the remaining amount
available under Note II for any Unit is not sufficient to pay in
full all costs to complete the Unit, Borrower shall, within ten days
of Borrower's receipt of written demand therefor from Lender, deposit
with Lender the amount set forth in Lender's notice, in cash, to be
held and disbursed for the payment of costs relating to the Unit. So
long as any such funds remain in such account, all costs of
construction of the applicable Unit will be paid from such funds
until they become depleted. Borrower's failure to timely deposit the
aforesaid funds with Lender shall constitute an Event of Default
under this Loan Agreement.
4. Assignment of Deposits. Deposits paid by individual
purchasers of Units pursuant to Approved Sales Contracts shall be
assigned to Lender as additional collateral for the Loan as more
particularly described in that certain Collateral Assignment of Sales
Contracts and Deposits of even date herewith.
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<PAGE> 14
5. Request for Advance. Lender agrees that the Disbursing
Agent shall make disbursements pursuant to the Construction Loan
Disbursement Agreement up to the full principal amount of Note II in
accordance with the Loan Budget, and in accordance with and subject
to the following procedure:
(a) Certificate for Payment. At such time as Borrower
shall desire to obtain a disbursement of any portion of the
Loan proceeds for the construction of a Unit, subject to the
other requirements hereof, Borrower shall complete, execute
and deliver to Lender a request for an advance on a form of
draw request approved by Lender, with copies to the Lender's
Inspector and the Disbursing Agent, setting forth a detailed
breakdown of the requested disbursement for each Unit and the
original cost breakdown approved by Lender together with the
percentage of completion of each item and the balance
remaining to complete each item. The Certificate for Payment
shall be certified by the Borrower, and the Contractor.
(b) Evidence of Progress of Construction. The above
said Certificate for Payment shall be accompanied by such
evidence, at Borrower's expense, in form and content
satisfactory to Lender, which shall include but not be limited
to Lender's Inspector's report, approval of the Certificate of
Payment by Lender's Inspector, Lender's Inspector's
certification that there are sufficient funds available under
the Loan to complete the Improvements (excluding purchaser
options under Approved Sales Contracts paid for by Borrower
during construction), properly executed certificates,
affidavits, waivers and releases of lien from Borrower, the
Contractor and/or such other persons as Lender may require,
showing:
(i) The value of the portion of the Unit
completed at that time;
(ii) That all outstanding claims for labor,
materials and fixtures for which Lender has funded prior
Requests for Advance, have been properly paid;
(iii) That there are no liens outstanding
against the Property except for Lender's lien and other than
inchoate liens for property taxes not yet due;
(iv) That Borrower has complied with all of
Borrower's obligations, as of the date thereof, under the Loan
Documents;
(v) That all construction prior to the date of
the request for an advance has been completed in a good and
workmanlike manner in accordance with the Plans and
Specifications and as required by all inspecting governmental
authorities having jurisdiction thereof;
(vi) That all funds previously disbursed by
Lender have been applied in accordance with the Loan Budget;
(vii) That copies of all bills or statements for
indirect expenses for which the advance is requested are
attached to said Certificate of Payment if requested Lender; and
(viii) Except as otherwise may be provided, that
all change orders shall have been approved in writing by Lender.
Where the draw request relates to items other than
payments for work performed or materials furnished under the
Construction Contract, there shall be included a statement of
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<PAGE> 15
the purposes for which the advance is desired and invoices for
the same, as Lender shall reasonably require and approve.
(c) Foundation Survey. Immediately upon the completion
of the construction of the foundations of each Unit, a
foundation survey shall be submitted to Lender which shall show
and which shall certify to Lender and Title Insurer, the
locations of such foundations. The surveyor shall also submit a
certification as to the absence of encroachments from or onto
the Land and compliance of the Units, as then constructed,
setback requirements and other relevant restrictions. Lender
reserves the right to require an endorsement to the title
insurance policy insuring that the building location is not in
violation of any easements of record and a Certificate of
Architect certifying that the building location is not in
violation of any setback restrictions.
(d) As-Built Surveys. At Lender's request during
construction, Borrower shall submit as-built surveys for the
Units on the Property to Lender and shall reference the as-built
survey in the title insurance policy. In addition, during
construction, Lender may request certification from Borrower
that all on-site and off-site Improvements required to be
constructed have been completed strictly in accordance with the
approved Plans and Specifications. The surveys shall show and
include the requirements expressed in the Commitment and such
other requirements as Lender may require.
(e) Access to Streets. Lender shall not make any
disbursement for construction of any of the Units on the
Property if any such Unit shall not have satisfactory access to
dedicated and completed streets unencumbered by liens.
(f) Final. Disbursement Date. Subject to the
provisions of this Article, Lender shall not be required to make
any disbursement from the proceeds of this Loan later than the
maturity date of the Note.
(g) Lien Priority as Prerequisite for Construction. As
of the date hereof, the Mortgage shall be of first lien priority
as to the Property. Lender shall in no event disburse funds from
the Loan proceeds for the construction of any of the
improvements unless (a) the Mortgage then shall constitute a
first lien on such Improvement, and (b) there shall exist no
other lien of any sort, whether prior or inferior, than the lien
of the Mortgage with respect to the Property except for the
inchoate liens for property taxes not yet due and any mechanics
lien which has no later than fifteen (15) days after filing been
either (i) bonded off or (ii) Borrower has filed a Notice of
Contest and placed an amount equal to one hundred ten percent
(110%) of the amount of the lien with TICOR Title Insurance
Company Borrower and Lender acknowledge and agree that in the
event the Borrower's Notice of Contest is unanswered within
sixty (60) days of proper filing, the one hundred ten percent
(110%) amount held in escrow by TICOR Title Insurance Company
("Escrow Monies") shall be returned to Borrower. The parties
further acknowledge and agree that if an answer or other
pleading is filed relating to the Notice of Contest, Borrower
shall he required within ten (10) days thereof to bond off the
lien at which time the Escrow Monies shall be returned to
Borrower. If Borrower does not bond off the lien within ten (10)
days, TICOR title Insurance Company shall be permitted to use
the Escrow Monies to pay off the lien.
(h) Materials Stored On-Site. Lender is willing to
make loan disbursements based on the invoice value of insured
materials properly stored on the construction site. All invoices
for materials stored on-site and the reasonableness
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<PAGE> 16
of the quantity of such materials are subject to Lender's review and approval.
Lender must have a first lien on the materials stored on-site, and a
disbursement therefor must not be in conflict with the terms of the Construction
Contract. A list must be submitted to Lender of the materials to be stored
on-site for which loan disbursements will be requested. Such list must include a
breakdown by type, number of units and cost per unit.
(i) Materials Stored Off-Site. Lender will not make any loan
disbursements based on the value of materials stored off-site, unless Lender
has given its approval to a disbursement based thereon because of the
difficulty or danger of storing such materials on-site, but Lender shall have
absolute discretion in determining whether to approve such disbursement and
upon what terms and conditions such disbursement will be made. In the event
Lender elects to make a loan disbursement for materials stored off-site, the
conditions of Paragraph (h) above shall apply to such disbursement.
(j) Continuation of Title Insurance Coverage. The Certificate for
Payment shall be accompanied by a date down endorsement to the Title Policy,
which endorsement shall (a) indicate that since the effective date of the
Title Policy (or the effective date of the last such endorsement, if any),
there has been no change in the status of title to the Property as set out in
the Title Policy, and (b) have the effect of increasing the coverage of the
Title Policy by an amount equal to the advance then being made, unless the
Title Policy expressly provides automatically and unconditionally for such
increase in coverage upon each such disbursement. Lender reserves the right to
require an endorsement to the title insurance policy, insuring that the
building location is not in violation of any easements of record and a
Certificate of Architect certifying that the building location is not in
violation of any setback restrictions.
6. Conditions Precedent to Each Disbursement. At no time and in no event
shall Lender be obligated to disburse funds:
(a) if any Event of Default as described herein or in the Mortgage
shall have occurred and shall not have been cured, except that Lender may, at
Lender's option, pay itself accrued interest to the extent that Loan proceeds
allocated to an interest reserve in the Loan Budget remain undisbursed; or
(b) if Lender determines that construction of the Improvements cannot
be completed within the time required by this Loan Agreement; or
(c) if, prior to the Loan closing and at all times during the term of
the Loan, Lender is not satisfied, in its sole discretion, that the proceeds of
the Loan remaining undisbursed under Note II will be sufficient to complete all
of the Improvements according to the Plans and Specifications and to pay for all
labor, materials and costs and all other costs and disbursements required to
complete the Improvements, including interest and other non-construction costs.
If required by Lender, Borrower shall pay with its own funds and furnish written
documentation which satisfactorily accounts to Lender for all acquisition,
development, or other construction costs in excess of the proceeds this Loan
necessary to fully complete the construction or the improvements. Each such
payment shall be expended before any or any other Loan disbursement will be
made, and shall be advanced as construction progresses; or
(d) if the Property shall have been damaged by fire or other
casualty.
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<PAGE> 17
7. Conditions Precedent to Final Disbursement. All Loan disbursements
shall he subject to the following condition:
The final Loan disbursement shall be withheld by Lender, and shall be
disbursed only upon compliance with the following requirements (in addition to
the requirements for all other disbursements as set forth above):
(a) Evidence of Completion. Receipt by Lender of satisfactory evidence
of the completion of the Unit substantially in accordance with the Plans and
Specifications and approval of such completion by local governmental
authorities.
(b) Final Releases of Lien; Contractor's Affidavit. Receipt by Lender
of all final releases of lien by Contractor and any Subcontractors and of the
requisite affidavit of Contractor sufficient in the opinion of Lender's counsel
to comply with the Florida Construction Lien Law, and the removal of any
mechanics, and materialmen's liens (inchoate or otherwise) affecting title to
the Property.
(c) Contractor's Certification. Certification from Contractor that all
on-site and off-site Improvements required to be constructed have been completed
strictly in accordance with the approved Plans and Specifications and are free
of structural deficiency.
(d) Borrower's Affidavit. Certification by Borrower that-all on-site
and off-site Improvements required to be constructed have been completed
substantially in accordance with the the approved Plans and Specifications and
are free of deficiency.
(e) Other Evidence. Such other evidence as Lender may require to
establish that each Unit and their intended use comply with all applicable
zoning and other requirements of the public authorities having jurisdiction
including but not limited to compliance with the National Environmental Policy
Act and any other applicable Federal, State, local or municipal environmental
impact or energy laws or regulations.
(f) Insurance. Insurance coverage for each Model Unit and Speculative
Unit shall be broadened to include hazard insurance, in form satisfactory to
Lender.
8. Notice, Frequency and Place of Disbursements. At Lender's option (a)
the above said draw request shall be submitted to Lender at least five (5)
business days prior to the date of the requested advance, (b) disbursements
shall be made no more frequently than monthly, (c) no more than six (6) draws
may be made per Unit, and (d) all disbursements shall be made by transfer to
Borrower's account at Lender or at such other place as Lender may designate from
time to time.
9. Deposit of Funds Advanced. The above notwithstanding, following any
Event of Default, as defined herein and in-the Mortgage, at Lender's option,
Borrower shall deposit all loan proceeds advanced by Lender in a separate and
exclusive account to be withdrawn and used solely for the payment of bills for
labor, materials and fixtures used or to be used in construction of the
Improvements and other costs contemplated by the approved budget, and Borrower
will promptly furnish Lender with evidence thereof.
10. Advances Do Not Constitute a Waiver. No advance of Loan proceeds
hereunder 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 waiver have the effect of precluding
Lender from
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<PAGE> 18
thereafter declaring such inability to be an event of default described herein
or in the Mortgage.
ARTICLE IV
PARTIAL RELEASES
1. Release of Units. Lender shall release each Unit from the lien of the
Mortgage upon Lender's receipt of the following for the Unit to be released:
(a) Release Price. (i) an amount equal to one hundred twenty percent
(120%) of the amount funded per Lot which is estimated to be $51,166.00 to be
applied against the outstanding principal balance of Note I, and (ii) one
hundred percent (100%) of the monies funded pursuant to Note II for construction
of the particular Unit for which a partial release is requested to be applied
against the outstanding principal balance of Note II ((i) and (ii) are
collectively known as the "Release Price").
(b) As-Build Survey. Receipt by Lender of three (3) copies of a
satisfactory "as-build" survey prepared by a registered surveyor, in accordance
with the Plans and Specifications and showing the Unit. The survey shall be
certified to Lender and Title Insurer and shall also include a narrative metes
znd bounds or platted description of the boundary of the Land, the area of the
Land and of the Unit, the location and dimensions of any easement and the
dimensions of the Unit. The surveyor must include on the on the survey a signed
narrative statement certifying the existence or nonexistence of any encroachment
from or onto the Land and must include the date of the survey and the surveyor's
registration number and seal and such other matters as required by Title
Insurer, in form and substance satisfactory to Lender and Title Insurer.
(c) Evidence of Completion. Receipt by Lender of satisfactory evidence
of the completion of the Unit substantial in accordance with the Plans and
Specifications and approval of such completion by local governmental
authorities.
Further, provided there exists no default of the terms and conditions of the
Loan, Lender shall release any Lot from the lien of the Mortgage, provided
construction of improvements has not commenced on the Lot for which a partial
release is requested, upon Lender's receipt of an amount equal to one hundred
twenty percent (120%) of the amount funded per Lot which is estimated to be
$51,166.00 ("Lot Release Price"). The Lot Release Price shall be applied by
Lender against the outstanding principal balance of Note I. Borrower shall pay
all costs in connection with the preparation, execution and recording of partial
releases of the Lots, including, but not limited to, Lender's counsel's fees and
costs.
2. Release of Common Areas. Lender shall, at Borrower's request, release
from the lien of the Mortgage the common areas, road right of ways, and any
water, sewer of drainage or other easement located on the Property, provided the
following terms and conditions are met: (i) the Loan is not in default; (ii)
development of the road right of ways is substantially completed; and (iii) the
common areas, road right of ways, or water, sewer, drainage or other easement
are being conveyed or transferred to the homeowners' association, Broward Conty,
or any other governmental entity or agency; (iv) Borrower provides Lender with
satisfactory evidence of the conveyance or transfer; and (v) there remains
continuous access and ingress and egress to the Property.
3. Costs and Expenses of Releases. The Borrower shall pay all of Lender's
reasonable costs and expenses incurred in the release of the Units.
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<PAGE> 19
ARTICLE V
WARRANTIES OF BORROWER
As material inducements to Lender to enter into this Loan Agreement and to
make the Loan, Borrower hereby warrants to Lender as follows:
1. Validity of Loan Documents. That the Loan Documents are in all
respects legal, valid and binding according to their terms and grant to Lender a
direct, valid and enforceable first lien security interest in the Property and
the personalty located thereon subject only to bankruptcy, insolvency and other
similar laws affecting the rights of creditors.
2. Priority of Lien on Personalty. That no bill of sale, security
agreement, financing statement or other title retention agreement (except those
executed in favor of Lender) has or will be executed with respect to any
personal property, equipment or fixtures used in conjunction with the
construction, operation or maintenance of the Improvements.
3. Conflicting Transactions of Borrower. That the consummation of the
transactions hereby contemplated and the performance of Borrower's obligations
under and by virtue of the Loan Documents will not result in any breach of, or
constitute a default under any mortgage, security deed, deed of trust, lease,
bank loan or credit agreement, corporate charter or bylaws or other instrument
to which Borrower is a party or by which it may be bound or affected.
4. Pending Litigation. That there are no actions, suits or proceedings
pending or, to the knowledge of Borrower, threatened against or affecting
Borrower or the Guarantor which affects any of the Property securing the Loan,
or involving the validity or enforceability of any of the Loan Documents or the
priority of the lien thereof, at law or in equity, or before or by any
governmental authority, except actions, suits and proceedings which are fully
covered by insurance and which, if adversely determined, would not substantially
impair Borrower's ability to perform each and every one of its obligations under
and by virtue of the Loan Documents; and that to Borrower's knowledge, it is not
in default with respect to any order, writ, injunction, decree or demand of any
court or any governmental authority.
5. Violations of Governmental Law, Ordinances or Regulations. That
Borrower has no knowledge of any violation or notice of violations of any
federal or state law or municipal ordinance or order or requirement of the
county or city in which the Property is located or any municipal department or
other governmental authority having jurisdiction affecting the Property, which
violations in any way relate to or affect the Property.
6. Compliance with Zoning Ordinances and Similar Laws. That the Plans and
Specifications and construction pursuant thereto and the use of the Property
contemplated thereby have been approved by all appropriate governmental and
quasi-governmental authorities and accordingly comply and will continue to
comply with all applicable governmental and quasi-governmental laws,
regulations, and standard requirements, including but not limited to the Fair
Housing Act of 1968 (as amended, and the Americans with Disabilities Act of
1990).
7. Availability of Utilities. That all utility services necessary for the
construction of the Improvements and the operation thereof for their intended
purpose are available at the boundaries of the Land, including water supply,
storm and sanitary sewer facilities, electric and telephone facilities.
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8. Building Permits. That all building permits required for the construction
of the Improvements have been obtained or may be obtained without undue delay,
unusual expense or material alteration of the Plans and Specifications. Borrower
shall deliver copies of all permits to Lender as they are obtained and before
construction commences.
9. Certificate of Occupancy. That all certificates of occupancy required
for the occupancy or the Improvements have been obtained or may be obtained
without undue delay or unusual expense. Borrower shall deliver copies of all
certificates of occupancy to Lender as they are obtained.
10. Condition of Property. That the Property is not now damaged or injured
as a result of any fire, explosion, accident, flood or other casualty.
11. Brokerage Commissions. That brokerage commission due in connection with
the transaction contemplated hereby has been paid in full and that any such
commission coming due in the future will be paid promptly by Borrower. Borrower
agrees to and shall indemnify Lender from any liability, claim or loss arising
by reason of any such brokerage commission. This provision shall survive the
repayment of the Loan and shall continue in full force and effect so long as
the possibility of such liability, claim or loss exists.
12. Usury. The amounts to be received by Lender which are or which may be
deemed to be interest hereunder or under any of the Loan Documents or otherwise
in connection with the transactions herein contemplated constitute lawful
interest and are not usurious or illegal under the laws of the State of Florida,
and no aspect of the transactions contemplated by this Loan Agreement is or will
be usurious under current Florida law.
13. Accuracy of Information. Lender's commitment to make the Loan, as
expressed in the Commitment and accepted by Borrower is based on the accuracy
of Borrower's and each Guarantor's representations and statements. Neither this
Loan Agreement nor any document, financial statement, credit information,
certificate or statement required herein to be furnished or furnished to Lender
contains any untrue statement of a fact or omits to state a fact material to
this Loan Agreement or to Lender's decision to enter into this Loan Agreement or
the transaction contemplated hereunder. Lender shall have the option to declare
the Loan to be breached if there shall have been any material misrepresentation
or misstatement or any material error in any statement, document or other
submission delivered to Lender, or if prior to the initial Loan disbursement,
there shall have been a material adverse change in the state of facts submitted
to Lender, or if Borrower or any Guarantor has become insolvent, bankrupt or
incapacitated, or has otherwise been subject to any material adverse change in
financial condition. The Commitment is hereby incorporated herein by reference,
but to the extent it conflicts with the Loan Documents, the Loan Documents shall
govern.
14. Set-Offs. As of the date hereof, Borrower does not have any knowledge
after due and diligent inquiry of any defense or set-off with respect to any
money disbursed or otherwise advanced hereunder.
15. Investment Company. Borrower represents and warrants that Borrower is
not an investment company as defined by the Investment Company Act of 1940, as
amended, and that Borrower is not required to register under said Act.
16. Continuation and Investigation. The warranties and representations
contained herein shall be and remain true and correct so long as any of
Borrower's obligations hereunder have not been satisfied, or so long as part of
the Loan shall remain
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outstanding, and each request by Borrower for a disbursement or extension of the
Loan shall constitute an affirmation that the foregoing representations and
warranties remain true and correct as of the date thereof. All representations,
warranties, covenants and agreements made herein or in any certificate or other
document delivered to Lender by or on behalf of Borrower pursuant to or in
connection with this Loan Agreement shall be deemed to have been relied upon by
Lender notwithstanding any investigation heretofore or hereafter made by Lender
or on its behalf, and shall survive the making of any or all of the
disbursements contemplated hereby.
17. Hazardous Substances.
(a) That neither Borrower nor any other person to the Borrower's
knowledge, after reasonable inquiry, has ever used the Property as a facility
for the storage, treatment or disposal of any "Hazardous Substances," as that
term is hereinafter defined;
(b) That the Property is now and at all times hereafter will continue to
be in full compliance with all federal, state and local "Environmental Laws" (as
that term is defined hereinafter), including but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), 42 USC Section 9601, et seq., the Superfund Amendments and
Reauthorization Act of 1986 ("SARA") , Public Law 99-499, 100 Stat. 1613,
the Resource Conservation and Recovery Act ("RCRA"), 42 USC Section
6901, et seq., the Florida Resource Recovery and Management Act, Section
403.701, et seq., Florida Statutes, the Pollutant Spill Prevention and Control
Act, Section 376.011-376.17 and 376.19376.21 Florida Statutes, as the same may
be amended from time to time and all ordinances, regulations, codes, plans,
orders, and decrees now existing or in the future enacted, promulgated,
adopted, entered or issued, both within and outside present contemplation of
the Borrower and Lender;
(c) That as of the date hereof there are no hazardous or toxic materials,
substances, wastes or other environmentally regulated substances including
solids or gaseous products and any materials containing asbestos), the presence
of which is limited, regulated or prohibited by any state, federal or local
governmental authority or agency having jurisdiction over the Property, or
which are otherwise known to pose a hazard to health or safety of occupants of
the Property, located on, in or under the Property or used in connection
therewith;
(d) That Borrower shall notify Lender of any change in the nature or
extent of any hazardous or toxic materials, substances or wastes maintained on,
in or under the Property or used in connection therewith, and will transmit to
Lender copies of any citations, orders, notices or other material governmental
or other communication received with respect to any other hazardous materials,
substances, wastes or other environmentally regulated substances affecting the
Property;
(e) That Borrower is not aware of, nor has the Borrower nor any of its
subsidiary or affiliated entities received notice of, any past, present or
future events, conditions, circumstances, activities, practices, incidents,
actions or plans which may interfere with or prevent compliance or continued
compliance with Environmental Laws or any ordinance, regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, or which may give rise to any common law or
legal liability, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened
release into the environment, of any Hazardous Substance;
<PAGE> 22
(f) That there is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or demand letter, notice of violation,
investigation, or proceeding pending or threatened against Borrower or the
Property, relating in any way to any Environmental Laws or any regulation code,
plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder;
(g) Borrower hereby agrees to indemnify, reimburse, defend and hold
harmless Lender, its officers, directors, employees, successors and assigns from
and against all demands, claims, civil or criminal actions or causes of action,
liens, assessments, civil or criminal penalties or fines, losses, damages,
liabilities, obligations, costs, disbursements, expenses or fees of any kind or
of any nature (including, without limitation, cleanup costs, attorneys',
consultants' or experts' fees and disbursements and costs of litigation at trial
and appellate levels) which may at any time be imposed upon, incurred by or
asserted or awarded against, Lender directly or indirectly, resulting from: (a)
any acts or activities of Borrower, its agents, employees or contractors, at, on
or about the Property which contaminate air, soils, surface waters or
groundwaters over, on or under the property; (b) arising from or out of any
Hazardous Substance on, in or under the Property; (c) pursuant to or in
connection with the application of any Environmental Law to the acts or
omissions of Borrower or any other person and any environmental damage alleged
to have been caused, in whole or in part, by the transportation, treatment,
storage, or disposal of any Hazardous Substance; or (d) arising from or in
relation to the presence, whether past, present or future, of any Hazardous
Substances on the Property.
Without limiting the foregoing, this indemnification provision specifically
protects the Lender against any claim or action from activities described in
(a), (b), (c) or (d) above, based in whole or in part upon any environmental
statute, rule, regulation or policy, including but not limited to Chapters 403
and 376, Florida Statutes, the Florida Administrative Code, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, ("CERCLA") 42
USC Section 9601, et seq., as amended, the Resource Conservation and Recovery
Act, 42 USC Section 6901, et seq., and other laws, whether now in existence or
enacted in the future.
Borrower's indemnification obligation hereunder shall be one of strict
liability and shall be enforceable without regard to any fault or knowledge of
Borrower with respect to any act or omission or condition or event which is the
basis of the claim under such indemnification obligation. Borrower's obligation
under this section shall not be limited to any extent by the term of the Note or
other obligations secured hereby, and such obligation shall continue, survive
and remain in full force and effect notwithstanding payment in full or other
satisfaction or release of said Note (and other obligations secured hereby) the
Mortgage and this Loan Agreement, or any foreclosure under the Mortgage, or any
delivery of a deed in lieu of foreclosure, unless Borrower is released pursuant
to paragraph 20 of that certain Environmental Compliance and Indemnification
Agreement of even date herewith. The provisions of this section shall be
deemed to survive and continue in full force and effect after any foreclosure
or other proceeding by which the Lender, and its successors and assigns succeed
to ownership of the Property.
As used herein, "Environmental Law" means any federal, state, local
statutory or common law relating to pollution or protection of the environment,
including without limitation, any common law of nuisance or trespass, and any
law or regulation relating to emissions, discharges, releases or threatened
releases of Hazardous Substances into the environment (including without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or otherwise relating to the manufacture,
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<PAGE> 23
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
As used herein, "Hazardous Substance" means any substance or material (i)
identified in Section 101(14) of CERCLA, 42 USC Section 9601(14), as the same
may be amended from time to time, or (ii) determined to be toxic, a pollutant or
contaminant, under federal, state or local statute, law, ordinance, rule or
regulation or judicial or administrative order or decision, as same may be
amended from time to time, including but not limited to petroleum and petroleum
products as defined in Sec. 376.301(10), Florida Statutes, as same may be
amended from time to time;
(h) Lender shall have the right,to require Borrower to (but not more
frequently than annually unless an Environmental Complaint is then outstanding)
perform (at Borrower's expense) an environmental audit and, if deemed necessary
by Lender, an environmental risk assessment, each of which must be satisfactory
to Lender in its sole discretion, of the Property, hazardous waste management
practices and/or hazardous waste disposal sites used by Borrower. Such audit
and/or risk assessment must be by an environmental consultant satisfactory to
Lender. Should Borrower fail to perform such environmental audit or risk
assessment within 30 days of the Lender's written request, Lender shall have the
right but not the obligation to retain an environmental consultant to perform
such environmental audit or risk assessment. All costs and expenses incurred by
Lender in the exercise of such rights shall bear interest at the default rate
set forth in the Note and shall be secured by the Mortgage and shall be payable
by Borrower upon demand or charged to Borrower's loan balance at the discretion
of the Lender; and
(i) Any breach of warranty, representation or agreement contained in
this Section shall be an Event of Default hereunder and shall entitle Lender
to exercise any and all remedies provided in the Mortgage, or otherwise
permitted by law.
18. Florida Construction Contract Prompt Payment Law. In consideration of
the making of the Loan by the Lender, Borrower does hereby agree to indemnify
and hold the Lender harmless from any and all losses, claims, and damages,
including interest, and attorneys fees, which the Lender may suffer by virtue of
the Lender having failed to comply with any of the provisions of the Florida
Construction Contract Prompt Payment Law or Florida Statutes section 713.3471.
Notwithstanding the matters set forth herein, this indemnification provision
shall not be binding if Lender shall not comply with the terms and conditions of
Article III of this Loan Agreement.
ARTICLE VI
COVENANTS OF BORROWER
Borrower hereby covenants and agrees with Lender as follows:
1. Loan Agreement. To duly and punctually perform, observe and comply with
all of the terms, provisions, conditions, covenants and agreements on its part
to be performed, observed and complied with hereunder and under the Loan
Documents and any other documents and instruments delivered to Lender in
connection herewith. Borrower will not suffer or permit any default or Event
of Default, as hereinafter defined to exist hereunder or thereunder. Borrower
will promptly give notice in writing to Lender (a) of the occurrence of any
material litigation or proceeding affecting Borrower and whether or not
Borrower's liability, if any, is covered by insurance, and (b) of any dispute
between Borrower and any governmental or regulatory body or any other party,
which dispute may materially interfere with Borrower's normal operations or with
construction of the Improvements.
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2. Construction Contract. (a) To permit no default under the terms
of the Construction Contract; (b) to waive none of Contractor's obligations
thereunder; (c) to do no act which would relieve contractor from its
obligations to construct the Improvements according to the Plans and
Specifications; and (d) to make no amendments, other than change orders as may
be permitted hereunder and under the Mortgage, to the Construction Contract
without Lender's prior written consent.
3. Agreement of Architect and Engineer. To promptly furnish
Lender with an agreement by Architect and Engineer, in form and content
acceptable to Lender, that, in the Event of Default by Borrower, as hereinafter
defined or under the terms of any of the Loan Documents, Architect and Engineer
will, at Lender's request: (a) continue performance pursuant to its agreement
with Borrower until completion of construction of the Improvements, provided
that Lender shall compensate Architect and Engineer from the date of Lender's
assuming such agreement in accordance with said agreement for all such services
rendered, and (b) permit Lender to use the Plans and Specifications at no cost
to Lender.
4. Agreement of Contractor. To promptly furnish Lender with an
agreement by Contractor, acceptable to Lender, that, in the Event of Default,
as hereinafter defined by Borrower under the terms of the Loan Documents,
Contractor will, at Lender's request, continue performance pursuant to its
agreement with Borrower until completion of construction of the Improvements,
provided that Contractor shall be compensated by Lender from the date of
Lender's assuming such agreement in accordance with said agreement for all such
services rendered.
5. Construction Subcontracts.
(a) To permit no default under the terms of the Major
Subcontracts;
(b) To waive none of Subcontractors' obligations
thereunder; and
(c) To do no act which would relieve Subcontractors of
their respective obligations to construct the Improvements according
to the Plans and Specifications.
6. Insurance. Borrower will procure for, deliver copies of and
original certificates of and maintain for the benefit of Lender during the life
of the Mortgage, insurance policies in such amounts as Lender shall require,
including a minimum of $1,000,000.00 / $1,000,000.00 of liability insurance
along with $3,000,000.00 umbrella policy, and insurance insuring the Property
against fire, builder's risk, hazard, extended coverage and such other
insurable hazards, casualties and contingencies as Lender may require. The
form of such policies and the companies issuing them shall be acceptable to
Lender. All policies shall contain a standard, non-contributory mortgagee
endorsement making losses payable to Lender, its successors and/or assigns, as
mortgagee and loss payee. All policies shall include a provision for a minimum
thirty (30) day advance notice to Lender of any intended policy cancellation or
modification. Borrower shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder, unless Lender is included thereon under a standard, non-contributory
mortgagee endorsement making losses payable to Lender. Borrower shall
immediately notify Lender whenever any such separate insurance is taken out and
shall promptly deliver to Lender the policy or policies of such insurance. The
said property insurance so obtained shall include "all risks", builder's risk,
on a nonreporting 100% completed value form, on the Improvements, buildings,
machinery, equipment, materials, supplies and temporary structures and all
other property of any nature used for the construction of the buildings,
excluding foundations. This
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coverage for interest expense is limited to the period of time from the date
of physical damage until such time as will reasonably elapse, in the exercise of
due diligence, to the repair of the damage to its prior state. The amount of
coverage of the policy of insurance shall be the full replacement cost,
including underground work. Applicable notice to be given to Lender at the
following address: Barnett Bank of South Florida, N.A., Document Services, Post
Office Box 40329, Jacksonville, Florida 32203-0329.
At such time as any portion of the Improvements are completed,
Borrower shall submit to Lender a business interruption or rent loss insurance
policy in an amount acceptable to Lender, issued by an insurance company
acceptable to Lender in Lender's sole discretion.
The Borrower shall submit to Lender evidence satisfactory to Lender as
to whether or not the Property or any part thereof is located within an area
identified pursuant to the Flood Disaster Protection Act of 1973 as being in a
flood hazard area. If the Property is located in a flood hazard area, flood
insurance shall be obtained for the maximum amount of coverage available
through the federal flood insurance program for the improvements located on the
Property from time to time or 100% of the highest insurance value of the
improvements on a replacement cost basis, whichever is less. The flood policy
shall cover the same parties covered under the other insurance policies with
coverage for flood, collapse, rain damage and such other usual coverage as may
be obtained thereunder, and such policy will be written with an insurance
company and with cancellation provisions as hereinabove provided. The
insurance coverage, without limiting the same by this description, shall extend
to any loss occasioned by fire, windstorm, other perils of extended coverage,
vandalism, malicious mischief, theft, mysterious disappearance and such other
coverage as is a normal incidence of such insurance. The foregoing insurance
shall specifically cover necessary architect and engineering fees necessary to
repair or replace any insured property and shall also cover debris removal.
Further, the insurance shall at least permit waiver of subrogation so any
release of liability entered into prior to any loss will not affect the
validity of the coverage otherwise provided.
At least thirty (30) days prior to the expiration date of all such
policies, Borrower shall deliver to Lender proof of renewals of all required
policies in a form satisfactory to Lender. Borrower shall deliver to Lender
receipts evidencing the payment of all such insurance policies and renewals on
an annual basis. As further security for the indebtedness secured hereby, the
delivery of the insurance policies to Lender shall constitute an assignment of
all unearned premiums. In the event of the foreclosure of the Mortgage or any
other transfer of title to the Property in extinguishment of the indebtedness
secured hereby, all right, title and interest of Borrower in and to all
insurance policies then in force shall pass to the purchaser or grantee.
Lender is hereby authorized and empowered, at its option, to adjust or
compromise any loss under any insurance policy. Each insurance company is
hereby authorized and directed to make payment for all such losses directly to
Lender instead of to Borrower and Lender jointly. After deducting from the
insurance proceeds any expense incurred by it in the collection or handling of
said funds, Lender shall apply the net proceeds, at it's sole option, to the
reduction of the sums secured hereby or toward the repair and restoration of the
Improvements, or for any other purpose or object satisfactory to Lender without
affecting the lien of the Mortgage for the full amount secured hereby before
such payment took place. Lender shall not be held responsible for any failure
to collect any insurance proceeds due under the terms of any policy, regardless
of the cause of such failure.
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If required by Lender after the occurrence of an Event of Default,
Borrower will pay to Lender on the first (1st) day of each month, together with
and in addition to the regular installment of interest and principal and until
the Note is fully paid, an amount equal to one-twelfth (1/12) of the yearly
premiums for insurance, to enable Lender to pay such insurance premiums when
due. The Borrower shall promptly furnish Lender with the insurance premium
statements. Such added payments shall not be nor be deemed to be trust funds,
but may be commingled with the general funds of Lender and Lender shall not pay
interest on them. At the option of Lender, such added payments may be carried
as a debit item on Lender's books and accounts. Upon demand of Lender,
Borrower agrees to deliver to Lender such additional sums as are necessary to
make up any deficiencies in the amounts necessary to enable Lender to pay such
insurance premiums. Lender shall have no responsibility for payment of any
premium for insurance hereunder, except to the extent that funds are deposited
by Borrower with Lender hereunder. In the event of a default by Borrower in
the performance of any of the terms, covenants and conditions in the Mortgage,
this Loan Agreement or the Note, Lender may, at Lender's option, apply any
amount then held by Lender under this paragraph to the reduction of the
indebtedness secured in the Mortgage.
If Borrower fails to provide any required insurance or fails to
continue such insurance in force, Lender may do so at the Borrower's expense.
BORROWER ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE
INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE
PREMISES, UP TO THE BALANCE OF THE NOTE; HOWEVER, BORROWER'S EQUITY IN THE
COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY
PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
7. Collection of Insurance Proceeds. To cooperate with Lender in
obtaining for Lender the benefits of any insurance or other proceeds lawfully
or equitably payable to Borrower or Lender in connection with the transactions
contemplated hereby and in paying any indebtedness or obligation of Borrower to
Lender incurred hereunder (including the payment by Borrower of the expense of
an independent appraisal on behalf of Lender in case of a fire or other
casualty affecting the Property).
8. Ad Valorem Tax. Subject to the provisions in the Mortgage,
Borrower shall submit proof, on an annual basis, that all ad valorem real
property taxes have been timely paid.
9. Application of Loan Proceeds. To use the proceeds of the Loan
solely for the purpose set forth herein and in no event to use any of the Loan
proceeds for any other purpose whatsoever. Borrower shall make only such
payments to the Contractor on account of other contracts or for other work
which may entitle the person performing such work to lien rights in the
Property as are proper payments under the Florida Construction Lien Law.
10. Expenses. To pay any and all costs of closing the Loan, and
any and all costs incurred during the term of the Loan any and all expenses of
Lender with respect thereto, including but not limited to fees of Lender's
Inspector, the disbursing agent, reasonable attorneys' fees and costs
(including reasonable attorneys' fees and costs incurred by Lender subsequent
to the closing of the Loan in connection with the disbursement, administration,
collection, restructure, amendment or transfer of the Loan), advances,
recording expenses, surveys, title insurance premiums, intangible taxes,
documentary stamps, sales taxes, surtax and other revenue fees, escrow fees,
Architect's and Engineer's costs and inspection fees, expenses of foreclosure
(including attorneys' fees and costs where Lender is a prevailing party) and
similar items, and to allow all closing papers, Loan Documents and other legal
matters to be subject to the approval of Lender's counsel. Under no
circumstances will Lender pay to any third party
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any mortgage brokerage or other fees incurred in connection with this Loan and
Borrower covenants and agrees to indemnify Lender and hold Lender harmless from
any and all such claims for fees or commissions by third parties. Further,
Borrower agrees to Day all of Bank's costs and reasonable attorneys' fees,
including all appellate litigation, involving any of such claims.
11. Borrower's Equity Requirement. Lender reserves the right to
require, at Borrower's expense, a construction cost analysis by Lender's
Engineer or by an expert in the construction cost field, which expert shall be
designated by Lender. If Lender estimates, at any time and from time to time,
that the amount necessary to assure final completion of the construction of the
Improvements including but not limited to interest and other soft or non-
construction budget items during the term of the Loan (the "Total Budget")
shall exceed the amount of the undisbursed Loan proceeds plus the total amount
of all equity investments made or scheduled to be made by Borrower, then Lender
shall have the option to require Borrower (a) to immediately deposit with
Lender the amount of any such difference, in cash or other form satisfactory to
Lender, which amount shall be disbursed toward the Total Budget costs prior to
any advance by Lender under the Loan, or (b) to expend the amount of any such
difference for items included in the Total Budget with satisfactory evidence of
such expenditure being provided to Lender prior to any advance by Lender of the
Loan funds. Lender shall be assured at all times, to its satisfaction, that
the undisbursed Loan funds are sufficient to complete the Improvements in
accordance with the Total Budget and in accordance with the Plans and
Specifications and this Loan Agreement. (Lender reserves the right of
continual verification of adequate equity investments made by Borrower as
herein set forth.) Each such deposit shall be expended before any or any other
Loan disbursements will be made,and it shall be advanced as construction
progresses.
12. Commencement and Completion of Construction. Development of
the Property shall commence within sixty (60) days of this date and subsequent
to the recordation of a Notice of Commencement, and Borrower shall diligently
pursue said construction to completion. Good workmanship and quality materials
shall be utilized. Quality of construction is of the essence and each
construction draw shall be subject to satisfactory quality and completion of
work in place. Borrower shall supply such sums of money and perform such
duties as may be necessary to complete the construction of the Improvements
pursuant to the Plans and Specifications and in full compliance with all terms
and conditions of the Loan Documents, all of which shall be accomplished within
the Term of the Construction Period as defined herein, and without liens,
claims or assessments (actual or contingent) asserted against the Property for
any material, labor or other items furnished in connection therewith, and all
in full compliance with the Florida Construction Lien Law, and further in
compliance with all construction, use, building, zoning and other similar
requirements of any pertinent governmental authority. Borrower will provide to
Lender evidence of satisfactory compliance with all of such requirements upon
request therefor by Lender. Completion of construction shall include but not
be limited to grading, landscaping, adequate sewer, water, electrical, gas,
telephone and other utility facilities, completed streets, sidewalks, drainage
and curbs, both on-site and off-site, public and private. The development of
all land development improvements shall be completed nine (9) months from the
date of Closing of the Loan. The construction and development of any Unit
described herein shall be substantially completed within seven (7) months of
the date that funds are first advanced with respect to the unit ("Term of the
Construction Period"). Borrower shall not be required to substantially
complete said construction within seven (7) months if said completion is
delayed due to any acts of God, emergencies, strikes or other causes out of
Borrower's control. Notwithstanding the Lender's determination that the Term
of the Construction Period
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shall be extended for this reason, the Lender, in its sole discretion at any
time, shall determine the length of the extension period to substantially
complete the construction of the improvements and Borrower shall promptly and
diligently complete said construction therefor. Borrower agrees to amend the
Notice of Commencement to extend the duration of its effectiveness if the
construction is delayed beyond the Term of the Construction Period. The
construction and development of the improvements shall be inspected and
approved by Lender's Inspector. "Substantially Completed" shall mean that the
Improvements have been completed in a sufficient manner to obtain all requisite
Certificates of Occupancy.
13. Access. Except for driveways and roads to be constructed on
the Property, the rights-of-way for all roads necessary for the full
utilization of the Improvements for their intended purposes, have either been
acquired by the appropriate governmental authority or have been dedicated to
public use and accepted by such governmental authority, and all such roads
shall have been completed, or all necessary steps shall have been taken by
Borrower and such governmental authority to assure the complete construction
and installation thereof prior to the date upon which access to the Property
via such roads will be necessary. All curb cuts and traffic signals shown on
the Plans and Specifications are existing or have been fully approved by all
necessary governmental authorities.
14. Right of Lender to Inspect Property and Review Plans. To
permit Lender and its representatives and agents and Lender's Inspector to
enter upon the Property and to inspect the Improvements and all materials to be
used in the construction thereof and to cooperate and cause Contractor to
cooperate with Lender and its representatives and agents and Lender's Inspector
during such inspections (including making available to Lender working copies of
the Plans and Specifications together with all related supplementary
materials); provided, however, that this provision shall not be deemed to
impose upon Lender any obligation to undertake such inspections. Lender shall
designate a construction Inspector to perform various services on behalf of
Lender. The costs of these services shall be charged to and shall be paid by
Borrower. The services performed by Lender's Inspector include but are not
limited to review of the Plans and Specifications, review of any and all
construction contracts, review of any and all other documents in the possession
or control of Borrower or any general contractor relating to the construction
of Improvements and all proposed changes to them, inspection of construction
work for conformity with the approved Plans and Specifications and approval of
requests for Loan disbursements. Borrower's architect and engineer shall
perform those services described in the architecture and engineer contracts,
including approvals of requisitions for payment required herein and the
submission to Lender of the architect's and engineer's certification required
prior to final disbursement.
15. Correction of Defects. To promptly correct any defect in the
Improvements or any departure from the Plans and Specifications not permitted
herein which has not been approved previously by Lender. The advance of any
Loan proceeds shall not constitute a waiver of Lender's right to require
compliance with this covenant.
16. Sign Regarding Financing. To promptly erect and maintain on
the Property, an a site suitable to Lender, a sign (1) , to be provided at
Lender's expense, indicating that Lender is providing financing, all to
Lender's reasonable satisfaction, and to prevent the destruction or removal of
said sign without Lender's prior written approval; provided, however, such sign
shall not violate any ordinance or restrictive covenant.
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17. Approval of Change Orders. To permit, during the construction
of the Improvements, no individual deviation from the Plans and specifications
which exceeds $5,000.00, and to permit no multiple deviations which, in the
aggregate, exceed $10,000.00, without Lender's prior written approval.
Notwithstanding the foregoing, no approval of Lender shall be required in
connection with changes requested by a purchaser under an approved Sales
Contract provided that the purchaser is required to pay Borrower for the cost
of all such changes under the terms of such approved Sales Contract.
Regardless of amount, Borrower shall submit all change orders to Lender within
five (5) days of the submission thereof to the Contractor.
18. Books and Records. To keep and maintain proper and accurate
books, records and accounts reflecting all items of income and expense of
Borrower in connection with the Property and the construction thereon; and upon
the request of Lender, to make such books, records and accounts immediately
available to Lender for inspection or independent audit. Such inspection shall
take place in Borrower's offices during normal business hours.
19. Financial and Operating Statements.
(a) To submit to Lender quarterly financial statements,no
later than 45 days after each quarter, certified to Lender or on a
Lender approved form, prepared in accordance with generally-accepted
accounting principles with respect to Borrower.
(b) To submit to Lender annual financial statements (both
consolidating and consolidated statements), including cash flows,
certified to Lender or on a Lender approved form, prepared in
accordance with generally-accepted accounting principles, with respect
to Borrower and the Guarantor. The statements shall be audited by a
certified public accountant.
20. Monthly Reports. To submit to Lender monthly reports
indicating the sales status of the Project along with a copy of all executed
contracts.
21. Additional Documents. To perform hereunder as follows:
(a) Construction. To furnish to Lender all instruments,
documents, initial surveys, footing or foundation surveys (following
the pouring of the final slab), certificates, plans and
specifications, appraisals, title insurance and other insurance,
reports and agreements and upon request (i) financial statements of
Borrower, and the Guarantor; (ii) other or further information as to
the financial condition of Borrower, and the Guarantor; (iii) the
names of all persons with whom Borrower has contracted or intends to
contract for major contracts for the construction of the Improvements
or the furnishing of labor or materials therefor (for the purposes
hereof, a major contract shall be any contract in excess of $20,000.00
designated by Lender to be a Major Contract); (iv) copies and/or lists
of all paid and/or unpaid bills for labor and materials with respect
to the construction of the Improvements; and (v) budgets of Borrower
and revisions thereof showing the estimated cost of construction of
the Improvements and funds required at any given time to complete and
pay or such construction, and each and every other document and
instrument required to be furnished by the terms of the Commitment.
(b) Preservation of Security. To sign and deliver to
Lender such documents, instruments, assignments and other writings,
and to do such other acts necessary or desirable to preserve and
protect the collateral at any time securing or intended to secure the
Note, as Lender may require.
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(c) This Loan Agreement. To do and execute all and such
further lawful and reasonable acts, conveyances and assurances in the
law for the better and more effective carrying out of the intents and
purposes of this Loan Agreement, as Lender shall reasonably require
from time to time.
22. Further Encumbrances. There shall be no secondary or further
financing of the personal or real property now or hereafter located on the
Property, or any part thereof, without Lender's prior written consent, which
consent Lender may arbitrarily withhold.
23. Leases and Sales Contracts Affecting Property. Borrower shall
not enter into any sales contract(s) affecting any portion of the Property for
which Borrower shall receive Loan monies pursuant to Note II upon terms which
are materially different from the sales contract previously approved by Lender
without Lender's prior written consent. If Lender is not and shall not fund
the construction of a particular Unit pursuant to Note II, Borrower shall
provide Lender with copies of the executed contract for the sale of said Unit
within ten days of execution of said Unit Contract, however, Lender shall have
no approval rights of contracts for Units which are not being funded pursuant
to Note II. Borrower shall not enter into any lease affecting any portion of
the Property.
24. Mortgagee Title Insurance. Borrower warrants that there are
no matters pending against Borrower or the project which could result in a
change in the status of the title to the Property in the period of time between
the effective date of the commitment for mortgagee title insurance and the
recording of the Mortgage (the "gap"). Borrower covenants that it shall not
commit any act or permit any act to be committed which might result in a change
in the status of the title to the Property during the gap, and Borrower shall
indemnify Lender and the title insurance agent and the title insurance
underwriter from any and all losses, costs and expenses (including reasonable
attorneys, fees and costs) suffered as a result of a change in the status of
the title to the Property during the gap.
25. Warranties and Representations True. Borrower's warranties,
representations and covenants in the Loan Documents shall be true and correct
on and as of the date of each advance with the same effect as if made on such
date.
26. Florida Construction Contract Prompt Payment Law.
(a) Borrower shall fully and timely comply with all of
the provisions of the Florida Construction Contract Prompt Payment
Law, Chapter 92-286, Laws of Florida, as amended from time to time.
Prior to the commencement of construction, and throughout the term of
the construction period of the Loan, the Borrower shall provide to the
Lender, a true, complete and correct list of all Major Subcontractors,
Major Contract Materialmen, and suppliers of custom fabricated items
which are to be incorporated into the Improvements. The Borrower shall,
at all times during the term of the construction period of the Loan,
provide to the Lender, within 10 days of the Borrower's receipt
thereof, Claims of Lien, and Demands Sworn Statement of Account,
issued by any party, whether pursuant to the Notice of Commencement or
otherwise,in connection with the Project.
(b) The Borrower and Lender stipulate and agree that for
purposes of section 713.3471(2), none of the construction loan
proceeds (as referred to in the statute) have been designated as
"Designated Construction Loan Proceeds", as defined in and by such
statute. In the event
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that the stipulation contained in this paragraph is deemed invalid, or
unenforceable, in whole or in part, then, in such event, to the extent
of such invalidity or unenforceability, the Borrower shall be deemed
to have not consented to the disbursement of any reallocated loan
proceeds, except where the Lender, prior to any disbursement not in
accordance with the original allocation of loan proceeds,
affirmatively notifies the Borrower in writing that it will avail
itself of a provision in the Mortgage, or this Loan Agreement,
permitting such reallocated disbursement ("Lender's Reallocated
Disbursement"). In the event that the Lender is going to make a
Lender's Reallocated Disbursement, the Borrower agrees that it shall,
within 3 business days of a request by the Lender, provide to the
Lender a written list, certified by an officer or official of the
Borrower having knowledge of the circumstances, and authority to
provide certificates on behalf of the Borrower, containing the name
and address of all contractor(s) (including all parties who may be
deemed a Contractor as a multiple prime contractor, or by virtue of
the relationship between the Borrower and any other party or entity
furnishing labor, material or services to the Project), and all other
actual and potential lienors, including, but not limited to, those who
have served a statutory notice to owner upon the Borrower in order to
insure that the Lender will be able to comply with the requirements of
Section 713.3471(2)(b) of the Florida Statutes.
(c) in the event that the Borrower requests a
reallocation of any portion of the construction loan proceeds in
accordance with the provisions of section 713.3471 of the Florida
Statutes, such reallocation request will be considered in accordance
with the terms and conditions of this Loan Agreement, and the Borrower
shall fully and timely comply with all of the Borrower's obligations
under section 713.3471(2)(a) of the Florida Statutes, including, but
not limited to, the providing of all notices required thereby, and
Borrower shall provide to Lender written sworn statements executed by
contractor(s) (as defined above) and all other actual or potential
lienors (as defined above), confirming that the contractor(s) or other
lienor or third party has received the written notice required by
section 713.3471 (2)(a) of the Florida Statutes. The Lender shall
not be obligated to approve a reallocation requested by the Borrower,
or to disburse funds pursuant to an approved reallocation request made
by the Borrower, until and unless the Borrower has complied with all
of its obligations relating to such disbursement under the terms and
provisions of this Loan Agreement and section 713.3471 of the Florida
Statutes. Nothing contained herein shall be deemed to constitute a
waiver by the Lender of any of its rights relating to the approval of
disbursement requests or construction budget or allocations provided
elsewhere in this Loan Agreement.
ARTICLE VII
DEFAULT'S
Upon the occurrence of any one or more of the following circumstances,
after the passage of time provided herein ("Event(s) of Default"), Lender
shall, at its option, be entitled, in addition to and not in lieu of the
remedies provided for the Note, Mortgage, or other Loan Documents, to proceed
to exercise any remedy described herein:
1. Default Under Promissory Note. Failure by Borrower to pay,
within fifteen (15) days when due and payable, any installment of interest:,
principal or any other payment required to be paid by this Loan Agreement, the
Mortgage, the Note or any other Loan Documents; or
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2. Default Under Loan Documents. Failure by Borrower or
Guarantor to duly observe any other covenant, condition or agreement of this
Loan Agreement, the Mortgage, the Note, the commitment, or any Loan Document or
any other security instrument given hereunder not involving the payment of
money which is not cured within fifteen (15) days after Borrower's receipt of
written notice of default, or such longer period of time if the default, by its
nature cannot be cured within said fifteen (15) day period provided Borrower
commences the curative action within said fifteen (15) day period and
diligently pursues the curative action until completion, but in no event shall
this provision be deemed or construed to extend the period for completion of
construction of the Improvements as provided in the Loan Agreement; or
3. Breach of Warranty. Any warranty made or agreed to be made
herein or in any related Loan Document heretofore, concurrently or hereafter
executed shall be breached by Borrower or Guarantor or shall prove to be false
or misleading; or
4. Filing of Liens Against the Property. Any lien for labor,
material, taxes or otherwise shall be filed against the Property or otherwise
incurred and not be (i) removed; (ii) bonded off; or (iii) if Borrower files a
Notice of Contest and does not place an amount equal to one hundred ten percent
(110%) of the amount of the lien with TICOR Title Insurance Company within
fifteen (15) days from Borrower's receipt of notice of the filing any such
lien; or
5. Material Adverse Change. Borrower or any Guarantor shall
suffer any material adverse change in either's respective financial condition
which, in Lender's reasonable opinion, could impair the ability of Borrower to
perform all of its duties and obligations under the Loan Documents; or
6. Deficiency. In Lender's sole opinion, the cost of completing
the Improvements in accordance with the Plans and Specifications exceeds the
total amount set forth in the Loan Budget, and Borrower has failed to make
arrangements satisfactory to Lender, in Lender's sole discretion, for the
payment of such additional costs; or
7. Levy upon the Property. A levy be made under any process on,
or a receiver be appointed for the Property or any other property of Borrower
which is not discharged within thirty (30) days; or
8. Bankruptcy or Insolvency of Borrower.
(a) The filing by Borrower or Guarantor of a voluntary or
involuntary petition in bankruptcy for adjudication as a bankrupt or
insolvent, or the filing by Borrower or Guarantor of any petition or
answer seeking or acquiescing in any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
for itself under any present or future federal, state or other
statute, law or regulation relating to bankruptcy, insolvency or other
relief for debtors, or Borrower or Guarantor seeking or consenting to
or acquiescing in the appointment of any trustee, receiver or
liquidator of Borrower or Guarantor or of all or any substantial part
of the Property or of any or all of the rents, revenues, issues,
earnings, profits or income thereof, or the making of any general
assignment for the benefit of creditors, or written admission by
Borrower or Guarantor of its inability pay its debts generally as they
become due; or
(b) The filing of a petition against Borrower or
Guarantor which is not dismissed within forty-five days thereof
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under
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any present or future federal, state or other statute, law or
regulation relating to bankruptcy, insolvency or other relief for
debtors, or the appointment of any trustee, receiver or liquidator of
Borrower or Guarantor of all or any substantial part of the Property
or of any or all of the rents, revenues, issues, earnings, profits or
income thereof without Borrower's consent or acquiescence; or
9. Assignment for the Benefit of Creditors. Borrower or
Guarantor shall make a general assignment for the benefit of creditors; or
10. Transfer of Property. The sale transfer, conveyance of
further encumbrance all or any part of its interest in the Property or in any
or the personalty located thereon or used or intended to be used in connection
therewith whether voluntary or by operation of law, without Lender's prior
written consent, excepting only transfers due to involuntary condemnation which
do not render the Property useless for its intended purpose hereunder. For
purposes of this paragraph, an assignment, sale or transfer shall also include
any assignment, sale, transfer hypothecation or any transfer or any stock of
the Borrower other than to an existing shareholder; or
11. Abandonment of Cessation of Construction. Construction of the
Improvements shall be abandoned or shall cease for any reason and not be
resumed within fifteen (15) business days thereafter unless such cessation is
due to any reason set forth herein, including to strike or unavailability of
materials unless such events of force majeure shall delay construction so long
that the Improvements reasonably cannot be completed within the time allocated
for completion herein; or
12. Lien Against Property. Borrower grants any mortgage, lien or
encumbrance upon the Property, except impact fees which shall be paid by
Borrower prior to the funding by Lender on a Unit; or
13. Encroachments and Permits. All or any portion of the
Improvements which encroach upon any street or road setback or easement or upon
any adjoining property, or violate any ordinance, regulation, rule or direction
of any federal or state agency, or of any governmental or quasi-governmental
authority, or any zoning setback line, or the building permit(s) shall be
revoked or suspended or shall lapse, or if any building or other permit or
license shall be conditional in nature and Borrower shall fail to punctually
satisfy the conditions so as to prevent its invalidity; or
14. Unauthorized Work. Borrower shall, without Lender's prior
written consent, undertake or contract for work on the Property outside of or
beyond the scope of the Plans and Specifications with the exception of any
change order which is in an amount less than $5,000.00 unless otherwise
authorized pursuant to the terms of this Loan Agreement; or
15. Breach. A violation or breach shall occur in any agreement,
covenant or restriction affecting title to the Property, including but not
limited to matters appearing as permitted exceptions in the Title Policy which
is not cured within fifteen (15) days after Borrower's receipt of written
notice of breach, or such longer period of time if the breach, by its nature
cannot be cured within said fifteen (15) day period provided Borrower commences
the curative action within said fifteen (15) day period and diligently pursues
the curative action until completion; or
16. Commencement of Construction. Construction of the Improvements
has not commenced within sixty (60) days of the date hereof; or
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17. Filing of Notice. The filing for record by Borrower or
Guarantor of a notice limiting the maximum amount which may be secured by the
Mortgage pursuant to Section 697.04(1)(b) of the Florida Statutes (1993).
18. Cross-Default of Note. Any breach or event of default pursuant
to Note I and Note II shall be an event of default pursuant to both Note I and
Note II.
ARTICLE VIII
REMEDIES OF LENDER
Upon the occurrence of any one or more of the circumstances set out as
an Event of Default herein, Lender shall, at its option, be entitled, in
addition to and not in lieu of the remedies provided for in the Note, Mortgage
or other related Loan Documents, to proceed to exercise any of the following
remedies:
1. Default Constitutes Default Under Loan Documents. Borrower
agrees that the occurrence of such Event of Default shall constitute a default
under each of the Loan Documents, thereby entitling Lender (a) to exercise any
of the various remedies therein provided, including the acceleration of the
indebtedness evidenced by the Note and the foreclosure of the Mortgage, and (b)
cumulatively to exercise all other rights, options and privileges provided by
law or in equity.
2. Acceleration of Maturity.
(a) In the event any payment of the principal sum, or any
installment thereof, or any interest thereon, is not made when payment is due,
after expiration of any applicable grace period the Loan may be declared in
default and the entire amount of the Note or so much as may have been advanced,
including the principal balance then outstanding, together with all interest
accrued thereon, shall be accelerated and shall become immediately due and
payable, at the option of Lender and without notice (the Borrower hereby
expressly waives notice of such default), time being of the essence of this
agreement.
(b) In the event Borrower fails to perform any covenant,
condition or agreement required in this Loan Agreement, the Note, Mortgage, or
any other related Loan Documents, after the expiration of any applicable grace
period, Lender may declare the Loan in default and the entire amount of the
Note, including the principal balance then outstanding, together with all
interest accrued thereon, shall be accelerated and declared to be immediately
due and payable at the option of Lender.
3. Lender's Right to Enter and Take Possession, Operate and Apply
Income.
(a) If an Event of Default shall have occurred and be
continuing, Borrower agrees that upon Lender's demand, Borrower shall forthwith
surrender to Lender the actual possession and, to the extent permitted by law,
Lender itself or by such officers or agents as it may appoint, may enter and
take possession of all the Property and may exclude Borrower and its agents and
employees wholly therefrom and may have joint access with Borrower to the
books, papers and accounts of Borrower.
(b) If an Event of Default shall have occurred and be
continuing, and if Borrower shall for any reason fail to surrender or deliver
all or any portion of the Property to Lender upon demand, Lender may obtain a
judgment or decree conferring on Lender the right to immediate possession or
requiring Borrower to deliver immediate possession of all or part of the
Property to Lender.
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(c) Borrower will pay to Lender upon demand, all expenses
of obtaining such judgment or decree (including all expenses incurred by Lender
as a result of any appeal), together with reasonable compensation to Lender,
its attorneys and agents; and all such expenses and compensation shall be
secured by the lien of the Mortgage.
(d) Upon every such entering upon or taking of
possession, Lender may hold, store, use, operate, manage and control the
Property and conduct Borrower's business on the Property and, from time to
time:
(i) make all maintenance, repairs, renewals,
replacements, additions, betterments and improvements necessary and
proper to the Property and purchase or otherwise acquire additional
fixtures, personalty and other property;
(ii) insure the Property;
(iii) manage and operate the Property and exercise
all of the rights and powers of Borrower (in Lender's name or
otherwise) with respect to the management and operation of the
Property;
(iv) enter into any and all agreements with
respect to the exercise by others of any of the powers herein granted
to Lender;
(v) to perform or cause to be performed any and
all work and labor necessary to complete the Improvements in
accordance with the Plans and Specifications; and
(vi) to disburse that portion of the Loan proceeds
not previously disbursed (including any retainage) to the extent
necessary to complete construction of the Improvements in accordance
with the Plans and Specifications, and if such completion requires a
larger sum than the remaining undisbursed portion of the Loan, to
disburse such additional funds, all of which funds so disbursed by
Lender shall be deemed to have been disbursed to Borrower and shall be
secured by the Mortgage. For this purpose, Borrower hereby
constitutes and appoints Lender its true and lawful attorney-in-fact
with full power of substitution to complete the construction of the
Improvements in Borrower's name and hereby empowers Lender as said
attorney-in-fact to take all actions necessary in connection
therewith, including but not limited to the following: (i) to use any
funds of Borrower, including any balance which may be held in escrow
and any funds which may remain unadvanced hereunder, for the purpose
of completing the Improvements in the manner called for by the Plans
and Specifications; (ii) to make such additions and changes and
corrections in the Plans and Specifications which shall be necessary
or desirable to complete the Improvements in substantially the manner
contemplated by the Plans and Specifications; (iii) to employ such
contractors, subcontractors, agents, architects and engineers and
inspectors as shall be required for said purposes; (iv) to pay, settle
or compromise all existing or future bills and claims which are or may
be liens against the Property or which may be necessary or desirable
for the completion of the Improvements or the clearance of title to
the Property;(v) to execute all applications and certificates in
Borrower's name 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 may do in its 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 by death
or otherwise. Said attorney-in-fact shall also have power to
prosecute and defend all actions or proceedings in connection with the
construction of the
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Improvements and to take such action and require such performance as
it deems necessary. In accordance therewith, Borrower hereby assigns
and quitclaims to Lender all sums to be advanced hereunder, including
retainage and any sums in escrow, conditioned upon the use of said
sums, if any, for the completion of the Improvements.
all as Lender may, from time to time, determine to be to its best advantage;
and Lender may collect and receive all the income, revenues, rents, issues and
profits of the same, including those past due as well as those accruing
thereafter, and after deducting:
(aa) All expenses of taking, holding, managing and
operating the Property (including compensation for the
services of all persons employed for such purposes);
(bb) The cost of all such maintenance, repairs,
renewals, replacements, additions, betterments, improvements,
purchases and acquisitions;
(cc) The cost of such insurance;
(dd) Such taxes, assessments and other charges prior
to the lien of the Mortgage as Lender may determine to pay;
(ee) other proper charges upon the Property or any
part thereof; and
(ff) The reasonable compensation, expenses and
disbursements of the attorneys and agents of Lender, including
attorneys, fees and costs for any appeal.
Lender shall apply the remainder of the sums received by Lender, first to the
payment of accrued interest and then to the payment of principal and all other
sums or indebtedness that may be due hereunder.
(e) Whenever all interest, principal installments and
other amounts due under the terms of the Note and Mortgage shall have been paid
and all defaults made good, Lender shall surrender possession of the Property
to Borrower, its successors or assigns. Lender's right to take possession,
however, shall exist if any subsequent Event of Default shall occur and be
continuing.
4. Receiver. If any Event of Default shall have occurred and be
continuing, Lender shall be entitled, as a matter of strict right and without
regard to the value or occupancy of the Property, to the appointment of a
receiver who will enter upon and take possession of the Property, collect the
rents and profits therefrom and apply the same as the court may direct. The
receiver shall have all the rights and powers permitted under the laws of
Florida. All costs and expenses (including receiver's fees, attorneys' fees
and costs, including attorneys' fees and costs incurred as a result of any
appeal, and agents' compensation) incurred in connection with the appointment
of a receiver shall he secured by the Mortgage. The right to enter and take
possession of the Property, to manage and operate the same and to collect the
rents, issues and profits thereof (whether by a receiver or otherwise) shall be
cumulative to any other right or remedy hereunder or afforded by law and may
be exercised by Lender concurrently therewith or independently thereof. Lender
shall be liable to account only for such rents, issues and profits actually
received by Lender whether received pursuant to this paragraph 4 or the
preceding paragraph 3 above. Notwithstanding the appointment of any receiver,
trustee or other custodian, Lender shall be entitled, as pledgee, to the
possession and control of any cash or other instruments, at the time held by or
payable or deliverable under the terms of this Loan Agreement or the Mortgage
to Lender.
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5. Lender's Power of Enforcement. If any Event of Default shall
have occurred and be continuing, whether Lender takes possession or not, Lender
may proceed by suit at law or in equity (or by any other appropriate proceeding
or remedy) to enforce payment of the Note or the performance of any term of the
Mortgage, this Loan Agreement, the Loan Documents or any other right, to
foreclose the Mortgage and to sell the Property in its entirety or in separate
parcels, under the judgment or decree of a court or courts of competent
jurisdiction and to pursue any other remedy available to it, all as Lender
shall deem most effectual. Lender may take action either by judicial
proceedings or by the exercise of its powers to take possession, as Lender may
determine.
6. Principal and Interest Become Due on Foreclosure. Upon
commencement of suit or foreclosure of the Mortgage, the unpaid principal
balance of the Note, if not previously accelerated and declared due for
Borrower's default, and the interest accrued thereon, together with all other
sums owed by Borrower to Lender that remain unpaid at the time of the
commencement of such suit or foreclosure, together with accrued interest
thereon, shall be immediately due and payable.
7. Purchase by Lender. Upon any foreclosure sale pursuant
to judicial proceedings, Lender may bid for and purchase all or any portion of
the Property and, upon compliance with the terms of sale, may hold, retain and
possess and dispose of the Property without further accountability to Borrower.
8. Waiver of Appraisement, Valuation, Stay, Extension and
Redemption Laws. Borrower agrees (to the full extent permitted by law) that
in case of a default on its part hereunder, neither Borrower nor anyone
claiming by, through or under it, shall or will set up, claim or seek to take
advantage of any appraisement, valuation, stay, extension or redemption laws
now or hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of the Mortgage or the final and absolute sale of the Property or
the final and absolute possession of the Property by the purchasers in
foreclosure, and Borrower, for itself and for all who may at any time claim
through or under it, hereby waives (to the full extent that it may lawfully do
so) the benefit of all such laws except Borrower's statutory right of
redemption for the ten (10) day period between issuance of a certificate of
sale and the issuance of a certificate of title, and any and all right to have
the assets comprising the Property marshalled upon any foreclosure and Borrower
agrees that the Property may be sold in its entirety.
9. Suits to Protect the Property. Lender shall have power: (a)
to institute and maintain such suits and proceedings as it may deem expedient
to prevent any impairment of the Property by any acts which may be unlawful or
which violate the Mortgage or this Loan Agreement; (b) to preserve or protect
Lender's interest in the Property and in the income, revenues, rents and
profits arising therefrom; and (c) to restrain the enforcement of or compliance
with any legislation or other government enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of or compliance with
such enactment, rule or order would impair Lender's security. All payments
made or costs or expenses incurred by Lender in connection with this paragraph,
including reasonable attorneys, fees and costs, whether or not suit is filed
and, if filed, for all appeals, shall he secured by the Mortgage and shall be
immediately repaid by Borrower to Lender on demand, with interest thereon from
the date incurred until the date repaid by Borrower at the same rate as
provided by the Note.
10. Borrower to Pay the Note an Any Default in Payment;
Application of Monies by Lender. If default shall be made in the payment of
any amount due under the Note, Mortgage, this Loan Agreement or any Loan
Documents, then after the expiration of any applicable grace period, upon
Lender's demand, Borrower will pay to Lender the whole amount due and payable
under the Note; and in case
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Borrower shall fail to pay the same upon demand, Lender shall be entitled to
sue for and to recover judgment for the whole amount so due and unpaid together
with all costs and expenses, including compensation, costs, expenses and
disbursements of Lender's agents and attorneys, whether or not suit is filed,
and if filed, for all appeals.
Lender shall be entitled to sue and recover judgment as aforesaid
either before, after or during the pendency of any proceeding for the
enforcement of the Mortgage, and the right of Lender to recover such judgment
shall not be affected by any taking, possession or foreclosure sale hereunder
or by the exercise of any other right, power or remedy for the enforcement of
the terms of the Mortgage or the foreclosure of the lien hereof.
In case of a foreclosure sale of all or any part of the Property and
of the application of the proceeds of sale to the payment of the debt secured
by the Mortgage, Lender shall be entitled to enforce payment of and to receive
all amounts then remaining due and unpaid upon the Note, and Lender shall be
entitled to recover judgment for any portion of the debt remaining unpaid, with
interest.
Borrower agrees, to the full extent that it may lawfully so agree,
that no recovery of any such judgment by Lender and no attachment or levy of
any execution upon any such judgment upon any of the Property or upon any other
property shall in any manner or to any extent affect the lien of the Mortgage
upon the Property or any part thereof or any lien, rights, powers or remedies
of Lender hereunder, but such lien, rights, powers and remedies shall continue
unimpaired.
Any money collected by Lender or received by Lender under this
paragraph 10 shall be applied as follows:
(a) to the payment of the compensation, expenses, costs and
disbursements of the agents and attorneys of Lender;
(b) to the payment of the amounts of accrued interest and
principal and any other amount due and unpaid under the Note; and
(c) to the payment of all other indebtedness due Lender under
any other loans secured by the Mortgage.
11. Delay Or Omission - No Waiver. No delay or omission of
Lender to exercise any right, power or remedy accruing upon any default shall
impair any such right, power or remedy or shall be a waiver of any such default
or acquiescence therein; and every right, power and remedy given by this Loan
Agreement, any Loan Document or by law to Lender may be exercised from time to
time and as often as may be deemed expedient by Lender.
12. No Waiver Of One Default To Affect Another, Etc. No waiver
of any default hereunder shall extend to or shall affect any subsequent or any
other then existing default or shall impair Lender's rights, powers or remedies
for the defaults not waived by Lender.
If Lender: (a) grants forbearance or an extension of time for the
payment of any sums secured by the Mortgage; (b) takes other or additional
security for the payment of the Note; (c) waives or does not exercise any right
granted in this Loan Agreement, the Mortgage or in the Note or any Loan
Documents; (d) releases any part of the Property from the lien of the Mortgage
or otherwise changes any of the terms of this Loan Agreement, the Note or
Mortgagee or any Loan Documents; (e) consents to the filing of any map, plat or
replat of the Land; (f) consents to the granting of any easement on the Land;
or (g) makes or consents to any agreement subordinating the lien of the
Mortgage, any such act or
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omission by Lender shall not release, discharge, modify, change or affect
Borrower's original liability under the Note, the Mortgage, this Loan
Agreement or otherwise, or the original liability of any maker, general
partner, co-signer, endorser, surety or guarantor of the Note, nor shall any
such act or omission preclude Lender from exercising any right, power or
privilege granted in this Loan Agreement or the Mortgage in the event of any
other concurrent or subsequent default, nor (except as otherwise expressly
provided in an instrument or instruments executed by Lender) shall the lien of
the Mortgage be altered thereby. In the event of the sale or transfer by
operation of law or otherwise of all or any part of the Property, Lender,
without further notice, is authorized and empowered to deal with any such
transferee as fully and to the same extent as it might deal with Borrower,
without in any way releasing or discharging any of Borrower's liabilities or
obligations hereunder.
13. Discontinuance of Proceedings - Position of Parties Restored.
In case Lender shall have proceeded to enforce any right or remedy under the
Mortgage by foreclosure, entry or otherwise and such proceedings shall have
been discontinued or abandoned for any reason, then and in every such case,
Borrower and Lender shall be restored to their former positions and rights
hereunder and all rights, powers and remedies of Lender shall continue as if no
such proceeding occurred.
14. Remedies Cumulative. No right, power or remedy conferred
upon or reserved to Lender by this Loan Agreement is intended to be exclusive
of any other right, power or remedy, but each and every such right, power and
remedy shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder or now or hereafter existing at law or
in equity or by statute.
ARTICLE IX
MISCELLANEOUS
In the event of a conflict with other provisions of this Loan
Agreement, the provisions of this Article shall control.
1. Binding Terms. All of the obligations, covenants, terms and
conditions hereof shall be binding obligations, covenants, terms and conditions
throughout the term of this loan.
2. Bank Accounts. Borrower shall open and maintain during the
entire term of this Loan all of its accounts with respect to the Project at
Barnett Bank of South Florida, N.A, including, without limitation, its
operating account with respect to the Project and the construction fund
account.
3. Monthly Reports. Borrower shall submit monthly reports to
Lender indicating the sales status of the Project along with a copy of all
executed sales contracts.
4. Certificate Re: Application of Proceeds and Remaining Costs.
Bills or statements for all expenses for which a disbursement is requested
shall, at Lender's option, be presented to Lender along with both a
certification from Borrower, Architect, and Contractor that all labor and
materials for which funds are requested have gone into the Project according to
the approved Plans and Specifications, and a certification from all of said
parties setting forth the estimated remaining cost of construction to complete
the Project.
5. Payment of Construction Costs. Lender shall be under no
duty or obligation to anyone to ascertain whether Borrower has used or will use
the Loan proceeds for the payment of bills incurred by Borrower in connection
with the construction of the Improvements. Payment of all bills for labor and
materials in
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connection with the construction of the improvements shall be Borrower's
responsibility, and Lender's sole obligation shall be to advance the proceeds
of the Loan subject to, and in accordance with this Loan Agreement.
6. Recommendation By Lender's Inspector. At, no time shall
Lender be obligated to disburse funds in excess of that recommended by Lender's
Inspector.
7. Notices To All Parties. All notices, statements, requests
and demands given to or made upon any party hereto in accordance with the
provisions of this Loan Agreement shall be deemed to have been given or made
when hand delivered or when deposited in the Certified Mails of the United
States, Return Receipt Requested, postage prepaid, addressed to such party at
the address or addresses hereinabove stated following the names of the
respective parties, or to a different address in accordance with any unrevoked
written direction from such party to the other parties hereto, except in cases
where it is expressly provided herein that such notice, request or demand shall
not be effective until received by the party to whom it is intended.
8. No Partnership Or Joint Venture. Nothing herein contained nor
the acts of the parties hereto shall be construed to create a partnership or
joint venture between Borrower and Lender, and the parties hereby acknowledge
that no such relationship exists between them.
9. No Assignment By Borrower. This Agreement may not be assigned
by Borrower without the prior written consent of Lender. If Lender approves an
assignment hereof by Borrower, Lender shall be entitled to make advances to
such assignee and such advances shall be evidenced by the Note and secured by
the Mortgage and related Loan Documents. Borrower shall remain liable for
payment of all sums advanced hereunder before and after such assignment and all
Guarantors shall remain liable under their respective guaranties.
10. Usury. It is the intention of the parties to comply with all
applicable usury laws. Accordingly, it is agreed that notwithstanding any
provision to the contrary in the Loan Documents, in no event shall the Loan
Documents require the payment or permit the collection of interest in excess of
the maximum amount permitted by such laws. If any such excess of interest is
contracted for, charged or received under the Loan Documents, or in the event
the maturity of the indebtedness evidenced by such Loan Documents is
accelerated in whole or in part, so that under any such circumstance, the
amount of interest contracted for, charged or received shall exceed the maximum
amount of interest permitted by the applicable usury laws, then in any such
event (a) the provisions of this paragraph shall govern or control, (b) neither
Borrower nor any other person or entity now or hereafter liable for repayment
of the Loan shall be obligated to pay the amount of such interest not permitted
by the applicable usury laws, (c) any such excess which may have been collected
shall be refunded to Borrower and (d) the effective rate of interest for the
Note shall be automatically reduced to the maximum lawful rate allowed under
applicable usury laws.
11. Time. Time is of the essence of this loan Agreement.
12. Waiver. No waiver of any term, provision, condition, covenant
or agreement herein contained shall be effective unless set forth in a writing
signed by Lender, and any such waiver shall be effective only to the extent set
forth in such writing. No failure by Lender to exercise, or no delay by Lender
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or
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further exercise thereof, or the exercise of any right or remedy provided by
law. No notice to or demand on Borrower in any case shall, in itself, entitle
Borrower to any other or further action in any circumstance without notice or
demand.
13. Conflict. The provisions of this Loan Agreement shall control
in the event of any conflict among it, the Commitment, the Note, the Mortgage
and any other Loan Document.
14. Additional Financing. The Lender's obligation to fund this
Loan is limited to the principal amount set forth in the Note herein and the
Lender is not obligated to fund any additional amounts other than as set forth
in the Note herein. It is expressly understood that Borrower has sought and
agreed to the terms for repayment set forth in the Note and it is the burden of
the Borrower to provide any permanent financing, bridge financing, or other
financing which may be necessary to repay this Loan on or prior to the Maturity
date. It is expressly understood that it is not the responsibility of the
Lender to provide to Borrower further financing of the Project or the
repayment of this Loan.
15. Right of First Offer. Lender shall have an absolute a right of
first offer to finance the acquisition, development, and construction with
respect to an additional 56 lots current under option by Borrower pursuant to
that Option Agreement dated September 26, 1995 by and between Borrower and WCI
Communities Limited Partnership. However, under no circumstances shall Lender
be obligated to provide such construction financing.
16. Guarantor's Minimum Tangible Net Worth. Throughout the term of
the Loan, Guarantor shall maintain a minimum tangible net worth, calculated in
accordance with generally-accepted accounting principles of not less than Ten
Million and 00/100 Dollars ($10,000,000.00) and a maximum debt to tangible net
worth ratio of 5.5 to 1.
17. Borrower's Minimum Tangible Net Worth. Throughout the term of
the Loan, Borrower shall maintain a minimum tangible net worth, calculated in
accordance with generally-accented accounting principles of not less than One
Million and 00/100 Dollars ($1,000,000.00) plus fifty percent (50%) of future
net, after tax, income.
18. Employment. Throughout the term of the Loan Borrower
shall not change the involvement and responsibility of David Adler with respect
to the Project without the approval of Lender.
19. Homeowner's Documents. Lender and Lender's counsel must
approve all proposed master association and homeowners' association
documentation with respect to Lender being obligated to fund the Project prior
to any advances under Note II.
20. Letter Of Credit. In connection with Loan, after closing
Lender agrees to issue a standby letter of credit (the "LC") or letters of
credit in the aggregate amount not to exceed One Hundred Fifty Thousand and
00/100 Dollars ($150,000.00) for the benefit of Borrower with respect to
subdivision improvements associated with the Project, provided Borrower
executes Lender's standard letter of credit documentation in connection with the
issuance of each LC and Borrower pays to Lender a letter of credit fee with
respect to each LC in the amount of greater of one percent (1%) of the amount
of such LC, or (ii) Three Hundred Fifty Dollars ($350.00). One Hundred Fifty
Thousand and 00/100 Dollars ($150,000.00) under Note I shall be reserved to
fund Borrower's obligations with respect to any advances under the LC.
21. Joinder. Within a reasonable period of time after receipt of
written request by the Borrower (in no event to exceed twenty (20) days from
the date of request), the Lender agrees to
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join in and/or consent ("Joinder") to such documents as may be reasonably
required (a) in order to obtain governmental approvals affecting the Property
which are necessary to complete construction of the Improvements; (b) for the
recording of the homeowner's documents, provided same is in form and content
satisfactory to Lender; and (c) for the dedication of and/or granting of
easements for utilities and drainage as may be necessary in connection with the
development of the Property, provided that the location and terms of such
easements are acceptable to Lender.
ARTICLE X
GENERAL CONDITIONS
The following conditions shall apply throughout the term of this Loan
Agreement:
1. Rights Of Third Parties. All conditions of Lender's
obligations hereunder, including the obligation to make advances, are imposed
solely and exclusively for the benefit of Lender, its successors and assigns,
and no other person other than the Borrower, shall have standing to require
satisfaction of such conditions in accordance with their terms or be entitled
to assume that Lender will refuse to make advances in the absence of strict
compliance with any or all thereof, and no other person, other than the
Borrower, under any circumstance, shall be deemed to be a beneficiary of such
conditions, any and all of which Lender freely may waive in whole or in part at
any time if, in its sole discretion, it deems it desirable to do so. In
particular, Lender makes no representation and assumes no obligation as to
third parties concerning the quality of the construction of the Improvements by
Borrower or the absence therefrom of defects. In this connection, Borrower
agrees to and shall indemnify Lender from any liability, claim or loss and
attorneys' fees and costs resulting from the disbursement of the Loan proceeds
or from the condition of the Property, whether related to the quality of
construction or otherwise and whether arising during or after the term of the
Loan. This provision shall survive the repayment of the Loan and shall
continue in full force and effect so long as the possibility of such liability,
claim or loss exists. Notwithstanding anything to the contrary contained in
this Loan Agreement, Lender shall not settle or compromise any lawsuit brought
by a third party relating to the matters set forth in this paragraph without
the express consent of Borrower, which consent shall be in Borrower's
discretion.
2. Evidence Of Satisfaction Of Conditions. Any condition of
this Loan Agreement which requires the submission of evidence of the existence
or nonexistence of a specified fact or facts, implies as a condition the
existence or nonexistence, as the case may be, of such fact or facts, and
Lender shall, at all times, be free to establish independently and to its
reasonable satisfaction and in its absolute discretion such existence or
nonexistence.
3. Assignment. Lender shall have the unconditional right to
assign all or any part of its interest hereunder to any third party, but
Borrower may not assign this Loan Agreement or any of its rights or obligations
hereunder without Lender's prior written consent.
4. Successors And Assigns Included In Parties. Whenever in
this Loan Agreement one of the parties hereto is named or referred to, the
heirs, legal representatives, successors and permitted assigns of such party
shall be included, and all covenants and agreements contained in this Loan
Agreement by or on behalf of Borrower or by or on behalf of Lender shall bind
and inure to the benefit of their respective heirs, legal representatives,
successors and permitted assigns, whether so expressed or not.
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5. HEADINGS. The headings of the sections, paragraphs and
subdivisions of this Loan Agreement are for the convenience of reference only,
are not to be considered a part hereof and shall not limit or otherwise affect
any of the terms hereof.
6. INVALID PROVISIONS TO AFFECT NO OTHERS. If fulfillment of
any provision hereof or any transaction related hereto at the time performance
of such provision shall be due, shall involve transcending the limit of
validity prescribed by law, then ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity; and if any clause or provision
herein contained operates or would prospectively operate to invalidate this
Loan Agreement in whole or in part, then only such clause or provision shall be
held for naught as though not herein contained, and the remainder of this Loan
Agreement shall remain operative and in full force and effect.
7. NUMBER AND GENDER. Whenever the singular or plural number,
masculine or feminine, or neuter gender is used herein, it shall equally
include the other.
8. AMENDMENTS. Neither this Loan Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by
written instrument signed by the party against whom enforcement of the change,
waiver, discharge or termination is sought.
9. GOVERNING LAW. This Loan Agreement shall be governed in its
enforcement, construction and interpretation by the laws of the State of
Florida.
10. LITIGATION. In the event any legal proceedings are instituted
between the parties concerning this Loan Agreement, the Note, the Mortgage, or
any other Loan Documents, and the Lender is the prevailing party, the Lender
shall be entitled to recover its costs of suit, including reasonable attorneys'
fees, at both trial and appellate levels.
11. PREPAYMENT OF NOTE. Notwithstanding anything contained
herein to the contrary, in the event Borrower shall prepay to Lender all
principal, accrued interest and any costs and expenses, including any
reasonable attorneys' fees and costs incurred by Lender to the date of said
prepayment, Lender shall upon receipt of said prepayment provide Borrower with
a satisfaction of the Mortgage and any other recorded Loan Documents
simultaneously therewith and the Note marked cancelled shall be forwarded to
Borrower within thirty (30) days thereof.
12. WAIVER OF TRIAL BY JURY. BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS LOAN AGREEMENT AND ANY DOCUMENT CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THIS LOAN.
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IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement
on the dates specified below.
WITNESSES: BORROWER:
THE ADLER COMPANIES, INC., a Florida
corporation (SEAL)
/s/ SUSAN PORTER
- ----------------------------- BY: /s/ LUIS RABELL
/s/ W. R. BLOOM -----------------------------------
- ----------------------------- Luis Rabell, Vice President
Dated: December 14, 1995
LENDER:
BARNETT BANK OF SOUTH FLORIDA N.A.
(SEAL)
/s/ SUSAN PORTER
- ----------------------------- By: /s/ MARK LEIDER
W. R. BLOOM -----------------------------------
- ----------------------------- Mark Leider,
Vice President
Dated: December 14, 1995
STATE OF FLORIDA )
: SS.
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this 15 day of
December, 1995, by Luis Rabell, Vice President of The Adler Companies, Inc., a
Florida corporation, on behalf of the corporation. He is personally known or
has produced FLORIDA DRIVERS LICENSE as identification.
-------------------------
/s/ SUSAN PORTER
-----------------------------------
Notary Public
Name of Notary Printed:
-----------------------------------
My commission expires: (NOTARY SEAL)
My commission number is:
[NOTARY SEAL]
STATE OF FLORIDA )
: SS.
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this day _____ of
December, 1995, by Mark Leider, Vice President of Barnett Bank of South
Florida, N.A., on behalf of the association. He is personally known to me or
has produced N/A as identification.
---------
/s/ SUSAN PORTER
-----------------------------------
Notary Public
Name of Notary Printed:
My commission expires: -----------------------------------
(NOTARY SEAL)
[NOTARY SEAL]
My commission number is:
MIA3-345609.2
44
<PAGE> 1
EXHIBIT 10.15(a)
A M E N D E D A N D R E S T A T E D
C O N S T R U C T I O N
L O A N A G R E E M E N T
Between
NEWMARK HOMES, L.P.
and
MELLON BANK, N.A.
$20,000,000.00 Construction Facility January 10, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1
GENERAL TERMS
Section 1.01 Terms Defined Above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2
AMOUNT AND TERMS OF ADVANCES
Section 2.01 The Advances and Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.02 Loan Procedures and Amounts of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.03 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.04 Computation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.05 Voluntary Prepayments; Partial Releases . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.06 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.07 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.08 Payment Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.09 Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.10 Changes in Subdivision Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.11 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.12 Increased Costs for Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.13 Inability to Determine LIBOR Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.14 Confirmation of Assumption of Indebtedness Under Note . . . . . . . . . . . . . . . . . . . 18
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.01 Partnership Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.02 Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.03 Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.04 No Legal Bar or Resultant Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.05 No Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.06 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.07 Investments and Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.08 Liabilities; Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.09 Taxes; Governmental Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.10 Titles, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.11 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.12 Casualties; Taking of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.13 Use of Proceeds; Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.14 Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.15 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.16 Location of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.17 Utility Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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<TABLE>
<S> <C> <C>
Section 3.18 No Material Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.19 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.20 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.21 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.23 Survey and Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.24 No Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.25 Wetlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.26 Flood Area; Filled Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.27 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.28 Deceptive Trade Practices Act Not Applicable . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.29 Geological Fault . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.30 No "Zero Lot Line" Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.31 Underground Storage Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 4
AFFIRMATIVE COVENANTS
Section 4.01 Financial Statements and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.02 Annual Certificates of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.03 Quarterly Certificates of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.04 Taxes and Other Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.05 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.06 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.07 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.08 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.09 Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.10 Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.11 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.12 Notices by Governmental Authority, Fire and Casualty Losses, Etc . . . . . . . . . . . . . 28
Section 4.13 Deposit Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.14 Application of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.15 Required Deposit by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.16 Payment of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.17 Appraisals; Inspections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.18 Plans and Specifications; Change Orders . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.19 Model Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.20 Title Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.21 Commencement of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.22 Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.23 Surveys and Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.24 Correction of Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.25 Environmental Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.26 Subcontractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.27 Speculative Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 5
NEGATIVE COVENANTS
Section 5.01 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.02 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.03 Investments, Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.04 Acquisition of Property to Develop Into Lots . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.05 Distributions, Payments, Etc. by the Borrower . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.06 Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.07 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.08 Construction Starts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.09 Restrictions and Annexation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.10 Limitation on Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.11 Mergers, Stock, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.12 Proceeds of Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.14 Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.15 Capital Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.16 Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.17 Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.18 Cost of Sales as a Percentage of Home Sales Revenue . . . . . . . . . . . . . . . . . . . . 35
Section 5.19 Ratio of Advances to Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.21 Flood Plain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.22 Geological Fault . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.23 Wetlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.24 Partnership Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 6.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.03 Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 7
CONDITIONS OF LENDING
Section 7.01 General Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.02 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 8
MISCELLANEOUS
Section 8.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.02 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 8.03 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.04 Survival of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.06 Renewal, Extension or Rearrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.07 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.08 No Liability of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.09 Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.10 Approval of Plans and Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.11 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.12 Singular and Plural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.13 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.14 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.15 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.16 Taxes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.17 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.18 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.19 Titles of Articles, Sections and Subsections . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.20 Satisfaction Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.21 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.22 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.23 No Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.25 Duration; Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.26 Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.27 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.28 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
Exhibits and Schedules
<TABLE>
<S> <C>
Exhibit A 1/10/96 Promissory Note, together with First Modification Agreement and Form of Second Modification
Agreement
Exhibit B-1 Form of Borrowing Request (Initial Advance)
Exhibit B-2 Form of Borrowing Request (Other than Initial Advance)
Exhibit C Form of Compliance Certificate
Exhibit D Disclosures
Exhibit E Form of Construction Facility Status Report
Exhibit F Form of Sold/Unsold Homes Report
Exhibit G Initial Counties Where Master Deed of Trust Recorded
Exhibit H List of Acceptable Title Insurance Companies
Exhibit I Form of Borrower's Affidavit
Exhibit J Borrower's Financial Statement
Schedule 1 Percentage of Completion Report
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED
CONSTRUCTION
LOAN AGREEMENT
THIS AMENDED AND RESTATED CONSTRUCTION LOAN AGREEMENT is made and
entered into as of the 10th day of January, 1997, between NEWMARK HOMES, L.P.,
a Texas limited partnership with principal offices at 10435 Greenbough, Suite
101, Stafford, Texas 77477 (the "Borrower"), and MELLON BANK, N.A., a national
banking association with offices at One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258-0001 (the "Bank").
W I T N E S S E T H:
WHEREAS, the Bank and Newmark Home Corporation, a Nevada corporation
("Newmark"), executed that certain Construction Loan Agreement dated January
10, 1996 (the "1996 Agreement"), pursuant to which the Bank agreed to extend a
$10,000,000 line of credit to Newmark on the terms and conditions set forth
therein and to evidence the indebtedness thereunder, Newmark executed an
delivered to the Bank a promissory note dated January 10, 1996, in the original
principal amount of $10,000,000 payable to the order of the Bank (such
promissory note as modified, assumed, renewed, rearranged and extended, being
the "Note"); and
WHEREAS, pursuant to Modification Agreement dated as of October 1,
1996 (the "First Modification Agreement"), Newmark conveyed the Mortgaged
Property subject to the Indebtedness under the 1996 Agreement to NHC Homes,
Inc., and NHC Homes, Inc. further conveyed the Mortgaged Property to the
Borrower and the Borrower assumed the Indebtedness under the 1996 Agreement and
the Note; and
WHEREAS, the Borrower has requested an increase in the Commitment, an
extension of the Initial Advance Period Termination Date and other amendments
to the 1996 Agreement; and
WHEREAS, the Borrower and the Bank have agreed to amend and restate in
its entirety the 1996 Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and of the Commitment and loans and Advances
hereinafter referred to, the Borrower and the Bank agree as follows:
ARTICLE 1
GENERAL TERMS
Section 1.01 Terms Defined Above. As used in this Agreement, the
terms "Bank," "Borrower," "Newmark," "1996 Agreement," "Note," and "First
Modification Agreement" shall have the meanings indicated above.
Section 1.02 Certain Definitions. As used in this Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
<PAGE> 7
"Adjusted Base Rate" shall mean the lesser of (i) the sum of
the interest rate per annum announced by the Bank as its "prime rate,"
plus .5% per annum and (ii) the Highest Lawful Rate. The "prime rate"
may be greater or less than other interest rates charged by the Bank
to other Borrowers and is not solely based or dependent upon the
interest rate which the Bank may charge any particular borrower or
class of borrowers.
"Adjusted LIBOR Rate" shall mean at any time, the lesser of
(a) the rate which is equal to the sum of the then applicable LIBOR
Rate plus 3.25% per annum and (b) the Highest Lawful Rate.
"Adjusted Loan Value" shall mean at any time and for any Lot
and Home, Loan Value less Lot Value.
"Advance" shall mean an advance of loan proceeds pursuant to
Section 2.01(a) hereof, which Advance may be an Initial Advance, an
interim Advance or a Final Advance and any other Advances made by the
Bank to or on behalf of the Borrower pursuant to the terms of the
Security Instruments.
"Affiliate" shall mean, as to any Person, any other Person
which directly or indirectly controls, or is under common control
with, or is controlled by, such Person and, if such Person is an
individual, any member of the immediate family (including parents,
spouse and children) of such individual and any trust whose principal
beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member
or trust. As used in this definition, "control" (including, with
correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interest, by
contract or otherwise).
"Agreement" shall mean this Amended and Restated Construction
Loan Agreement, as the same may from time to time be amended or
supplemented.
"Applicable Percentage" shall mean:
(a) 75% for each Sold Home and Lot;
(b) 75% for each Speculative Home and Lot; and
(c) 75% for each Model Home and Lot.
"Appraisal" shall mean with respect to each Home, a current,
fair market value appraisal in form and substance satisfactory to the
Bank from an independent appraiser satisfactory to the Bank which
appraises on a "completed value" the Home to be constructed on a
specified Lot in an Approved Subdivision and also sets forth a fair
market value for the Lot, and shall be performed in accordance with
laws, rules and regulations of applicable Governmental Authority and
the policies and procedures established by and written instructions
from the Bank.
"Approved Subdivision" shall mean a Developed Subdivision in
which the Bank shall have approved in writing the acquisition of Lots
and the construction of Homes thereon.
2
<PAGE> 8
Factors to be considered by the Bank in determining whether or not to
approve such Developed Subdivision shall include, but shall not be
limited to, the following:
(a) the location of the subdivision;
(b) the price range of the Homes being sold in
the subdivision and the market concept of such Homes;
(c) the sales history of Homes in such
subdivision constructed by the Borrower;
(d) the sales history of Homes in such
subdivision constructed by a Person other than the Borrower;
and
(e) community demographic concentrations.
If the Bank determines in its sole discretion, reasonably exercised,
that factors have changed such that a subdivision no longer qualifies
as an Approved Subdivision, then upon written notice to the Borrower,
such subdivision shall no longer qualify as an Approved Subdivision.
Upon correction of such factors to the Bank's satisfaction, such
subdivision may again qualify as an Approved Subdivision.
"Authorized Borrower Representative" shall mean any one of the
individuals named as an Authorized Borrower Representative in the
Notice of Authorized Borrower Representatives dated the date hereof,
signed by the general partner of the Borrower and delivered to the
Bank, as such list of individuals may be modified from time to time by
the Borrower by delivery to the Bank of a notice of any such
modification signed by the general partner of the Borrower.
"Base Rate Advance" shall mean each Advance made hereunder by
the Bank to the Borrower for which the Borrower has elected to have
the Adjusted Base Rate applied for the calculation of interest or
which has otherwise become a Base Rate Advance pursuant to the terms
hereof.
"Borrower's Completion Deposit" shall have the meaning
assigned such term in Section 4.15.
"Borrowing Base" shall mean at any time an amount equal to the
amount established as the Borrowing Base from time to time pursuant to
Section 2.07.
"Borrowing Request" shall mean a request for an Advance
pursuant to Section 2.01(a) duly and properly executed by an
Authorized Borrower Representative which, (i) in the case of Initial
Advances, shall be substantially in the form attached as Exhibit B-1
and (ii) in the case of Advances other than Initial Advances, shall be
substantially in the form attached as Exhibit B-2.
"Business Day" shall mean a day other than a Saturday, Sunday
or legal holiday for commercial banks under the laws of the States of
Pennsylvania or Texas.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statute.
3
<PAGE> 9
"Commitment" shall mean the obligation of the Bank to make
loans to the Borrower under Section 2.01(a), up to the maximum amount
therein stated.
"Completion Date" shall have the meaning set forth in Section
2.01(a).
"Compliance Certificate" shall mean a certificate duly and
properly executed by an Authorized Borrower Representative to be
substantially in the form attached as Exhibit C.
"Construction Costs" shall mean for each Home the estimated
cost of construction.
"Construction Costs Schedule" shall mean a schedule in form
and substance satisfactory to the Bank showing the Lot cost and
budgeted Construction Costs for each Type of Home being or to be
constructed in an Approved Subdivision. The cost for the Lot included
shall not exceed the lesser of (i) the actual cost of the Lot or (ii)
the Fair Market Value of the Lot as set forth in the Appraisal.
"Construction Facility" shall mean the loan facility provided
for in Subsection 2.01(a) hereof.
"Construction Facility Status Report" shall mean a monthly
report with respect to the Lots acquired and the completion status of
each Home under construction by the Borrower, and financed by Bank,
properly completed by the Borrower in the form of Exhibit E and in
substance reasonably satisfactory to the Bank.
"Debt" shall mean, for any Person, without duplication:
(a) all obligations on account of money borrowed
by, or credit extended to or on behalf of, or for or on
account of deposits with or advances to, such Person;
(b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments;
(c) all obligations of such Person for the
deferred purchase price of property or services;
(d) all obligations secured by a lien on the
property owned by such Person (whether or not assumed); and
all obligations of such Person under leases which are, or are
required under GAAP to be, capitalized on such Person's
balance sheet (without regard to any limitation of the rights
and remedies of the holder of such lien or the lessor under
such lease to repossession or sale of such property);
(e) the face amount of all letters of credit
issued for the account of such Person and, without
duplication, the unreimbursed amount of all drafts drawn
thereunder, and all other obligations of such Person
associated with such letters of credit or draws thereon;
(f) all obligations of such Person in respect of
acceptances or similar obligations issued for the account of
such Person;
4
<PAGE> 10
(g) all obligations of such Person under any
interest rate or currency protection agreement, interest rate
or currency future, interest rate or currency option, interest
rate or currency swap or cap or other interest rate or
currency hedge agreement; and
(h) all direct or contingent liabilities upon or
with respect to any obligation or liability of any other
Person (an "Obligor") resulting from such Person directly or
indirectly assuming, guaranteeing, becoming surety for or
otherwise agreeing, becoming or remaining directly or
contingently liable upon or with respect to such obligation or
liability of such Obligor, including without limitation any
guarantee of any of the Debt or other obligations or
liabilities of an obligor and any liability, (contingent or
otherwise), directly or indirectly: (i) to purchase or assume,
or to supply funds for the payment, purchase or satisfaction
of, any obligation or liability of an obligor, (ii) to make
any loan, advance, capital contribution or other investment
in, or to purchase or release any property or services from,
an Obligor in order to maintain the solvency of such Obligor
or to enable such obligor to meet any other financial
condition or obligation, (iii) to purchase or lease property
or services of an Obligor regardless of the nondelivery of or
failure to furnish such property or services or (iv) in
respect of any other transaction the effect of which is to
assure the payment or performance (or payment of damages or
other remedy in the event of nonpayment or nonperformance) of
any obligation or liability of an Obligor.
"Default" shall mean the occurrence of any of the events
specified in Section 6.01, whether or not any requirement for notice
or lapse of time or other condition precedent has been satisfied.
"Developed Subdivision" shall mean a residential subdivision
of real property located in one or more Valid Counties and which has
been developed to a stage acceptable to the Bank. In determining
whether such subdivision is developed to an acceptable stage, the Bank
will consider and may request evidence of, among other things, the
following:
(a) that such subdivision is a platted
subdivision pursuant to a recorded subdivision plat that has
been approved by all necessary Governmental Authorities;
(b) whether the improvements shown on the
subdivision plat for such subdivision are completed in
accordance with all requirements of all necessary Governmental
Authorities, including, but not limited to, all roads;
(c) whether the roads shown on the subdivision
plat for such subdivision are properly dedicated to the public
and accepted for public maintenance by the applicable
Governmental Authorities;
(d) whether the common area amenities for such
subdivision are completed;
(e) whether the improvements, facilities, and
systems necessary to provide adequate utility service and
drainage to all residential lots located within such
subdivision are completed in accordance with all requirements
of all applicable Governmental Authorities and extend utility
service and drainage to the boundaries of
5
<PAGE> 11
all residential lots in such subdivision, such utility service
to include water, electrical, gas, telephone, and sanitary and
storm sewer service;
(f) whether the providers of utility service to
such subdivision have adequate capacity and treatment
facilities to service the subdivision and have committed to
provide adequate service to such subdivision;
(g) whether any part of such subdivision is
contaminated with hazardous substances or solid wastes and
whether such subdivision is located near any Property which is
so contaminated (in order to allow the Bank to make such
determination, the Borrower will provide the Bank with an
inspection or audit of such subdivision from an engineering or
consulting firm approved by the Bank, indicating the presence
or absence of hazardous substances and solid wastes on such
Property and providing such other information as is typically
included in a Phase I environmental audit);
(h) whether the subdivision is restricted and, if
applicable, zoned to limit use to detached single family
residences, and whether there is in place a recorded set of
restrictive covenants acceptable to the Bank covering such
subdivision and pursuant to which adequate provisions are made
for a homeowners' association, architectural integrity, and
maintenance assessments;
(i) whether such subdivision is located within
the 100-year flood plain or any other area that is flood
prone;
(j) whether such subdivision is located upon or
within one-quarter mile of a geological fault;
(k) whether the status of the subsurface soils
conditions, including faulting propensity (as described in a
current report from a qualified engineer acceptable to the
Bank), is adequate for construction of Homes;
(l) the total of all tax rates imposed by all
applicable taxing authorities against Property located within
such subdivision;
(m) whether such subdivision is located on, over,
or within one mile of any underground storage facilities used
for injected natural or processed gas or other liquid
hydrocarbons or petroleum products; and
(n) the extent to which the subdivision contains
areas designated as "wetlands" by the U.S. Army Corps of
Engineers.
"Drawdown Termination Date" shall mean July 10, 1998.
"Environmental Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, orders, or determinations of any
Governmental Authority pertaining to health or the environment
applicable to the Borrower, any Subsidiary, or any of their Properties
in effect in any and all jurisdictions in which the Borrower or the
Subsidiaries are conducting or at any time have conducted business, or
where any Property of the Borrower or the Subsidiaries is located, or
where any hazardous substances generated by or disposed of by the
Borrower or the Subsidiaries are located, including but not limited to
the Clean Air Act, as amended, the
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Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended by the Superfund Amendments and Reauthorization
Act of 1986 ("CERCLA"), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of
1970, as amended, the Resource Conservation and Recovery Act of 1976,
as amended by the Used Oil Recycling Act of 1980, the Solid Waste
Disposal Act Amendments of 1980, and the Hazardous and Solid Waste
Amendments of 1984 ("RCRA"), as amended, the Safe Drinking Water Act,
as amended, the Toxic Substances Control Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Texas Clean
Air Act, as amended, the Texas Water Code, as amended, the Texas Solid
Waste Disposal Act, as amended, and other environmental conservation
or protection laws. The terms "hazardous substance", "release" and
"threatened release" shall have the meanings specified in CERCLA, and
the terms "solid waste" and "disposal" (or "disposed") shall have the
meanings specified in RCRA; provided, however, that (i) in the event
either CERCLA or RCRA is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply hereunder
subsequent to the effective date of such amendment, (ii) to the extent
the laws of the state in which any Property of the Borrower or any
Subsidiary is located establish a meaning for "hazardous substance",
"release", "threatened release", "solid waste" or "disposal" which is
broader than that specified in either CERCLA or RCRA, such broader
meaning shall apply, and (iii) the terms "hazardous substance" and
"solid waste" shall include all oil and gas exploration and production
wastes that may present an endangerment to public health or welfare or
the environment, even if such wastes are specifically exempt from
classification as hazardous substances or solid wastes pursuant to
CERCLA or RCRA or the state analogues to those statutes.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether
or not incorporated) which together with the Borrower or a Subsidiary
would be deemed to be a "single employer" within the meaning of
Section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of
Section 414 of the Code.
"Event of Default" shall mean the occurrence of any of the
events specified in Section 6.01, provided that any requirement for
notice or lapse of time or any other condition precedent has been
satisfied.
"Excepted Liens" shall mean (i) Liens for ad valorem taxes,
assessments, or other governmental charges or levies not yet due or
which are being contested in good faith by appropriate action; (ii)
Liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public
liability obligations; (iii) vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction or
other like Liens arising by operation of law in the ordinary course of
business or incident to the construction or improvement of any
Property in respect of obligations permitted under the terms of this
Agreement which are subordinate to the Liens created by the Security
Instruments and are not yet due or which are being contested in good
faith by appropriate proceedings by or on behalf of the Borrower or
any Subsidiary in accordance with the procedures and requirements set
forth in Section 4.16; (iv) customary Liens in any Approved
Subdivision, including customary restrictive covenants and utility
easements, which do not and will not unreasonably interfere with the
construction, operation, maintenance and sale of Lots or Homes; and
(v) Permitted Encumbrances as set forth in each Mortgage.
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<PAGE> 13
"Excluded Unit" shall mean a Lot and Home with respect to
which its respective Percentage of Completion Value is excluded from
the Borrowing Base calculation because:
(a) it is a Speculative Home with respect to which the
Initial Advance was made more than nine (9) months before the
Borrowing Base calculation; or
(b) it is a Model Home with respect to which the Initial
Advance was made more than eighteen (18) months before the
Borrowing Base calculation; or
(c) it is a Speculative Home formerly used as a Model
Home but as of the date of the Borrowing Base calculation, at
least ninety (90) days has elapsed since such Home was used as
a Model Home.
"Fair Market Value" shall mean with respect to each Lot and
Home, the fair market value of the Home upon one hundred percent
(100%) completion of all construction thereof in accordance with the
Plans and Specifications for such Home and the fair market value for
such Lot all as determined by the Appraisal; provided that the fair
market value of Model Homes shall not include value attributable to
"options" or "extras" not considered "standard" based on the Plans and
Specifications for the Type of Home that is being used as a Model and
further provided that the Bank may adjust, in its reasonable
discretion, the fair market value reflected in any such Appraisal
obtained.
"Final Advance" shall mean, for each Lot and the Home
constructed thereon, the last Advance to be made in connection
therewith.
"Financial Statements" shall mean the consolidated and/or
consolidating financial statements of the Borrower and its
Subsidiaries described or referred to in Section 3.06.
"Financing Statement" shall mean a UCC-1 Financing Statement
naming the Borrower as debtor and the Bank as secured party in form
and substance satisfactory to the Bank, perfecting a first priority
security interest in any and all personal Property and general
intangibles now or hereafter located on, used in connection with, or
related to the Lot or Lots and Home or Homes covered thereby.
"GAAP" shall mean "generally accepted accounting principles"
in the United States, applied on a basis consistent with the
principles used in preparing the most recent annual financial
statements of the Borrower furnished to the Bank and referred to in
Section 3.06 hereof; provided that (a) in making determinations on a
consolidated basis with respect to a Person and its Subsidiaries, such
consolidation shall be a proportionate consolidation and shall include
all Subsidiaries, and (b) in making determinations of the aggregate
Debt of a Person and its Subsidiaries, any Debt of such Person or any
such Subsidiary described in clause (i) of the definition of Debt
herein shall be treated as if such Person or such Subsidiary were an
obligor with respect to such Debt.
"Governmental Authority" shall mean the United States of
America, the State of Texas, the state, county, city and political
subdivisions in which any Property of the Borrower or any Subsidiary
is located or which exercises jurisdiction over any such Property, and
any agency, department, commission, board, bureau, homeowners
association, utility district, flood control district, road district,
improvement district, or similar district, court, grand jury or
instrumentality or any of them which exercises jurisdiction over any
such Property.
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<PAGE> 14
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization, or other
direction or requirement (including but not limited to any of the
foregoing which relate to environmental standards or controls, energy
regulations and occupational, safety and health standards or controls)
of any Governmental Authority.
"Highest Lawful Rate" shall mean the maximum nonusurious
interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Note or on
other Debt, as the case may be, under the law of the State of Texas
(or the law of any other jurisdiction whose laws may be mandatorily
applicable notwithstanding other provisions of this Agreement), or law
of the United States of America applicable to the Bank and the
Transactions which would permit the Bank to contract for, charge,
take, reserve or receive a greater amount of interest than under Texas
(or such other jurisdiction's) law.
"Home" shall mean a detached single family residential
structure and related amenities and improvements.
"Indebtedness" shall mean any and all amounts owing or to be
owing by the Borrower to the Bank in connection with the Note, the
1996 Note, or any Security Instrument including this Agreement and all
other liabilities of the Borrower to the Bank from time to time
outstanding.
"Initial Advance" shall mean, for each Lot and the Home to be
constructed thereon and financed under the Construction Facility, the
first Advance made in connection therewith.
"Initial Advance Period Termination Date" shall mean one year
from the date hereof.
"Initial Counties" shall mean the counties in which the Master
Deed of Trust shall initially be recorded, which counties are listed
on Exhibit G.
"LIBOR Rate Advance" means each Advance made hereunder by the
Bank to the Borrower for which the Borrower has elected to have the
Adjusted LIBOR Rate applied for the calculation of interest, and which
has not been converted to a Base Rate Advance pursuant to the terms
hereof.
"LIBOR Rate" shall mean the rate for deposits in U.S. dollars
offered to major money center banks in the London interbank market for
one-month periods rounded upward to the nearest 1/100 of 1%, as
determined by the Bank two (2) Business Days before the first day of
each calendar month, with changes in such rate being effective on the
first day of each calendar month.
"Lien" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of
the Property, whether such interest is based on the common law,
statute or contract, and including but not limited to the lien or
security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purposes of
this Agreement, the Borrower or any Subsidiary shall be deemed to be
the owner of any Property which it has acquired or holds subject to a
conditional sale agreement,
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<PAGE> 15
financing lease or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for
security purposes.
"Loan Value" shall mean, as to each Sold Home and the Lot on
which it is to be constructed in an Approved Subdivision, the
Applicable Percentage multiplied by the lesser of (i) the Fair Market
Value of such Lot and Sold Home and (ii) the purchase price set out in
the executed earnest money contract relating to such Sold Home, a copy
of which has been delivered to the Bank; and as to each other Home and
the Lot on which it is to be constructed in an Approved Subdivision,
the Applicable Percentage multiplied by the Fair Market Value of such
Lot and Home, provided that the Loan Value for any Home and related
Lot shall not exceed $200,000.
"Lot" shall mean an unimproved (but fully developed) single
family residential lot located in an Approved Subdivision.
"Lot Value" shall mean the lesser of (i) the purchase price of
such Lot, including closing costs and (ii) an amount equal to 25% of
the Loan Value of the Lot and Home to be constructed thereon.
"Master Deed of Trust" shall mean the Master Form of Deed of
Trust, Security Agreement and Financing Statement Recorded by Mellon
Bank, N.A., a copy of which has been furnished to the Borrower.
"Material Adverse Effect" shall mean as to the Borrower, any
material and adverse effect on (i) the assets, liabilities, financial
condition, business or operations of the Borrower or its Subsidiaries
from those reflected in the Financial Statements or from the facts
represented or warranted in this Agreement or any other Security
Instrument, or (ii) the ability of the Borrower or its Subsidiaries to
carry out their business as at the date of this Agreement or as
proposed at the date of this Agreement to be conducted or meet the
Borrower's obligations under the Note, this Agreement, or the other
Security Instruments on a timely basis.
"Maturity Date" shall mean October 10, 1998.
"Model Home" as used herein shall mean any Home owned by the
Borrower or any Affiliate of the Borrower which has been fully
completed and decorated to be used as a model for display to
prospective purchasers of Homes built by the Borrower in the
particular Approved Subdivision in which such "Model Home" is located,
which Home shall be open at least six (6) days a week during normal
business hours, with Borrower's sales staff on- site.
"Model Home Inventory" shall mean the total number of Model
Homes owned by the Borrower.
"Mortgage" shall mean a Deed of Trust, Security Agreement and
Financing Statement, securing the payment of any and all Indebtedness
and creating in favor of the Bank a valid and enforceable first
priority Lien on and security interest in the Lot or Lots described
therein and any and all interests of the Borrower in any improvements,
personal Property, and general intangibles now or hereafter located
on, used in connection with, or related to such Lot or Lots and being
in form and substance satisfactory to the Bank.
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<PAGE> 16
"Note" shall mean the promissory note dated January 10, 1996,
executed by Newmark and assumed by the Borrower, pursuant to
Modification Agreement dated as of October 1, 1996, executed by and
among Newmark, NHC Homes, Inc., and the Borrower, and as modified and
extended pursuant to the Second Modification and Extension Agreement
executed by and between the Borrower and the Bank as of the 10th day
of January, 1997, all of which are attached hereto and comprise
Exhibit A.
"Partners" shall mean Newmark and the limited partners under
the Partnership Agreement.
"Partnership Agreement" shall mean that certain Agreement of
Limited Partnership effective October 1, 1996 between the Partners, as
such agreement has been or may be amended or supplemented from time to
time.
"Percentage of Completion" shall mean, with respect to each
Lot and Home as of any time of determination (which determination
shall be made by the Bank in its sole discretion), the percentage of
completion determined in accordance with Schedule 1 attached hereto.
"Percentage of Completion Value" shall mean, for each Lot and
the Home to be constructed thereon and at any time and from time to
time, the sum of (i) Adjusted Loan Value (as of the date of
calculation) of such Lot and the Home to be constructed thereon
multiplied by the Percentage of Completion of such Lot and Home as of
such time plus (ii) the Lot Value for such Lot.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision
thereof, or any other form of entity.
"Plan" shall mean any employee pension benefit plan, as
defined in Section 3(2) of ERISA.
"Plans and Specifications" shall mean, for each Home, the
Borrower's construction plans detailing the plans and specifications,
and containing architectural drawings specifying the type and style of
such Home, prepared by an architect and initialed for identification
purposes on or prior to the date hereof by the Borrower and the Bank
and including all working drawings and shop drawings, as the same may
be amended, modified, or supplemented from time to time by change
orders executed in compliance with the provisions of the Security
Instruments.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Release Price" shall have the meaning assigned such term in
Subsection 2.05(b).
"Reserved Commitment" shall mean, for each Lot and Home being
financed under the Construction Facility, the difference at any time
and from time to time between (i) the Loan Value thereof less (ii) the
principal amount deemed advanced by the Bank, in its sole discretion,
for the acquisition and construction of such Lot and Home.
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<PAGE> 17
"Security Instruments" shall mean this Agreement, the Master
Deed of Trust, each Mortgage, each Financing Statement, and any and
all other agreements or instruments now or hereafter executed and
delivered by the Borrower, any Subsidiary or any other Person (other
than participation or similar agreements between the Bank and any
other bank or creditor with respect to any Indebtedness pursuant to
this Agreement) in connection with, or as security for the payment or
performance of, the Note or this Agreement, as such agreements may be
amended or supplemented from time to time.
"Sold Home" shall mean a Home with respect to which a Person,
other than the Borrower or any Affiliate of the Borrower, has executed
a valid and enforceable contract for the purchase thereof, a copy of
which shall be furnished to the Bank upon request. Upon the recision
or cancellation of any such contract for any reason, the Home shall no
longer be a Sold Home.
"Sold/Unsold Homes Report" shall mean a report by subdivision
and by lender setting forth the sales status of each Home and Lot in
the Borrower's inventory or under agreement or option (whether or not
financed by the Bank), which is furnished to the Bank pursuant to
Subsection 4.01(c)(ii) and is substantially in the form of Exhibit F
hereto.
"Speculative Home" shall mean a Home other than a Sold Home or
a Model Home.
"Speculative Home Inventory" shall mean the total number of
Speculative Homes owned by the Borrower.
"Subsidiary" shall mean for any Person any corporation of
which more than fifty percent (50%) of the issued and outstanding
securities having ordinary voting power for the election of directors
is owned or controlled, directly or indirectly, by such Person and/or
one or more of its subsidiaries.
"Tangible Net Worth" of a Person at any time shall mean the
total amount of partners' equity of such Person and its Subsidiaries
at such time determined on a consolidated basis in accordance with
GAAP, except that there shall be deducted therefrom the book value of
all intangible assets and deferred charges and prepaid expenses of
such Person and its Subsidiaries at such time determined on a
consolidated basis in accordance with GAAP.
"Title Binder" shall mean a paid Mortgagee Title Policy Binder
on Interim Construction Loan issued by a Title Insurer in connection
with each Home on the form currently approved by the Texas State Board
of Insurance and otherwise satisfactory to the Bank.
"Title Insurer" shall mean any of the title insurance
companies listed on Exhibit H, or such other title insurance company
or companies satisfactory to the Bank.
"Title Policy" shall mean a paid Mortgagee Policy of Title
Insurance issued by a Title Insurer and otherwise satisfactory to the
Bank which is furnished by the Borrower pursuant to the terms hereof.
"Transactions" shall mean the transactions provided for in and
contemplated by this Agreement, the other Security Instruments and the
Note.
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<PAGE> 18
"Type of Home" shall mean each of the various types or styles
of homes being constructed by the Borrower (and excluding "options" or
"extras" not included as "standard"), the standard Plans and
Specifications of which have been approved by the Bank and shall be
referenced as between the Bank and the Borrower by a name or number to
be agreed upon that describes each such Type of Home. Each such Type
of Home may be identified in Borrowing Requests (or schedules thereto)
by use of such name or number. When the Borrower desires to build
additional Types of Homes, it shall submit the Plans and
Specifications for such additional Type of Home and shall identify the
name or number by which such additional Type of Home shall be
identified, and upon approval by the Bank, such type or style of home
shall be a "Type of Home".
"Valid County" shall mean any of the Initial Counties or any
other county in the State of Texas in which the Master Deed of Trust
has been properly filed and recorded.
Section 1.03 Accounting Principles. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, it shall be done in accordance with
GAAP applied on a basis consistent with those reflected by the Financial
Statements, except where such principles are inconsistent with the requirements
of this Agreement.
ARTICLE 2
AMOUNT AND TERMS OF ADVANCES
Section 2.01 The Advances and Commitment. Subject to the terms
and conditions and relying on the representations and warranties contained in
this Agreement, the Bank agrees to make loans to the Borrower as hereinafter
set forth:
(a) Construction Facility Advances - From the date of
this Agreement through the close of business on the Business Day
preceding the Drawdown Termination Date, the Bank will, subject to the
terms and conditions hereof, make Advances to the Borrower from time
to time on any Business Day in such amounts as the Borrower may
request up to the maximum amount hereinafter stated, and the Borrower
may make borrowings, prepayments (as permitted or required in Sections
2.05 and 2.06) and reborrowings in respect thereof; provided, however,
that the sum of the aggregate principal amount of all such Advances at
any one time outstanding plus the aggregate amount, at such time, of
the Reserved Commitments shall not exceed $20,000,000 and further
provided that the sum of the aggregate principal amount of all
Advances at any time outstanding shall not exceed the Borrowing Base.
The Borrower has assumed the obligations of Newmark under the 1996
Agreement and the Note. To evidence the increase in the Commitment
and the amendment to certain provisions of the Note, the Borrower is
executing and delivering to the Bank the Second Modification and
Extension Agreement dated as of January 10, 1997. No Advance shall be
made to finance the construction of a particular Home after the date
which is six (6) months from the date of the Initial Advance relating
to such Home and the Lot upon which it is being constructed (the
"Completion Date"). No Initial Advance shall be made after the
Initial Advance Period Termination Date. No Advances shall be made to
finance construction of Homes after the Drawdown Termination Date. No
Advance shall be made with respect to any Lot and Home if such
Advance, when aggregated with all prior Advances with respect to such
Lot and Home,
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<PAGE> 19
would cause the aggregate Advances for such Lot and Home to exceed the
Loan Value of such Lot and Home.
(b) Payment -
(1) Interest on the principal amounts from time
to time outstanding under the Note shall accrue at the rates
provided in Section 2.03. Interest shall be payable monthly,
commencing on the first day of the month following the Initial
Advance, and at maturity.
(2) All amounts outstanding hereunder, under the
Note and under the Security Instruments and not sooner due
hereunder or thereunder shall be due and payable in full on
the Maturity Date.
Section 2.02 Loan Procedures and Amounts of Advances. The
Borrower may request one (1) funding of Advances per week by submitting to the
Bank one or more Borrowing Requests at least ten (10) Business Days prior to
the date each Initial Advance is requested to be funded and at least three (3)
Business Days prior to the date each Advance other than an Initial Advance is
requested to be funded. Each such funding may include Initial Advances,
interim Advances and/or Final Advances. All conditions precedent for any
Advance shall have been satisfied prior to delivery of the Borrowing Request
for such Advance, and no Advance (whether initial, interim or final) shall be
made unless all conditions precedent to such Advance have been satisfied. Each
Advance shall not exceed the amount available pursuant to Subsection 2.01(a) at
the time such Advance is made. Each Advance shall be made at the office of the
Bank and shall be funded prior to 2:00 p.m., Pittsburgh time, on the day so
requested in immediately available funds in the amount so requested. Each
Borrowing Request shall designate whether the requested Advance shall be a
LIBOR Rate Advance or a Base Rate Advance. If an Initial Advance is to be made
at Closing, the Borrower shall designate whether such Advance is to be a LIBOR
Rate Advance or a Base Rate Advance at least two (2) Business Days prior to
Closing. All amounts outstanding during any calendar month shall be comprised
of only LIBOR Rate Advances or only Base Rate Advances. If an Advance is made
as a LIBOR Rate Advance, it will continue as a LIBOR Rate Advance, subject to
the provisions of Sections 2.11 and 2.13 hereof, unless the Borrower notifies
the Bank two (2) Business Days before the first day of a calendar month that
the Borrower wishes to convert such outstanding Advances to Base Rate Advances
effective as of the first day of the following calendar month, in which case
all outstanding Advances shall be converted to Base Rate Advances as of the
first day of the following calendar month and all Advances made thereafter
shall be Base Rate Advances until the first day of the calendar month following
notification by the Borrower (at least two (2) Business Days prior to the first
day of such calendar month in which the conversion is to occur) that it has
elected to make LIBOR Rate Advances in accordance with the terms and provisions
hereof. Any LIBOR Rate Advances converted to Base Rate Advances may likewise
be re-converted to LIBOR Rate Advances by notifying the Bank in writing two (2)
Business Days before the end of a calendar month that the Borrower wishes to
re-convert such Advances to LIBOR Rate Advances as of the first day of the
following calendar month. If an Advance is made as a Base Rate Advance, it
will continue as a Base Rate Advance unless the Borrower notifies the Bank two
(2) Business Days before the first day of a calendar month that the Borrower
wishes to convert outstanding Advances to LIBOR Rate Advances effective as of
the first day of the following calendar month, in which case such Advances
shall be converted to LIBOR Rate Advances as of the first day of the following
calendar month and all Advances made thereafter shall be LIBOR Rate Advances
until the first day of the calendar month following notification by the
Borrower (at least two (2) Business Days prior to the first day of such
calendar month in which the conversion is to occur) that it has again elected
to make Base Rate Advances in accordance with the terms and provisions hereof.
Any Base
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<PAGE> 20
Rate Advances converted to LIBOR Rate Advances may likewise be re-converted to
Base Rate Advances by notifying the Bank in writing two (2) Business Days
before the end of a calendar month that the Borrower wishes to re-convert such
Advances to Base Rate Advances as of the first day of the following calendar
month.
Section 2.03 Interest Rate. The unpaid principal balance of the
Note from time to time outstanding shall accrue interest from the date of each
Advance until such principal amount has been paid in full, at the lesser of
(for Base Rate Advances) (i) the Adjusted Base Rate and (ii) the Highest Lawful
Rate and at the lesser of (for LIBOR Rate Advances) (x) the Adjusted LIBOR Rate
and (y) the Highest Lawful Rate and further provided that any amount of
principal which is not paid when due shall bear interest at 4% per annum above
the rate per annum required to be paid on such amount immediately prior to the
date on which such amount became due, but in no event to exceed the Highest
Lawful Rate. Adjustments in the varying interest rate shall be made with
respect to the Highest Lawful Rate, to the extent allowed by law, on the
effective date of any change in the Highest Lawful Rate. Adjustments in the
Adjusted LIBOR Rate shall be effective on the first day of each calendar month.
Adjustments in the Adjusted Base Rate shall become effective on the date of
changes in the Bank's prime rate. The Adjusted LIBOR Rate is additionally
subject to adjustment pursuant to the terms of Section 2.12 hereof.
Section 2.04 Computation. All payments of interest shall be
computed on the per annum basis of a year of 365 or 366 days, as the case may
be.
Section 2.05 Voluntary Prepayments; Partial Releases.
(a) Voluntary Prepayments - The Borrower may at its option prepay
the principal amount of the Note outstanding hereunder at any time in whole or
from time to time in part, together with accrued interest thereon to the date
of prepayment; provided, that a prepayment pursuant to Subsection 2.05(b) shall
not constitute a prepayment pursuant to this Subsection 2.05(a).
(b) Partial Releases - Provided that no Default or Event of
Default has occurred and is continuing, the Bank agrees to release from any
Lien the Bank may have thereon pursuant to a Mortgage, individual Lots and the
Homes being constructed thereon that are financed by Advances hereunder and are
being sold to a consumer purchaser simultaneously with the release of the Lien,
upon payment by the Borrower to the Bank in immediately available funds of one
hundred percent (100%) of the Loan Value for such Lot and Home plus all other
amounts advanced by the Bank in excess of the Loan Value (if any) with respect
to such Lot and Home hereunder or under the Mortgage (the "Release Price").
Upon payment by the Borrower of the appropriate Release Price as provided in
this Subsection, the Bank will execute a partial release of Lien. Upon the
payment of the Release Price, the Reserved Commitment attributable to the Lot
and Home being released shall no longer be reserved but shall again become part
of the available Commitment.
Section 2.06 Mandatory Prepayments.
(a) If at any time the outstanding principal balance under the Note
exceeds the Borrowing Base, then the Borrower shall forthwith prepay
the amount of such excess for application towards reduction of the
outstanding principal balance of the Note. The Borrower shall have
the right to terminate permanently the Commitment on at least five (5)
Business Days' prior notice. If the Borrower exercises its option to
terminate the Commitment, then the Borrower shall forthwith prepay the
outstanding principal balance under the Note, together with all
accrued interest and other amounts due hereunder.
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(b) In the event of an occurrence of any of the events described in
Subsection 6.01(l) or (s) hereof, but after giving effect to such
occurrence, there have been no more than 4 occurrences of such event
in any consecutive 12-month period, the Borrower shall promptly pay to
the Bank the Percentage of Completion Value of the affected Home as a
mandatory prepayment, the Percentage of Completion Value of the Home
shall be excluded from the Borrowing Base, and the Bank shall have no
further obligations to fund Advances with respect to the Lot and Home.
Section 2.07 Borrowing Base. The Borrower shall submit to the
Bank a Construction Facility Status Report on or before the tenth day of each
month showing the status as of the last day of the preceding month, and if the
Borrower wishes to obtain during a month, Advances which would exceed the
Borrowing Base then in effect after taking into account Advances, releases, and
other reductions in the Borrowing Base, the Borrower shall submit to the Bank a
current Construction Facility Status Report prior to obtaining Advances which
shall demonstrate availability under the Borrowing Base. The Bank will, at its
option, inspect some or all of the Homes listed in the Construction Facility
Status Report for purposes of evaluating the Percentage of Completion of each
such Home. Based upon such Construction Facility Status Report and/or the
Bank's inspection and evaluation, the Bank in its sole discretion shall
establish a borrowing base which shall be effective until the earlier of (i)
the date of delivery of a more current Construction Facility Status Report or
(ii) the date that a more current Construction Facility Status Report is due.
The "Borrowing Base" shall, at any given time, be equal to the aggregate
Percentage of Completion Value set forth on the Construction Facility Status
Report for all Lots and Homes financed under the Construction Facility at the
time of calculation and which have not become Excluded Units, less the
applicable Percentage of Completion Value of the Lots and Homes released by the
Bank since the date of the last Borrowing Base calculation. The Borrowing Base
may, at any time, be adjusted pursuant to the Bank's inspection and evaluation
of the Lots and Homes financed under the Construction Facility and, absent
manifest error, the Bank's determination of the Percentage of Completion of any
such Lot and Home shall be binding and conclusive. Furthermore, if the Bank
determines in its sole discretion, reasonably exercised, that the Fair Market
Value has declined, or that actual construction costs are less than the
Construction Costs for the Type of Home being built set forth in the most
current Construction Costs Schedule, then the Borrowing Base may be adjusted
and the Bank's redetermination of the Borrowing Base shall be binding and
conclusive.
Section 2.08 Payment Procedure. All payments and prepayments made
by the Borrower under the Note or this Agreement shall be made to the Bank at
its offices described above in immediately available funds before 2:00 p.m.,
Pittsburgh time, on the date that such payment is required to be made. Any
payment received and accepted by the Bank after such time shall be considered
for all purposes (including the calculation of interest, to the extent
permitted by law) as having been made on the Bank's next following Business
Day.
Section 2.09 Business Days. If the date for any loan payment or
prepayment payment hereunder falls on a day which is not a Business Day, then
for all purposes of the Note and this Agreement the same shall be deemed to
have fallen on the next following Business Day, and such extension of time
shall in such case be included in the computation of payments of interest.
Section 2.10 Changes in Subdivision Status. If the Bank
determines that any Approved Subdivision or Developed Subdivision no longer
qualifies as such, the Bank shall (subject to all other terms and conditions
hereof) continue to provide financing under the Construction Facility for Lots
and Homes located in such subdivision to the extent that such Lots and Homes
were included in the Borrowing Base prior to such change in status. The Bank
shall have no further obligation to make any
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further Initial Advances with respect to Lots and Homes in any subdivision
which the Bank determines no longer qualifies as an Approved Subdivision or a
Developed Subdivision.
Section 2.11 Illegality. If, after the date of this Agreement,
there is adopted any law, rule or regulation, or any change therein, or any
change in the interpretation or administration thereof by any Governmental
Authority or compliance by the Bank with any request or directive (whether or
not having the force of law) of any Governmental Authority and any of same
shall make it unlawful or impossible for the Bank to make, maintain or fund the
Advances, the Bank shall notify the Borrower. Upon receipt of such notice, the
Borrower may either (i) repay in full the then outstanding principal amount of
the affected Advances, together with accrued interest thereon, or (ii) continue
to pay amounts due under the Note, as then in effect, but the Bank shall not
have any further obligation hereunder to fund Advances. If, after the date of
this Agreement, there is adopted any law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority or compliance by the Bank with any request or directive
(whether or not having the force of law) of any Governmental Authority and any
of same shall make it unlawful or impossible for the Bank to make, maintain or
fund the LIBOR Rate Advances, the Bank shall notify the Borrower and such
Advances shall be converted to Base Rate Advances.
Section 2.12 Increased Costs for Advances. If any Governmental
Authority shall at any time impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by the Bank, or shall impose on the Bank any
other condition affecting the Advances or the Bank's obligation to make the
Advances; and, the result of any of the foregoing is to increase the cost to
the Bank of making or maintaining the Advances, or to reduce the amount of any
sum received or receivable by the Bank under this Agreement or under the Note
by an amount deemed by the Bank to be material then, within thirty (30) days
after demand by the Bank, the Borrower shall pay to the Bank such additional
amount or amounts as will compensate the Bank for such increased cost or
reduction. A certificate of the Bank claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to the Bank
hereunder shall be conclusive in the absence of manifest error. If the Bank
demands compensation under this Section, then the Borrower may at any time
repay in full the then outstanding affected Advances, together with accrued
interest thereon to the date of prepayment. If either (i) the introduction of,
or any change in, or in the interpretation of, any law or regulation, or (ii)
compliance with any guideline or request from any central bank or Governmental
Authority (whether or not having the force of law) affects or would affect the
amount of capital required or expected to be maintained by the Bank or any
corporation controlling the Bank and the Bank reasonably determines that the
amount of such capital is increased by or based upon the existence of the
Advances hereunder or of the Bank's commitment to lend hereunder, then, upon
demand by the Bank, the Borrower shall pay to the Bank, from time to time, as
specified by the Bank, additional amounts sufficient to compensate the Bank in
the light of such circumstances, to the extent that the Bank reasonably
determines such increase in capital to be allocable to the existence of the
Advances hereunder or the Bank's commitment to lend hereunder. A certificate
as to such amounts submitted to the Borrower by the Bank shall be conclusive
and binding for all purposes, absent manifest error.
Section 2.13 Inability to Determine LIBOR Rate. If at any time
the Bank is unable to determine the rate for deposits in U.S. dollars offered
to major money center banks in the London interbank market, the Bank shall
forthwith notify the Borrower that the rate cannot be determined and the
Advances will automatically, on the first day of the next calendar month, be
converted to Base Rate Advances until the Bank shall notify the Borrower that
the circumstances causing such suspension no longer exist, at which time the
Advances may be re-converted to LIBOR Rate Advances on the first day of the
succeeding calendar month.
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Section 2.14 Confirmation of Assumption of Indebtedness Under
Note. The Borrower hereby ratifies and confirms the indebtedness and the
assumption of indebtedness and obligations assumed under the Note and the
indebtedness arising after the date of assumption and acknowledges its
obligation to repay the liabilities and indebtedness now existing or hereafter
arising under the Note.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement, the Borrower
makes the representations and warranties to the Bank (which representations and
warranties will survive the delivery of the Note and the making of the Advances
thereunder) set forth below:
Section 3.01 Partnership Existence. The Borrower (i) is a Texas
limited partnership duly formed pursuant to The Texas Revised Limited
Partnership Act of the State of Texas and its sole general partner is Newmark;
(ii) the business which the Borrower carries on and which it proposes at the
date of this Agreement to carry on lawfully may be carried on by the Partners
in partnership; and (iii) the Borrower is duly authorized to do business as a
limited partnership wherever the nature of its Properties or its activities
requires such authorization. If any of the Partners is a corporation, such
Partner is a corporation duly organized, legally existing and in good standing
under the laws of the jurisdiction in which it is incorporated and is duly
qualified as a foreign corporation in all jurisdictions wherein the Property
owned or the business transacted by each such respective Partner makes such
qualification necessary. Each of the Borrower's Subsidiaries is a corporation
duly organized, legally existing and in good standing under the laws of the
jurisdiction in which it is incorporated and is duly qualified as a foreign
corporation in all jurisdictions wherein the Property owned or the business
transacted by each such respective Subsidiary makes such qualification
necessary.
Section 3.02 Power and Authorization. The general partner of the
Borrower (i) has full power and authority to create and issue the Note on
behalf of the Borrower and the Security Instruments, including this Agreement,
to which the Borrower is a party; (ii) the Borrower has full power and
authority to perform its obligations under the Security Instruments; (iii) each
Subsidiary is duly authorized and empowered to execute, deliver, and perform
the Security Instruments, including this Agreement, to which it respectively is
a party. All action on the respective part of the Borrower and its
Subsidiaries and any stockholder of or partner in any of such Persons requisite
for the due issuance and delivery of the Note and the due execution, delivery,
and performance of the Security Instruments, including this Agreement, to which
the Borrower, the Subsidiaries, or any stockholder of or partner in any of such
Persons is a party has been duly and effectively taken.
Section 3.03 Binding Obligations. This Agreement does, and the
Note and other Security Instruments to which the Borrower and each Subsidiary,
respectively, are parties upon their creation, issuance, execution and delivery
will, constitute valid and binding obligations of the Borrower and each
Subsidiary, respectively, enforceable in accordance with their terms, except as
such enforceability may be limited by bankruptcy laws.
Section 3.04 No Legal Bar or Resultant Lien. The Note and the
Security Instruments, including this Agreement, to which the Borrower or any
Subsidiary is a party and the compliance with and performance by the Borrower
or any Subsidiary of the terms thereof do not and will not violate any
provisions of the Partnership Agreement of the Borrower or the Articles of
Incorporation or the Bylaws of the general partner or any Subsidiary of the
Borrower, or any contract, agreement,
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instrument or Governmental Requirement presently in effect to which the
Borrower or any Subsidiary is subject, and will not result in the creation or
imposition of any Lien upon any Properties of the Borrower or any Subsidiary
other than those permitted by this Agreement, except where such violation does
not and will not have a Material Adverse Effect.
Section 3.05 No Consent. Except as disclosed in Exhibit D, the
Borrower's and each of Subsidiary's execution, delivery and performance of the
Note and the Security Instruments, including this Agreement, to which the
Borrower and each Subsidiary respectively are parties do not require the
consent or approval of any Partner, or of any stockholder of or partner in any
of the Partners of the Borrower, or of any other Person which has not been
obtained, including but not limited to any Governmental Authority.
Section 3.06 Financial Condition. The consolidated and
consolidating financial statements of the Borrower for the period ending
December 31, 1996 (including any related schedules or notes) which have been
delivered to the Bank have been prepared in accordance with GAAP, consistently
applied, and present fairly the financial condition and changes in financial
position of the Borrower as at the date or dates and for the period or periods
stated and that no change has since occurred in the condition, financial or
otherwise, of the Borrower which would have a Material Adverse Effect.
Section 3.07 Investments and Guaranties. At the date of this
Agreement, neither the Borrower nor any Subsidiary has made investments in,
advances to or guaranties of the obligations of any Person, except as reflected
in the Financial Statements or disclosed to the Bank in Exhibit D and except as
otherwise permitted by this Agreement.
Section 3.08 Liabilities; Litigation. Except for liabilities
incurred in the normal course of business, neither the Borrower nor any
Subsidiary has any material (individually or in the aggregate) liabilities,
direct or contingent, except as disclosed or referred to in the Financial
Statements or as disclosed to the Bank in Exhibit D, and at the date of this
Agreement there is no litigation, legal, administrative or arbitral proceeding,
investigation or other action of any nature pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary which
(A) challenges the validity of this Agreement, the Note or any of the other
Security Instruments or (B) involves the possibility of any judgment or
liability not fully covered by insurance, and which would have a Material
Adverse Effect.
Section 3.09 Taxes; Governmental Charges. The Borrower and the
Subsidiaries have filed all tax returns and reports required to be filed and
have paid all taxes, assessments, fees, and other governmental charges levied
upon any of them or upon any of their respective Properties or income which are
due and payable, including interest and penalties, or have provided adequate
reserves for the payment thereof and are contesting the same in accordance with
the provisions of Section 4.04 hereof.
Section 3.10 Titles, Etc. The Borrower and the Subsidiaries have
good and indefeasible title in fee simple to all real property covered by a
Mortgage and good and indefeasible title to their other Properties, free and
clear of all Liens except (i) Liens referred to in the Financial Statements,
(ii) Liens disclosed to the Bank in Exhibit D, (iii) Liens and minor
irregularities in title which do not interfere with the occupation, use, or
enjoyment by the Borrower or any Subsidiary of any of their respective
Properties in the normal course of business as presently conducted or impair
the value thereof for such business, except where such interference or
impairment do not have a Material Adverse Effect, (iv) Liens otherwise
permitted or contemplated by this Agreement or the other Security Instruments,
or (v) Excepted Liens.
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Section 3.11 Defaults. Neither the Borrower nor any Subsidiary is
in default nor has any event or circumstance occurred which, but for the
passage of time or the giving of notice, or both, would constitute a default
under any material loan or credit agreement, indenture, mortgage, deed of
trust, security agreement or other agreement or instrument evidencing or
pertaining to any Debt of the Borrower or any Subsidiary, or under any material
agreement or other instrument to which the Borrower or any Subsidiary is a
party or by which the Borrower or any Subsidiary is bound, and no Default
hereunder has occurred and is continuing.
Section 3.12 Casualties; Taking of Properties. Since the date of
the Financial Statements, neither the business nor the Properties of the
Borrower and the Subsidiaries, taken as a whole, have been materially and
adversely affected by any cause or event. No Home for which Advances hereunder
have been made (and continue to be outstanding) has suffered any material fire
or other casualty loss.
Section 3.13 Use of Proceeds; Margin Stock. The proceeds of each
Advance will be used solely to pay for the cost of the acquisition of Lots (or
to refund the cost of Lots which were previously acquired) located in an
Approved Subdivision and the cost of new construction of Homes on each such
Lot; none of such proceeds will be used for the purpose of purchasing or
carrying any "margin stock" as defined in Regulation U of the Board of
Governors of the Federal Reserve System (12 C.F.R. Part 221), or for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry a margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of such
Regulation U. Neither the Borrower nor any Subsidiary is engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stocks and neither the Borrower
nor any Subsidiary, nor any Person acting on behalf of the Borrower or any
Subsidiary, has taken or will take any action which might cause the Note or any
of the Security Instruments, including this Agreement, to violate Regulation U
or any other regulation of the Board of Governors of the Federal Reserve System
or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.
Section 3.14 Compliance with the Law. Neither the Borrower nor
any Subsidiary (i) is in violation of any Governmental Requirement concerning
its respective Properties or the conduct of its respective business to the
extent that any such violation or penalty arising therefrom would have a
Material Adverse Effect or (ii) has failed to obtain any license, permit,
franchise or other governmental authorization necessary to the ownership of any
of their respective Properties or the conduct of their respective business,
which violation or failure would have (in the event such violation or failure
were asserted by any Person through appropriate action) a Material Adverse
Effect or (iii) has been accused of being in violation of Title IX of the
Organized Crime Control Act of 1970, entitled "Racketeer Influenced and Corrupt
Organizations" (RICO), 18 U.S.C. Section 1961 et seq.
Section 3.15 ERISA.
(a) The Borrower, each Subsidiary, and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the Code
regarding each Plan.
(b) Each Plan is and has been maintained in substantial compliance
with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could
result in imposition on the Borrower, any Subsidiary or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil
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penalty assessed pursuant to subsections (c), (i) or (l) of Section 502 of
ERISA or tax imposed pursuant to Section 4975 of the Code or (ii) breach of
fiduciary duty liability damages under Section 409 of ERISA.
(d) Full payment has been made when due of all amounts which the
Borrower, the Subsidiaries, and any ERISA Affiliate is required under the terms
of each Plan or applicable law to have paid as contributions to such Plan as of
the date hereof.
(e) Neither the Borrower, any Subsidiary nor any ERISA Affiliate
sponsors, maintains or contributes to an employee welfare benefit plan, as
defined in Section 3(1) of ERISA, including but not limited to any such plan
maintained to provide benefits to former employees of such entities, that may
not be terminated by the Borrower, any Subsidiary or any ERISA Affiliate in its
sole discretion at any time without incurring liability in excess of $250,000.
(f) Neither the Borrower, the Subsidiaries, nor any ERISA
Affiliate sponsors, maintains, or contributes to, or has at any time in the
six-year period preceding the date of this Agreement sponsored, maintained or
contributed to, any employee pension benefit plan, as defined in Section 3(2)
of ERISA, that is subject to Title IV of ERISA (including, without limitation,
any multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA).
Section 3.16 Location of the Borrower. The Borrower's principal
place of business and chief executive offices are located at the address stated
in the first paragraph of this Agreement. The Borrower has not been known as
or used any other corporate, fictitious, assumed or trade names during the past
five (5) years, except as disclosed in Exhibit D.
Section 3.17 Utility Services. All utility services necessary for
the construction of the Homes on all Lots mortgaged to the Bank and the
operation thereof for their intended purpose are (or will be prior to the
Completion Date of the Home to be constructed thereon) available at the
boundaries of each such Lot, including water supply, storm and sanitary sewer
facilities, gas (if applicable), electric, and telephone facilities. All roads
necessary for the full utilization of such Homes for their intended purposes
have been completed substantially in accordance with all regulations and
specifications of applicable Governmental Authorities and accepted for
maintenance by the county or city in which they are located.
Section 3.18 No Material Misstatements. No information, exhibit
or report furnished to the Bank by the Borrower or any Subsidiary in connection
with the negotiation of this Agreement contained any material misstatement of
fact or omitted to state a material fact or any fact necessary to make the
statement contained therein not misleading.
Section 3.19 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
Section 3.20 Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is a "holding company", or a "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 3.21 Subsidiaries. The Borrower has no Subsidiaries
except as disclosed in Exhibit D.
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Section 3.22 Environmental Matters.
(a) Neither any Property of the Borrower or the Subsidiaries nor
the operations conducted thereon violate any order or requirement of any court
or Governmental Authority or any Environmental Law;
(b) The Borrower has made due inquiry and none of the Property of
the Borrower subject to a Mortgage is listed or anticipated to be listed on the
CERCLA National Priorities List or a similar state priorities list for
properties requiring remediation that is maintained by a Governmental Authority
under any Environmental Law. The Borrower has made due inquiry and no other
Property of the Borrower or the Subsidiaries is listed, is anticipated to be
listed on the CERCLA National Priorities List or a similar state priorities
list for properties requiring remediation that is maintained by a Governmental
Authority under any Environmental Law. To the best of Borrower's knowledge, no
site immediately adjacent to any Property of the Borrower subject to a Mortgage
is listed on the CERCLA National Priorities List or a similar state priorities
list for properties requiring remediation that is maintained by a Governmental
Authority under any Environmental Law.
(c) Except as disclosed to the Bank in Exhibit D, without
limitation of clause (a) above, no Property of the Borrower or the Subsidiaries
which is subject to a Mortgage, nor the operations currently conducted thereon
or, to the best of Borrower's knowledge after obtaining and reviewing a Phase I
Environmental Assessment in accordance with the Standard Practice for
Environmental Site Assessments, E1527-93 or other report of environmental
conditions satisfactory to the Bank, nor the operations conducted by any prior
owner or operator of such Property or operation, are in violation of or subject
to any existing, pending action, suit, investigation, inquiry, or proceeding by
or before any court or Governmental Authority or to any remedial obligations
under Environmental Laws;
(d) All notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed in connection with the operation or use
of any and all Property of the Borrower and the Subsidiaries, including but not
limited to treatment, storage, disposal, or release of a hazardous substance or
solid waste into the environment, have been duly obtained or filed, and the
Borrower and the Subsidiaries are in compliance with the terms and conditions
of any such notice, permit, license or similar authorization;
(e) All hazardous substances or solid waste generated at any
Property of the Borrower and the Subsidiaries have , during the period of
ownership or operation of such Property by the Borrower or any Subsidiary, been
transported, treated and disposed of only by carriers maintaining valid permits
under RCRA and any other Environmental Law and only at treatment, storage and
disposal facilities maintaining valid permits under RCRA and any other
Environmental Law, which carriers and facilities have been and are operating in
compliance with such permits and are not the subject of any existing, pending
or threatened action, investigation or inquiry by any Governmental Authority in
connection with any Environmental Law;
(f) The Borrower and the Subsidiaries have taken all reasonable
and prudent steps necessary to determine and have determined that no hazardous
substances or solid waste have been disposed of or otherwise released and there
has been no release of any hazardous substances on or to any Property of the
Borrower or the Subsidiaries except in compliance with Environmental Laws and
to the extent that any such release is not material and is remediable without
significant cost or any liability, and that there are no storage tanks or other
containers on or under the Property of the Borrower or the Subsidiaries from
which hazardous substances or other contaminants may be released into the
surrounding environment in reportable quantities;
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(g) The Borrower and the Subsidiaries have no material contingent
liability in connection with any release of any hazardous substance or solid
waste into the environment; and
(h) There are no conditions existing on any Property of the
Borrower or the Subsidiaries or resulting from operations conducted thereon
that could give rise to or result in the imposition of remedial obligations
under Environmental Laws other than conditions that customarily exist in the
homebuilding business that are not material and are remediable without
significant cost or any liability.
(i) To the best of the Borrower's knowledge, none of the Property
of the Borrower is located on a site used or formerly used as a landfill.
Section 3.23 Survey and Other Documents. Each survey of Lots
furnished to the Bank accurately depicts the state of facts it purports to
depict and each other document furnished to the Bank is a true and correct copy
thereof, has not been modified or amended and is in full force and effect on
the date hereof.
Section 3.24 No Control. The Borrower is not and no Person having
"control" (as defined in 12 U.S.C. Section 375(b)(5) or in regulations
promulgated pursuant thereto) of Borrower is an "executive officer,"
"director," or "principal shareholder" (as those terms are defined in 12 U.S.C.
Section 375(b) or in regulations promulgated pursuant thereto) of the Bank, of
a bank holding company of which the Bank is a subsidiary, or of any subsidiary
of a bank holding company of which Bank is a subsidiary, or of any bank at
which the Bank maintains a "correspondent account" (as such term is defined in
such statute or regulations) or of any bank which maintains a correspondent
account with the Bank.
Section 3.25 Wetlands. A wetlands survey of the Lots has been
conducted and no Lot financed by the Construction Facility contains any area
designated as "wetlands" by the U.S. Army Corps of Engineers.
Section 3.26 Flood Area; Filled Land. Unless otherwise agreed by
the Bank in writing, no part of any Lot mortgaged to the Bank is in an "area of
special flood hazard" as that term is defined in the National Flood Insurance
Act of 1968 (as amended and supplemented by the Flood Disaster Protection Act
of 1973). No Lot consists of and no Home will be located on filled in land,
except to the extent that the composition and compaction of any fill used
complies with applicable Governmental Requirements of the Department of Housing
and Urban Development.
Section 3.27 Solvency. The Borrower is solvent, is generally
paying its debts as they become due, and has no outstanding liens, suits,
garnishments, bankruptcies or court actions which could render it insolvent.
Section 3.28 Deceptive Trade Practices Act Not Applicable. The
Borrower has more than $25,000,000 in assets and is not a "consumer" within the
meaning of the Texas Deceptive Trade Practices Act. (Texas Business and
Commerce Code Section 17.41 et seq.). Attached hereto as Exhibit J is a true
and correct current financial statement showing assets in excess of
$25,000,000.
Section 3.29 Geological Fault. To the best of Borrower's
knowledge, except to the extent that the Borrower has notified the Bank to the
contrary, no Lot is located within one-quarter mile of any geological fault.
Section 3.30 No "Zero Lot Line" Construction. The Borrower does
not have and does not intend to have any "zero lot line" construction of Homes
on the Lots mortgaged to the Bank.
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Section 3.31 Underground Storage Facilities. To the best of
Borrower's knowledge, except as consented to by the Bank, no part of any Lot or
other real property upon which the Bank has been granted a Lien and no part of
any Approved Subdivision is situated on, over or within one mile of any
underground storage facilities used for injection of natural gas or processed
gas or other liquid hydrocarbons except for service stations or similar
facilities operated to dispense to consumers products utilized in the operation
of automotive vehicles.
ARTICLE 4
AFFIRMATIVE COVENANTS
The Borrower will at all times comply with the covenants contained in
this Article 4, from the date hereof and for so long as any part of the
Indebtedness or the Commitment is outstanding.
Section 4.01 Financial Statements and Reports. The Borrower will
promptly furnish to the Bank from time to time upon request such information
regarding the business and affairs and financial condition of the Borrower and
the Subsidiaries as the Bank may reasonably request, and the Borrower will
furnish to the Bank:
(a) Annual Reports - Promptly after becoming available
and in any event within one hundred twenty (120) days after the close
of each fiscal year of the Borrower, the audited consolidated (or,
where appropriate, combined) and consolidating balance sheets of the
Borrower and its Subsidiaries as at the end of such year, the audited
consolidated (or, where appropriate, combined) and consolidating
statements of profit and loss of the Borrower and its Subsidiaries,
respectively, for such year, and the audited consolidated (or, where
appropriate, combined) and consolidating statements of reconciliation
of capital accounts of the Borrower and its Subsidiaries,
respectively, for such year, including a statement of contingent
liabilities and accompanied by the related report of independent
public accountants of nationally recognized standing, which report
shall be to the effect that such statements have been prepared in
accordance with GAAP consistently followed throughout the period
indicated except for such changes in such principles with which the
independent public accountants shall have concurred;
(b) Quarterly Financial Reports - Promptly after becoming
available and in any event within thirty (30) days after the end of
each quarter in each fiscal year of the Borrower, the consolidated
(or, where appropriate, combined) and consolidating balance sheets of
the Borrower and its Subsidiaries as at the end of such quarter, and
the consolidated (or, where appropriate, combined) and consolidating
statements of profit and loss of the Borrower and its Subsidiaries for
such quarter and for the period from the beginning of the fiscal year
to the end of such quarter, certified by an Authorized Borrower
Representative to have been prepared in accordance with GAAP
consistently followed throughout the period indicated except to the
extent stated therein, subject to normal changes resulting from
year-end adjustment;
(c) Other Reports -
(i) As soon as available, but in any event by the
tenth (10th) of each calendar month, a Construction Facility
Status Report by Approved Subdivision with respect to all Lots
and Homes financed under the Construction Facility as of the
end of the prior month.
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(ii) As soon as available, and in any event by the
tenth (10th) day of each calendar month, a Sold/Unsold Homes
Report in form of Exhibit F hereto as of the end of the prior
month; and
(d) Audit Reports - Promptly upon receipt thereof, one
copy of each other report submitted to the Borrower or any Subsidiary
by independent accountants in connection with any annual, interim or
special audit made by them of the books of the Borrower or any
Subsidiary;
(e) Construction Costs Schedules - Prior to commencement
of construction of each Type of Home, and thereafter as changes occur
or upon request by the Bank, a current Construction Costs Schedule for
such Type of Home; and
(f) Satisfaction of Conditions Precedent - Promptly upon
request by the Bank, the Borrower shall provide the Bank with such
documents, reports or other evidence as the Bank may reasonably
request evidencing the satisfaction by the Borrower of the conditions
precedent set forth in Article 7.
Section 4.02 Annual Certificates of Compliance. Concurrently with
the furnishing of the annual financial statements pursuant to Subsection
4.01(a), the Borrower will furnish or cause to be furnished to the Bank a
certificate signed by an Authorized Borrower Representative (i) stating that a
review of the activities of the Borrower and the Subsidiaries has been made
under his supervision with a view to determining whether the Borrower and the
Subsidiaries have fulfilled all of their obligations under this Agreement, the
other Security Instruments and the Note; (ii) stating that the Borrower and the
Subsidiaries have fulfilled their obligations under such instruments and that
all representations made herein continue to be true and correct in all material
respects (or specifying the nature of any change), or if there shall be a
Default or Event of Default, specifying the nature and status thereof and the
Borrower's proposed response thereto; (iii) demonstrating in reasonable detail
compliance (including but not limited to showing all calculations) as at the
end of such fiscal year with Sections 5.16, 5.17, 5.18 and 5.19, and with such
other provisions hereof as the Bank may reasonably request; and (iv) containing
or accompanied by such financial or other details, information and material as
the Bank may reasonably request to evidence such compliance.
Section 4.03 Quarterly Certificates of Compliance. Concurrently
with the furnishing of the quarterly financial statements pursuant to
Subsection 4.01(b), the Borrower will furnish or cause to be furnished to the
Bank an Authorized Borrower Representative's certificate in the same form as
the certificate required by Section 4.02, including all the matters referred to
in clauses (i) through (iii), inclusive, thereof.
Section 4.04 Taxes and Other Liens. The Borrower will pay and
discharge promptly all material taxes, assessments and governmental charges or
levies imposed upon the Borrower or any Subsidiary or upon the income or any
Property of the Borrower or any Subsidiary which, if unpaid, might become a
Lien upon any or all of the Property of the Borrower or any Subsidiary;
provided, however, that neither the Borrower nor any Subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in good faith by
appropriate proceedings diligently conducted by or on behalf of the Borrower or
such Subsidiary, and if the Borrower or such Subsidiary shall have set up
reserves therefor adequate under GAAP. The Borrower shall promptly pay any
amounts finally adjudged by a court of competent jurisdiction to be due,
together with all costs, interest and penalties.
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Section 4.05 Maintenance. The Borrower will and will cause each
Subsidiary to (i) maintain its partnership or corporate existence (as the case
may be), rights and franchises and (ii) observe and comply with all
Governmental Requirements.
Section 4.06 Further Assurances. The Borrower will and will cause
each Subsidiary to cure promptly any defects in the creation and issuance of
the Note and the execution and delivery of the Security Instruments, including
this Agreement. The Borrower at its expense will promptly execute and deliver
to the Bank upon request all such other and further documents, agreements and
instruments (or cause any of the Subsidiaries to take such action) in
compliance with or accomplishment of the covenants and agreements of the
Borrower or any of the Subsidiaries in the Security Instruments, including this
Agreement, or to further evidence and more fully describe the collateral
intended as security for the Note, or to correct any omissions in the Security
Instruments, or more fully to state the security obligations set out herein or
in any of the Security Instruments, or to perfect, protect or preserve any
Liens created pursuant to any of the Security Instruments, or to make any
recordings, to file any notices, or obtain any consents, all as may be
reasonably necessary or appropriate in connection therewith.
Section 4.07 Costs and Expenses. The Borrower will pay all
reasonable legal fees and all reasonable out-of- pocket expenses incurred by
the Bank in connection with the negotiation, documentation and administration
of this Agreement and any and all other Security Instruments contemplated
hereby (including any amendments hereto or thereto or consents or waivers
hereunder or thereunder); provided, however, that the Bank will obtain at its
expense prior to the occurrence of an Event of Default, appraisals and
inspections of the Homes and Lots. The Borrower will, upon request, promptly
reimburse the Bank for all amounts reasonably expended, advanced or incurred by
the Bank to satisfy any obligation of the Borrower under this Agreement or any
other Security Instrument, or to collect the Note, or to enforce the rights of
the Bank under this Agreement or any other Security Instrument, which amounts
will include all court costs, attorneys' fees (including but not limited to
trial, appeal or other proceedings), fees of auditors and accountants, and
investigation expenses reasonably incurred by the Bank in connection with any
such matters, together with interest at the post-maturity rate specified in
Section 2.03 on each such amount from the date three (3) days after written
demand or request by the Bank for reimbursement until the date of reimbursement
to the Bank. The Borrower will pay at the time of execution of this Agreement,
or when due, or at the option of the Bank at any time or times hereafter
specified by the Bank, all costs and expenses required by the terms of this
Agreement, the Note, or the Security Instruments, and including but not limited
to:
(a) All survey and continuations of survey costs and
expenses, including the cost of a survey;
(b) All premiums for Title Binders, Title Policies and
other insurance policies; and
(c) All other reasonable costs and expenses payable to
third parties incurred by the Bank in connection with the consummation
of the Transactions contemplated by this Agreement, other than
appraisal and inspection fees incurred by the Bank prior to the
occurrence of an Event of Default, as set forth herein.
Section 4.08 Insurance. The Borrower and the Subsidiaries now
maintain and will continue to maintain, with financially sound and reputable
insurers, insurance with respect to their respective Properties and business
against such liabilities, casualties, risks and contingencies and in such types
and amounts as is customary in the case of Persons engaged in the same or
similar businesses and similarly situated, including but not limited to public
liability (including liability arising out of or in
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connection with the operation of autos and other vehicles) insurance in the
minimum amount of either $1,000,000, workmen's compensation insurance up to
the statutory limits, an umbrella policy in the minimum amount of $5,000,000,
completed value fire and extended coverage insurance, and, with respect to all
Property mortgaged to the Bank, flood insurance for each Lot if located within
an "area of special flood hazard", as that term is defined in the National
Flood Insurance Act of 1968 (as amended and supplemented by the Flood Disaster
Protection Act of 1973), provided, however, that inclusion of this provision
shall not constitute a waiver of the provisions of Section 5.22 hereof,
builder's risk insurance in the amount at any time of one hundred percent
(100%) of the Percentage of Completion Value for each of the Homes financed
under the Construction Facility, together with such other insurance as the Bank
may require covering the associated Lot and the Home to be constructed thereon,
all in amounts approved by the Bank, such insurance to be written in form and
with companies approved by the Bank with loss made payable to the Bank pursuant
to the Texas standard mortgagee clause, without contribution, and the Borrower
shall have delivered the corresponding certificates of insurance to the Bank
with evidence of payment of premiums thereon. Such policy shall provide, by
way of riders, endorsements or otherwise, that the insurance provided thereby
shall not be terminated, reduced or otherwise limited regardless of any breach
of the representations and agreements set forth therein and that no such policy
shall be canceled, endorsed or amended to any extent unless the issuer thereof
shall have first given the Bank at least thirty (30) days' prior written
notice. Annually and upon request of the Bank, the Borrower will furnish or
cause to be furnished to the Bank from time to time (i) a summary of the
insurance coverage of the Borrower and the Subsidiaries in form and substance
satisfactory to the Bank and if requested will furnish the Bank copies of the
applicable policies and (ii) a copy of any report provided by the Borrower to
any insurance company concerning the Homes. In the case of any fire, accident
or other casualty causing loss or damage to any Properties of the Borrower
securing the payment of the Indebtedness, the proceeds of such policies shall
be used either (i) to repair or replace such damaged Property, or (ii) to
prepay the Indebtedness, such election to be made by the Bank.
Section 4.09 Right of Inspection. The Borrower will permit and
will cause each Subsidiary to permit any officer, employee or agent of the Bank
to visit and inspect any of the Properties of the Borrower or any Subsidiary,
examine the Borrower's or any Subsidiary's books of record and accounts, take
copies and extracts therefrom, and discuss the affairs, finances and accounts
of the Borrower or any Subsidiary with the Borrower's or such Subsidiary's
officers, accountants and auditors, all at such reasonable times and as often
as the Bank may desire.
Section 4.10 Notice of Certain Events. The Borrower shall
promptly notify the Bank if the Borrower obtains knowledge of the occurrence of
(i) any event which constitutes a Default, together with a detailed statement
by an Authorized Borrower Representative of the steps being taken to cure the
effect of such Default; or (ii) the receipt of any notice from, or the taking
of any other action by, the holder of any promissory note, debenture, or other
evidence of indebtedness of the Borrower or any Subsidiary or of any security
(as defined in the Securities Act of 1933, as amended) of the Borrower or any
Subsidiary with respect to a claimed default, together with a detailed
statement by a responsible officer of the Borrower specifying the notice given
or other action taken by such holder and the nature of the claimed default and
what action the Borrower or such Subsidiary is taking or proposes to take with
respect thereto; or (iii) any legal, judicial or regulatory proceedings
affecting the Borrower or any Subsidiary or any of the Properties of the
Borrower or any Subsidiary and involving an amount in controversy equal to
$100,000 or more individually or $250,000 in the aggregate; or (iv) any dispute
between the Borrower or any Subsidiary and any governmental or regulatory body
or any other Person which, if adversely determined, would have a Material
Adverse Effect; or (v) any event or condition having a Material Adverse Effect;
or (vi) any material difficulty in obtaining labor or materials which would
have a material effect on the Borrower's ability to complete construction of
any
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Home in accordance with the Plans and Specifications before the Completion
Date; or (vii) the presence of any hazardous substance on any Lot or in any
Home.
Section 4.11 Affiliates. All transactions between the Borrower or
any Subsidiary and any Affiliate of the Borrower or any Subsidiary shall be
arms length transactions undertaken in good faith and in the ordinary course of
business, unless approved by the Bank in its reasonable discretion, but the
foregoing shall not limit or prohibit payments by the Subsidiaries to the
Borrower.
Section 4.12 Notices by Governmental Authority, Fire and Casualty
Losses, Etc. The Borrower will timely comply with and promptly furnish to the
Bank true and complete copies of any official notice or claim by any
Governmental Authority pertaining to any Lot mortgaged to the Bank or any Home
to be constructed thereon. The Borrower will promptly notify the Bank of any
fire or casualty or any notice of taking or eminent domain action or proceeding
affecting any such Lot or Home. In the event any such Lot or Home is taken in
an eminent domain action or proceeding, the condemnation proceeds resulting
from such action or proceeding shall be paid to the Bank to be applied as a
prepayment of the Indebtedness.
Section 4.13 Deposit Account. The Borrower maintains a depository
account with Bank One, account number 9310741418, styled Newmark Homes, L.P.
Disbursement Account. The Borrower hereby instructs the Bank to deposit the
proceeds of each Advance made pursuant to Section 2.02 of this Agreement
directly into such account; provided, however, that Initial Advances, to the
extent of Lot acquisition (or refunding of acquisition cost of Lots previously
acquired) and closing costs shall be funded directly to the title company
handling the closing.
Section 4.14 Application of Advances. The Borrower will use all
Advances hereunder solely for purposes set forth in Section 3.13 hereof.
Section 4.15 Required Deposit by Borrower. If the Bank reasonably
determines in its good faith judgment at any time that the Reserved Commitment
for any given Lot and Home mortgaged to the Bank will be insufficient for
payment in full of:
(a) The remaining unpaid cost of labor, materials and
services required for the completion of the Home being constructed
thereon; and
(b) Any other costs and expenses required to be paid in
connection with the completion of construction of such Home in
accordance with any Governmental Requirements;
then the Borrower will, on request of the Bank, promptly deposit with the Bank
any sum or sums over and above the Reserved Commitment allocated to such Lot
and Home necessary to complete such Home (the "Borrower's Completion Deposit").
The Bank may advance all or a portion of the Borrower's Completion Deposit
prior to making any additional Advance with respect to such Lot and Home.
Section 4.16 Payment of Claims. The Borrower shall promptly pay
or cause to be paid when due all costs and expenses incurred in connection with
all Lots mortgaged to the Bank and the construction of the Homes thereon, and
the Borrower shall keep such Lots free and clear of any mechanic's Liens, Liens
other than Excepted Liens, charges, or claims other than the Lien of the
Mortgage and other Liens approved in writing by the Bank, whether inferior or
superior to the Mortgage. A discharge of any Mortgage and taking of a new
Mortgage in substitution thereof shall not release or diminish this obligation.
Notwithstanding anything to the contrary contained in this Agreement, the
Borrower may contest (i) the validity or amount of any claim of any contractor,
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consultant, architect, or other Person providing labor, materials, or services
with respect to any Lot mortgaged to the Bank or the construction of the Home
thereon, (ii) any tax or special assessment levied by any Governmental
Authority, or (iii) the enforcement of or compliance with any Governmental
Requirements, and any such contest on the part of the Borrower shall not be a
Default hereunder provided that during the pendency of any such contest the
Borrower shall furnish to the Bank and the Title Insurer an indemnity bond with
a corporate surety satisfactory to the Bank and the Title Insurer or other
security acceptable to them in an amount equal to one hundred twenty-five
percent (125%) of such claim or tax, and provided further that the Borrower
shall pay any amount finally adjudged by a court of competent jurisdiction to
be due, with all costs, interest, and penalties thereon before such judgment
creates a Lien on such Lot or the Home to be constructed thereon.
Section 4.17 Appraisals; Inspections. The Bank may order and
obtain Appraisals at its expense; provided, that upon the occurrence of a
Default, Appraisals may be ordered by the Bank at the Borrower's expense. The
Borrower shall allow the Bank's appraiser access to its Properties and records
and shall cooperate in any other reasonable manner in allowing such Appraisal
to be prepared and completed on a timely basis. The Bank may order and obtain
periodic inspections of the Lots and Homes financed by the Bank. The Bank
shall bear the cost of such inspections prior to the occurrence of an Event of
Default; the Borrower shall bear the cost of any such inspections after the
occurrence of an Event of Default. The Borrower shall allow the Bank's
inspector access to the Lots and Homes and related construction records and
shall cooperate in any other reasonable manner in allowing inspections to be
conducted in a timely manner.
Section 4.18 Plans and Specifications; Change Orders. The
Borrower will construct each Home in a good and workmanlike manner, in
accordance with the Plans and Specifications and in accordance with all
Governmental Requirements and applicable private covenants. Prior to
commencement of construction (and upon request by the Bank hereafter), the
Borrower shall furnish the Bank with copies of the Plans and Specifications for
each Home to be constructed under the Construction Facility, together with a
Construction Costs Schedule. Any change or changes to the Plans and
Specifications for any Home resulting in a decrease in the Construction Costs
of such Home and which exceed in the aggregate ten percent (10%) of the total
Construction Costs of such Home shall be disclosed to the Bank by providing the
Bank with a revised Construction Costs Schedule including any change orders.
Section 4.19 Model Homes. The Borrower will maintain at least
one, but no more than three, Model Homes in each Approved Subdivision wherein
the Borrower is building one or more Homes financed by the Construction
Facility. No more than two (2) Model Homes in each Approved Subdivision
wherein the Borrower is building other Homes financed by the Construction
Facility shall be financed under the Construction Facility at any one time.
The Borrower's Model Home Inventory financed by the Construction Facility shall
not exceed twenty percent (20%) of the total number of Homes financed by the
Bank which are completed or under construction by the Borrower determined as of
the date of the Initial Advance for the respective Model Home. The Fair Market
Value of any Model Home shall not include value attributable to landscaping,
fencing, or any "options" or "extras" not typically included in the Type of
Home being built for use as a Model Home.
Section 4.20 Title Policies. If, for any reason and
notwithstanding any other provision of this Agreement to the contrary, a Title
Binder is within two (2) weeks of its expiration date or if a material defect
in title to the Property covered thereby becomes known and is not cured by the
earlier of (i) 30 days from the date of discovery by the Borrower and (ii) two
weeks prior to the expiration date of the Title Binder, the Borrower shall
cause the Title Insurer that issued such Title Binder to convert such Title
Binder to a Title Policy and shall pay all premiums therefor.
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Section 4.21 Commencement of Construction. Within ten (10) days
after the date of the Initial Advance with respect to a Home, the Borrower
shall commence construction and shall thereafter prosecute the same with
diligence and continuity to completion. Upon commencement of construction, if
requested by the Bank, the Borrower shall execute and deliver to the Bank an
Affidavit of Commencement of Construction in accordance with the provisions of
the Texas Property Code and in recordable form. The Borrower shall not cease
construction of any Home for more than five (5) days without the consent of the
Bank.
Section 4.22 Materials. The Borrower shall cause all materials
(a) to be purchased in a manner that will result in the ownership thereof
vesting unconditionally in the Borrower, free from all liens, charges,
encumbrances and security interests, on delivery of such materials to the Lots,
(b) to be stored at the Lots under adequate safeguards to minimize the
possibility of loss, theft, damage or commingling with other materials or
projects, (c) to be covered by the lien and security interest of the Mortgage,
and (d) to be covered by the "Builder's Risk" insurance policy required by the
Mortgage. The Borrower shall deliver to the Bank, on demand, copies of any
contracts, bills of sale, statements, receipted vouchers or agreements under
which the Borrower claims title to any materials used in the construction of,
or incorporated or to be incorporated into, the Homes.
Section 4.23 Surveys and Plans. Upon request by the Bank, the
Borrower shall furnish to the Bank, at the Borrower's cost and expense,
immediately after (or in no more than three (3) days after) installation of the
forms for the pouring of the foundation or slab on the Lot in question, a
certificate by a licensed engineer or surveyor satisfactory to the Bank, in
form and scope acceptable to the Bank, to the effect that the location of the
foundation or slab is entirely within the perimeter of the Lot and does not
encroach upon, breach, or violate any set back lines.
Section 4.24 Correction of Defects. The Borrower will correct any
structural defect in the Homes and, upon demand of the Bank, the Borrower will
correct any material departure from the Plans and Specifications not approved
by the Bank and of any encroachment by any part of the Home or related
improvements on or over any building lines, easements, property lines or other
restricted areas which the foundation survey or any other survey or inspection
reflects. No Advance made shall constitute a waiver of the Bank's right to
require compliance with this covenant with respect to any such defects or
departures from the Plans and Specifications not theretofore discovered by, or
called to the attention of, the Bank in writing.
Section 4.25 Environmental Assessment. The Borrower will cause,
at no cost or expense to the Bank, a Phase I environmental assessment of the
Lots prepared by a qualified engineer approved by the Bank and a copy of the
environmental assessment to be delivered to the Bank prior to the Initial
Advance to be made with respect to the Lots covered by the assessment. The
assessment must show that the Lots do not contain any hazardous substances and
otherwise be in form and substance satisfactory to the Bank. A copy of the
Phase I environmental assessment furnished to the Borrower by the developer of
the subdivision may satisfy this requirement, in the sole discretion of the
Bank.
Section 4.26 Subcontractors. The Borrower will, if requested,
make available to the Bank, or its representatives within a reasonable period
after such request is made, counterparts and/or conditional assignments of any
and all construction contracts, bills of sale, statements, conveyances,
receipted vouchers or agreements of any nature under which the Borrower claims
title to any materials or supplies used or to be used in the construction of
the Home, and any lien waivers by any subcontractor, laborer or materialman
furnishing materials for construction or performing work upon any Home.
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Section 4.27 Speculative Homes.
(a) At no time from the date hereof through June 30, 1997 will the
aggregate Loan Value with respect to Speculative Homes then financed by the
Bank exceed an amount equal to the lesser of (x) sixty-five percent (65%) of
the Commitment or (y) sixty-five percent (65%) of the aggregate Loan Value of
all Homes then being financed by the Bank under the Facility on the date of
calculation.
(b) From and after July 1, 1997, at no time during the remaining
term of the Facility will the aggregate Loan Value with respect to Speculative
Homes then financed by the Bank exceed an amount equal to the lesser of (x)
sixty percent (60%) of the Commitment or (y) sixty percent (60%) of the
aggregate Loan Value with respect to all Homes then being financed by the Bank
under the Facility on the date of calculation.
(c) At no time will the total number of Speculative Homes (whether
or not financed by the Bank), completed or under construction by the Borrower
or any Subsidiary or Affiliate exceed seventy percent (70%) of the total number
of Homes (whether or not financed by the Bank) completed or under construction
by the Borrower or any Subsidiary or Affiliate.
ARTICLE 5
NEGATIVE COVENANTS
The Borrower will at all times comply with the covenants contained in
this Article 5, from the date hereof and for so long as any part of the
Indebtedness or the Commitment is outstanding.
Section 5.01 Debt. Neither the Borrower nor any Subsidiary will
incur, create, assume or suffer to exist any Debt, or any Debt which would
arise under commitments to lend, except:
(a) the Note or other Indebtedness;
(b) Debt of or commitments to lend to the Borrower and
its Subsidiaries existing on the date of this Agreement and renewals
(but not increases) thereof and under the construction facilities of
which the Borrower shall have given the Bank notice;
(c) customary accounts payable of the Borrower and its
Subsidiaries (for the deferred purchase price of Property, other than
real estate, or services) from time to time incurred in the ordinary
course of the Borrower's or its Subsidiaries' home building business
and which are not in excess of sixty (60) days past the invoice or
billing date;
(d) Debt of the Borrower or the Subsidiaries in the
maximum aggregate amount of $1,500,000 incurred after the date hereof
for the purpose of acquiring real Property to develop into Lots (and
for such development) for the purpose of the construction (primarily
by the Borrower) of Homes thereon (provided, however, that the maximum
amount of Debt pursuant to this Subsection together with the amount of
investments outstanding at any time pursuant to Subsection 5.04 shall
not exceed $3,000,000); and
(e) Debt of the Borrower in the maximum aggregate amount
of $100,000 for the deferred purchase price of equipment used by the
Borrower or its Subsidiaries in the ordinary course of business.
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Section 5.02 Liens. Neither the Borrower nor any Subsidiary will
create, incur, assume or permit to exist any Lien on any of its Properties (now
owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens existing on Lots and Homes to be constructed
thereon, the acquisition and construction of which are being financed
pursuant to the credit facilities described in Section 5.01(b);
(d) Liens disclosed in Exhibit D;
(e) Liens securing Debt described in Subsection 5.01(d)
and (e); and
(f) Non-consensual statutory, administrative or judicial
Liens that are not material either individually or in the aggregate.
Section 5.03 Investments, Loans and Advances. Neither the
Borrower nor any Subsidiary will make or permit to remain outstanding any loans
or advances to or investments in any Person, except that the foregoing
restriction shall not apply to:
(a) Investments, loans or advances, the material details
of which have been set forth in the Financial Statements or are
disclosed to the Bank in Exhibit D;
(b) Investments in direct obligations of the United
States of America or any agency thereof;
(c) Investments in certificates of deposit of maturities
less than one year, issued by commercial banks in the United States of
America having capital and surplus in excess of $50,000,000;
(d) Investments in commercial paper of maturities less
than one year if at the time of purchase such paper is rated in either
of the two highest rating categories of Standard & Poors Corporation,
Moody's Investors Service, Inc., or any other rating agency
satisfactory to the Bank; and
(e) Routine loans or advances to employees made in the
ordinary course of business not to exceed the aggregate amount, for
the Borrower and all Subsidiaries combined, of $250,000 at any one
time outstanding.
Section 5.04 Acquisition of Property to Develop Into Lots.
Neither the Borrower nor any Subsidiary shall make investments for the purpose
of acquiring real Property to develop into Lots (and for such development) for
the purpose of the construction (primarily by the Borrower) of Homes thereon
exceeding the maximum amount of $1,500,000 (provided, however, that the maximum
amount of investments pursuant to this Subsection including the amount of Debt
outstanding at any time pursuant to Subsection 5.01(d) shall not exceed
$3,000,000).
Section 5.05 Distributions, Payments, Etc. by the Borrower . The
Borrower will not make any distributions, returns of capital, payments of fees
to Partners, shareholders or Venturers if any
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Default has occurred and is continuing hereunder or would occur after giving
effect thereto. The Borrower shall not sell and shall not permit any
Subsidiary to issue, sell, or otherwise dispose of any shares of its capital
stock or other securities or rights, warrants or options to purchase, or
acquire any shares or securities or issue any class of capital stock if the
effect thereof would be to cause the Borrower to breach any other covenant of
this Agreement.
Section 5.06 Sales and Leasebacks. Except for sales and
leasebacks of Model Homes, neither the Borrower nor any Subsidiary will enter
into any arrangement, directly or indirectly, with any Person whereby the
Borrower or any Subsidiary shall sell or transfer any Property, whether now
owned or hereafter acquired, and whereby the Borrower or any Subsidiary shall
then or thereafter rent or lease as lessee such Property or any part thereof or
other Property which the Borrower or any Subsidiary intends to use for
substantially the same purpose or purposes as the Property sold or transferred.
Sales and leasebacks of Model Homes shall be permitted to the extent that no
default occurs under Section 5.10 hereof on account of lease payments.
Section 5.07 Nature of Business. Neither the Borrower nor any
Subsidiary will engage in any business other than the lot development and home
building business.
Section 5.08 Construction Starts. The Borrower will not undertake
any construction start on any Home to be financed under the Construction
Facility unless it has first granted to the Bank a first lien Mortgage on all
of the Borrower's right, title, and interest in the Property associated with
such Home as security for any and all Indebtedness. No construction contract
shall have been executed or recorded with respect to each Lot to be covered by
such first lien Mortgage, no work of any kind (including but not limited to the
destruction or removal of any existing improvements, site work, clearing,
grubbing, draining, or fencing of each such Lot by the Borrower or its agents)
shall have commenced or shall have been performed on any such Lot, no equipment
or material shall have been delivered to or upon any such Lot for any purpose
whatsoever, no contract (or memorandum or affidavit thereof) for the supplying
of labor, materials or services for the construction of the improvements
thereto shall have been recorded by any Person in the mechanic's lien or other
appropriate records in the county where any such Lot is located, and no
specially fabricated materials or equipment shall have been ordered or received
prior to the recordation of such first lien Mortgage. The Borrower will not
undertake any construction start on any Home to be financed under the
Construction Facility for which the Bank has not approved Plans and
Specifications or for which the Bank has not obtained an Appraisal. The
Borrower will not undertake any construction start on any Home financed under
the Construction Facility that is not located in an Approved Subdivision.
Section 5.09 Restrictions and Annexation. Neither the Borrower
nor any Subsidiary will impose any restrictive covenants or encumbrances upon
any Lot mortgaged to the Bank or the Home to be constructed thereon, or execute
or file any subdivision plat or effect the annexation of all or part of any
such Lot to any city or other political unit without the prior written consent
of the Bank.
Section 5.10 Limitation on Leases. Neither the Borrower nor any
Subsidiary will create, incur, assume, or suffer to exist any obligation for
the payment of rent or hire of Property of any kind whatsoever (real or
personal) under leases or lease agreements (other than leases or lease
agreements which constitute Debt) which would cause the aggregate amount of all
payments made by the Borrower and the Subsidiaries (determined on a
consolidated basis) pursuant to such leases or lease agreements to exceed
$300,000 in any period of twelve consecutive calendar months.
Section 5.11 Mergers, Stock, Etc. The Borrower will not merge or
consolidate with or sell, assign, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or
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substantially all of its Properties (whether now owned or hereafter acquired)
to any Person, nor will the Borrower permit any Subsidiary to do so.
Section 5.12 Proceeds of Note. The Borrower will not permit the
proceeds of the Note to be used for any purpose other than those permitted by
Section 3.13.
Section 5.13 ERISA. The Borrower and the Subsidiaries will not at
any time:
(a) Engage in, or permit any ERISA Affiliate to engage
in, any transaction in connection with which the Borrower, any
Subsidiary or any ERISA Affiliate could be subjected to either a civil
penalty assessed pursuant to subsections (c), (i) or (l) of Section
502 of ERISA or a tax imposed by Section 4975 of the Code;
(b) Fail to make, permit any ERISA Affiliate to fail to
make, full payment when due, of all amounts which the Borrower or any
ERISA Affiliate is required to pay as contributions thereto, whether
pursuant to the provisions of the Plan, any agreement relating
thereto, or applicable law;
(c) Contribute to or assume an obligation to contribute
to, or permit any ERISA Affiliate to contribute to or assume an
obligation to contribute to, any employee pension benefit plan, as
defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA
(including, without limitation, any multiemployer plan, as defined in
Section 3(37) of 4001(a)(3) of ERISA);
(d) Acquire, or permit any ERISA Affiliate to acquire, an
interest in any Person that causes such Person to become an ERISA
Affiliate with respect to the Borrower or any Subsidiary or with
respect to any ERISA Affiliate of the Borrower or any Subsidiary if
such Person sponsors, maintains or contributes to, or at any time in
the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, any employee pension benefit plan, as
defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA
(including, without limitation, any multiemployer plan, as defined in
Section 3(37) of 4001(a)(3) of ERISA); or
(e) Contribute to or assume an obligation to contribute
to, or permit any ERISA Affiliate to contribute to or assume an
obligation to contribute to, any employee welfare benefit plan, as
defined in section 3(1) of ERISA, including but not limited to any
such plan maintained to provide benefits to former employees of such
entities, that may not be terminated by such entities in their sole
discretion at any time without any material liability.
Section 5.14 Sale or Discount of Receivables. Neither the
Borrower nor any Subsidiary will discount or sell with recourse, or sell for
less than the greater of the face or market value thereof, any of its notes
receivable or accounts receivable.
Section 5.15 Capital Assets. Neither the Borrower nor any
Subsidiary will make expenditures for capital or fixed assets in any fiscal
year of the Borrower exceeding the aggregate amount, determined on a
consolidated basis, of $250,000, excluding Model Home furnishings.
Section 5.16 Net Worth. The Borrower will not permit its
consolidated Tangible Net Worth to be less than $9,000,000 at any time.
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Section 5.17 Leverage. The Borrower will not permit its ratio of
(i) consolidated total liabilities (including contingent liabilities) to (ii)
consolidated tangible net worth to be greater than 5.0 to 1 at any time.
Section 5.18 Cost of Sales as a Percentage of Home Sales Revenue.
The Borrower will not permit its ratio of (i) cost of sales (determined by
specific identification of land, direct construction and closing costs and
allocation of indirect construction costs, in accordance with GAAP) to (ii)
revenue from sales of Homes (whether or not financed by the Bank and recognized
when title, possession and other attributes of ownership have been transferred
to a buyer, the seller is no longer obligated to perform any significant
activities related to the sale and sufficient payment, in accordance with GAAP,
has been received) for any two (2) consecutive fiscal quarterly periods to
exceed 89%.
Section 5.19 Ratio of Advances to Fair Market Value. The Borrower
will not permit the ratio of the aggregate principal amount of all Advances at
any time outstanding to the aggregate Fair Market Values, at such time, of all
Homes being financed under the Construction Facility at the time of calculation
to be greater than .75 to 1.
Section 5.20 Environmental Matters. Neither the Borrower nor any
Subsidiary will cause or permit any Property of any such party to be in
violation of, or do anything or permit anything to be done which will subject
any such Property to, any remedial obligations under any Environmental Laws in
excess of $250,000 in the aggregate, assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions and circumstances, if
any, pertaining to such Property, and the Borrower and the Subsidiaries will
promptly notify the Bank in writing of any existing, pending or threatened
action or investigation by any Governmental Authority in connection with any
Environmental Laws. The Borrower and the Subsidiaries will establish and
implement such procedures as may be necessary to continuously determine and
assure that (i) there occurs no material violation of any order or requirement
of any court or Governmental Authority or of any Environmental Law, (ii) no
solid wastes are disposed of on any Property owned by any such party in
quantities or locations that would require remedial action under any
Environmental Laws, and (iii) no hazardous substance will be released on or to
any such Property. The Borrower and the Subsidiaries covenant and agree to
keep or cause all Property owned by them to be kept free of any hazardous waste
or contaminants and to remove the same (or if removal is prohibited by law, to
take whatever action is required by law) promptly upon discovery at its sole
expense. Without limitation of the Bank's rights to declare a default
hereunder and to exercise all remedies available by reason thereof, if the
Borrower fails to comply with or perform any of the foregoing covenants and
obligations, the Bank may (without any obligation, express or implied) remove
any hazardous substance or solid waste from such Property (or if removal is
prohibited by law, take whatever action is required by law) and the cost of the
removal or such other action shall be a demand obligation due and owing by the
Borrower to the Bank (which obligation the Borrower hereby promises to pay upon
demand) pursuant to this Agreement and shall be subject to and covered by the
provisions of Sections 4.16 and 8.09. The Borrower grants to the Bank and its
agents, employees, contractors and consultants access to such Property and the
license (which is coupled with an interest and irrevocable while this Agreement
is in effect) to remove the hazardous substance or solid waste (or if removal
is prohibited by law, to take whatever action is required by law) and agrees to
indemnify and save the Bank harmless from all costs and expenses involved
therewith to the extent that the same is caused by acts or omissions of the
Borrower. Upon the Bank's reasonable request, at any time and from time to
time during the existence of this Agreement, the Borrower will provide at the
Borrower's sole expense an inspection or audit of such Property from an
engineering or consulting firm approved by the Bank, indicating the presence or
absence of hazardous substances and solid wastes on such Property. If the
Borrower fails to provide same after twenty (20) days' notice, the Bank may
order same, and the Borrower grants to the Bank and its employees, agents,
contractors
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and consultants access to such Property and a license (which is coupled with an
interest and irrevocable while this Agreement is in effect) to perform
inspections and tests, including but not limited to the taking of soil borings
and groundwater samples. The cost of such inspections and tests shall be a
demand obligation owing by the Borrower (which the Borrower hereby promises to
pay) to the Bank pursuant to this Agreement and shall be subject to and covered
by the provisions of Sections 4.16 and 8.09.
Section 5.21 Flood Plain. Without the express written consent of
the Bank, no part of any Lot mortgaged to the Bank will lie below the 100-year
flood plain level or within any area that has been designated by the Federal
Emergency Management Agency as an area having special flood hazards or, if it
does, the community in which such Lot is located shall have been approved for
flood insurance under the National Flood Insurance Program and flood insurance
shall be available for such Lot under such program.
Section 5.22 Geological Fault. Except as consented to by the
Bank, no part of any Lot upon which the Bank shall be granted a Lien shall be
situated within one-quarter mile of any geological fault of which the Borrower
has knowledge.
Section 5.23 Wetlands. The Borrower will not acquire any Lot
under the Construction Facility which contains any area designated as
"wetlands" by the U.S. Army Corps of Engineers.
Section 5.24 Partnership Documents. The Borrower will not amend
its Agreement of Limited Partnership in any material manner without the prior
written consent of the Bank.
ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. Any of the following events shall be
considered an "Event of Default" as that term is used herein:
(a) Payments - Default is made in the payment when due of
any installment of principal or interest on the Note or other
Indebtedness (other than payments due in connection with partial
releases) which remains unremedied for a period of fifteen (15) days
after the due date; or
(b) Representations and Warranties - Any representation
or warranty by the Borrower or any Subsidiary or other Person herein
or in any other Security Instrument, or in any certificate, request,
or other document furnished pursuant to or under this Agreement or any
other Security Instrument proves to have been incorrect in any
material respect as of the date when made or deemed made; or
(c) Affirmative Covenants - Default is made in the due
observance or performance by the Borrower of any of the covenants or
agreements contained in Article 4, and such Default continues
unremedied for a period of thirty (30) days after the earlier of (i)
notice thereof being given by the Bank to the Borrower, or (ii) such
Default otherwise becoming known to the Borrower; or
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(d) Negative Covenants - Default is made in the due
observance or performance by the Borrower of any of the covenants or
agreements contained in Article 5; or
(e) Other Security Instrument Obligations - Default is
made in the due observance or performance by the Borrower or any
Subsidiary or other Person of any of the other covenants or agreements
contained in any Security Instrument other than this Agreement, and
such default continues unremedied beyond the expiration of any
applicable grace period which may be expressly allowed under such
Security Instrument; or
(f) Involuntary Bankruptcy or Other Proceedings - An
involuntary case or other proceeding shall be commenced against the
Borrower which seeks liquidation, reorganization or other relief with
respect to it or its debts or other liabilities under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its Property, and
such involuntary case or other proceeding shall remain undismissed or
unstayed for a period of sixty (60) days, or an order for relief
against the Borrower shall be entered in any such case under the
Federal Bankruptcy Code; or
(g) Voluntary Petitions, Etc. - The Borrower shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts or
other liabilities under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its Property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors,
or shall fail generally to, or shall admit in writing its inability to
pay its debts generally as they become due, or shall take any
corporate or partnership action to authorize or effect any of the
foregoing; or
(h) Discontinuance of Business - The Borrower
discontinues its homebuilding business or shall take any action to or
shall otherwise begin the process of winding up its business or
affairs, or dissolving, liquidating, or terminating; or
(i) Default on Other Debt - Any Debt of the Borrower
which exceeds the aggregate amount of $100,000 is not paid when due
(or within any grace period applicable thereto) or as a result of the
occurrence of any default or event of default (howsoever described and
whether or not involving culpability on the part of any Person), or
any Debt of Borrower is declared to be or otherwise becomes due and
payable prior to its specified maturity; or
(j) Undischarged Judgments - The Borrower shall fail
within thirty (30) days to pay, bond or otherwise discharge any
judgment or order for the payment of money in excess of $10,000 that
is not otherwise being satisfied in accordance with its terms and is
not stayed on appeal or otherwise being appropriately contested in
good faith; or
(k) Subsidiary - Any Subsidiary takes, suffers or permits
to exist as to such Person any of the events or conditions referred to
in Subsections 6.01(f), (g), (i) or (j); or
(l) Affidavit of Commencement of Construction - If any
Affidavit of Commencement of Construction is filed or requested by the
Bank, such Affidavit is delivered to the Bank or filed with respect to
any Lot or Home which specifies a date of commencement
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which is prior to the date the Mortgage covering such Lot or Home was
recorded, and there have been more than such four (4) such occurrences
in a consecutive twelve-month period.
(m) Security Instruments - Any Mortgage or Financing
Statement after delivery thereof shall for any reason, except to the
extent permitted by the terms thereof, cease to be in full force and
effect and valid, binding and enforceable in accordance with its
terms, or cease to create a valid and perfected Lien of the priority
required thereby on any of the collateral purported to be covered
thereby and the Borrower fails to fully remedy or cure the same within
fifteen (15) days after the Bank gives notice thereof to the Borrower,
or the Borrower shall so state in writing; or
(n) Title - The Borrower's title to any Lot mortgaged to
the Bank is not reasonably satisfactory to the Bank, regardless of
whether the Lien, encumbrance or question existed at the time of a
prior Advance, and such objection is not remedied or cured within
thirty (30) days after the Bank gives notice thereof to the Borrower;
or
(o) Failure to Complete - Any Home shall not have been
completed substantially in accordance with the Plans and
Specifications on or before the Completion Date; or
(p) Casualty Loss; Condemnation - Any Lot and Home or any
part thereof shall be condemned or damaged by fire or other casualty,
or any other event shall occur, in such manner as to preclude, in the
Bank's sole judgment, the completion of the Home by the Completion
Date; or
(q) Change in Control - There shall not have occurred any
change in "control" of the Borrower. "Control" shall mean possession
(whether direct or indirect) of power to direct or cause the direction
of management or other policies of the Borrower, whether through
ownership of stock or other ownership interest, by contract or
otherwise; or
(r) Key Officer - Lonnie Fedrick or any replacement
officer of the general partner of the Borrower acceptable to the Bank
ceases to be in charge of the day-to-day operations of the Borrower,
or permits to exist as to such Person any of the events or conditions
referred to in Subsections 6.01(f) or (g); or
(s) Survey - A survey at any time shall show that any
Home encroaches upon any street, easement, right of way or adjoining
property or violates any set back requirement or that any adjoining
structure encroaches on any Lot to an extent deemed material by the
Bank and there have been more than four (4) such occurrences in a
consecutive twelve-month period; or
(t) Percentage of Completion - The stated Percentage of
Completion with respect to any Home included in a Construction
Facility Status Report shall be greater than the actual Percentage of
Completion of such Home; or
(u) Change of General Partner - Newmark shall cease to be
the general partner of the Borrower.
Section 6.02 Remedies. Upon the occurrence of any Event of
Default described in Subsection 6.01(f) or (g), or in Subsection 6.01(k) or (r)
to the extent that such Subsections refer to Subsection 6.01(f) or (g), the
Commitment and other lending obligations, if any, of the Bank hereunder
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shall immediately terminate, and the entire principal amount of all
Indebtedness then outstanding together with interest then accrued thereon shall
become immediately due and payable, all without written notice and without
presentment, demand, notice of intent to accelerate, notice of acceleration,
protest, notice of protest or dishonor or any other notice of default of any
kind, all of which are hereby expressly waived by the Borrower and its
Subsidiaries. Upon the occurrence and at any time during the continuance of
any other Event of Default specified in Section 6.01, the Bank may by ten (10)
days prior written notice to the Borrower with opportunity to cure (i) declare
the entire principal amount of all Indebtedness then outstanding together with
interest then accrued thereon to be immediately due and payable without
presentment, demand, protest, notice of protest or dishonor or other notice of
default of any kind, all of which are hereby expressly waived by the Borrower
and its Subsidiaries, and/or (ii) terminate the Commitment and other lending
obligations, if any, of the Bank hereunder, unless and until the Bank shall
reinstate same in writing. In addition to the foregoing, upon the occurrence
and during the continuance of any Event of Default, the Bank shall have the
right, but not the obligation, in its own name or in the name of the Borrower,
to enter into possession of the Lots mortgaged to the Bank and the Homes being
constructed thereon, to perform all work and labor necessary to complete such
Homes, and to employ watchmen and other safeguards to protect such Lots and
Homes. Upon the occurrence and continuance of an Event of Default, the Bank
may take any one or more of the following actions and the Borrower hereby
constitutes and appoints the Bank as the true and lawful attorney-in-fact of
the Borrower, with full power of substitution, and in the name of the Borrower,
if the Bank elects to do so, and hereby empowers the Bank and/or said attorney
or attorneys to:
(a) Use such sums as are necessary, including any
proceeds of any Advance and the Borrower's Completion Deposits, and
employ such architects, engineers, contractors, subcontractors, agents
and inspectors, as may be required for the purpose of completing the
construction of the Homes financed under the Construction Facility
substantially in accordance with the Governmental Requirements and the
Plans and Specifications;
(b) Execute all applications and certificates in the name
of the Borrower which may be required for completion of construction
of the Homes financed under the Construction Facility;
(c) Pay, settle, or compromise all existing bills and
claims which may be Liens against the Homes financed under the
Construction Facility or as may be necessary for the completion of the
job, or clearance of title;
(d) Endorse the name of the Borrower on any checks or
drafts representing proceeds of the insurance policies, or other
checks or instruments payable to the Borrower with respect to such
Lots and Homes to be constructed thereon and financed under the
Construction Facility;
(e) Execute all applications and certificates in the name
of the Borrower which may be required by any of the contract
documents;
(f) Employ at the expense of the Borrower a watchman or
such other security agency as the Bank may choose to protect the Homes
financed under the Construction Facility, building materials and
equipment from depreciation or injury;
(g) Do any and every act with respect to the construction
of the Homes financed under the Construction Facility which the
Borrower may do;
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(h) Prosecute or defend any action or proceeding incident
to the construction of the Homes financed under the Construction
Facility as the Bank deems necessary; and
(i) Generally do any and every act with respect to the
construction, occupancy and use of the Lots and Homes as the Borrower
may do in its own behalf.
All sums so expended by the Bank hereunder shall be deemed to be advanced to
the Borrower hereunder and secured by the Mortgages even if in excess of the
amount of the Loan Value of the related Lots and Homes, and the total thereof
shall be due and payable from the Borrower to the Bank pursuant to the terms of
the Construction Facility. The power-of-attorney granted hereby is a power
coupled with an interest and is irrevocable. The Bank shall have no obligation
to undertake any of the foregoing actions, and if the Bank should do so, it
shall have no liability to the Borrower for the sufficiency or adequacy of any
such action.
Section 6.03 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank to or for the credit or the
account of the Borrower against any and all of the Indebtedness of the
Borrower, irrespective of whether or not the Bank shall have made any demand
under this Agreement or the Note and although such obligations may be
unmatured. The Bank agrees promptly to notify the Borrower after any such
set-off and application, provided that the failure to give such notice shall
not affect the validity of such set-off and application. The rights of the
Bank under this Section are in addition to other rights and remedies (including
but not limited to other rights of set-off) which the Bank may have.
ARTICLE 7
CONDITIONS OF LENDING
The obligations of the Bank to make the Advances pursuant to this
Agreement are subject to the conditions precedent stated in this Article 7.
Section 7.01 General Conditions. The obligation of the Bank to
continue to make Advances under this Agreement is subject to the following
conditions precedent, wherein each document to be delivered to the Bank shall
be in form and substance satisfactory to it:
(a) Construction Loan Agreement - The Borrower shall have
executed and delivered to the Bank this Amended and Restated
Construction Loan Agreement.
(b) Note - The Borrower shall have executed and delivered
the Second Modification and Extension Agreement to the Bank.
(c) Certificates - The Bank shall have received a
certificate signed by the Secretary of the general partner of the
Borrower, certifying (i) the name, title, and true signature of the
Authorized Borrower Representative authorized to sign this Agreement,
the Note, the Security Instruments and the other documents or
certificates to be delivered pursuant thereto, and (ii) the resolution
of the Board of Directors of the general partner of the Borrower and
partnership consents, if applicable, authorizing, among other things,
(A) this Agreement and all transactions
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contemplated hereby, including but not limited to all Advances which
may be made from time to time hereunder, and (B) to execute and
deliver any and all instruments and documents relating to (A) above,
including but not limited to the Note, Security Instruments and the
other documents or certificates to be delivered pursuant thereto,
together with all affidavits and documents evidencing other necessary
partnership or corporate action with respect to any thereof.
(d) Partnership Documents - The Bank shall have received
a copy, certified as true by the Secretary of the general partner of
the Borrower of the complete Limited Partnership Agreement, and the
articles of incorporation and bylaws of the general partner of the
Borrower, and as of the date of execution hereof, the Authorized
Borrower Representative shall have confirmed that there have been no
further amendments thereto.
(e) Good Standing - The Bank shall have received a
certificate as of a date reasonably close to the date hereof from the
office of the Comptroller of the State of Texas certifying that the
general partner of the Borrower is in good standing and if the
Borrower is not a Texas corporation, a certificate of authority to do
business in Texas and a certificate of existence from the jurisdiction
in which the Borrower is incorporated.
(f) Recordings - The Master Deed of Trust shall have been
duly delivered to the appropriate offices of each Initial County for
filing or recording, and the Bank shall have received confirmations of
receipt thereof from the appropriate filing or recording offices, if
the Borrower is going to acquire Lots under this Facility in counties
in which the Bank has not yet filed the Master Deed of Trust.
(g) Loans to One Borrower - The Borrower shall have
executed and delivered to the Bank a Loans to One Borrower Affidavit
in form and substance satisfactory to the Bank.
(h) Environmental Site Assessment - The Bank shall have
received a Phase I environmental site assessment of the Lots or other
report of environmental conditions satisfactory to the Bank prior to
inclusion of the subdivision in which the Lots are located as an
Approved Subdivision.
(i) Other - The Bank shall have received such other
documents as it may reasonably have requested at any time at or prior
to the closing date referred to in Subsection 7.01. The documents to
be delivered pursuant to the terms hereof shall be satisfactory to the
Bank.
(j) Approved Subdivisions - The Bank shall have
designated "Approved Subdivisions."
(k) The Bank shall have executed this Agreement in
Pittsburgh, Pennsylvania.
Section 7.02 Advances.
(a) Each Advance - The obligation of the Bank to make each Advance
(whether initial, interim or final) is subject, in addition to the conditions
precedent set forth in Section 7.01, to the following further conditions
precedent:
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(i) Borrowing Request - The Bank shall have received the
appropriate Borrowing Request satisfactory to the Bank together with
all appropriate schedules thereto, which shall also be completed to
the Bank's satisfaction.
(ii) Work Completed - All work on each Lot and Home
financed under the Construction Facility that is required to have been
completed for such Lot and Home to satisfy the requirements for the
Percentage of Completion Value set forth for such Lot and Home in the
most current Construction Facility Status Report shall have been
completed and performed in a good and workmanlike manner, all
materials and fixtures usually installed and furnished at such stage
of construction shall have been furnished and installed, and all
construction materials and fixtures shall have been incorporated in
the Homes on such Lots, all substantially in accordance with the Plans
and Specifications and all Governmental Requirements.
(iii) Inspection - At the Bank's option, the Bank shall
have inspected the Lots and Homes financed under the Construction
Facility, through inspectors acceptable to the Bank, and shall have
made a determination that the Percentage of Completion of each of such
Home is as reflected in the most current Construction Facility Status
Report and shall have approved the progress of such construction.
(iv) No Default - The fact that immediately after giving
effect to such Advance, no Default shall have occurred and be
continuing.
(v) Representations and Warranties - The fact that the
representations and warranties of the Borrower contained in this
Agreement or any other Security Instrument (other than those
representations and warranties which are by their terms limited to the
date of the agreement in which they are initially made) are true and
correct in all material respects on and as of the date of such
Advance.
(vi) No Material Adverse Change - There shall have
occurred, in the sole opinion of the Bank, no change, either in any
case or in the aggregate, in the condition, financial or otherwise, of
the Borrower or any Subsidiary or with respect to the Borrower's or
any Subsidiary's Properties from the facts represented in any Security
Instrument, including this Agreement or in the Financial Statements,
which would have a Material Adverse Effect.
(vii) Title Update - Upon request by the Bank, the Borrower
shall obtain, at its expense, from the appropriate Title Insurer a
title report showing that since the date of issuance of the applicable
Title Binder, there are no liens affecting the Property covered by
such Title Binder other than those expressly listed in such Title
Binder.
(viii) Payment of Costs and Expenses - All costs and charges
incurred by the Borrower hereunder on or prior to the date of any
previous Advance shall have been paid.
(ix) Flood Insurance - If the Lot and Home are to be
situated in an area identified as having special flood hazards, the
Bank shall have received (as to each Advance with respect to such Lot
and Home after the Initial Advance) the flood insurance policy in form
and substance satisfactory to the Bank.
(x) Other - The Bank shall have received such other
documents as it may reasonably have requested at any time or prior to
funding such Loan.
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Each borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such borrowing as to the facts specified in
Subsections 7.02(a)(iv) and (v).
(b) Initial Advance - The obligation of the Bank to make each
Initial Advance is subject to the following further conditions precedent:
(i) Mortgage and Financing Statement - A Mortgage and
Financing Statement covering the Lots identified in the Borrowing
Request shall have been executed by the Borrower; the Mortgage shall
have been duly delivered to the appropriate offices of the appropriate
Valid County or Counties for filing or recording, and the Bank shall
have received confirmations of receipt thereof from the appropriate
filing or recording offices.
(ii) Title Binder - The Bank shall have received a paid
Title Binder, at the Borrower's expense, dated the date of the Initial
Advance in the amount of the Loan Value of the associated Lots and the
Homes to be constructed thereon. The Title Binder shall (x) show fee
simple title vested in the Borrower to the associated Lots, (y) bind
the Title Insurer to insure the Lien of the Mortgage on such Lots in
favor of the Bank to be a valid first and prior Lien free and clear of
all defects or encumbrances other than Excepted Liens and except as
the Bank shall approve in writing, and (z) contain no survey
exceptions not theretofore approved by the Bank in writing, and the
status of the title to the Lots shown therein shall otherwise be
satisfactory to the Bank. It is hereby expressly agreed and
understood that the recordation of a Mortgage subject to specific
title exceptions and the acceptance of a Title Binder shall not mean
or indicate that the Bank has approved the status of the title to the
Lots as shown in such Title Binder or otherwise. The Bank has the
right to require that the Borrower remove or cure any and all
impediments, whether of record or otherwise, which affect the
development, construction, leasing, sale or operation of such Lots or
the Homes to be constructed thereon.
(iii) Plat of Approved Subdivision, Etc. - The Bank shall
have received and approved (x) a copy of the plat of the Approved
Subdivision, which shall be entirely located in the State of Texas, in
which the associated Lots are located, identifying the location of
each such Lot, and (y) evidence satisfactory to the Bank that the
subdivision in which the associated Lots are located is a Developed
Subdivision as defined herein in all respects.
(iv) Plans and Specifications, Etc. - The Bank shall have
received and approved (x) Plans and Specifications for each Home to be
constructed on the associated Lots; and (y) Construction Costs
Schedule for each such Home, all in form satisfactory to the Bank.
(v) No Construction Started - The Borrower shall not have
commenced construction on or had materials delivered to any associated
Lot prior to the recording of the Mortgage granting the Bank a Lien on
such Lot, and shall provide the Bank with satisfactory evidence to
that effect.
(vi) Number of Lots - Each Loan Request for an Initial
Advance shall be associated with a minimum of five (5) Lots (unless
the Bank shall agree otherwise).
(vii) Appraisal - The Bank shall have obtained at its
expense a current Appraisal satisfactory to the Bank and in compliance
with its regulatory requirements which appraises each associated Lot
and the value of the Home to be constructed thereon and shows a loan
to value ratio of not more than 75% and which shall be dated not more
than thirty (30) days prior to the date of such Initial Advance for
such Home.
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(viii) Advance Delivery - Any document, instrument,
commitment, or other writing or written evidence required to be
furnished pursuant to the terms hereof to the Bank shall have been
furnished to the Bank at least ten (10) Business Days prior to the
date upon which the Bank is to fund the applicable Initial Advance.
The Borrower shall furnish to the Bank a legal description of the Lots
associated with the applicable Initial Advance at least ten (10)
Business Days prior to the date upon which the Bank is to fund such
Initial Advance.
(ix) Survey - A survey of the Lot prepared by, and
certified to the Bank by, a registered surveyor acceptable to the
Bank, such survey and certification to meet the Bank's standard survey
requirements and which is to be furnished at the Borrower's sole cost
and expense shall have been received by the Bank.
(x) Certificate of Receipt of Master Deed of Trust - The
Borrower shall execute and deliver to the Bank a certificate to the
effect that Borrower has received and reviewed a copy of the Master
Deed of Trust.
(xi) Site Plan - The Borrower shall have delivered to the
Bank a site plan showing the location of the Home on the Lot.
(xii) Architect's Consent - The Borrower shall have
furnished the Bank with the architect's written consent to use of the
Plans and Specifications by the Bank, to the extent that the Plans and
Specifications have not been developed by the Borrower.
(xiii) Insurance - Evidence satisfactory to Bank that the
insurance required by the Mortgage (including, without limitation,
casualty, liability, flood (if required), business interruption and
workmen's compensation insurance) is in full force and effect shall
have been received by the Bank.
(xiv) Borrower's Affidavit - The Borrower shall execute and
deliver to the Bank a Borrower's Affidavit in the form of Exhibit I
hereto.
(xv) Flood Plain and Insurance Matters - The Bank shall
have received evidence satisfactory to the Bank that the Lot and Home
will not lie below the level of the 100-year flood plain or any area
that has been designated by the Federal Emergency Management Agency as
an area having special flood hazards. If the Lot and Home are to be
situated in an area identified as having special flood hazards, the
Bank shall have received a copy of the flood insurance policy
application, indicating that the maximum limits of coverage have been
obtained and that the full premium therefor has been paid in full.
(xvi) Permits and Approvals - The Borrower shall have
obtained all governmental and non-governmental approvals or permits
required for the commencement of construction of Homes on the
associated Lots.
(xvii) Other - Upon request by the Bank, the Borrower shall
furnish to the Bank, each in form and substance satisfactory to the
Bank, waivers of liens or claims on the Lots and Homes being financed
by the Construction Facility as well as any construction contracts,
other documents or invoices related thereto.
(c) Final Advance - The obligation of the Bank to make each Final
Advance with respect to a Home is subject to the following further conditions
precedent:
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(i) Completion of Construction - All Homes subject to the
request for a Final Advance and located on Lots identified in the most
current Construction Facility Status Report shall have been completed
in accordance with the Plans and Specifications, as verified by the
Bank through inspection, and that all requirements for the Percentage
of Completion for any Home to be deemed to be one hundred percent
(100%) provided in the definition of "Percentage of Completion" shall
have been fully complied with to the satisfaction of the Bank.
(ii) Governmental Requirements - The Borrower shall have
obtained and the Bank shall have received upon request evidence
satisfactory to it that all Governmental Requirements and
non-governmental requirements regarding the construction and
completion of each such Home have been satisfied.
(iii) No Mechanic's Liens - Upon the Bank's request, the
Bank shall have received evidence satisfactory to it that all actual
construction costs for each such Home have been paid in full, or that
such payment has been adequately provided for, and that no mechanic's
or materialmen's liens or other encumbrances have been filed and
remain in effect against all or any part of such Lots or, at the
Bank's request, a complete release of Liens signed by the Borrower as
general contractor and all subcontractors.
(iv) Affidavit of Completion - If requested by the Bank,
the Bank shall have received an affidavit of completion which shall
comply with the provisions of the Texas Property Code, have been
executed in recordable form and shall state the respective dates of
completion of the Homes covered thereby.
ARTICLE 8
MISCELLANEOUS
Section 8.01 Notices. Any notice required or permitted to be
given under or in connection with this Agreement, the other Security
Instruments (except as may otherwise be expressly required therein) or the Note
shall be in writing and shall be mailed by first class or express mail, postage
prepaid, or sent by telex, telegram, telecopy or other similar form of rapid
transmission confirmed by mailing (by first class or express mail, postage
prepaid) written confirmation at substantially the same time as such rapid
transmission, or personally delivered to an officer of the receiving party.
All such communications shall be mailed, sent or delivered,
(a) if to the Borrower, to its address shown at the
beginning of this Agreement, or to such other address or to such
individual's or department's attention as it may have furnished the
Bank in writing;
(b) if to the Bank, to its address shown at the beginning
of this Agreement, or to such other address or to such individual's or
department's attention as it may have furnished the Borrower in
writing.
Any communication so addressed and mailed shall be deemed to be given within
two (2) Business Days of when so mailed, except that Loan Requests or
communications related to Loan Requests shall not be effective until actually
received by the Bank; any notice so sent by rapid transmission shall be deemed
to be given when receipt of such transmission is acknowledged; and any
communication so
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delivered in person shall be deemed to be given when receipted for by, or
actually received by, an authorized officer of the Borrower or the Bank, as the
case may be.
Section 8.02 Amendments and Waivers. Any provision of this
Agreement, the other Security Instruments or the Note may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Borrower (and/or any other Person which is a party to any Security Instrument
being amended or with respect to which a waiver is being obtained) and the
Bank.
Section 8.03 Invalidity. In the event that any one or more of the
provisions contained in the Note, this Agreement or in any other Security
Instrument shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of the Note, this Agreement or any other Security
Instrument.
Section 8.04 Survival of Agreements. All representations and
warranties of the Borrower herein or in the other Security Instruments, and all
covenants and agreements herein not fully performed before the effective date
or dates of this Agreement and of the other Security Instruments, shall survive
such date or dates.
Section 8.05 Successors and Assigns. The Note, this Agreement and
any other Security Instrument shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto. The Borrower shall not, however, have the right to assign its rights
under this Agreement or any interest herein without the prior written consent
of the Bank. The Bank may sell participations in the Note or other
Indebtedness of the Borrower incurred or to be incurred pursuant to this
Agreement to other lenders without the consent of the Borrower. In the event
that the Bank sells participations in the Note or other Indebtedness of the
Borrower incurred or to be incurred pursuant to this Agreement to other
lenders, each of such other lenders shall have the rights of set off against
such Indebtedness and similar rights or Liens to the same extent as may be
available to the Bank.
Section 8.06 Renewal, Extension or Rearrangement. All provisions
of this Agreement and of any other Security Instruments relating to the Note or
other Indebtedness shall apply with equal force and effect to each and all
promissory notes hereinafter executed which in whole or in part represent a
renewal, extension for any period, increase or rearrangement of any part of the
Indebtedness originally represented by the Note or of any part of such other
Indebtedness.
Section 8.07 Waivers. No course of dealing on the part of the
Bank, its officers, employees, consultants or agents, including but not limited
to any course of dealing whereby the Bank does not require complete compliance
with the terms, provisions and conditions hereof, nor any failure or delay by
the Bank with respect to exercising any right, power or privilege of the Bank
under the Note, this Agreement or any other Security Instrument shall operate
as a waiver thereof, except as otherwise provided in Section 8.02 and, without
limiting the foregoing, the Bank may at any time require complete compliance
with any and all terms, provisions and conditions hereof.
Section 8.08 No Liability of Bank. The Bank shall have no
liability, obligation or responsibility whatsoever with respect to the
construction of any Home except to make any Advance hereunder upon the terms
and conditions herein stated in the Bank's sole function as lender, and the
only consideration passing from the Bank to the Borrower is the Loan proceeds
in accordance with and subject to the terms and conditions of this Agreement.
The Bank shall not be obligated to inspect any Lot mortgaged to the Bank or for
the construction of a Home thereon. The Bank shall have the right from time to
time to waive any of the terms of this Agreement without prejudice to its right
to require
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strict compliance in the future, and no Person shall be a third party
beneficiary of this Agreement or be entitled to require or rely upon the Bank's
enforcement of this Agreement. The Borrower has selected all architects,
engineers, contractors, sub-contractors, materialmen, as well as all others
furnishing services or materials to the construction of such Homes, and the
Bank has, and shall have, no responsibility whatsoever for them or any other
party or for their performance or default or for the quality of their materials
or workmanship or for any failure to construct, complete, protect, or insure
such Homes, or for the payment of costs of labor, materials, or services
supplied for the construction of such Homes, or for the performance of any
obligation of the Borrower whatsoever. Nothing, including but not limited to
any disbursement of loan proceeds or acceptance hereunder of any document or
instrument, shall be construed as a representation of warranty, express or
implied, to any party by the Bank.
Section 8.09 Indemnities. The Borrower hereby agrees to indemnify
the Bank, its officers, directors, employees, representatives, agents and
Affiliates from, hold each of them harmless against, and promptly upon demand
pay or reimburse each of them for, any and all claims, demands, and causes of
action, loss, damage, liabilities, costs and expenses (including attorneys'
fees and expenses, remediation costs, loss of value of the Property, and
incidental and consequential damages) of any and every kind or character, known
or unknown, fixed or contingent, incurred by the Bank or asserted by any
Person, including but not limited to employees of the Borrower, any contractor
constructing the Homes and the employees of any such contractor, any tenant of
or purchaser from the Borrower arising, (i) from or out of the construction,
occupancy or possession of the Homes by the Borrower, its agents, employees,
contractors, subcontractors, or employees of such contractors or
subcontractors, and (ii) out of or in any way related to (A) the breach of any
representation or warranty as set forth herein regarding environmental matters
to the extent that such matters are caused by the Borrower, (B) the failure of
the Borrower or any Subsidiary to perform any obligation herein required to be
performed by the Borrower pursuant to Environmental Laws, or (C) any act,
omission, event or circumstance pertaining to environmental matters that is
associated with the ownership, construction, occupancy, operation, use and/or
maintenance of any Property of the Borrower, regardless of whether the act,
omission, event or circumstance constituted a violation of any Environmental
Laws at the time of its existence or occurrence. The provisions of this
Section shall survive the final payment of all Indebtedness and the termination
of this Agreement and shall continue thereafter in full force and effect.
Section 8.10 Approval of Plans and Specifications. Approval by
the Bank of Plans and Specifications shall not be deemed to imply any warranty,
approval or representation by the Bank that the Home, if constructed in
accordance therewith, will be structurally sound, will comply with all
Governmental Requirements, will be fit for any particular purpose, or will have
a market value of any particular magnitude, but shall be limited solely to the
consent by the Bank to the Home to be constructed in accordance therewith.
Section 8.11 Cumulative Rights. All rights and remedies of the
Bank under the Note, this Agreement and each other Security Instrument shall be
cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 8.12 Singular and Plural. Words used herein in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular herein shall apply to
such words when used in the plural where the context so permits and vice versa.
Section 8.13 Construction. This Agreement is, and each of the
Note will be, a contract made under and shall be construed in accordance with
and governed by the laws of the United States of
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America and the State of Texas, as such laws are now in effect and, with
respect to usury laws, if any, applicable to the Bank and to the extent allowed
thereby, as such laws may hereafter be in effect which allow a higher maximum
nonusurious interest rate than such laws now allow. Tex. Rev. Civ. Stat. Ann.
art. 5069, ch. 15 (which regulates certain revolving credit loan accounts and
revolving triparty accounts) shall not apply to this Agreement or the Note.
Section 8.14 Interest. The real property covered by each Mortgage
is "residential real property", and the Advances are or will be secured by a
first lien on residential real property within the meaning of Part A, Title V
of the Depository Institutions Deregulation and Monetary Control Act of 1980,
as amended (the "Act"), and the regulations promulgated thereunder. If, for
any reason, the provisions of Part A, Title V of the Act shall be found not to
exempt any and all interest and other charges contracted for, charged, taken,
received or reserved in connection with the Advances from any limitations
otherwise applicable, then the provisions of the immediately following
paragraph shall apply, but otherwise the immediately following paragraph shall
be inapplicable.
It is the intention of the parties hereto to conform strictly to usury
laws applicable to the Bank and the Transactions. Accordingly, if the
Transactions would be usurious under applicable law, then, notwithstanding
anything to the contrary in the Note, this Agreement or in any other Security
Instrument or agreement entered into in connection with the Transactions or as
security for the Note, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under applicable law that is
contracted for, taken, reserved, charged or received under the Note, this
Agreement or under any of such other Security Instruments or agreements or
otherwise in connection with the Transactions shall under no circumstances
exceed the maximum amount allowed by such applicable law, and any excess shall
be cancelled automatically and if theretofore paid shall be credited by the
Bank on the principal amount of the Indebtedness (or, to the extent that the
principal amount of the Indebtedness shall have been or would thereby be paid
in full, refunded by the Bank to the Borrower); (ii) in the event that the
maturity of the Note is accelerated for any reason, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under applicable law may never include more than the maximum amount
allowed by such applicable law; and (iii) excess interest, if any, provided for
in this Agreement or otherwise in connection with the Transactions shall be
cancelled automatically and, if theretofore paid, shall be credited by the Bank
on the principal amount of the Indebtedness (or, to the extent that the
principal amount of the Indebtedness shall have been or would thereby be paid
in full, refunded by the Bank to the Borrower). The right to accelerate the
maturity of the Note does not include the right to accelerate any interest
which has not otherwise accrued on the date of such acceleration, and the Bank
does not intend to collect any unearned interest in the event of acceleration.
All sums paid or agreed to be paid to the Bank for the use, forbearance or
detention of sums included in the Indebtedness shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread throughout the
full term of the Note until payment in full so that the rate or amount of
interest on account of the Indebtedness does not exceed the applicable usury
ceiling, if any. As used in this Section, the term "applicable law" shall mean
the law of the State of Texas (or the law of any other jurisdiction whose laws
may be mandatorily applicable notwithstanding other provisions of this
Agreement), or law of the United States of America applicable to the Bank and
the Transactions which would permit the Bank to contract for, charge, take,
reserve or receive a greater amount of interest than under Texas (or such other
jurisdiction's) law. To the extent that Article 5069-1.04 of the Texas Revised
Civil Statutes is relevant to the Bank for the purpose of determining the
Highest Lawful Rate, the Bank hereby elects to determine the applicable rate
ceiling under such Article by the indicated (weekly) rate ceiling from time to
time in effect, subject to the Bank's right subsequently to change such method
in accordance with applicable law. In no event shall the provisions of Tex.
Rev. Civ. Stat. art. 5069-2.01 through 5069-8.06 or 5069-15.01 through
5069-15.11 be applicable to this Agreement or the Note.
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Section 8.15 References. The words "herein," "hereof,"
"hereunder" and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular article, section or
subsection. Any reference herein to an Article, Section or Subsection shall be
deemed to refer to the applicable Article, Section or Subsection of this
Agreement unless otherwise stated herein. Any reference herein to an exhibit
shall be deemed to refer to the applicable exhibit attached hereto unless
otherwise stated herein.
Section 8.16 Taxes, etc. Any taxes (excluding income taxes)
payable or ruled payable by federal or state authority in respect of the Note,
this Agreement or the other Security Instruments shall be paid by the Borrower,
together with interest and penalties, if any.
Section 8.17 Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, the Bank shall not be obligated to
extend credit to the Borrower in an amount in violation of any limitation or
prohibition provided by any applicable statute or regulation.
Section 8.18 Exhibits. The exhibits attached to this Agreement
are incorporated herein and shall be considered a part of this Agreement for
the purposes stated herein, except that in the event of any conflict between
any of the provisions of such exhibits and the provisions of this Agreement,
the provisions of this Agreement shall prevail.
Section 8.19 Titles of Articles, Sections and Subsections. All
titles or headings to articles, sections, subsections or other divisions of
this Agreement or the exhibits hereto are only for the convenience of the
parties and shall not be construed to have any effect or meaning with respect
to the other content of such articles, sections, subsections or other
divisions, such other content being controlling as to the agreement between the
parties hereto.
Section 8.20 Satisfaction Requirement. If any agreement,
certificate, instrument or other writing, or any action taken or to be taken,
is by the terms of this Agreement required to be satisfactory to any party, the
determination of such satisfaction shall be made by such party in its sole and
exclusive judgment exercised in good faith.
Section 8.21 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND UNDER THE NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF TEXAS.
Section 8.22 Submission to Jurisdiction.
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR THE NOTE OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN THE COURTS OF THE
STATE OF TEXAS, THE COMMONWEALTH OF PENNSYLVANIA OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS OR THE WESTERN DISTRICT OF
PENNSYLVANIA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER
HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS.
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(b) Nothing herein shall affect the right of the Bank to serve
process in any other manner permitted by law or to commence legal proceedings
or otherwise proceed against the Borrower in any other jurisdiction.
(c) The parties hereto recognize that in matters related to the
Note, this Agreement and the other Security Instruments, they may be entitled
to a trial in which matters of fact are determined by a jury (as opposed to a
trial in which such matters are determined by a federal or state judge). The
parties hereto also recognize that one of the remedies available to them in any
trial may, under certain circumstances, be the right to receive damages in
excess of those actually sustained by it. In the past in some instances, such
damages have equalled or exceeded the amount of actual damages. By signing
below, the parties hereto will give up their rights to claim any damages other
than actual damages. Each Person who is asked to sign below should think
carefully about the consequences of signing and should consult their own
attorney.
WAIVER OF RIGHTS RELATED TO DAMAGES. TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, EACH OF THE UNDERSIGNED HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
CERTIFICATIONS. EACH OF THE UNDERSIGNED HEREBY CERTIFIES THAT NEITHER
ANY REPRESENTATIVE OR AGENT OR ANY PERSON NOR ANY PARTY'S COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT ANY PERSON WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH OF THE
UNDERSIGNED ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
TRANSACTION BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
HEREIN. THE FOREGOING WAIVER OF RIGHTS RELATED TO DAMAGES SHALL NOT APPLY IN
ANY TRANSACTION SUBJECT TO THE TEXAS DECEPTIVE TRADE PRACTICES ACT OR GOVERNED
BY CHAPTER 6, 6A OR 7 OF THE TEXAS CONSUMER CREDIT CODE, IF APPLICABLE. The
parties hereto agree that if any of the foregoing provisions shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions will not be affected or impaired.
The parties hereto by signing below certify that they have read and understood
the foregoing prior to signing; that they have had the opportunity to obtain
the advice and assistance of counsel with respect to the foregoing; that they
sign below with full knowledge and understanding of the consequences of their
act; and that they have received a counterpart original of this document signed
by all parties.
Section 8.23 No Broker. The Borrower represents and warrants to
the Bank that no broker was involved in procuring the Construction Loan
Facility or the commitment of the Bank to make Advances in connection with the
Transactions contemplated hereby and agrees to indemnify and save harmless the
Bank from and against any and all claims for any brokerage commission arising
out of the Construction Loan Facility, the making of the Advances or the
Transactions contemplated hereby.
Section 8.24 Amendment and Restatement. This Agreement amends and
restates in its entirety the Construction Loan Agreement dated January 10,
1996, between the Bank and Newmark with respect to which the Borrower hereunder
has, pursuant to the First Modification Agreement, assumed the obligations of
the borrower under that agreement.
Section 8.25 Duration; Survival. All representations and
warranties of the Borrower contained herein or made in connection herewith
shall survive the making of and shall not be waived by the execution and
delivery of this Agreement or the Note, any investigation by the Bank or the
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making of any Advance hereunder. All covenants and agreements of the Borrower
contained herein shall continue in full force and effect from and after the
date hereof so long as it may borrow hereunder and until payment in full of the
Note, interest thereon and all other obligations of the Borrower under this
Agreement, the Note and the other Security Instruments. Without limitation, it
is understood that all obligations of the Borrower to make payments to or
indemnify the Bank shall survive the payment in full of the principal of and
interest on the Note.
Section 8.26 Participations. With the prior written consent of
the Borrower, the Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell participations
to one or more commercial banks or other Persons (each a "Participant") in all
or a portion of its rights and obligations under this Agreement and the other
Security Instruments (including, without limitation, all or a portion of the
Loan and the Note), provided that
(i) the Bank's obligations under this Agreement and the
other Security Instruments shall remain unchanged,
(ii) the Bank shall remain solely responsible to the
Borrower for the performance of such obligations, and
(iii) the Borrower shall continue to deal solely and
directly with the Bank in connection with the Bank's rights and
obligations under this Agreement and each of the other Security
Instruments.
Section 8.27 Assignments. With the prior written consent of the
Borrower, the Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time assign the
Indebtedness, the Note and its rights and obligations under this Agreement and
the other Security Instruments to a commercial bank or other Person, and in
that event Borrower shall execute and deliver replacement notes to the extent
necessary to reflect the assignment.
Section 8.28 Entire Agreement. THIS WRITTEN AGREEMENT, THE NOTE,
AS MODIFIED, AND THE SECURITY INSTRUMENTS 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.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
BORROWER: NEWMARK HOMES, L.P., A TEXAS LIMITED
PARTNERSHIP
BY: NEWMARK HOME CORPORATION, A NEVADA
CORPORATION, ITS SOLE GENERAL PARTNER
By: /s/ TERRY WHITE
------------------------------------
Name: TERRY WHITE
----------------------------------
Title: SVP
---------------------------------
BANK: MELLON BANK, N.A.
By: /s/ WAYNE P. ROBERTSON
---------------------------------------------
Name: WAYNE P. ROBERTSON
-------------------------------------------
Title: Assistant Vice President
------------------------------------------
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EXHIBIT 10.15(b)
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (this "Agreement") is made and entered
into as of the 1st day of October, 1996, by and among MELLON BANK, N.A. (the
"Lender"), NEWMARK HOME CORPORATION, a Nevada corporation ("Newmark"), NHC
Homes, Inc., a Nevada corporation ("NHC"), and Newmark Homes, L.P., a Texas
limited partnership ("NHLP").
W I T N E S S E T H:
WHEREAS, Lender has previously extended or agreed to extend credit to
Newmark as evidenced by that certain Construction Loan Agreement dated as of
January 10, 1996 (such Construction Loan Agreement, as amended from time to
time, being referred to herein as the "Loan Agreement"), with advances
evidenced by the Revolving Construction Facility Note of same date in the
original principal amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000) (the
"Note"); and
WHEREAS, Newmark is the present owner of the Mortgaged Property (as
defined in the Mortgages hereinafter described); and
WHEREAS, Newmark has agreed to transfer, assign and convey by general
warranty deed (and subject to the indebtedness and liabilities of Newmark under
the Loan Agreement and the Note) the Mortgaged Property to NHC, and to assign
the obligations under the Loan Agreement, the Note, and the Security
Instruments (as defined in the Loan Agreement) to NHC which has, in turn,
agreed to immediately transfer, assign and convey the Mortgaged Property to
NHLP by general warranty deed and to additionally assign the obligations,
indebtedness and liabilities under the Loan Agreement, the Note and the
Security Instruments to NHLP; and
WHEREAS, NHLP desires to assume the obligations, indebtedness and
liabilities under the Loan Agreement, the Note and the Mortgages (hereinafter
defined) and to be accorded the rights of the "Borrower" under the Loan
Agreement; and
WHEREAS, Lender is the present owner and holder of the Note and the
"Beneficiary" under the Mortgages and Newmark, NHC and NHLP and Lender desire
to amend and modify the Loan Agreement, the Note and the Mortgages as set forth
below; and
WHEREAS, said Loan Agreement and the Mortgages provide that a
conveyance of the Mortgaged Property by Newmark without the consent of Lender
or Beneficiary, as the case may be, is an "Event of Default" thereunder; and
WHEREAS, Lender has filed for record a Master Form Deed of Trust,
Security Agreement and Financing Statement in the Real Property Records of
various counties as set
<PAGE> 2
forth on Exhibit A attached hereto (the "Master Deed of Trust"), and Newmark
has executed and delivered as security for the indebtedness, covenants and
obligations of Newmark under the Loan Agreement and the Note various Deeds of
Trust, Security Agreements and Financing Statements in favor of J. Dickson
Rogers, Trustee, for the benefit of Lender incorporating by reference the terms
and conditions of the Master Deed of Trust and, among other things, describing
the indebtedness secured and the property covered thereby, recorded as
indicated in Exhibit B attached hereto and covering the Mortgaged Property as
described therein and in Exhibit C attached hereto (such Deeds of Trust,
Security Agreements and Financing Statements are herein called the
"Mortgages"); and
WHEREAS, the Lender is willing to consent to the transfer of title to
the Mortgaged Properties from Newmark to NHC and from NHC to NHLP and the
assumption of the obligations and Indebtedness (as defined in the Loan
Agreement and the Mortgages) referred to above by NHLP, on the terms and
conditions set forth below; and
NOW, THEREFORE, in consideration of the mutual covenants,
considerations and agreements contained herein, it is agreed as follows:
I.
Subject to the terms and conditions hereof, Lender hereby consents to
the transfer and conveyance of the Mortgaged Property to NHC from Newmark,
subject to the Indebtedness which is secured in part by liens and security
interests on the Mortgaged Property granted for the benefit of Lender. Subject
to the terms and conditions hereof, Lender hereby further consents to the
transfer and conveyance of the Mortgaged Property to NHLP from NHC, and the
assumption by NHLP of the Indebtedness under the Note, Loan Agreement and the
Security Instruments secured in part by the liens and security interests on the
Mortgaged Property granted for the benefit of Lender and the assumption by NHLP
of the liabilities and obligations of Newmark under the Loan Agreement,
Mortgages and other Security Instruments. Lender hereby agrees that upon
completion of the transactions described herein, NHLP shall have the rights of
"Borrower" under the Loan Agreement.
II.
Upon conveyance of the Mortgaged Property from Newmark to NHC, NHC
does hereby assume and agree to perform all of the obligations of "Borrower" or
"Grantor" contained in the Loan Agreement, the Note and the Mortgages, as
modified; provided, however, notwithstanding anything to the contrary, it is
expressly understood and agreed by all parties hereto that NHC is taking the
Mortgaged Property subject to the Indebtedness and does not intend, and has not
by the execution of this Agreement, assumed or agreed to assume the payment of,
nor shall NHC be personally liable for, payment of the Note described above.
NHC shall be liable upon the Indebtedness evidenced by the Note, all sums to
accrue or to become payable thereon and all amounts covenanted to be paid by
NHC under the Loan Agreement, the Mortgages and the Security Instruments only
to the extent of the security for the payment thereof including, without
limitation, all properties, rights and estates described in
2
<PAGE> 3
the Mortgages. If default occurs in the timely and prompt payment of all or
part of such Indebtedness, as and when due from time to time and at maturity,
howsoever such maturity may be brought about, any judicial proceedings against
NHC brought by Lender or other holder of the Note shall be limited to the
preservation, enforcement and foreclosure of the liens and security interests
granted under the Mortgages now or at any time hereafter securing the payment
hereof, and no attachment, execution or other writ of process shall be sought,
issued or levied upon any assets, properties or funds of NHC other than the
properties, rights, estates, and interests, described in the Mortgages securing
the Note. In the event of foreclosure of such liens and security interests
granted under the Mortgages securing the payment of the Note by private power
of sale or otherwise, no judgment for any deficiency upon such indebtedness,
sums and amounts shall be obtainable by Lender or other holder of the Note
against NHC or its successors, assigns, or other legal representatives. NHC
does hereby ratify and confirm the liens and security interests on the
Mortgaged Property granted for the benefit of Lender in the Mortgages and
agrees that such liens and security interests are valid and subsisting and are
hereby renewed and carried forward.
III.
Upon conveyance of the Mortgaged Property from NHC to NHLP, NHLP does
hereby assume and agree to perform all of the obligations of "Borrower" or
"Grantor" contained in the Loan Agreement, the Note, and the Mortgages, as
modified, it being understood and agreed by all parties hereto that NHLP
intends to and does hereby assume and become personally liable for the payment
of the Note referred to above and that NHLP shall be personally liable upon the
Indebtedness pursuant to the Loan Agreement and the Mortgages including,
without limitation, that evidenced by the Note, all sums to accrue or to become
payable thereon and all amounts covenanted to be paid by "Grantor" under the
Mortgages and by "Borrower" under the Loan Agreement and Security Instruments.
IV.
Upon the conveyance of the Mortgaged Property to NHLP and the
satisfaction of Lender's conditions hereto, the Mortgages, as modified, shall
be hereby amended to include Newmark Homes, L.P., a Texas limited partnership,
in said documents as "Grantor". NHLP does hereby ratify and confirm the liens
and security interests on the Mortgaged Property granted in the Mortgages for
the benefit of Lender and that such liens and security interests are valid and
subsisting and are hereby renewed and carried forward. NHLP shall become the
"Borrower" under the Note and Loan Agreement. The liability of Newmark Home
Corporation for the payment of the Indebtedness is not released hereby.
Newmark represents and warrants to Lender that the post-transfer balance sheet
of NHLP will be substantially identical with respect to assets, liabilities and
capital structure to the pre-transfer balance sheet of Newmark.
3
<PAGE> 4
V.
In the event any item, term or provision contained in this Agreement
is in conflict, or may be hereafter held to be in conflict with any applicable
laws, this instrument shall be effected only as to its application to such
item, term or provision, and shall in all other respects remain in full force
and effect. In no event and upon no contingency shall the maker or makers of
the Note or Notes secured hereby, or any party liable thereon or therefore, be
required to pay interest in excess of the maximum interest that may be lawfully
charged by the holder of said Indebtedness under the applicable usury laws.
VI.
Except as specifically modified herein, the terms and conditions of
the Loan Agreement, the Note and the Mortgages shall in all other respects
remain the same and shall continue as valid and binding obligations of the
respective parties, their successors and assigns.
VII.
NHLP agrees to execute such other amendments and modifications to the
Loan Agreement and the Security Instruments as Lender may reasonably request in
connection herewith and to deliver to Lender the following:
(a) copies of the general warranty deeds from Newmark to NHC and from NHC
to NHLP;
(b) copies of the resolutions of the boards of directors of the respective
corporations, certified by the Secretary thereof, authorizing the
transfers by Newmark and NHC and the assumption of the Indebtedness by
NHLP and authorizing the formation of NHLP and the acquisition by
Newmark of the General Partner's interest in NHLP;
(c) confirmation that all title binders covering the Mortgaged Property
and issued prior to the date hereof remain in full force and effect;
(d) copies of all corporate documents of NHC including, without
limitation, articles of incorporation, bylaws, certificates of
existence and good standing, and the partnership agreement,
certificate of limited partnership of NHLP and consents to the
assumption of the Indebtedness; and
(e) opinions of counsel to Newmark, NHC and NHLP to the effect that (i)
NHC is a corporation duly incorporated under the laws of the State of
Nevada and in good standing in the State of Nevada, (ii) the
transactions contemplated hereunder and the conveyances have been
approved by all necessary corporate action on the part of NHC, (iii)
the execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action on the part of
Newmark and NHC, (iv) this Agreement has been duly executed by
authorized officers of Newmark and of
4
<PAGE> 5
NHC, (v) NHLP is a limited partnership duly formed and existing under
the laws of the State of Texas, (vi) all necessary partnership
consents have been obtained for the execution and delivery of this
Agreement, the transactions hereunder and the performance of this
Agreement by NHLP, and (vii) this Agreement has been duly executed and
delivered on behalf of NHLP.
Additionally, Lender shall have been reimbursed for its reasonable fees and
expenses of counsel incurred in connection with this transaction and shall have
received pro forma financial statements prepared in accordance with generally
accepted accounting principles for NHLP which set forth a post-transfer balance
sheet identical with respect to assets, liabilities and capital structure to
Newmark's pre-transfer balance sheet satisfactory to Lender.
VIII.
This Agreement shall not be effective until it has been executed in
Pittsburgh, Pennsylvania by the Lender.
This Agreement is being executed in multiple original counterparts.
For recording purposes, various counterparts have been executed and there may
be attached to each such counterpart an Exhibit C containing only the
description of the Mortgaged Property, or portions thereof, which relates to
the county or state in which the particular counterpart is to be recorded. A
complete original counterpart of this Agreement with a complete Exhibit C may
be obtained from Lender. Each of such counterparts shall for all purposes be
deemed to be an original and all such counterparts shall together constitute
but one and the same instrument.
THIS MODIFICATION AGREEMENT, THE NOTE, THE LOAN AGREEMENT, THE MORTGAGES
AND THE OTHER SECURITY INSTRUMENTS REPRESENT THE ENTIRE AGREEMENT OF THE
PARTIES HERETO 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.
Address: NEWMARK HOME CORPORATION
10435 Greenbough, Ste. 101
Stafford, TX 77477
By: /s/ TERRY WHITE
----------------------------------------
Terry White, Chief Financial Officer
5
<PAGE> 6
Address: NHC HOMES, INC.
One East First St., Ste. 1600
Reno, NV 89505
By: /s/ LARRY HORNER
----------------------------------------
Larry Horner, President
Address: NEWMARK HOMES, L.P.
10435 Greenbough, Ste. 101
Stafford, TX 77477 By: NEWMARK HOME CORPORATION,
Its Sole General Partner
By: /s/ TERRY WHITE
----------------------------------------
Terry White, Chief Financial Officer
Address: MELLON BANK, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258-0001
By: /s/ JANIS R. CAREY
----------------------------------------
Name: JANIS R. CAREY
--------------------------------------
Title: Vice President
-------------------------------------
THE STATE OF TEXAS )
)
COUNTY OF FORT BEND )
This instrument was acknowledged before me on October 9, 1996 by Terry
White, Chief Financial Officer of Newmark Home Corporation, a Nevada
corporation, on behalf of said corporation.
/s/ LINDA SOTIER
------------------------------------------
Notary Public, State of Texas
[SEAL]
6
<PAGE> 7
THE STATE OF NEW YORK )
)
BOROUGH OF MANHATTAN )
This instrument was acknowledged before me on Oct. 15, 1996 by Larry
Horner, President of NHC Homes, Inc., a Nevada corporation, on behalf of said
corporation.
/s/ DEIRDRE M. KEAG
-------------------------------------------
Notary Public, State of New York
[SEAL]
THE STATE OF TEXAS )
)
COUNTY OF FORT BEND )
This instrument was acknowledged before me on Oct. 9, 1996 by Terry
White, Chief Financial Officer of Newmark Home Corporation, a Nevada
corporation, Sole General Partner of Newmark Homes, L.P., a Texas limited
partnership, on behalf of said limited partnership.
/s/ LINDA SOTIER
---------------------------------------
Notary Public, State of Texas
[SEAL]
THE STATE OF PENNSYLVANIA )
)
COUNTY OF ALLEGHENY )
This instrument was acknowledged before me on Oct. 18, 1996 by Janis R.
Carey, Vice President of Mellon Bank, N.A., a national banking association, on
behalf of said banking association.
/s/ CHRISTINE SHOSTEK
--------------------------------------------
Notary Public, State of Pennsylvania
[SEAL]
7
<PAGE> 1
EXHIBIT 10.15(c)
SECOND
MODIFICATION AGREEMENT
THIS SECOND MODIFICATION AGREEMENT (this "Agreement") is made and
entered into as of the 10th day of January, 1997, by and among MELLON BANK,
N.A. ("Bank"), and Newmark Homes, L.P., a Texas limited partnership
("Borrower").
W I T N E S S E T H:
WHEREAS, Bank previously extended or agreed to extend credit to
Newmark Home Corporation ("Newmark"), as evidenced by that certain Construction
Loan Agreement dated as of January 10, 1996 (such Construction Loan Agreement,
as amended from time to time, being referred to herein as the "Original Loan
Agreement"), with advances thereunder to be evidenced by the Revolving
Construction Facility Note of same date in the original principal amount of TEN
MILLION AND NO/100 DOLLARS ($10,000,000) (such promissory note as modified by
the First Modification Agreement (hereinafter defined), this Second
Modification Agreement, and as further renewed, rearranged, or extended, is
hereinafter referred to as the "Note"); and
WHEREAS, pursuant to Modification Agreement dated as of October 1,
1996 executed by and among Bank, Newmark, NHC Homes, Inc. and Borrower (the
"First Modification Agreement"), Borrower assumed the liabilities, obligations,
and indebtedness of Newmark under the Note and the Original Loan Agreement; and
WHEREAS, Bank and Borrower are amending and restating in its entirety
the Original Loan Agreement and, among other things, Bank is increasing its
commitment thereunder to $20,000,000, subject to all the terms and conditions
of the Amended and Restated Credit Agreement; and
WHEREAS, Bank is the present owner and holder of the Note and the
"Beneficiary" under the Mortgages securing the same, and Borrower and Bank
desire to amend and modify the Note and to extend the liens granted in favor of
Bank pursuant to the various Deeds of Trust, Security Agreements and Financing
Statements in favor of J. Dickson Rogers, Trustee, for the benefit of Bank
incorporating by reference the terms and conditions of the Master Deed of
Trust;
NOW, THEREFORE, in consideration of the mutual covenants,
considerations and agreements contained herein, it is agreed as follows:
1. The outstanding principal balance of the Note as of January
10, 1997 is $5,075,326.28.
<PAGE> 2
2. The commitment of the Bank has been increased subject to the
terms and conditions of the Amended and Restated Construction Loan Agreement of
even date herewith executed by and between Bank and Borrower. The maximum
stated principal amount of the Note is increased to $20,000,000. The principal
of the Note is and shall be due and payable on October 10, 1998.
3. Accrued and unpaid interest at the rate specified in the Note
shall remain due and payable monthly on the days specified in the Note.
4. This Second Modification Agreement, the Note, the Security
Instruments, and the maximum rate of nonusurious interest applicable to the
loan evidenced by the Note shall be governed by (i) the laws of the United
States of America and the State of Texas in effect on the date of the loan
evidenced by the Note, (ii) to the extent allowed by applicable law, such laws
as are presently in effect, to the extent they provide a higher maximum rate of
nonusurious interest than laws in effect on the date of the loan and, (iii) to
the extent allowed by applicable law, such laws as may hereafter be in effect
to the extent they provide a higher maximum rate of nonusurious interest than
laws presently in effect. In no event shall Tex. Rev. Civ. Stat. Ann. Art.
5069 Ch. 15, as amended (which regulates certain revolving loan accounts and
revolving triparty accounts) apply hereto or thereto.
5. Unless changed in accordance with law, the applicable rate
ceiling under Texas law shall be the indicated (weekly) rate ceiling from time
to time in effect as provided in Tex. Rev. Civ. Stat. Ann. Art. 5069-1.04, as
amended.
6. Except as herein modified, the Note (including provisions
therein, if any, providing for recapture of interest in the event the otherwise
stated rate of interest is limited by the highest lawful contract rate), the
Security Instruments, as supplemented, and all other instruments executed in
connection with or as security for the payment of the Note, or in the
performance of the Borrower's obligations under any and all of such
instruments, shall in all respects remain in full force and effect according to
the terms, provisions and conditions thereof, and any and all rights, titles,
interests, liens and powers created or existing thereunder are renewed,
extended and carried forward hereby.
7. Borrower hereby ratifies and confirms its assumption of and
agreement to pay all obligations, liabilities and indebtedness arising under
the Note, as increased hereby or under the Security Instruments.
8. Capitalized terms used but not defined herein shall have the
meaning set forth in the Amended and Restated Credit Agreement.
9. This Agreement shall not be effective until it has been
executed in Pittsburgh, Pennsylvania by Bank.
10. This Agreement is being executed in multiple original
counterparts. For recording purposes, various counterparts have been executed
for recording. Each of such
2
<PAGE> 3
counterparts shall for all purposes be deemed to be an original and all such
counterparts shall together constitute but one and the same instrument.
11. THIS SECOND MODIFICATION AGREEMENT, THE NOTE, THE LOAN
AGREEMENT, THE MORTGAGES AND THE OTHER SECURITY INSTRUMENTS REPRESENT THE
ENTIRE AGREEMENT OF THE PARTIES HERETO 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.
Address: NEWMARK HOMES, L.P.
10435 Greenbough, Ste. 101
Stafford, TX 77477 By: NEWMARK HOME CORPORATION,
Its Sole General Partner
By: /s/ TERRY WHITE
----------------------------------------
Terry White, Chief Financial Officer
Address: MELLON BANK, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258-0001
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
3
<PAGE> 4
THE STATE OF TEXAS )
)
COUNTY OF FORT BEND )
This instrument was acknowledged before me on March 10, 1997 by
Terry White, Chief Financial Officer of Newmark Home Corporation, a Nevada
corporation, Sole General Partner of Newmark Homes, L.P., a Texas limited
partnership, on behalf of said limited partnership.
/s/ LINDA SOTIER
[SEAL] ---------------------------------------
Notary Public, State of Texas
THE STATE OF PENNSYLVANIA )
)
COUNTY OF ________________________ )
This instrument was acknowledged before me on ________________, 1997
by _______________________, __________________ of Mellon Bank, N.A., a national
banking association, on behalf of said banking association.
---------------------------------------
Notary Public, State of Pennsylvania
4
<PAGE> 1
EXHIBIT 10.16(a)
A-1
L O A N A G R E E M E N T
Between
UNITED SAVINGS ASSOCIATION OF TEXAS FSB
and
NEWMARK HOME CORPORATION
$12,000,000.00 June 28, 1990
<PAGE> 2
A-1
TABLE OF CONTENTS
United Savings Association of Texas FSB
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 GENERAL TERMS
- --------- -------------
Section 1.01 Terms Defined Above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 2 AMOUNT AND TERMS OF LOAN
- --------- ------------------------
Section 2.01 The Loans and Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.02 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.03 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.04 Notice and Manner of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.05 Computation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.06 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.07 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.08 Term and Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.09 Termination of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.10 Payment Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.11 Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
- --------- ------------------------------
Section 3.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.02 Corporate Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.03 Binding Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.04 No Legal Bar or Resultant Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.05 No Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.06 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.07 Investments and Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.08 Liabilities; Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.09 Taxes; Governmental Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.10 Titles, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.11 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.12 Casualties; Taking of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.13 Use of Proceeds; Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.14 Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.15 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.16 No Material Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.17 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.18 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.19 Designated Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.21 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.22 Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.23 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.24 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.25 Streets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.26 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.27 No Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
i
<PAGE> 3
A-1
<TABLE>
<S> <C> <C>
Section 3.28 Affirmation of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.29 Advances and Income as Trust Fund and Fiduciary Property . . . . . . . . . . . . . . . . . 22
Section 3.30 No Financing of Corporate Takeovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.31 Location of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4 AFFIRMATIVE COVENANTS
- --------- ---------------------
Section 4.01 Financial Statements and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.02 Annual Certificates of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.03 Quarterly Certificates of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.04 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.05 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.06 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.07 Performance of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.08 Reimbursement of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.09 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.10 Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.11 Inspection of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.12 Inspection of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.13 Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.14 ERISA Information and Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.15 Collateral Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.16 Down-Date Endorsements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.17 Compliance with Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.18 Correction of Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.19 Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.20 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.21 Compliance with Governmental Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.22 Construction Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.23 Conveyance and Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.24 Inspection Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.25 Sign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.26 Construction of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.27 Application of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.28 Borrower's Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.29 Notices by Governmental Authority; Fire and Casualty Losses, Etc. . . . . . . . . . . . . . 34
Section 4.30 Joint Disbursement and Application by Lender . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.31 Deed of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.32 Flood Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.33 Substantial Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.34 Easements, Encumbrances, Liens and Restrictive Covenants . . . . . . . . . . . . . . . . . 35
Section 4.35 Continued Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.36 Continued Viability of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.37 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.38 Ownership and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.39 Indemnification of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.40 Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.41 Tax and Insurance Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.42 Sales and Operations Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<TABLE>
<S> <C> <C>
Section 4.43 Maintenance, Repair and Operation of Units . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.44 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.45 Performance of Designated Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.46 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.47 Streets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.48 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.49 Environmental Cleanup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 5 NEGATIVE COVENANTS
- --------- ------------------
Section 5.01 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.02 Investments, Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.03 Dividends, Distributions and Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.04 Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.05 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.06 Limitation on Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.07 Mergers, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.08 Proceeds of Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.09 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.10 Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.11 Capital Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.13 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.14 Ratio of Total Liabilities to Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.15 Preservation of Designated Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 6 EVENTS OF DEFAULT
- --------- -----------------
Section 6.01 Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.03 Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.04 Rights Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 7 CONDITIONS OF LENDING
- --------- ---------------------
Section 7.01 Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.02 All Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.03 Funding of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.04 Limitation on Speculative Starts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.05 Limitation on Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.06 Certain Recordings and Documents After Closing . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.07 Application of Interim Construction Loan Proceeds . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8 PARTIAL RELEASES
- --------- ----------------
Section 8.01 Conditions to and Procedures for Partial Release . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 9 MISCELLANEOUS
- --------- -------------
Section 9.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.02 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.03 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.04 Survival of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.06 Renewal, Extension or Rearrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.07 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.08 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.09 Singular and Plural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.10 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.11 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.12 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.13 Taxes, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.14 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.15 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.16 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.17 Titles of Articles, Sections and Subsections . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.18 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.19 Trust Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.20 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.21 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
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LIST OF EXHIBITS
United Savings Association of Texas FSB
<TABLE>
<S> <C>
EXHIBIT "A" Affidavit
EXHIBIT "B" Budget
EXHIBIT "C" Borrowing Request
EXHIBIT "D" Survey Requirements
EXHIBIT "E" Master Form of Deed of Trust
EXHIBIT "F" Line of Credit Note
EXHIBIT "G" Security Agreement
EXHIBIT "H" Supplemental Deed of Trust
EXHIBIT "I" Schedule of Disclosures
EXHIBIT "J" Form of Compliance Certificate
EXHIBIT "K" Construction Draw Request
EXHIBIT "L" Affidavit of Bills Paid
EXHIBIT "M" Partial Release of Lien
</TABLE>
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LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of this 26th day of
June, 1990 between NEWMARK HOME CORPORATION, a Texas corporation with principal
offices at 10435 Greenbough, Suite 101, Stafford, Texas 77477, ("Borrower");
and UNITED SAVINGS ASSOCIATION OF TEXAS FSB, with principal offices at 3200
Southwest Freeway, Suite 2000, Houston, Texas 77027 (the "Lender").
WHEREAS, Lender, for the consideration hereinafter set forth and
subject to the terms and conditions herein stated, hereby commits and agrees to
make loans to Borrower totaling, in the aggregate, an amount not to exceed
TWELVE MILLION AND N0/100 DOLLARS ($12,000,000.00). Such loans shall be
secured by the Premises, as hereinafter defined; and
WHEREAS, the loans are to be used by Borrower to finance the
acquisition of the Land, as hereinafter defined, and the construction of
single-family residences thereon in accordance with plans and specifications
and a cost breakdown submitted to and approved by Lender; and
WHEREAS, the loans shall be evidenced by a promissory note to be
executed by Borrower and delivered to Lender, deeds of trust and security
agreements securing the payment thereof, financing statements perfecting the
security interests created in such deeds of trust and security agreements, and
such other documents as set forth in this Agreement or as required by Lender;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and of the loans and commitment hereinafter
referred to, the Borrower and the Lender agree as follows:
ARTICLE I
GENERAL TERMS
Section 1.01 Terms Defined Above. As used in this Loan Agreement,
the terms "Borrower" and "Lender" shall have the meanings indicated above.
Section 1.02 Certain Definitions. As used in this Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
"Advance" shall mean a disbursement by Lender to or for the benefit of
Borrower of any of the proceeds of the Note.
"Affidavit" shall mean that certain Borrower's loan purpose affidavit
executed in connection with each Interim Construction Loan, a pro forma copy of
which is attached hereto as Exhibit "A."
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"Affiliate" shall mean a Person, directly or indirectly, through one
or more intermediaries, controlling, controlled by or under common control with
the Person in question, which, in the case of a Person which is a partnership,
shall include each of the constituent partners thereof. The term "control", as
used in the immediately preceding sentence, shall mean, with respect to a
Person that is a corporation, the right to the exercise, directly or
indirectly, of more than ten percent (10%) of the voting rights attributable to
the shares of the controlled corporation, including without limitation, the
voting power for the election of the directors of such Person or the direct
management or policies of such Person, whether through the ownership of voting
securities, by contract or otherwise, and, with respect to a Person that is not
a corporation, the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of the controlled Person.
Affiliate shall also mean a Person who is related to the Person in question.
The term "related to" in the immediately preceding sentence shall mean a
relation of immediate family including father, mother, brother, sister, son,
daughter, or any such relation created by the occurrence of marriage by any
such Persons.
"Agreement" shall mean this Loan Agreement, as the same may from time
to time be amended or supplemented.
"Appraisal" shall mean, with respect to each Unit, an appraisal, to be
prepared at the sole cost and expense of the Borrower, in form and substance
satisfactory to the Lender stating the anticipated appraised value of such Unit
upon Substantial Completion of a Residence constructed thereon, and the
appraised value of the Lot prior to commencement of construction thereon, such
appraisal to be prepared by an appraiser approved by Lender who is a member of
the American Institute of Real Estate Appraisers or, in the event such Unit is
to be financed by a loan insured by the FHA or guaranteed by the VA, by an
appraiser employed or selected by such administration for which the financing
is being requested. In addition, the Lender shall have the right, at any time
and from time to time, to appoint another appraiser of its choice to inspect,
at the sole cost and expense of the Borrower, any Unit and the Improvements
thereon and to render his appraisal of such Unit and Improvements. In the event
the Lender so elects, the appraisal rendered by such appraiser shall be the
"Appraisal" hereunder for all purposes, including, without limitation,
determination of the Maximum Loan Amount of any Interim Construction Loan.
"Appraised Value" shall mean, with respect to each Unit, an amount
equal to the Appraisal.
"Borrower's Deposit" shall mean such cash sums as Lender may
reasonably deem necessary in accordance with Section 4.28 hereof.
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"Borrowing Request" shall mean a request for an Advance pursuant to
Section 2.01 hereof containing all information set forth in and to be
substantially in the form of Exhibit "C" attached hereto.
"Budget" shall mean the detailed budget in form as attached hereto as
Exhibit "B" or in such other form as shall be acceptable to Lender, prepared by
Borrower in connection with any Interim Construction Loan reflecting the cost
of acquisition, construction and operation of the portion of the Premises
covered thereby which shall not have been changed or modified without the prior
written consent of Lender.
"Business Day" shall mean a day other than a Saturday, Sunday or legal
holiday for federally insured depository institutions under the laws of the
United States of America.
"CMSA" shall mean Consolidated Metropolitan Statistical Area.
"Commitment" shall mean the obligation of the Lender to make Advances
to the Borrower under Section 2.01 hereof, up to the maximum amount therein
stated.
"Completion Date" shall mean, (i) with respect to each Presale and the
Interim Construction Loan in connection therewith, one hundred eighty (180)
days from the date of the initial Advance under such Interim Construction Loan,
(ii) with respect to each Speculative Sale and the Interim Construction Loan in
connection therewith, two hundred seventy (270) days from the date of the
initial Advance under such Interim Construction Loan, and (iii) with respect to
each Model and the Interim Construction Loan in connection therewith, three
hundred sixty (360) days from the date of the initial Advance under such
Interim Construction Loan.
"Construction Contracts" shall mean the contracts between Borrower and
any contractor or subcontractor relating to rendering of services or furnishing
of materials in connection with the construction of all or any portion of the
Improvements, contracts between any general contractor and any subcontractor,
and contracts between any of the foregoing and any other Person or entity
relating to rendering of services or furnishing of materials in connection with
the construction of the Improvements. All of the foregoing contracts shall be
subject to the prior written approval of Lender.
"Current Survey" shall mean a slab survey of a Lot made by a duly
licensed surveyor or civil engineer satisfactory to Lender containing the
information and meeting all of the requirements as set forth in Exhibit "D",
attached hereto.
"Debt" shall mean, for any Person, without duplication: (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of Property or services for which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which such
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Person otherwise assures a creditor against loss; (ii) all obligations under
leases which shall have been, or should have been, in accordance with generally
accepted accounting principles in effect on the date of this Agreement,
recorded as capital leases in respect of which such Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in respect of
which obligations such Person otherwise assures a creditor against loss, and
(iii) unfunded vested benefits under each Plan.
"Deeds of Trust" shall mean the Master Form of Deed of Trust, any and
all Supplemental Deeds of Trust and any one or more other deeds of trust and
security agreements, whether now or hereafter executed, covering one or more
Units and securing the Indebtedness, duly executed by Borrower and such others
(if any) as shall be required to create in favor of Lender, first priority
Liens upon and security interests in all of the Units, and any and all
supplements, modifications, amendments, and/or extensions thereof.
"Default" shall mean the occurrence of any of the events specified in
Section 6.01 hereof, whether or not any requirement for notice or lapse of time
or other condition precedent has been satisfied.
"Designated Contract" shall mean each agreement (whether one or more)
referred to in Section 3.19 hereof.
"Drawdown Termination Date" shall mean June 28, 1991.
"Environmental Complaint" means any complaint, order, citation or
notice by any Person asserting that the Borrower, or any Property of it, is in
violation of or does not comply with any Environmental Law.
"Environmental Laws" means: (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C.A. 9601 et. seq.
("CERCLA"), (ii) the Resource Conservation and Recovery Act, as amended by the
Hazardous and Solid Waste Amendment of 1984, 42 U.S.C.A. 6901 et. seq.
("RCRA"), (iii) the Clean Air Act, 42 U.S.C.A. 7401 et. seq., (iv) the Clean
Water Act of 1977, 33 U.S.C.A. 1251 et. seq., (v) the Toxic Substances Control
Act, 15 U.S.C.A. 2601 et. seq., (vi) the Safe Drinking Water Act, 42 U.S.C.
300(f) et. seq. ; (vii) the Refuse Act, 33 U.S.C. 407 et. seq., (viii) the
Texas Solid waste Disposal Act, Tex. Health and Safety Code, section 361.001
et. seq.; (ix) the Texas Clean Air Act, Tex. Health and Safety Code, Section
382.001 et. seq., (x) the regulations promulgated pursuant to the aforesaid
laws, or any of them, and (xi) all other federal, state or local laws,
ordinances, orders, rules or regulations, new or hereafter existing, that
directly and/or indirectly related to air pollution, water pollution, noise
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control, and/or the presence, storage, escape, seepage, leakage, emission,
release, use, spillage, generation, transportation, handling, discharge,
disposal, or recovery of on-site or off-site hazardous or toxic substances,
wastes or materials and/or underground storage tanks, and as each and any of
the foregoing laws, ordinances, orders, rules or regulations may be amended or
enacted from time to time.
"Environmental Liability" means any claim, demand, obligation, cause
of action, accusation, allegation, order, violation, damage, injury, judgment,
injunction, penalty or fine, cost of enforcement, cost of cleanup, removal,
encapsulation or other remedial action, or any other cost or expense
whatsoever, including, without limitation, reasonable attorneys' fees and
disbursements, resulting from the violation or alleged violation of any
Environmental Law or the existence of Hazardous Material, the imposition of any
Environmental Lien.
"Environmental Lien" means a Lien (as hereinafter defined) in favor of
any Person arising as a result of or securing (i) any liability under an
Environmental Law, or (ii) damages arising from or costs incurred by any Person
in response to any actual or threatened Hazardous Discharge.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which, together with the Borrower, would be treated as a single
employer under Section 4001 of ERISA.
"Event of Default" shall mean the occurrence of any of the events
specified in Section 6.01 hereof, provided that any requirement for notice or
lapse of time or any other condition precedent has been satisfied.
"Excepted Liens" shall mean the following, all of which must be
acceptable to the Lender in the Lender's sole discretion: (i) Liens for taxes,
assessments or other governmental charges or levies not yet due or which are
being contested in good faith by appropriate action; (ii) Liens in connection
with workmen's compensation, unemployment insurance or other social security,
old age pension or public liability obligations; (iii) legal or equitable
encumbrances deemed to exist by reason of negative pledge covenants (such as
that made in Section 5.02 hereof) and other covenants or undertakings of like
nature; and (iv) the outstanding Liens, easements, building lines,
restrictions, security interests and other matters (if any) approved in writing
by Lender relating to any of the Lots.
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"Financial Statements" shall mean the financial statement or
statements of the Borrower described or referred to in Section 3.06 hereof.
"Governmental Authority" includes the United States of America, the
state, county, city or any political subdivision in which all or any portion of
the Premises is located, and any court or political subdivision, agency,
department, commission, board, bureau or instrumentality having jurisdiction
over Borrower, Lender, all or any portion of the Premises or construction
thereon.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, rule, regulation, judgement, decree, injunction, franchise,
permit, certificate, license, authorization or other direction or requirement
now or hereafter existing (including, without limitation, any of the foregoing
which relate to environmental standards or controls, energy regulations and
occupational, safety and health standards or controls) of any (domestic or
foreign) federal, state, county, municipal or other government, department,
commission, board, court, agency or any other instrumentality of any of them,
which exercises jurisdiction over the Borrower or any of its Property.
"Hazardous Discharge" means the happening of any event involving the
presence, disposal, escape, seepage, leakage, emission, release, use, storage,
spillage, discharge, investigation, cleanup, removal or remediation of any
Hazardous Material which violates, or threatens to violate, any Environmental
Law.
"Hazardous Material" shall mean one or more of the following
substances:
(a) Those substances included within the definitions of "hazardous
substances", "hazardous materials", "toxic substances", or "solid waste" in any
one or more of the Environmental Laws, or the Hazardous Materials
Transportation Act (49 U.S.C. or in the regulations promulgated pursuant to
said law);
(b) Those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto);
(c) Such other substances, materials and wastes which are or
become regulated under applicable local, state, or federal law, or the United
States government, or which are classified as hazardous or toxic under federal,
state, or local laws, orders, ordinances, rules or regulations; and
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(d) Any material, waste, or substances which are: (i) asbestos,
(ii) polychlorinated biphenyls; (iii) a substance described in clause (a) of
the definition of "Hazardous Material"; (iv) explosives; (v) radioactive
materials; (vi) gasoline; (vii) petroleum; (viii) petroleum products, or (ix)
related or similar materials or substances.
"Highest Lawful Rate" shall mean the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Note or on other Indebtedness, as
the case may be, under laws applicable to the Lender which are presently in
effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"Impositions" shall mean all real estate and personal property taxes;
water, gas, sewer, electricity and other utility rates and charges; charges
imposed pursuant to any subdivision, planned unit development or condominium
declaration or restrictions; charges for any easement, license or agreement
maintained for the benefit of the Premises, and all other taxes, charges and
assessments and any interest, costs or penalties with respect thereto of any
kind and nature whatsoever which at any time prior to or after the execution
hereof may be assessed, levied or imposed upon all or any portion of the
Premises or the ownership, use, occupancy or enjoyment thereof.
"Improvements" shall mean all Residences and any other improvements,
buildings, structures, equipment and amenities located on the Land and provided
for in the Plans.
"Indebtedness" shall mean any and all amounts owing or to be owing by
the Borrower to the Lender in connection with the Note or any Security
Instruments, including this Agreement, and all other liabilities of the
Borrower to the Lender from time to time existing, whether in connection with
this or other transactions, including without limitation, the Preclosing
Indebtedness referred to in Section 9.19 hereof.
"Insurance Policies" shall mean (a) owner's and contractor's policies
of comprehensive general public liability insurance, including worker's
compensation insurance; (b) hazard insurance against all risks of loss,
including collapse, in an amount not less than the full replacement cost of all
Improvements, including the cost of debris removal, with annual agreed amount
endorsement and sufficient at all times to prevent Borrower from becoming a co-
insurer, such insurance prior to completion of the Improvements to be in
builder's risk form on a nonreporting basis and including coverage for all
materials and equipment, wherever located, intended to be installed in or
utilized in the construction of the Improvements; (c) if any portion of
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the Premises is in a "Flood Hazard Area", a flood insurance policy, or binder
therefor, with respect to that portion of the Premises, in an amount equal to
the portion of the Maximum Loan Amount attributable to such portion of the
Premises or the maximum amount available under the Flood Disaster Protection
Act of 1973 and regulations issued pursuant thereto, as amended from time to
time, whichever is less, in form complying with the "insurance purchase
requirement" of that Act; and (d) such other insurance, if any, as Lender may
require from time to time including but not limited to rent and rental value
insurance (in the sum of rentals of a period specified by Lender, real estate
taxes, special assessments and utility charges, and premiums for all insurance
required to be paid for by Borrower or by tenants), broad form boiler and
machinery insurance on all equipment and objects customarily covered thereby if
there are pressure fired vehicles within any portion of the Premises, and
errors and omissions insurance for architects, engineers and other
professionals involved in the design or construction of any of the
Improvements; in addition, the term "Insurance Policies" shall mean insurance
policies issued and maintained in form, in amounts and by companies
satisfactory to Lender, containing a mortgage clause (without contribution) in
favor of Lender with loss proceeds payable to Lender as its interest may
appear, requiring not less than ten (10) days prior written notice to Lender of
any cancellation or change of coverage, and providing that no act of the
insured or any occupant, and no occupancy or use of any portion of the Premises
for purposes more hazardous than permitted by the terms of the policy, will
affect the validity or enforceability of the insurance as respects Lender.
"Interim Construction Loan" shall mean, with respect to each Unit, the
Advances made and to be made from time to time pursuant to the Commitment.
"Land" shall mean all of the Lots.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the lien or security interest arising from a mortgage, encumbrance,
pledge, Environmental Lien, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes. The term
"Lien" shall include reservations, exceptions, encroachments, easements, rights
of way, covenants, conditions, restrictions, leases and other title exceptions
and encumbrances affecting Property. For the purposes of this Agreement, the
Borrower shall be deemed to be the owner of any Property which it has acquired
or holds subject to a conditional sale agreement, financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
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"Lot" shall mean a fully developed single-family residential lot in a
subdivision, with respect to which all development and construction work has
been completed, (including completion of all public roadways necessary to
provide sufficient access to such Lot and completion of all water, sanitary and
storm sewer facilities in capacities sufficient for single-family residential
use) so that such Lot is ready and of sufficient size for a residence to be
constructed thereon or such other lots as Lender may approve from time to time.
"Margin Percentage" shall mean, with respect to the Note, the percent
per annum which is expressly enumerated in Section 2.02 hereof (before or after
maturity, as appropriate) to be added to the Prime Rate to determine (except as
may be limited by applicable law) the interest rate on the Note.
"Master Form of Deed of Trust" shall mean those certain Master Form of
Deeds of Trust and Security Agreement in the form of Exhibit "E", attached
hereto, and recorded in all counties wherein Lots subject to any Interim
Construction Loan are situated.
"Master Planned Communities" shall mean a planned development,
approved in writing by Lender, which contains within its boundaries
subdivisions and such amenities as shall be determined by Lender.
"Material Adverse Effect" shall mean any material and adverse effect
on (i) the assets, liabilities, financial condition, business, operations,
affairs or circumstances of the Borrower from those reflected in the Financial
Statements or from the facts represented or warranted in this Agreement or any
other Security Instrument, or (ii) the ability of the Borrower to carry out its
business as of the date of this Agreement or as proposed at the date of this
Agreement to be conducted or meet its obligations under the Note, this
Agreement or the other Security Instruments on a timely basis.
"Maximum Loan Amount" shall mean, with respect to each Interim
Construction Loan, in connection with a Unit in the Houston CMSA, an amount
equal to seventy percent (70%) of the lesser of (i) the Appraised Value of the
Unit(s) attributable to such Interim Construction Loan, or (ii) the Sales Price
of the Unit(s) attributable to such Interim Construction Loan and, with respect
to each Interim Construction Loan in connection with a Unit in the Austin CMSA,
an amount equal to sixty percent (60%) of the lesser of (i) the Appraised Value
of the Unit(s) attributable to such Interim Construction Loan, or (ii) the
Sales Price of the Unit(s) attributable to such Interim Construction Loan.
"Model" shall mean a Unit to be used by Borrower in promoting the sale
of other Units offered for sale by Borrower.
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"Note" shall mean the promissory note described in Section 2.01(a)
hereof, executed by Borrower payable to the order of Lender, in the form
attached hereto as Exhibit "F" and all duly authorized renewals, extensions,
modifications, increases, reinstatements and/or rearrangements thereof
expressly agreed to in writing by the Lender.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
Governmental Authority, or any body, authority, agency or political subdivision
thereof, or any other form of entity.
"Plan" shall mean any Plan subject to Title IV of ERISA and maintained
by the Borrower or any such plan to which the Borrower is required to
contribute on behalf of its employees.
"Plans" shall mean the final working drawings and specifications for
the construction of a Residence or Residences (including soil reports and
engineering calculations) prepared by architects and/or engineers and as
modified or supplemented from time to time and approved for each Interim
Construction Loan by Lender, Borrower, and, to the extent necessary, by each
Governmental Authority.
"Premises" shall mean the Land, the Improvements, all fixtures,
equipment, leases, rentals, and personal property of any kind or character now
or hereafter related to, situated on or used in connection with the Land or in
any improvements now or hereafter constructed thereon, and all related parts,
accessions and accessories thereto and all replacements or substitutions
therefor, as well as all other improvements, benefits and appurtenances now or
hereafter placed thereon or accruing thereto.
"Presale" shall mean a Unit for which Borrower has delivered to Lender
a contract for sale with a bona fide third party purchaser not an Affiliate of
Borrower (unless approved in writing by Lender).
"Prime Rate" shall mean the variable rate of interest per annum
established by Texas Commerce Bank National Association ("TCB") from time to
time as its prime rate which shall vary from time to time effective on the same
day as any changes of the announced prime rate of TCB. Such rate is set by TCB
as general rate of interest, taking into account such factors as TCB may deem
appropriate, it being understood that many of TCB's commercial or other loans
are priced in relation to such rate, that it is not necessarily the lowest or
best rate charged to any customer by TCB and that TCB or the Lender may make
various commercial or other loans at rates of interest having no relationship
to such rate.
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"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Release Parcel" shall have the meaning set forth in Section 8.01
hereof.
"Rents" shall mean all of the rents, revenues, income, proceeds,
royalties, profits and/or other benefits paid or payable for using, leasing,
licensing, possessing, operating from or in, residing in, selling, mining,
extracting or otherwise enjoying or using any Unit.
"Residence" shall mean any single-family dwelling constructed or to be
constructed on a Lot from the proceeds of any Interim Construction Loan.
"Sales Price" shall mean, with respect to each Unit, the price
therefor, initially established by Borrower prior to the initial Advance of an
Interim Construction Loan in connection with such Unit.
"Security Agreement" shall mean the Security Agreement duly executed
by Borrower and such others (if any) for the benefit of Lender in the form of
Exhibit "G", attached hereto.
"Security Instruments" shall mean this Agreement, the agreements or
instruments described or referred to in Section 4.15 or Subsection 7.01(e)
hereof, the Deeds of Trust, and any and all other agreements or instruments now
or hereafter executed and delivered by the Borrower, or any other Person (other
than participation or similar agreements between the Lender and any other bank
or creditor with respect to any Indebtedness pursuant to this Agreement) in
connection with, or as security for the payment or performance of, the Note or
this Agreement, as such agreements may be amended, modified, extended,
increased, reinstated, rearranged or supplemented from time to time.
"Speculative Start" shall mean a Unit which is not a Presale.
"Subdivisions" shall mean those certain parcels of lots or
subdivisions located in one or more CMSA's as shall be approved in writing from
time to time by Lender.
"Substantial Completion" shall mean completion of a Residence in
accordance with the Plans in the sole reasonable judgment of the Lender.
"Supplemental Deed of Trust" shall mean a supplemental deed of trust,
security agreement and financing statement substantially in the form attached
hereto as Exhibit "H" executed by the Borrower for the benefit of the Lender
whereby a Lot and the Improvements thereon or to be constructed
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thereon are made subject to the terms and provisions of the Master Form of Deed
of Trust and which creates in favor of Lender, a first priority Lien and
security interest in the Lot and Improvements thereon.
"Title Company" shall mean Stewart Title Company or such other title
company expressly approved by Lender in writing from time to time.
"Title Insurance Binder" shall mean one or more mortgagee title
insurance policies or binders, as Lender may require, issued in favor of Lender
by the Title Company if and as required by Lender in an amount equal to one
hundred percent (100%) of the amount of each Interim Construction Loan,
insuring or agreeing to insure Lender's Lien in such form as may be prescribed
by applicable Governmental Requirements and as shall be satisfactory to Lender,
certifying that good and indefeasible title to the Lot(s) relating to such
Interim Construction Loan is vested in Borrower, subject only to exceptions
acceptable to Lender, and required by state title insurance regulations.
"Unit" shall mean any Lot and the Residence located thereon covered by
an Interim Construction Loan.
Section 1.03 Accounting Principles. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with generally
accepted accounting principles applied on a basis consistent with those
reflected by the Financial Statements, except where such principles are
inconsistent with the requirements of this Agreement.
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ARTICLE 2
AMOUNT AND TERMS OF LOAN
Section 2.01 The Loans and Commitment.
(a) Subject to the terms and conditions and relying on
the representations and warranties contained in this Agreement and
except as hereinafter provided, the Lender agrees to make to Borrower
Interim Construction Loans in an aggregate principal amount (the
"Commitment Amount") up to but not exceeding at any one time the
lesser of (i) $12,000,000.00 or (ii) the aggregate sum of the Maximum
Loan Amount of all Interim Construction Loans. To evidence the Loans
made by the Lender pursuant to this Section 2.01, the Borrower will
issue, execute and deliver the Note payable to the order of Lender in
the principal amount of the Note, dated as of the date hereof and
payable on the Drawdown Termination Date. Accrued interest is due and
payable on the Note monthly, the first such payment being due and
payable August 1, 1990, and the remaining payments being due and
payable on the first (1st) day of each and every succeeding month
thereafter and at the maturity thereof.
(b) At such time as an Interim Construction Loan shall
have been paid in full and Lender's commitment, duties and obligations
thereunder have terminated, the amount of funds advanced thereunder
shall once again be available to Borrower pursuant to additional
Interim Construction Loans to be made in accordance with the terms and
provisions hereof; that is, the amount available to Borrower under the
Commitment shall increase and decrease in accordance with Advances and
principal repayments by Borrower. The amount of funds available under
the Commitment at any time shall be determined by subtracting the
Maximum Loan Amount of all then existing Interim Construction Loans
(regardless of whether all principal has been advanced thereunder)
from $12,000,000.00. The resulting figure shall be available for
additional Interim Construction Loans under the Commitment.
(c) Notwithstanding anything contained herein to the
contrary at no time during the term of this Agreement shall the sum of
the aggregate Maximum Loan Amount of all Interim Construction Loans
under the Commitment relating to Units located in the Austin CMSA
exceed $2,000,000.00; and notwithstanding anything contained herein to
the contrary, at no time shall the sum of the aggregate Maximum Loan
Amount of all Interim Construction Loans under the Commitment relating
to Units located in the Houston CMSA exceed $10,000,000.00; and
notwithstanding anything contained herein to the contrary, at no time
shall the sum of the aggregate Maximum Loan Amount of all Interim
Construction Loans under the Commitment exceed the Commitment Amount.
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(d) Subject to the foregoing and except as otherwise
herein provided, Borrower may, at any time until the termination of
the Commitment as set forth in Section 2.09 hereof, submit to Lender a
Borrowing Request requesting Lender to make under this Agreement one
or more Interim Construction Loans for the acquisition and
construction of any one or more Units. Such Borrowing Request shall
state the amount of the Interim Construction Loan requested and
identify Subdivision and the Lot or Lots to be acquired out of the
proceeds of such Interim Construction Loan and whether such Lot or
Lots and the Residence or Residences to be located thereon are
Presales or Speculative Starts. Such Borrowing Request shall be
accompanied with a Budget and Plans.
(e) All Interim Construction Loans closed under this
Agreement shall be subject to approval by Lender in accordance with
Lender's usual underwriting guidelines and procedures, consistently
applied, and shall conform in all respects to the rules and
regulations governing Lender as a federally chartered and insured
savings bank. Such underwriting guidelines shall include, but not be
limited to, a quarterly review of Borrower's total inventory of unsold
houses and financial statements.
(f) Notwithstanding Lender's approval of Borrower's
Borrowing Request, Borrower must satisfy all of the conditions
precedent to any Interim Construction Loan and all terms and
conditions set forth in this Agreement before Lender shall be
obligated to make any Interim Construction Loan, or any Advance
thereunder.
Section 2.02 Interest Rate. The Note shall bear interest from
the date thereof until maturity at a varying rate per annum which is one
percent (1%) per annum above the Prime Rate (but in no event to exceed the
Highest Lawful Rate). Past due principal and interest in respect of the Note
shall bear interest at a varying rate per annum which is 5% per annum above the
Prime Rate (but in no event to exceed the Highest Lawful Rate). Adjustments in
the varying interest rate shall be made on the same day as each change in the
Prime Rate and, to the extent allowed by law, on the effective date of any
change in the Highest Lawful Rate.
Section 2.03 Fees.
(a) On the date of execution hereof, Borrower shall pay
to Lender a commitment fee in the amount of one quarter of one percent
(.25%);
(b) On the date of the initial Advance of each Interim
Construction Loan made or to be made hereunder, Borrower shall pay to
Lender an origination fee in the amount of one quarter of one percent
(.25%) of the amount of such Interim Construction Loan;
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(c) With respect to each Interim Construction Loan, for
the period from the Completion Date and continuing through any portion
of the period through and including the ninetieth (90th) day
thereafter, the Borrower may elect to pay to the Lender on the
Completion Date, an extension fee of one-quarter of one percent (.25%)
of the Maximum Loan Amount of such Interim Construction Loan and upon
receipt thereof by the Lender the Completion Date with respect to such
Interim Construction Loan shall be extended ninety (90) days from the
date of the original Completion Date or ninety (90) days from the date
of any prior extension thereof, as applicable. Provided, however,
Borrower shall only be entitled to one such extension unless written
consent for additional extensions shall have been approved in writing
by Lender.
Section 2.04 Notice and Manner of Borrowing. The amount of each
Advance shall be designated by the Borrower's execution of a Borrowing Request
to be received by the Lender at least three but not more than ten (10) Business
Days prior to the date of such Advance, which date shall be a Business Day.
Each such Advance shall be made at the office of the Lender, and shall be
funded in immediately available funds.
Section 2.05 Computation. All payments of interest shall be
computed on the per annum basis of a year of three hundred sixty (360) days and
for the actual number of days (including the first day but excluding the last
day) elapsed unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the per annum basis of a year of three
hundred sixty-five (365) or three hundred sixty-six (366) days, as the case may
be.
Section 2.06 Voluntary Prepayments. The Borrower may at its
option prepay the principal amount of the Note outstanding hereunder at any
time in whole or from time to time in part (but no partial prepayment shall be
less than $10,000.00), without premium or fee upon giving the Lender at least
three (3) Business Days, prior notice of the aggregate principal amount to be
prepaid, and in the event of any such notice being given, the amount so
notified shall be due and payable on the day so notified, together with accrued
interest thereon to the date of prepayment.
Section 2.07 Mandatory Prepayments.
(a) If at any time the outstanding balance under any
Interim Construction Loan exceeds the Maximum Loan Amount, then the
Borrower shall forthwith prepay the amount of such excess for
application towards reduction of the outstanding principal balance of
the Note. Such prepayment shall be without premium or fee, and shall
be made together with the payment of accrued interest on the amount
prepaid.
(b) If, at any time, after the Completion Date of any
Interim Construction Loan, including any extension thereof there shall
remain any outstanding balance owing on such
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Interim Construction Loan, then the Borrower shall forthwith prepay
the amount of such excess for application towards reduction of the
outstanding principal balance of the Note. Such prepayment shall be
without premium or penalty, and shall be made together with the
payment of accrued interest on the amount prepaid.
Section 2.08 Term and Repayment. The entire unpaid principal
and accrued interest of each Interim Construction Loan shall be repaid on or
before the Completion Date.
Section 2.09 Termination of Commitment.
(a) The initial funding of Advances for all Interim
Construction Loans hereunder must take place no later than the
Drawdown Termination Date and this Commitment shall expire on said
date unless the parties hereto mutually agree in writing to extend the
Commitment.
(b) Notwithstanding anything contained herein to the
contrary, the commitment of Lender to make Advances under any Interim
Construction Loan shall terminate on the Drawdown Termination Date
and, unless the parties mutually agree in writing to extend the
Commitment, all unpaid principal and accrued interest shall be due and
payable in full. Notwithstanding termination of Lender's commitment
and obligations thereunder and hereunder, all duties and obligations
of Borrower under this Agreement and all other Security Instruments
shall continue in full force and effect until the full and final
payment of the Note and performance of all obligations in the Security
Instruments.
Section 2.10 Payment Procedure. All payments and prepayments
made by the Borrower under the Note or this Agreement shall be made to the
Lender at its offices described above in immediately available funds before
12:00 noon, Houston time, on the date that such payment is required to be made.
The Borrower hereby authorizes the Lender, if and to the extent payment or
prepayment is not made when due hereunder or under the Note or Security
Instruments, to charge from time to time against the Borrower's account with
the Lender any amount so due. Any payment received and accepted by the Lender
after such time shall be considered for all purposes (including the calculation
of interest, to the extent permitted by law) as having been made on the
Lender's next following Business Day.
Section 2.11 Business Days. If the date for any loan payment or
prepayment or extension fee payment hereunder falls on a day which is not a
Business Day, then for all purposes of the Note and this Agreement the same
shall be deemed to have fallen on the next following Business Day, and such
extension of time shall in such case be included in the computation of payments
of interest or extension fee, as the case may be.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement, the
Borrower represents and warrants to the Lender (which representations and
warranties will survive the delivery of the Note and the making of the Advances
thereunder and shall be continually in full force and effect throughout the
term of this Agreement and any extension or renewals hereof) that:
Section 3.01 Corporate Existence. The Borrower is a
corporation duly organized, legally existing and in good standing under the
laws of the State of Texas, and is duly qualified as a foreign corporation in
all jurisdictions wherein the Property owned or the business transacted by it
makes such qualification necessary.
Section 3.02 Corporate Power and Authorization. The
Borrower is duly authorized and empowered to create and issue the Note; and the
Borrower is duly authorized and empowered to execute, deliver and perform the
Security Instruments, including this Agreement, to which it is a party; and all
corporate action on the Borrower's part requisite for the due creation and
issuance of the Note and for the due execution, delivery and performance of the
Security Instruments, including this Agreement, to which the Borrower is a
party has been duly and effectively taken.
Section 3.03 Binding Indebtedness. This Agreement does, and the
Note and other Security Instruments to which the Borrower is a party upon their
creation, issuance, execution and delivery will, constitute valid and binding
obligations of the Borrower, enforceable in accordance with their terms (except
that enforcement may be subject to any applicable bankruptcy, insolvency or
similar laws generally affecting the enforcement of creditors' rights).
Section 3.04 No Legal Bar or Resultant Lien. The Note and the
Security Instruments, including this Agreement, to which the Borrower is a
party do not and will not violate any provisions of its articles or certificate
of incorporation, bylaws, or any contract, agreement, instrument or
Governmental Requirement to which the Borrower is subject, or result in the
creation or imposition of any Lien upon any Properties of the Borrower, other
than those permitted by this Agreement. Borrower's development, improvement and
sale of the Land and Improvements and any sale or lease of any portion thereof
by Borrower are and shall be exempt from the registration and reporting
requirements of the Interstate Land Sales Full Disclosure Act and regulations
thereunder, as amended from time to time.
Section 3.05 No Consent. The Borrower's execution, delivery
and performance of the Note and the Security Instruments, including this
Agreement, to which the Borrower is a party do not require the consent or
approval of any other Person which has not been obtained, including, without
limitation, any regulatory authority
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or governmental body of the United States of America or any state thereof or
any political subdivision of the United States of America or any state thereof.
Section 3.06 Financial Condition. The audited annual financial
statements of the Borrower for its fiscal year ended December 31, 1989, and the
unaudited interim financial statements of the Borrower for its fiscal quarter
ended March 31, 1990, (including any related schedules or notes) which have
been delivered to the Lender, have been prepared in accordance with generally
accepted accounting principles, consistently applied, and present fairly the
financial condition and changes in financial position of the Borrower as at the
date or dates and for the period or periods stated (subject only to normal
year-end audit adjustments with respect to such unaudited interim statements).
No change, either in any case or in the aggregate, has since occurred in the
condition, financial or otherwise, of the Borrower which would have a Material
Adverse Effect, except as disclosed to the Lender in Exhibit "I" hereto.
Section 3.07 Investments and Guaranties. At the date of this
Agreement, the Borrower has not made investments in, advances to or guaranties
of the obligations of any Person, except as reflected in the Financial
Statements or disclosed to the Lender in Exhibit "I" hereto.
Section 3.08 Liabilities; Litigation. Except for liabilities
incurred in the normal course of business, the Borrower does not have at the
date of this Agreement any material (individually or in the aggregate)
liabilities, direct or contingent, except as disclosed or referred to in the
Financial Statements or as disclosed to the Lender in Exhibit "I" hereto.
Except as disclosed to the Lender in Exhibit "I" hereto, at the date of this
Agreement there is no litigation, legal, administrative or arbitral proceeding,
investigation or other action of any nature pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower which involves the
possibility of any judgment or liability not fully covered by insurance, and
which would have a Material Adverse Effect. No unusual, extraordinary or
unduly burdensome restriction, restraint, or hazard exists by contract, law or
governmental regulation or otherwise relative to the business or Properties of
the Borrower, except as disclosed to the Lender in Exhibit "I" hereto.
Section 3.09 Taxes; Governmental Charges. The Borrower has
filed all tax returns and reports required to be filed and has paid all taxes,
assessments, fees and other governmental charges levied upon it or upon its
Properties or income which are due and payable, including interest and
penalties, or has provided adequate reserves for the payment thereof.
Section 3.10 Titles, etc.. The Borrower has good title to its
material (individually or in the aggregate) Properties, free and clear of all
Liens except (i) Liens referred to in the Financial Statements, (ii) Liens
disclosed to the Lender in
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Exhibit "I" thereto, (iii) Liens and minor irregularities in title which do not
materially interfere with the occupation, use and enjoyment by the Borrower of
its Properties in the normal course of business as presently conducted or
materially impair the value thereof for such business, or (iv) Liens otherwise
permitted or contemplated by this Agreement or the other Security Instruments.
In connection with any Interim Construction Loan, the Borrower is, or will be
subsequent to the initial Advance of such Interim Construction Loan, the legal
and equitable fee simple absolute owner of the Lot attributable thereto and all
Improvements thereon, subject only to title exceptions (specified in the Title
Insurance Policy) which are hereafter accepted by Lender.
Section 3.11 Defaults. The Borrower is not in Default nor
has any event or circumstance occurred which, but for the passage of time or
the giving of notice, or both, would constitute a Default under any loan or
credit agreement, indenture, mortgage, deed of trust, security agreement or
other agreement or instrument evidencing or pertaining to any Debt of the
Borrower, or any under any material agreement or instrument to which the
Borrower is a party or by which it is bound, except as disclosed to the Lender
in Exhibit "I" hereto. No Default or Event of Default hereunder has occurred
and is continuing.
Section 3.12 Casualties; Taking of Properties. Since the
date of the Financial Statements, neither the business nor the Properties of
the Borrower have been materially and adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any domestic or foreign
government or any agency thereof, riot, activities of armed forces or acts of
God or of any public enemy.
Section 3.13 Use of Proceeds; Margin Stock. The proceeds of the
Note will be used by the Borrower for the following purposes: Construction of
Residences in accordance with the terms and provisions hereof. None of such
proceeds will be used for the purpose of purchasing or carrying any "margin
stock" as defined in Regulation U of the Board of Governors of the Federal
Reserve System (12 C.F.R. Part 221), or for the purpose of reducing or retiring
any indebtedness which was originally incurred to purchase or carry a margin
stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation U. The Borrower is not
engaged principally, or as one of the Borrower's important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stocks. Neither the Borrower nor any Person acting on behalf of the Borrower
has taken or will take any action which might cause the Note or any of the
Security Instruments, including this Agreement, to violate Regulation U or any
other regulation of the Board of Governors of the Federal Reserve System or to
violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.
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Section 3.14 Compliance with the Law. The Borrower to its best
knowledge,
(a) is not in violation of any Governmental Requirement;
and
(b) has not failed to obtain any license, permit,
franchise or other governmental authorization necessary to the
ownership of any of its Properties or the conduct of its business;
which violation or failure would have (in the event such violation or failure
were asserted by any Person through appropriate action) a Material Adverse
Effect.
Section 3.15 ERISA.
(a) The Borrower and any ERISA Affiliate are in
compliance in all material respects with the applicable provisions of
ERISA, and no "reportable event," as such term, is defined in Section
4043 of ERISA, has occurred with respect to any Plan of the Borrower.
(b) Neither the Borrower nor any ERISA Affiliate has
incurred or expects to incur any withdrawal liability to any
multi-employer Plan.
(c) Neither the Borrower nor any ERISA Affiliate would be
liable for any amount pursuant to Section 4062, 4063 or 4064 of ERISA
if all Plans terminated as of the most recent valuation dates of such
Plans.
(d) No notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated under Section 4041 of ERISA.
(e) The Pension Benefit Guaranty Corporation (the "PBGC")
has not instituted proceedings to terminate, or appoint a trustee to
administer, a Plan and no event has occurred or condition exists which
might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Plan.
Section 3.16 No Material Misstatements. No information,
exhibit or report furnished to the Lender by the Borrower in connection with
the negotiation of this Agreement contained any material misstatement of fact
or omitted to state a material fact or any fact necessary to make the statement
contained therein not misleading.
Section 3.17 Investment Company Act. The Borrower is not an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
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Section 3.18 Public Utility Holding Company Act. The
Borrower is not a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 3.19 Designated Contracts. If requested by Lender, the
Borrower has delivered to the Lender true and correct copies of all material
agreements, contracts and understandings, written or oral, between Borrower and
any other Person relating to the Premises, relating to Debts owed or Liens
granted by Borrower to any Person, and/or relating to any Properties of
Borrower. Such agreements have not been modified or terminated, and they are in
full force and effect as of the date hereof. Neither the Borrower nor any other
Person is in Default thereunder, except as disclosed to the Lender in Exhibit
"I" hereto.
Section 3.20 Environmental Matters. Except as disclosed on
Exhibit "I" attached hereto, the Borrower, (a) is unaware of and has not
received notice of, any actual or alleged Environmental Liability which would
individually or in the aggregate have a Material Adverse Effect arising in
connection with (i) any actual or alleged non-compliance with or violation of
the requirements of any Environmental Law or (ii) any actual, alleged, or
threatened Hazardous Discharge, (b) has no threatened or actual liability in
connection with any actual, alleged, or threatened Hazardous Discharge which
would individually or in the aggregate have a Material Adverse Effect, and (c)
is unaware of, and has not received notice of, any inspection, investigation or
evaluation concerning whether any remedial action is needed to respond to any
actual, alleged, or threatened Hazardous Discharge for which the Borrower is or
may be liable. All Property covered by the Security instruments is in
compliance with all Environmental Laws.
Section 3.21 Compliance. The Residences, when completed in
accordance with the Plans, and their intended uses, will comply with all
applicable laws, ordinances, regulations, restrictive covenants and
requirements of Governmental Authorities (including, without limitation,
building ordinances, health ordinances, handicap ordinances, zoning laws and
environmental regulations). Prior to commencement of construction of a
Residence, the Plans will have been approved by all Governmental Authorities
with jurisdiction over the Residences.
Section 3.22 Budget. Each Budget accurately reflects or will
accurately reflect all costs which will be incurred by Borrower in the
acquisition, construction and operation of the portion of the Premises covered
thereby through the maturity of the Note.
Section 3.23 Sufficient Funds. Sufficient funds are
available to Borrower in addition to proceeds of the Note to pay all Costs of
Construction of the Improvements.
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Section 3.24 Utilities. All utility services and permits
(including, without limitation, water and sewage permits) in such capacities as
are necessary for the construction of the Residences and the operation thereof
for their intended purpose are available at the boundary of each Lot, including
water supply, storm and sanitary sewer facilities, gas, electric and telephone
facilities.
Section 3.25 Streets. All streets, roads, and/or
highways necessary for the full utilization of any Residence for its intended
purpose has been completed or the necessary rights-of-way therefor have either
been acquired by the appropriate Governmental Authority or have been dedicated
to the public use and accepted by such Governmental Authority, and all
necessary steps have been taken by Borrower and any such Governmental Authority
to assure the complete construction and installation thereof prior to the
Substantial Completion for the applicable Residence.
Section 3.26 Permits. All zoning, utility, building,
health and operating permits (if any) required for the construction and
operation of each Residence have been obtained or shall be obtained prior to
the commencement of construction of such Residence and copies of same shall
have been delivered to Lender.
Section 3.27 No Work. No work or construction (including
the destruction or removal of any existing improvements, site work, clearing,
grubbing, draining or fencing of the Land) has been or will be commenced on the
Land which is the subject of the Interim Construction Loan, and no contract,
oral or written has been nor will be, executed for the construction of any
Residence, and no materials or supplies to be used in the construction of any
Residence have been delivered to the Land, and no contract or affidavit has
been nor will any contract or affidavit be, filed for record, which (with
respect to any of the foregoing) could result in the imposition of a mechanic's
or materialman's lien on any portion of the Land prior to or on parity with the
lien and security interest evidenced by any Deed of Trust.
Section 3.28 Affirmation of Representations and Warranties.
Receipt of each Advance and each Borrowing Request shall constitute an
affirmation that the representations and warranties of Borrower contained in
this Agreement are true and correct in all material respects as of the date
thereof and, unless Lender is notified in writing to the contrary before the
disbursement of any Advance, will be so on the date thereof.
Section 3.29 Advances and Income as Trust Funds and Fiduciary
Property. All Advances of loan proceeds made or to be made to Borrower and
all rents and other income from the Premises are to be held in trust by
Borrower and distributed and utilized pursuant to the terms of this Agreement.
Borrower agrees to and shall maintain standard of a fiduciary of Lender with
respect to each and every Advance and all income from the Premises, expressly
recognizing that breach of such fiduciary standard could result in a violation
of various federal and state, civil and criminal
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statutes, including, but not limited to, Chapter 32 of the Texas Penal Code and
Chapter 162 of the Texas Property Code.
Section 3.30 No Financing of Corporate Takeovers. No proceeds
of any Advance will be used to acquire any security in any transaction which is
subject to Sections 13 or 14 of the securities Exchange Act of 1934, including
particularly but without limitation Sections 13(d) and 14(d) thereof.
Section 3.31 Location of the Borrower. The Borrower's
principal place of business and chief executive offices are located at the
address stated in the opening recital of this Agreement.
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ARTICLE 4
AFFIRMATIVE COVENANTS
The Borrower will at all times comply with the covenants contained in
this Article 4, from the date hereof and for so long as any part of the
Indebtedness or the Commitment is outstanding.
Section 4.01 Financial Statements and Reports. The
Borrower will promptly furnish to the Lender from time to time upon request
such information regarding the business and affairs and financial condition of
the Borrower as the Lender may reasonably request, and will furnish to the
Lender:
(a) Annual Reports - promptly after becoming available
and in any event within ninety (90) days after the close of each
fiscal year of the Borrower, the audited balance sheet of the Borrower
as at the end of such year, the audited statement of profit and loss
of the Borrower for such year, and the audited statement of
reconciliation of capital accounts of the Borrower for such year,
setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, accompanied by the related
report of Ernst & Young or other independent public accountants
acceptable to the Lender which report shall be to the effect that such
statements have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the period
indicated except for such changes in such principles with which the
independent public accountants shall have concurred; and
(b) Quarterly Reports - promptly after becoming available
and in any event within forty-five (45) days after the end of each of
the first three quarterly periods in each fiscal year of the Borrower,
the balance sheet of the Borrower as at the end of such period, the
statement of profit and loss of the Borrower for such quarter and for
the period from the beginning of the fiscal year to the close of such
quarter, and the statement of reconciliation of capital accounts of
the Borrower for such quarter and for the period from the beginning of
the fiscal year to the close of such quarter, setting forth in each
case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, certified by the
principal financial officer of the Borrower to have been prepared in
accordance with generally accepted accounting principles consistently
followed throughout the period indicated except to the extent stated
therein, subject to normal changes resulting from year-end
adjustments; and
(c) Promptly after becoming available and, in any event,
within twenty-one (21) days after the end of each month in each fiscal
year of the Borrower, the balance sheet of the Borrower as at the end
of such month, the statement of profit
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and loss of the Borrower for such month, and for the period from the
beginning of the fiscal year to the close of such month, and the
statement of reconciliation of capital accounts of the Borrower for
such month and for the period from the beginning of the fiscal year to
the close of such month, setting forth in each case, in comparative
form, the corresponding figures for the corresponding period of the
preceding fiscal year, certified by the principal financial officer of
the Borrower to have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the
period indicated except to the extent stated therein, subject to
normal changes resulting from year end adjustments; and
(d) Audit Reports - promptly upon receipt thereof, one
copy of each other report submitted to the Borrower by independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Borrower; and
(e) Environmental Notices - Notice to the Lender in
writing, immediately delivered to Lender upon Borrower's becoming
aware that Borrower has received any information, notice, advice or of
any claim, demand, action, event, condition, report, or investigation
indicating any potential or actual liability arising in connection
with (i) the noncompliance with or violation of the requirements of
any Environmental Law which individually or in the aggregate might
have a Material Adverse Effect, (ii) the release or threatened release
of any toxic or hazardous material, waste, substance or constituent
into the environment which individually or in the aggregate might have
a Material Adverse Effect or which release or threatened release the
Borrower have a duty to report under any Environmental Law, or (iii)
the existence of any Environmental Lien on any Properties or assets of
the Borrower.
Section 4.02 Annual Certificates of Compliance. Concurrently with
the furnishing of the annual financial statements pursuant to Subsection
4.01(a) hereof, the Borrower will furnish or cause to be furnished to the
Lender certificates of compliance, as follows:
(a) a certificate signed by the principal financial
officer of the Borrower (i) stating that a review of the activities of
the Borrower has been made under his supervision with a view to
determining whether the Borrower has fulfilled all of its obligations
under this Agreement, the other Security Instruments and the Note;
(ii) stating that the Borrower has fulfilled its obligations under
such instruments and that all representations made herein continue to
be true and correct (or specifying the nature of any change), or if
the Borrower shall be in Default, specifying any Default and the
nature and status thereof; (iii) to the extent requested from time to
time by the Lender, specifically affirming
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compliance of the Borrower with any of its representations or
obligations under such instruments; and (iv) containing or accompanied
by such financial or other details, information and material as the
Lender may reasonably request to evidence such compliance; and
(b) a certificate from the independent public accountants
stating that their audit has not disclosed the existence of any
condition which constitutes a Default, or if their audit has disclosed
the existence of any such condition, specifying the nature, period of
existence and status thereof.
Section 4.03 Quarterly Certificates of Compliance. Concurrently
with the furnishing of the quarterly financial statements pursuant to
Subsection 4.01(b) hereof, the Borrower will furnish or cause to be furnished
to the Lender a principal financial officer's certificate in the same form as
the certificate required by Subsection 4.02(a) hereof, including all the
matters referred to in clauses (i) through (iv), inclusive, thereof.
Section 4.04 Payment of Impositions. Borrower will pay and
discharge, or cause to be paid and discharged, any and all Impositions not
later than the due date thereof, or the day any fine, penalty, interest or cost
may be added thereto or imposed or the day any Lien may be filed for the
nonpayment thereof (if such day is used to determine the due date of the
respective item); provided, however, that Borrower may, if permitted by law and
if installment payments would not create or permit the filings of a Lien
against any portion of the Premises, pay the Impositions in installments
whether or not interest shall accrue on the unpaid balance of such Impositions.
Borrower may in good faith, in lieu of paying such Impositions as they become
due and payable, by appropriate proceedings, contest the validity thereof.
During such contest Borrower shall not be deemed in Default hereunder because
of such nonpayment if, prior to delinquency of the asserted tax or assessment,
Borrower furnishes Lender an indemnity bond, conditioned that such tax or
assessment with interest, cost and penalties be paid as herein stipulated,
secured by a deposit in cash or security acceptable to Lender or with surety
acceptable to Lender, in the amount of the tax or assessment being contested by
Borrower and a reasonable additional sum to pay all possible costs, interest
and penalties imposed or incurred in connection therewith. Upon conclusion of
such contest Borrower shall promptly pay any amount adjudged by a court of
competent jurisdiction to be due, with all costs, penalties and interest
thereon prior to the date such judgment becomes final or any writ or order is
issued under which any portion of the Premises may be sold pursuant to such
judgment.
Section 4.05 Maintenance. The Borrower will (i) maintain its
corporate existence, rights and franchises; (ii) observe and comply with all
Governmental Requirements, and (iii) maintain its Properties (and any
Properties leased by or consigned to it or held under title retention or
conditional sales contracts) in good an workable condition at all times and
make all repairs, replacements
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additions, betterments and improvements to its Properties as are needful and
proper so that the business carried on in connection therewith may be conducted
properly and efficiently at all times.
Section 4.06 Further Assurances. The Borrower will promptly
cure any defects in the creation and issuance of the Note and the execution and
delivery of the Security Instruments, including this Agreement. The Borrower at
its expense will promptly execute and deliver to the Lender upon request all
such other and further documents, agreements and instruments in compliance with
or accomplishment of the covenants and agreements of the Borrower in the
Security Instruments, including this Agreement, or to further evidence and more
fully describe the collateral intended as security for the Note, or to correct
any omissions in the Security Instruments, or more fully to state the security
obligations set out herein or in any of the Security Instruments, or to
perfect, protect or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, to file any notices, or obtain any
consents, all as may be necessary or appropriate in connection therewith.
Section 4.07 Performance of Indebtedness. The Borrower will
pay the Note according to the reading, tenor and effect thereof; and the
Borrower will do and perform every act and discharge all of the obligations
provided to be performed and discharged by the Borrower under the Security
Instruments, including this Agreement, at the time or times and in the manner
specified.
Section 4.08 Reimbursement of Expenses. The Borrower will
pay all costs in connection with each Interim Construction Loan and all fees,
charges or taxes for the recording or filing of Security Instruments. The
Borrower will also pay all reasonable out-of-pocket expenses of the Lender in
connection with the administration of this Agreement and the other Security
Instruments. Without limiting the generality of the foregoing, the Borrower
shall pay when due all costs and expenses required by this Agreement,
including, without limitation (a) all taxes, assessments and impositions
applicable to any portion of the Premises; (b) all fees for filing or recording
any Security Instruments; (c) all fees and commissions lawfully due to brokers,
salesmen and agents in connection with the Indebtedness or the Premises; (d)
all reasonable fees and expenses of counsel to Lender in connection with the
negotiation, preparation, interpretation, amendment or enforcement of any of
the Security Instruments, the making of any Advance, or any suit to which
Lender is a party involving this Agreement or any portion of the Premises; (e)
all title insurance and title examination charges, including premiums for the
Title Insurance Binders; (f) all survey costs and expenses, including the cost
of the Current Surveys; (g) all premiums for the Insurance Policies; and (h)
all other reasonable costs and expenses incurred by Lender in connection with
the Premises, including, without limitation, appraisal fees, inspection fees
and costs, closing costs, internal audit fees, audit fees and costs and
expenses to cure any Default hereunder or preserve all or any portion of the
Premises. In the event Borrower shall fail, refuse or neglect to
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pay any costs and expenses specified in this Agreement or any other Security
Instrument when due, then at any time thereafter and without notice to or
demand upon Borrower and without waiving or releasing any other right, remedy
or recourse Lender may have because of the same, Lender may, but shall not be
obligated to, make such payment or payments for the account of and at the
expense of Borrower. The Borrower will, upon request, promptly reimburse the
Lender for all amounts expended, advanced or incurred by the Lender to satisfy
any obligation of the Borrower under this Agreement or any other Security
Instrument, or to collect the Note, or to enforce the rights of the Lender
under this Agreement or any other Security Instrument, which amounts will
include all court costs, attorneys' fees (including, without limitation, for
trial, appeal or other proceedings), fees of auditors and accountants, and
investigation expenses reasonably incurred by the Lender in connection with any
such matters, together with interest at the post-maturity rate specified in
section 2.02 hereof on each such amount from the date of written demand or
request by the Lender for reimbursement until the date of reimbursement to the
Lender.
Section 4.09 Insurance.
(a) The Borrower now maintains and will continue to
maintain with financially sound and reputable insurers, Insurance
Policies with respect to its Properties and the Premises and business
against such liabilities, casualties, risks and contingencies and in
such types and amounts as shall be acceptable to Lender.
(b) Upon request of the Lender, the Borrower will furnish
or cause to be furnished to the Lender from time to time a summary of
the insurance coverage of the Borrower in form and substance
satisfactory to the Lender and if requested will furnish the Lender
copies of the applicable Insurance Policies.
(c) In the case of any fire, accident or other casualty
causing loss or damage to any Properties of the Borrower, the proceeds
of such policies shall be used at the option of Lender (i) to repair
or replace the damaged Property, or (ii) to prepay the Indebtedness.
If Lender elects to make the insurance proceeds available to Borrower
to repair and restore the damaged Unit(s) rather than applying the
proceeds to payment of the Indebtedness, such proceeds will be
deposited with Lender, together with any additional funds of Borrower
which Lender determines are necessary to complete the repairs and
restoration, and such funds will be disbursed by Lender in accordance
with the terms of this Agreement before any additional Advances shall
be made in connection with the applicable Interim Construction Loan.
Borrower agrees to promptly and diligently repair and restore the
Premises.
(d) Borrower shall cooperate with Lender in obtaining for
Lender the benefits of any Insurance Policy or other proceeds lawfully
or equitably payable to Lender in connection
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with the transactions contemplated hereby and the collection of any
Indebtedness of Borrower to Lender incurred hereunder (including
payment by Borrower of the expense of any independent appraisal an
behalf of Lender in case of fire or other casualty affecting any of
the Improvements).
(e) The Borrower will obtain endorsements to the policies
pertaining to all physical Properties in which the Lender shall have a
Lien under the Security Instruments naming the Lender as a loss payee
and containing provisions that such policies will not be canceled
without thirty (30) days' prior written notice having been given by
the insurance company to the Lender.
Section 4.10 Accounts and Records. The Borrower will keep books
of record and account in which full, true and correct entries will be made of
all dealings or transactions in relation to its business and activities, in
accordance with generally accepted accounting principles, consistently applied
except only for changes in accounting principles or practices with which the
Borrower's independent public accountants concur.
Section 4.11 Inspection of Books and Records. The Borrower will
permit any officer, employee or agent of the Lender to visit, inspect, examine
the Borrower's books of record and accounts, take copies and extracts
therefrom, and discuss the affairs, finances and accounts of the Borrower with
the Borrower's officers, accountants and auditors, all at such reasonable times
and as often as the Lender may desire.
Section 4.12 Inspection of Premises. Lender, its employees,
agents and/or representatives, will, at all times, and from time to time, be
permitted to enter upon the Premises, or any portion thereof, and any of the
locations where materials for the Improvements are being stored, to inspect the
Premises, Improvements and all materials to be used in the construction
thereof, and to examine all detailed plans and shop drawings, books, records,
contracts, statements, invoices, bills, reports, lien waivers, and all other
documents of any kind relating to the construction, leasing and operation of
the Premises and/or any of the Improvements, which shall be kept at the
construction site or such other location designated in writing by Borrower to
Lender and approved by Lender in writing. Borrower shall cooperate and shall
cause its agents and employees to cooperate with Lender and its representatives
and agents during such inspection. This provision shall not be deemed to impose
upon Lender any duty or obligations whatsoever to undertake such inspections,
to correct any defects in the Premises or any of the Improvements or to notify
any person with respect thereto nor shall it amount to a waiver of any Defect
which Lender might have discovered by such inspection but failed to notify
Borrower of same.
Section 4.13 Notice of Certain Events. The Borrower shall
promptly notify the Lender if the Borrower learns of the occurrence of (i) any
event which constitutes a Default, together with a
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detailed statement by a responsible officer of the Borrower of the steps being
taken to cure the effect of such Default; or (ii) the receipt of any notice
from, or the taking of any other action by, the holder of any promissory note,
debenture or other evidence of indebtedness of the Borrower of the Borrower
with respect to a claimed Default, together with a detailed statement by a
responsible officer of the Borrower specifying the notice given or other action
taken by such holder and the nature of the claimed Default and what action the
Borrower is taking or proposes to take with respect thereto; or (iii) any
legal, judicial or regulatory proceedings affecting the Borrower or any of its
Properties in which the amount involved is material and is not covered by
insurance or which, if adversely determined, would have a Material Adverse
Effect; or (iv) any dispute between the Borrower and any Governmental Authority
or regulatory body or any other Person which, if adversely determined, would
have a Material Adverse Effect; or (v) any material Default or noncompliance of
any party to any of the Designated Contracts with any of the terms and
conditions of the Designated Contracts, or any notice of termination or other
material proceedings or actions which might adversely affect any of the
Designated Contracts; or (vi) any amendment (whether or not material and
whether or not permitted by this Agreement or by any consent of the Lender to a
deviation from the terms of this Agreement) of any of the Designated Contracts,
together with a copy of such amendment; or (vii) any event or condition having
a Material Adverse Effect.
Section 4.14 ERISA Information and Compliance. The
Borrower will and will use best efforts to cause each ERISA Affiliate to
promptly furnish to the Lender (i) if requested by the Lender, promptly after
the filing thereof with the United States Secretary of Labor or the PBGC,
copies of each annual and other report with respect to each Plan or any trust
created thereunder, (ii) immediately upon becoming aware of the occurrence of
any "reportable event," as such term is defined in Section 4043 of ERISA, or of
any "prohibited transaction," as such term is defined in Section 4975 of the
Internal Revenue Code of 1986, as amended, in connection with any Plan or any
trust created thereunder, a written notice signed by the president or the
principal financial officer of the Borrower (or ERISA Affiliate as the case may
be) specifying the nature thereof, what action the Borrower is taking or
proposes to take with respect thereto, and, when known, any action taken by the
Internal Revenue Service with respect thereto, (iii) at least ten (10) days
prior to the filing by any Plan administrator of a notice of intent to
terminate (a) Plan, a copy of such notice, (iv) promptly upon receipt, and in
no event more than three (3) days after receipt, of a notice by the Borrower or
any ERISA Affiliate or any administrator of any Plan that the PBGC has
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan, a copy of such notice, (v) promptly and in any event
within three (3) days after it knows or has reason to know of any event or
condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, a
statement of the chief financial officer of the Borrower describing such event
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or condition; and (vi) promptly and in no event more than ten (10) days after
receipt thereof by the Borrower or any ERISA Affiliate, each notice received by
the Borrower or any ERISA Affiliate concerning the imposition of any withdrawal
liability under Section 4202 of ERISA. The Borrower will use its best efforts
to cause each ERISA Affiliate to fund all current service pension liabilities
as they are incurred under the provisions of any Plan from time to time in
effect for the benefit of employees of the Borrower, and comply with all
applicable provisions of ERISA.
Section 4.15 Collateral Security. At any time the Lender may
deliver to the Borrower a written demand for collateral security pursuant to
this Section. Upon receipt of such demand, the Borrower will grant to the
Lender, as security for the Note and other Indebtedness under or in connection
with this Agreement, a first-priority Lien (superior to any other Lien except
those permitted under Subsections 5.02(a) or (b) hereof) on such Properties of
the Borrower as the Lender may require. The Liens will be created and perfected
by and in accordance with the provisions of security agreements and financing
statements, deeds of trust or other Security Instruments, all in form and
substance satisfactory to the Lender in sufficient executed (and acknowledged
where necessary or appropriate) counterparts for recording purposes.
Section 4.16 Down-Date Endorsements. Commencing not later than
one hundred twenty (120) days after the initial Advance of each Interim
Construction Loan (the "Applicable Date"), and prior to each Advance thereafter
until Substantial Completion of the Unit covered by a particular Title
Insurance Binder, Borrower will furnish to Lender a certificate issued by the
Title Company reflecting such changes in title to the applicable Lot as may
have occurred since the date of issuance of the Title Insurance Binder.
Commencing on the Applicable Date, Borrower shall deliver to Lender with each
Borrowing Request a satisfactory down-date endorsement to the applicable Title
Insurance Binder, which endorsement shall (i) indicate that since the effective
date of the Title Insurance Binder (or the effective date of the last such
endorsement, if any) there has been no change in the status of title to the
applicable Lot and (ii) have the effect of increasing the coverage of the Title
Insurance Binder by an amount equal to the Advance then being made unless said
Title Insurance Binder expressly provides automatically and without condition
for such increase in coverage upon each such Advance. Any costs in connection
with any of the foregoing shall be paid at the sole cost and expense of
Borrower.
Section 4.17 Compliance with Plans. Borrower will prosecute the
construction of each Residence in accordance with the Plans applicable to that
Residence.
Section 4.18 Correction of Defects. Borrower shall correct or
cause to be corrected (a) any defect in any Residence; (b) any material
departure in the construction of any Residence from the Plans applicable
thereto, Governmental Requirements, or the requirements of any lease, if
applicable; or (c) any encroachment
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by any part of a Residence or any structure located on any Lot on any building
line, easement, property line, or restricted area.
Section 4.19 Survey. Borrower will furnish to Lender at any stage
of construction, upon Lender's reasonable request, a Current Survey for any
Unit. Said Survey must meet the requirements specified on Exhibit "D" attached
hereto.
Section 4.20 Documents. Borrower will deliver and cause to
be delivered to Lender from time to time as required by Lender, all such
statements, receipts and other data and information as Lender may reasonably
require, reflecting (i) payment of bills for architectural services and for
labor and materials used in the construction of the Improvements and (ii)
compliance with any of the provisions and agreements contained in the Security
Instruments. Borrower shall execute and deliver to Lender, from time to time
as required by Lender, such other documents as shall reasonably be necessary to
provide the rights and remedies to Lender granted or provided for by the
Security Instruments. Borrower agrees that, upon request of Lender, that
Borrower shall promptly cure any defects in the execution and delivery of this
Agreement, any Note or any of the Security Instruments given as security for
the payment of the Note. Borrower shall furnish Lender such reports on the
operations of Borrower and on Borrower's Affiliates and associated enterprises,
including details of projects or properties financed by parties other than
Lender, as Lender may reasonably request.
Section 4.21 Compliance with Governmental Requirements.
Borrower shall promptly comply with all Governmental Requirements affecting any
portion of the Premises in all respects and Lender will be furnished, on
demand, evidence of such compliance. Borrower assumes full responsibility for
the compliance of the Plan s, the Land and the Improvements with all
Governmental Requirements and with sound building and engineering practice,
and, notwithstanding any approvals by Lender, Lender shall have no
responsibility or obligation whatsoever for the Plans or any other matter
incident to the Land or the construction of the Improvements.
Section 4.22 Construction Contracts. Upon receipt of written
request from Lender, Borrower agrees to cause major contractors and
subcontractors to subordinate their respective liens, claims, and charges to
the Deed of Trust covering the Units which are subject of such Construction
Contracts and the rights, remedies and recourses of Lender thereunder.
Section 4.23 Conveyance and Encumbrance. Subject to the
provisions of Section 8.01 hereof, Borrower shall not sell, lease, exchange,
assign, convey or transfer possession of, or otherwise dispose of any of the
Units, or any legal or beneficial interests therein without the prior written
consent of Lender, which consent shall be in Lender's sole discretion. However,
except as provided in Section 8.01 hereof, if ownership of a Unit or any part
thereof or any interest therein becomes vested in any Person other than
Borrower, any proceeds of such sale shall constitute a trust fund
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for the benefit of Lender, and Lender may, without notice to Borrower, deal
with such successor or successors with reference to the applicable Deed of
Trust and Indebtedness in the same manner as with Borrower without in any way
discharging Borrower from the Indebtedness, and without waiving any Default or
Event of Default caused by such vesting of title in another Person. No transfer
of any portion of the Premises, no forbearance by Lender and no extension of
the time for the payment of the Indebtedness or the performance of any of the
obligations performed or to be performed by the Borrower granted by Lender
shall release, discharge or affect in any way the liability of Borrower
hereunder.
Section 4.24 Inspection Fee. Borrower shall pay to Lender at the
time of each Advance and at the closing of the sale of each and every Unit
covered by the Deed of Trust a reasonable Inspection Fee, the amount of which
shall be determined by Lender.
Section 4.25 Sign. If required by Lender, Borrower shall
maintain on a suitable site in each Subdivision, a sign indicating that
construction financing is being provided by Lender, all to the reasonable
satisfaction of Lender.
Section 4.26 Construction of Improvements. Borrower agrees
that (i) each Residence shall be constructed entirely on the Lot upon which
such Residence was intended to be located; (ii) until the Interim Construction
Loan is repaid, no future conveyance of any portion of or interest in the
applicable Unit will be made by Borrower which will cause any encroachment
above, on, or under the surface of such Unit; (iii) construction of a Residence
will not encroach upon or overhang any easement or right-of-way upon the land
of others; (iv) each Residence when erected, shall be wholly within the
building restriction lines however established; and (v) upon request, Borrower
shall, from time to time, furnish satisfactory evidence, in the sole judgment
of Lender, of the foregoing. The construction of all Residences shall begin
promptly, but not later than, before forty-five (45) days from the date of the
initial Advance with respect to each Interim Construction Loan relating thereto
and shall be prosecuted with diligence and continuity and in a good and
workmanlike manner, and in accordance with sound building and engineering
practices, all applicable restrictive covenants, Governmental Requirements, and
the Plans. After construction of a Residence has commenced, Borrower shall not
permit work to be stopped on that Residence for a period in excess of ten (10)
consecutive calendar days, and Borrower shall cause Substantial Completion to
occur in accordance with the applicable Plans, on or before the Completion
Date, free and clear of all Liens except the Lien of the applicable Deed of
Trust.
Section 4.27 Application of Loan Proceeds.
(a) Each time Borrower receives an Advance, Borrower
shall promptly apply the same toward the payment of the items covered
by the Borrowing Request in connection therewith and at Lender's
request, shall furnish evidence satisfactory to Lender that all such
items have been paid. No Advance by
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Lender shall ever be used to defray living expenses, to anticipate
profit or to defray any other item not expressly set forth in the
Budget connected with Cost of Construction.
(b) Borrower will hold all Advances of each Interim
Construction Loan as a trust fund to be applied for the sole purpose
of paying the costs of items set forth in the Budget for each Interim
Construction Loan, respectively, and shall apply the same to the
payment of such cost.
Section 4.28 Borrower's Deposit. If from time to time Lender
reasonably determines that the actual cost of Substantial Completion of a Unit
exceeds or appears likely to exceed the amount of the unadvanced portion of an
Interim Construction Loan, then Borrower shall, within five (5) calendar days
following receipt of Lender's request, make a Borrower's Deposit with Lender.
Lender may advance all or a portion of Borrower's Deposit prior to making any
further Advance of the Interim Construction Loan. Borrower shall promptly
notify Lender in writing if and when the actual cost of Substantial Completion
of a Unit exceeds, or appears likely to exceed, the amount of the unadvanced
portion of the Interim Construction Loan relating to such Residences and the
unadvanced portion of any then existing Borrower's Deposit.
Section 4.29 Notices by Governmental Authority; Fire and Casualty
Losses, Etc. Borrower shall timely comply with and promptly furnish to
Lender true and complete copies of any notice or claim by any Governmental
Authority pertaining to any portion of the Premises. Borrower shall promptly
notify Lender of any fire or other casualty or any notice of taking or eminent
domain action or proceeding affecting any portion of the Premises. Borrower
shall maintain the Insurance Policies in full force and effect until the
Indebtedness is fully paid and performed.
Section 4.30 Joint Disbursement and Application by Lender.
Lender shall have the right, but not the obligation, to disburse jointly the
proceeds of any Advance to the satisfaction of any item included in any Budget;
it is agreed by the parties hereto that the foregoing shall authorize Lender to
jointly disburse any Advance in connection with any Interim Construction Loan
to pay any item included in a Budget relating to an Interim Construction Loan
and/or any other Interim Construction Loan. Any Advance by Lender for such
purpose, except Borrower's Deposit, shall be part of the Indebtedness and shall
be governed and secured by the Security Instruments. Borrower hereby authorizes
Lender to hold, use, disburse and apply the Borrower's Deposit for payment of
costs and expenses incident to the Indebtedness and the Premises, and the
payment of the Indebtedness or performance of Borrower's Indebtedness
hereunder. Borrower hereby assigns and pledges the proceeds of Borrower's
Deposit and grants therein a security interest to Lender for such purposes.
Lender may jointly disburse any portion of any Advance in connection with any
Interim Construction Loan at any time, and from time to time, to persons other
than Borrower for the purposes specified in this section irrespective of any
other provision hereof, and the amount of
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Advances to which Borrower shall thereafter be entitled pursuant to such
Interim Construction Loan shall be correspondingly reduced. This authorization
by Borrower shall be irrevocably vested in Lender for the purpose of protecting
Lender's security interest in the Premises created under the Security
Instruments and shall constitute a power coupled with that interest.
Section 4.31 Deed of Trust. Borrower shall deliver to Lender
evidence satisfactory to Lender that (i) each Deed of Trust constitutes a
first, prior and enforceable lien and security interest against the portion of
the Premises covered thereby, and (ii) there shall have been, as of the date of
each Advance under the Note no change in the status of title to the Premises
covered thereby, including without limitation, survey exceptions not
theretofore approved in writing by Lender.
Section 4.32 Flood Area. Prior to the initial Advance
of each Interim Construction Loan Borrower shall deliver to Lender
evidence satisfactory to Lender that the Improvements covered thereby
will not be situated in an area that has been identified by the
Secretary of Housing and Urban Development as an area having special
flood hazards. Should it be determined, however, that any of the
Improvements are to be situated in an area identified as having
special flood hazards, and if Lender agrees to waive such requirement,
Lender may require flood insurance with maximum limits of coverage and
may require that the full premium thereof be paid in full prior to any
advance hereunder. The flood insurance policy or policies shall all be
in form and substance satisfactory to Lender.
Section 4.33 Substantial Compliance. In no event shall Lender be
obligated or committed to make any Advance hereunder in connection with an
Interim Construction Loan unless, in the judgment of Lender, all Improvements
ordinarily completed at the stage of construction when the Advance has been
requested, shall have been completed in a good and workmanlike manner, and all
materials and fixtures usually installed and furnished at such stage of
construction shall have been furnished and installed, and all construction,
materials, and fixtures shall be in substantial conformity with the Plans and
all Governmental Requirements.
Section 4.34 Easements, Encumbrances, Liens and Restrictive
Covenants. Borrower shall not grant any easement, impose any restrictive
covenants upon any of the Land or the Improvements, execute or file any
subdivision plat affecting any of the Land or consent to the annexation thereof
to any city without the prior written consent of Lender, which consent shall
not be unreasonably withheld. Borrower shall not, without the prior written
consent of Lender, create, place, suffer or permit to be created or placed or,
through any act or failure to act, acquiesce in the placing or allow to remain,
any mortgage, pledge, lien (statutory, constitutional or contractual), security
interest, encumbrance or charge on, or conditional sale or other title
retention agreement, regardless of whether same are expressly subordinate to
the liens
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and security interests of the Security Instruments, with respect to any of the
Land, other than the Permitted Encumbrances.
Section 4.35 Continued Existence. Borrower shall maintain its
existence and promptly and properly comply with all Governmental Requirements
applicable to it or to any of its Property, business operations and
transactions, and shall preserve and maintain all licenses, privileges,
franchises, certificates and the like necessary for the operation of its
business.
Section 4.36 Continued Viability of Warranties. Borrower
shall promptly notify Lender of any change in any fact or circumstances
represented or warranted by Borrower in the Security Instruments.
Section 4.37 Transactions with Affiliates. Borrower will not
engage in any transaction with any Affiliate of Borrower on terms less
favorable to Borrower than would be obtainable at the time in comparable
transactions with Persons not Affiliates of Borrower.
Section 4.38 Ownership and Management. Borrower will not
permit any change to occur in the ownership or management of any portion of the
Premises or the capital stock of Borrower. Within ninety (90) days of the end
of each fiscal year of Borrower, Borrower shall furnish to Lender a complete
and accurate list of the names and addresses of the then current stockholders.
Section 4.39 Indemnification of Lender. Borrower hereby
expressly acknowledges and recognizes Borrower's responsibility for and agrees
to indemnify, defend and hold Lender and Lender's officers, directors,
shareholders, agents, employees, successors and assigns (as well as the
officers, directors, shareholders, agents and employees of Lender's successors
and assigns) absolutely harmless from and against all costs, expenses,
liabilities, losses, damages, fines, penalties and/or obligations incurred by
or imposed upon or alleged to be due of Lender or Lender's successors and
assigns in connection with the assertion of (a) any claim for brokerage, agency
or finder's fees or commissions in connection with the Indebtedness or the
Premises not arising by, through or under Lender; or (b) any claim for
reasonable attorneys', appraisal, title insurance, inspection or other fees,
costs and expenses incurred in connection with the administration, collection
or refinancing of the Indebtedness, which arise by, through or on behalf of
Borrower or any agent or representative of Borrower; (c) any claim arising out
of or occurring because of or related to any Default hereunder;(d) the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release, or threatened release of any Hazardous Material on, from, or affecting
the Premises or any other property; (e) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or related to such
Hazardous Material; (f) any lawsuit brought or threatened, settlement reached,
or government order relating to such Hazardous Material; or (g) any violations
of laws, orders, an regulations, requirements, or demands of government
authorities,
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which are based upon or in any way related to such Hazardous Material. Without
limiting the remedies available to Lender with respect to the enforcement of
its indemnification rights as stated herein or as stated in any of the Security
Instruments, in the event any claim or demand is made or any other fact comes
to the attention of Lender in connection with, relating or pertaining to, or
arising out of the transactions contemplated by this Agreement, which Lender
reasonably believes might involve or lead to some liability of Lender, Borrower
shall, immediately upon receipt of written notification of any such claim or
demand, assume in full the personal responsibility for and, to the extent
requested by Lender, the defense of any such claim or demand and pay in
connection therewith any loss, damage, deficiency, liability or obligation,
including without limitation, attorneys' fees and court costs incurred in
connection therewith. In the event of court action in connection with any such
claim or demand Borrower shall assume, to the extent requested by Lender, the
responsibility for the defense of any such action, and shall immediately
satisfy and discharge any final decree or judgment rendered therein. Lender
may, in its sole and uncontrolled discretion, make any payments sustained or
incurred by reason of any of the foregoing, and Borrower shall immediately
repay to Lender in cash the amount of such payment, with interest thereon at
the rate specified in the Note to be applicable to past-due principal. Lender
shall have the right to join Borrower as a party defendant in any legal action
brought against Lender, and Borrower hereby consents to the entry of an order
making Borrower a party defendant to any such action.
Section 4.40 Incumbency. Borrower shall from time to time, at
the request of Lender, certify to Lender the names, signatures, and positions
of all persons authorized to execute and deliver any of the Security
Instruments.
Section 4.41 Tax and Insurance Payments. Upon reasonable
written request from Lender, after the occurrence of an Event of Default,
Borrower shall make monthly escrow payments (hereinafter referred to as the 11
"T&I Payments") to Lender, in advance, on the first day of the month for each
month during the term of the Loan as follows:
(a) Monthly Payments. The amount of each such T&I
Payment shall be (i) one-twelfth (1/12) of the annual real and
personal property taxes assessed against the Premises and/or the use
or ownership thereof (hereinafter referred to as the "Taxes")
estimated if necessary) to become due for the tax year during which
such T&I Payment is being made; plus (ii) one-twelfth (1/12) of the
premiums (hereinafter referred to as the "Premiums") for the
Insurance Policies for the calendar year during which such T&I Payment
is being made, to the extent that such Premiums have not already been
prepaid or fully paid; Lender shall have the right to report
Borrower's tax identification number with respect to the T&I Payments
regardless of the name in which the account is established. The T&I
Payments shall be applied in accordance with subparagraph (e) below
entitled "Application of T&I Payments".
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(b) Initial Catch-Up Payment. In addition to the
foregoing described monthly payments, Borrower shall make an initial
lump sum payment equal to the amount of the T&I Payments attributable
to the months of January through and including the month in which such
request for T&I Payments is made. Such lump sum payment shall be
delivered to Lender upon request therefor and shall be deemed part of
the T&I Payments.
(c) Account. The T&I Payments shall be placed in
a non-interest bearing account in the name of Lender only or, in
Lender's sole and absolute discretion, in the name of Lender and/or
Borrower, and may be commingled with Lender's other funds. Lender
shall have the right to report Borrower's tax identification number
with respect to the T&I Payments regardless of the name in which the
account is established. The T&I Payments shall be applied in
accordance with the provisions of this section entitled "Tax and
Insurance Payments". Provided no Event of Default has occurred and is
continuing, the amount of the T&I Payments due for the month of March
of any calendar year shall be reduced by the amount, if any, by which
the T&I Payments made during the previous calendar year exceed the
actual amount of Taxes and Premiums due for such previous calendar
year.
(d) Additional Payments. If Lender reasonably
determines that any amounts previously paid by Borrower are (or will
be) insufficient for the payment in full of the Taxes and Premiums,
Lender shall notify Borrower of the additional amounts required to
provide a sufficient fund and, within ten (10) days after the date of
Lender's notice, Borrower shall pay to Lender the additional amount
stated in Lender's notice.
(e) Application of T&I Payments. Lender shall apply
the T&I Payments toward the Taxes and the Premiums due from time to
time (or, at Lender's option, Lender may issue a check payable jointly
to Borrower and the party to whom such payments are to be made), upon
the following terms and conditions:
(i) Lender shall have received a written request
from Borrower, specifying the amounts to be paid and to whom
such payments are to be made, which request shall have been
delivered to Lender not more than thirty (30) days and not
less than ten (10) days prior to the time such payments first
become due and payable;
(ii) Lender shall have ten (10) days after receipt
of Borrower's written request in which to make such payments
to the extent of T&I Payments received by Lender and not
previously disposed of pursuant to this section entitled "Tax
and Insurance Payments";
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(iii) Lender shall have received the original tax
statements received by Borrower or its agents with respect to
the Taxes;
(iv) There shall then exist no Event of Default;
(v) Lender shall be under no obligation
whatsoever to pay any of the Taxes or the Premiums except to
the extent of the amount of the T&I Payments, and then only if
the conditions set forth in this paragraph entitled
"Application of T&I Payments" have been met; and
(vi) Even if the conditions set forth in this
paragraph have not been met, and whether or not a Default or
an Event of Default then exists, Lender shall have the right
in Lender's sole and absolute discretion, but shall be under
no obligation whatsoever, to apply the T&I Payments toward
payment of the Taxes and Premiums within thirty (30) days
before the same first become due and payable, or at any time
thereafter.
(f) Additional Provisions. If an Event of Default has
occurred and is continuing hereunder, Lender shall have the additional
option of (i) applying all or any part of the T&I Payments against the
Indebtedness in such order as Lender shall elect, without notice to
Borrower or any other Person; and/or (ii) pre-paying the Taxes and/or
Premiums. Notwithstanding anything to the contrary contained in this
Agreement, Lender hereby reserves the right to waive the payment by
Borrower to Lender of the T&I Payments and, in the event Lender does
so waive such payment in writing, such waiver shall be without
prejudice to Lender's right to insist, at any subsequent time or
times, that such payments be made in accordance herewith. Upon any
assignment of the Deed of Trust, Lender shall have the right to pay
over the balance of the T&I Payments then in Lender's possession to
Lender's assignee, whereupon Lender shall then become completely
released from all liability with respect thereof.
Section 4.42 Sales and Operations Report. Borrower shall
provide or cause to be provided to Lender within ten (10) days after the end of
each calendar month, a certified current sales schedule certified by an officer
of Borrower, operating statement certified by an officer of Borrower, and if
requested by Lender, copies of all contracts executed during the previous
calendar month. The sales schedule shall show, as of the end of such month, the
Units sold or under contract, the name of the purchaser, the terms of the
purchase, and such other information as may be reasonably required by Lender.
The certified operating statement shall set forth a monthly and year-to-date
income and expense statement for each Unit, which shall disclose the source and
amount of all revenues received, the amount of expenditures incurred or paid
and, if required by Lender, the parties to whom any such payments were made as
of the end of such month, with respect to all income and expense attributable
to the Unit for such month, and
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shall contain such other information and supporting documentation as may
required by Lender. Borrower shall provide to Lender, upon request, such other
information pertaining to the Premises, the operations of the Premises or any
other information reasonably requested by Lender.
Section 4.43 Maintenance, Repair and Operation of Units.
Borrower shall maintain the Units in first class order, condition and
appearance; operate the Units properly and efficiently and in compliance with
any and all restrictive covenants affecting any of the Units; protect every
part of the Units and the material stored thereon from removal, destruction,
and damage; not commit or permit any waste of any of the Units; not use,
maintain, operate or occupy, or allow the use, maintenance, operation or
occupancy of any unit in a manner which violates any Governmental Requirement,
or may be dangerous, constitutes a public or private nuisance, or makes void,
voidable or cancelable, or increases the premium of, any insurance then
enforced with respect thereto; upon demand by Lender and at Borrower's sole
expense, correct any defect in any of the Units; and make all repairs,
replacements, renewals, additions, betterments, improvements and alterations
thereof and thereto, interior and exterior, structural or non-structural,
ordinary and extraordinary, foreseen and unforeseen, which are necessary or
reasonably appropriate to keep the Units in such order and condition.
Section 4.44 Condemnation. In the event the Premises or any
portion thereof is taken or damaged by eminent domain powers of any
Governmental Authority, or be transferred in lieu thereof, all damages or other
amounts awarded shall be paid to Lender and applied to payment of the Interim
Construction Loans secured by the portion of the Premises affected after
deducting any costs incurred in connection therewith, and all or any portion of
the Indebtedness, at Lender's option, may be declared immediately due and
payable.
Section 4.45 Performance of Designated Contracts. The
Borrower will perform and observe in all material respects each of the
provisions of the Designated Contracts to which it is a party on its part to be
performed or observed prior to the termination thereof, unless and to the
extent only that the same shall be contested in good faith by appropriate
action by or on behalf of the Borrower.
Section 4.46 Utilities. At the request of Lender, Borrower
shall furnish to Lender a letter from such parties as Lender may reasonably
require indicating that all utility services and permits (including, without
limitation, water and sewage permits) in such capacities as are necessary for
the construction of the Residences and the operation thereof for their intended
purpose are available at the boundary of each Lot, including water supply,
storm and sanitary sewer facilities, gas, electric and telephone facilities.
Section 4.47 Streets. At the request of Lender, Borrower
shall furnish a letter to Lender from a surveyor not disapproved by
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Lender indicating that all streets, roads, and/or highways necessary for the
full utilization of any Residence or its intended purpose has been completed or
the necessary rights-of-way therefor have either been acquired by the
appropriate Governmental Authority or have been dedicated to the public use and
accepted by such Governmental Authority, and all necessary steps have been
taken by Borrower and any such Governmental authority to assure the complete
construction and installation thereof prior to the Substantial Completion of
the applicable Residence and the surveyor shall warrant the truth and accuracy
of the foregoing representations.
Section 4.48 Permits. At the request of Lender, Borrower
shall deliver to Lender, prior to the commencement of construction of any
Residence, certified copies of all zoning, utility, building, health and
operating permits (if any) required for the construction and operation of each
Residence.
Section 4.49 Environmental Cleanup. In the event Borrower or
Lender is or becomes obligated by any of the Environmental Laws or Governmental
Requirements, or otherwise directed by any Governmental Authority, to clean up,
remove, or encapsulate, or cause the cleanup, removal, or encapsulation of any
Hazardous Material from the Premises, the Borrower (i) shall promptly undertake
to arrange for such cleanup, removal and disposal in accordance with all
applicable laws, rules, regulations and guidelines, (ii) shall exercise its
best efforts to ensure that such cleanup and removal shall be conducted in a
timely and diligent manner, and (iii) hereby expressly assumes the cost and
expense of such cleanup, removal and/or encapsulation.
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ARTICLE 5
NEGATIVE COVENANTS
The Borrower will, at all times, comply with the covenants contained
in this Article 5, from the date hereof and for so long as any part of the
Indebtedness or the Commitment is outstanding:
Section 5.01 Debt. The Borrower will not incur, create, assume
or suffer to exist any Debt, or any Lien on its Properties if any such Debt or
Lien would result in a violation of Sections 5.13 or 5.14.
Section 5.02 Investments, Loans and Advances. The Borrower will
not make or permit to remain outstanding any loans or advances to or
investments in any Person, except that the foregoing restriction shall not
apply to:
(a) investments, loans or advances the material details
of which have been set forth in the Financial Statements or are
disclosed to the Lender in Exhibit "I" hereto;
(b) investments in direct obligations of the United
States of America or any agency thereof;
(c) investments in certificates of deposit of maturities
less than one (1) year, issued by commercial banks in the United
States of America having capital and surplus in excess of $50,000,000;
(d) investments in commercial paper of maturities less
than one (1) year if at the time of purchase such paper is rated in
either of the two highest rating categories of Standard & Poors
Corporation, Moody's Investors Service, Inc., or any other rating
agency selected by the Borrower and satisfactory to the Lender; and
Section 5.03 Dividends, Distributions and Redemptions. The
Borrower will not declare or pay any dividend, purchase, redeem or otherwise
acquire for value any of its stock now or hereafter outstanding, return any
capital to its stockholders, or make any distribution of its assets to its
stockholders as such, except that the Borrower may (i) declare and deliver
stock dividends, (ii) redeem stock with the proceeds received from the issue of
new shares, and (iii) pay dividends to its stockholders and purchase its own
outstanding capital stock, provided that any of such actions described in (i),
(ii) or (iii) shall not result in a violation of any other covenant herein,
including, without limitation, sections 5.13 and 5.14.
Section 5.04 Sales and Leasebacks. The Borrower will not enter
into any arrangement, directly or indirectly, with any Person whereby the
Borrower shall sell or transfer any Property, whether now owned or hereafter
acquired, and whereby the Borrower shall
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then or thereafter rent or lease as lessee such Property or any part thereof or
other Property which the Borrower intends to use for substantially the same
purpose or purposes as the Property sold or transferred.
Section 5.05 Nature of Business. The Borrower will not permit
any material change to be made in the character of its business as carried on
at the date hereof.
Section 5.06 Limitation on Leases. The Borrower will not
create, incur, assume or suffer to exist any obligation for the payment of rent
or hire of Property of any kind whatsoever (real or personal), under leases or
lease agreements (including leases or lease agreements which constitute Debt)
if the creation, incurrence, assumption or sufferance thereof would result in a
violation of Sections 5.13 or 5.14 hereof.
Section 5.07 Mergers, Etc. The Borrower will not merge or
consolidate with, or sell, assign, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all of its
Properties (whether now owned or hereafter acquired) to, any Person.
Section 5.08 Proceeds of Note. The Borrower will not permit
the proceeds of the Note to be used for any purpose other than those permitted
by Section 3.13 hereof.
Section 5.09 ERISA Compliance. Neither the Borrower nor any
ERISA Affiliate will, at any time:
(a) permit any Plan maintained by it to engage in any
"prohibited transaction" as such term is defined in Section 4975 of
the Internal Revenue Code of 1986, as amended;
(b) permit any Plan maintained by it to incur any
"accumulated funding deficiency" as such term is defined in Section
302 of ERISA; or
(c) terminate any such Plan in a manner which could
result in the imposition of a Lien on the Property of the Borrower
pursuant to Section 4068 of ERISA.
(d) file a notice of intent to terminate a Plan under
Section 4041 of ERISA which could, in the opinion of the Lender, have
a Material Adverse Effect of the financial condition of the Borrower.
(e) withdraw from a multi-employer Plan in a manner that,
in the determination of the Lender, could have a Material Adverse
Effect on the financial condition of the Borrower.
Section 5.10 Sale or Discount of Receivables. The Borrower will
not discount or sell with recourse, or sell for less than the
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greater of the face or market value thereof, any of its notes receivable or
accounts receivable.
Section 5.11 Capital Assets. The Borrower will not make
expenditures for capital or fixed assets in any fiscal year of the Borrower if
such expenditure would result in a violation of Sections 5.13 or 5.14 hereof.
Section 5.12 Environmental Matters. The Borrower will not (i)
cause or permit any Hazardous Material to be placed, held, located, or disposed
of on, under, or at any Property now or hereafter owned, leased, or otherwise
controlled directly or indirectly by the Borrower, (ii) cause or permit any
such Property to ever be used (whether by the Borrower, or any other Person) as
a dump site or storage site (whether permanent or temporary) for any Hazardous
Material without first having in place adequate insurance of a sufficient
amount to totally cover (subject to a deductibility clause not to exceed
$25,000.00) any and all potential liability of any nature or amount arising
from said events listed herein. Without limitation of the Lender's rights under
this Agreement, Lender's representatives shall have the right, but not the
obligation, if in the Lender's opinion adequate insurance as aforesaid is not
in place, to enter upon any such Property or take such other actions as the
Lender deems necessary or advisable to cleanup, remove, resolve, or minimize
the impact of, or otherwise deal with, any Hazardous Discharge or Environmental
Complaint which could result in Environmental Liability against the Borrower,
the Lender, or otherwise, or which, in the sole opinion of the Lender would
jeopardize the priority of any of the Lender's present or future Liens against
the Property, the value of any Property or any rights of the Lender under this
Agreement, the Notes, or any other Security Instrument. All costs and expenses
incurred by the Lender and its employees, agents or representatives in the
exercise of any such rights, including, without limitation, the costs and
expenses of any remedial action, attorney and consultant fees, investigation
and laboratory fees, court costs and litigation expenses, shall become part of
the Indebtedness and be payable upon demand, together with interest thereon at
the Highest Lawful Rate.
Section 5.13 Tangible Net Worth. The Borrower will not permit
its tangible net worth to be less than $5,000,000.00 at any time.
As used in this Section "tangible net worth" shall mean the sum of
preferred stock (if any), par value of common stock, capital in excess of par
value of common stock, and retained earnings less treasury stock (if any) less
good will.
Section 5.14 Ratio of Total Liabilities to Net Worth. The
Borrower will not permit its ratio of (i) total liabilities to (ii) tangible
net worth to be greater than 5 to 1 at any time.
As used in this Section "tangible net worth" shall have meaning as
defined in Section 5.13 hereof.
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Section 5.15 Preservation of Designated Contracts. The
Borrower will not agree to any change, modification or amendment to or waiver
of any of the terms or provisions of any of the Designated Contracts. The
Borrower will not take any action or permit any action to be taken by others
which will release any Person from its obligations or liabilities under any of
the Designated Contracts.
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ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. Any of the following events shall be
considered an "Event of Default" as that term is used herein:
(a) Payments - Default is made in the payment or
prepayment when due of any installment of principal or interest on the
Note or other Indebtedness or any of the Preclosing Indebtedness
referred to in Section 9.19 hereof, and such Default continues for
longer than ten (10) days past the due date provided therefor, whether
or not notice of such Default shall have been given by Lender to
Borrower; or
(b) Representations and Warranties - any representation
or warranty by the Borrower herein or in any other Security Instrument
or in any certificate, request or other document furnished pursuant to
or under this Agreement or any other Security Instrument proves to
have been incorrect in any material respect as of the date when made
or deemed made; or
(c) Affirmative Covenants - Default is made in the due
observance or performance by the Borrower of any of the covenants or
agreements contained in Article 4 hereof of this Agreement, and except
with respect to the covenants set forth in Sections 4.11, 4.12, 4.23,
4.31 or 4.34 hereof (for which Sections no cure period shall be
applicable) such Default continues unremedied for a period of thirty
(30) days after the earlier of (i) notice thereof being given by the
Lender to the Borrower, or (ii) such Default otherwise becoming known
to the Borrower; provided, however, in the event that Lender shall
have delivered two (2) such notices in any twelve (12) month period,
the Borrower shall not be entitled to any further notice, grace, or
opportunity to cure, and any subsequent Default shall be an Event of
Default immediately; or
(d) Negative Covenants - Default is made in the due
observance or performance by the Borrower of any of the covenants or
agreements contained in Article 5 hereof of this Agreement; or
(e) Other Security Instrument Indebtedness - Default is
made in the due observance or performance by the Borrower of any of
the covenants or agreements contained in any Security Instrument other
than this Agreement or in any of the Preclosing Security Instruments
referred to in Section 9.19 hereof, and such Default continues
unremedied beyond the expiration of any applicable grace period which
may be expressly allowed under such Security Instrument; or
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(f) Involuntary Bankruptcy or Other Proceedings - an
involuntary case or other proceeding shall be commenced against the
Borrower which seeks liquidation, reorganization or other relief with
respect to it or its debts or other liabilities under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its Property, and
such involuntary case or other proceeding shall remain undismissed or
unstayed for a period of thirty (30) days; or an order for relief
against the Borrower shall be entered in any such case under the
United States Bankruptcy Code; or
(g) Voluntary Petitions, etc. - the Borrower shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts or
other liabilities under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its Property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors,
or shall fail generally to, or shall admit in writing its inability to
pay its Debts generally as they become due, or shall take any
corporate action to authorize or effect any of the foregoing; or
(h) Discontinuance of Business - the Borrower
discontinues its usual business; or
(i) Default on Other Debt - the Borrower fails to make
any payment due on any material Debt, or any event shall occur or any
condition shall exist in respect of any Debt of the Borrower, or under
any agreement securing or relating to such Debt, the effect of which
is to cause or to permit any holder of such Debt to cause (whether or
not such holder elects to cause) such Debt, or a portion thereof, to
become due prior to its stated maturity and such condition continues
unremedied for a period of thirty (30) days after notice thereof being
given by the Lender to the Borrower; or
(j) Undischarged Judgments - the Borrower shall fail
within thirty (30) days to pay, bond or otherwise discharge any
judgment or order for the payment of money in excess of $50,000 that
is not otherwise being satisfied in accordance with its terms and is
not stayed on appeal or otherwise being appropriately contested in
good faith; or
(k) Security Instruments - the Security Instruments or
the Preclosing Security Instruments shall for any reason, except to
the extent permitted by the terms thereof or hereof, cease to be in
full force and effect and valid, binding and enforceable (except as
enforceability may be limited as stated in Section 3.03 hereof) in
accordance with their terms, or cease to create a valid and perfected
Lien of the priority
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required thereby on any of the collateral purported to be covered
thereby, or the Borrower shall so state in writing; or
(1) Construction of any one or more of the Residences
shall not be commenced within forty-five (45) days after the date of
each Interim Construction Loan relating to such Residences or,
construction having been commenced on any Residence, shall cease for a
period of ten (10) consecutive calendar days at any time prior to the
Substantial Completion of such Residences;
(m) A Deed of Trust shall not, in the opinion of counsel
for Lender, constitute a first, prior and enforceable lien upon the
portion of the Premises securing payment of the Indebtedness;
(n) A Current Survey shall show that a Residence or any
part thereof encroaches upon a street, any easement, right-of-way,
set-back lines or any adjoining property or any Residence is not
constructed entirely on the Lot on which it was intended to be
constructed;
(o) Borrower shall attempt to assign its rights under
this Agreement or any portion of the Premises shall be conveyed or
shall be encumbered (except for taxes not yet due);
(p) Borrower neglects, fails, or refuses to keep in full
force and effect any required permit or approval from any appropriate
Governmental Authority with respect to the construction of any
Residence;
(q) Substantial Completion of a Residence fails to occur
on or before the Completion Date for the Residence established in the
Interim Construction Loan;
(r) There is any substantial deviation in the work of
construction from the Plans without the prior written approval of
Lender, or there is incorporated in any Residence any defective
workmanship or materials, which said deviation or defect is not
commenced to be corrected within ten (10) Business Days after the
first to occur of (i) the discovery thereof by Borrower or (ii)
receipt of Lender's notification to Borrower of the existence thereof.
and such removal or correction is not diligently continued to its
conclusion;
(s) Borrower fails to obtain, when required by Government
Requirement, inspections and/or approvals of the Residences from all
Governmental Authorities and requisite certificates of occupancy;
(t) Occurrence of any condition, no matter how caused,
which renders it impossible in the reasonable determination of Lender,
for Borrower timely to comply fully with, or to cause timely full
compliance with, the provisions hereof or of any
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other of the Security Instruments and such condition continues
unremedied for a period of thirty (30) days after notice thereof being
given by the Lender to the Borrower;
(u) Failure of Borrower to permit Lender or its
representatives at all reasonable times, to enter upon the Land,
inspect the Improvements and the construction thereof and all
materials, fixtures and articles used or to be used in such
construction and to examine all detailed plans, shop drawings and
specifications which relate to the Improvements, or the failure of
Borrower to furnish to Lender or its authorized representatives, when
requested, copies of such plans, drawings and specifications;
(v) Execution by Borrower of any conditional contract of
sale, chattel mortgage or other security agreement covering any
materials, fixtures, equipment, appliances or articles intended to be
incorporated in the Improvements or the appurtenances thereto, or the
filing of a financing statement under the Uniform Commercial Code, the
publishing of notice of such security agreement, or the failure to
purchase any such materials, fixtures, equipment, appliances or
articles so that the ownership thereof will vest unconditionally in
Borrower free from all Liens and encumbrances, on delivery to the Land
or the failure of Borrower to produce and deliver to Lender upon
demand the contracts, bills of sale, statements, receipted vouchers or
agreements, or any of them, under which Borrower claims title to such
materials, fixtures, equipment, appliances and articles;
(w) If Borrower shall have (i) concealed, removed or
permitted to be concealed or removed any part of Borrower's Property
with the intent to hinder, delay or defraud any of Borrower's
creditors; or (ii) made or suffered a transfer of any of Borrower's
Property which may be fraudulent under any debtor relief law or
fraudulent conveyance or similar law; or (iii) suffered or permitted,
while insolvent (under any applicable definition of the term), any
creditor to obtain a Lien upon any of Borrower's Property through
legal proceedings or distraint which lien is not permanently vacated
within thirty (30) days from the date thereof.
Section 6.02 Remedies.
(a) Upon the occurrence of any Event of Default described
in Subsection 6.01(f) or (g) hereof, the Commitment and other lending
obligations, if any, of the Lender hereunder shall immediately
terminate, and the entire principal amount of all Indebtedness then
outstanding together with interest then accrued thereon shall become
immediately due and payable, all without written notice and without
presentment, demand, protest, notice of protest or dishonor or any
other notice of Default of any kind, all of which are hereby expressly
waived by the Borrower. Upon the occurrence and at any time during the
continuance of any other Event of Default specified in
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Section 6.01 hereof, the Lender may by written notice to the Borrower
(i) declare the entire principal amount of all Indebtedness then
outstanding together with interest then accrued thereon to be
immediately due and payable without presentment, demand, protest,
notice of protest or dishonor other notice of Default of any kind, all
of which are hereby expressly waived by the Borrower, and/or (ii)
terminate the Commitment and other lending obligations, if any, of the
Lender hereunder unless and until the Lender shall reinstate same in
writing.
(b) Upon an occurrence of an Event of Default, Lender
shall have the right, but not the obligation, to enter upon and take
immediate exclusive possession of all or any part of the Premises,
either with or without process of law, forcibly or otherwise (so long
as such action does not constitute a breach of the peace), expel and
remove any Persons, goods or chattels occupying or upon the same,
employ watchmen and other safeguards to protect the Premises, receive
all rents and issue receipts therefor, manage, control and operate the
Premises as fully as Borrower might do if in possession thereof,
including, without limitation, the making of all repairs and
replacements deemed necessary by Lender, the construction of
Improvements thereon and leasing of the same, or any part thereof,
from time to time, and after deducting all attorneys' fees and all
costs and expenses incurred in the protection, care, maintenance,
management and operation of the Premises, apply the remaining net
income, if any, to the Premises or toward the satisfaction of any
deficiency remaining after any foreclosure proceedings, and/or toward
their satisfaction of any of the Indebtedness as provided herein. At
the option of Lender, such entry and taking of possession shall be
accomplished either by actual entry and possession or by written
notice served personally upon or sent by certified mail to Borrower at
the address of Borrower set forth herein. Borrower agrees to surrender
possession of the Premises to Lender immediately upon the occurrence
of an Event of Default upon the request of Lender. If Borrower shall
remain in physical possession of the Premises, or any part thereof,
after any Event of Default and Lender's request that Borrower
surrender the Premises, such possession shall be as a tenant at
sufferance of Lender, Borrower agrees to pay Lender, or to any
receiver appointed as provided below, after such Event of Default, a
reasonable monthly rental for the Premises, or a part thereof so
occupied by Borrower, to be applied as provided above in the first
sentence of this subparagraph and to be paid in advance on the first
(1st) day of each calendar month, and, in Default of so doing,
Borrower may be dispossessed by the usual summary proceeding. This
covenant shall be effective irrespective of whether any foreclosure
proceeding shall have been instituted and irrespective of any
application for, or appointment of, a receiver.
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(c) Upon the occurrence of an Event of Default hereunder
or under any other Security Instrument, Lender may, at its option,
apply for by ex parte petition and obtain, by appropriate judicial
action, appointment of a receiver or receivers for all or any part of
the Land and the Improvements as a matter or right, without regard to
the sufficiency of the security, without any showing of insolvency,
fraud or mismanagement on the part of Borrower, and without the
necessity of filing judicial proceedings (other than the proceedings
for the appointment of the receiver or receivers) to protect or
enforce the rights of Lender. Borrower hereby consents to any such
appointment.
(d) Upon the occurrence of an Event of Default hereunder
or under any other Security Instrument, Lender may, at its option,
exercise any and all other rights and remedies afforded by the laws of
the State of Texas, or by any and all of the Security Instruments, or
otherwise.
Section 6.03 Right of Set-off. Upon the occurrence and
during the continuance of any Event of Default, or if the Borrower becomes
insolvent, however evidenced, the Lender is hereby authorized at any time and
from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Lender to or for the credit or the
account of the Borrower against any and all of the Indebtedness of the
Borrower, irrespective of whether or not the Lender shall have made any demand
under this Agreement or the Note and although such obligations may be
unmatured. The Lender agrees promptly to notify the Borrower after any such
set-off and application, provided that the failure to give such notice shall
not affect the validity of such set-off and application. The rights of the
Lender under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Lender may
have.
Section 6.04 Rights Vested. The authorization and rights granted
by Sections 6.02 and 6.03 hereof shall be deemed irrevocably vested in Lender
for the purpose of protecting Lender's security interest in the Premises
created under the Security Instruments and shall constitute a power coupled
with that interest, and may not be revoked by Borrower.
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ARTICLE 7
CONDITIONS OF LENDING
The obligations of the Lender to make the loans pursuant to this
Agreement are subject to the conditions precedent stated in this Article 7.
Section 7.01 Initial Advance. The obligations of the
Lender pursuant to the Commitment and under this Agreement are, in addition to
the conditions precedent specified in Section 7.02 hereof, subject to the
following conditions precedent wherein each document to be delivered to the
Lender shall be in form and substance satisfactory to it:
(a) Note - the Borrower shall have duly and validly
issued, executed and delivered the Note to the Lender.
(b) Compliance Certificate - the Lender shall have
received a compliance certificate, which shall be true and correct, in
the form of Exhibit "J" attached hereto, duly and properly executed by
an executive officer of the Borrower, and dated as of the date of such
Advance.
(c) Secretary's Certificates --
(i) the Lender shall have received certificates
of the Secretary or Assistant Secretary of the Borrower in
form and substance satisfactory to the Lender with respect to
the authorization of Borrower to execute and deliver of the
Note, this Agreement and any other Security Instruments
provided herein and authorization of the officers of the
Borrower to sign such instruments, and (B) specimen signatures
of the officers so authorized.
(ii) The Lender shall also have received a copy,
certified as true by the Secretary or Assistant Secretary of
the Borrower, of the articles or certificate of incorporation
and the bylaws of the Borrower.
(d) Opinion of Borrower's Counsel - the Lender shall have
received from Morris, Tinsley & Snowden, counsel for the Borrower, a
favorable written opinion as to the matters contained in Sections
3.01, 3.02, 3.03, 3.04, 3.05, 3.17 and 3.18 hereof; and as to such
counsel's knowledge of pending or threatened material litigation or
governmental or regulatory proceedings against the Borrower; and as to
such other matters incident to the transactions herein contemplated as
the Lender may reasonably request.
(e) Other Security Instruments - the Lender shall have
received the following instruments, each duly and validly executed and
delivered by the respective parties thereto (other than the Lender),
and in sufficient executed
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counterparts for recording purposes when applicable, as security for
the Note and other Indebtedness:
(i) the Security Agreement
(ii) financing statements collectively covering
all the Borrower's personal Property in which the Lender shall
have Liens pursuant to the Security Instruments referred to in
clauses (i) and (ii), inclusive, of this Subsection 7.01(e).
(f) Recordings - The Security Instruments mentioned in
Subsections 7.01(e) hereof, or other notices related thereto if
necessary or appropriate, shall have been duly delivered to the
appropriate offices for filing or recording when applicable, and the
Lender shall have received confirmations of receipt thereof from the
appropriate filing or recording offices.
(g) Title Insurance Binder - The Lender shall have
received from the Title Company a Title Insurance Binder with respect
to each Unit for which any Advance has been made or for which any
Borrowing Request has delivered to Lender.
(h) Additional Conditions Precedent - As conditions
precedent to the making of the initial Advance hereunder, Borrower
shall deliver to Lender the following:
(i) A Deed of Trust covering each unit
attributable to an Interim Construction Loan;
(ii) Any releases, agreements, indemnities, or
other documents required by the Title Company as a condition
to issuing the Title Insurance Binder;
(iii) A certified copy of the recorded Subdivision
plat in which the Lots covered by the Deed of Trust are
located, properly filed of record and otherwise complying with
all applicable laws unless Borrower has previously furnished
such plat to Lender;
(iv) Evidence of the Insurance Policies and
delivery of all documents or certificates as Lender may
require with respect thereto;
(i) Each of the Security Instruments executed in
connection herewith and in connection with each Interim Construction
Loan shall be duly executed by Borrower and Borrower shall deliver
evidence to Lender, in form and substance satisfactory to Lender, that
such Security Instruments constitute valid and binding obligations of
Borrower, enforceable in accordance with their respective terms.
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(j) Possession of Collateral Security - To the extent
that such possession is necessary or appropriate for the purpose of
perfecting the Lender's Lien in such collateral security, all Property
in which the Lender shall at any time be entitled to have a Lien
pursuant to this Agreement or any other Security Instrument shall have
been physically delivered to the possession of the Lender or any
bailee accepted by the Lender.
(k) Purpose Statement - the Borrower shall have executed
and delivered a purpose statement on Federal Reserve Form U-1 of the
Board of Governors of the Federal Reserve System, properly completed.
(l) Other - the Lender shall have received such other
documents as it may reasonably have requested.
Section 7.02 All Advances. The obligation of the Lender to make
each Advance (including the initial Advance with respect to each Interim
Construction Loan) pursuant to this Agreement is subject to the following
further conditions precedent:
(a) Borrowing Requests - at least three but not more than
ten (10) Business Days before each Advance hereunder the Lender shall
have received a Borrowing Request which shall be true and correct and
shall be duly and properly executed and completed by the Borrower.
(b) No Default - the fact that immediately after such
Advance, no Default shall have occurred and be continuing.
(c) Representations and Warranties - the fact that the
representations and warranties of the Borrower contained in this
Agreement or any other Security Instrument (other than those
representations and warranties which are by their terms limited to the
date of the Agreement in which they are initially made) are true and
correct in all material respects on and as of the date of such
Advance.
(d) No Material Adverse Change - there shall have
occurred, in the sole reasonable opinion of the Lender, no change,
either in any case or in the aggregate, in the condition, financial or
otherwise, of the Borrower or with respect to the Borrower's
Properties from the facts represented in any Security Instrument,
including this Agreement, which would have a Material Adverse Effect.
(e) Additional Conditions Precedent -
(i) All conditions precedent as may be required
in connection with any Advance pursuant to Section 7.01 hereof
shall have been satisfied in the sole judgment of Lender;
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(ii) Prior to the initial Advance under each
Interim Construction Loan, Borrower shall have delivered to
Lender an Affidavit;
(iii) If required by Lender, Borrower shall deliver
to Lender a Construction Draw Request executed by Borrower in
the form of Exhibit "K" attached hereto and incorporated
herein for all purposes, or in such other form as Lender may
from time to time require;
(iv) If required by Lender, Borrower shall deliver
to Lender down-date endorsements to the Title Insurance Binder
prepared by the Title Company showing that since the date of
issuance of the Title Insurance Policy, no Lien or other
encumbrances have been claimed, granted or otherwise created
with respect to or covering the subject Lot(s);
(v) If required by Lender, Borrower shall deliver
to Lender lien waivers from the subcontractors and materialmen
connected with any items to be paid in connection with said
application for Advance; such lien waivers shall be in form
and substance satisfactory to Lender;
(vi) If required by Lender, Borrower shall deliver
to Lender copies of such billing statements, vouchers or
invoices from the Persons to whom money is owed, as Lender may
require;
(vii) The location of all or any part of a
Residence does not and will not encroach upon any adjoining
properties or interfere with any easement, building setback
line, restrictive covenant or right-of-way, and each Residence
is constructed on the Lot approved by Lender for the
construction of such Residence;
(viii) Borrower shall deliver to Lender current
monthly operating and sales reports, in form and substance
satisfactory to Lender along with copies of any contracts
entered into since the last Advance;
(ix) If required by Lender, Borrower shall deliver
to Lender all subcontracts executed prior to the date of such
Advance in connection with the construction of the Residences
and not previously delivered to Lender;
(x) If required by Lender, Borrower shall deliver
to Lender any and all other supporting documents reasonably
required by Lender;
(xi) All funds previously disbursed by Lender
under all Interim Construction Loans shall have been applied
in accordance with the Budget relating to such Interim
Construction Loans;
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(xii) All construction prior to the date of a
Borrowing Request shall have been done in accordance with the
Plans with no substantial deviations;
(xiii) The amount of undisbursed proceeds from any
Interim Construction Loan attributable to the Unit relating to
such Interim Construction Loan is sufficient to pay the cost
of completing such Unit in accordance with the Plans; and
(xiv) The Borrower shall deliver to the Lender in
connection with each Unit for which an Advance is requested,
an Affidavit of Bills Paid in the form of Exhibit "L",
attached hereto and incorporated herein for all purposes.
(xv) If required by Lender, Borrower shall obtain
and deliver to Lender the following site assessments conducted
and certified by independent qualified environmental
consultant(s) approved by Lender:
(a) a Category 1 or Phase 1
environmental audit assessing the presence of
Hazardous Material, if any, at the Premises;
(b) such further site assessments as
Lender may require due to the results obtained in (a)
above; and
(c) a report from such consultant(s) to
the effect that no Hazardous Materials are present at
the Premises.
The environmental consultant(s), its qualifications, the scope
and methodology of its investigations, its reports and recommendations
and the form, scope and substance of its certifications to Lender
shall be acceptable to Lender in all respects. For purposes of this
Section, a Category 1 or Phase 1 environmental audit refers to what is
commonly known within the industry as a three-phase approach the
purpose of which is to assess the presence or absence of information
that indicates potential contamination and to make recommendations for
further investigation. A Category I or Phase 1 environmental audit
would typically include, but not be limited to: a site history review,
interviews with individuals who are familiar with the site and
regulatory agency personnel, a site visit and off-site research (i.e.,
aerial photographs).
(f) If required by the Lender, the Borrower shall deliver
to Lender the Construction Contract applicable to the Interim
Construction Loan under which the Advance is requested, unless
Borrower has previously furnished such Construction Contract to
Lender;
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(g) The Borrower shall have delivered to Lender within
ten (10) business days after the slab has been poured on each Lot, the
Current Survey applicable to the Interim Construction Loan under which
the Advance is requested, unless Borrower has previously furnished
such Current Survey to Lender;
(h) If required by Lender, the Borrower shall deliver to
Lender the Plans applicable to the Interim Construction Loan under
which the Advance is requested, unless Borrower has previously
furnished such Plans to Lender;
(i) The Lender shall have obtained an Appraisal of the
Unit applicable to the Interim Construction Loan under which the
Advance is requested, unless such Appraisal shall have been already
obtained by Lender;
Section 7.03 Funding of Advances. Within three (3) Business
Days following the fulfillment by Borrower of all conditions precedent to any
Advance, Lender shall at its discretion make such Advance to Borrower or
jointly to the parties entitled to payment.
Section 7.04 Limitation on Speculative Starts.
Notwithstanding any provision contained herein to the contrary, Lender shall
not be obligated to make any Interim Construction Loan to finance any
Speculative Start in any Subdivision if:
(a) the aggregate sum of the Maximum Loan Amount of all
Interim Construction Loans attributable to Speculative Starts exceeds
the sum of $6,000,000.00;
(b) the aggregate sum of the Maximum Loan Amount of all
Interim Construction Loans attributable to Speculative Starts in the
Houston CMSA exceeds the sum of $5,000,000.00;
(c) the aggregate sum of the Maximum Loan Amount of all
Interim Construction Loans attributable to Speculative Starts in
Austin CMSA exceeds in the aggregate, the sum of $1,000,000.00;
(d) the total number of Speculative Starts in Greatwood
Subdivision and New Territory Subdivision approved in writing by
Lender exceeds, in the aggregate, fifteen (15); or
(e) the total number of Speculative Starts in
Subdivisions other than Greatwood Subdivision and New Territory
Subdivision exceeds, in the aggregate, ten (10).
Section 7.05 Limitation on Models. Notwithstanding any
provision contained herein to the contrary, Lender shall not be obligated to
make any Interim Construction Loan to finance any Models in any (a) Subdivision
if the total number of Models in all Subdivisions exceeds in the aggregate
eight (8); or (b) the total number of Models in any one Subdivision exceeds in
the aggregate two (2).
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Section 7.06 Certain Recordings and Documents After Closing.
(a) Recordings - within ten (10) Business Days after the
execution by Borrower of any Deed of Trust provided for hereunder, the
Lender or its counsel shall have mailed or otherwise delivered such
Deed of Trust to the appropriate filing or recording offices except to
the extent that such filings or recordings shall already have been
made in satisfaction of Subsection 7.01(f) hereof.
(b) Confirmations of Recordings and Lien Priority - within
thirty (30) days from the date of execution of each Deed of Trust
provided for hereunder, the Lender shall have received confirmations
of the recording thereof from the appropriate recording offices, and
such offices or the Title Company demonstrate to the satisfaction of
Lender that there are no other intervening filings or recordings
against the Properties described in such Deed of Trust.
(c) Other - the Lender shall have received such other
documents as it may reasonably have requested at any time, including,
without limitation, any documents referred to in Section 7.01 hereof
or for the purposes referred to in Section 4.06 hereof.
(d) Funding - during the term of this Agreement, until
the requirements of Subsections (a), (b), and (c) of this Section
shall have been satisfied in full, the Lender shall not be obligated
to make Advances under the Commitment, notwithstanding anything else
in this Agreement to the contrary.
Section 7.07 Application of Interim Construction Loan Proceeds.
Borrower will hold all Advances of each Interim Construction Loan as a trust
fund to be applied for the sole purpose of paying the cost of construction of
the Units under each such Interim Construction Loan in accordance with the
Budget and shall apply the same to the payment of such costs. Borrower will
apply such Advances by Lender to the payment of material and labor costs in
connection with construction of the Units under each such Interim Construction
Loan pursuant to the request for Advance. Such payment will be made promptly
and Advances will be used for no other purpose so long as any sums of money
remain due by Borrower for the payment of material and labor.
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ARTICLE 8
PARTIAL RELEASES
Section 8.01 Conditions to and Procedures for Partial Release.
Provided (i) no Event of Default exists under the Note, this Agreement, or any
of the Security Instruments; (ii) Lender does not disapprove a proposed
contract of sale for any Release Parcel (as defined hereafter) and said sale is
closed; and (iii) Borrower pays to Lender the Release Price, as hereinafter
defined, Borrower shall be entitled to receive Partial Releases from Lender of
the Liens created by any Deeds of Trust and any other Security Instruments
benefiting Lender on the following basis:
(a) Borrower to Deliver Contracts for Sale and Partial
Releases. Borrower shall deliver to Lender (i) if required by
Lender, a copy of the proposed contract of sale for the Release
Parcel, (ii) the Settlement Statement prepared by the Title Company in
connection with the sale of a Release Parcel, and (iii) a partial
release instrument ("Partial Release") in form and substance identical
to the form attached hereto as Exhibit "M", which shall include a lot
and block legal description of the Unit for which the Partial Release
is requested (the "Release Parcel") . In addition, the Partial Release
shall be accompanied by information necessary for Lender to process
the Partial Release, including, without limitation, the name and
address of the Title Insurance Company to whose attention the Partial
Release should be directed, any applicable order numbers, and the date
on which the Partial Release is to become effective. Borrower also
shall specify the name and address of the prospective purchaser or
transferee of the Release Parcel and such other documents and
information as Lender may reasonably request.
(b) Partial Release Price. Upon satisfaction of all of
the conditions precedent to a Partial Release, in the reasonable
judgment of Lender, Borrower shall pay to Lender the Release Price, as
defined hereafter. The Release Price ("Release Price") for each
Release Parcel shall be an amount equal to the aggregate sum of (i)
all Advances made under the Interim Construction Loan in connection
with the Release Parcel including, without limitation, the pro rata
share of interest paid in connection with the Interim Construction
Loan, and all other fees and charges reasonably required by Lender.
Contemporaneously with the payment to Lender of the Release Price,
Lender shall execute and deliver all documents necessary to effect the
release of its Lien on the Release Parcel, all such documents and
instruments to be prepared, reviewed and recorded at Borrower's sole
cost and expense and to be a part of the Release Price. The Release
Price shall be applied to principal of the Note in inverse order of
maturity.
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(c) Borrower to Pay Expenses Associated with Partial
Releases. Borrower shall pay all reasonable costs and expenses of
Lender arising in connection with any Partial Releases of any portion
of the Premises, including but not limited to reasonable legal fees of
Lender's counsel, title insurance premiums arising as a result of
endorsements required by Lender in connection with such Partial
Release, and all other costs arising in connection with the execution
and delivery of the Partial Release, all such costs and expenses to be
a part of the Release Price in connection with any such Release Parcel
related thereto.
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ARTICLE 9
MISCELLANEOUS
Section 9.01 Notices. Any notice required or permitted to
be given under or in connection with this Agreement, the other Security
Instruments (except as may otherwise be expressly required therein) or the
Note shall be in writing and shall be mailed by first class or express mail,
postage prepaid, or sent by telex, telegram, telecopy or other similar form of
rapid transmission confirmed by mailing (by first class or express mail,
postage prepaid) written confirmation at substantially the same time as such
rapid transmission, or personally delivered to an officer of the receiving
party. All such communications shall be mailed, sent or delivered,
(a) if to the Borrower, to its address shown at the
beginning of this Agreement, or to such other address or to such
individual's or department's attention as it may have furnished the
Lender in writing; or
(b) if to the Lender, to its address shown at the
beginning of this Agreement, or to such other address or to such
individual's or department's attention as it may have furnished the
Borrower in writing.
Any communication so addressed and mailed shall be deemed to be given when so
mailed, except that Borrowing Requests or communications related to Borrowing
Requests shall not be effective until actually received by the Lender; and any
notice so sent by rapid transmission shall be deemed to be given when receipt
of such transmission is acknowledged, and any communication so delivered in
person shall be deemed to be given when receipted for by, or actually received
by, an authorized officer of the Borrower or the Lender, as the case may be.
Section 9.02 Amendments and Waivers. Any provision of this
Agreement, the other Security Instruments or the Note may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Borrower (and/or any other Person which is a party to any Security Instrument
being amended or with respect to which a waiver is being obtained) and the
Lender.
Section 9.03 Invalidity. In the event that any one or more of
the provisions contained in the Note, this Agreement or in any other Security
Instrument shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of the Note, this Agreement or any other Security
Instrument.
Section 9.04 Survival of Agreements. All representations and
warranties of the Borrower herein or in the other Security Instruments, and all
covenants and agreements herein not fully performed before the effective date
or dates of this Agreement and of the other Security Instruments, shall survive
such date or dates.
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Section 9.05 Successors and Assigns. All covenants and agreements
contained by or on behalf of the Borrower in the Note, this Agreement and any
other Security Instrument shall bind its duly authorized successors and assigns
and shall inure to the benefit of the Lender and its successors and assigns.
The Borrower shall not, however, have the right to assign its rights under this
Agreement or any interest herein, without the express prior written consent of
the Lender. In the event that the Lender sells participations in the Note or
other Indebtedness of the Borrower incurred or to be incurred pursuant to this
Agreement, to other lenders, each of such other lenders shall have the rights
of set off against such Indebtedness and similar rights or Liens to the same
extent as may be available to the Lender.
Section 9.06 Renewal, Extension or Rearrangement. All
provisions of this Agreement and of any other Security Instruments relating to
the Note or other Indebtedness shall apply with equal force and effect to each
and all promissory notes hereinafter executed which in whole or in part
represent a renewal, extension for any period, increase or rearrangement of any
part of the Indebtedness originally represented by the Note or of any part of
such other Indebtedness.
Section 9.07 Waivers. No course of dealing on the part of
the Lender, its officers, employees, consultants or agents, nor any failure or
delay by the Lender with respect to exercising any right, power or privilege of
the Lender under the Note, this Agreement or any other Security Instrument
shall operate as a waiver thereof, except as otherwise provided in Section 9.02
hereof.
Section 9.08 Cumulative Rights. Rights and remedies of the
Lender under the Note, this Agreement and each other Security Instrument shall
be cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 9.09 Singular and Plural. Words used herein in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular herein shall apply to
such words when used in the plural where the context so permits and vice versa.
Section 9.10 CONSTRUCTION. THIS AGREEMENT IS, AND THE NOTE
WILL BE, A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA AND THE STATE OF TEXAS, AS
SUCH LAWS ARE NOW IN EFFECT AND, WITH RESPECT TO USURY LAWS, IF ANY, APPLICABLE
TO THE LENDER AND TO THE EXTENT ALLOWED THEREBY, AS SUCH LAWS MAY HEREAFTER BE
IN EFFECT WHICH ALLOW A HIGHER MAXIMUM NONUSURIOUS INTEREST RATE THAN SUCH LAWS
NOW ALLOW. TEX. REV. CIV. STAT. ANN. ART. 5069, CH. 15 (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY
TO THIS AGREEMENT OR THE NOTE.
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Section 9.11 Interest. It is the intention of the parties hereto
to conform strictly to usury laws applicable to the Lender. Accordingly, if the
transactions contemplated hereby would be usurious under applicable law
(including the laws of the United States of America and the State of Texas),
then, in that event, notwithstanding anything to the contrary in the Note, this
Agreement or in any other Security Instrument or agreement entered into in
connection with or as security for the Note, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under law applicable
to the Lender that is contracted for, taken, reserved, charged or received under
the Note, this Agreement or under any of the other aforesaid Security
Instruments or agreements or otherwise in connection with the Note shall under
no circumstances exceed the maximum amount allowed by such applicable law, and
any excess shall be credited by the Lender on the principal amount of the
Indebtedness (or, if the principal amount of the Indebtedness shall have been
paid in full, refunded by the Lender to the Borrower); and (ii) in the event
that the maturity of the Note is accelerated by reason of an election of the
Lender resulting from any Event of Default under this Agreement or otherwise, or
in the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to the Lender may never include
more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be canceled
automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by the Lender on the principal amount of the
Indebtedness (or, if the principal amount of the Indebtedness shall have been
paid in full, refunded by the Lender to the Borrower) . Without limiting the
foregoing, all calculations of the rate of interest taken, reserved, contracted
for, charged, received or provided for under the Note or any of the Security
Instruments which are made for the purpose of determining whether the interest
rate exceeds the Highest Lawful Rate shall be made, to the extent allowed by
law, by amortizing, prorating, allocating and spreading in equal parts during
the period of the full stated term of the loan evidenced hereby, all interest at
any time taken, reserved, contracted for, charged, received or provided for
under the Note or any of the Security Instruments.
To the extent that Article 5069-1.04 of the Texas Revised Civil
Statutes is relevant to the Lender for the purpose of determining the Highest
Lawful Rate, the Lender hereby elects to determine the applicable rate ceiling
under such Article by the indicated (weekly) rate ceiling from time to time in
effect, subject to the Lender's right subsequently to change such method in
accordance with applicable law.
If at any time the sum of the Margin Percentage plus the Prime Rate
exceeds the Highest Lawful Rate, the rate of interest to accrue on the Note
shall be limited to the Highest Lawful Rate, but any subsequent reductions in
the Prime Rate shall not reduce the
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interest to accrue on the Note below the Highest Lawful Rate until the total
amount of interest accrued on the Note equals the amount of interest which
would have accrued if a varying rate per annum equal to the sum of the Margin
Percentage plus the Prime Rate had at all times been in effect. If at maturity
or final payment of the Note the total amount of interest paid or accrued on
the Note under the foregoing provisions is less than the total amount of
interest which would have accrued if a varying rate per annum equal to the sum
of the Margin Percentage plus the Prime Rate had at all times been in effect,
then the Borrower agrees, to the fullest extent permitted by law, to pay to the
Lender an amount equal to the difference between (a) the lesser of (i) the
amount of interest which would have accrued on the Note the Highest Lawful Rate
had at all times been in effect or (ii) the amount of interest which would have
accrued on the Note if a varying rate per annum equal to the sum of the Margin
Percentage plus the Prime Rate had at all times been in effect, and (b) the
amount of interest accrued in accordance with the other provisions of the Note.
Section 9.12 References. The words "herein," "hereof,"
"hereunder" and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular article, section or
subsection.
Section 9.13 Taxes, etc. Any taxes (excluding income taxes)
payable or ruled payable by federal or state authority in respect of the Note,
this Agreement or the other Security Instruments shall be paid by the Borrower,
together with interest and penalties, if any.
Section 9.14 Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, the Lender shall not be obligated to
extend credit to the Borrower in an amount in violation of any limitation or
prohibitation provided by any applicable statute or regulation.
Section 9.15 Entire Agreement. The Note, this Agreement and
the Security Instruments referred to in Subsection 7.01(e) hereof embody the
entire agreement and understanding between the Lender and the Borrower and
supersede all prior agreements and understandings between such parties relating
to the subject matter hereof and thereof.
Section 9.16 Exhibits. The exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein, except that in the event of any
conflict between any of the provisions of such exhibits and the provisions of
this Agreement, the provisions of this Agreement shall prevail.
Section 9.17 Titles of Articles, Sections and Subsections. All
titles or headings to articles, sections, subsections or other divisions of
this Agreement or the exhibits hereto are only for the convenience of the
parties and shall not be construed to have any effect or meaning with respect
to the other content of such
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articles, sections, subsections or other divisions, such other content being
controlling as to the agreement between the parties hereto.
Section 9.18 Jurisdiction. All actions or proceedings with
respect to the Note, this Agreement or the other Security Instruments may be
instituted in the courts of the State of Texas, the United States District
Court for the Southern District of Texas, or elsewhere to the extent that
jurisdiction shall exist apart from the provisions of this Section, as the
Lender may elect, and by execution and delivery of this Agreement, the Borrower
irrevocably and unconditionally submits to the jurisdiction (both subject
matter and personal) of each such court, and irrevocably and unconditionally
waives (i) any objection the Borrower may now or hereafter have to the laying
of venue in any of such courts, and (ii) any claim that any action or
proceeding brought in any of such courts has been brought in an inconvenient
forum.
Section 9.19 Trust Funds. Borrower acknowledges that it is
familiar with chapter 162 Construction Payments, Loan Receipts and
Misapplication of Trust Funds, Property Code, Vernon's Texas Codes Annotated
that makes a portion of the proceeds of the Loan intended to cover costs of
construction trust funds for the benefit of contractors and materialmen for the
Premises, and makes it a criminal offense to divert any of said proceeds to any
other use unless and until all of said beneficiaries are paid in full.
Section 9.20 Counterparts. This Agreement may be executed in
two or more counterparts, and it shall not be necessary that the signatures of
all parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Section 9.21 Effectiveness. This Agreement shall not be
effective until delivered to the Lender at its principal offices in the State
of Texas, indicated at the first page of this Agreement, accepted by the Lender
in such State, and executed by the Lender in such State.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN PARTIES.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
BORROWER: NEWMARK HOME CORPORATION
By: /s/ JOHN HARRIS
------------------------
Name: John Harris
-----------------------
Title: President
----------------------
UNITED SAVINGS ASSOCIATION OF
TEXAS FSB
By:
------------------------
Name:
-----------------------
Title:
----------------------
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EXHIBIT 10.16(b)
PROMISSORY NOTE
$30,000,000.00 Houston, Texas July 1, 1997
NEWMARK HOMES, L.P. (hereinafter called the "Borrower"), a Texas
limited partnership with offices at 10435 Greenbough, Suite 101, Stafford,
Texas 77477, for value received, promises and agrees to pay on or before the
earlier of (i) July 1, 1999, or (ii) the Completion Date of the last Interim
Construction Loan originated prior to the Drawdown Termination Date, to the
order of BANK UNITED (hereinafter called the "Lender") at its offices at 3200
Southwest Freeway, Suite 2000, Houston, Texas 77027, in coin or currency of the
United States of America which at the time of payment is legal tender for the
payment of public and private debts, the principal sum of THIRTY MILLION AND
NO/100 DOLLARS ($30,000,000.00), or so much thereof as may be advanced pursuant
to the Loan Agreement hereinafter mentioned.
All capitalized terms which are used but not defined in this Note
shall have the same meanings as in the Loan Agreement dated June 28, 1990
between Newmark Home Corporation, a Texas corporation, (hereinafter called "Old
Newmark") and the Lender as amended by that certain First Amendment to Loan
Agreement dated as of May 14, 1991, by and between Old Newmark and Lender (the
"First Amendment"), as further amended by that certain Second Amendment to Loan
Agreement dated as of June 28, 1991, by and between Old Newmark and Lender (the
"Second Amendment"), as further amended by that certain Third Amendment to Loan
Agreement dated as of March 17, 1992, by and between Old Newmark and Lender
(the "Third Amendment"), as further amended by that certain Fourth Amendment to
Loan Agreement dated as of June 18, 1992, by and between Old Newmark and Lender
(the "Fourth Amendment"), as further amended by that certain Fifth Amendment to
Loan Agreement dated as of June 28, 1993, by and between Old Newmark and Lender
(the "Fifth Amendment"); as further amended by that certain Sixth Amendment to
Loan Agreement dated as of June 28, 1994 by and between Old Newmark and Lender
(the "Sixth Amendment"); as further amended by that certain Seventh Amendment
to Loan Agreement dated as of May 28, 1995 by and between Newmark Home
Corporation, a Nevada corporation, ("General Partner") and Lender (the "Seventh
Amendment"); as further amended by that certain Eighth Amendment to Loan
Agreement dated as of February 28, 1996 (the "Eighth Amendment") by and between
General Partner and Lender; as further amended by that certain Ninth Amendment
to Loan Agreement dated as of May 28, 1996 (the "Ninth Amendment") by and
between General Partner and Lender; as further amended by
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that certain Tenth Amendment to Loan Agreement dated as of October 1, 1996 (the
"Tenth Amendment") by and between Borrower and Lender; as further amended by
that certain Eleventh Amendment to Loan Agreement dated as of November 15,
1996, (the "Eleventh Amendment") by and between Borrower and Lender; and as
further amended by that certain Twelfth Amendment to Loan Agreement dated as of
July 1, 1997 (the "Twelfth Amendment") by and between Borrower and Lender (such
Loan Agreement, the First Amendment, the Second Amendment, the Third Amendment,
the Fourth Amendment, the Fifth Amendment, the Sixth Amendment, the Seventh
Amendment, the Eighth Amendment, the Ninth Amendment, the Tenth Amendment, the
Eleventh Amendment and the Twelfth Amendment together with all amendments or
supplements thereto, being the "Loan Agreement").
In addition to the principal sum referred to in the first paragraph of
this Note, the Borrower also agrees to pay interest on all amounts hereof so
advanced and remaining from time to time unpaid hereon from the date hereof
until maturity. The Advances made under each Interim Construction Loan
approved by Lender under the Loan Agreement shall bear interest as provided in
the Loan Agreement. Past due principal and interest shall bear interest at a
varying rate per annum which is five percent (5%) above the Prime Rate, (but in
no event to exceed the Highest Lawful Rate).
Accrued interest is due and payable monthly, the first such payment
being due and payable on August 1, 1997 and the remaining payments being due
and payable on the first (1st) day of each and every succeeding calendar month
thereafter and at the maturity of this Note.
The Borrower and any and each co-maker, guarantor, accommodation
party, endorser or other Person liable for the payment or collection of this
Note expressly waive notice, presentment, demand or payment, protest, notice of
protest, and non-payment or dishonor, notice of intent to demand, bringing of
suit, and diligence in taking any action to collect amounts called for
hereunder and in the handling of Property at any time existing as security in
connection herewith, and shall be directly and primarily liable for the payment
of all sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder or in connection with any Lien at any time had or existing
as security for any amount called for hereunder. Provided however, that upon
any Event of Default defined by the Loan Agreement, Borrower shall be entitled
to written notice of Lender' intent to accelerate five (5) days prior to
acceleration. Upon the occurrence and at any time during the
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continuance of any Event of Default the Lender may, if the Event of Default is
not cured within five (5) days after notice of intent to accelerate is given by
Lender to Borrower, by written notice of acceleration to the Borrower declare
the entire principal amount of all Indebtedness then outstanding together with
interest then accrued thereon to be immediately due and payable without
notices, presentment, demand, etc. expressly waived above.
It is the intention of the parties hereto to conform strictly to usury
laws applicable to the Lender. Accordingly, if the transactions contemplated
hereby would be usurious under applicable law (including the laws of the United
States of America and the State of Texas), then, in that event, notwithstanding
anything to the contrary herein or in the Loan Agreement or in any other
Security Instrument or agreement entered into in connection with or as security
for this Note, it is agreed as follows: (i) the aggregate of all consideration
which constitutes interest under law applicable to the Lender that is
contracted for, taken, reserved, charged or received herein or under the Loan
Agreement or under any of the other aforesaid Security Instruments or
agreements or otherwise in connection herewith shall under no circumstances
exceed the maximum amount allowed by such applicable law, and any excess shall
be credited by the Lender on the principal amount of the Indebtedness (or, if
the principal amount of the Indebtedness shall have been paid in full, refunded
by the Lender to the Borrower, as required); and (ii) in the event that the
maturity of this Note is accelerated by reason of an election of the Lender
resulting from any Event of Default under the Loan Agreement or otherwise, or
in the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to the Lender may never include
more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in the Loan Agreement or otherwise shall be
canceled automatically as of the date of such acceleration or prepayment and,
if theretofore paid, shall be credited by the Lender on the principal amount of
the Indebtedness (or, if the principal amount of the Indebtedness shall have
been paid in full, refunded by the Lender to the Borrower, as required).
Without limiting the foregoing, all calculations of the rate of interest taken,
reserved, contracted for, charged, received or provided for under this Note or
any of the Security Instruments which are made for the purpose of determining
whether the interest rate exceeds the Highest Lawful Rate shall be made, to the
extent allowed by law, by amortizing, prorating, allocating and spreading in
equal parts during the period of the full stated term of the loan evidenced
hereby, all interest at any time taken, reserved, contracted for, charged,
received or provided for under this Note or any of
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<PAGE> 4
the Security Instruments. To the extent that Article 5069-1.04 of the Texas
Revised Civil Statutes is relevant to the Lender for the purpose of determining
the Highest Lawful Rate, the Lender hereby elects to determine the applicable
rate ceiling under such Article by the indicated (weekly) rate ceiling from
time to time in effect, subject to the Lender's right subsequently to change
such method in accordance with applicable law.
The following shall be the basis for the finder of fact's
determination of the fair market value of a particular Unit foreclosed upon as
of the date of the foreclosure sale in proceedings governed by Sections 51.003,
51.004, and 51.005 of the Texas Property Code (as amended from time to time):
a. The Unit shall be valued in an "as is" condition as of the
date of the foreclosure sale, without any assumption or
expectation either that a Residence will be constructed on the
Lot or any Residence previously constructed or started thereon
will be repaired in any manner or completed as applicable
before a resale of the Unit after foreclosure;
b. The valuation shall be based upon an assumption that the
foreclosure purchaser desires a prompt resale of the Unit for
cash promptly (but no later than twelve months) following the
foreclosure sale;
c. All reasonable closing costs customarily borne by the seller
in a commercial real estate transaction shall be deducted from
the gross fair market value of the Unit, including, without
limitation, brokerage commissions, title insurance, a survey
of the Unit, tax prorations, attorney's fees, and marketing
costs;
d. The gross fair market value of the Unit shall be further
discounted to account for any estimated holding costs
associated with maintaining the Unit pending sale, including,
without limitation, utilities expenses, property management
fees, taxes and assessments (to the extent not accounted for
in c. above), and other maintenance expenses.
e. Any expert opinion testimony given or considered in connection
with a determination of the fair market value of the Unit must
be given by persons having at least five years experience in
appraising property similar to the Unit and who have conducted
and prepared a complete written appraisal of the Unit taking
into consideration the factors set forth above.
-4-
<PAGE> 5
This Note is issued pursuant to and is entitled to the benefits of the
Loan Agreement. Reference is made to the Loan Agreement for provisions for the
acceleration of the maturity hereof on the occurrence of certain events
specified therein, for interest rate computations in the event that the
otherwise agreed rate is at any time limited by the Highest Lawful Rate, for
the reimbursement of attorneys' fees or other costs of collection or
enforcement, and for all other pertinent purposes. It is contemplated that by
reason of prepayment hereon there may be times when no Indebtedness is owing
hereunder; but notwithstanding such occurrences, this Note shall remain valid
and shall be in full force and effect as to loans made pursuant to the Loan
Agreement subsequent to each occurrence.
This Note represents an amendment and restatement of that certain
$30,000,000.00 Note dated November 15, 1996, ("Previous Note") executed by
General Partner and payable to the order of Lender. The Indebtedness evidenced
by the Previous Note is not extinguished hereby. This Note is secured as
provided in the Loan Agreement.
NEWMARK HOMES, L.P.
By: Newmark Home Corporation,
General Partner
By: /s/ TERRY WHITE
---------------------------
Name: Terry White
-------------------------
Title: Senior Vice President
------------------------
-5-
<PAGE> 1
EXHIBIT 10.16(c)
SUPPLEMENTAL DEED OF TRUST AND SECURITY AGREEMENT
THE STATE OF TEXAS (
( KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF _________ (
That the undersigned Newmark Homes, L.P., a Texas limited partnership,
whose address for notice hereunder is 10435 Greenbough, Suite 101, Stafford,
Texas 77477 (hereinafter called the "Grantor"), in consideration of TEN AND
NO/100 DOLLARS ($10.00) cash in hand paid by Randolph C. Henson, Trustee
(hereinafter called the "Trustee"), the receipt of which payment is hereby
acknowledged and confessed, and of the debt and trust hereinafter mentioned,
has GRANTED, BARGAINED, SOLD and CONVEYED, and by these presents does GRANT,
BARGAIN, SELL and CONVEY unto the Trustee, and unto the successor or substitute
Trustee hereinafter provided, the following property situated in ______________
County, Texas, to-wit:
INSERT LEGAL DESCRIPTION
together with all buildings and other improvements thereon and hereafter placed
thereon, and all fixtures, materials, equipment, apparatus, furniture,
furnishings and other property, real and personal, now or hereafter installed
or used on the above described property or the improvements thereon, including,
but not limited to: (i) all heating, lighting, refrigeration, plumbing,
ventilating, incinerating, water-heating, cooking and air conditioning
equipment, fixtures and appurtenances, and other chattels and personal property
used or furnished in connection with the operation, use and enjoyment of the
above described property and the improvements thereon, (ii) irrigation and
drainage equipment, and (iii) all surface and underground water rights,
drainage rights, wastewater capacity reservations, utility letters, renewal
letters, permits, reservations, capital recovery charge receipts or any other
document or instrument relating to the furnishing of utilities to and on the
above-described property or any portion thereof (including, without limitation,
water supply, sewage, gas, electric and telephone facilities) (the property
described in this subparagraph (iii) is referred to in this Deed of Trust as
the "Utility Rights), and all renewals, replacements and substitutions thereof
and additions thereto, all of which said property and fixtures shall be deemed
to be a part of and affixed to the above described real property; all rents,
revenues, bonus money, royalties, rights and benefits accruing to the Grantor
under all present and future oil, gas and mineral leases on any part of the
above described property; and all the estate, right, title and interest of
every nature whatsoever of
-1-
<PAGE> 2
the Grantor in and to all of the foregoing and every part and parcel thereof.
TO HAVE AND TO HOLD the above described property, together with all
and singular the rights, privileges, hereditaments and appurtenances thereunto
in anywise incident, appertaining or belonging (all of which are hereinafter
called the "Premises") unto the Trustee, and his successors or substitutes
forever; and the Grantor hereby binds itself, its successors, assigns and legal
representatives, to warrant and forever defend title to said Premises unto the
Trustee, his successors and substitutes, against every person whomsoever
lawfully claiming or to claim the same or any part thereof, by, through, or
under it, but not otherwise.
ARTICLE I
This conveyance is made in trust on the following trusts, terms and
conditions, and for the purpose of securing and enforcing the payment and
performance of the following (hereinafter called the "Obligations"): (a) the
payment of all the Indebtedness (as defined in the hereinafter identified Loan
Agreement) of the Grantor to BANK UNITED, a federally chartered savings bank,
whose address is 3200 Southwest Freeway, Houston, Texas, Suite 2000, Houston,
Texas 77027 (hereinafter, together with any subsequent transferee, assignee,
holder, or owner of the obligations, called the "Beneficiary"), now or
hereafter existing under or in connection with that certain Loan Agreement
dated as of June 28, 1990, as amended by that certain First Amendment to Loan
Agreement dated as of May 14, 1991, as further amended by that certain Second
Amendment to Loan Agreement dated as of June 28, 1991, as further amended by
that certain Third Amendment to Loan Agreement dated as of March 17, 1992, as
further amended by that certain Fourth Amendment to Loan Agreement dated as of
June 28, 1992, as further amended by that certain Fifth Amendment to Loan
Agreement dated as of June 28, 1993 as further amended by that certain Sixth
Amendment to Loan Agreement dated as of June 28, 1994, as further amended by
that certain Seventh Amendment to Loan Agreement dated as of May 28, 1995, as
further amended by that certain Eighth Amendment to Loan Agreement dated as of
February 28, 1996, as further amended by that certain Ninth Amendment to Loan
Agreement dated as of May 28, 1996, as further amended by that certain Tenth
Amendment to Loan Agreement dated as of October 1, 1996, as further amended by
that certain Eleventh Amendment to Loan Agreement dated as of November 15, 1996
and as further amended by that certain Twelfth Amendment to Loan Agreement
dated as of July 1, 1997 each by and between the Grantor or its predecessor and
the Beneficiary (said Loan Agreement, as the same may from time to time be
amended or supplemented, hereinafter called the "Loan Agreement"), including,
without limitation, all amounts from time to time outstanding under the Note
(as defined in the Loan Agreement), being that certain
-2-
<PAGE> 3
revolving promissory note dated July 1, 1997 in the face amount of
$30,000,000.00, issued by the Grantor, payable to the order of the Beneficiary
and with final maturity on the earlier to occur of (i) May 28, 1998, or (ii)
the Completion Date of the last Interim Construction Loan originated prior to
the Drawdown Termination Date and any and all renewals, extensions for any
period, modifications, amendments, enlargements or rearrangements thereof; (b)
the performance of all obligations of the Grantor under this Deed of Trust or
any of the Security Instruments (as defined in the Loan Agreement), including
the Loan Agreement; (c) all other sums of money which may be hereafter paid or
advanced by or on behalf of the Beneficiary under the terms and provisions of
this Deed of Trust; (d) any additional loans made by the Beneficiary to the
Grantor (it being contemplated that the Beneficiary may lend additional sums to
the Grantor from time to time, but shall not be obligated to do so, and the
Grantor hereby agrees that any such additional loans shall be secured by this
Deed of Trust; and (e) any and all other indebtedness, obligations and
liabilities of any kind of the Grantor to the Beneficiary, now and hereafter
existing, absolute or contingent, joint and/or several, secured or unsecured,
due or not due, arising by operation of law or otherwise, or direct or
indirect, including indebtedness, obligations and liabilities to the
Beneficiary of the Grantor as a member of any partnership, syndicate,
association or other group, and whether incurred by the Grantor as principal,
surety, endorser, guarantor, accommodation party or otherwise, and whether
originally contracted with the Beneficiary or acquired by the Beneficiary
pursuant to a loan participation agreement or otherwise.
ARTICLE II
The Grantor hereby agrees that all of the provisions of Articles II,
III, IV and V of the Master Form of Deed of Trust and Security Agreement
Recorded by Bank United (the "Master Form"), filed for record on ______________
in the Office of the County Clerk of ______________ County, Texas, under
Clerk's File No. ____________ of the Official Public Records of Real Property
of ______________ County, Texas, are hereby incorporated herein by reference as
if such representations, warranties, covenants and other provisions set forth
in the Master Form were fully made in this Deed of Trust and Security Agreement
and apply to the Premises herein described as if they were set forth in this
Deed of Trust and Security Agreement.
ARTICLE III
If the obligations secured hereby are fully paid and performed in
accordance with the terms and provisions of this instrument, the Master Form,
the Note and all other Security Instruments, and if the covenants and
agreements contained herein
-3-
<PAGE> 4
and in the Loan Agreement are kept and performed, then this conveyance shall
become null and void and shall be released at the expense of the Grantor;
otherwise, the same shall remain in full force and effect; and upon the
occurrence, and during the continuation of an Event of Default (as defined in
the Loan Agreement), then the Obligations secured hereby shall, at once or at
any time thereafter while any part of the Obligations remain unpaid, at the
option of any Beneficiary, become due and payable without demand or notice (all
rights to demand and notice being hereby expressly waived except as otherwise
expressly provided in the Loan Agreement), and it shall thereupon be the duty
of the above named Trustee, or his successor or substitute, as hereinafter
provided, to enforce this trust at the request of any Beneficiary (which
request shall be presumed) and to sell or offer for sale all or any part of the
Premises in such portions, order and parcels as Beneficiary may determine, with
or without having first taken possession of the same, to the highest bidder for
cash at public auction. Such sale shall be made in accordance with the terms
and provisions of the Master Form.
This Deed of Trust and Security Agreement is executed subject to the
matters set forth on ___________________ Commitment for Title Insurance (GF
#____________) dated _______________ as exceptions 1 and _____ through _____ on
Schedule B (the "Permitted Encumbrances"). This Deed of Trust and Security
Agreement is a "construction mortgage" within the meaning of Section 9.313 of
the Texas Business and Commerce Code in that it secures an obligation incurred
for the construction of improvements on land.
The Grantor hereby acknowledges receipt of a copy of the Master Form
upon the execution and delivery of this Deed of Trust and Security Agreement.
DATED and EFFECTIVE as of the ___ day of ________________, 19____.
NEWMARK HOMES, L.P.
By: Newmark Home Corporation,
General Partner
By:________________________________
Name:______________________________
Title:_____________________________
-4-
<PAGE> 5
THE STATE OF TEXAS )
)
COUNTY OF ____________ )
This instrument was acknowledged before me on the _____ day of
______________, 19____, by _______________________________________ of Newmark
Home Corporation, a Nevada corporation, on behalf of said corporation and the
corporation acknowledged this instrument as partner on behalf of Newmark Homes,
L.P., a Texas limited partnership.
------------------------------
Notary Public in and for the
State of Texas
After recording, please return to:
Bank United
3200 Southwest Freeway, Suite 2000
Houston, Texas 77027
Attention: Construction Loan Department
-5-
<PAGE> 1
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of November 1, 1996
(the "Effective Date") by and between NEWMARK HOME CORPORATION, a Nevada
corporation (the "Employer"), and TERRY WHITE, an individual residing in Sugar
Land, Texas (the "Employee").
RECITALS
The Employer, its divisions, subsidiaries, and other affiliated entities are
primarily engaged in the business of constructing single family residences. It
is the intent and purpose of the parties hereto to specify in this Agreement
the terms and conditions of Employee's employment with the Employer.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.
"Agreement"--this Employment Agreement, as amended from time to time.
"Base Salary"--as defined in Section 3.1(a).
"Basic Compensation" means Base Salary and Benefits.
"Benefits"--as defined in Section 3.1(b).
"Board of Directors" means the board of directors of the Employer.
"Disability"--as defined in Section 4.2.
"Effective Date" means the date stated in the first paragraph of this
Agreement.
"Employment Period" means the term of the Employee's employment under
this Agreement.
"Fiscal Year" means the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
"For cause"--as defined in Section 4.3.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, business trust, association,
organization, or governmental body.
<PAGE> 2
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
The Employer hereby employs the Employee, and the Employee
hereby accepts employment by the Employer, upon the terms and
conditions set forth in this Agreement.
2.2 TERM
Subject to the provisions of Section 5, the term of the
Employee's employment under this Agreement will be three (3)
years and two (2) months, beginning on the Effective Date and
ending on December 31, 1999.
2.3 DUTIES
The Employee will serve as Sr. Vice President, Chief Financial
Officer and Treasurer of the Employer for the term of this
Agreement and will have such duties as are assigned or
delegated to the Employee by the Board of Directors. The
Employee will devote his full business time, attention, skill,
and energy exclusively to the business of the Employer, will
use his best efforts to promote the success of the Employer's
business, and will cooperate fully with the Board of Directors
in the advancement of the best interests of the Employer.
Nothing in this Section 2.3, however, will prevent the
Employee from engaging in additional activities in connection
with personal investments and community affairs that are not
inconsistent with the Employee's duties under this Agreement.
If the Employee is elected as a director of the Employer or as
a director or officer of any of its affiliates, the Employee
will fulfill his duties as such director or officer without
additional compensation.
3. COMPENSATION
The compensation and other benefits payable to the Employee under this
Agreement shall constitute the full consideration to be paid to the
Employee for all services to be rendered by the Employee for the
Employer, its divisions, subsidiaries and other affiliated entities.
3.1 BASIC COMPENSATION
(a) The Employee will be paid an annual salary as set
forth below ("Base Salary"), which will be payable in
equal periodic installments according to the
Employer's customary payroll practices, but no less
frequently than monthly.
<TABLE>
<CAPTION>
Year Base Salary
---- -----------
<S> <C>
10/1/96 - 12/31/96 $125,000.00
1997 $137,500.00
1998 $150,000.00
1999 $162,500.00
</TABLE>
2
<PAGE> 3
(b) The Employee will, during the Employment Period, be
permitted to participate in such pension, profit
sharing, bonus, life insurance, hospitalization,
major medical and other employee benefit plans of the
Employer that may be in effect from time to time, to
the extent Employee is eligible under the terms of
those plans (collectively, the "Benefits"). The term
"Benefits" shall include (a) the payments under the
Option Termination Agreement dated as of October 1,
1993 as provided therein, and (b) the 1996 Bonus
Program currently in effect.
4. TERMINATION
4.1 EVENTS OF TERMINATION
The Employment Period, the Employee's Basic Compensation, and
any and all other rights of the Employee under this Agreement
or otherwise as an employee of the Employer will terminate
(except as otherwise provided in this Section 4):
(a) upon the death of the Employee;
(b) upon the disability of the Employee (as defined in
Section 4.2) immediately upon notice from either
party to the other; or
(c) for cause (as defined in Section 4.3), immediately
upon notice from the Employer to the Employee, or at
such later time as such notice may specify;
4.2 DEFINITION OF DISABILITY
For purposes of Section 4.1, the Employee will be deemed to
have a "disability" if, for physical or mental reasons, the
Employee is unable to perform the essential functions of the
Employee's duties under this Agreement for 120 consecutive
days, or 180 days during any twelve (12) month period, as
determined in accordance with this Section 4.2. The disability
of the Employee will be determined by a medical doctor
selected by written agreement of the Employer and the Employee
upon the request of either party by notice to the other. If
the Employer and the Employee cannot agree on the selection of
a medical doctor, each of them will select a medical doctor
and the two (2) medical doctors will select a third medical
doctor who will determine whether the Employee has a
disability. The determination of the medical doctor selected
under this Section 4.2 will be binding on both parties. The
Employee must submit to a reasonable number of examinations by
the medical doctor making the determination of disability
under this Section 4.2, and the Employee hereby authorizes the
disclosure and release to the Employer of such determination
and all supporting medical records. If the Employee is not
legally competent, the Employee's legal guardian or duly
authorized attorney-in-fact will act in the Employee's stead,
under this Section 4.2, for the purposes of submitting the
Employee to the examinations, and providing the authorization
of disclosure, required under this Section 4.2.
3
<PAGE> 4
4.3 DEFINITION OF "FOR CAUSE"
For purposes of Section 4.1, the phrase "for cause" means: (a)
the commission of fraud, theft, embezzlement, or similar
malfeasance involving moral turpitude or the conviction of, or
plea of nolo contendere to, any felony; (b) gross negligence,
nonfeasance, dishonesty, willful misconduct or substantial
failure to perform employment duties in a manner consistent
with normal standards of job performance after prior
evaluation and warning related to such standards of job
performance; or (c) the appropriation (or attempted
appropriation) of a material business opportunity of the
Employer.
4.4 TERMINATION PAY
Effective upon the termination of this Agreement, the Employer
will be obligated to pay the Employee (or, in the event of his
death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 4.4, and in lieu
of all other amounts and in settlement and complete release of
all claims the Employee may have against the Employer. For
purposes of this Section 4.4, the Employee's designated
beneficiary will be such individual beneficiary or trust,
located at such address, as the Employee may designate by
notice to the Employer from time to time or, if the Employee
fails to give notice to the Employer of such a beneficiary,
the Employee's estate.
(a) Termination by the Employer for Cause. If the
Employer terminates this Agreement for cause, the
Employee will be entitled to receive his accrued, but
unpaid, Base Salary only through the date such
termination is effective.
(b) Termination upon Disability. If this Agreement is
terminated by either party as a result of the
Employee's disability, as determined under Section
4.2, the Employer will pay the Employee his Base
Salary through the remainder of the calendar month
during which such termination is effective.
(c) Termination upon Death. If this Agreement is
terminated because of the Employee's death, the
Employee's estate will be entitled to receive his
Base Salary through the end of the calendar month in
which his death occurs.
(d) Benefits. The Employee's accrual of, or participation
in plans providing for, Benefits, will cease at the
effective date of the termination of this Agreement,
except as otherwise specifically provided in writing
in the documentation for any such Benefit. The
Employee will not receive, as part of his termination
pay pursuant to this Section 4, any payment or other
compensation for any vacation, holiday, sick leave,
or other leave unused on the date the notice of
termination is given under this Agreement, unless
Employer's written personnel policies provide
otherwise.
4
<PAGE> 5
5. GENERAL PROVISIONS
5.1 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any
delay by either party in exercising any right, power, or
privilege under this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be
discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by
the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take
further action without notice or demand as provided in this
Agreement.
5.2 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective
successors, assigns, heirs, and legal representatives,
including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets
may be transferred. The duties and covenants of the Employee
under this Agreement, being personal, may not be delegated.
5.3 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have
been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by facsimile (with written
confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case
to the appropriate addresses and facsimile numbers set forth
below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
If to Employer:
Newmark Home Corporation
10435 Greenbough, Suite 101
Stafford, TX 77477
Facsimile No.: 713/261-4663
5
<PAGE> 6
With a copy to:
Cathryn L. Porter
Pacific USA Holdings Corp.
3200 Southwest Freeway, Suite 1220
Houston, TX 77027
Facsimile No.: 713/871-0155
If to the Employee:
Terry White
4006 Austin Meadow
Sugar Land, Texas 77479
5.4 ENTIRE AGREEMENT; AMENDMENTS
This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or
written, between the parties hereto with respect to the
subject matter hereof. This Agreement may not be amended
orally, but only by an agreement in writing signed by the
parties hereto.
5.5 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Texas without regard to conflicts of laws principles.
5.6 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
"EMPLOYER"
NEWMARK HOME CORPORATION
By: /s/ LONNIE M. FEDRICK
----------------------------
Name: Lonnie M. Fedrick
--------------------------
Title: President 12/23/96
-------------------------
"EMPLOYEE"
/s/ TERRY WHITE
-------------------------------
TERRY WHITE
6
<PAGE> 1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of November 1, 1996
(the "Effective Date") by and between NEWMARK HOME CORPORATION, a Nevada
corporation (the "Employer"), and ERIC ROME, an individual residing in Austin,
Texas (the "Employee").
RECITALS
The Employer, its divisions, subsidiaries, and other affiliated entities are
primarily engaged in the business of constructing single family residences. It
is the intent and purpose of the parties hereto to specify in this Agreement
the terms and conditions of Employee's employment with the Employer.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.
"Agreement"--this Employment Agreement, as amended from time to time.
"Base Salary"--as defined in Section 3.1(a).
"Basic Compensation" means Base Salary and Benefits.
"Benefits"--as defined in Section 3.1(b).
"Board of Directors" means the board of directors of the Employer.
"Disability"--as defined in Section 4.2.
"Effective Date" means the date stated in the first paragraph of this
Agreement.
"Employment Period" means the term of the Employee's employment under
this Agreement.
"Fiscal Year" means the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
"For cause"--as defined in Section 4.3.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, business trust, association,
organization, or governmental body.
<PAGE> 2
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
The Employer hereby employs the Employee, and the Employee
hereby accepts employment by the Employer, upon the terms and
conditions set forth in this Agreement.
2.2 TERM
Subject to the provisions of Section 5, the term of the
Employee's employment under this Agreement will be three (3)
years and two (2) months, beginning on the Effective Date and
ending on December 31, 1999.
2.3 DUTIES
The Employee will serve as President-Texas Division of the
Employer for the term of this Agreement and will have such
duties as are assigned or delegated to the Employee by the
Board of Directors. The Employee will devote his full business
time, attention, skill, and energy exclusively to the business
of the Employer, will use his best efforts to promote the
success of the Employer's business, and will cooperate fully
with the Board of Directors in the advancement of the best
interests of the Employer. Nothing in this Section 2.3,
however, will prevent the Employee from engaging in additional
activities in connection with personal investments and
community affairs that are not inconsistent with the
Employee's duties under this Agreement. If the Employee is
elected as a director of the Employer or as a director or
officer of any of its affiliates, the Employee will fulfill
his duties as such director or officer without additional
compensation.
3. COMPENSATION
The compensation and other benefits payable to the Employee under this
Agreement shall constitute the full consideration to be paid to the
Employee for all services to be rendered by the Employee for the
Employer, its divisions, subsidiaries and other affiliated entities.
3.1 BASIC COMPENSATION
(a) The Employee will be paid an annual salary as set
forth below ("Base Salary"), which will be payable in
equal periodic installments according to the
Employer's customary payroll practices, but no less
frequently than monthly.
<TABLE>
<CAPTION>
Year Base Salary
---- -----------
<S> <C>
11/1/96 - 12/31/96 $200,000.00
1997 $225,000.00
1998 $250,000.00
1999 $275,000.00
</TABLE>
2
<PAGE> 3
(b) The Employee will, during the Employment Period, be
permitted to participate in such pension, profit
sharing, bonus, life insurance, hospitalization,
major medical and other employee benefit plans of the
Employer that may be in effect from time to time, to
the extent Employee is eligible under the terms of
those plans (collectively, the "Benefits"). The term
"Benefits" shall include (a) the payments under the
Option Termination Agreement dated as of October 1,
1993 as provided therein, and (b) the 1996 Bonus
Program currently in effect.
4. TERMINATION
4.1 EVENTS OF TERMINATION
The Employment Period, the Employee's Basic Compensation, and
any and all other rights of the Employee under this Agreement
or otherwise as an employee of the Employer will terminate
(except as otherwise provided in this Section 4):
(a) upon the death of the Employee;
(b) upon the disability of the Employee (as defined in
Section 4.2) immediately upon notice from either
party to the other; or
(c) for cause (as defined in Section 4.3), immediately
upon notice from the Employer to the Employee, or at
such later time as such notice may specify;
4.2 DEFINITION OF DISABILITY
For purposes of Section 4.1, the Employee will be deemed to
have a "disability" if, for physical or mental reasons, the
Employee is unable to perform the essential functions of the
Employee's duties under this Agreement for 120 consecutive
days, or 180 days during any twelve (12) month period, as
determined in accordance with this Section 4.2. The disability
of the Employee will be determined by a medical doctor
selected by written agreement of the Employer and the Employee
upon the request of either party by notice to the other. If
the Employer and the Employee cannot agree on the selection of
a medical doctor, each of them will select a medical doctor
and the two (2) medical doctors will select a third medical
doctor who will determine whether the Employee has a
disability. The determination of the medical doctor selected
under this Section 4.2 will be binding on both parties. The
Employee must submit to a reasonable number of examinations by
the medical doctor making the determination of disability
under this Section 4.2, and the Employee hereby authorizes the
disclosure and release to the Employer of such determination
and all supporting medical records. If the Employee is not
legally competent, the Employee's legal guardian or duly
authorized attorney-in-fact will act in the Employee's stead,
under this Section 4.2, for the purposes of submitting the
Employee to the examinations, and providing the authorization
of disclosure, required under this Section 4.2.
3
<PAGE> 4
4.3 DEFINITION OF "FOR CAUSE"
For purposes of Section 4.1, the phrase "for cause" means: (a)
the commission of fraud, theft, embezzlement, or similar
malfeasance involving moral turpitude or the conviction of, or
plea of nolo contendere to, any felony; (b) gross negligence,
nonfeasance, dishonesty, willful misconduct or substantial
failure to perform employment duties in a manner consistent
with normal standards of job performance after prior
evaluation and warning related to such standards of job
performance; or (c) the appropriation (or attempted
appropriation) of a material business opportunity of the
Employer.
4.4 TERMINATION PAY
Effective upon the termination of this Agreement, the Employer
will be obligated to pay the Employee (or, in the event of his
death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 4.4, and in lieu
of all other amounts and in settlement and complete release of
all claims the Employee may have against the Employer. For
purposes of this Section 4.4, the Employee's designated
beneficiary will be such individual beneficiary or trust,
located at such address, as the Employee may designate by
notice to the Employer from time to time or, if the Employee
fails to give notice to the Employer of such a beneficiary,
the Employee's estate.
(a) Termination by the Employer for Cause. If the
Employer terminates this Agreement for cause, the
Employee will be entitled to receive his accrued, but
unpaid, Base Salary only through the date such
termination is effective.
(b) Termination upon Disability. If this Agreement is
terminated by either party as a result of the
Employee's disability, as determined under Section
4.2, the Employer will pay the Employee his Base
Salary through the remainder of the calendar month
during which such termination is effective.
(c) Termination upon Death. If this Agreement is
terminated because of the Employee's death, the
Employee's estate will be entitled to receive his
Base Salary through the end of the calendar month in
which his death occurs.
(d) Benefits. The Employee's accrual of, or participation
in plans providing for, Benefits, will cease at the
effective date of the termination of this Agreement,
except as otherwise specifically provided in writing
in the documentation for any such Benefit. The
Employee will not receive, as part of his termination
pay pursuant to this Section 4, any payment or other
compensation for any vacation, holiday, sick leave,
or other leave unused on the date the notice of
termination is given under this Agreement, unless
Employer's written personnel policies provide
otherwise.
4
<PAGE> 5
5. GENERAL PROVISIONS
5.1 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any
delay by either party in exercising any right, power, or
privilege under this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be
discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by
the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take
further action without notice or demand as provided in this
Agreement.
5.2 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective
successors, assigns, heirs, and legal representatives,
including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets
may be transferred. The duties and covenants of the Employee
under this Agreement, being personal, may not be delegated.
5.3 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have
been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by facsimile (with written
confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case
to the appropriate addresses and facsimile numbers set forth
below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
If to Employer:
Newmark Home Corporation
10435 Greenbough, Suite 101
Stafford, TX 77477
Facsimile No.: 713/261-4663
5
<PAGE> 6
With a copy to:
Cathryn L. Porter
Pacific USA Holdings Corp.
3200 Southwest Freeway, Suite 1220
Houston, TX 77027
Facsimile No.: 713/871-0155
If to the Employee:
Eric Rome
2909 Montebello Ct.
Austin, Texas 78746
5.4 ENTIRE AGREEMENT; AMENDMENTS
This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or
written, between the parties hereto with respect to the
subject matter hereof. This Agreement may not be amended
orally, but only by an agreement in writing signed by the
parties hereto.
5.5 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Texas without regard to conflicts of laws principles.
5.6 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
"EMPLOYER"
NEWMARK HOME CORPORATION
By: /s/ LONNIE M. FEDRICK
----------------------------
Name: Lonnie M. Fedrick
--------------------------
Title: President 12/23/96
-------------------------
"EMPLOYEE"
/s/ ERIC ROME 12/13/96
-------------------------------
ERIC ROME
6
<PAGE> 1
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of November 1, 1996
(the "Effective Date") by and between NEWMARK HOME CORPORATION, a Nevada
corporation (the "Employer"), and STEVE TREECE, an individual residing in
Plano, Texas (the "Employee").
RECITALS
The Employer, its divisions, subsidiaries, and other affiliated entities are
primarily engaged in the business of constructing single family residences. It
is the intent and purpose of the parties hereto to specify in this Agreement
the terms and conditions of Employee's employment with the Employer.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.
"Agreement"--this Employment Agreement, as amended from time to time.
"Base Salary"--as defined in Section 3.1(a).
"Basic Compensation" means Base Salary and Benefits.
"Benefits"--as defined in Section 3.1(b).
"Board of Directors" means the board of directors of the Employer.
"Disability"--as defined in Section 4.2.
"Effective Date" means the date stated in the first paragraph of this
Agreement.
"Employment Period" means the term of the Employee's employment under
this Agreement.
"Fiscal Year" means the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
"For cause"--as defined in Section 4.3.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, business trust, association,
organization, or governmental body.
<PAGE> 2
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
The Employer hereby employs the Employee, and the Employee
hereby accepts employment by the Employer, upon the terms and
conditions set forth in this Agreement.
2.2 TERM
Subject to the provisions of Section 5, the term of the
Employee's employment under this Agreement will be three (3)
years and two (2) months, beginning on the Effective Date and
ending on December 31, 1999.
2.3 DUTIES
The Employee will serve as Executive Vice President-North
Texas Division of the Employer for the term of this Agreement
and will have such duties as are assigned or delegated to the
Employee by the Board of Directors. The Employee will devote
his full business time, attention, skill, and energy
exclusively to the business of the Employer, will use his best
efforts to promote the success of the Employer's business, and
will cooperate fully with the Board of Directors in the
advancement of the best interests of the Employer. Nothing in
this Section 2.3, however, will prevent the Employee from
engaging in additional activities in connection with personal
investments and community affairs that are not inconsistent
with the Employee's duties under this Agreement. If the
Employee is elected as a director of the Employer or as a
director or officer of any of its affiliates, the Employee
will fulfill his duties as such director or officer without
additional compensation.
3. COMPENSATION
The compensation and other benefits payable to the Employee under this
Agreement shall constitute the full consideration to be paid to the
Employee for all services to be rendered by the Employee for the
Employer, its divisions, subsidiaries and other affiliated entities.
3.1 BASIC COMPENSATION
(a) The Employee will be paid an annual salary as set
forth below ("Base Salary"), which will be payable in
equal periodic installments according to the
Employer's customary payroll practices, but no less
frequently than monthly.
<TABLE>
<CAPTION>
Year Base Salary
---- -----------
<S> <C>
11/1/96 - 12/31/96 $120,000.00
1997 $140,000.00
1998 $155,000.00
1999 $170,000.00
</TABLE>
2
<PAGE> 3
(b) The Employee will, during the Employment Period, be
permitted to participate in such pension, profit
sharing, bonus, life insurance, hospitalization,
major medical and other employee benefit plans of the
Employer that may be in effect from time to time, to
the extent Employee is eligible under the terms of
those plans (collectively, the "Benefits"). The term
"Benefits" shall include the 1996 Bonus Program
currently in effect.
4. TERMINATION
4.1 EVENTS OF TERMINATION
The Employment Period, the Employee's Basic Compensation, and
any and all other rights of the Employee under this Agreement
or otherwise as an employee of the Employer will terminate
(except as otherwise provided in this Section 4):
(a) upon the death of the Employee;
(b) upon the disability of the Employee (as defined in
Section 4.2) immediately upon notice from either
party to the other; or
(c) for cause (as defined in Section 4.3), immediately
upon notice from the Employer to the Employee, or at
such later time as such notice may specify;
4.2 DEFINITION OF DISABILITY
For purposes of Section 4.1, the Employee will be deemed to
have a "disability" if, for physical or mental reasons, the
Employee is unable to perform the essential functions of the
Employee's duties under this Agreement for 120 consecutive
days, or 180 days during any twelve (12) month period, as
determined in accordance with this Section 4.2. The disability
of the Employee will be determined by a medical doctor
selected by written agreement of the Employer and the Employee
upon the request of either party by notice to the other. If
the Employer and the Employee cannot agree on the selection of
a medical doctor, each of them will select a medical doctor
and the two (2) medical doctors will select a third medical
doctor who will determine whether the Employee has a
disability. The determination of the medical doctor selected
under this Section 4.2 will be binding on both parties. The
Employee must submit to a reasonable number of examinations by
the medical doctor making the determination of disability
under this Section 4.2, and the Employee hereby authorizes the
disclosure and release to the Employer of such determination
and all supporting medical records. If the Employee is not
legally competent, the Employee's legal guardian or duly
authorized attorney-in-fact will act in the Employee's stead,
under this Section 4.2, for the purposes of submitting the
Employee to the examinations, and providing the authorization
of disclosure, required under this Section 4.2.
3
<PAGE> 4
4.3 DEFINITION OF "FOR CAUSE"
For purposes of Section 4.1, the phrase "for cause" means: (a)
the commission of fraud, theft, embezzlement, or similar
malfeasance involving moral turpitude or the conviction of, or
plea of nolo contendere to, any felony; (b) gross negligence,
nonfeasance, dishonesty, willful misconduct or substantial
failure to perform employment duties in a manner consistent
with normal standards of job performance after prior
evaluation and warning related to such standards of job
performance; or (c) the appropriation (or attempted
appropriation) of a material business opportunity of the
Employer.
4.4 TERMINATION PAY
Effective upon the termination of this Agreement, the Employer
will be obligated to pay the Employee (or, in the event of his
death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 4.4, and in lieu
of all other amounts and in settlement and complete release of
all claims the Employee may have against the Employer. For
purposes of this Section 4.4, the Employee's designated
beneficiary will be such individual beneficiary or trust,
located at such address, as the Employee may designate by
notice to the Employer from time to time or, if the Employee
fails to give notice to the Employer of such a beneficiary,
the Employee's estate.
(a) Termination by the Employer for Cause. If the
Employer terminates this Agreement for cause, the
Employee will be entitled to receive his accrued, but
unpaid, Base Salary only through the date such
termination is effective.
(b) Termination upon Disability. If this Agreement is
terminated by either party as a result of the
Employee's disability, as determined under Section
4.2, the Employer will pay the Employee his Base
Salary through the remainder of the calendar month
during which such termination is effective.
(c) Termination upon Death. If this Agreement is
terminated because of the Employee's death, the
Employee's estate will be entitled to receive his
Base Salary through the end of the calendar month in
which his death occurs.
(d) Benefits. The Employee's accrual of, or participation
in plans providing for, Benefits, will cease at the
effective date of the termination of this Agreement,
except as otherwise specifically provided in writing
in the documentation for any such Benefit. The
Employee will not receive, as part of his termination
pay pursuant to this Section 4, any payment or other
compensation for any vacation, holiday, sick leave,
or other leave unused on the date the notice of
termination is given under this Agreement, unless
Employer's written personnel policies provide
otherwise.
4
<PAGE> 5
5. GENERAL PROVISIONS
5.1 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any
delay by either party in exercising any right, power, or
privilege under this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be
discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by
the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take
further action without notice or demand as provided in this
Agreement.
5.2 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective
successors, assigns, heirs, and legal representatives,
including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets
may be transferred. The duties and covenants of the Employee
under this Agreement, being personal, may not be delegated.
5.3 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have
been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by facsimile (with written
confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case
to the appropriate addresses and facsimile numbers set forth
below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
If to Employer:
Newmark Home Corporation
10435 Greenbough, Suite 101
Stafford, TX 77477
Facsimile No.: 713/261-4663
5
<PAGE> 6
With a copy to:
Cathryn L. Porter
Pacific USA Holdings Corp.
3200 Southwest Freeway, Suite 1220
Houston, TX 77027
Facsimile No.: 713/871-0155
If to the Employee:
Steve Treece
6724 Myrtle Beach
Plano, TX 75893
5.4 ENTIRE AGREEMENT; AMENDMENTS
This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or
written, between the parties hereto with respect to the
subject matter hereof. This Agreement may not be amended
orally, but only by an agreement in writing signed by the
parties hereto.
5.5 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Texas without regard to conflicts of laws principles.
5.6 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
"EMPLOYER"
NEWMARK HOME CORPORATION
By: /s/ LONNIE M. FEDRICK
----------------------------
Name: Lonnie M. Fedrick
--------------------------
Title: President 12/23/96
-------------------------
"EMPLOYEE"
/s/ STEVE TREECE
-------------------------------
STEVE TREECE
6
<PAGE> 1
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of November 1, 1996
(the "Effective Date") by and between NEWMARK HOME CORPORATION, a Nevada
corporation (the "Employer"), and RAYMOND G. HURLBUT, an individual residing in
Sugar Land, Texas (the "Employee").
RECITALS
The Employer, its divisions, subsidiaries, and other affiliated entities are
primarily engaged in the business of constructing single family residences. It
is the intent and purpose of the parties hereto to specify in this Agreement
the terms and conditions of Employee's employment with the Employer.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.
"Agreement"--this Employment Agreement, as amended from time to time.
"Base Salary"--as defined in Section 3.1(a).
"Basic Compensation" means Base Salary and Benefits.
"Benefits"--as defined in Section 3.1(b).
"Board of Directors" means the board of directors of the Employer.
"Disability"--as defined in Section 4.2.
"Effective Date" means the date stated in the first paragraph of this
Agreement.
"Employment Period" means the term of the Employee's employment under
this Agreement.
"Fiscal Year" means the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
"For cause"--as defined in Section 4.3.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, business trust, association,
organization, or governmental body.
<PAGE> 2
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
The Employer hereby employs the Employee, and the Employee
hereby accepts employment by the Employer, upon the terms and
conditions set forth in this Agreement.
2.2 TERM
Subject to the provisions of Section 5, the term of the
Employee's employment under this Agreement will be three (3)
years and two (2) months, beginning on the Effective Date and
ending on December 31, 1999.
2.3 DUTIES
The Employee will serve as Executive Vice President of the
Employer for the term of this Agreement and will have such
duties as are assigned or delegated to the Employee by the
Board of Directors. The Employee will devote his full business
time, attention, skill, and energy exclusively to the business
of the Employer, will use his best efforts to promote the
success of the Employer's business, and will cooperate fully
with the Board of Directors in the advancement of the best
interests of the Employer. Nothing in this Section 2.3,
however, will prevent the Employee from engaging in additional
activities in connection with personal investments and
community affairs that are not inconsistent with the
Employee's duties under this Agreement. If the Employee is
elected as a director of the Employer or as a director or
officer of any of its affiliates, the Employee will fulfill
his duties as such director or officer without additional
compensation.
3. COMPENSATION
The compensation and other benefits payable to the Employee under this
Agreement shall constitute the full consideration to be paid to the
Employee for all services to be rendered by the Employee for the
Employer, its divisions, subsidiaries and other affiliated entities.
3.1 BASIC COMPENSATION
(a) The Employee will be paid an annual salary as set
forth below ("Base Salary"), which will be payable in
equal periodic installments according to the
Employer's customary payroll practices, but no less
frequently than monthly.
<TABLE>
<CAPTION>
Year Base Salary
---- -----------
<S> <C>
11/1/96 - 12/31/96 $165,000.00
1997 $185,000.00
1998 $205,000.00
1999 $225,000.00
</TABLE>
2
<PAGE> 3
(b) The Employee will, during the Employment Period, be
permitted to participate in such pension, profit
sharing, bonus, life insurance, hospitalization,
major medical and other employee benefit plans of the
Employer that may be in effect from time to time, to
the extent Employee is eligible under the terms of
those plans (collectively, the "Benefits"). The term
"Benefits" shall include the 1996 Bonus Program
currently in effect.
4. TERMINATION
4.1 EVENTS OF TERMINATION
The Employment Period, the Employee's Basic Compensation, and
any and all other rights of the Employee under this Agreement
or otherwise as an employee of the Employer will terminate
(except as otherwise provided in this Section 4):
(a) upon the death of the Employee;
(b) upon the disability of the Employee (as defined in
Section 4.2) immediately upon notice from either
party to the other; or
(c) for cause (as defined in Section 4.3), immediately
upon notice from the Employer to the Employee, or at
such later time as such notice may specify;
4.2 DEFINITION OF DISABILITY
For purposes of Section 4.1, the Employee will be deemed to
have a "disability" if, for physical or mental reasons, the
Employee is unable to perform the essential functions of the
Employee's duties under this Agreement for 120 consecutive
days, or 180 days during any twelve (12) month period, as
determined in accordance with this Section 4.2. The disability
of the Employee will be determined by a medical doctor
selected by written agreement of the Employer and the Employee
upon the request of either party by notice to the other. If
the Employer and the Employee cannot agree on the selection of
a medical doctor, each of them will select a medical doctor
and the two (2) medical doctors will select a third medical
doctor who will determine whether the Employee has a
disability. The determination of the medical doctor selected
under this Section 4.2 will be binding on both parties. The
Employee must submit to a reasonable number of examinations by
the medical doctor making the determination of disability
under this Section 4.2, and the Employee hereby authorizes the
disclosure and release to the Employer of such determination
and all supporting medical records. If the Employee is not
legally competent, the Employee's legal guardian or duly
authorized attorney-in-fact will act in the Employee's stead,
under this Section 4.2, for the purposes of submitting the
Employee to the examinations, and providing the authorization
of disclosure, required under this Section 4.2.
3
<PAGE> 4
4.3 DEFINITION OF "FOR CAUSE"
For purposes of Section 4.1, the phrase "for cause" means: (a)
the commission of fraud, theft, embezzlement, or similar
malfeasance involving moral turpitude or the conviction of, or
plea of nolo contendere to, any felony; (b) gross negligence,
nonfeasance, dishonesty, willful misconduct or substantial
failure to perform employment duties in a manner consistent
with normal standards of job performance after prior
evaluation and warning related to such standards of job
performance; or (c) the appropriation (or attempted
appropriation) of a material business opportunity of the
Employer.
4.4 TERMINATION PAY
Effective upon the termination of this Agreement, the Employer
will be obligated to pay the Employee (or, in the event of his
death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 4.4, and in lieu
of all other amounts and in settlement and complete release of
all claims the Employee may have against the Employer. For
purposes of this Section 4.4, the Employee's designated
beneficiary will be such individual beneficiary or trust,
located at such address, as the Employee may designate by
notice to the Employer from time to time or, if the Employee
fails to give notice to the Employer of such a beneficiary,
the Employee's estate.
(a) Termination by the Employer for Cause. If the
Employer terminates this Agreement for cause, the
Employee will be entitled to receive his accrued, but
unpaid, Base Salary only through the date such
termination is effective.
(b) Termination upon Disability. If this Agreement is
terminated by either party as a result of the
Employee's disability, as determined under Section
4.2, the Employer will pay the Employee his Base
Salary through the remainder of the calendar month
during which such termination is effective.
(c) Termination upon Death. If this Agreement is
terminated because of the Employee's death, the
Employee's estate will be entitled to receive his
Base Salary through the end of the calendar month in
which his death occurs.
(d) Benefits. The Employee's accrual of, or participation
in plans providing for, Benefits, will cease at the
effective date of the termination of this Agreement,
except as otherwise specifically provided in writing
in the documentation for any such Benefit. The
Employee will not receive, as part of his termination
pay pursuant to this Section 4, any payment or other
compensation for any vacation, holiday, sick leave,
or other leave unused on the date the notice of
termination is given under this Agreement, unless
Employer's written personnel policies provide
otherwise.
4
<PAGE> 5
5. GENERAL PROVISIONS
5.1 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any
delay by either party in exercising any right, power, or
privilege under this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be
discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by
the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take
further action without notice or demand as provided in this
Agreement.
5.2 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective
successors, assigns, heirs, and legal representatives,
including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets
may be transferred. The duties and covenants of the Employee
under this Agreement, being personal, may not be delegated.
5.3 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have
been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by facsimile (with written
confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case
to the appropriate addresses and facsimile numbers set forth
below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
If to Employer:
Newmark Home Corporation
10435 Greenbough, Suite 101
Stafford, TX 77477
Facsimile No.: 713/261-4663
5
<PAGE> 6
With a copy to:
Cathryn L. Porter
Pacific USA Holdings Corp.
3200 Southwest Freeway, Suite 1220
Houston, TX 77027
Facsimile No.: 713/871-0155
If to the Employee:
Raymond G. Hurlbut
20 Clear Springs
Sugar Land, Texas 77479
5.4 ENTIRE AGREEMENT; AMENDMENTS
This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or
written, between the parties hereto with respect to the
subject matter hereof. This Agreement may not be amended
orally, but only by an agreement in writing signed by the
parties hereto.
5.5 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Texas without regard to conflicts of laws principles.
5.6 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
"EMPLOYER"
NEWMARK HOME CORPORATION
By: /s/ LONNIE M. FEDRICK
----------------------------
Name: Lonnie M. Fedrick
--------------------------
Title: President 1/8/97
-------------------------
"EMPLOYEE"
/s/ RAYMOND G. HURLBUT
-------------------------------
RAYMOND G. HURLBUT
6
<PAGE> 1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of November 1, 1996
(the "Effective Date") by and between NEWMARK HOME CORPORATION, a Nevada
corporation (the "Employer"), and MIKE BECKETT, an individual residing in
Missouri City, Texas (the "Employee").
RECITALS
The Employer, its divisions, subsidiaries, and other affiliated entities are
primarily engaged in the business of constructing single family residences. It
is the intent and purpose of the parties hereto to specify in this Agreement
the terms and conditions of Employee's employment with the Employer.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.
"Agreement"--this Employment Agreement, as amended from time to time.
"Base Salary"--as defined in Section 3.1(a).
"Basic Compensation" means Base Salary and Benefits.
"Benefits"--as defined in Section 3.1(b).
"Board of Directors" means the board of directors of the Employer.
"Disability"--as defined in Section 4.2.
"Effective Date" means the date stated in the first paragraph of this
Agreement.
"Employment Period" means the term of the Employee's employment under
this Agreement.
"Fiscal Year" means the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
"For cause"--as defined in Section 4.3.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, business trust, association,
organization, or governmental body.
<PAGE> 2
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
The Employer hereby employs the Employee, and the Employee
hereby accepts employment by the Employer, upon the terms and
conditions set forth in this Agreement.
2.2 TERM
Subject to the provisions of Section 5, the term of the
Employee's employment under this Agreement will be three (3)
years and two (2) months, beginning on the Effective Date and
ending on December 31, 1999.
2.3 DUTIES
The Employee will serve as Sr. Vice President-Purchasing of
the Employer for the term of this Agreement and will have such
duties as are assigned or delegated to the Employee by the
Board of Directors. The Employee will devote his full business
time, attention, skill, and energy exclusively to the business
of the Employer, will use his best efforts to promote the
success of the Employer's business, and will cooperate fully
with the Board of Directors in the advancement of the best
interests of the Employer. Nothing in this Section 2.3,
however, will prevent the Employee from engaging in additional
activities in connection with personal investments and
community affairs that are not inconsistent with the
Employee's duties under this Agreement. If the Employee is
elected as a director of the Employer or as a director or
officer of any of its affiliates, the Employee will fulfill
his duties as such director or officer without additional
compensation.
3. COMPENSATION
The compensation and other benefits payable to the Employee under this
Agreement shall constitute the full consideration to be paid to the
Employee for all services to be rendered by the Employee for the
Employer, its divisions, subsidiaries and other affiliated entities.
3.1 BASIC COMPENSATION
(a) The Employee will be paid an annual salary as set
forth below ("Base Salary"), which will be payable in
equal periodic installments according to the
Employer's customary payroll practices, but no less
frequently than monthly.
<TABLE>
<CAPTION>
Year Base Salary
---- -----------
<S> <C>
11/1/96 - 12/31/96 $125,000.00
1997 $140,000.00
1998 $155,000.00
1999 $170,000.00
</TABLE>
2
<PAGE> 3
(b) The Employee will, during the Employment Period, be
permitted to participate in such pension, profit
sharing, bonus, life insurance, hospitalization,
major medical and other employee benefit plans of the
Employer that may be in effect from time to time, to
the extent Employee is eligible under the terms of
those plans (collectively, the "Benefits"). The term
"Benefits" shall include (a) the payments under the
Option Termination Agreement dated as of October 1,
1993 as provided therein, and (b) the 1996 Bonus
Program currently in effect.
4. TERMINATION
4.1 EVENTS OF TERMINATION
The Employment Period, the Employee's Basic Compensation, and
any and all other rights of the Employee under this Agreement
or otherwise as an employee of the Employer will terminate
(except as otherwise provided in this Section 4):
(a) upon the death of the Employee;
(b) upon the disability of the Employee (as defined in
Section 4.2) immediately upon notice from either
party to the other; or
(c) for cause (as defined in Section 4.3), immediately
upon notice from the Employer to the Employee, or at
such later time as such notice may specify;
4.2 DEFINITION OF DISABILITY
For purposes of Section 4.1, the Employee will be deemed to
have a "disability" if, for physical or mental reasons, the
Employee is unable to perform the essential functions of the
Employee's duties under this Agreement for 120 consecutive
days, or 180 days during any twelve (12) month period, as
determined in accordance with this Section 4.2. The disability
of the Employee will be determined by a medical doctor
selected by written agreement of the Employer and the Employee
upon the request of either party by notice to the other. If
the Employer and the Employee cannot agree on the selection of
a medical doctor, each of them will select a medical doctor
and the two (2) medical doctors will select a third medical
doctor who will determine whether the Employee has a
disability. The determination of the medical doctor selected
under this Section 4.2 will be binding on both parties. The
Employee must submit to a reasonable number of examinations by
the medical doctor making the determination of disability
under this Section 4.2, and the Employee hereby authorizes the
disclosure and release to the Employer of such determination
and all supporting medical records. If the Employee is not
legally competent, the Employee's legal guardian or duly
authorized attorney-in-fact will act in the Employee's stead,
under this Section 4.2, for the purposes of submitting the
Employee to the examinations, and providing the authorization
of disclosure, required under this Section 4.2.
3
<PAGE> 4
4.3 DEFINITION OF "FOR CAUSE"
For purposes of Section 4.1, the phrase "for cause" means: (a)
the commission of fraud, theft, embezzlement, or similar
malfeasance involving moral turpitude or the conviction of, or
plea of nolo contendere to, any felony; (b) gross negligence,
nonfeasance, dishonesty, willful misconduct or substantial
failure to perform employment duties in a manner consistent
with normal standards of job performance after prior
evaluation and warning related to such standards of job
performance; or (c) the appropriation (or attempted
appropriation) of a material business opportunity of the
Employer.
4.4 TERMINATION PAY
Effective upon the termination of this Agreement, the Employer
will be obligated to pay the Employee (or, in the event of his
death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 4.4, and in lieu
of all other amounts and in settlement and complete release of
all claims the Employee may have against the Employer. For
purposes of this Section 4.4, the Employee's designated
beneficiary will be such individual beneficiary or trust,
located at such address, as the Employee may designate by
notice to the Employer from time to time or, if the Employee
fails to give notice to the Employer of such a beneficiary,
the Employee's estate.
(a) Termination by the Employer for Cause. If the
Employer terminates this Agreement for cause, the
Employee will be entitled to receive his accrued, but
unpaid, Base Salary only through the date such
termination is effective.
(b) Termination upon Disability. If this Agreement is
terminated by either party as a result of the
Employee's disability, as determined under Section
4.2, the Employer will pay the Employee his Base
Salary through the remainder of the calendar month
during which such termination is effective.
(c) Termination upon Death. If this Agreement is
terminated because of the Employee's death, the
Employee's estate will be entitled to receive his
Base Salary through the end of the calendar month in
which his death occurs.
(d) Benefits. The Employee's accrual of, or participation
in plans providing for, Benefits, will cease at the
effective date of the termination of this Agreement,
except as otherwise specifically provided in writing
in the documentation for any such Benefit. The
Employee will not receive, as part of his termination
pay pursuant to this Section 4, any payment or other
compensation for any vacation, holiday, sick leave,
or other leave unused on the date the notice of
termination is given under this Agreement, unless
Employer's written personnel policies provide
otherwise.
4
<PAGE> 5
5. GENERAL PROVISIONS
5.1 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any
delay by either party in exercising any right, power, or
privilege under this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be
discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by
the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take
further action without notice or demand as provided in this
Agreement.
5.2 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective
successors, assigns, heirs, and legal representatives,
including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets
may be transferred. The duties and covenants of the Employee
under this Agreement, being personal, may not be delegated.
5.3 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have
been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by facsimile (with written
confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case
to the appropriate addresses and facsimile numbers set forth
below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
If to Employer:
Newmark Home Corporation
10435 Greenbough, Suite 101
Stafford, TX 77477
Facsimile No.: 713/261-4663
5
<PAGE> 6
With a copy to:
Cathryn L. Porter
Pacific USA Holdings Corp.
3200 Southwest Freeway, Suite 1220
Houston, TX 77027
Facsimile No.: 713/871-0155
If to the Employee:
Mike Beckett
4731 Diamond Spring
Missouri City, Texas 77459
5.4 ENTIRE AGREEMENT; AMENDMENTS
This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or
written, between the parties hereto with respect to the
subject matter hereof. This Agreement may not be amended
orally, but only by an agreement in writing signed by the
parties hereto.
5.5 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Texas without regard to conflicts of laws principles.
5.6 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
"EMPLOYER"
NEWMARK HOME CORPORATION
By: /s/ LONNIE M. FEDRICK
----------------------------
Name: Lonnie M. Fedrick
--------------------------
Title: President 12/26/96
-------------------------
"EMPLOYEE"
/s/ J.M. BECKETT
-------------------------------
MIKE BECKETT
6
<PAGE> 1
EXHIBIT 10.22
December 12, 1997
James Carr
9350 Sunset Drive, Suite 100
Miami, Florida 33173
Westbrooke Communities Inc.
Westbrooke at West Lake, Inc.
Westbrooke at Winston Trails, Inc.
Westbrooke at Pembroke Pines, Inc.
Westbrooke at Oakridge, Inc.
9350 Sunset Drive, Suite 100
Miami, Florida 33173
Attn: Mr. James Carr; President and Chief Executive Officer
Gentlemen:
This letter sets forth the intent of Pacific USA Holdings Corp., a Texas
corporation ("Pacific USA"), Newmark Homes Corp., a Nevada corporation and
wholly owned indirect subsidiary of Pacific USA ("Newmark"), and a corporation
to be formed which will be a wholly owned subsidiary of Newmark ("Acquiring
Entity"), James Carr ("Carr"), Westbrooke Communities, Inc., Westbrooke at West
Lake, Inc., Westbrooke at Pembroke Pines, Inc., Westbrooke at Winston Trails,
Inc., and Westbrooke at Oakridge, Inc. with respect to the purchase by Newmark
of the business known as The Westbrooke Partnership (the "Business") on the
following terms and conditions:
1. Basic Terms.
a. Acquisition of Business. Newmark will purchase 100%
of the Business (except as contemplated in paragraph 8(b)
hereof) of The Westbrooke Partnership, a Florida general
partnership (the "Partnership"), which is conducted by and
through Westbrooke Communities, Inc., Westbrooke at West Lake,
Inc., Westbrooke at Pembroke Pines, Inc., Westbrooke at
Winston Trails, Inc., and Westbrooke at Oakridge, Inc. (herein
collectively called the "Westbrooke Entities"). To facilitate
the purchase of the Partnership, Newmark will purchase 100%
of the issued and outstanding stock (collectively "Stock") in
the Westbrooke Entities. At closing, the Westbrooke Entities
and the Key Employees described in paragraph 8(b) below shall
own 100% of the outstanding partnership interests in
<PAGE> 2
Westbrooke Communities, Inc.
December 12, 1997
Page 2
the Partnership. The Stock shall be free from all liabilities
and encumbrances. Newmark shall make an election under
Section 338 of the Internal Code of 1986, as amended;
provided, however, if, as a result of such election, either
Carr or the Key Employees shall have an effective tax rate of
greater than the lowest capital gains rate then in effect and
applicable as to each such person with respect to any purchase
price paid in exchange for stock described herein, then
Pacific USA and Newmark will agree to adjust the respective
purchase prices so that the net effective after-tax benefit to
each of Carr and the Key Employees reflects the rate that
would have been payable by each had such election not been
made.
b. Letter of Credit. On or before December 29, 1997,
Newmark will provide an irrevocable letter of credit in the
amount of $10,000,000 on behalf of the Partnership in favor of
Nations Bank. The Partnership shall obtain a loan in the
amount of $10,000,000 from Nations Bank (the "Nations Bank
Loan") which shall be used solely for the purpose of (x)
paying in full the $7,500,000 loan made to the Partnership by
Morgan Guaranty Trust Company of New York, as Trustee, and (y)
purchasing the partnership interest in the Partnership owned
by Athena Westbrooke Investors, L.P. The terms of the Nations
Bank Loan shall be acceptable to both Newmark and the
Partnership. If the Closing does not occur on or before
January 2, 1998, the $10,000,000 Letter of Credit shall be
returned to Newmark. As security for the return of the Letter
of Credit, Carr shall pledge the Stock to Newmark and shall
personally guarantee the obligation. Such pledge (as it
relates to the $10 Million Letter of Credit) and the guaranty
shall be released at the closing. In addition, all closing
documents relating to the purchase of the Stock shall be
escrowed with a third party acceptable to all parties hereto,
with instructions to deliver the documents as instructed in an
Escrow Agreement, the terms of which shall be acceptable to
all parties hereto.
2. Purchase Price.
The purchase price for the Stock shall be as follows:
a. At closing, Newmark shall execute and deliver to Carr
a non-negotiable Promissory Note in the original principal sum
of $3,000,000 (the "Non-Negotiable Note") and a negotiable
Promissory Note in the amount of $9,341,000 (the "Negotiable
Note") (the Non-Negotiable Note and the Negotiable Note are
herein collectively called the "Purchase Notes"), each earning
interest at the rate of 6.45% per annum and being payable in
five annual installments, commencing upon the first
anniversary date of the closing. The initial principal
payment, due on the first anniversary date of the closing,
shall equal one-fifth (1/5) of the aggregate principal
<PAGE> 3
Westbrooke Communities, Inc.
December 12, 1997
Page 3
balance of the Purchase Notes and shall be applied solely to
the Negotiable Note. The remaining annual installments for
the Purchase Notes shall be payable in four equal
installments, based on the principal balance of each Purchase
Note. Interest shall be due and payable in five annual
installments. The Purchase Notes shall contain the usual and
customary provisions for attorneys' fees in the event of
default; notice in the event of default with a thirty (30) day
opportunity to cure; standard waivers; prepayment privileges
without premium or penalty; and such other terms and
provisions as may be mutually agreeable between Carr and
Newmark. Finalization of the amount of the Negotiable Note
versus the Non-Negotiable Note and payment terms of the
Purchase Notes are subject to completion of due diligence by
Newmark. The Purchase Notes shall initially be guaranteed by
Pacific USA and secured by a pledge of one hundred percent
(100%) of the Stock. The terms of the guaranty and pledge
agreement shall be mutually acceptable to the parties. The
parties agree that immediately following the receipt of the
Collateral by Carr, as a result of a foreclosure under the
pledge, any guaranties of indebtedness of the Acquired Entity
by Pacific USA or its affiliates must be released, and Carr
and the Partnership shall indemnify Pacific USA and its
affiliates for any liability under such guaranties, pending
such release. On the earlier to occur of (a) the closing of
the initial public offering of Newmark, (b) the sale by
Pacific USA of substantially all of the assets of Pacific
Southwest Bank, or (c) June 30, 1998, Newmark shall deliver to
Westbrooke, in substitution of the Pacific USA guaranty and
the pledge of Stock, an irrevocable letter of credit in the
amount of the outstanding principal balance of the Purchase
Notes, plus one year's interest. If the letter of credit
expires prior to the maturity date of the Purchase Notes,
Newmark shall cause a renewal or replacement letter of credit
to be issued not less than 30 days prior to such expiration.
Any renewal or replacement letter of credit which expires
prior to the maturity date of the Purchase Notes shall
similarly be renewed or replaced by Newmark not less than 30
days prior to the expiration of such renewal or replacement
letter of credit. The letter of credit shall be issued by
Bank United, Bank One or another bank acceptable to Carr,
which acceptance will not be unreasonably withheld. In the
event Newmark is unable to deliver the letter of credit on or
before June 30, 1998 for any reason, Newmark and Carr shall
attempt to agree on alternative collateral acceptable to Carr,
if the parties cannot agree on or before September 30, 1998,
then the Purchase Notes shall be deemed in default and Carr
can exercise all remedies under the Purchase Notes, the
guaranty and the pledge agreement. In such event, neither
Pacific USA nor Newmark shall have any right of subrogation or
otherwise against the Partnership or Carr for the Letter of
Credit described in paragraph 1.b. hereof.
<PAGE> 4
Westbrooke Communities, Inc.
December 12, 1997
Page 4
At the expiration of the two year survival period for
representations and warranties as described in Paragraph 5
hereof, a negotiable note shall be substituted for the
Non-Negotiable Note.
b. In addition to the consideration paid at the Closing
as set forth above, Newmark agrees to pay Carr additional
consideration (herein called the "Additional Consideration")
as set forth below. Carr's right to receive Additional
Consideration shall be contingent, and shall be based upon the
"Net Income" (as defined below) of the Acquiring Entity and
its subsidiaries for a period of five years after the Closing.
Additional Consideration shall be calculated and payable as
follows:
(1) Additional Consideration shall be based on
the consolidated Net Income of the
Partnership and its subsidiaries, before
federal and state income taxes, for the five
fiscal years following the closing and shall
be payable only if the Partnership achieves
the cumulative "Threshhold Net Income" for
each such fiscal year. The fiscal year end
is December 31. Threshhold Net Income for
each fiscal year shall be as follows.
<TABLE>
<CAPTION>
Threshhold Cumulative
---------- ----------
Net Income Net Income
---------- ----------
<S> <C> <C>
1998: $3,400,000 $3,400,000
1999: $3,640,000 7,040,000
2000: $3,880,000 10,920,000
2001: $4,120,000 15,040,000
2002: $4,360,000 19,400,000
</TABLE>
If Cumulative Threshold Net Income is not
achieved in one fiscal year and Additional
Consideration for such year is not paid, but
Cumulative Net Income in a subsequent fiscal
year is achieved, the Additional
Consideration for the prior year shall be
paid in the fiscal year during which
Cumulative Net Income is achieved.
(2) For each fiscal year beginning January 1,
1998 and ending December 31, 2002 in which
the Threshhold Net Income has been achieved,
Newmark shall pay Carr $900,000. Any payment
for a fiscal year will be paid on or before
ten (10) days following completion of the
audit, but in any event prior to April 30 of
the following year.
<PAGE> 5
Westbrooke Communities, Inc.
December 12, 1997
Page 5
(3) "Net Income" means, for any period in respect
of which the amount thereof shall be
determined, the aggregate of the net income
for such period (taken as a cumulative
whole), before federal and state income
taxes, determined in accordance with
generally accepted accounting principles,
applied consistent with past practices of the
Partnership ("GAAP"), and based on audited
financial statements, modified as follows: To
the extent included in the consolidated net
income of the Acquiring Entity, Net Income
shall exclude the effect of the following
items:
(i) any extraordinary gain or loss;
(ii) any additional depreciation,
amortization or other expense
resulting from the write-up of any
asset and any amortization of
goodwill or other intangibles
relating to the acquisition of the
Westbrooke Entities by the Acquiring
Entity;
(iii) any expenses, including
interest, incurred in connection with
(x) the financing of the acquisition
of the Westbrooke Entities, including
the $10,000,000 Nations Bank Loan and
the Purchase Notes and (y) any loans
provided to the Acquiring Entity or
its subsidiaries by Newmark or any
affiliate of Newmark in lieu of
contribution of capital;
(iv) any gain, loss, income or
expense resulting from a change
in the Partnership's or the
Westbrooke Entities' accounting
methods, principles or practices
after the closing;
(v) any expenses directly or
indirectly incurred in connection
with the acquisition of the
Westbrooke Entities by the Acquiring
Entity;
(vi) any expenses, gain or loss
relating to The Adler Companies, Inc.
(and its subsidiaries) which is
currently a wholly owned subsidiary
of Newmark;
<PAGE> 6
Westbrooke Communities, Inc.
December 12, 1997
Page 6
(vii) any overhead cost related to
The Adler Companies, Inc. (and its
subsidiaries), such costs to be
allocated consistent with the
Partnership's current methodology of
allocating costs to jobs;
(viii) any corporate assessments or
charges from Pacific USA or any of
its affiliates other than the
reimbursement of any out-of-pocket
expenses incurred by Pacific USA (or
any affiliate of Pacific USA) that
the Acquired Entity (or its
subsidiaries) would incur on a
stand-alone basis (considering
competitive market rates at which the
same could be obtained from third
party sources), and under no
circumstances will any such
reimbursement exceed, on a pro rata
basis, the corresponding amounts
charged to any other affiliate of
Pacific USA; and
(ix) in the event capital of the
Acquired Entity is dividended or
distributed to Newmark (excluding
however, tax payments under any Tax
Sharing Agreement with Pacific USA),
Net Income shall include deemed
interest income on such funds
equivalent to 9% per annum.
If the Acquiring Entity is merged or
consolidated with any other PUSA Entity
during the period the Additional
Consideration is payable, Net Income shall be
determined only on the results of the
Acquiring Entity's operations, as conducted
prior to such merger or consolidation. The
term "PUSA Entity" shall mean any entity
which, at the time of determination, has been
a member of the Pacific USA consolidated
group for at least 6 months.
(4) Each payment of Additional Consideration
shall be characterized as principal and
interest. The portion of the payment that
represents interest shall be determined by
using the lowest federal mid-term rate under
Section 1274 of the Code that is effective as
of the closing date. The remaining portion
of the payment shall constitute an
installment payment of additional purchase
price for the stock purchased.
<PAGE> 7
Westbrooke Communities, Inc.
December 12, 1997
Page 7
(5) It is understood and agreed that the
Additional Consideration is contingent since
it is based on future operations of the
Acquired Company and its subsidiaries.
(6) The payment of the Additional Consideration
shall be accelerated and due and payable in
full upon the following events:
(i) termination of the Carr
Employment Agreement other than for cause,
which shall be defined in such agreement;
(ii) the sale by Acquiring Entity
of substantially all of its assets to a
single purchaser or a group of associated
purchasers in one transaction, or a merger of
Acquiring Entity with another entity or
similar transaction (except with a PUSA
Entity), other than through an orderly
liquidation of assets as a result of a
decision to abandon the Florida market due to
two consecutive years of not meeting
Threshhold Net Income.
(7) The Additional Consideration will cease and
no longer be payable in the event of a
voluntary termination of the Acquiring
Entity's business and liquidation of its
assets as a result of a decision to abandon
the Florida market due to two consecutive
years of not meeting Threshhold Net Income.
(8) During each of the fourth and fifth fiscal
years, Newmark shall escrow with a third
party acceptable to Carr, estimated
Additional Consideration for such year on a
quarterly basis.
c. The purchase price is based on the assumption that
immediately prior to the consummation of this transaction, the
consolidated stockholders equity of the Westbrooke Entities,
determined in accordance with GAAP (except as follows), will
be $5,000,000. For purposes of the calculation of
consolidated stockholders equity, the effect of the following
items shall be excluded: (i) any extraordinary gain or loss,
and (ii) any expenses directly or indirectly incurred in
connection with the sale of the Westbrooke Entities to
Newmark. The purchase price will be adjusted based on a final
audit as follows. The adjustment amount (which may be a
positive or negative number) will be equal to (a) the
consolidated stockholders' equity of the Westbrooke Entities
as of the Closing Date determined in accordance with the
foregoing, minus (b) $5,000,000. Any adjustment payable by
Carr shall be reflected by an adjustment to the principal
balance of the Purchase Notes. Any adjustment payable by
Newmark
<PAGE> 8
Westbrooke Communities, Inc.
December 12, 1997
Page 8
shall be made by the delivery of a negotiable promissory note,
bearing interest at 9% per annum and payable on or before June
30, 1998; provided, however, the parties agree that the
payment terms of the note will be adjusted if the payment
would have a detrimental effect on the cash flow of the
Business.
d. The Acquiring Entity shall have the right to make a
timely election under Section 338(h)(10) of the Code with
respect to its purchase of the Stock, and shall seek
equivalent treatment of such purchase under all applicable
state and local tax laws, to the extent such treatment is
available. If required, the Westbrooke Entities and Carr
shall join in such election.
3. Operation of the Business.
It is the intent of the parties that Carr will continue to
manage the day to day operations of the Business in his role
as President and Chief Executive Officer of the Acquiring
Entity. Carr will not have authority to make major decisions,
except with the approval of the Board of Directors of the
Company. The following shall be included in major decisions:
a. acquire any real property or personal
property having a purchase price exceeding $100,000
(tangible or intangible);
b. sell or otherwise dispose of all or any
portion of the assets other than in the ordinary
course of business;
c. modify in any material respect or refinance
any indebtedness or incur any indebtedness on behalf
of the Acquiring Entity or any of its subsidiaries;
d. except for advances under purchase agreements
for real property, cause or permit the Acquiring
Entity or any of its subsidiaries to make loans or
advances to any person;
e. confess any judgment regardless of amount or
settle any claim in an amount greater than $100,000;
f. create or modify any savings, bonus, deferred
compensation, pension, profit sharing, retirement,
insurance, severance or other fringe benefit,
arrangement or practice or any other "employee
benefit plan" as defined by ERISA, whether formal or
informal, enter into or modify any
<PAGE> 9
Westbrooke Communities, Inc.
December 12, 1997
Page 9
employment agreement or commitment, enter into or
engage in any negotiations with respect to any
collective bargaining or union agreement or
commitment, or agree to do any of the foregoing;
g. modification of compensation will be subject
to the review and approval of the Acquiring Entity's
Compensation Committee, provided however, that
modification of compensation for non-key employees,
on a case by case basis, to facilitate day to day
operations and activities will be permitted;
h. commence construction of any speculative
single-family residential dwellings (excluding model
homes) if the number of such dwellings, together with
the number of speculative single-family residential
dwellings already owned by the Acquiring Entity and
its subsidiaries (whether or not under construction),
shall exceed fifty (50) and, except for such
speculative dwellings, shall not undertake the
construction of any residential dwelling other than
pursuant to a binding contract for the purchase
thereof entered into in the ordinary course of
business.
4. Employment Agreement.
Carr shall be employed as President and Chief Executive
Officer of the Acquiring Entity. Carr's employment agreement
shall provide for termination only for cause, that he report
only to the Chairman and that his title, job responsibilities
and location of the performance of services not be changed
without his consent. At the closing, an Employment Agreement
for a term of four (4) years shall be entered into between
Carr and Acquiring Entity, which agreement shall contain such
terms and conditions as shall be agreed upon by Newmark and
Carr, including a covenant not to compete to the effect that,
Carr will not (a) directly or indirectly, as an investor or
otherwise, enter into a business or activity, except as
otherwise agreed to in writing, similar to any of the business
activities now being conducted by the Partnership or the
Westbrooke Entities or (b) induce any employees of the
Acquiring Entity, the Partnership or the Westbrooke Entities
to leave their employment with Westbrooke. In addition, if
Carr terminates the Employment Agreement without cause prior
to the end of the term, he shall forfeit the balance of the
compensation payable under such agreement from and after the
date of such termination and he shall pay as liquidated
damages to the Acquiring Entity an amount equivalent to twelve
months of his then current base salary. If any breach by the
Acquiring Entity of any payment obligation under the
Employment Agreement shall occur and not be cured within 30
days after notice to the
<PAGE> 10
Westbrooke Communities, Inc.
December 12, 1997
Page 10
Acquiring Entity, of if any breach by the Acquiring Entity of
any other payment obligation under the definitive agreement
shall occur and not be cured within 90 days after notice to
the Acquiring Entity, then, at Carr's option, Carr may
terminate the Employment Agreement and the covenant not to
compete shall terminate.
In addition, Harold L. Eisenacher, Leonard R. Chernys and
Diana Ibarria will enter into three (3) year employment
agreements with the Acquiring Entity. Such agreements shall
contain such terms and conditions as shall be agreed upon by
such individuals and the Acquiring Entity, including a
covenant not to compete and a liquidated damages provision in
the event of termination by any such individual without cause
on terms similar as contained in Carr's agreement.
5. Indemnification by Carr.
Carr shall make comprehensive representations and warranties
concerning the Business. Carr shall indemnify and hold
harmless Acquiring Entity, the Partnership and the Westbrooke
Entities and their successors and assigns from all demands,
claims, actions, assessments, losses, damages and attorney's
fees and costs resulting from any undisclosed liabilities
which arose prior to the closing relating to the Business or
the breach of any representation or warranty. There shall be
a deductible in the amount of $600,000 for indemnification
relating to undisclosed liabilities and breaches.
Notwithstanding the foregoing, there shall be no deductible
for federal and state income taxes relating to periods prior
to the Closing or for audit adjustments. Any indemnified
liabilities in excess of the $600,000 deductible may be offset
against the Non-Negotiable Note and the Additional
Consideration.
Except as hereinafter provided, the representations and
warranties shall survive for a period of two years. The
representation related to federal and state income taxes shall
continue until the applicable statutes of limitations have
expired.
<PAGE> 11
Westbrooke Communities, Inc.
December 12, 1997
Page 11
6. Conduct Pending the Closing Date.
From the date hereof until the closing date, the Partnership
and the Westbrooke Entities shall conduct its business in its
ordinary manner consistent with prior practices, and will not
engage in any transactions or incur any liability not in the
ordinary course of business. Notwithstanding the foregoing,
it is acknowledged and agreed that (a) Carr intends to
dividend approximately $5,000,000 from the Westbrooke Entities
to himself prior to the closing and (b) Westbrooke
Communities, Inc. will convey to Carr the condominium in
Beaver Creek prior to the Closing.
7. Review and Confidentiality.
Upon the signing of this letter by all of the parties hereto,
Newmark and its agents shall have such access to the business
and corporate records of Westbrooke and the premises of
Westbrooke as it may reasonably request for the purpose of
evaluating the property and assets of Westbrooke and
conducting an investigation concerning the assets, contracts,
trade accounts, pending or threatened law suits, and other
relevant contractual, corporate and financial information.
Newmark agrees that any information hereafter or heretofore
obtained from Westbrooke shall be held in strict confidence
and will be disclosed only to the employees, agents, attorneys
and/or accountants of Newmark or Pacific USA involved in this
transaction. In the event the transaction contemplated hereby
shall not be consummated, any confidential information shall
not be used or disclosed or revealed to any third party
without the written consent of Westbrooke and shall be
returned to Westbrooke. Upon the signing of this letter of
intent by all parties, Newmark shall provide Westbrooke with
the most recent audited and most recent unaudited financial
statements of Newmark and Pacific USA. Westbrooke and its
agents shall maintain such information in strict confidence
and in the event the transaction contemplated hereby shall not
be consummated, any confidential information shall not be
used, disclosed or revealed to any third party without the
written consent of Pacific USA and shall be returned to
Pacific USA.
8. Conditions to Closing. The following shall be conditions to
closing:
a. Carr and the Westbrooke Entities shall have purchased
all interests in the Partnership owned by Athena Westbrooke
Investors, L.P. or persons or entities other than the
Westbrooke Entities. All issued and outstanding partnership
interests shall be owned by the Westbrooke Entities and the
Key Employees immediately prior to Closing
<PAGE> 12
Westbrooke Communities, Inc.
December 12, 1997
Page 12
b. Profits Interest.
On or before December 30, 1997, Harold L. Eisenacher, Leonard
R. Chernys and Diana Ibarria (the "Employee Partners") will
each be issued a .02% interest in the Partnership's Profits
and Losses, share of Gain or Loss on the Disposition, and
share of distributions of the Partnership (as those terms are
defined in the Partnership Agreement). Employee Partners will
not receive a capital interest or a vote with respect to the
management of the Partnership. In addition, in the event the
Partnership is sold within five years from the Admission Date
(as defined below), each Employee Partners will receive 3.3%
of the purchase price for the Partnership in excess of $200
million. Simultaneous therewith, the Employee Partners will
be admitted as general partners to the Partnership (the
"Admission Date"). On the Admission Date, the Partnership
will file with the Secretary of the State of Florida a
Statement of Partnership Authority in accordance with Section
620.8303, Florida Statutes, limiting the authority of each of
the Employee Partners to enter into transactions on behalf of
the Partnership.
c. Put Option.
On or before December 30, 1997, each of the Employee Partners
will enter into a Purchase Agreement with the Acquiring
Entity. The Purchase Agreement will give the Employee
Partners an option to put their entire interest in the
Partnership (the "Partnership Interest") to Acquiring Entity
(the "Put Option"). The Put Option will be exercisable at any
time on or after January 1, 2000 to and including February 29,
2000 (the "Exercise Date") and paid on or before ten (10) days
following completion of the audit of the Business for the
fiscal year ending December 31, 1999, but in any event prior
to April 30, 2000. The Put Option will provide that the
Employee Partner may sell his or her entire right, title and
interest in and to all (but not less than all) of his or her
Partnership Interest of that Employee Partner to Acquiring
Entity, in consideration for the following payments:
(1) For each of the first two fiscal years beginning
January 1, 1998 and ending December 31, 1999, in
which the cumulative Threshold Net Income has been
achieved, Acquiring Entity shall pay the Employee
Partner $200,000, plus the following additional
amounts:
(i) 1.98% of the Net Income of the Partnership for each
of the first two fiscal years beginning January 1,
1998 and ending December 31, 1999; and
<PAGE> 13
Westbrooke Communities, Inc.
December 12, 1997
Page 13
(ii) an amount equal to the interest rate, which is the
lowest federal mid-term rate under Section 1274 of
the Code that is effective on April 30, 1999, from
April 30, 1999 and ending on April 29, 2000 on the
following amounts: (x) 1.98% of the Net Income of the
Partnership for the fiscal year ending December 31,
1998 and (y) provided that the cumulative Threshold
Net Income has been achieved for the fiscal year
ending December 31, 1998, $200,000.
(2) the following contingent amounts: (i) for each fiscal
year beginning January 1, 2000 and ending December
31, 2002, in which the cumulative Threshold Net
Income has been achieved, Acquiring Entity shall pay
the Employee Partner $200,000 and (ii) 2% of the Net
Income of the Partnership for each fiscal year
beginning January 1, 2000 and ending December 31,
2002. Each payment for a fiscal year will be paid on
or before ten (10) days following completion of the
audit of the Business for such fiscal year, but in
any event prior to April 30 of the following year.
(3) It is understood that the purchase price for the
Employee Partner's Partnership Interest is contingent
since it is based on future operations of the
Acquired Company and its subsidiaries.
(4) The portion of the purchase price for the Employee
Partner's Partnership Interest described in
supbaragraphs 8(c)(1)(i), 8(c)(1)(ii)(x) and
8(c)(2)(ii) is also contingent upon the Employee
Partner's continued employment with the Acquiring
Entity. In the event the Employee Partner's
employment is terminated by the Acquiring Entity for
cause or by the Employee Partner without cause, which
shall be defined in such Employee Partner's
Employment Agreement with the Acquiring Entity, or
because of death or disability, no further payments
under supbaragraphs 8(c)(1)(i), 8(c)(1)(ii)(x) and
8(c)(2)(ii) will be made to such Employee Partner
for his or her Partnership Interest, except for any
amounts accrued and earned for fiscal years prior to
such termination, and in the event of death or
disability, a prorated amount of the current year's
purchase price through the date of death or
disability.
(5) The Threshold Net Income as it relates to the
purchase price for an Employee Partner's Partnership
Interest shall be determined on the same terms and
conditions as determined with respect to Carr, unless
otherwise provided herein.
<PAGE> 14
Westbrooke Communities, Inc.
December 12, 1997
Page 14
9. Closing.
Closing of the purchase and sale contemplated hereby shall
take place on January 2, 1998. Pacific USA agrees to
guarantee all obligations of Newmark or the Acquiring Entity
under the definitive agreement until the closing of the
initial public offering of stock in Newmark. It is
anticipated that the Acquiring Entity will pay the Nations
Bank Loan in full upon the closing of (a) the closing of the
initial public offering of stock in Newmark or (b) the sale of
substantially all of the assets of Pacific Southwest Bank. At
Closing Carr will be removed from all personal guarantees
including, without limitation any guarantees relating to
Nations Bank, Ohio Savings, performance of the Oakridge
Contract and Master Surety Bond with General Accident
Insurance Company.
10. Brokers.
None of the parties hereto have entered into any agreement or
incurred any obligation either directly or indirectly, to pay
any finder's fee or broker's commission or any similar
compensation in connection with this transaction.
11. Conditions.
Consummation of the transactions contemplated hereby is
expressly subject to the negotiation and execution of the
definitive agreements contemplated by paragraphs 4 and 13.
12. Expenses.
Each party shall pay all of its expenses and costs incurred in
connection with negotiating and consummating the transactions
contemplated hereby; provided, however, that Newmark shall
bear the cost of any Hart-Scott-Rodino filing if same shall be
determined by the parties to be necessary.
13. Definitive Agreement.
Within thirty (30) days after full execution of this
non-binding letter of intent, the parties hereto shall
negotiate to reach a mutually satisfactory contract which
shall address in more detail the terms set forth in this
letter and such other terms as are agreed upon by the parties.
After such thirty (30) day period, this letter of intent
<PAGE> 15
Westbrooke Communities, Inc.
December 12, 1997
Page 15
shall terminate and the Westbrooke Entities and Carr shall
have no obligation to continue negotiations with Newmark.
The parties agree that an arbitration provision will be
included in the Employment Agreements and in the purchase
agreement, providing for arbitration by the American
Arbitration Association in Miami, Florida.
14. No Negotiations.
From the date hereof until the earlier of the expiration of
the thirty (30) days described in Paragraph 13, or termination
of negotiations with respect to the definitive agreement by
mutual written consent, the Westbrooke Entities and Carr
shall not, and will direct the officers, directors, financial
advisors and counsel of the Westbrooke Entities not to,
solicit or enter into any discussions or negotiations with, or
furnish or cause to be furnished any information concerning,
the Westbrooke Entities to any person or entity (other than
Newmark and its representatives) in connection with any
acquisition of the Partnership or the Westbrooke Entities,
whether by merger, purchase of the capital stock, sale of all
or substantially all of the assets or other takeover or
business combination involving the Partnership or the
Westbrooke Entities or in connection with any offering of
stock of the Westbrooke Entities.
<PAGE> 16
Westbrooke Communities, Inc.
December 12, 1997
Page 16
This letter is merely an expression of the intent of the parties with respect
to the transactions contemplated hereby, and, except for paragraphs 10, 12 and
14 and the confidentiality provisions of paragraph 7 (all of which are
enforceable obligations of the parties hereto) is not intended to be binding
upon any of the parties hereto. It shall remain within the sole discretion of
each party whether or not to enter into the contract and no party shall have
any liability for failing to do so.
Please execute the enclosed counterpart of this letter to acknowledge your
willingness to pursue negotiation of the contract upon the terms set forth in
this letter, and return the executed counterpart to the undersigned.
Sincerely,
PACIFIC USA HOLDINGS CORP.,
on behalf of itself and Newmark Homes Corp.
By: /s/ MICHAEL K. MCCRAW
-------------------------------------
Name: Michael K. McCraw
Title: Chief Financial Officer
<PAGE> 17
Westbrooke Communities, Inc.
December 12, 1997
Page 17
ACCEPTED AND AGREED TO
THIS 12TH DAY OF DECEMBER, 1997.
THE ENTITIES DESCRIBED ABOVE COMPRISING THE WESTBROOKE ENTITIES
By: /s/ JAMES CARR
-------------------------------------
Name: James Carr
Title: President and Chief Executive Officer
/s/ JAMES CARR
- -----------------------------------------
James Carr, Individually
/s/ HAROLD C. EISENACHER
- -----------------------------------------
Harold C. Eisenacher, Individually
/s/ LEONARD R. CHERNYS
- -----------------------------------------
Leonard R. Chernys, Individually
/s/ DIANA IBARRIA
- -----------------------------------------
Diana Ibarria, Individually
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
NHC HOLDINGS CORP.
Newmark Home Corporation
NEWMARK FINANCE CORPORATION
Newmark Finance Affiliate, Ltd.
NHC Homes, Inc.
Newmark Homes, L.P.
Pacific Title, L.C.
NHM Investments, Inc.
NHC Mortgage Group, L.P.
THE ADLER COMPANIES, INC.
TAP ACQUISITION CO.
Twin Acres Partnership
ADRO CONST., INC.
ADLER REALTY CO.
Pacific United Development Corp.
PUDC, Inc.
Pacific United, L.P.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
AND REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors
Newmark Homes Corp.:
The audits referred to in our report dated February 14, 1997, included the
related financial statement schedules as of December 31, 1996, and for each of
the years in the three-year period ended December 31, 1996, included in the
registration statement. Our responsibility is to express an opinion on these
financial statement schedules based on our audits. In our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" and "Selected Financial and Operating
Data" in the prospectus.
/s/ KPMG PEAT MARWICK LLP
Dallas, Texas
December 11, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 2, 1997 with respect to the financial
statements of Westbrooke Communities, Inc. and Affiliates included in the
Registration Statement on Form S-1 and related Prospectus of Newmark Homes Corp.
for the registration of 2,000,000 shares of its common stock.
/s/ ERNST & YOUNG LLP
Miami, Florida
December 11, 1997
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<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
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<SECURITIES> 1,000 0
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<PP&E> 1,691 2,832
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0 0
0 0
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